Veritex Holdings, Inc. Reports Third Quarter 2024 Operating Results

DALLAS, Oct. 22, 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 September 30, 2024.

“We are pleased to announce both our third quarter results and updates on our balance sheet transformation over the past 2 years,” said C. Malcolm Holland, III, the Company’s Chairman and Chief Executive Officer. “My team has remained focused on growing granular, attractively priced deposits, increasing capital, managing concentrations and reducing credit risk exposure all while continuing to grow a fortress balance sheet through full relationship banking. I could not be more proud of our team of nearly 900 employees who embraced the challenges we set forth back in 2022 and each day going forward.”

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 Third Quarter Financial, Credit and Company Highlights

• Return on average assets (“ROAA”) increased 9 bps compared to June 30, 2024;
• 7.2% linked quarter revenue growth;
• Nonperforming assets (“NPAs”) decreased 13 bps from the prior quarter to 0.52% of total assets;
• Total deposits grew $311.2 million, or 11.60% annualized, compared to June 30, 2024;
• Common equity tier 1 capital grew 37 bps from the prior quarter to 10.86%;
• Net interest margin (“NIM”) expanded to 3.30%;
• Loan to deposit ratio, excluding mortgage warehouse loans, decreased to 81.9% as of September 30, 2024, compared to 85.9% as of June 30, 2024 and 90.7% as of September 30, 2023;
• Tangible book value per common share increased to $21.72;
• Allowance for credit losses (“ACL”) to total loans held for investment (“LHI”) increased to 1.21%, compared to 1.16% as of June 30, 2024 and 1.14% as of September 30, 2023; and
• Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on November 22, 2024.

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

Net Interest Income

For the three months ended September 30, 2024, net interest income before provision for credit losses was $100.1 million and NIM was 3.30% compared to $96.2 million and 3.29%, respectively, for the three months ended June 30, 2024. The approximately $3.8 million increase, or 4.0%, in net interest income before provision for credit losses was primarily due to a $4.8 million increase in interest income on deposits in financial institutions and fed funds sold, a $1.4 million decrease in interest expense on advances from the Federal Home Loan Bank (“FHLB”), a $422 thousand increase in interest income on debt securities and a $282 thousand increase in interest income on loans. The increase was partially offset by a $1.6 million increase in interest expense on transactions and savings deposits and a $1.4 million increase in interest expense on certificates and other time deposits, during the three months ended September 30, 2024. NIM increased 1 basis point compared to the three months ended June 30, 2024, primarily due to a decrease in funding costs on deposits during the three months ended September 30, 2024, partially offset by a decrease in loan yields and average balances.

Compared to the three months ended September 30, 2023, net interest income before provision for credit losses for the three months ended September 30, 2024 increased by $701 thousand, or 0.7%. The increase was primarily due to a $8.5 million decrease in interest expense on advances from the FHLB, a $5.4 million increase in interest income on deposits in financial institutions and fed funds sold and a $4.9 million increase in interest income on debt securities. The increase was partially offset by a $10.1 million increase in interest expense on certificates and other time deposits, a $7.3 million increase in interest expense on transaction and savings deposits and a $690 thousand decrease in interest income on equity securities and other investments. Compared to the three months ended September 30, 2023, NIM decreased 16 bps from 3.46% for the three months ended September 30, 2024. The decrease was primarily due to the increase in funding costs on deposits during the three months ended September 30, 2024, partially offset by an increase in loan yields and an increase in average balances and yields on debt securities.

Noninterest Income

Noninterest income for the three months ended September 30, 2024 was $13.1 million, an increase of $2.5 million, or 23.9%, compared to the three months ended June 30, 2024. The increase was primarily due to a $1.6 million increase in other income, driven by a $1.2 million increase in other real estate owned (“OREO”) income, a $1.1 million increase in loan fees and a $468 thousand increase in service charges and fees on deposits for the three months ended September 30, 2024. The increase was partially offset by a $540 thousand decrease in government guaranteed loan income.

Compared to the three months ended September 30, 2023, noninterest income for the three months ended September 30, 2024 increased by $3.4 million, or 35.5%. The increase was primarily due to a $2.2 million increase in other income, driven by a $1.2 million increase in OREO income, a $1.7 million increase in loan fees and a $283 thousand increase in service charges and fees on deposit accounts. The increase was partially offset by a $1.0 million decrease in government guaranteed loan income, primarily driven by a decrease in the Company’s USDA sales.

Noninterest Expense

Noninterest expense was $70.1 million for the three months ended September 30, 2024, compared to $63.1 million for the three months ended June 30, 2024, an increase of $7.0 million, or 11.0%. The increase was primarily due to a $4.6 million increase in salaries and employee benefits primarily due to an increase in incentive accruals to 80% of target payout, a $1.9 million increase in other noninterest expense primarily driven by OREO expenses, a $805 thousand increase in marketing expenses and a $204 thousand increase in occupancy and equipment expense. The increase is partially offset by a decrease of $714 thousand in professional and regulatory fees compared to the three months ended June 30, 2024.

Compared to the three months ended September 30, 2023, noninterest expense for the three months ended September 30, 2024 increased by $10.7 million, or 18.0%. The increase was primarily due to a $6.4 million increase in salaries and employee benefits primarily due to the increase in incentive accruals aforementioned, a $5.6 million increase in other noninterest expense, a $727 thousand increase data processing and software expense, and a $428 thousand increase in marketing expenses. The increase was partially offset by a $2.4 million decrease in professional and regulatory fees compared to the three months ended September 30, 2023.

Financial Condition

Total LHI was $9.03 billion at September 30, 2024, a decrease of $180.5 million compared to June 30, 2024.

Total deposits were $11.04 billion at September 30, 2024, an increase of $311.2 million, or 11.6% linked quarter annualized. The increase was primarily the result of an increase of $227.2 million in noninterest bearing deposits and an increase of $225.3 million in interest-bearing transaction and savings deposits. The increase was partially offset by a decrease of $118.7 million in certificates and other time deposits and a decrease of $22.6 million in correspondent money market accounts.

Credit Quality

NPAs totaled $67.3 million, or 0.52% of total assets, of which $58.3 million represents LHI and $9.0 million represents OREO at September 30, 2024, compared to $83.0 million, or 0.65% of total assets, at June 30, 2024. The Company had net charge-offs of $269 thousand for the three months ended September 30, 2024. Annualized net charge-offs to average loans outstanding were 1bp, for the three months ended September 30, 2024, compared to 28 bps and 8 bps for the three months ended June 30, 2024 and September 30, 2023, respectively.

ACL as a percentage of LHI was 1.21%, 1.16% and 1.14% at September 30, 2024, June 30, 2024 and September 30, 2023, respectively. The Company recorded a provision for credit losses of $4.0 million, $8.3 million and $8.6 million for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively. The recorded provision for credit losses for the three months ended September 30, 2024, compared to the three months ended June 30, 2024, was primarily attributable to an increase in general reserves as a result of changes in economic factors which now represents 97% of the total ACL as a percentage of LHI. The balance for unfunded commitments for the three months ended September 30, 2024 remained relatively stable compared to the three months ended June 30, 2024 and recorded no benefit or provision for unfunded commitments for the three months ended September 30, 2024. The Company recorded no benefit or provision for unfunded commitments for the three months ended June 30, 2024 and a $909 thousand benefit for unfunded commitments for the three months ended September 30, 2023.

Income Tax

Income tax expense for the three months ended September 30, 2024 totaled $8.1 million, a decrease of $154 thousand, or 1.9%, compared to the three months ended June 30, 2024. The Company’s effective tax rate was approximately 20.6% for the three months ended September 30, 2024. The decrease was primarily due a $941 thousand change in the Company’s valuation allowance slightly offset by a return to provision of $224 thousand and a net discrete tax expense of $501 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, October 22, 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 November 22, 2024 to stockholders of record as of the close of business on November 8, 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, October 23, 2024, at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting http://edge.media-server.com/mmc/p/99msavdf 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/BI8a41df4f3f824d2888f9cf9a3e02c9b8. 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.

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.

¹ Refer 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.
² Dividend amount represents dividend paid per common share subsequent to each respective quarter end.
³ Annualized ratio for quarterly metrics.

¹ Includes average outstanding balances of LHFS of $54.3 million, $58.5 million and $28.3 million for the quarters ended September 30, 2024, June 30, 2024, and September 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.

¹ Includes average outstanding balances of LHFS of $55.5 million and $23.8 million for the nine months ended September 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.

¹Includes average outstanding balances of LHFS of $54.3 million, $58.5 million, $53.9 million, $31.2 million and $28.3 million for the three months ended September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023, and September 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

¹ Total LHI does not include deferred fees of $8.2 million, $7.8 million, $6.9 million, $8.8 million and $10.1 million at September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023 and September 30, 2023, respectively.

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.
³ Annualized ratio for quarterly metrics.

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: