VBTX - Earnings call 4 2022 | Veritex Holdings, Inc.

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Operator

Good day, and welcome to the Veritex Holdings Fourth Quarter 2022 Earnings Conference Call and webcast. [Operator Instructions] Please note, this event will be recorded.

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

Susan Caudle

you. Thank

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

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

by phone, statement us note For that available harbor those joining of safe please and on the you our are presentation website veritexbank.com.

All are harbor safe during comments statement. made today's subject to call that

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

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

to turn the I Malcolm. call will now over

Malcolm Holland

you, Today, we everyone, Thank call. quarter focus our on our year-end quarter to results results. and our fourth fourth XXXX Susan. welcome well want earnings as to morning, as Good

quarter, we or X.XX%, few efficiency million, per give momentarily. ROAA increase the X.X%, items over at earnings the for for will continue which perform with TBV XX%. did of reported note, Terry detail at you ratio and $X.XX at metrics to The $XX were $X.XX on million. Pretax per share have XQ of of levels XX% year of the share additional year, pre-provision quarter $XXX.X X.XX% and ROTCE a operating and or returns the for For X.XX% year. Year-over-year

and XX% quarter XXXX with will to year. pipelines warehouse down our XXXX temper, mortgage clear over since current be that end XQ less in for to for trending lower much in growth is It growth than down the loan continues the XX% XX%. Loan

of the low a in of are interest of book. construction self-policing uncertain X job slowing think credit The consisting a digits, growth requirements. be certainly will done borrowers market the double to recession primarily loan XXXX the be have good is funded They looming continue the We as down their forecast. rate and

quarters fairly the feel for loan of for decline quarter in we with remained seeing trends a an charge-off record will but negatively slower coming previous credit do as did consistent continue of C&I rates, are $XXX payoffs this is we some million, with at million a the that are of level quarters. signs economy Overall moving acquired Payoffs fully rising stress. of the now extinguished. This creating several $X months. been monitoring credit level we've We to

keeps provision for million loans. of quarter ACL charge-off at the of accounts our Our $XX.X growth for total the and X.XX%

acceptable to bps, assets greatest X.XX%. continues level growth our an remain did with Deposit to greatest increase at be still NPAs banks, focus our challenge. and but XX of most

did grow. grow during as our XX% commitment dedicated annualized deposits rate to and Our strategy deposits our same quarter, growing and at the loans the fourth shows

strategic Terry. initiative. in while now the investing deposit to I'll technology over are people our top We core process, turn making and call gathering

Terry Earley

the charge-off on Thank The of Page earlier. several X. referenced been acceptable. our very that better without year lot around have the Malcolm after dividend. you, was a XX.XX%, ROTCE Starting for share ROAA value up and and XX% and X.X% and of for the metrics Tangible fronts financial adding Malcolm. year challenging effect the would quarter pride ended book efficiency on per a the credit the back quarter the are still QX loss acquired on

$XXX the basis, issued remember where on capital million raised approximately shares financial factor the to results in the in we common As common X.X first and you look raise year-over-year equity. in at a quarter million

achieved have return to pleased bank. are we tangible performance on outlook, EPS raise favorable year-over-year weighed common such economic result the in for Capital and on the a current equity. certainly the Given

a was XXXX very year. credit Additionally, favorable

we need As provide didn't established reserves pandemic. to for the during the growth given

over not million $X reoccur in fees also in Finally, did XXXX. that PPP in we XXXX, had

production Slide from XX% to more On rates rose became to interest of concern. as continue economic liquidity declined X, and a Loan QX increase, uncertainty QX

With emphasis rate drop of million C&I per the CRE. $XXX and shifted quarter. ADC in million growing of construction C&I. the lower you to on termination Slide emphasis on the a greater the and our through for evidence of portfolio late ADC appetite focus see continues at to to deal the Interlink QX, our Unfunded On XX, $XXX deposit greater

$X.X points up fourth about basis XX% accounted impacted income short-term $XXX.X XX QX the to to rate X.XX%. in by QX. X% biggest million. our in primary was interest margin The over interest deposit net December DFW for QX X negatively QX. On the the raising increased The the Fed $X.X of growth, was in margin interest C&I XX. in NIM Houston. interest rates competition problem reversals also on million quarter, The intense million increase from The for in increase and or During accounted from month for markets X.XX%. items by production, to of of and the of Page million which increased represents are credits just XX% $X.X Net the our which

other a at is just reasonable institutions. financial for not This to limited volume deposit competition price

to achieve. betas are the close For All interest system. on volume to peak the creating and or are directly the were income are harder very bad in say, likely in with at X.X%, deposit making rate to U.S. this net T-bills NIMs first my as growth banking going paying time up, catch their near yesterday, Treasury. X-month pressure significant the the At career, competing banks

floating end floating through and originations these X.XX%, largely of XX% deposits XXXX. quarter falling loan was sensitivity floating is basis were QX, points. up QX. We've interest an XX asset that Veritex's while during out carrying mitigate points to please basis our unchanged yield QX rate Slide been intentionally X.XX%. XX hedging loans from to rate short at On rates XX, rate increased note loan loans

beta the deposit So, floating book, a have offset impact. thankful loan to to predominantly rate

the deposit a productive million front XX% beginning CAGR XX, a quarter since Slide of the growth and $XXX of with XXXX. on

total approximately is seen cycle-to-date average points and deposit time funds deposits rate deposit beta mix have basis XX% to the basis XX%. deposit during XXX the X% total has as Fed Our growing We've declining effective rates increased change DDA at XXX points. and start QX with moved

The at Noninterest just on additional Thrive increased thrive minute. with comments increased business in and lower XX. million USDA $X.X loss and a million. Great by back come to USDA by Slide in an On largely We'll swap offset the $XX.X performance income was revenue.

due quarters, Noninterest were $XX.X comp expense, have up variable the investments up performance is million during and million, increased same. variable at in Capital North to The $X.X comp fourth is $X.X including costs, severance we spread increases other the Avenue the categories. across for the expense increase exceptional rest A part quarter. million many pressure the talent the discussed inflationary was to the and meaningful of fee Salaries of reflecting reflect

though range. in efficiency remains strong expenses ratio Even are the the XX% operating up,

ratios less Slower hiring loan production loan is Looking as capital slowing. pressure. and growth XXXX. seems funding into prudent stronger forward, in slow growth and pace This translate will the of

Turning XX. to Slide

in We full. noted in year for USDA premiums million. well pipeline pretty the loans with $XX our earlier, great And was quarter XXXX full closed As and closed. positive I is for looking a QX entered $XXX additionally, 'XX, we NAC, million momentum, with

since volume much ago XXXX, Our on almost side. SBA business the premiums end third than the continues quarter weaker in $XX recent in but pipeline million leadership XX% to sale Gain traction. including than We SBA and SBA business in stronger new The million closed in as strengthen the QX. the hires are quarter. up of gain a is $XX USDA

but Moving recorded an gain Thrive. to is X.XX% of to locks. margins almost volume loss volatility significant long-dated to the $X collapsed $XXX equity due method rate on to of rates, sale funded decreased rate impact Veritex rising over and million million

and company, Given XXXX structure given XX mortgage an they issuing effort forecasted QX, longer to volume. rate stopped these than locks expense in the of results rightsize days initiated

expect both meaningfully financial to actions We Thrive's performance. improve

On CETX at during the $XXX points approximately XX, by basis XX grew and the end million quarter billion. expanded to year during capital have Slide $XX total ratios year-over-year. $X.X million XXXX

capital, achieve call our on to moderating coupled loan commitments, that higher that, unfunded and allow the Looking Clay credit. XX% turn some target should like the comments believe with for forward lower of us growth rates, CETX by I'd we earnings over to XXXX. on to from With of rising end

Michael Riebe

morning, you, everyone. and good Terry, Thank

move Moving office to change that's The driven quarter driven by assets see during of in credit. is has to had liquidity experienced our process that can capitalization. maintain business the criticized quarter during mention properties and Page continues that XX, review largest team. was during the of a the an for by downgraded word in customer We Credit the a earnings, special our quarterly finance Surveillance quarter increase underperformance. to note the for you X year negative good but demonstrated

the of mentioned, the for a that accounting pool of loans, our was driven uptick during in XX% they these was credit same. As pools downgrade the for be great closure PCD pool up an made quarter. A nonaccrual PCD NPAs to a That Malcolm loans in had by we of status. single balance posted X of at unit of is almost the a outstanding acquired because

projections million, $X for to the unemployment the and accounted for $X.X GDP, in quarter ACL mostly for Texas the Our million change Moody's by which due increase. of grew

offset for Growth of $X.X in bill, loans by million additional the an accounted charge-offs.

primarily past range. the of dues we dues During year season Most XX-day past of XX- cleared had to was caused in bulge bulge the January. created million administrative $XX.X increase delays. in by a by early of in the the quarter, end was the

charge-offs. to Turning

an experienced acquired space. power deterioration million During an credit unexpected the the quarter, generation in in commercial we $X.X

missive the became us the viability and question borrower. unresponsive the the that borrower established During milestones of to quarter, led

future acted remove treat collection the that Given a as quarters. books and from the we fact any in the we'll quickly proceeds recovery credit to

With that, I'll it to over turn Malcolm. back

Malcolm Holland

Thank you, Clay.

have think As a any XXXX, confident on Operator? that, some and we XXXX minds. questions. all answer of we'll to performance. be happy uncertainty positive I With is I our in level assure well Veritex positioned economic look into remain we you,

Operator

Brady [Operator Instructions] Our with first question KBW. comes from Gailey

Brady Gailey

base case just the the right bottom sensitivity, where you X.XX% a corner I your margin interest margin. to you and rate a net for rate you with in points said like and that interest have interest did your interest Slide of kind outlook about you scenario, X.XX% talk wanted of And net December. to XX start

and So reconcile I'm think numbers, margin color some the that on those interest you in net how will XXXX. trend X trying to just but

Terry Earley

net they peaked. as or their near said, haven't think I if margins interest at think Well, -- I I peak

case basic is $XXX -- the we ]. sheet view in income and XXX on that interest static our -- balance look, a model [ net personal that did Our with in million QX, shows

you So that with possible. that not very growing interest growth, even tells really net income is

large of funding are deposit it's view, pressure. here, because going In rates it's where cost for not

going So to I with be hard said, net to it's betas. interest grow deposit income

how it grow predict. net And it likely might pricing get to the hard year. QX It's be we Treasury is anyone NIMs that will believe think also I down. interest that's the pressure really, be income, this. a of... deposit Never will to competitor flat, primary so so it's throughout our competition under is who view downwards And -- difficult but kind doesn't like could seen U.S. will Brady, to be be that NIMs

Michael Riebe

sand. in Head

Terry Earley

in Yes. their got head It's sand.

Brady Gailey

low grow that to including make loan Or you hard to growth It's I'm Just the NII year? dollars, the loan for is even sure hearing excluding double-digit right. growth?

Terry Earley

static mean it's balance I a sheet.

can happen it rate it I'm the -- just with just loan I'm it's deposit actually -- knowing include not what to I low double income roll -- -- going be what's to shot we digits. you if betas. of been just think because grow sheet It's next talking harder. So to balance year and this growth to we've interest going forward doesn't net about, the going but took

not that of pressures. You're leverage getting you've lever same 'XX loan because going to from growth been of pricing in or same amount deposit get the

Brady Gailey

about It are than a estimates. expenses. XXXX? still on expenses little you're right. you in in hiring like helpful. and we how higher That's All investing and came next color on your expenses guys think feels Then should what Any my

Malcolm Holland

Yes.

are them we're Let address we whether have -- hiring say are still I at couple piece that it. still looking that a through. of replacements the key me of There of we would most but positions some working just size Again, to in Almost on XXXX. going be program the of focused $XX deposit all have an going place in We them actually. would over be generation to put billion that's deal. growing internal do that side. audit we're are

XX%, are But that is X years, there [ yesterday, is as our down or increase Terry? in in be expenses, areas to a amount the right people. I XX% the from it of total huge telling X the I you was drive was are about not we base of don't of in me ] a now. to hiring from but last than Do terms have. going Cara replacement been talk think expense going couple that's it's think where the where But want to we less

Terry Earley

We're that. going I on this dollars But mean up in adds area, We put adds more that more more said, on and 'XX. I going way. great deposit see not think a through -- don't side. the just to the addition dollars and Well, to FTEs money surprise, I build we're focused net this -- are real, deposit going base like -- we more Also, to marketing is we to way in -- -- we're the inflation do that are that the going Malcolm significant, surprise. to way to be spend help can't staffing more net thing granular

are and QX if expenses right a little, add annualize probably the you think in you're probably I So -- place. about

Malcolm Holland

But I'll too, Brady. just say this,

One on us. people in bought say in a side. a salary We arguably moving the And billion. I back little XQ. comp new in, the had of grew where the out. think, XXXX, the XQ, part that could kind on phenomenons I And side, we're quarter up was, third we you we $X all of because low look bank We're to some XXXX. people expenses on we billion in some just mean coming our I $X of little it late had a caught as

increases efficiency the the despite in look at has we side. remained hard so which expense the stable on And ratio, spike

was over I think And $X year. adding into in a settling billion so just we're assets expense last new level the

Terry Earley

Yes.

billion Let year-over-year grew me X I year, billion. mean grew $X.X -- for total year-over-year $X.XX from the the to they on assets, right at average year. QX and And to assets NIE grew $X.XX up average $X add bps, yet that. million assets for average, is they to not million QX, to over the only

period. assets of heck bank while X and so our $X to And been grew Malcolm bps, is NIE right, it's we billion up X average an inflationary

Brady Gailey

right. finally the me, hard All X it's about thrive line the idea USDA items? But know an lot for I with a basis. fees Anyway, any mean on And of quarter. at quarter, a for volatility great volatile to not forecast having then those then but having those to a look I ongoing great

Terry Earley

it tried the expense fourth think say is the I million. was long-dated I you while significant with $X.XX -- if margin where to to is okay? -- expense stopping very The pretty much Thrive. for deal should Thrive comments, performance they've by revert -- of it's financial $X.XX historically not locks, better sale out year the in gain your gain just on which making And sale changes. was letting margin $X.XX on pretty cuts, my been, So can million, quarter see I the

I and mean, I got that see good can only us. question, that's feel that's $XXX in about quarter QX for and pretty you fourth we demand the do. NAC. the 'XX you pent-up the and and but came we through QX year, really as their pipeline, of we're quarter. mean -- But I after can for million see as million if good USDA some [indiscernible] you -- close the take NAC, $XX tell we've

Operator

D.A. comes Davidson. question next Tenner with from Our Gary

Gary Tenner

of little in kind annualizing your kind to expense on of adding and line fourth recent on as said, just the comment the Terry, quarter XXXX. start a bit, you

growth. what single-digit in think comments? to quarter, talked mid- comment high sounds -- growth XXXX. your last you I loan you're That intended Is of kind of like expense about suggest made to that you in kind just high-teens more you kind of

Terry Earley

is now. I'm single, it what I'd single across just full more the digits look, over the board. was QX, year right what say, high surprised was thinking that year -- I full low XXXX Well, by over digits certainly, But double high the

as not as go high seems. may I'm be trying So it to it's

I I high from Let More -- up. low XXXX that cleared hope double me single, levels.

Gary Tenner

talking mean, then for headwind to XXXX on not you 'XX about also would degree is expense visibility based based I at breakeven Okay. visibility on the on side VBTX? made, what Is in 'XX in to it's scenario to the your Thrive, there based in And you be comments a were where where on in least just at a there on there visibility is mortgage or all? Thrive

Terry Earley

-- over kind people the in what last and get. the spent talking a look, all some the and best what the on the XX Thrive where It's That's lot you industry the of 'XX, feedback can we is Absolutely. -- industry the of success based exactly days said. just of we to time in it's

Malcolm Holland

And that there. a making of they at hope volume side. on together map reductions. Candidly, to a have and not small put they year acquisition They're get nice helped the did They was that expense very a costly prayer. the volume. appropriate a not road clear end some the have It's really

feel pretty a so breakeven year Thrive. darn we And in confident for

Gary Tenner

way I about of kind what the I was side it fourth in activity talk quarter. out quarter? could see called didn't on your for the talked last think I Okay. just side of more last time brokered Great. on some And me, probably utilizing and the deposit you quarter, things that the wonder in anywhere. then deposits about the of fourth if there, growth in you

Terry Earley

kind grew It very grew in in math, the and number, I'm And absent the Like on rest We to that's we it was. linked meaningful side annualized, -- XX right that so still X%. done tells somewhere of that, absent the fourth quarter doing X% many X%. the quarter. ], my head. -- I I'm seen still but if was [ brokered, brokered, yes, of I've that you the the haven't we -- X%, where tells was brokerage you peers did report.

Gary Tenner

Okay.

So about those at you how you out terms of talk of kind can maturities? in all laddered

Terry Earley

from the we're risk, From XX about out thinking XX how like I sheet rate out would -- to keep liquidity, are months. We under an a with we XX just -- balance some. to going overall balance and interest

I'd that we're not but and to don't to a where CDs that's or XX, I say some customers trying doing XX under, bit keep go and just more there it's skewed everything to it's -- aggressively XX long way months aggressively. is and want and for months are pricing as longer-term So frequently asking little XX, [indiscernible]. we're longer. because real We're

Operator

question Our Rabatin with next Hovde Brett from Group. comes

Brett Rabatin

I Wanted and to you it I just circle the back understood aggressive on to few a and -- downgrades just sure pretty quick and pieces that. make know guys make you're credit with just to can X taking and [ a talk your those maybe what look office and But that led you portfolio done ] you've downgrades? what the properties, about prostate at commercial maybe

Michael Riebe

Yes.

that and a at the a loan that that the appropriately graded everything $X weakness over that's that quarter in office we're we in So and book, to we for million had we every any looked did dive We during question, deep Brett. anything saw addressing Thanks great make had sure deal. the question. the

part credit our every of process portfolio. million entire at year. that's And surveillance in $X for over looked we the just So that

Brett Rabatin

those So led downgrade any of credits? to specifically color what the on X

Michael Riebe

that has been of had tenants. just Bank historical damage that been of it Hurricane has really from never a has to Green out PCD, Harvey recovered that. And of then problem acquisition X from that -- some asset came Loss

Brett Rabatin

Okay.

cash kind having much how guys inside B basically -- have of the it's instead with you LTV, office and do might color -- it's like sounds it space any have in So loop? issues flow perspective a on Class you of

Terry Earley

Which loop?

Brett Rabatin

Houston, specifically.

Michael Riebe

me XX% see general of office Class up is Today, XX% the of which makes stress. Class encouraging have because office of, least that aware our B in exposure, CBD I is of office to where I'm amount that None in that's book our we we'll book. think A, no

Brett Rabatin

were linked but credits, criticized on Okay. questions And the assets these the somebody sorry, these all X of increase quarter? -- in for bulk this, were or

Michael Riebe

those all discussed special group, not them. X the of borrowers. largest And our X that's actually No, finance that was [ then That's a with in -- largest a note office mention I ] move second. The yes. of of

the areas are those X quarter. So of largest the during downgrade

Brett Rabatin

the CDs. And back be a find funding with efforts Okay. the alternative not in balance that to there market-oriented, sources various were to grow maybe on for then fourth deposits second. would last funded you CDs. year, Obviously, And quarter some but maybe be sheet

you Terry, of from pivot strategy little and you environment other to view be the maybe in competition market. just fintech sources not whether shocked shell the to or a or with Has CD grow terms guys alternative for treasury sound Given your might looking deposits, funding? the changed entail a different could it that sources

Malcolm Holland

to question, hasn't I mean strategy answer your up. changed. just Yes. It's ramped

that this As and I in work. third guys. hired quarter lead think this -- We really multiyear hired fourth now strategy. the good Canada, said week. just quarter, just of we consultant some They our we in producing started a he's a the was X we

funding those maybe we're magic some And magic solve problem. single pulling going It's this movement. that's is starting X X There and or X X, no of to think every to things, see I about and levers. vertical you're pill different

we It's very lot see not know did our efforts But moving deposits, wanted our positive grow back of some grow I to. time. industry of in can direction. a You just to the -- shrank. we we But take a did going some what deposits. are albeit efforts,

couple piece that these about when these The strategy. as in there's in gap in fintech successful talk to be we I as CDs, hoping are continue we're And a making about so we specifically, mean, we're area. these fillers are short-term Terry when -- -- hires, funding talked hires of our that

be of They for going us. this have funding to We group. some a are nice have week that opportunities opportunities as specific

on continue strategy. that we So

take We little think it's diverted one. going right a time. off We to the just more of It's bit it. haven't

Terry Earley

they to be beta, down, meaningful Brett, you're And but thing. going not bad high there thinking a that's about are there, rates if opportunities are but

So...

Brett Rabatin

Okay. maybe follow-up that. last one on And just

As like feel quarter of you maybe -- we get guys you you think the terms to what do in just the you took what relative about mentioned, fourth do we versus curve? might betas, think the percentage of have took as treasury pain you guys to in

Terry Earley

Say it more one time.

You broke up little a bit.

Brett Rabatin

Sorry.

at looking movement the and funds deck on just in So have XQ, And terms XQ a slide in to your Fed do And funds in XQ rates if to effective. the total of and deposit pressure? average, accelerated XQ. interest-bearing portion I showing you growth the and in deposit upward your there's an effective it deposit in Fed rates obvious rate rate, feel you the to don't that of hit to the meaningful but need pricing know you like has go taken then

Terry Earley

customers, money No, more to market every going day and just relationships combat hand-to-hand margin I these I time deposit deposits, And get the think got still retain you're because you've I these that got would tell beta, you. the pricing on I is customers think coming fight aggressive you've think these what to it's dollars.

way is. environment just the It's the

going another just $XX got I its in peak. don't We're thing. this another near as there, million and we year. beta they're going the in or be the year. maybe million pressure the in why that's expect of for say, like would the later balance get is so we get don't there's there, somewhere but Fed I I And nowhere NIM And think -- QX, hang deposit certainly out $XX it to as then to I seems Look,

Operator

Michael comes Raymond Our question James. from with next Rose

Michael Rose

just kind guys in been on my asked pretty questions Most have of found you answered. But of have a tone. credit, cautious and

we I why just basis nature, year? to the that criticized now And conservative despite as see the the given your you loan would only little expect tone? through point ratio build up was just the not increase but think a cautious that that's reserve bit build classified in move loss more X

Malcolm Holland

we'd mean, have well to we you there's constraining that into build. a I it as do lot is see -- expect And know. it, But CECL metric. a goes pretty

here -- a could not happen. changing some of on can't we've amount and tweak Candidly, fair we it's that the in there. so done And our tweak possibilities weightings

our We Q factors. haven't messed with

to number work keep at And just out spits hard sometimes. so the we pretty model it a levels lower those because much

be And going so it's to difficult.

forward, have accomplish But we a we're going there. but little And to is in more not certainly, yes, hope to bit our it, desire certain.

Terry Earley

me expect to just and that, went I to trend continue. down went Let to to XX, Michael? year-over-year, XX our sense, specifics that general add $X.XX is, from up our to bps excluding which But from loans $X.XX. that reserve, to allowance Does make would

Michael Rose

they're Got et Yes. But this structure you earn can down Thrive. do to the expect just the are Obviously, at year? changes, actually back understand cetera. you just kind amount I'm maybe then from that of And looking expense it. forecasts in a I it's money making significant outlook. BA the 'XX. Obviously, actually investment a quarter. tough

Terry Earley

would possible? is be would I I success, it think positive go No, number. I Yes. mean, success I back. mean And a

$X volume was available [ to referenced them look, that brought expense the the is for The Malcolm their margin of target a X.XX onto They've significant think had the where option the able this in close breakeven. on is ] at acquisition small XX% bring but a billion the margins. out good reason platform. year I only cost to is of they've cuts. And company to been strip volume

a But long-dated and was and of that's achievable? closed stand DFW, I and business markets, obviously. was was already Thrive XXX why December, for key do good in -- expense and we rightsizing heading average their fixing what better what, were And I above the to it's -- XX% Houston, close always X results without I've XX% No. Antonio, think, And where December their I that's so in into December, I've structure the year. And the of remember do San and is And last without result. legacy that's encouraging. The Texas. is that that think which XXXX. for month. the locks units know They seen breakeven seen or

what about from me And go see can tells can can get, this we where it December so that results. you from idea the here, Thrive where that's is

Michael Rose

just All right. stock me, And then finally for Helpful. trading X.Xx by tangible.

earlier growth do balance noted you a at this of loan kind and buyback to thoughts Any you as And could point? around there? grow what You slows. that growth sheet capital expect

Terry Earley

and in capital to and about situation this something I looks think But -- clear XX% like CETX half is credit outlook that's mean the has we it's we'll don't credit valuation. I or close it's something better. when fine, looks is And the that think of credit built XXXX the think mild recession back the -- about. clear, not recession the is we

back in don't the to out just think get in half no time is looking plans now as the to be at have for especially just it rule wouldn't could the right of just the the I It's back not it. the we to But if be half. first year. I we that half. It's now, time goes just right something now, planned. everything

Operator

with comes question from Sandler. next Brad Milsaps Piper Our

Bradley Milsaps

end rate of addressed most year? but I missed it, the Terry, housekeeping a was of spot We've portfolio couple if maybe and questions. loan the everything, at for the just I what the apologize

Terry Earley

bring number didn't that me. I with Gosh,

Bradley Milsaps

No, later. follow we can up

Terry Earley

call, may if But... have of just it. I'll the before it the do, end I I say

Bradley Milsaps

NIC. tied okay. -- increase big then had the you to quarter expenses was curious, mentioned you just the in And And then somewhat at

to performance. trying revenue? -- think -- or think numbers good XX% it is that on of Is to forward, kind how actually is about it how those tied see USDA is of about the it? Or curious, a wanted Just kind is payout just XX% going of to that that much to that

Terry Earley

that It's nearly -- given But in now, on dollars and space Brad, and right it $XXX. loan is if have And that in variable we really double that's the digits. much. meaningfully that's the the rate of market XX/XX want attract comp. moved just to you just No, the good year some. it's gain premiums sale And not the end producers the low

Bradley Milsaps

loans investment? And that's held a for

Terry Earley

Yes.

Bradley Milsaps

Is there? of well. you I've kind up the And securities just then general just -- yielding in a and -- this that say start maybe a Okay. improvement. yield bit as would off quite noticed rolling lower Any was one-timers

Malcolm Holland

I'm sorry.

Terry Earley

broke you One a split. just Brad, more time, up

Bradley Milsaps

The bit. securities a also Yes, quite was yield I up apologize. portfolio

nature in Just anything kind if there's in or be there of would onetime that's curious just... that if

Malcolm Holland

include it. different, with they're does That's Xs, materially be They in gave the And to excluded warehouse. rate that are mortgage rate that [indiscernible] honest definitely not you you. also not I but them. just

Bradley Milsaps

Okay. question. Great. then picture And bigger final

lot construction. of a did guys You

once out these projects some out but that end. providing environment Are the financing? just kind of about pretty projects, environment capped completed. are on the new folks permanent cases? these doing know CRE, Some talk I home you for there what you other a construction in they to coming is of curious Can some finding guys are of you're an for

Malcolm Holland

there's mean I specific markets. Yes. going still commerce our especially in on,

about the paper new read NIKE which a one every became huge there. read day You A -- the I've this deal industrial tenant is because morning. sold

on. there absolute are is so people still commerce certainly bit, have going but a cap increased And The selling industrial. rates

the off projects. of in about or paid a Half $XXX -- think was fourth I about million. sold CRE it was that we quarter, --

and term, down. REITs more A that this is terms coming of Just fund But the quality doing But anticipating haven't but requests mainly seen really us of do it people down, this certainly come buying we down. in are are multi -- haven't out the we stuff it and bigger in. slow because we stuff they're that of assets, we the slowing industrial. type see seen lot slowing

Terry Earley

has been. more it a agency And is the CMBS much outlook than viable

XX in Davis' viable fixed just commerce and but going ways there's yesterday mean Fort XX, to is in payoff I they're Worth, the morning. million. XX-year there portfolio Also, in I lot mean, $XX the get going slow, then can Craig range. a saw of this it about You big but rate I on.

Operator

Our question from comes Stephens. next with Matt Olney

Matt Olney

I the to Clay referenced think of back of the the the downgrades financing quarter. in primary want credit discussion. go And note as sources a one I to fourth

the what of specific was exactly was quarter? size downgraded of that your loans? financing me And in remind Just these is credit in fourth the the types what

Michael Riebe

borrowers Matt. residences. this it's It's financing very small -- fix thanks, flip, single-family and very, granular So particular financing exposure.

the commitments So million but no is categories, the various in you actual single-family broad types, this give granular was up about very that we're product borrower made touching exposure that The -- a of total what facility. color is finance size there. on overall -- And of a the space. some $XXX particular the on is portfolio talking then

Matt Olney

something And is for several years. this doing you remember correctly, been if have I guys

Michael Riebe

Yes. Yes.

the experience We have in in -- that space. broad experience

Matt Olney

Okay.

so single-family metro, of the Texas -- residential, types in guess sounds markets? it more when of I more it's And we Is think the those about it risk like loans. here

Michael Riebe

is that slow which... risk the yes, a in little mean, -- that I space, Yes.

Malcolm Holland

it. got do everyone's And to

and borrowers You of very, they a of percentage finance. have granular, hundreds we're what very financing

advance a XX%, XX% XX%, it's on XX% an advance. XX%, already So

reason on was So way down but heavy and right, hit collateral capital. an very there. values loss, The strong remain that on operating are one they that had cash there

This be. strong showed why mention to we're loss, company, is very And our but is stuff much think get collateral. when We there. we that's put -- we're they very, when need anxiety on a the not a don't that up quick to it's have very special any they side -- to -- ever ended company. on This the strong they not there's we'd

Matt Olney

from for are first there NIBs? could expectations guess when year could bit stabilize? headwinds the Appreciate Great. I'm message the what average in down you shifting we're is of the average there And your getting across curious were bank? the all -- I with quite from the there. deposit this on the peers. a the those industry of color I seeing the of be then quarter, And others think guess, noninterest-bearing think more kind I and half deposits, the deposits the Okay. the your there I'm And fourth outflows in we're sorry, back do

Terry Earley

described is you Well, just I accurate. outlook think the

and to I ever trend rates I as as incentive continue mean customers think liquidity. it's there's going manage seen of down. to are aggressively I've aware so to much

-- But that's over and business, So importance don't found at been think -- the C&I end we've going I have whole of of shift think we're the year. our that we I last heavily think why I the on. don't mix that investing in that

even that it good just good get had it's just and our deposit production community But and -- had stabilize side, and are and us community see help And they our time. especially quarters. it's in the They -- You harder It's years. going. going and a to growth and the in commercial. C&I

Matt Olney

Yes.

Terry. kind then growth could that here? funding loan Thanks material flows Okay. thinking Any And cash securities help in for fund 'XX of portfolio. about coming that off that the

Terry Earley

Well, I think what I mean, here's say. would I --

million. between loan at was difference we -- you only growth, million growth minus FHLB. those loan The million roughly, deposit and $XXX the -- look was $XX growth the $XXX If from the borrowed

So be to case we helpful? funded type come the it's million continue. a base should there's Is mean $XX book million going projected That from earnings. that million year flow of -- and to in rates. to to for the be going terms million $XXX loan quarter securities growth on of $XX $XXX off the of I cash

And so it's continue us to as and going earnings meaningfully to well. help

Operator

for Thank call. concludes conference today's you. This Thank participating. you

may You now disconnect.

Veritex (VBTX) 25 Jan 232022 Q4 Earnings call transcript