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Veritex Holdings, Inc. Reports First Quarter Operating Results

DALLAS, April 27, 2021 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. (“Veritex” or the “Company”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the quarter ended March 31, 2021.

“We are very pleased with our operating results for the first quarter of 2021. Our business momentum continues to build as a result of our investments in talent and the accelerated reopening of the Texas economy,” said C. Malcolm Holland, III, the Company’s Chairman and Chief Executive Officer. “Our loan and deposit growth remains good, credit trends are improving and our balance sheet it strong. We couldn’t be more excited about the future of Veritex including today’s announcement of our partnership with Thrive Mortgage.”

First Quarter Highlights

  • Net income of $31.8 million, or $0.64 diluted earnings per share (“EPS”), compared to $22.8 million, or $0.46 diluted EPS, for the quarter ended December 31, 2020 and $4.1 million, or $0.08 diluted EPS, for the quarter ended March 31, 2020;
  • Pre-tax, pre-provision operating earnings1 totaled $40.2 million, compared to $38.4 million for the quarter ended December 31, 2020 and $39.1 million for the quarter ended March 31, 2020;
  • Operating return on average tangible common equity1 of 17.39% for the three months ended March 31, 2021 compared to 16.44% for the three months ended December 31, 2020;
  • Total loans held for investment, excluding PPP loans, grew $137.0 million from the fourth quarter of 2020, or 8.65% annualized. Total loans held for investment, excluding PPP loans, grew $337.6 million, or 5.42%, year over year;
  • Total deposits grew $391.7 million from the fourth quarter of 2020, or 24.0% annualized, with the average cost of total deposits decreasing to 0.31% for the three months ended March 31, 2021 from 0.38% and 1.02% for the three months ended December 31, 2020 and March 31, 2020, respectively;
  • Declared quarterly cash dividend of $0.17 payable on May 20, 2021;
  • Extended the expiration date of the stock buyback program to December 31, 2021.
         
Financial Highlights   Q1 2021   Q4 2020
    (Dollars in thousands)
(unaudited)
GAAP        
Net income   $ 31,787     $ 22,801  
Diluted EPS   0.64     0.46  
Book value per common share   24.96     24.39  
Return on average assets2   1.44 %   1.04 %
Efficiency ratio   49.62     62.52  
Non-GAAP1        
Operating earnings   $ 32,213     $ 29,730  
Diluted operating EPS   0.64     0.60  
Tangible book value per common share   16.34     15.70  
Pre-tax, pre-provision operating earnings   40,210     38,407  
Pre-tax, pre-provision operating return on average assets2   1.82 %   1.75 %
Operating return on average assets2   1.46     1.35  
Operating efficiency ratio   49.62     49.49  
Return on average tangible common equity   17.17     12.84  
Operating return on average tangible common equity   17.39     16.44  

1 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.
2 Annualized ratio.

Results of Operations for the Three Months Ended March 31, 2021

Net Interest Income

For the three months ended March 31, 2021, net interest income before provision for credit losses was $65.6 million and net interest margin was 3.22% compared to $66.8 million and 3.29%, respectively, for the three months ended December 31, 2020. Net interest margin decreased 7 basis point from the three months ended December 31, 2020 primarily due to a decrease in the average yields earned on loans slightly offset by the average rates paid on interest-bearing demand and savings deposits and certificate and other time deposits for the three months ended March 31, 2021. As a result, the average cost of interest-bearing deposits decreased 10 basis points to 0.45% for the three months ended March 31, 2021 from 0.55% for the three months ended December 31, 2020.

Net interest income before provision for credit losses decreased by $1.8 million from $67.4 million to $65.6 million and net interest margin decreased by 45 basis points from 3.67% to 3.22% for the three months ended March 31, 2021 as compared to the same period in 2020. The decrease in net interest income before provision for credit losses was primarily due to a $10.5 million decrease in interest income on loans and a $1.2 million increase in interest expense on subordinated debentures and subordinated notes, partially offset by $4.6 million and $5.2 million decrease in interest expenses on transaction and savings deposits and certificates and other time deposits, respectively, during the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Net interest margin decreased 45 basis points from the three months ended March 31, 2020 primarily due to a decrease in yields earned on loan balances, partially offset by decreases in the average rate paid on interest-bearing demand and savings deposits and certificates and other time deposits for the three months ended March 31, 2021. As a result, the average cost of interest-bearing deposits decreased 92 basis points to 0.45% for the three months ended March 31, 2021 from 1.37% for the three months ended March 31, 2020.

Noninterest Income

Noninterest income for the three months ended March 31, 2021 was $14.2 million, an increase of $5.2 million, or 57.3%, compared to the three months ended December 31, 2020. The increase was primarily due to a $6.1 million increase in government guaranteed loan income, net, driven by $6.6 million of fee income earned on PPP loans during the three months ended March 31, 2021 with no corresponding fee income earned on PPP loans earned during the three months ended December 31, 2020. This was partially offset by a $1.5 million decrease in derivative income.

Compared to the three months ended March 31, 2020, noninterest income for the three months ended March 31, 2021 increased by $6.9 million, or 95.6%. The increase was primarily due to a $6.1 million increase in government guaranteed loan income, net, as a result of the fee income earned on PPP loans for the three months ended March 31, 2021 with no corresponding fee income earned on PPP loans during the three months ended March 31, 2020.

Noninterest Expense

Noninterest expense was $39.6 million for the three months ended March 31, 2021, compared to $47.4 million for the three months ended December 31, 2020, a decrease of $7.8 million, or 16.4%. The decrease was primarily driven by a $9.7 million decrease in debt extinguishment costs on Federal Home Loan Bank ("FHLB") advances that were pre-paid during the three months ended December 31, 2020 with no corresponding FHLB advance prepayments during the three months ended March 31, 2021. This decrease was partially offset by a $2.9 million increase in salaries and employee benefits primarily driven by a $980 thousand decrease in deferred origination costs, a $515 thousand increase in FICA taxes and a $331 thousand increase in employee stock based compensation.

Compared to the three months ended March 31, 2020, noninterest expense for the three months ended March 31, 2021 increased by $4.1 million, or 11.4%. The increase was primarily driven by a $4.1 million increase in salaries and employee benefits as a result of a $1.9 million increase in accrued bonus, a $1.2 million increase in lender incentive and a $487 thousand increase in employee stock based compensation.

Financial Condition

Total loans were $7.0 billion at March 31, 2021, an increase of $184.8 million, or 10.9% annualized, compared to December 31, 2020. The increase was the result of the continued execution and success of our loan growth strategy.

Total deposits were $6.9 billion at March 31, 2021, an increase of $391.7 million, or 24.0% annualized, compared to December 31, 2020. The increase was primarily the result of increases of $231.2 million in interest-bearing transaction and savings deposits, $85.9 million in certificates and other time deposits, and $74.6 million in noninterest-bearing demand deposits.

Asset Quality

Nonperforming assets totaled $85.0 million, or 0.92% of total assets at March 31, 2021, compared to $87.6 million, or 0.99% of total assets, at December 31, 2020. Included in nonperforming assets is $9.1 million of accruing loans 90 or more days past due that are considered well-secured and in the process of collection. Excluding accruing loans 90 or more days past due, nonperforming assets represented 0.82% of total assets at March 31, 2021, a 13 basis point decrease compared to December 31, 2020. The Company’s net charge-offs for the three months ended March 31, 2021 were nominal.

The Company recorded no provision for credit losses for the three months ended March 31, 2021 and December 31, 2020, compared to $31.8 million for the three months ended March 31, 2020. The decrease in the recorded provision for credit losses for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, was primarily attributable to improvement in the Texas economic forecasts used in the Current Expected Credit Losses (“CECL”) model in the first quarter of 2021 to reflect the expected impact of the COVID-19 pandemic as of March 31, 2021, as compared to our Texas economic forecasts and expected impact of the COVID-19 pandemic as of March 31, 2020. In the first quarter of 2021, we also recorded a $570 thousand recovery in our provision for unfunded commitments which was attributable to improvement in the Texas economic forecasts compared to a $902 thousand provision for unfunded commitments recorded for the three months ended December 31, 2020. Allowance for credit losses as a percentage of LHI, excluding MW and PPP loans, was 1.76%, 1.80% and 1.73% at March 31, 2021, December 31, 2020 and March 31, 2020, respectively.

Dividend Information

On April 27, 2021, Veritex’s Board of Directors declared a quarterly cash dividend of $0.17 per share on its outstanding shares of common stock. The dividend will be paid on or after May 20, 2021 to stockholders of record as of the close of business on May 6, 2021.

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, 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, 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 to review the results on Tuesday, April 27, 2021 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/vz2jxi3a and will receive a unique PIN, which can be used when dialing in for the call. This will allow attendees to access the call immediately. Alternatively, participants may call toll-free at (877) 703-9880.

The call and corresponding presentation slides will be webcast live on the home page of the Company's website, https://ir.veritexbank.com/. An audio replay will be available one hour after the conclusion of the call at (855) 859-2056, Conference #4978885. This replay, as well as the webcast, will be available until May 4, 2021.

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 contains certain “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 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 date of Veritex’s quarterly cash dividend, the impact of certain changes in Veritex’s accounting policies, standards and interpretations, the effects of the COVID-19 pandemic and actions taken in response thereto, 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,” “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, 2020 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 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)

    For the Three Months Ended
    Mar 31, 2021   Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020
    (Dollars and shares in thousands)
Per Share Data (Common Stock):                    
Basic EPS   $ 0.64     $ 0.46     $ 0.46     $ 0.48     $ 0.08  
Diluted EPS   0.64     0.46     0.46     0.48     0.08  
Book value per common share   24.96     24.39     23.87     23.45     23.19  
Tangible book value per common share1   16.34     15.70     15.19     14.71     14.39  
                     
Common Stock Data:                    
Shares outstanding at period end   49,433     49,340     49,650     49,633     49,557  
Weighted average basic shares outstanding for the period   49,394     49,571     49,647     49,597     50,725  
Weighted average diluted shares outstanding for the period   49,998     49,837     49,775     49,727     51,056  
                     
Summary of Credit Ratios:                    
ACL to total LHI, excluding mortgage warehouse and PPP loans   1.76 %   1.80 %   2.10 %   2.01 %   1.73 %
Nonperforming assets to total assets   0.92     0.99     1.11     0.62     0.60  
Net charge-offs to average loans outstanding       0.28     0.04     0.03      
                     
Summary Performance Ratios:                    
Return on average assets2   1.44     1.04     1.06     1.11     0.20  
Return on average equity2   10.53     7.58     7.74     8.36     1.41  
Return on average tangible common equity1, 2   17.17     12.84     13.27     14.49     3.27  
Efficiency ratio   49.62     62.52     48.12     46.02     47.61  
                     
Selected Performance Metrics - Operating:                    
Diluted operating EPS1   $ 0.64     $ 0.60     $ 0.46     $ 0.43     $ 0.08  
Pre-tax, pre-provision operating return on average assets1, 2   1.82 %   1.75 %   1.82 %   2.11 %   1.94 %
Operating return on average assets1, 2   1.46     1.35     1.06     0.98     0.20  
Operating return on average tangible common equity1, 2   17.39     16.44     13.27     12.90     3.27  
Operating efficiency ratio1   49.62     49.49     48.11     45.74     47.61  
                     
Veritex Holdings, Inc. Capital Ratios:                    
Tier 1 capital to average assets (leverage)   9.50     9.43     9.54     9.16     9.49  
Common equity tier 1 capital   9.27     9.30     9.67     9.66     9.53  
Tier 1 capital to risk-weighted assets   9.61     9.66     10.05     10.05     9.92  
Total capital to risk-weighted assets   13.38     13.56     12.70     12.71     12.48  
Tangible common equity to tangible assets1   9.17     9.23     9.12     8.96     8.81  

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.
Annualized ratio for quarterly metrics.


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

    Mar 31, 2021   Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020
    (unaudited)       (unaudited)   (unaudited)   (unaudited)
ASSETS                    
Cash and cash equivalents   $ 468,029       $ 230,825       $ 128,767       $ 160,306       $ 430,842    
Debt securities   1,077,860       1,055,201       1,091,440       1,112,061       1,117,804    
Other investments   87,226       87,192       98,023       104,213       112,775    
                     
Loans held for sale   19,864       21,414       13,928       28,041       15,048    
Loans held for investment, Paycheck Protection Program (“PPP”) loans, carried at fair value   407,353       358,042       405,465       398,949          
Loans held for investment, mortgage warehouse (“MW”)   599,001       577,594       544,845       441,992       371,161    
Loans held for investment, excluding MW and PPP   5,963,493       5,847,862       5,789,293       5,726,873       5,853,735    
Total loans   6,989,711       6,804,912       6,753,531       6,595,855       6,239,944    
Allowance for credit losses (“ACL”)   (104,936 )     (105,084 )     (121,591 )     (115,365 )     (100,983 )  
Bank-owned life insurance   83,318       82,855       82,366       81,876       81,395    
Bank premises, furniture and equipment, net   114,585       115,063       115,794       115,560       116,056    
Other real estate owned (“OREO”)   2,337       2,337       5,796       7,716       7,720    
Intangible assets, net of accumulated amortization   59,236       61,733       64,716       66,705       69,444    
Goodwill   370,840       370,840       370,840       370,840       370,840    
Other assets   89,304       114,997       112,693       88,091       85,787    
Total assets   $ 9,237,510       $ 8,820,871       $ 8,702,375       $ 8,587,858       $ 8,531,624    
LIABILITIES AND STOCKHOLDERS’ EQUITY                    
Deposits:                    
Noninterest-bearing deposits   $ 2,171,719       $ 2,097,099       $ 1,920,715       $ 1,907,697       $ 1,549,260    
Interest-bearing transaction and savings deposits   3,189,693       2,958,456       2,821,945       2,714,149       2,536,865    
Certificates and other time deposits   1,543,158       1,457,291       1,479,896       1,503,701       1,713,820    
Total deposits   6,904,570       6,512,846       6,222,556       6,125,547       5,799,945    
Accounts payable and other liabilities   55,902       61,928       69,540       68,713       61,746    
Advances from Federal Home Loan Bank   777,679       777,718       1,082,756       1,087,794       1,377,832    
Subordinated debentures and subordinated notes   262,774       262,778       140,158       140,283       140,406    
Securities sold under agreements to repurchase   2,777       2,225       2,028       1,772       2,426    
Total liabilities   8,003,702       7,617,495       7,517,038       7,424,109       7,382,355    
Commitments and contingencies                    
Stockholders’ equity:                    
Common stock   557       555       555       555       554    
Additional paid-in capital   1,131,324       1,126,437       1,124,148       1,122,063       1,119,757    
Retained earnings   195,661       172,232       157,639       143,277       127,812    
Accumulated other comprehensive income   62,413       56,225       47,155       42,014       45,306    
Treasury stock   (156,147 )     (152,073 )     (144,160 )     (144,160 )     (144,160 )  
Total stockholders’ equity   1,233,808       1,203,376       1,185,337       1,163,749       1,149,269    
Total liabilities and stockholders’ equity   $ 9,237,510       $ 8,820,871       $ 8,702,375       $ 8,587,858       $ 8,531,624    
                                                   

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

    For the Three Months Ended
    Mar 31, 2021   Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020
Interest income:                    
Loans, including fees   $ 67,399       $ 69,597       $ 68,685       $ 70,440     $ 77,861    
Debt securities   7,437       7,652       7,852       7,825     7,397    
Deposits in financial institutions and Fed Funds sold   127       99       65       186     871    
Equity securities and other investments   663       752       827       891     850    
Total interest income   75,626       78,100       77,429       79,342     86,979    
Interest expense:                    
Transaction and savings deposits   1,980       2,105       2,105       2,471     6,552    
Certificates and other time deposits   3,061       3,919       5,004       6,515     8,240    
Advances from FHLB   1,812       2,222       2,707       2,801     2,879    
Subordinated debentures and subordinated notes   3,138       3,088       1,743       1,798     1,903    
Total interest expense   9,991       11,334       11,559       13,585     19,574    
Net interest income   65,635       66,766       65,870       65,757     67,405    
Provision for credit losses               8,692       16,172     31,776    
(Benefit) provision for unfunded commitments   (570 )     902       1,447       2,799     3,881    
Net interest income after provisions   66,205       65,864       55,731       46,786     31,748    
Noninterest income:                    
Service charges and fees on deposit accounts   3,629       3,971       3,130       2,960     3,642    
Loan fees   1,341       684       1,787       1,240     845    
(Loss) gain on sales of investment securities         (256 )     (8 )     2,879        
Gain on sales of mortgage loans held for sale   507       317       472       308     142    
Government guaranteed loan income, net   6,548       448       2,257       11,006     439    
Other   2,147       3,848       2,157       2,897     2,014    
Total noninterest income   14,172       9,012       9,795       21,290     7,247    
Noninterest expense:                    
Salaries and employee benefits   22,932       20,011       20,553       20,019     18,870    
Occupancy and equipment   4,096       4,116       3,980       3,994     4,273    
Professional and regulatory fees   3,441       3,578       3,159       2,796     2,196    
Data processing and software expense   2,319       2,238       2,452       2,434     2,089    
Marketing   909       945       1,062       561     1,083    
Amortization of intangibles   2,537       2,558       2,840       2,696     2,696    
Telephone and communications   337       340       345       308     319    
COVID expenses               132       1,245        
Debt extinguishment costs         9,746             1,561        
Other   3,026       3,841       1,885       4,447     4,019    
Total noninterest expense   39,597       47,373       36,408       40,061     35,545    
Income before income tax expense   40,780       27,503       29,118       28,015     3,450    
Income tax expense (benefit)   8,993       4,702       6,198       3,987     (684 )  
Net income   $ 31,787       $ 22,801       $ 22,920       $ 24,028     $ 4,134    
                     
Basic EPS   $ 0.64       $ 0.46       $ 0.46       $ 0.48     $ 0.08    
Diluted EPS   $ 0.64       $ 0.46       $ 0.46       $ 0.48     $ 0.08    
Weighted average basic shares outstanding   49,394       49,571       49,647       49,597     50,725    
Weighted average diluted shares outstanding   49,998       49,837       49,775       49,727     51,056    
                                       

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

    For the Three Months Ended
    March 31, 2021   December 31, 2020   March 31, 2020
    Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
Assets                                    
Interest-earning assets:                                    
Loans1   $ 5,897,815       $ 62,702     4.31 %   $ 5,798,692       $ 65,259     4.48 %   $ 5,784,965       $ 76,527     5.32 %
Loans held for investment, MW   510,678       3,815     3.03     446,027       3,355     2.99     163,646       1,334     3.28  
PPP loans   356,356       882     1.00     390,509       983     1.00                
Debt securities   1,063,538       7,437     2.84     1,076,031       7,652     2.83     1,038,954       7,397     2.86  
Interest-bearing deposits in other banks   341,483       127     0.15     258,687       99     0.15     308,546       871     1.14  
Equity securities and other investments   87,178       663     3.08     95,706       752     3.13     91,917       850     3.72  
Total interest-earning assets   8,257,048       75,626     3.71     8,065,652       78,100     3.85     7,388,028       86,979     4.74  
Allowance for credit losses   (105,972 )             (121,162 )             (44,270 )          
Noninterest-earning assets   790,195               805,651               782,024            
Total assets   $ 8,941,271               $ 8,750,141               $ 8,125,782            
                                     
Liabilities and Stockholders’ Equity                                    
Interest-bearing liabilities:                                    
Interest-bearing demand and savings deposits   $ 3,038,586       $ 1,980     0.26 %   $ 2,862,084       $ 2,105     0.29 %   $ 2,638,633       $ 6,552     1.00 %
Certificates and other time deposits   1,509,836       3,061     0.82     1,467,250       3,919     1.06     1,650,678       8,240     2.01  
Advances from FHLB   777,694       1,812     0.94     885,014       2,222     1.00     937,901       2,879     1.23  
Subordinated debentures and subordinated notes   265,356       3,138     4.80     259,581       3,088     4.73     145,189       1,903     5.27  
Total interest-bearing liabilities   5,591,472       9,991     0.72     5,473,929       11,334     0.82     5,372,401       19,574     1.47  
                                     
Noninterest-bearing liabilities:                                    
Noninterest-bearing deposits   2,069,233               2,011,995               1,523,702            
Other liabilities   56,272               67,943               46,563            
Total liabilities   7,716,977               7,553,867               6,942,666            
Stockholders’ equity   1,224,294               1,196,274               1,183,116            
Total liabilities and stockholders’ equity   $ 8,941,271               $ 8,750,141               $ 8,125,782            
                                     
Net interest rate spread2           2.99 %           3.03 %           3.27 %
Net interest income       $ 65,635             $ 66,766             $ 67,405      
Net interest margin3           3.22 %           3.29 %           3.67 %

1 Includes average outstanding balances of loans held for sale of $16,602, $11,938 and $10,995 for the three months ended March 31, 2021, December 31, 2020, and March 31, 2020, respectively, and average balances of loans held for investment, excluding mortgage warehouse and PPP loans.
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

Yield Trend

    For the Three Months Ended
    March 31, 2021   December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31, 2020
Average yield on interest-earning assets:                    
Loans1   4.31 %   4.48 %   4.49 %   4.68 %   5.32 %
Loans held for investment, MW   3.03     2.99     3.00     3.01     3.28  
PPP loans   1.00     1.00     1.00     1.00      
Debt securities   2.84     2.83     2.84     2.82     2.86  
Interest-bearing deposits in other banks   0.15     0.15     0.15     0.20     1.14  
Equity securities and other investments   3.08     3.13     3.17     3.24     3.72  
Total interest-earning assets   3.71 %   3.85 %   3.90 %   3.99 %   4.74 %
                     
Average rate on interest-bearing liabilities:                    
Interest-bearing demand and savings deposits   0.26 %   0.29 %   0.31 %   0.37 %   1.00 %
Certificates and other time deposits   0.82     1.06     1.36     1.61     2.01  
Advances from FHLB   0.94     1.00     1.01     0.93     1.23  
Subordinated debentures and subordinated notes   4.80     4.73     4.87     5.07     5.27  
Total interest-bearing liabilities   0.72 %   0.82 %   0.85 %   0.97 %   1.47 %
                     
Net interest rate spread2   2.99 %   3.03 %   3.05 %   3.02 %   3.27 %
Net interest margin3   3.22 %   3.29 %   3.32 %   3.31 %   3.67 %

Includes average outstanding balances of loans held for sale of $16,602, $11,938, $15,404, $22,958 and $10,995 for the three months ended March 31, 2021, December 31, 2020, September 30, 2020, June 30, 2020 and March 31, 2020, respectively, and average balances of loans held for investment, excluding mortgage warehouse and PPP loans.
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

    For the Three Months Ended
    March 31, 2021   December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31, 2020
Average cost of interest-bearing deposits   0.45 %   0.55 %   0.67 %   0.84 %   1.37 %
Average costs of total deposits, including noninterest-bearing   0.31     0.38     0.46     0.59     1.02  
                               

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

Total LHI and Deposit Portfolio Composition

    March 31, 2021   December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31, 2020
    (Dollars in thousands)
LHI1                                        
Commercial   $ 1,632,040   27.4 %   $ 1,559,546   26.7 %   $ 1,623,249   28.0 %   $ 1,555,300   27.2 %   $ 1,777,603   30.4 %
Real Estate:                                        
Owner occupied commercial   733,310   12.3     717,472   12.3     734,939   12.7     769,952   13.4     723,839   12.4  
Commercial   1,970,945   33.0     1,904,132   32.5     1,817,013   31.4     1,847,480   32.3     1,828,386   31.2  
Construction and land   723,444   12.1     693,030   11.8     623,496   10.8     599,510   10.5     566,470   9.7  
Farmland   14,751   0.2     13,844   0.2     14,413   0.2     14,723   0.3     14,930   0.3  
1-4 family residential   492,609   8.3     524,344   9.0     548,953   9.5     528,688   9.2     536,892   9.2  
Multi-family residential   386,844   6.5     424,962   7.3     412,412   7.1     394,829   6.8     388,374   6.7  
Consumer   12,431   0.2     13,000   0.2     14,127   0.1     14,932   0.3     15,771   0.3  
Total LHI   $ 5,966,374   100 %   $ 5,850,330   100 %   $ 5,788,602   100 %   $ 5,725,414   100 %   $ 5,852,265   100 %
                                         
MW   599,001       577,594       544,845       441,992       373,161    
PPP loans   407,353       358,042       405,465       398,949          
                                         
Total LHI1   $ 6,972,728       $ 6,785,966       $ 6,738,912       $ 6,566,355       $ 6,225,426    
                                         
Deposits                                        
Noninterest-bearing   $ 2,171,719   31.6 %   $ 2,097,099   32.3 %   $ 1,920,715   30.9 %   $ 1,907,697   31.1 %   $ 1,549,260   26.7 %
Interest-bearing transaction   463,343   6.7     453,110   7.0     450,739   7.2     343,640   5.6     306,641   5.3  
Money market   2,602,903   37.7     2,398,526   36.8     2,267,191   36.4     2,272,520   37.1     2,143,874   37.0  
Savings   123,447   1.8     106,820   1.6     104,015   1.7     97,989   1.6     86,350   1.5  
Certificates and other time deposits   1,543,158   22.2     1,457,291   22.4     1,479,896   23.7     1,503,701   24.5     1,713,820   29.6  
Total deposits   $ 6,904,570   100 %   $ 6,512,846   100 %   $ 6,222,556   100 %   $ 6,125,547   100 %   $ 5,799,945   100 %
                                         
Loan to Deposit Ratio     101.0 %       104.2 %       108.3 %       107.2 %       107.3 %  
Loan to Deposit Ratio, excluding MW and PPP loans     86.4 %       89.8 %       93.0 %       93.5 %       100.9 %  

1 Total LHI does not include deferred fees of $2.9 million, $2.5 million, and $691 thousand at March 31, 2021, December 31, 2020 and September 30, 2020, respectively, deferred costs of $1.5 million and $1.5 million at June 30, 2020 and March 31, 2020, respectively.


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

Asset Quality

  For the Three Months Ended
  Mar 31, 2021   Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020
  (Dollars in thousands)
Nonperforming Assets (“NPAs”):                  
Nonaccrual loans $ 73,594     $ 81,096     $ 88,877     $ 43,594     $ 38,836  
Accruing loans 90 or more days past due1 9,093     4,204     1,689     2,021     4,764  
Total nonperforming loans held for investment (“NPLs”) 82,687     85,300     90,566     45,615     43,600  
OREO 2,337     2,337     5,796     7,716     7,720  
Total NPAs $ 85,024     $ 87,637     $ 96,362     $ 53,331     $ 51,320  
                   
Charge-offs:                  
Residential $ (15 )   $ (18 )   $     $     $  
Owner occupied commercial real estate         (2,421 )        
Nonowner occupied commercial real estate     (2,865 )            
Commercial (346 )   (13,699 )   (68 )   (1,740 )    
Consumer (18 )   (26 )   (11 )   (57 )   (68 )
Total charge-offs (379 )   (16,608 )   (2,500 )   (1,797 )   (68 )
                   
Recoveries:                  
Residential 3     49     7         1  
Commercial 226     52     14     7     29  
Consumer 2         13         274  
Total recoveries 231     101     34     7     304  
                   
Net charge-offs $ (148 )   $ (16,507 )   $ (2,466 )   $ (1,790 )   $ 236  
                   
CECL transition adjustment $     $     $     $     $ 39,137  
                   
Allowance for credit losses (“ACL”) at end of period $ 104,936     $ 105,084     $ 121,591     $ 115,365     $ 100,983  
                   
Asset Quality Ratios:                  
NPAs to total assets   0.92 %     0.99 %     1.11 %     0.62 %     0.60 %
NPLs to total LHI, excluding MW and PPP loans   1.39       1.46       1.56       0.80       0.75  
ACL to total LHI, excluding MW and PPP loans   1.76       1.80       2.10       2.01       1.73  
Net charge-offs to average loans outstanding         0.28       0.04       0.03        

1 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.


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 generally accepted accounting principles as in effect from time to time in the United States (“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:

    As of
    Mar 31, 2021   Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020
    (Dollars in thousands, except per share data)
Tangible Common Equity                    
Total stockholders' equity   $ 1,233,808       $ 1,203,376       $ 1,185,337       $ 1,163,749       $ 1,149,269    
Adjustments:                    
Goodwill   (370,840 )     (370,840 )     (370,840 )     (370,840 )     (370,840 )  
Core deposit intangibles   (55,311 )     (57,758 )     (60,209 )     (62,661 )     (65,112 )  
Tangible common equity   $ 807,657       $ 774,778       $ 754,288       $ 730,248       $ 713,317    
Common shares outstanding   49,433       49,340       49,650       49,633       49,557    
                     
Book value per common share   $ 24.96       $ 24.39       $ 23.87       $ 23.45       $ 23.19    
Tangible book value per common share   $ 16.34       $ 15.70       $ 15.19       $ 14.71       $ 14.39    
                                                   

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:

    As of
    Mar 31, 2021   Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020
    (Dollars in thousands)
Tangible Common Equity                    
Total stockholders' equity   $ 1,233,808       $ 1,203,376       $ 1,185,337       $ 1,163,749       $ 1,149,269    
Adjustments:                    
Goodwill   (370,840 )     (370,840 )     (370,840 )     (370,840 )     (370,840 )  
Core deposit intangibles   (55,311 )     (57,758 )     (60,209 )     (62,661 )     (65,112 )  
Tangible common equity   $ 807,657       $ 774,778       $ 754,288       $ 730,248       $ 713,317    
Tangible Assets                    
Total assets   $ 9,237,510       $ 8,820,871       $ 8,702,375       $ 8,587,858       $ 8,531,624    
Adjustments:                    
Goodwill   (370,840 )     (370,840 )     (370,840 )     (370,840 )     (370,840 )  
Core deposit intangibles   (55,311 )     (57,758 )     (60,209 )     (62,661 )     (65,112 )  
Tangible Assets   $ 8,811,359       $ 8,392,273       $ 8,271,326       $ 8,154,357       $ 8,095,672    
Tangible Common Equity to Tangible Assets   9.17 %     9.23 %     9.12 %     8.96 %     8.81 %  
                                         

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

Return on Average Tangible Common Equity. Return on average tangible common equity is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) net income available for common stockholders adjusted for amortization of core deposit intangibles (which we refer to as “return”) as net income, plus amortization of core deposit intangibles, less tax benefit at the statutory rate; (b) average tangible common equity as total average stockholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization; and (c) return (as described in clause (a)) divided by average tangible common equity (as described in clause (b)). For return on average tangible common equity, the most directly comparable financial measure calculated in accordance with GAAP is return on average equity.

We believe that this measure is important to many investors in the marketplace who are interested in the return on common equity, exclusive of the impact of core deposit intangibles. Goodwill and core deposit intangibles have the effect of increasing total stockholders’ equity while not increasing our tangible common equity. This measure is particularly relevant to acquisitive institutions that may have higher balances in goodwill and core deposit intangibles than non-acquisitive institutions.

The following table reconciles, as of the dates set forth below, average tangible common equity to average common equity and net income available for common stockholders adjusted for amortization of core deposit intangibles, net of taxes to net income and presents our return on average tangible common equity:

    For the Three Months Ended
    Mar 31, 2021   Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020
    (Dollars in thousands)
Net income available for common stockholders adjusted for amortization of core deposit intangibles                    
Net income   $ 31,787       $ 22,801       $ 22,920       $ 24,028       $ 4,134    
Adjustments:                    
Plus: Amortization of core deposit intangibles   2,447       2,451       2,451       2,451       2,451    
Less: Tax benefit at the statutory rate   514       515       515       515       515    
Net income available for common stockholders adjusted for amortization of core deposit intangibles   $ 33,720       $ 24,737       $ 24,856       $ 25,964       $ 6,070    
                     
Average Tangible Common Equity                    
Total average stockholders' equity   $ 1,224,294       $ 1,196,274       $ 1,177,882       $ 1,155,798       $ 1,183,116    
Adjustments:                    
Average goodwill   (370,840 )     (370,840 )     (370,840 )     (370,840 )     (370,840 )  
Average core deposit intangibles   (56,913 )     (59,010 )     (61,666 )     (64,151 )     (66,439 )  
Average tangible common equity   $ 796,541       $ 766,424       $ 745,376       $ 720,807       $ 745,837    
Return on Average Tangible Common Equity (Annualized)   17.17 %     12.84 %     13.27 %     14.49 %     3.27 %  
                                         

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

Operating Earnings, Pre-tax, Pre-provision Operating Earnings and performance metrics calculated using Operating Earnings and Pre-tax, Pre-provision Operating Earnings, including Diluted Operating Earnings per Share, Operating Return on Average Assets, Pre-tax, Pre-Provision Operating Return on Average Assets, Operating Return on Average Tangible Common Equity and Operating Efficiency Ratio. Operating earnings, pre-tax, pre-provision operating earnings and the performance metrics calculated using these metrics, listed below, are non-GAAP measures used by management to evaluate the Company’s financial performance. We calculate (a) operating earnings as net income plus loss (gain) on sale of securities, net, plus loss (gain) on sale of disposed branch assets, plus FHLB pre-payment fees, plus merger and acquisition expenses, less tax impact of adjustments, plus other merger and acquisition tax items, plus re-measurement of deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. We calculate (b) diluted operating earnings per share as operating earnings as described in clause (a) divided by weighted average diluted shares outstanding. We calculate (c) pre-tax, pre-provision operating earnings as operating earnings as described in clause (a) plus provision for income taxes, plus provision for loan losses. We calculate (d) pre-tax, pre-provision operating return on average assets as pre-tax, pre-provision operating earnings as described in clause (a) divided by average total assets. We calculate (e) operating return on average assets as operating earnings as described in clause (a) divided by average total assets. We calculate (f) operating return on average tangible common equity as operating earnings as described in clause (a), adjusted for the amortization of intangibles and tax benefit at the statutory rate, divided by total average tangible common equity (average stockholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization). We calculate (g) operating efficiency ratio as non interest expense plus adjustments to operating non interest expense divided by (i) non interest income plus adjustments to operating non interest income plus (ii) net interest income.

We believe that these measures and the operating metrics calculated utilizing these measures are important to management and many investors in the marketplace who are interested in understanding the ongoing operating performance of the Company and provide meaningful comparisons to its peers.

The following tables reconcile, as of the dates set forth below, operating net income and pre-tax, pre-provision operating earnings and related metrics:

    For the Three Months Ended
    Mar 31, 2021   Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020
    (Dollars in thousands)
Operating Earnings                    
Net income   $ 31,787     $ 22,801       $ 22,920     $ 24,028       $ 4,134  
Plus: Loss (gain) on sale of securities available for sale, net       256       8     (2,879 )      
Plus: Debt extinguishment costs1       9,746           1,561        
Operating pre-tax income   31,787     32,803       22,928     22,710       4,134  
Less: Tax impact of adjustments       2,100           (277 )      
Plus: Nonrecurring tax adjustments2   426     (973 )         (1,799 )      
Operating earnings   $ 32,213     $ 29,730       $ 22,928     $ 21,188       $ 4,134  
                     
Weighted average diluted shares outstanding   49,998     49,837       49,775     49,727       51,056  
Diluted EPS   $ 0.64     $ 0.46       $ 0.46     $ 0.48       $ 0.08  
Diluted operating EPS   0.64     0.60       0.46     0.43       0.08  

1 Debt extinguishment costs relate to prepayment penalties paid in connection with the early payoff of FHLB structured advances.
2 A nonrecurring tax adjustment of $426 thousand recorded in the first quarter of 2021 was due to a true-up of a deferred tax liability. A nonrecurring tax adjustment of $973 thousand recorded in the fourth quarter of 2020 was primarily due the reversal of acquired deferred tax liabilities resulting in a tax benefit of $1.2 million offset by tax expense of $281 thousand for the setup of an uncertain tax position liability relating to state tax exposure for tax years prior to the year ending December 31, 2020. A nonrecurring tax adjustment of $1,799 was recorded in the second quarter of 2020 as a result of the Company amending a prior year Green tax return to carry back a net operating loss ("NOL") incurred by Green on January 1, 2019. The Company was allowed to carry back this NOL as result of a provision in the CARES Act which permits NOLs generated in tax years 2018, 2019 or 2020 to be carried back five years.


    For the Three Months Ended
    Mar 31, 2021   Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020
    (Dollars in thousands)
Pre-Tax, Pre-Provision Operating Earnings                    
Net income   $ 31,787       $ 22,801       $ 22,920       $ 24,028       $ 4,134    
Plus: Provision (benefit) for income taxes   8,993       4,702       6,198       3,987       (684 )  
Pus: (Benefit) provision for credit losses and unfunded commitments   (570 )     902       10,139       18,971       35,657    
Plus: Loss (gain) on sale of securities, net         256       8       (2,879 )        
Plus: Merger and acquisition expenses                              
Pre-tax, pre-provision operating earnings   $ 40,210       $ 38,407       $ 39,265       $ 45,668       $ 39,107    
                     
Average total assets   $ 8,941,271       $ 8,750,141       $ 8,585,926       $ 8,689,774       $ 8,125,782    
Pre-tax, pre-provision operating return on average assets1   1.82   %   1.75   %   1.82   %   2.11   %   1.94   %
                     
Average total assets   $ 8,941,271       $ 8,750,141       $ 8,585,926       $ 8,689,774       $ 8,125,782    
Return on average assets1   1.44   %   1.04   %   1.06   %   1.11   %   0.20   %
Operating return on average assets1   1.46       1.35       1.06       0.98       0.20    
                     
Operating earnings adjusted for amortization of core deposit intangibles                    
Operating earnings   $ 32,213       $ 29,730       $ 22,928       $ 21,188       $ 4,134    
Adjustments:                    
Plus: Amortization of core deposit intangibles   2,447       2,451       2,451       2,451       2,451    
Less: Tax benefit at the statutory rate   514       515       515       515       515    
Operating earnings adjusted for amortization of core deposit intangibles   $ 34,146       $ 31,666       $ 24,864       $ 23,124       $ 6,070    
                     
Average Tangible Common Equity                    
Total average stockholders' equity   $ 1,224,294       $ 1,196,274       $ 1,177,882       $ 1,155,798       $ 1,183,116    
Adjustments:                    
Less: Average goodwill   (370,840 )     (370,840 )     (370,840 )     (370,840 )     (370,840 )  
Less: Average core deposit intangibles   (56,913 )     (59,010 )     (61,666 )     (64,151 )     (66,439 )  
Average tangible common equity   $ 796,541       $ 766,424       $ 745,376       $ 720,807       $ 745,837    
Operating return on average tangible common equity1   17.39   %   16.44   %   13.27   %   12.90   %   3.27   %
                     
Efficiency ratio   49.62   %   62.52   %   48.12   %   46.02   %   47.61   %
Operating efficiency ratio   49.62   %   49.49   %   48.11   %   45.74   %   47.61   %

1 Annualized ratio.


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