VBTX - Earnings call transcript Q1 2024

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Operator

Good morning, and welcome to the Veritex Holdings First Quarter 2024 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event will be recorded. I will now turn the conference over to Will Holford with Veritex.

Will Holford

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

our safe refer Slide harbor into presentation, our X. logged our including statement you're webcast, to please slide If beginning on

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

are comments safe harbor to statement. All subject the today made

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

Joining Chief will Chairman to Earley, the me Holland, CEO; and our over today are Financial Malcolm and Terry Malcolm. call now our I Officer. turn

Malcolm Holland

Thank you, welcome our Will. first and to quarter earnings morning, Good call. everyone,

was quarter, For million earnings million. $X.XX X.XX% we $XX.X return of or reported the $XX.X per first or preprovision share. Pretax

balance and strategic our adding to our plan and while the our our increasing decreasing reserves value, improving in loan same sheet at continue loss concentrations. tangible time profile, liquidity We book

that loss our quarter, the and million during Additionally, From on annually stock cautious to we a transformation. rate, repurchase focus ] a a very transaction we that we but EPS $XX continue program. sheet the securities [ add standpoint, $X.XX growth balance trade is announced anticipated

XX% loan X%, our loans growth $XXX.X quarter, last note is $X.X to were or flat, Progress For or the XX% Interesting billion. made. months, were million virtually while deposits or up up around deposits annualized. million is the up were $XXX that XX being while over

funding to will to more mix that advantageous focus continue in a addition our down of Our deposit continued is generation primary break deposits costs.

single the while be year, an to we double high deposits mix. digits in rest should of the loan believe into in the growth the improved low with single be will digits, low Looking

be As the uncertainty rate we to name appears current the the of game. outlook, navigate

said, of loan that on monitoring credit and our remain surveillance we focused With portfolio.

on over many credit, with made previous progress with metrics specific Same the quarter credits. remained fairly stable

specialty from X.XX% assets. to NPAs result or increase in $X a increased NPAs facility. was The acquired total X.XX% million Our medical of downgraded a of

During a in also balance. which the on the student a increase of represents million loan resulting XX% in quarter, ORE, foreclosed we loan $XX.X

Charge-offs forward value. for the significant most property $X.X The which relates XX% to to previous million, land from the down down quarter Houston across relationships. the which million quarter office $X.X of the we wrote totaling discounted were to

loss this quarter our loan to past marginally Our and previous XX% down the $XXX down exposure continue in over is see we XX grew during nonaccruals, the past months. excluding which dues from X.XX%, reduction million to reserve were quarter, office

call I'll over now turn the to Terry.

Terry Earley

Thank the on strengthening you. side. the work sheet. we've but balance deposit in to and do, progress the Malcolm I'm covered encouraged has credit progress, by made there's more our especially

up X Starting XXX million. points, on allowance at meaningfully The quarters, basis reserve sits now have in we X. the last over increased $XX the as coverage Page by

Excluding portfolio, the at allowance XXX basis warehouse our sits mortgage coverage points.

much year reserves general we've comprise allowance, total a than the been in XX% stronger a ago. Our position of

for approach, a build of to the the We've categories. the longer economic with nonowner-occupied the We seems at continue risk. a reserve loan in by scenario to higher the bottom coupled more page. included rate reflects the owner-occupied appropriate and conservative of a assumptions level geopolitical significant significant This portfolio shift which breakdown in

X. Page to Moving

per year-over-year. The in it year-over-year increase X. to the Tangible paid and capital CETX X.X% that significant XXXX, the have by year-over-year public points expansion by during book has XXX risk-weighted X X contributor ratio last the and has dividends. It's $XX.XX grew stands to at expanded quarter decline rate since bps total went shareholders. On that approximately there's quarters, worth been in the and the XX.X% basis, the $XXX dividends is been value value to Page a noting ratios, a Over including XX.XX%. Veritex including capital book a of million. $XX at which million now increased per A to share compounded basis in share tangible on shareholder assets

deposit Veritex reduction to at from deposit XX.X% and also ratio low allowed XX.X% reduce loan-to-deposit ago. and warehouse. to X/XX/XX. wholesale mortgage was if XXX.X% year loan our funding allowed strong its Our growth a XX.X% ratio XX.X%, exclude growth you The at to loan-to-deposit reliance growth X/XX/XX a The in

deposit rate graph, over we've between As maturities short see in the XXXX in $X.X at remainder and X.XX%. you can a X.X% time have and portfolio kept left CD bottom the the billion of

the the rise steep our of Since This was and largely then, out March leveled below cost monthly right, on On deposits cost total in we has through September XXXX. pretty deposits. is of rate total December. the bottom show a it

On warehouse. Annualized X.X%, XX. approximately was multifamily growth mortgage Slide increases by in CRE loan driven and

progress make in to our reducing continue We CRE concentrations.

This XXX%. Over year, by has been to risk-based to the driven XXX% from XXX%. be reduced ADC getting under the risk-based in We our total decrease committed of the to XXXX. quarter capital XXX% third XXX% there last and from base concentration we've to in remain significant to and total risk capital think CRE CRE and of total concentrations XXX% under ADC our we should

the for right estate Finally, 'XX. please real see of commercial through the end our bottom maturities

and of represent see, million undue the bank at approximately risk can for million maturities $XXX $XXX XXXX. rate XXXX of balance not for you to approximately fixed As do the all

including and XX Slide is real by estate of the class, portfolios commercial state. detail one out asset provides ADC the on

XX.X%, followed decreased loans. Slide X.X% portfolio higher the from of breakdown percentage of significant clients volume mix first a less drivers asset count the loan-to-deposit and during office and decrease were the $XXX almost lower our is of X basis the ratio. little now XX, our offset out-of-state portfolio Slide portfolio, X.XX%. to as predominantly by below we true this to estate bit only loan pressure geographies. On day an income is margin and yields, look of is and feel unfavorable The excess businesses to of by funding impact other national achieve million to was a an resulting net $X.X NIM down growth. deposit real total and from to we mentioned, of mortgage, to ratio decreased $XX or pushed The This decline continue interest have out-of-state including the interest portfolio. is XX% a quarter. last the where million Texas million points the in The QX the increase our Malcolm to lower biggest XX% from illustrates net in investment shift into going comprises As and XX deposit of continues than year

about up of deposit costs previous assets. XX only quarters. Slide are yields remains The is the points flat. duration only points. XX% portfolio and portfolio basis XX.X% the a metrics years quarter over AFS. increased of change certain quarter a on yields shows basis our are XX Slide is X the basis in the from Investment is relatively of are and points average XX portfolio. investment This takeaways X Loan the Key welcome for XX. X held

accretive net at reinvested investments loss the and is the a X.XX% to to As and This previously completed margin QX noted, yield and sold EPS. X.X-year average trade in earning interest proceeds have expected $X.XX points be average to yield. X.XX% which we earn-back and X we the loss in

billion. uncollateralized of snapshot year. which March totaled This our Finally, cash and over last is represents of XX% borrowing of since available or you uninsured This capacity, a XX on $X.X the this slide, X.Xx level liquidity deposits. see

up prior but loans trailing On function income. our USDA include fee X%. Operating XX% quarter government The for production year of quarter. beginning Slide USDA over with levels, was very some the business XX, in was no and approved. The management loan had XXXX SBA for while the The of a the they close revenue to disappointing 'XX and was QX, production, a sale environment quarter a the than Production gain a funding expenses almost are of first surface on the of spot quarter, of which noninterest quarter challenging is in much higher lack QX in the to get closed were sale expectations. line from business. normal cost, bright the premiums up were

than below approximately equity treatment effective the effective to for over price. expected The in rate periods higher to the Finally, remainder the vesting value is XX.XX% the of for return to quarter fair tax rate previous tax the year. awards tax was due of

call turn I'd to for comments. the like over to that, Malcolm With concluding

Malcolm Holland

you, Thank Terry.

We growth. continue continuing and reposition improve while stronger our and to balance to position sheet earnings to on a focus TBV

Curtis Our acting Credit Anderson, have leadership of Chief has and surveillance Officer, increased results. already provided their oversight under positive that activities credit teams the our

remain Our focused. teams

now questions. we'll Operator, any take

Operator

[Operator KBW. comes Catherine Instructions] from first Our with Mealor question

Catherine Mealor

but change in where bit. just of moves special in and with portfolios one quarter? credit I a On little just up the substandard show came came like some a down, -- want it start X Can you bit assets, the looks this those of the classified your to about mention you talk out little slide question.

Malcolm Holland

We payoffs of we has a the exact that names ] couple in. then the good a flipping call we had guys, that. had of that on couple actually, Yes. what couple [ moved page to And

moving one in quick of ourselves we enough. stuff And so things the a off found place where that weren't we

weren't we shelf space. creating And so

behind that And real C&I judgment so was X started X, see, it. We and to one to one substandard. that. We we then one sale let's do had office, a, X, the just payoffs had estate a have

there in some the million. large deal, was credit a C&I -- So side. behind and strong then had went we we on pretty moved we a a out it with And moved opening people -- deal to as couple deal substandard it. a it land land substandard turn that a and deal upgrades about And it with underwrote some to a to of then and a $XX we office pass

starting going So down quarter, we see both I and there, shrinking. can each hope they but think that -- the move I trends continue to movement out are start we're in where to do to

Catherine Mealor

what's credits? the Any trends on substandard, Great. us types that what of some of that? or into Or of a moved credits kind just flavor of give in Okay.

Malcolm Holland

but trend few nothing about anything would category. get real that systemic. There's don't concerned think there I there's was I or specific terms no there's asset C&I, few of in are a any a estates, there

Catherine Mealor

by initiated And just your CRE you All to position, ratio also lower think there the quarter, talked how want get you'll but on then and you've right. Okay. to the about your you buyback. buyback and third capital capital

-- active you So how maybe we your CRE Would how on with but we -- concentration should with we then also expect hitting to new the those balance be levels, do aggressive authorization? of do that kind X how buyback. and being you

Terry Earley

this it is you phrase I would What well. act, Terry. very is that on balancing a Catherine, say --

I around on on but expect usage to become which time the not credit, Our uncertainty aggressive you I the higher view us obviously. is, helps estate rates commercial will. -- overly real expect expect it's buyback, longer quarter, to and don't this given if be side, I for the underweight,

equal about think on a I expect I usage. X-year, underweight You buyback. expect life a weight would overweight, or this X-year wouldn't

So think we -- want -- think we undervalued. it's we it's

use patience is You But and us the impacts will next longer. X called it that rates see for the right think higher see how what course do quarters. I for credit we over now, given of as

Operator

Next comes Scouten Stephen question from with Sandler. Piper

Stephen Scouten

the CD curious some Terry, Guys, the X.XX% and you off I around new of I roll laid will out X.XX%. CD think, between pricing, that was

Just you might new put you kind to you on. what production where think able -- wondering of think be

Terry Earley

market into here wholesale back I few up been borrowing Well, think days. what's the last say first X%. [ I been and in it's costs there, bps very going well treasury, until seen actually, ticking quarter that's ] great teasing -- question. the XX We've the you pick so on with in look rates last or would in up going as a X-year

see I'm able amazing. But And It's past, little there, little what's be it new is in would come headwinds surprised funding fixed-income flat. with over seeing. upward not competitiveness and I'm going past I competitive several that so been to pressure been for irrationality I does of to I roll like I out think wouldn't that's quarters, is we're of production. to we've going on a say because a CD general that is markets, worry -- where one and our stable CD markets NIM still go to but the bit has It's pricing the worried portfolio, or very in and so the put the bit costs think I been the down a

up XX%. maybe So

XX%. up I we... think on the based downside be would what case Right now,

Malcolm Holland

I we've month I rates mentioned those CDs. XX% handled just rate. remarkably that the it's after mean retention consistent month, retention been

Terry Earley

has Yes. It very been good.

much profile is anything. is and in bps, and as we we achieve that accounts, on one some total cost of XX, The grown in us actually XX haven't went helped of love. quarter, lowered things early market we a some that other the very thing, the deposit It's actually as flat rates money we've in lost

total kind of now So having every I'm we're little the just great Stephen. -- that. And though. we're worried retention portfolio -- taking it's about a CDs. a hand-to-hand on approach, day we right combat We're

Stephen Scouten

to Yes. time? it deposits, things been And letting I the really it's over that tackling is, changes? and mix and there Are months. significant continuing next terms XX deposit blocking progress structural of more a improve answer my last just growing the out is Or may this right really and kind mean, question in over nice the of any play incentivizing

Malcolm Holland

the we see helpful. The acquisition, design, -- we I of acquisition, small want. for definitely with tackling. also And when to last It's and it's it. year That's It incentives. hired really some blocking by beginning focus the starting X effort on logos. an [indiscernible] customer to it's it, call new and problem definitely new It's now what been of guess, we it quarters is it's granular. you're at customer But incredibly last, just very

that. seeing success -- granular, so slow, we seeing takes movement. accountability it's long it's haven't some very haven't while that we you're a see you're accountability the time a mean, an discipline to of it think small when I movement. And had and but for I that here some of But it's some

Terry Earley

is which we've around something seen is Two time. talking a additional about, growth, talked about, deposit here in not comments. long franchise-enhancing What Malcolm's

with -- end is some hired And small to made to under $XX showing million. the going a companies we've structural. revenues line to going hire space, top continue see It's the we're is structural. time us, of dollars It concerted investment progress. on front focus We've business. it we'll you're our on that's great of effort That business revenues, where to takes push and the have

Stephen Scouten

helpful. Got last for it. very That's just Got thing then maybe And it. me.

rest quarter-over-quarter the think do year-over-year the have you much basis, Maybe in program On not business. of I and USDA for how of on the through kind funding so possible. but you was of year about a so mean, visibility that? that any terms more

Terry Earley

Yes.

Here's what say. I loan down expect our forecast would internally, XX%. we've government-guaranteed would taken I to XX%

harder loans need down to exceptionally approved. upmarket In loan doing the in Our move SBA in business USDA, well. is and it's market We get to credit size.

the think lowering all -- this we think what got internal what's about But that, did of just disappointing looks just, so thing rest I you it's believe think to do most And was of it as I it's said, our But the you good. the quarter. I the in that's mean year the revenue pretty quarter. led above as to I us forecast. --

Stephen, I'm So now. way answer to right that's best the it there

Operator

Next question comes Davidson. with from D.A. Ahmad Hasan

Ahmad Hasan

Gary for talk And X. Ahmad This you Hasan on is Tenner. about Slide can

You mentioned funding. term

X%. a over $X little around at have You maturing billion

sheet on balance replacing NIM there? the and the on relative impacts funding the costs reduce you just liquidity thoughts or will So there? Or any

Terry Earley

And X% between probably of and retail to terms evolves. relationship more wholesale to think it's think there. the as I to there. that -- anyway. see ticking what -- X to That earlier, to impact NIM was pricing portfolio of got closer wholesale there Well, market of clearly more X% up saying in X% to in market, the bps. is quarters the it's how X% I going X but I about XX X It's we're be not is we've course just the the on pricing And of cost terms The over -- cost. bps and market the just

think portfolio. insurmountable quick mean it's I to billion, get any going short it's enticed over rates don't down reprice mean, an -- I I'm as we to this on headwind $X our the headwind. It's I of do. stretch down, We inverted go there, of. can. as to able come a as want be long. see be we the imagination. reprice and I it's aware curve got stay to we we by relatively to goal by you got not think because you to just to to still deposit want I NIM we've mean the And down So one if

Ahmad Hasan

helpful. maybe loan pretty growth. That's loan nice And side, growth this then Great. the had on quarter

seeing geographically you're or? high-growth like guys anything forward like from sectors there, So any even that specific you is in Or are moving the coming about pipeline? excited -- markets it any

Malcolm Holland

is in it all from say would almost be predominantly few our it's I markets. Yes. markets. but a There outside, our of coming might

a in time, are their pipeline. as been And that lot candidly stage pipeline strong but as of is they've of some in early pipelines. it the Our

we're as So the C&I a on mentioned, effort on have seeing, small concerted we business focus Terry space. to commercial

market, new as seeing But to real are or time. estate of And that starting so the estate real over Things are suggest catch up super environment. some the the would level deals kind rate that predict on to where that's I pipeline growth. The some not we're back with active do going set there side. we're come industry be

may and replace to we our that is our if lose, will quarter. but by the down, one do of third we -- #X goals our Now goal -- we get concentration our

to bunch come than that at into a digits low have have payoffs loan there. on through of not we growth they we loans that assuming but load not right now. I'm up stronger go real And mid-single estate visibility than do we But we're have So see best. greater going predicting been, the that's pipeline some

Operator

] from comes Jonas with Julian Raymond question James. [ Next

Unknown Analyst

term? have you into a quantify just question. payoffs visibility you last in Are on I So that follow-up near the that the have to able

Malcolm Holland

a you clear I clear we visibility. Yes. into the not billion had something may bankers things I pay going end that off. about $X the little refinance, worth 'XX, board dart $X look of our think a we not get of 'XX, close -- But I but billion think in game, if get I we it's happen. would sell But estate to may don't and to some also believe loans to hope get at but of of -- back we things real that. bit we're mean day, what

quickly. you only things it's really -- to folks tell our our the borrowers, our with stay close to but our people, way folks borrowers So -- is change

with thought were fourth the so -- payoffs we what back quarter missed And our forward kind as looked in we not was on first of we first the quarter. quarter the

missed quarters, X previous we So at -- the good. hit we pretty it

we'll that we So back have like -- But the tell in go to you XX now, quarter. whether I quarter think second days from we'll successful. fourth we're levels can

Terry Earley

forecast ground And We back the payoffs. we [indiscernible] up, every month from test it.

I of good what mean, we've perfect? No. to really is But we is so next the think it over got visibility quarters. going X happen And

the year an about Our Malcolm adds haircut on bankers mentioned. payoffs, that you for the little element to but a longer as bit are optimistic rate certainly how scenario to higher have

Unknown Analyst

And expenses? expenses. noninterest it. shifting we that. can And guess out of increases quarter kind think about occur? us to Appreciate should I Got annual when your how over you remind merit

Terry Earley

in Annual X. merit April incurs

Malcolm Holland

right. That's Yes.

Terry Earley

We're franchise management we we're that deposits, as the were to chose I money. C&I and this space. going haul. fix in that's other here look, know they drive invest certainly ways going our sheet to words the can what's to create And balance for if line long in business thoughtful for value to to over value look with -- to be was my got they save as expectations. a small going were But us but we're in and going consensus we've try above to I I carefully

and depends the -- a it year going the we're variable the yes. -- of can't down see mean aren't But performance premiums on lot over course at of certainly, I insurance I goes. how So comp the FDIC all.

a on We're in other watch that so on not build, can't a yet, when that's -- we're audit. you internal helping process. do we're trying XX, it audit I is think And staff, co-source build we but And to this We of on full as business. a that's of have going we're to and just out have -- all. still the thing transition internal year you started process over to lot you go having the

our you stress of And So staff. this we've We've our start financial enhanced there's on management, double testing. our when management, information third-party process, load stress will. a bit vendor little risk our a our risk We've I you enhanced if expenses model mean security our enhanced testing. management,

look look, expenses don't lower. go for So to

Malcolm Holland

of most revenue-type were noticed people. positions you And those non-production

would pretty levels. I management I Terry so our the just quarter first good expense And -- about was think echo felt said, what

Unknown Analyst

Appreciate that. want I last horse And one NIM the me again. beat for here. to

think NIM the trough? benefits the sense given So conjunction restructuring, term? kind from about And completed the in the for and NII compression this in should near with will have you securities recently when quarter, trending of do NIM portfolio your a the how we

Terry Earley

I largely think it's trough right now.

in I But environment the be stable pick for think sacrificed securities think, funding What on I've longer we pretty belief: balance the mix. those we things over that. closely watching then and trade benefits then things to note, a higher don't and; the reversals could the cost; regard get from it to could got there's up, current really interest And of way wholesale that feel year. be NIM that go we with credit should if some. the I deposit rate the I'm X think

quarters that's but going loans longer, you best right see nonaccrual. for way. us just several for don't now, last higher pretty Interest don't So from reversals I the the have been know. into painful more for

X is thing say planning on rate currently we're Here's that cuts. the other I would

here, we're And forecasting involved. NIM so about what talk when I the from internally that's

Operator

with Olney Matt Our Stephens. next question comes from

Matt Olney

that Terry, guessing the to mentioned on interest but margin. yields the why I'm appreciate of around reversals. quarter. there? color this any quarter fourth just related last loan question it's you kind down reversals, versus I the guess, I went

Terry Earley

mean, Yes. one I is mean there's interest them. of reversals always at I a things lot certainly play. of

significant. anything that, than I And so it's too mean, not other

say deposits our deposit also relationship is with just the go there, some loan balances too, mortgage loans warehouse saw -- would up. especially the warehouse of factor playing and went a some mean, on balances seasonal I I you pricing So up,

And so into playing too. all that's that,

Matt Olney

Okay.

on there, Okay. the I back balance saw a this we been now end you end look just by by bank be for I the build portfolio then build liquidity at and about that the And quarters. talking few appreciate that. the to going we've the If securities build think think the And the then? liquidity you where the could be any color year. the complete year, do of by of that then would

Terry Earley

I you mean and behave will into us continuing quarter or a security I assuming see expect so the $XXX would as side, million loans to invest deposits forecast.

so So make one in say, January year the something a those ending is lines, to reasons well, have talk talked balance but is to along I we impact NIM. billion the about billion $X.X $X.XXX it say probably earnings the that an call. lot this, would and going the didn't about I of the I I -- between sheet that's on

gotten good we've we've a second of still, of too... was -- with going weigh to little trade. a it's of to the a a think that part I able bit. There bit offset But lot question your been loss

Malcolm Holland

I job we've the our But move to think in test. goal the year, go we ratio, fight. limits, within And topic. goal. The be the do to can but that say if And kind would by that ever of end -- end that on to which I would well be year. the of going would we loan always get within think that Just concentrations is listen, the that's our on, don't deposit we limits, sub say of already for We're big done are past wholesale first be done, the borrowings, us XX at goal be I lower. there another

Matt Olney

Okay. up I some more just the Any color look of the kind the side. you far color more there. were same I disclosed March, yields? as any like security think of I out following products as X%. back still the at the what color recent guess restructure topic on on new of just appreciate where purchases And kind that on on of And Is there. that we're yields north in the on

Terry Earley

of in But space. the much very income it's fixed barbell strategy a

If rates, find you product; can't you like the yields. two, the want to one, for you down don't protect

a had duration get be it's So like this X.X short, loss of years. to if paid was a like so of trade combination you stuff the

buying exact somewhere yield. probably risk-weighted we the It's we're by the So get [ be and high-risk And can but imagination. securities of don't in assets. cap probably have stuff stretch XX% or ], not XX% where paid the to capital-efficient, I it's shorter-duration XX%. any enhance sub

So the carries normal MBS XX. about ] and it's just [

to I and So Matt, -- do would to that's anyway, us expect continue that.

how Our to not usage focus on at things the on very think impact is risk-weighted efficient about its at that we look we change. or think about portfolio how and capital assets We going in space.

Operator

participation. Thank you. This for concludes the you your conference. Thank

disconnect. now may You

Veritex (VBTX) 24 Apr 242024 Q1 Earnings call transcript