Veritex Holdings, Inc.

Good day and welcome to the Veritex Holdings Second Quarter 2022 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. Please note, this event will be recorded. I will now turn the conference over to Ms. Susan Cottle, Investor Relations Officer and Secretary to the Board of Veritex Holdings. Please go ahead.

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 are 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, Kerry Early, our Chief Financial Officer, and Clay Reby, our Chief Credit Officer. I will now turn the call over to Malcolm.

Good morning, everyone, and welcome to our second quarter earnings call. Before we get started, I'd like to congratulate and thank my dedicated team on producing yet another exceptional quarter for Veritex. We're proud to serve Texas as a whole, and specifically the DFW and Houston markets, which are two of the strongest and most resilient markets in the U.S. Texas' focus on promoting growth, a pro-business environment, and increased job opportunities aligns to our core culture and mission. Slide four of our deck provides a small glimpse into the incredible statistics of our market we serve, which continue to provide ongoing opportunities to further our profile and scalability. Now let's jump into the earnings for the second quarter. For the quarter, we had net operating income of 30 million, or 55 cents per share, and a pre-tax pre-provision operating income of 46.7 million, or 85 cents per share. This pre-tax pre-provision is an increase of 5.1 million over the previous quarter, despite lower non-interest income of 4.7 million. The increase was fueled by a surge in net interest income of over $11 million. Obviously, this increase in net interest income was a result of some outstanding loan growth. As I mentioned last quarter, the loan growth came late in Q1, which started this quarter with a great deal of momentum. This momentum only got stronger during 2Q. For the quarter, Loans net of mortgage warehouse grew $791 million, or 44% annualized, and $1.16 billion for the first half of the year, or 35% annualized. This quarter was a perfect storm of many of our lending teams surpassing our expectations, payoffs reducing, and candidly, good old-fashioned relationship building. The quality of our growth was exceptional. It should be noted that between 25% and 30% of our growth in 2022 was from newly hired talent since the start of the pandemic. We look at this growth as an increase in market share versus economic growth as these lenders move their books of business. I've been saying for two years now how we are committed to new hires and looking to increase our talent, our experience levels, and investment in quality relationships. As you can see, these efforts are paying off. You can see on slide 7 the breakdown of the loan categories that stratifies the growth for the second quarter. I do wish to address the notion that this level of growth is headed into what many describe as a weakening market. Our credit underwriting over the past several quarters has only become more stringent with increased stress analysis and continued large equity contributions. The Texas economy continues to produce outstanding results and outperform national numbers. The best metric I've found is that Texas sales tax was up 16% over the prior June. For the first 10 months of the state's fiscal year, sales tax revenue topped $35 billion, a year-over-year gain of 20%, which is more than double the rise in inflation. Understand that these are backward-looking metrics, but we have not seen the distress with our clients at this point in time. We have seen a few projects pause due to rising rates or supply chain costs. With that said, we expect our loan growth to slow in the back half of the year to 16% to 18% range. Our deposit growth for the year has also been exceptional, with 2Q growth of 630 million, or 32% annualized, And for the first half of the year, 1.2 billion are 32% annualized. Our non-interest bearing deposits have consistently stayed in the 35% of total deposit range, even in this rising rate environment. I couldn't be prouder of the job our relationship managers and our support functions have done to continue to build our bank. Like growth, our credit metrics continue to trend in a positive direction. NPAs fell for the seventh consecutive quarter and now stand at 40 bps, down from a high of 111 bps at 3Q2020. Chargeoffs for the quarter were virtually nil at $909,000 for the quarter. Our ACL remained at 1.02% after a loan reserve expense of $9 million, primarily driven by our strong growth quarter. We have and will continue to be diligent and conservative in our underwriting standards and the selection of new credit opportunities. I'll now turn the call over to Terry.