Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Veritex Holdings Inc (VBTX, Financial) reported operating earnings of $32.2 million or $0.59 per share, with pre-tax, pre-provision earnings of $44.6 million.
- The company's CET1 ratio increased to 10.86%, indicating a stronger capital position.
- Deposits grew by $311 million or 11.6% annualized, showcasing effective deposit gathering strategies.
- The bank realized $80 million in criticized payoffs and paydowns, reducing NPAs from $83 million to $67 million.
- Net interest income increased by $3.9 million to just over $100 million, driven by higher loan rates and NIM expansion.
Negative Points
- Loan growth was negatively impacted by large payoffs, resulting in a decrease of $126 million quarter over quarter.
- The CRE concentration ratios remain a concern, although they are being managed below 300 and 100 going forward.
- Operating non-interest expenses increased by $6 million, driven by higher incentive accruals and OREO expenses.
- The USDA fee revenue performance was disappointing, with ongoing efforts to improve it.
- The excess liquidity carried by the bank negatively impacted the net interest margin and return on average assets.
Q & A Highlights
Q: Can you discuss the trends in your loan growth and pipeline, given the impact of paydowns and the current economic environment?
A: C. Malcolm Holland, CEO, noted that while the pipeline, especially in C&I, is strong, significant payoffs have impacted net balances. The expectation for mid-single-digit loan growth has been adjusted due to these payoffs, which are a sign of a healthy loan portfolio. Terry Earley, CFO, added that election uncertainty is affecting company decisions, and while the mortgage warehouse was strong in Q3, future growth may be challenged by current economic conditions.
Q: What is the impact of the hedge related to the margin, and will you renew it upon expiration?
A: Terry Earley, CFO, explained that the hedge, which was beneficially priced at 42 basis points, cannot be renewed at the same rate due to market conditions. The hedge contributes approximately $1 million a month to the NIM, and while it will roll off, other hedges will help mitigate the impact.
Q: How should we think about the margin as we move into 2025, considering your asset sensitivity and deposit cost opportunities?
A: Terry Earley, CFO, stated that while the NIM is not expected to expand significantly in 2025, maintaining it in the 3.20% range is feasible with effective deposit pricing and balance sheet management. The focus will be on pricing down deposits and leveraging new loan production rates.
Q: Can you provide insights into the USDA revenue outlook and how it should be modeled?
A: C. Malcolm Holland, CEO, mentioned that USDA revenue is difficult to model due to its lumpiness, with a good year involving 8-12 loans. The focus is on leveraging USDA and SBA businesses together to reduce lumpiness and improve predictability.
Q: What are your plans for the excess liquidity position, and how do you intend to deploy it?
A: Terry Earley, CFO, indicated plans to reduce excess liquidity by paying down wholesale broker deposits, investing in securities, and improving loan growth. The goal is to enhance NIM by optimizing the liquidity position.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
