Q1 2020 Earnings Call
Ladies and gentlemen, please many along your program will begin momentarily again. Please many line you're programmable again momentarily. Thank you for your patience.
[music].
Good day and welcome to the Veritex Holdings first quarter 2020 earnings conference call and webcast.
All participants will be in listen only mode.
Please note this event is being recorded.
I'll now turn the conference over to Ms. Susan Caudle.
Best Relations Officer, and Secretary to the Board Veritex Holdings.
Thank you before we get started I would like to remind you said. 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 we buy any forward looking statement.
At this time, if you are locked into my webcast. Please refer to our slide presentation, including our Safe Harbor statement beginning on slide two.
For those of you joining us I phone. Please note that the safe Harbor statement and presentation are available on our website Veritex banks dotcom.
Comments made during today's call are subject to that Safe Harbor statement.
On slide three we have provided an update to our risk factors.
Regarding the impact that cobot 19 could have on our behalf.
In addition, some of the financial metrics discussed will be on a non-GAAP basis with our management believes better reflects the underlying core operating performance up a bit.
Please see the reconciliation of I'll discuss non-GAAP measures in our filed 8-K earnings release.
Joining me today are now come Collins, our chairman and CEO, Terry Earley, our Chief Financial Officer, Clay Levy, our Chief Credit Officer, and Angela Harper, our Chief risk Officer Malcolm.
Good morning, everybody.
Stating the obvious this quarter's called be considerably different than our previous calls and their last a few minutes longer.
Our desire to days to give you clear and transparent view of the bank and at the same time for bottom work and some grand or look at our business.
Well, we can always tell you what we know right now understanding that things are evolving and changing very quickly on the world We live today.
More communicate discounts or do you five main topics.
Number one pandemic update and work or we do another bank number two our credit status as we see it right now.
Three.
Diesel discussion.
For balance sheet liquidity and capital metrics and then bar.
Quarterly earnings are related items before we dive into these barbarians I want to start with what I believe is the most relevant financial metric for us during these days.
Pretax pre provision for the first quarter, we produced pretax pre provision net income of 39.1 million or 1.94% return on average assets.
Continued strength of this number gives us confidence in the earnings power. This institution in the uncertain times that we find ourselves.
Jerry will provide more detail on financial performance in a few minutes.
First and foremost our entire staff is doing well and it's healthy no confirmed cases of cold with 19 for any of our 660 plus employees.
We made the decision to go into pandemic mode in mid March and at that time prepared for minimum of a six week business as unusual plant.
We currently are fully functioning in all areas of the bank with approximately 45% of our staff working exclusively oxide.
Most of the remaining snapper rotating days between being handed out of our physical losses.
We have weekly crisis management tactical and strategic team meetings, and I have a weekly telephonic update with our board of directors.
Our branches off or walk in access BOP wondering only well have dropped through facilities every married open for business.
Additionally, we are supporting our local communities with approximately 500000, a donations to assist doesn't need during this pandemic.
He's donations doesn't have targeted the food needs and the women's and children's shelters and the communities in which we served.
Our initial response to this pandemic on the credit side has been our involvement loan payment deferments and participating this be a TPP loan program.
Slide eight shows up process and a breakdown of the number of payment Deferments book and the principal loan balance associated with those requests.
As of April 24th we have booked 517 deferrals with principal balances.
894 million or 10 at a high percentage of total commitments for 15%.
Total loans outstanding.
The majority of those the permits are in retail see Ari hospitality office, CRT and general Cnine.
Additionally.
Fully embraced the PPD program had been active participants on slide nine you can see that our team. It was pulled together participate in the PDP process.
Great implemented a team of over 90 people from all areas of the bank to execute a plan to deliver as many PPV evolved as possible.
I'm proud to say that we ever approved 1142, each round number applications in funded 1047 loans totaling 308, Megan as of April 20 fours.
We're currently in the process of working through the second funding of PPP as of yesterday, we have an additional 880 trend numbers, which equates to 99% of all applications. We have received today.
And expected additional funding there in $100 million.
In light of these times, we're living in the relative uncertainty we want to provide some additional granularity of our loan portfolio and several industry specific breakdown.
Slide 11, stratify as our loan portfolio by loan type, including some additional category details.
As you can see we remain very balanced in our portfolio distribution I.
I would direct your attention to the weighted average loan to values for each of the commercial real estate categories.
As I've said many times when you deal with any borrowers and get substantial equity in your transactions. These components were certainly well when times are difficult as they did at the bank does work in a 1988 to 1990 in 2008 to 2000 and die.
You can see on this slide car healthy equity positions in these portfolios.
The next several slides give you some detail details our most asked about sectors and ones that could be stressed.
Cobot 19.
The specific industries are hospitality restaurant energy and health care.
They account for 9.3% of our total loan portfolio.
Turning to slide 12, let's look at our hospitality and restaurant exposure. Our hospitality portfolio is comprised of 127 different loans with a total outstanding balance.
344 million or 5.9% my loan book your average loan is less than $4 million.
Over 75% of the portfolio be national flag hotels, the portfolio's loan to value is approximately 61%.
It should be noted that seven to seven largest loans totaled 150 million.
Or 44% of this portfolio and have a collective loan to value of 53%.
These represent our strongest borrowers unfortunately, none of these properties depend on the convention business as of March 31, 2020, none of these poor none of this portfolio was nonperforming, but I expect that may change in the back half of this year.
Our operators owners developers and this sector have been an industry for many many years, although none of US no obvious is going to play out exactly these borrowers are season and best in class.
The restaurant portfolios made up of 155 loans with an outstanding balance of 160 million, which represents 2% of our loan portfolio.
The average loan size is 700000, our sixth largest borrowers account for 11 loans totaling 42 million or 36%.
The portfolio all but one of these credits, which is a highly recognized restaurant and the DFW your area, our secured by well margin real estate collateral.
80% of loans in our restaurant portfolio less SBK loans are secured by real estate.
On slide 13, we've included some additional color on a very small energy book in our health care exposure to energy book continues to decline in its almost diminimus at this point.
This small portfolio consists of 21 different borrowers with an average loan amount of less than $1 million.
Three oilfield service borrowers account for over half of the energy portfolio and our secured by the company's real estate facilities.
We've also included some additional detail our health care portfolio, which remains healthy and only represents 1.1% of our total loan portfolio.
Slide 14 provides a detailed look at our retail.
She or he book and leverage lending portfolios.
Our retail hearing portfolio has 154 loans with an outstanding balance of 436 million or 7.5% about total loans outstanding.
Weighted average loan to value for this portfolio is less than 60%.
Again substantial equity in our portfolios.
On slide 15, you'll see detail on advances of lines on lines of credit than our snacks.
We did not see huge advantages on a commercial lines. Although the ones. We did have came late in the quarter. Our snic portfolio is very diversified and continues to fall performed very well.
Overall asset quality remains at acceptable levels through March 30, Onest Npis at 26% of total assets and our second straight quarter in a net recovery position.
I did want to quickly touch on growth for the quarter, you'll see that we had annualized non mortgage warehouse loan growth of over 8%, while mortgage warehouse grew 190 million.
Our pipelines were solid with many opportunities in the works obviously, we're now in a very different situation.
And that we originally.
Talk and we've stepped up that growth and certainly take a backseat until we see some positive economic.
I'll now turn the call over the Terry.
Thank you welcome and good morning, everybody wants to take a few minutes to provide you with more details on various access financial results for the first quarter, including Seesawing the allowance for loan losses.
Capital deposits liquidity and earnings.
Let's jump back to slide five.
It's page gives you a good overview in the first quarter results earnings per fully diluted share was eight cents as we don't be allowance for credit losses to approximately 101 million for 1.73% in anticipation of future losses due to the economic impact of code 90.
Going down the page note the metrics and bread box.
In my opinion, this economic environment of uncertainty and increasing credit cost due to the pandemic. The single most important metric is our pretax pre provision earnings and return on average assets.
194 basis points of pretax pre provision return on average assets indicates that we have the ability to absorb approximately 250 basis points or credit loss per year before it impacts or capital base.
Now on slide 18.
Focuses on our allowance for credit losses like most banks, we adopted to cease on January Onest. This slide lays out the impact from Cecil on each one.
On December 31st through the day of adoption and ending on March 30 Onest.
Next is on employment and GDP forecast, where you can see so model comes from Moodys, specifically their baseline forecast that were updated on April seven.
Preceded table in the bottom left part of the page.
As you can see this table the impact of Kevin 19 is reflected in the deteriorating forecast for Texas unemployment the GDP, namely unemployment was expected to peak in Q2 at 8% and improve over the next three quarters GDP is expected to bottom out in Q2, and a negative 5% and improved from there again this.
So as not the April 2nd forecast.
Looking at the column the top payables labeled January one adoption impact. This reflects the change from an incurred loss model going forward looking like the one last model coupled with the economic forecast on the day of adoption.
This change in approach, including economic forecast drove an increase in our APC Ulta total worms 52 basis points on December 31 to 123 basis points on January one.
Primarily driven by reserves on or acquired portfolios that were not previously required to have a reserve under the incurred loss model. Please also note the increase in the PCD reserves of 19.1 billion were 34 basis points of the total Hcl primarily reflects the on Accretable credit Mark.
Moving into the allowance.
Focusing on the column labeled Q1 reserve build the declining economic outlook compared with 19 negatively impacted our coop loans in PCB reserves to the tune of $27.7 billion.
Additionally, we established 4.3 million in specific reserves, primarily due to impairments on three of 3.4 million that came from two loans totaling 6 million and be green portfolio that were not credit deteriorated on the date of acquisition.
We had 236000 net recoveries for the quarter.
Result was a quarterly loan loss provision of 31.8 million and an increase in the credit loss reserve to total loans at March 31st 273 basis points.
Please now we're trying to build the reserve to prepare for the upcoming expected adverse credit environment to that in addition to the loss history and the economic forecast, we have qualitative factors that records represent approximately 30 basis points of the total Hcl.
Also worthy of note that 85% of the provision was due to the deteriorating economy.
Our opinion as we look forward, there's a high degree of uncertainty and little to became being overly optimistic at this stage of the pandemic.
On the slide 20.
Lets transition to discussion Cecil in the allowance for loan losses to capital capital ratios at the holding company in the bank remained very strong those ratios along with tangible common equity to tangible assets.
Greece, this quarter, reflecting weaker earnings share repurchases Cecil transitions adjustment and dividends.
Back in December Veritex announced an increase in stock buyback to $175 million during the quarter. We returned 58.3 million to common shareholders, including 49.6 million from the repurchase of slightly over 2 million shares and 8.7 billion in common dividends, we spend and the stock buyback program on March.
16, and expect to remain sidelined for the foreseeable future given the uncertainty of this pandemic. The current authorization has $31 million remaining and is open until December 30, Onest 2020.
Regarding the dividend, we declared a regular quarterly dividends or 17 cents per share after conducting multiple capital burned down scenarios again vertex is strong pretax pre provision earnings gives us the ability to absorb substantial credit losses without weakening or capital base, we anticipate being able to.
In maintaining the dividend that depends on cobot 19, and its impact on the Texas economy.
Turning to slide 21 in deposits.
Oh.
The mix of the deposit portfolio has improved significantly since the beginning of 2019 with noninterest bearing deposits at 26.7%.
Total deposits and the reliance on time deposits dropping from 36% to 30% the loan to deposit ratio, excluding the mortgage warehouse at quarter end stood at 100.9%.
Slightly above the range we've targeted.
As we've discussed on every earnings call since the fed interest rates in May of 2019, we've been aggressively reducing money market and time deposit rates and shifting out of higher cost market index deposits.
The graph on the bottom left of the page shows on a monthly basis deposit rates, excluding purchase accounting declined by 39 basis points from December 19, due to March 2020.
Over the same period federal home loan bank borrowings declined by 37 basis points from 1.47% 1.1%.
Looking past the first quarter the table in the middle part of the page shows time deposit repricing opportunities for the remainder of 2020 and beyond.
Additionally, the graph on the bottom right shows significant deposit inflows that have occurred so far in April deposits have increased over 300 billion with almost two thirds being in non interest bearing deposits.
Obviously, the balance sheet is flush with liquidity and the loan to deposit ratio was down since quarter end to end comfortably within our target range.
Moving on to slide 22, and liquidity the purpose of the slides to highlight three things.
First is our primary and secondary liquidity sources the table in the bottom right should we have over $2.5 billion in total liquidity sources, plus another 325 million available from the fed under the PPP all that.
Also note that beginning on March six.
We doubled the amount of normal liquidity, we're carrying on the balance sheet.
We believe that liquidity is up the highest importance given the uncertain become independent we concluded it was pretty double our liquidity cushion.
Second is our investment portfolio with approximately $1.1 billion as you will note 97% of the portfolio is available for sale the portfolio yield is just over 3%.
And the projected cash flow coming off the portfolio in the next year is projected to be 175 million or 16%.
Finally, we're maintaining our excess liquidity into the second quarter note that in the Red box at the bottom that liquidity on the balance sheet has gone up even with the funding of the CPP loans, reflecting very strong deposit inflows.
On page 23, you will note for brass first is our return on average assets in our pretax pre provision return on average asset trend in the top left graph.
I can see operating efficiency ratio, which shows that we've been below 48% over the last five quarters. The graphs on the rights on the page of the trend in tangible book value per share on the top and the graph at the bottom is a build a TBV per share from December 30, Onest through March 31st.
On slide 24, Big net interest margin decreased 40 basis points to 3.67% in Q1 with eight basis points in the decline due to lower purchase accounting adjustment.
While the adjusted NAV, which excludes all purchase accounting impacts ended the quarter at 3.39%.
Table in the bottom right on slide shows the items that impacted both the gap now and the adjusted now.
Focusing on the adjusted NIM, which excludes the impact purchase accounting falling short term interest rates, coupled with loan portfolio that is 70% flooded have impacted the yield on loans and reduce the adjusted NIM 19 basis points.
This was largely offset by 14 basis points of NIM expansion from lower rates on interest bearing deposits and another three basis points expansion and the lower rates paid on the FHLB advances as we've discussed for several quarters, we continued to be aggressive on funding side, including rate reductions on our deposit portfolio.
As we announced during the fourth quarter Veritex completed the issuance of $75 billion in sub debt. This funding cost two basis points a decline in the first quarter NIM.
Additionally, we've been able to negotiate a 1% LIBOR floor and over 50% of the one deferment request, where the interest rate was tied to one month LIBOR.
Finally, this can be seen on page nine the earnings release, we continue to carry considerable excess liquidity.
As a result of the pandemic. This excess liquidity is only increase so far in Q2 much of it should be deployed through the PPP program, but it will put downward pressure on the NIM in Q2.
Slide 25, Veritex reported operating fee income 7.2 million.
Fees were down but significantly offset other fee income, which includes customer interest rate swap. These Q1 with the best quarter, we've ever had and this important fee business staying on slide 25 operating noninterest expense was flat in Q4 to Q1 and in line with management expectations with that.
Let's turn the call back over to Mount.
Thank you Terry.
Our cat today was to communicate clearly with little more granularity on our current operating position and credit picture our balance sheet remains very strong our efficiency ratio continues at levels, we're very pleased with and our ability to create pretax pre provision income looks very sustainable.
I'd like to adequate worried about my team like all my colleagues we've been in the trenches for six weeks now and have been fighting everyday figure out the new normal and what lever we need to pull backs.
Not want to be in the situation with any other team there and one word incredible.
Im grateful for their efforts on loyalty.
We remain focused and dedicated to managing these challenging an ever changing times are committed to remaining one of the best Bank from Texas.
Thanks for your patience today, operator, we'll now open the line for any quick question.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
Withdraw your question press the pound cake.
Again that star one on your telephone to ask a question. Please standby, while we compile the Q and a roster.
Our first question comes from the line of Michael Rose of Raymond James Your question. Please.
Hey, good morning, guys how are you.
Hey, Mike.
So just wanted to get some color.
I'm sorry, if I missed this much earnings calls this morning, just a little bit greater color on your on your at risk categories. Thanks for.
Wanting them.
Where do you see kind of the more immediate stress and then you know depending on how long. This last I mean, we do get a temporary boost from some of the government programs like like PPP and deal but that is temporary so if this last longer are there other categories that may.
Broadened out that that at risk exposure and then maybe if you could just comments on.
What that would look like thanks.
Yeah, you after really hard question and Thats looking into the future Michael and so much by Mr. responses I don't know you can tell me what the future looks like there might be able to help.
And that's not being flippant as promised it's just really hard to decked out, but as we look at our hospitality portfolio I mean, that's the one that comes combined first.
We've had quite a few conversations with our guys already.
You know you're reading the numbers occupancy if they're even open several on would just shut the doors because it's cheaper do that.
No the occupancy during the single digit so we can get people back traveling and moving around the country again, I think we can weather weather the storm our folks.
Couple of things, we have gone for us in that portfolio specifically is.
The folks that we loan money to in that space are very very experience and have been around a long long time number one and then number two we got a whole bunch to equity.
Then what is what does a whole bunch equity main if nobody.
Walking in the door every day.
Maybe not much.
So right now, we're having lots of conversations.
Like everyone, we're waiting to see people start moving around the country, but that's certainly one that is top of mind for us.
The next one would probably be on the real.
Retail real estate side, and we actually feel pretty good about that went very very small piece of that is big box stuff majority of that is more neighborhood or out in front of.
Grocery type stuff.
We don't we feel pretty good again, a lot of equity in those.
No. The other categories, we looked at transportation, we have less than 1%, yes in transportation.
What other categories I'm sure, there's going to be some see an eye struggles and some stress.
But industry specific at this point I would be guessing if I told you, we're I think that would happen.
[noise] anything on the the construction front construction on Lantus is about 10% of the books and if thoughts there.
Yeah, I mean, our construction book is again Thats at a high equity hi.
Low leverage deal, obviously construction hasn't stopped.
It's gone on very strong.
We did have so we had two large large construction deals.
Clay run was industrial another win both both industrial.
With big equities.
That have niven funded one dollar in our borrowers that they're going to.
Building for six months and and so a lot of our construction deals are still into the equity phase.
So.
I actually feel if this thing last.
Six months nine months, a year I think our construction book is going to hold up real nice because that's when these things are going to be delivered so.
I'm actually less concerned about our construction book.
A lot of our books.
Very helpful. Maybe just one more for me for Terry can you talk about maybe some.
Near term expectations for for the margin just just with the with the puts and takes and then how the the Triple B program worldwide.
Will flow through for you guys and maybe what the estimated C.
I would be and what the revenue to you'd expect from that thanks.
Yeah. Thanks, Michael.
First of all of them.
I think you've got got things moving different ways here I highlighted in my prepared comments, what's going on in the CD book and the opportunity there.
But but equally and this is not in the timing doesn't match up here, but you also add what's really working the other way is what's been going on with one month LIBOR.
And where it ended the quarter versus where it sits today is around 40, bips give or take I believe.
And probably has a little bit further to drop not tremendously from there, but a little bit further so you know as we've said we've got pretty significant.
Part of the portfolio tied to one month LIBOR and so we're going to feel that in Q2.
The benefit from and the benefit from Cds are going to be spread over the next two three and four so I expect the NIM to feel pressure in Q2, the pretty neutral in Q3 and should show some expansion in Q4.
In terms of the PPP, obviously, we're looking at total fees right now.
$12 million to $13 million.
We are that's you know obviously as we thought about Malcolm mentioned is that the contributions were making that's in line of some of the revenue benefit we're getting from big the distributors for the SBS agonists Ppb program.
But so between 12 and $13 million gross and.
The hope is when were seven weeks and that they have funding, we're going to be asking the government to pay us all.
And our credit team and our bankers have done a really good job in qualifying what's what's forgivable under this program. So we're not expecting a huge tail and so we think that if we get paid all that stuff come in as fee income or yield in the second quarter obviously.
For the things that funded in phase, one thats kind of higher probability than whats funding base to lots, so hopefully that helps and.
You know that it's been it's been good to be a part of that and I think just.
This was in malcolm's comments, but really know.
How much of our lending it's like.
Is under 350000 dollar Sullivan Sox average loan as to 10 I believe the out of the total book and so it's been really good to help but small businesses.
Okay. So just just to be clear you're expecting that to go through fee income not not and I have the margin because you're going to hold it for held for sale.
Triple B loans, yes.
Okay perfect. Thanks for taking my questions guys.
Thank you. Our next question comes from Brad Milsaps of Piper Sandler Your question. Please.
Hey, good morning, guys.
Hi, Brad Brad.
Really great details that you got provided the and the slide deck really appreciate that I apologize if I missed that there was an uptick in.
Non performing loans, just just curious any color there on I think there's about a $10 million. So increase I apologize if I missed it earlier.
Yes, Brad this is clay review I'll take that one yeah.
This is due to primarily the three credits a total about 7.6 million.
Two of those borrowers are contractors that demonstrates.
Stress on the code.
Turning once the oilfield services company, that's in liquidation that OCO service company.
We've got that loan fully reserved and the balances really 10 smaller credits that are had some timing issues ever say so.
Primarily related to three credits.
Great. Thank you.
And Malcolm.
Obviously, the world's turned upside down and you guys were expecting some good.
Loan growth momentum this year, obviously with how things are chains out pursued a lot of that gets cut to the back burner focused on your existing customer base and PPP, but just kind of curious your thoughts around opportunities that that might availed themselves. In this kind of market for guys like yourself that do have good preprovision Arnie powering capital to take advantage.
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Yeah, I mean, I've been preaching to my team for six weeks about the opportunities that this is going to provide us in a whole bunch of different areas. Obviously right now it's kind of batten down the hatches and getting the foxhole and fight it out a little bit but I do believe this association that's going on.
In the state of Texas on the banking side.
Just going to create some opportunities we're seeing them.
I wish we could have with all this wish we wouldn't have had this but we were on I've done record for one of our best quarters ever on the growth side. I mean, we are pipelines were stout that new commercial team. We've been assembling has been super active and so there is some opportunities there. So I don't think those opportunities or.
John There is still there, but there's certainly been pushed off.
And growth is just taking a bit over the vaccine, but I do think there will be opportunities with people and I think theres going be opportunities with clients, we were able to serve.
We were able to serve some folks during this PPP process that maybe had just an account here too but banks with this and we're using this as their primary.
And.
The primary bank couldn't handle that are didnt handle that or what.
Communicating so I do think theres going to be some opportunities Brad I think though will be will be guarded I mean, it's hard to put in commercial credit side of the credit guys right now today loan this low 10 million Bucks.
And we don't know the future but.
I think there will be later in the year.
Okay, Great and then the on expenses Terry you guys to great job they were flat linked quarter essentially.
I assume you're maybe have some additional expenses related to EBIT, but any thoughts around kind of run rate operating expense costs as you kind of think about the balance of the year.
Well first thing I would say is not spending a lot of money right now.
Hi, Thanks.
In terms of when you think about expenses, such a high percentage, obviously pretty well lock, but they're somewhere between five and 10% that's really discretionary on the margin and that's what I'm really excited is.
You bet, you just not spending a lot of money right now.
So even if we.
My belief is extensive should stay fairly flat, even if we take advantage of the opportunity to hire some new people is because I think we're not spending a lot of other dollars Anda. So I would that would be as I look out the rest of the year I'm expecting expenses to stay relatively flat.
Okay, Great and then maybe just kind of one final housekeeping the accretion on the loan book was 4.4 million this quarter I know, it's hard to predict.
What kind of how should we think about that over the next several quarters maybe.
If you're a prepayment so just just kind of curious how you expect that to trend.
Well, certainly prepayments are going to slow.
And that's that's just to give an this in this environment, which will certainly slowed down some.
Brett I think it's hard to predict I think the most meaningful way to answered. The question is that we've got $25 million worth public.
Accretable interest rate Mark on the balance sheet right now thats going to come in over the next.
Two three years, depending on the pace the Prepays and do I think it's going to stay at the four plus million dollars a quarter likely not but but we still got ways to go.
And that's why I'm, just so much what happens on the accretion side is so out of our control and so driven by macro factors I treat and I'd like to stay focused on on the adjusted them, where I'll show I'll show you. The other side, but what we're focused on what we can control, which is backing out the purchase accounting.
Yes, great. Thank you very much.
Thanks, Brad.
Thank you again to ask your question. Please press Star one are you touched on telephone.
Next question comes from the line of Gary Tenner of D.A. Davidson. Your line is open.
Thanks, Good morning.
I wanted to ask about the deferment process, you kind of laid out the flow chart of how you go through it but I'm curious just from an underwriting perspective.
Any kind of concessions you're getting from the borrowers too.
Extend loans or defer loans and how you're.
You're thinking of that.
Thank you Gary it's clearly be outside of that one yes process that we have from an underwriting standpoint.
Yes.
Just going through and.
And so this is not just a program.
Either way.
Customer base.
Our time and effort focusing on.
There are really the here and it's so absolutely.
And.
Let's move.
Right.
So.
In the second part of your question.
For getting ahead.
Well it was early wrapped around that.
I kind of concessions from the borrowers that you are further.
From a concession standpoint.
We got a lot more about.
Although the bore based loans that we suffered so.
Something in return for.
Thanks.
Okay. Thank you.
Then.
Lot of focused obviously on the kind of cobot specific.
Portfolios are those that will be viewed as being at risk.
You don't have a meaningful energy portfolio, but I'm just curious as you kind of think maybe longer term ramifications assuming a recovery.
From the health crisis.
You know that could support somewhat higher energy prices on we have right now.
But even prior to that.
Prices were bit lower because of.
Kind of global production, how are you thinking about the secondary impacts of.
Energy, particularly in Houston, where you Didnt have a real meaningful usten franchise during the last downturn.
Yes, I mean listen we we don't have we have de minimis level of direct energy exposure, which I've outlined.
We live in the state taxes are 90% plus of our business. It's in the state taxes.
Yeah, So we're going to be effective period, and the conversation it'll be secondary tertiary.
And.
So we have people that touch the energy business, either at a distance or fairly close whether its uniform type people are guys that are selling screws do though I mean, it just it it's just part of the business so as energy hurts.
The state, we're going to hurt a little bit too I don't think it's as catastrophic is not a direct obligations.
But you know I could it.
We don't have any we haven't I guess, they have one multifamily deal out Midland Odessa and I, just I think I think of Midland Odessa as well that was the hot bed in the United States for the Permian out there and you could you can find the department well today I'll bet, you can probably find an apartment or.
Maybe not but those guys probably are paying the rent.
So we're not heavy out in west, Texas, but we I think we did have one complex out there, where we did or it's gone or I care. We had one hotel exposure at Morococha like we have any Ics, okay in that none of this indirect okay. So we do look at Gary It's just really hard to calculate.
Gary just carry let me tag on to that I think the way we picked this up but the fact reusing the Moody's, Texas, GDP and unemployment forecast so to the extent those are reflecting what's going on in the oil industry, it's coming through the forecast pretty directly and we are providing for perspective and so.
Even though we don't have direct exposure I'm pretty confident and especially in on a 1.73% and would qualitative factors included in that that we're doing pretty good job of anticipating the secondary and tertiary impact from oil on the Texas economy.
Yes.
Thanks very much.
Thanks.
Thank you. Our next question comes from weather delay of KBW. Your line is open.
Hey, good morning, guys.
Okay.
Just to.
Touch on the secondary impact of energy, which you just mentioned I was curious that you added geographical breakdown of.
Just between Dallas, and Houston and your loan portfolio.
It's I mean, well the banks about two thirds, one third division.
And the loan distribution is going to be close to that.
Got it okay. That's helpful.
And then the color surrounding the weekly deposit growth on slide 21 is really interesting I was just curious if you think that.
Deposit inflows in flux is more temporary in nature or if they can be longer lasting source of funding for the bank.
I think it's a little bit of both to be honest with you I think some of this inflows is somewhat temporary given everything going on in the PPP program, but I think theres a significant piece of this meaningful piece that is more sustainable as people.
You know that.
Move out of the equity in the fixed income markets.
And the banks.
So.
The flows have just been amazing and.
So I think it's going to really for the net for the foreseeable future how long I don't know I think the funding position of not just veritex. When I would anticipate most banks are going to being a significantly better funding place and they've been in years and years.
So.
Got it that's helpful that that's all I had thanks guys.
Thank you.
Correct.
And ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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