Veritex Holdings, Inc.

Good day and welcome to the Veritex Holdings first quarter 2022 earnings conference call and webcast. All participants will be in the listen-only mode. Please note this event is being recorded. I will now turn the conference over to Ms. Susan Cottle, Investor Relations Officer and Secretary to the Board of Veritex Holdings.

Thank you. Before we get started, I would like to remind you that this presentation may include forward-looking statements and those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ. The company undertakes no obligation to publicly revise any forward-looking statements. At this time, if you're logged into our webcast, please refer to our slide presentation, including our safe harbor statement beginning on slide two. For those of you joining us by phone, please note that the safe harbor statement and presentation are available on our website, veritexbank.com. All comments made during today's call are subject to that safe harbor statement. Some of the financial metrics discussed will be on a non-GAAP basis, which our management believes better reflects the underlying core operating performance of the business. Please see the reconciliation of all discussed non-GAAP measures in our filed 8K earnings release. Joining me today are Malcolm Holland, our Chairman and CEO, Terry Early, our Chief Financial Officer, and Clay Reedy, our Chief Credit Officer. I'll now turn the call over to Malcolm.

Good morning, everyone. I'm pleased to bring to you our first quarter financial results. Operating net income was 66 cents, or $34 million, and a pre-tax, pre-reserve of 1.71%. The quarter had many positive attributes that continued to set us up for long-term success and increasing earnings growth. As I think about our growth during the quarter, both loan and deposit growth exceeded our expectations. Yet the majority of the loan growth came late in the quarter. Our average loan growth from Q4 to Q2 was only $107 million, producing less than expected revenue for net interest income. But our ending loan balance was $362 million greater than Q4 ending balance, resulting in a 21% annualized growth quarter and a great starting point for Q2. The growth came in C&I, $87 million, CRE of $222 million, and residential of $61 million. Just as encouraging was our deposit growth of 29%, with the majority being non-interest-bearing DDA, which grew $225 million during the quarter. The loan pipelines have actually increased and remain robust and should set us up for a similar to higher loan growth for the next several quarters. The why behind our growth profile continues to be the same four things. One, focus on constant upgrade and hiring of experienced and proven talent. Two, operating in the strongest growth markets in the country. Three, continued market disruption. And four, a commitment from my team that strong risk-focused growth is a pathway to enhancing our company's value. On the credit side, we find all of our metrics continue to trend in a very positive direction. NPAs have declined for the fifth consecutive quarter, moving down to 0.46% of assets from 0.51 the previous quarter. Criticized assets decreased 21% year over year. Past dues remain in an acceptable range, while total charge-offs were $4.8 million centered in two acquired credits, which were previously reserved. I'd like to spend a few minutes discussing the talent we continue to attract to our company. As you're aware, we have made it a major priority to invest in top-notch talent, both on the client-facing and non-client-facing side. For the quarter, we hired 47 new people, 20 of which are new position ads and 27 replacement ads. Of the 20 new ads, 10 are on the production side. This does not include the three seasoned lenders we hired in the Houston market a couple of weeks ago. These three hires and the teams they will assemble make a major statement to the Houston market that Veritex is committed and positioned very well to continue our organic growth in this market. Our focus on talent and finding the right people, and most importantly, that fit our culture and share our dedication to quality growth, will continue to drive our value proposition.