Veritex Holdings, Inc. Reports Second Quarter 2024 Operating Results

DALLAS, July 23, 2024 (GLOBE NEWSWIRE) — Veritex Holdings, Inc. (“Veritex”, the “Company”, “we” or “our”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the quarter ended June 30, 2024.

“We are pleased with the second quarter results, highlighted by improved credit quality, stabilized NIM and continued repositioning of our balance sheet,” said C. Malcolm Holland, III, the Company’s Chairman and Chief Executive Officer. “Our LDR, excluding mortgage warehouse, dropped below 86%, we built capital and continue to execute on our strategic plan.”

¹ Annualized ratio.
² Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of these non-generally accepted accounting principles (“GAAP”) financial measures to their most directly comparable GAAP measures.

Other Second Quarter Financial, Credit and Company Highlights

• Pre-tax, pre-provision operating return on average assets was 1.42% as of June 30, 2024;
• Nonperforming assets (“NPAs”) decreased 17 bps from the prior quarter to 0.65% of total assets;
• Net interest margin (“NIM”) increased to 3.29%, a 5 bps improvement from the prior quarter;
• Common equity tier 1 capital grew 12 bps from the prior quarter to 10.49%;
• Total deposits grew $71.0 million, or 2.67% annualized, compared to March 31, 2024;
• Total loans grew $70.3 million, or 2.88% annualized, compared to March 31, 2024;
• Loan to deposit ratio, excluding mortgage warehouse loans, decreased to 85.9% as of June 30, 2024 compared to 86.9% as of March 31, 2024 and 100.4% as of June 30, 2023;
• Tangible book value per common share increased to $20.62;
• Allowance for credit losses (“ACL”) to total loans held for investment (“LHI”) increased to 1.16%, compared to 1.15% as of March 31, 2024 and 1.05% as of June 30, 2023;
• Named one of the “Best Companies to Work For”, “Best in Banking” and “Best Companies in the South” by the 2024 – 2025 U.S. News & World Report which evaluates companies based on quality of pay, work/life balance, and opportunities for professional development and advancement; and
• Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on August 23, 2024.

Results of Operations for the Three Months Ended June 30, 2024

Net Interest Income

For the three months ended June 30, 2024, net interest income before provision for credit losses was $96.2 million and net interest margin was 3.29% compared to $92.8 million and 3.24%, respectively, for the three months ended March 31, 2024. The $3.4 million increase, or 3.7%, in net interest income before provision for credit losses was primarily due to a $5.0 million increase in interest income on loans driven by an increase in loan yields, a $1.7 million increase in interest income on debt securities and other investments and a $1.2 million decrease in interest expense on transaction and savings deposits. The increase in net interest income was partially offset by a $4.3 million increase in interest expense on certificates and other time deposits, during the three months ended June 30, 2024. NIM increased 5 bps compared to the three months ended March 31, 2024, primarily due to an increase in loan yields during the three months ended June 30, 2024, partially offset by an increase in rates on certificates and other time deposits.

Compared to the three months ended June 30, 2023, net interest income before provision for credit losses for the three months ended June 30, 2024 decreased by $4.6 million, or 4.6%. The decrease was primarily due to a $16.7 million increase in interest expense on certificates and other time deposits and a $12.7 million increase in interest expense on transaction and savings deposits. The decrease was partially offset by a $16.1 million decrease in interest expense on advances from the Federal Home Loan Bank (“FHLB”), a $5.2 million increase in interest income on debt securities and a $3.3 million increase in interest income on loans driven by an increase in loan yields and average balances. NIM decreased 22 bps from 3.51% for the three months ended June 30, 2023. The decrease was primarily due to the increase in funding costs on deposits during the three months ended June 30, 2024, partially offset by an increase in loan yields and debt securities.

Noninterest Income

Noninterest income for the three months ended June 30, 2024 was $10.6 million, an increase of $3.9 million, or 58.8%, compared to the three months ended March 31, 2024. The increase was primarily due to a $6.3 million loss on sales of investment securities in the prior quarter as a result of a strategic restructuring, in which we sold $120.1 million of lower-yielding available for sale (“AFS”) securities, at amortized cost, with a 3.11% average yield, and reinvested the proceeds in higher yielding AFS securities with a 6.24% average yield, which occurred in March of 2024, with no corresponding transaction in the three months ended June 30, 2024. The increase was partially offset by a $1.3 million decrease in government guaranteed loan income, primarily driven by a decrease in the Company’s SBA and USDA sales, a $746 thousand decrease in other income and a $303 thousand decrease in loan fees.

Compared to the three months ended June 30, 2023, noninterest income for the three months ended June 30, 2024 decreased by $3.1 million, or 22.7%. The decrease was primarily due to a $2.8 million decrease in government guaranteed loan income, primarily driven by a decrease in the Company’s USDA sales, a $657 thousand decrease in customer swap income and a $485 thousand decrease in equity method investment income. Additionally, the decrease was related to a $298 thousand decrease in service charges and fees on deposit accounts. The decrease was partially offset by a $687 thousand increase in loan fees and a $463 thousand increase in other income.

Noninterest Expense

Noninterest expense was $63.1 million for the three months ended June 30, 2024, compared to $62.1 million for the three months ended March 31, 2024, an increase of $1.0 million, or 1.7%. The increase was primarily due to a $1.4 million increase in other noninterest expense, a $430 thousand increase in marketing expenses and a $241 thousand increase in data processing and software expense. The increase is partially offset by a $575 thousand decrease in salaries and employee benefits and a decrease of $436 thousand in professional and regulatory fees driven by FDIC insurance assessment expense, which decreased $203 thousand compared to the three months ended March 31, 2024.

Compared to the three months ended June 30, 2023, noninterest expense for the three months ended June 30, 2024 increased by $5.9 million, or 10.4%. The increase was primarily due to a $4.1 million increase in salaries and employee benefits and a $3.6 million increase in other noninterest expense. The increase was partially offset by a $1.3 million decrease in professional and regulatory fees driven by FDIC insurance assessment expense, which decreased $937 thousand compared to the three months ended June 30, 2023 and a $651 thousand decrease in marketing expense.

Financial Condition

Total LHI was $9.21 billion at June 30, 2024, a decrease of $40.5 million, or 1.7% annualized, compared to March 31, 2024.

Total deposits were $10.72 billion at June 30, 2024, an increase of $71.0 million, or 2.7% annualized, compared to March 31, 2024. The increase was primarily the result of an increase of $257.8 million in certificates and other time deposits and an increase of $67.5 million in noninterest-bearing deposits. The increase was partially offset by a decrease of $13.6 million in correspondent money market account balances and a decrease of $240.7 million in interest-bearing transaction and savings deposits.

Credit Quality

NPAs totaled $83.0 million, or 0.65% of total assets, of which $58.8 million represents LHI and $24.3 million represents other real estate owned (“OREO”) at June 30, 2024, compared to $103.8 million, or 0.82% of total assets, at March 31, 2024. The Company had net charge-offs of $6.9 million for the three months ended June 30, 2024. Annualized net charge-offs to average loans outstanding were 28 bps, of which 16 bps were acquired credits, for the three months ended June 30, 2024, compared to 22 bps and 48 bps for the three months ended March 31, 2024 and June 30, 2023, respectively.

ACL as a percentage of LHI was 1.16%, 1.15% and 1.05% at June 30, 2024, March 31, 2024 and June 30, 2023, respectively. The Company recorded a provision for credit losses of $8.3 million, $7.5 million and $15.0 million for the three months ended June 30, 2024, March 31, 2024 and June 30, 2023, respectively. The recorded provision for credit losses for the three months ended June 30, 2024, compared to the three months ended March 31, 2024, was primarily attributable to an increase in general reserves as a result of changes in economic factors. As the balance for unfunded commitments for the three months ended June 30, 2024 remained stable compared to the three months ended March 31, 2024, the Company recorded no benefit or provision for unfunded commitments for the three months ended June 30, 2024. The Company recorded a $1.5 million and a $1.1 million benefit for unfunded commitments for the three months ended March 31, 2024, and June 30, 2023, respectively.

Income Tax

Income tax expense for the three months ended June 30, 2024 totaled $8.2 million, an increase of $1.0 million, or 13.6%, compared to the three months ended March 31, 2024. The Company’s effective tax rate was approximately 23.2% for the three months ended June 30, 2024. The increase was primarily due to an one-time tax expense of $527 thousand, which is excluded from operating earnings, and a net discrete tax expense of $410 thousand associated with the recognition of an excess tax expense realized on share-based payment awards.

Dividend Information

After the close of the market on Tuesday, July 23, 2024, Veritex’s Board of Directors declared a quarterly cash dividend of $0.20 per share on its outstanding shares of common stock. The dividend will be paid on or after August 23, 2024 to stockholders of record as of the close of business on August 9, 2024.

Non-GAAP Financial Measures

Veritex’s management uses certain non-GAAP (U.S. generally accepted accounting principles) financial measures to evaluate its operating performance and provide information that is important to investors. However, non-GAAP financial measures are supplemental and should be viewed in addition to, and not as an alternative for, Veritex’s reported results prepared in accordance with GAAP. Specifically, Veritex reviews and reports tangible book value per common share of the Company; operating earnings; tangible common equity to tangible assets; return on average tangible common equity; pre-tax, pre-provision operating earnings; pre-tax, pre-provision operating return on average assets; pre-tax, pre-provision operating return on average loans; diluted operating earnings per share; operating return on average assets; operating return on average tangible common equity; and operating efficiency ratio. Veritex has included in this earnings release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to “Reconciliation of Non-GAAP Financial Measures” after the financial highlights at the end of this earnings release for a reconciliation of these non-GAAP financial measures.

Conference Call

The Company will host an investor conference call and webcast to review the results on Wednesday, July 24, 2024, at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/kp9m28ir and will receive a unique PIN, which can be used when dialing in for the call.

Participants may also register via teleconference: https://register.vevent.com/register/BIc18141b3387848439444d3060b38d779. Once registration is completed, participants will be provided with a dial-in number containing a personalized conference code to access the call. All participants are instructed to dial-in 15 minutes prior to the start time.

A replay will be available within approximately two hours after the completion of the call, and made accessible for one week thereafter. You may access the replay via webcast through the investor relations section of Veritex’s website.

About Veritex Holdings, Inc.

Headquartered in Dallas, Texas, Veritex is a bank holding company that conducts banking activities through its wholly owned subsidiary, Veritex Community Bank, with locations throughout the Dallas-Fort Worth metroplex and in the Houston metropolitan area. Veritex Community Bank is a Texas state chartered bank regulated by the Texas Department of Banking and the Board of Governors of the Federal Reserve System. For more information, visit www.veritexbank.com.

Media and Investor Relations:
investorrelations@veritexbank.com

Forward-Looking Statements

This earnings release includes “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors, which change over time and are beyond our control, that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.   Forward-looking statements include, without limitation, statements relating to the expected payment of Veritex Holdings, Inc.’s (“Veritex”) quarterly cash dividend; the impact of certain changes in Veritex’s accounting policies, standards and interpretations; turmoil in the banking industry, responsive measures to mitigate and manage such turmoil and related supervisory and regulatory actions and costs; and Veritex’s future financial performance, business and growth strategy, projected plans and objectives, as well as other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact broader economic and industry trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “seeks,” “targets,” “outlooks,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Veritex’s Annual Report on Form 10-K for the year ended December 31, 2023 and any updates to those risk factors set forth in Veritex’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov. If one or more events related to these or other risks or uncertainties materialize, or if Veritex’s underlying assumptions prove to be incorrect, actual results may differ materially from what Veritex anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. Veritex does not undertake any obligation, and specifically declines any obligation, to supplement, update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law. All forward-looking statements, expressed or implied, included in this earnings release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Veritex or persons acting on Veritex’s behalf may issue.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)

¹Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” after the financial highlights for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.
²Dividend amount represents dividend paid per common share subsequent to each respective quarter end.
³Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 Financial Instruments – Credit Losses and were accounted for on a pooled basis that have subsequently been placed on nonaccrual status.
⁴Annualized ratio for quarterly metrics.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands)

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands, except per share data)

¹ Includes provision for credit losses on AFS securities of $885 thousand for the six months ended June 30, 2023.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)

¹ Includes average outstanding balances of LHFS of $58.5 million, $53.9 million and $23.4 million for the quarters ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively, and average balances of LHI, excluding MW.
² Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
³ Net interest margin is equal to net interest income divided by average interest-earning assets.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands, except percentages)

¹ Includes average outstanding balances of LHFS of $56.2 million and $21.5 million for the six months ended June 30, 2024 and 2023, respectively, and average balances of LHI, excluding MW.
² Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
³ Net interest margin is equal to net interest income divided by average interest-earning assets.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
Yield Trend

  
¹Includes average outstanding balances of LHFS of $58.5 million, $53.9 million, $31.2 million, $28.3 million and $23.4 million for the three months ended June 30, 2024, March 31, 2024, December 31, 2023, September 30, 2023, and June 30, 2023, respectively, and average balances of LHI, excluding MW.
² Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
³ Net interest margin is equal to net interest income divided by average interest-earning assets.

Supplemental Yield Trend

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)

LHI and Deposit Portfolio Composition

¹ Total LHI does not include deferred fees of $7.8 million, $6.9 million, $8.8 million, $10.1 million and $12.7 million at June 30, 2024, March 31, 2024, December 31, 2023, September 30, 2023 and June 30, 2023, respectively.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
Asset Quality

¹ Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 Financial Instruments – Credit Losses and were accounted for on a pooled basis that have subsequently been placed on nonaccrual status.
² Accruing loans greater than 90 days past due exclude purchase credit deteriorated loans greater than 90 days past due that are accounted for on a pooled basis.
³Annualized ratio for quarterly metrics.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

We identify certain financial measures discussed in this earnings release as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP, in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios calculated using exclusively either one or both of (i) financial measures calculated in accordance with GAAP and (ii) operating measures or other measures that are not non-GAAP financial measures.

The non-GAAP financial measures that we present in this earnings release should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we present in this earnings release may differ from that of other companies reporting measures with similar names. You should understand how such other financial institutions calculate their financial measures that appear to be similar or have similar names to the non-GAAP financial measures we have discussed in this earnings release when comparing such non-GAAP financial measures.

Tangible Book Value Per Common Share. Tangible book value is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total stockholders’ equity less goodwill and core deposit intangibles, net of accumulated amortization; and (b) tangible book value per common share as tangible common equity (as described in clause (a)) divided by number of common shares outstanding. For tangible book value per common share, the most directly comparable financial measure calculated in accordance with GAAP is book value per common share.

We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in core deposit intangibles. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.

The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and presents our tangible book value per common share compared with our book value per common share:

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

Tangible Common Equity to Tangible Assets. Tangible common equity to tangible assets is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total stockholders’ equity, less goodwill and core deposit intangibles, net of accumulated amortization; (b) tangible assets as total assets less goodwill and core deposit intangibles, net of accumulated amortization; and (c) tangible common equity to tangible assets as tangible common equity (as described in clause (a)) divided by tangible assets (as described in clause (b)). For tangible common equity to tangible assets, the most directly comparable financial measure calculated in accordance with GAAP is total stockholders’ equity to total assets.

We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, in each case, exclusive of changes in core deposit intangibles. Goodwill and other intangible assets have the effect of increasing both total stockholders’ equity and assets while not increasing our tangible common equity or tangible assets.

The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and total assets to tangible assets and presents our tangible common equity to tangible assets: