Veritex Holdings, Inc.

Q2 2022 Earnings Conference Call


spk_0: welcome to the varitek hold a second quarter two thousand funny to earn a conference call and webcast all participants will be in a listen only mode please note this event will be recorded i will now through the conference over it's miss susan caudal investor relations officer and secretary to the board of varitek holding
spk_1: please go ahead
spk_2: thank you before we get started i would like to remind you that this presentation they include forward looking statements and those statements are subject to risks and uncertainties that could cause actual and and to prepare to rebuild to differ the company undertake no obligation to publicly revive 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 flights to for those of you joining up by phone please note that the safe harbor statement and presentation are available on our way the site varitek spanked dot com all comments made during to they call are subject to that third quarter statement some of the financial metrics discussed will be on a non gaap basis with our management believe better reflects the underlying core operating performance of the business please see the reconciliation of all discuss non gap measures and are filed eight k earnings really joining make today or malcolm holland our chairman and ceo jerry early our chief financial officer and quite really are cheap credit officer i will now on the call over the malcolm
spk_3: good morning everyone and welcome door second quarter earnings goal for we get started or like to congratulate you for my dedicated team i'm producing yet another exceptional quarter barbaric decks were proud to serve directors as a whole and specifically the dfw in houston markets which are to the strongest and most resilient markets in the us that's his focus on promoting growth of the pro business environment and in greece job opportunities aligned to our core culture and mission blood for forward that provides a small glimpse into the incredible statistics of our market research which continue to provide ongoing opportunities to further our pro file and scale ability now it's jump into their earnings for the second quarter for the quarter we had net operating income of thirty million or fifty five cents per share and a pre tax free provision operating income of forty six point seven million or eighty five cents per share this greek pre provision is an increase a five point one million over the previous quarter despite lower non interest income of four point seven million the increases few by a surgeon net interest income of over eleven million dollars obviously this in greece in that interesting guy was a result of some outstanding long growth as i mentioned last quarter alone growth came late in que one which started this quarter with a great deal of momentum this momentum only got stronger during to que for the quarter loans net of mortgage whereas grew seven hundred ninety one million or forty four percent annualized and one point one six be for the first half of the year thirty five percent annualized this quarter was a perfect storm of many of our lending came surpassing our expectations a also reducing and candidly good old fashioned relationship building the quality of our growth was exceptional it should be noted that between twenty five and thirty percent of our growth and twenty twenty two was from newly hired talent since the start of the pandemic we look at this growth as an increase in market share vs 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 our our experience levels and investment in quality relationships as you can see these efforts are paid off give v unplugged seven the breakdown of the long categories that stratified 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 week in a market our credit underwriting over the past several quarters has only become more stringent with increase stressed analysis and continued large equity contributions the taxes economy continues to produce outstanding results and outperform national numbers the best metric i've found is at taxes sales was up sales tax without sixteen percent over the prior james for the first ten months to the states fiscal year sales tax revenue job thirty five billion a year over year gain of twenty percent which is more than double the rise and inflation understand that these are backward looking metrics where we have not seen the distress with our clients at this point got you've seen a few projects past due to rising rates or supply chain cause with that said we expect our long growth to slow in the back half of the year to sixteen to eighteen gross that range our deposit growth for the year has also been exceptional with to queue growth of six hundred thirty million or thirty two percent annualized and for the first half of the year one point two billion or thirty two percent annualized are non interest bearing deposits have consistently stayed in the thirty five percent of total budget range even in this rising rate environment i couldn't be prouder of the job or relationship managers are support functions of done to continue to build our back like growth our credit metrics continue the trend in a positive direction mps fell for the seventh consecutive quarter and now stand at forty bibs down from a high above one hundred and eleven bibs at three to twenty twenty charges for a quarter or virtually nil and nine hundred nine thousand for the quarter our a remained at one point out two percent after alone reserve expensive nine me and primarily driven by are strong growth quarter we have and will continue be diligent and conservative than our underwriting standards and the selection new credit opportunities allowed to end the call over the dairy
spk_4: thank you mountain
spk_5: before and it started in specific pages and results it's important to remember that qt was the first full quarter since or capital raise in march the capital raise was critical
spk_3: given our anticipated alone growth for que to however the capital raise inherently makes earnings per share and return on tangible common equity metrics more challenging starting on page six qt was a very strong quarter for barricades with one exception net interest income grew almost sixteen percent on a link order basis and expenses were in line with previously provided guidance which include the talent investments we've been making since the beginning of the pandemic additionally credit metrics continue to improve our weak spot which is largely out of our control was the income i will discuss this more later in my commentary we don't have a presentation table on operating leverage but let's start a discussion their revenue growth since que to twenty one has been nineteen point two percent even with weaker fees and key to expense growth over the same period has been just under fifteen percent this results in about four and a half percent a positive operating leverage if you back out the impact of one point six million ppp face during you to twenty one been operating leverage improved seven percent those are strong result that indicate our investments and talent which are significant factor in our growth profile are generating strong returns are operating return on average tangible common equity with down to twelve point eight percent and q do is the capital raise and lower fee income colonel tangible common equity is average sixteen point six percent over the last four quarters
spk_5: protect his pre tax free provision operating return on average just it was one point seven six percent freaky to miss averaged one point eighty percent for the last year reflecting a growing but efficient company
spk_3: cable but by for share has grown back in point seven percent over the last book workers after adding back the impact of the dividend landslides seven malcolm's already mentioned alone growth for the quarter the slum growth includes the purchase of a hundred thirty seven billion dollars and owner occupied mortgages on slide eight advances on the a d c portfolio are approximately four hundred million per quarter average mortgage warehouse balances increase thirteen point six percent in the second quarter and we're certainly pleased with these results given what's going on in the mortgage industry this portfolio represent six percent of average total lunch and que to skipping the page ten net interest income increased by lem point five million or almost sixteen percent i'm she want to eighty four point five million in to the two biggest items in the increase or growth which accounted for some point four million dollars of the increase in the fed raising short term interest rates which race which represents about two point four million an edifice margin increased twenty basis points from she won the three point four two percent the nim got stronger as the quarter progressed given the timing of the fed rate hikes and a lag in the recent of one month so for and live or baselines the name for the month
spk_5: a gym with three point five five percent and has strengthened further in july it's contractual loan deals on the portfolio have increased another thirty one basis point three mid march or internal modeling indicates we should achieve five built with him expansion for every twenty five basis points and fit move
spk_3: are you looked a model that interesting computer period to keep the following him on first the any balance in earning asset or five hundred and eighty two million dollars above the average earning as for que to creating a significant positive to jump on given market expectations of a hundred and seventy five basis points and additional federer
spk_5: hikes and twenty twenty two this will add significantly to net interest income protect his ass that sensitivity has decreased slightly since que one the so as are downright risk we have intentionally putting on fixed rate at that on the balance sheet to mitigate falling short rates and twenty twenty three
spk_3: skipping to slide twelve is a said earlier fee income was the one week point barbaric act during you to not everything can decline by four point seven million to ten point four million for the quarter revenue related to our government were government related businesses drove the decline daniel sale income decline four point one million dollars additionally there was a one point three million right down on our as be a and us be a servicing assets partially offsetting these plans or increases and deposit face equity investment income beer the of the yacht indefinite drawn mortgage and interest rates swap fees in fact you to swapping come with the highest and grow texas history turning swipe they're paying you to was a puppy quarter for north avenue capital as the us the a centralized all funding decisions in washington after lunch may and outstrip federal government budget allocations is significantly impacted our ability to get loans was this was compounded by rising interest rate and economic and certainly which resulted in gainesville premiums going down approximately forty to fifty percent additionally the rising interest rate resulted in the back in the valuation impair impairment of those assets that the service yes it on their their the previously
spk_5: as it relates to que three twenty to do with our understanding that us the a has found hundreds of millions of dollars of additional funding for their be an hour program which improves our chances of getting a few us the a loans closed the new fiscal year for the government starting que for so funding should not be a problem from that point forward or as be a business
spk_3: with also impacted by lower gain or sell premiums and the same range as they were in the us the a business and also a servicing bearman it is likely that if django sell premiums and the u s da and as be a market remain under pressure that varitek so choose not to sell a portion of our production rather we will portfolio the loans
spk_5: given their strong pricing and favorable capital treatment
spk_3: no this we're going to make the right long term economic decision for their decks even if it means foregoing short term revenue
spk_6: moving to thrive
spk_3: funded by human crete approximately ninety percent you to buy the m b a is forecasting a two percent decline for the same period drive been able to maintain their gain also margins do the high percentage of volume coming from sun belt states and a great reliance on purchase business vs reefer there are aggressively managing cost and staffing levels while successfully hiring strong origination games in different parts of the country they could add meaningfully to forecasted closed one volumes going forward it's been one year since we made that investment in thrive over that period of time we generated a pre tax return on our investment of up between thirteen and fourteen percent in what has been a very turbulent mortgage market operating expenses on slide fourteen increase two million dollar suit you one the biggest driver the increase is marking cost associated with the vertex bank
spk_5: contrary golf championship which is a tournament held in arlington texas during the month of april so forth and twenty twenty two been purchased hundred ninety four million dollars an operating expenses we remain confident in our expense guidance the hundred and eighty five to one hundred ninety five million dollars for the boy year moving forward slide fifteen a strong quarter on the deposit fraught with growth of six hundred twenty eight million dollars with rope
spk_3: being driven by our community bank at thirteen point seven percent link quarter annual us where we run a sub fifty three percent loan to deposit ratio
spk_4: the rest of the growth is from my mortgage warehouse business interlink and brokered tom deposits are offsetting outflows intercourse on a banking division
spk_3: total deposit cause increased eleven basis points the twenty eight basis points in response to the fed increasing rates that hundred and twenty five basis points during the quarter on slide sixteen term capital group thirty six million during the quarter to one point three billion dollars see eg one ratios have expanded by twenty three basis points year over year as a quarter and we had significant excess capital bug regulatory minimums minimums close to cattle conservation buck looking forward on capital we believe that moderating one growth coupled with higher earnings from rising interest rates of strengthen the cavalry ratios additionally we are evaluating a credit risk transfer on our movies warehouse portfolio to lower risk weighted that this transaction should at approximately thirty basis points us are eighty one lab
spk_5: well when it's complete that i would like to turn the call back of the malcolm
spk_3: thank you very we had an exciting quarter and very focused on the positive ah madame we have created by or upgrade and power and focus on scale as i've mentioned many times or focus has always been on hiring top quality gallon for the quarter we are sixty five new employees sixteen of which are all the production side are hired of producers will slow a bit now that we have many of our teams at full capacity but our overall and that's with and talent for varitek will continue we've added a new pipeline of potential backers with our first class undergoing the vertex banker development program we have sixteen participants five internal and eleven external that are part of a one year development program that focuses on building eat your tower well sept thirteen college students and a vertex summer intern program which is now and it's for year we are committed to developing the back in leaders of the future and know this pipeline of talent will benefit us for years to come a quick update on the interlink transaction we continued have detail dialogue and work with our regulators with full expectation of the three que closing as previously communicated airline continues to grow and provence very well the future continues be bright for a company we have the right team and the right mark kids and we continue to feel strongly that we have a for a man on building continued back for that i liked open the line up with any questions
spk_0: as a reminder to ask a question he will need to press taiwan on your telephone again that is taiwan or your telephone christian bible that particular in a roster and our first question is from that rabbit in front office your line is now open
spk_7: thanks this is actually taylor stepping in for brett a question on the i'm gonna get guaranteed just a reminder you know if you know what made that flowing off and about shooting that is already sort of read through on the expense guy that we should think about going forward
spk_3: no i mean that this is a temporary every thing bad at we we strongly are committed to the business or evading are investing in our and and and and building that business more as they would just right now with rates going up and with this temporary blip in funding from dc and our government ah where it's business as usual for us what you know we can tx pipelines are full and we continue to hire the the know in that business so but you know lucky if if that jail cell margins gonna stay week with these are great balance sheet assets given that she got a twenty percent risk waiting for capital purposes as a enough so if if if the economic long term economic decision is it the best for us to hold we're going to have
spk_5: although we're going to keep building the business cover that much capital right thanks are also on the marketing expanse me and us that ah a while but you treaty that the benefit from that with a beat both sides about sheet or anything else specific from wrapping up
spk_3: you know where where we have a go at night marking budget will continue to market the way we market we we have spend heavily in the gulf industry and continue to add to do that despite the many changes and that and the tours right now
spk_8: a good and
spk_7: on and a hires anything specific and as and obviously that's been
spk_5: the eating as you mentioned on a earlier by tab and he said especially focus or just general general producers a job that that you've been having a mainly yeah i'm a week we've gotta get somewhat of a full team across the board with the exception of a few areas
spk_3: in our commercial air as we continue to invest then we feel really good with the votes we have and the recent hours and east and the been very very positive and the momentum down there is just it just starting to build so and again i just reiterate that a lot of the the new business that we add this is share grab and for us but that's a real positive but been i think we're in a good place on the hiring but we still have forty seven open positions there will always be and
spk_7: oh thank you for your commentary present
spk_9: and your next question comes from the line of pretty daily with kbw your line is open
spk_10: hey thanks want to go
spk_11: a bright mortem bray
spk_5: the so the game on sale premium yeah comedy and in the second korea was that something there that more just a side of the time to that related the the rising interest rates do you expect that that bounce back you what what's the forecast on how you think about going on sale going into that business or the just kind of after the market and it's hard to forecast
spk_3: well the i think a lot of it is driven by rising rates and economic uncertainty and that's making even with strong prepay protection in the us the a space i think it's making the in the the buyers investors in that paper less aggressive in their bedding and and so i think that that's what country be it now i think once there's been the the the terminal rape or fed funds and the timing of the of the record moving or short term rates moving down is what i think's going to be key and and just greater economic certain the on the the know are we going to have a recession out the past your accent or is gonna be i think that's when premium start to strengthen so much general view is that premiums will probably remain weak through the balance of the year i expect them to start strengthening as we get into twenty twenty three so that on the prey
spk_5: amy i'm side on on the funding and as i think will be will be closing loans the question is are we just gonna hold are we going to sell and and so i expect close by yum now that the u s the a getting it it's getting it's funding lined up and we're heading into a new fiscal year starting october one i expect of a really strong back half of the year
spk_3: on the funding side but major stall end up in portfolio we just got really good implications for net interest margin growth and fatter up and at any pets way it happens so be it you know ah we just we have a way looking at the present day the cash flow of sell vs whole you're discounting at or cause the capital and when that to believe the time for it to spell and your breakeven period if it gets too short we just hold we're going to stay that methodology because it's the right long term economic decision for their decks
spk_10: yeah that that makes sense
spk_5: but the just for expectations when one key was such a great quarter of five million dollars of the there yet to us closer to one know an or longer one i am made you think the to cure a this kind of what we should expect for the back half of the year or already think it could be better i think it a think i would expect
spk_4: that it will be it will be a little better but not you know i don't think it's it's back to ah i think i think i think he three will be the weakest that thank you for will get better
spk_3: that will get back to q one levels hard to card to know brady ah but but but i think of this is true for the f b a business as well i don't think it's gonna be great and to a mean a roughly right now only half our production beach or ertl spell when we look at the gain also premium so ah i would be pretty conservative on that but that you know the thing i feel the bathtub i you know in terms of what's going to offset that we made a big strategic car to been beginning of the quarter an interest rate swaps him and we had the best for ever and key to trust me it's gonna be even better than that and keep it cause we can see what's in the pipeline there so there's some offsets but i wouldn't go crazy facing key three getting overly optimistic that i mean i think we have better than que to around the income because the interest rate swaps i think the government guarantee business is gonna stay week on the or felt that the the court and then improved more people
spk_10: erica i got that makes sense then finally for me
spk_5: you know growth is slowing here still going to be great growth the or growth is slowing the profitability of joined the benefit from higher rates your sounds like you've got to get a little boost to capital from the crt or where else feel so that you know the stocks at a times earnings so you
spk_10: do you start thinking about reengage than the by back at this point given all those dynamics
spk_3: now now just not the right time and of candidly investors rather addison best in the future growth i'm not into the company and that's where we're focused but i wouldn't i would not model and any buybacks it's definitely an attractive valuation and historically before we had such a strong growth profile well the answer would have been different would have been saying yes but that's not where we find ourselves now and so that would move will deploy at all our capital generation even you know even what you saw that cbt one went down the nine twenty five yeah i need that moving back up and so i you know with the growth profile that that we're talking about it's pretty neutral the capital body that build and i needed to build our he he wanted to eat up year over year it is up your of your twenty two bit
spk_12: okay
spk_13: i great thanks for the target
spk_0: that a bright
spk_14: and your next question comes from the line of matt only with season think airline is open
spk_15: hey thanks why everybody
spk_16: i got a mountain ah
spk_17: sounds like a long road pipeline remain strong the back half the year when it would love to hear more about the plan for funding
spk_16: the growth
spk_3: the corner particular and qq he took on will fhlb ah i guess you're happy and a link deal closing at some point or quarter so just you all together to let the he can either the thoughts on on funding the growth the back as we're back
spk_5: yeah that's a great question are you know we have started to participate of the downstream bank and interlink even before we had a closed and we we started doing that in in in the second quarter at the optics with the broker dealers that have us as the acquire going ahead participating is just she's pretty compelling from their perspective so that that's what we did so i would expect you that we've been saying all along that we we thought we probably find up the one and a half billion dollars with and or like ah a it in twenty twenty two and that so i expect that could be a big contributor also think that bomb
spk_3: our our mortgage warehouse business continues to dead to see good opportunities and the yeah and the the into the deposit space there are the escrow deposits those type things were were saying were able to achieve good spread about you see our rate
spk_5: and then let you know our community bank ah continues ah to really produce great results for us on the deposit side got a strong emphasis on treasury so i think it's gonna be a combination of all those things are map that are gonna that are going to to to fund the growth in the back half are all i can say is with the
spk_3: the growth that the industry say and i'm glad that we have been or lake ah you know pretty close to closing because i doubt it without it on the it would be a much much more different and challenge a water we read our up a set of plans for our bankers on the deposit side and damn or start the season a off from that and the will continued oh focused on
spk_18: incentives on the about sad but the community back at it unbelievable growth quarter and expect that there that will move into the corporate side here also since we retain that planet them and we change that the beginning of the year gap percent of the ever heard of that funding was going to get right that much greater emphasis on
spk_16: on the the day of deposits yeah
spk_3: yeah i agree on the time he had a should be should be good
spk_5: any color on how much of the deposit growth in qq were from some of those participation that that you mention terry
spk_4: i mean if it's prey spray of the crime and mentioned for intentionally and they all pretty significant robbers with the one downside being our correspondent making division and you can see the by banking division because of what's happening with and growth across lung growth the costs cross the industry and the fed
spk_16: poland liquidity ah the scoop them so we think a pretty steady decline in that at the you know and earlier in the first quarter it was it was the public finance so on and you know mad mad they're all all significant contributors to this quarter six hundred and twenty eight million dollars probably the largest was and early but the rest are awfully awfully significant and become contributors aka a couple i guess is he can step back that the kind of the same same discussion with interlink
spk_5: house we think about how much of the future growth majesty and drink you that next year thereafter and much longer
spk_3: do you expect to be funded by the inner and a leg
spk_5: i would say you know a third to a half probably something in that range
spk_16: you know if we're if we're growing lungs in the mid keynes at you know i think we've through through our banking initiatives and treasury initiates community bank cetera we can we can find you know ah single low double digits something like that and then the rest the come through and are like in are like it never the sole answer it shit the funding gap and make up the difference the golf and the to markets we operate and of be dug in east and the lung growth opportunities with strong credit or far outstrip the deposit on the opportunities
spk_3: and and and just lafley you mentioned the community bank author had some really good deposit quoted quarter how would you characterize the bank deposit pricing with and and natural market and would have had the compare to them the other peers are within that the houston and idiot teddy market i would say it's pretty well a it's in line with the market right now i think y'all have heard me say for the past few years come back a few years prevent any a call that he had to hand combat and end and and that i felt like the after you with the most irrational deposit pricing lock it up slain in my career
spk_19: which covers a long time and a lot of geography and it's just incredibly competitive month personal view is that that level of competition will return will it be queue for would be early next year i'm not exactly sure but i think you yeah we have too many competitors
spk_20: ah it's i think it's gonna be prepared for right now that has manifested itself yet pretty rational at the current up
spk_0: okay thanks yes
spk_21: think that
spk_22: and your next question comes from in line of sadness us from pfeiffer sandler christmas eve just asking
spk_9: read
spk_23: i'm sorry brad he says disconnected
spk_4: well ago go to the next question
spk_3: your next question is from my clothes from raymond james
spk_24: caroline is now open
spk_3: eg morning as thanks for taking my questions object i follow up on that the morning just to follow up on of funding question with within our like and understand as lot of movie pieces obviously good core a polygraph his quarters you talked about am i think you guys talk about you don't get no longer deposit ratio somewhere down unfair kind of amid voted mid eighties if i remember correctly it that is that still the is that smell the outlook and then i think in response the math question yet said it our mid teens growth rate might be acceptable it sounded like for for next year that kind of still what we're which bacon at this point thanks yeah so mid mid teens is what we're looking at for next year in i'll call it fourteen to sixteen something along those lines a lot a lot of that is already embedded you look at our unfairly commitments the know we feel we feel very confident that we can we can meet those those numbers you know what they like at early the academy here has not as not slowed down much of their few projects they pull out the table or three things maybe been put off that the most part it's still got a crazy the first question on the and are like a forgot exactly what you're asking michael apologize for just around or the targeted kind of lager deposit ratio
spk_5: oh yeah yeah yeah had a big you talk about low to mid eighties is kind of the and right a guy our goal is our goal is to totally get it in the mid eighties and it adds a warehouse abs absent warehouse we think that you know it's just that really stop balance sheet and so the yes the answer is absolutely year you remember correctly what what tag on the malcolm's comment you know with with earnings during profile going into twenty three coupled with growth range he just gave you that will allow us to a creek capital to eat he wanted federal reserve that that of pretty good that's that's a that's a good place for their tax is is that type of lung growth that type of our next profile that type of capital c eighty one growth so got it in and then maybe it's a follow is he night reshape the the updated has to be in the in the deck but as the in early you know deposits grow and you find out that the betas obviously gonna increase please give us an update on what's your beta assumptions it would be over the next couple quarter specs
spk_3: for the for the whole company or for and are like a have company for the i get out of cumulative we believe as we get through the end of this year and in the next to starting the first few quarters the next year we see a cumulative deposit beta in the in the low to mid forties ah that that's that's what we believe right now that's factoring in and are like ah so that's that's why you know if we got a beta key motive in that range were off our floors on the loan side given what the beds already done that's what gives us confidence and in the near expansion with
spk_5: think we can see and aren't you know that said in the i'm in in june was three fifty five and we've already thing that thirty one before it if increase in our our contractual a girl rates on a loan book and they the first half of the month so we're feeling pretty good that and you see that in the table on the interest rates it's devotee just the absolute growth and dollars though pretty encourage nine hundred and a good the positive operating leverage going forward very very helpful and then maybe it's finally one for me just yeah sounds like guy maybe the expense fair
spk_3: tragic as long as you had a little bit less than of the map and he said that the teens are pretty stacked up at this point
spk_5: i guess moving into twice or am not try it and you down here then are you gonna continue to be opportunistic but your higher costs have have gone up you mention that the teams are a relatively for this point
spk_3: it would seem like expands grab the yeah could really decelerate you guys who get some really strong i positive operating leverage is we think about next year just given your the and i trained in that yeah the movement and earning athletes to be talked about i terry the is it is it plausible to think we could see a free big you have got down in the efficiency ratios you get that leverage back yeah yeah yeah you could it you can expect to see meaningful improvement in the efficiency ratio over the next four to six quarter's with what's going on and i mean you know i could ask a fair amount of what you think about your expense growth and then you know it's than hear it fourteen point seven percent year over year
spk_25: but when you generating quote twenty two percent backing out the effect of ppp faith ah yeah you know in and twenty twenty one that you know it
spk_3: why don't really a lot of they gotta say a whole lot about expense growth as long as we can generate that revenue growth the on the other thing is even if you back out the effect of rising grapes apples are operating leverage is still close to five
spk_26: so expenses are going off but we're driving the revenue and an and up on that operating leverage in an incredibly weak the income quarter for us so
spk_3: hum think the model is working and and but i do think you can see significant improvements in efficiency as we moved to the balance of this you're heading into twenty for three week we like our expense guidance you know we haven't had one eighty five to one nine five you asked about twenty twenty three may we don't have any here huge things on tap candidly our teams are quite for i will be opportunistic it's fish in a couple different areas but i think there's a chance that in a we're gonna play be fairly flat there's gotta be some wage inflation obviously i think it the first the are all of us are gonna have to deal with that when i they all the industry you gonna have to deal with some wage inflation i'm a guy yesterday i think it was google or somebody said we're going to go and get re raises right now no one that given just to keep everybody around so yeah all that stuff may start that but i feel pretty good of our bad our expense and you know candidly you start looking out for and we look at fifty ratio little there's no way we can be that that good
spk_27: because if there's gonna be some some expenses and some cost that damn you know you may see some technology things next year he may see some treasury investments of those types of things little drives and
spk_5: deposit injure deposit growth but i feel pretty good i'm in twenty three looks pretty good in carries ride i did you know the the dead horse but as the increase in revenue is not just the right thing by any stretch the imagination it's really kind of it seventy five twenty five deal
spk_12: historically this last quarter and so that's a gift that keeps giving when it's when it's on the growth that it understand all of the expense that might be get keep in mind the and only costs will come in so but that's not you don't go get me wrong
spk_28: i find the get that revenues should out strip that to on the iran
spk_9: on the knowledge that yup that that the as the young for pressure
spk_23: i appreciate autologous thank you
spk_3: pay x michael
spk_29: and your next question come from the line from north of with piper sandler
spk_30: your line is now open bread
spk_5: do more yards
spk_18: the lord i'm glad that about
spk_31: yeah don't know what happened there on
spk_3: call dropped or something
spk_18: the one of didn't put you back
spk_3: read exactly i don't know
spk_4: let's see i i also apologize if i'm this is when i dropped but the the chart that you guys added on on flight an arm and the it's really good i just wouldn't make sure i understand i'm kind of some of the assumption bear the base case of four hundred and five million of that interesting com which would imply over one hundred million a quarter is that if you do not think that just if you
spk_3: just leave what you're just like about she car one where it is ah you know no mid no further rate increases no further growth and then as we move up a scale there that would reflect rate increases but not necessarily growth is that it that allergy you to think about those numbers absolutely assuming a the shock yes but but as opposed to it as opposed to a ramp so but now you're thinking about look we did ninety five million dollars roughly at know that well we did eighty five million i'm sorry in in in that interesting come but we think about what the margins doing in june versus what it was ah you know that's thirteen beeps higher and every be up to the about a million dollars so our run rate just on a static balance sheet is not eighty four and a if not eighty four and thirteen it angel last vote so that they don't misunderstand but it's significantly as another for work for the call
spk_4: or million dollars just right on the jump off if you will yeah so yeah yeah
spk_11: getting to a hundred million you know getting over one hundred million dollars in quarterly netting of your income is is pretty pretty doable pretty fast
spk_3: he will get out yeah yet either getting to a hundred million in up getting over one hundred million dollars and quarterly net and brought income is is pretty pretty doable pretty fast right me think about guy growth
spk_12: it didn't the again make our right
spk_3: go that route of that which we've already seen some growth and three kids
spk_5: church and that chart and that short on page can with that include your forty to forty five percent correct you motivate us option as well
spk_12: absolutely
spk_3: yeah okay and then i'm none because the follow may be on the provision it look like i'm new growth your provisioning it toward the right around ninety basis points on t v getting that makes sense going forward odyssey over time that would get paid kind of church and that short and that short on page stand with that include your forty two
spk_18: forty five percent correct you motivate us option as well
spk_5: absolutely
spk_4: okay
spk_3: and then i'm just going to follow may be on the provision it look like i'm new growth your provisioning it for the right around ninety basis points
spk_5: he did it that makes sense going forward odyssey overtime that would get paid a kind of bring you know the reserve down depending upon charge awesome odyssey you know other i'm she can make adjustments know for for other factors that is that the that kind of the way you guys are thinking about it
spk_32: i'm thinking about that the reserves think pretty flat word is now ah think we're heading into a percentage wise for that our fly out the one or two somewhere that range feels good to me and knowing their said there's so much economic uncertainty and even though i'm in the camper i believe the received as either
spk_9: ian or about the be in a recession i don't think that recessions gonna come to taxes because of it as you look forward as the gdp forecast for movies so i think it but i do think we have to be cognizant of deteriorating forecast and so we're going to have to continue to provide for that the to a degree thought that yeah that's the
spk_33: best advice back and give this is what you are object goal it's gonna keep the reserve level in that one okay range it and and if we need to provide a little bit more do that so be it
spk_5: perfect that you guys are will appreciate it the like you bet
spk_34: and last question cause the line of carry tanner from the a davidson here line is now open
spk_18: thanks good morning
spk_3: again when asked about them pay one for the longer than a to the area you talked about kind of what you think from a percentage basis for just taken up the main categories you grow up i should construction taste different up at a fairly steady pace given the on fun commitments by between commercial real estate and single family or which with the drivers of of of go
spk_18: wrote this quarter or any shifting kind of work the next might come from beyond construction
spk_3: yeah mena i've our commercial teams are a wrap it up their pipelines are are really quite father industries that they're represented are quite diversified in of the houston game is is just getting some sea legs under and we've already looked at a couple of three deals for them the in others it is a big deal in dallas
spk_27: that we're going to close or have close in the insurance pays
spk_3: the gets it
spk_34: followed solid relationship there's some more of that coming through i really think i look for the commercial side to really be the driver of it
spk_3: if you're absolutely accurate we're already embedded on the on they get a disease patients are those deals are book in but we also look for a we look for a pretty pretty big payoff back half of the year forecast not allow their backs forecast on the pipeline that i can have never seen one like what we're doing and the the level of granularity and in in funding and pay off i mean where serial forecasters as it relates to that and so we need every week and we're looking at every day or granularity on whether the know it's going to happen or not app and but ah you know i think the commercial real estate space is going to slow and is slowing
spk_5: the and part of it is is underwriting have been removed or i don't write up a couple of points something we were run and he also stress analysis amid fours an hour run it i'm in mid sixties and for some field on bethel out as nicely hidden in those right so that's got about a forced slow down at you will but i can't it i look for the commercial space to be a pretty active the back of the back half and again this is a a market share move in my opinion from these these new hires that we've made our tag i don't expect
spk_12: read the real estate ah with wonderful family to target the do as much yeah we using that been one of the key drivers and getting your downright protection cause the five percent ah so expect that to slow i agree with mouth i'm on a nice to me that got findings with for their some real estate though some the other it to some degree
spk_5: really good looking stabilize opportunity got their athletes with starting to see pricing get a little bit better get ah so so a but a young one of really make a point about that the residential real estate is with you won't see us be as active they're buying stuff is we have been the horrors that
spk_35: okay i appreciate that an edge to declare not i'm you talking about forecast mchouses that really starting xi somebody is construction projects
spk_27: i cannot come to fruition and and and convert okay so that's enough in that lot of get creative outlet
spk_36: yes
spk_5: and on the on the deposited sorry that the have of hand me and a june thirty spotter it's on of is for total deposits oh you know it they would definitely just like a talk about god somewhere and in the you know is a interest bearing or total
spk_3: either which is very highly regarded
spk_5: interest bearing you're gonna be a dab in the seventies
spk_3: agence it
spk_10: adding at that date
spk_5: yeah i get perfect and then just one last question of a maybe target elementary question tripod i spent the valuation allowance on the servicing asset
spk_37: the are you looking servicing assets becoming more bibles richmond and i are so kind of innocence of marabouts what's that thought or mm
spk_5: what not a good question by the way i had the same one well you get in the more you the face you're absolutely right is rates go up like to and cash flow streams that you know you value and servicing assets get longer in better or it unfortunately in the us the ans be a space is rates go up even a
spk_9: south virtually floating rate at it you default risk as got ah meaning the it from an investor's standpoint the used the the on the going to have back your loan his car not at a premium you pay the life and from that and rifai risk goes up as well because the banks you have or the borrowers who's
spk_38: businesses that continued to grow and mature and season ah or what looked to jump out of that space quicker and into typical bank lending space and so i think both of those contribute to shorter lives in that's what drives the servicing valuation down

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