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Veritex Holdings, Inc. Reports First Quarter Operating Results

DALLAS, April 25, 2023 (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 March 31, 2023.

“I am incredibly pleased with our first quarter operating performance. We reported outstanding earnings metrics while all banks were navigating the impact of the recent banking environment,” said C. Malcolm Holland, III. “These recent events have given our bankers an opportunity to connect with our customers and prospects to provide reassurance of our Company’s ability to meet their needs. I am encouraged that the time and focus put in over the years resulted in very little deposit outflow since last quarter.”

  Quarter to Date
Financial Highlights Q1 2023 Q4 2022 Q1 2022
  (Dollars in thousands, except per share data)
(unaudited)
GAAP      
Net income $38,411  $39,897  $33,470 
Diluted EPS  0.70   0.73   0.65 
Book value per common share  27.54   26.83   26.86 
Return on average assets2  1.28%  1.35%  1.36%
Efficiency ratio  48.42   47.63   52.84 
Return on average equity2  10.55   11.03   10.00 
Non-GAAP1      
Operating earnings $43,274  $40,395  $34,014 
Diluted operating EPS  0.79   0.74   0.66 
Tangible book value per common share  19.43   18.64   18.51 
Pre-tax, pre-provision operating earnings  66,461   63,694   42,265 
Pre-tax, pre-provision operating return on average assets2  2.21%  2.15%  1.71%
Pre-tax, pre-provision operating return on average loans 2  2.84   2.78   2.34 
Operating return on average assets2  1.44   1.36   1.38 
Operating efficiency ratio  45.63   47.11   52.05 
Return on average tangible common equity2  15.81   16.75   15.84 
Operating return on average tangible common equity2  17.72   16.95   16.08 

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.

Other First Quarter Highlights

  • Pre-tax, pre-provision operating return on average assets increased 6 bps from the fourth quarter of 2022 to 2.21% and increased 50 bps from the first quarter 2022;
  • Pre-tax, pre-provision operating return on average loans increased 6 bps from the fourth quarter of 2022 to 2.84% and increased 50 bps from the first quarter 2022;
  • Tangible book value per common share increased to $19.43 during the three months ended March 31, 2023 compared to $18.64 for the three months ended December 31, 2022 and $18.51 for the three months ended March 31, 2022;
  • Non-performing assets (“NPAs”) to total assets decreased to 0.35%, or 1 bps from December 31, 2022 and 11 bps from March 31, 2022, respectively;
  • Annualized net charge-offs to average loans outstanding were 4 bps for the first quarter of 2023 compared to 28 bps for the three months ended December 31, 2022;
  • Total loans held for investment (“LHI”), excluding mortgage warehouse (“MW”), grew $200.7 million, or 8.9% annualized, during the three months ended March 31, 2023 from $9.04 billion at the end of the fourth quarter of 2022;
  • Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on May 25, 2023.

Results of Operations for the Three Months Ended March 31, 2023

Net Interest Income

For the three months ended March 31, 2023, net interest income before provision for credit losses was $103.4 million and net interest margin was 3.69% compared to $106.1 million and 3.87%, respectively, for the three months ended December 31, 2022. The $2.7 million decrease in net interest income before provision for credit losses was primarily due to a $12.4 million increase in interest expense on certificates and other time deposits and a $5.8 million increase in transaction and savings deposits driven by an increase in funding costs on deposits, partially offset by a $14.9 million increase in loan yields and average balances during the three months ended March 31, 2023. Net interest margin decreased 18 basis points compared to the three months ended December 31, 2022, primarily due to the increase in funding costs on deposits during three months ended March 31, 2023, partially offset by an increase in loan yields and average balances.

Compared to the three months ended March 31, 2022, net interest income before provision for credit losses for the three months ended March 31, 2023 increased by $30.3 million, or 41.6%. The increase was primarily due to a $80.3 million increase in interest income on loans driven by an increase in average balances and loan yields, partially offset by a $28.1 million increase in transaction and savings deposits and a $19.6 million increase in certificates and other time deposits driven by an increase in funding costs. Net interest margin increased 47 basis points to 3.69% for the three months ended March 31, 2023 from 3.22% for the three months ended March 31, 2022. The increase was primarily due to the increase in average balances and loan yields during the three months ended March 31, 2023, partially offset by an increase in funding costs.

Noninterest Income

Noninterest income for the three months ended March 31, 2023 was $13.5 million, a decrease of $795 thousand, or 5.5%, compared to the three months ended December 31, 2022. The decrease was primarily due to a $5.3 million loss on sales of investment securities due to the Company selling $116.2 million of investment securities in early March 2023 and a $2.1 million decrease in customer swap income. The decrease was partially offset by a $3.9 million decrease in equity method investment losses and a $1.9 million increase in government guaranteed loan income primarily driven by an increase in USDA loans sold through our wholly owned subsidiary North Avenue Capital, LLC (“NAC”).

Compared to the three months ended March 31, 2022, noninterest income for the three months ended March 31, 2023 decreased by $1.6 million, or 10.4%. The decrease was primarily due to a $5.3 million loss on sales of investment securities due to the Company selling $116.2 million of investment securities in early March 2023 and a $1.9 million decrease in equity method investment income. The decrease was partially offset by a $4.8 million increase in government guaranteed loan income primarily driven by an increase in USDA loans sold through NAC and a $959 thousand increase in BOLI income.

Noninterest Expense

Noninterest expense was $56.6 million for the three months ended March 31, 2023, compared to $57.4 million for the three months ended December 31, 2022, a decrease of $744 thousand, or 1.3%. The decrease was primarily due to a $1.8 million decrease in salaries and employee benefits, partially offset by a $523 thousand increase in data processing and software expenses, a $196 thousand increase in third party banking services, a $120 thousand increase in telephone and communications expenses, and a $459 thousand increase in other miscellaneous expenses.

Compared to the three months ended March 31, 2022, noninterest expense for the three months ended March 31, 2023 increased by $10.0 million, or 21.6%. The increase was primarily driven by a $4.4 million increase in salaries and employee benefits, a $1.8 million increase in data processing and software expenses, a $1.4 million increase in loan and collection expenses, a $1.2 million increase in professional and regulatory fees, and a $429 thousand increase in third party banking services.

Financial Condition

Total LHI, excluding MW, were $9.24 billion at March 31, 2023, an increase of $200.7 million, or 8.9% annualized, compared to December 31, 2022. The increase was the result of the continued execution, and success of our loan growth strategy, including our continued investment in talent.

Total deposits were $9.03 billion at March 31, 2023, a decrease of $88.5 million, or 3.9% annualized, compared to December 31, 2022. The decrease was primarily the result of a decrease of $447.8 million in correspondent money market deposits and a decrease of $428.2 million in non-interest bearing deposits, partially offset by an increase of $810.2 million in certificates and other time deposits.

Credit Quality

Nonperforming assets totaled $44.5 million, or 0.35% of total assets, at March 31, 2023, compared to $43.7 million, or 0.36% of total assets, at December 31, 2022. The Company had net charge-offs of $858 thousand for the quarter, which were fully reserved against in prior quarters under our allowance for credit loss (“ACL”) model.

The Company recorded a provision for credit losses of $8.5 million for the three months ended March 31, 2023, an $11.8 million provision for credit losses for the three months ended December 31, 2022 and a $500 thousand benefit for credit losses for the three months ended March 31, 2022. The recorded provision for credit losses for the three months ended March 31, 2023, compared to the three months ended December 31, 2022, was primarily attributable to an increase in general reserves as a result of changes in economic factors and loan growth. The Company recorded a provision for unfunded commitments of $1.5 million for the three months ended March 31, 2023, a $523 thousand benefit for unfunded commitments for the three months ended December 31, 2022, and a $493 thousand provision for unfunded commitments for the three months ended March 31, 2022. The recorded provision for unfunded commitments for the three months ended March 31, 2023, compared to the three months ended December 31, 2022, was attributable to changes in economic factors partially offset by a decrease in unfunded commitment balances. ACL as a percentage of LHI, excluding MW, was 1.07%, 1.01% and 1.02% at March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

Dividend Information

After the close of the market on Tuesday, April 25, 2023, 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 May 25, 2023 to stockholders of record as of the close of business on May 11, 2023.

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, pre-tax, pre-provision operating return on average loans, 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, April 26, 2023, at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/4tvcudmz and will receive a unique PIN, which can be used when dialing in for the call.

Participants may also register via teleconference at:
https://register.vevent.com/register/BI557c0ef1335341a3870ff09ae09bc101. 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; the effects of the COVID-19 pandemic and actions taken in response thereto; a continuation of recent turmoil in the banking industry, responsive measures to mitigate and manage it 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, 2022 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)

  For the Quarter Ended
  Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022
  (Dollars and shares in thousands, except per share data)
Per Share Data (Common Stock):          
Basic EPS $0.71  $0.74  $0.80  $0.55  $0.66 
Diluted EPS  0.70   0.73   0.79   0.54   0.65 
Book value per common share  27.54   26.83   26.15   26.50   26.86 
Tangible book value per common share1  19.43   18.64   17.91   18.20   18.51 
Dividends paid per common share outstanding2  0.20   0.20   0.20   0.20   0.20 
           
Common Stock Data:          
Shares outstanding at period end  54,229   54,030   53,988   53,951   53,907 
Weighted average basic shares outstanding for the period  54,149   54,011   53,979   53,949   50,695 
Weighted average diluted shares outstanding for the period  54,606   54,780   54,633   54,646   51,571 
           
Summary of Credit Ratios:          
ACL to total LHI, excluding MW  1.07%  1.01%  1.00%  1.02%  1.02%
NPAs to total assets  0.35   0.36   0.26   0.40   0.46 
NPAs, excluding nonaccrual purchase credit deteriorated (“PCD”) loans, to total assets3  0.25   0.25   0.26   0.40   0.46 
Net charge-offs to average loans outstanding, excluding MW4  0.04   0.28   0.12   0.04   0.28 
           
Summary Performance Ratios:          
Return on average assets4  1.28%  1.35%  1.50%  1.11%  1.36%
Return on average equity4  10.55   11.03   11.82   8.21   10.00 
Return on average tangible common equity1, 4  15.81   16.75   17.82   12.68   15.84 
Efficiency ratio  48.42   47.63   44.71   50.76   52.84 
Net interest margin  3.69   3.87   3.77   3.42   3.22 
           
Selected Performance Metrics - Operating:          
Diluted operating EPS1 $0.79  $0.74  $0.80  $0.55  $0.66 
Pre-tax, pre-provision operating return on average assets1, 4  2.21%  2.15%  2.20%  1.76%  1.71%
Pre-tax, pre-provision operating return on average loans1, 4  2.84   2.78   2.88   2.35   2.34 
Operating return on average assets1,4  1.44   1.36   1.51   1.12   1.38 
Operating return on average tangible common equity1,4  17.72   16.95   17.94   12.77   16.08 
Operating efficiency ratio1  45.63   47.11   44.37   50.45   52.05 
           
Veritex Holdings, Inc. Capital Ratios:          
Average stockholders' equity to average total assets  12.09%  12.20%  12.69%  13.51%  13.58%
Tangible common equity to tangible assets1  8.66   8.60   8.58   9.04   9.98 
Tier 1 capital to average assets (leverage)  9.67   9.82   9.79   10.14   10.66 
Common equity tier 1 capital  9.32   9.09   9.09   9.25   9.84 
Tier 1 capital to risk-weighted assets  9.56   9.34   9.35   9.52   10.14 
Total capital to risk-weighted assets  11.99   11.63   11.68   11.95   12.73 

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 ASC326 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)


  Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022
  (unaudited)   (unaudited) (unaudited) (unaudited)
ASSETS          
Cash and cash equivalents $808,395  $436,077  $433,897  $410,716  $551,573 
Debt securities, net  1,150,959   1,282,460   1,303,004   1,354,403   1,244,514 
Other investments  137,621   122,450   115,551   202,685   188,699 
           
Loans held for sale  42,816   20,641   17,644   14,210   18,721 
LHI, MW  437,501   446,227   523,805   629,291   542,877 
LHI, excluding MW  9,237,159   9,036,424   8,513,254   7,923,131   7,143,941 
Total loans  9,717,476   9,503,292   9,054,703   8,566,632   7,705,539 
ACL, loans  (98,694)  (91,052)  (85,037)  (80,576)  (72,485)
Bank-owned life insurance  84,962   84,496   84,030   84,097   83,641 
Bank premises, furniture and equipment, net  107,540   108,824   108,720   108,769   109,138 
Other real estate owned (“OREO”)           1,032   1,062 
Intangible assets, net of accumulated amortization  51,086   53,213   56,238   59,011   63,986 
Goodwill  404,452   404,452   404,452   404,452   404,452 
Other assets  245,690   250,149   238,896   193,590   173,561 
Total assets $12,609,487  $12,154,361  $11,714,454  $11,304,811  $10,453,680 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Deposits:          
Noninterest-bearing deposits $2,212,389  $2,640,617  $2,811,412  $2,947,830  $2,765,895 
Interest-bearing transaction and savings deposits  3,492,011   3,514,729   3,437,898   3,233,803   3,030,852 
Certificates and other time deposits  2,896,870   2,086,642   1,667,364   1,562,626   1,435,409 
Correspondent money market deposits  433,468   881,246   831,770   773,447   657,440 
Total deposits  9,034,738   9,123,234   8,748,444   8,517,706   7,889,596 
Accounts payable and other liabilities  171,985   177,579   173,198   126,116   105,552 
Advances from Federal Home Loan Bank (“FHLB”)  1,680,000   1,175,000   1,150,000   1,000,000   777,522 
Subordinated debentures and subordinated notes  229,027   228,775   228,524   228,272   228,018 
Securities sold under agreements to repurchase        2,389   3,275   4,996 
Total liabilities  11,115,750   10,704,588   10,302,555   9,875,369   9,005,684 
Commitments and contingencies          
Stockholders’ equity:          
Common stock  609   607   606   606   605 
Additional paid-in capital  1,308,345   1,306,852   1,303,171   1,300,170   1,297,161 
Retained earnings  406,873   379,299   350,195   317,664   298,830 
Accumulated other comprehensive (loss) income  (54,508)  (69,403)  (74,491)  (21,416)  18,982 
Treasury stock  (167,582)  (167,582)  (167,582)  (167,582)  (167,582)
Total stockholders’ equity  1,493,737   1,449,773   1,411,899   1,429,442   1,447,996 
Total liabilities and stockholders’ equity $12,609,487  $12,154,361  $11,714,454  $11,304,811  $10,453,680 


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



  For the Quarter Ended
  Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022
  (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Interest income:          
Loans, including fees $151,707  $136,846  $109,199  $82,191  $71,443 
Debt securities  10,988   10,880   10,462   9,632   7,762 
Deposits in financial institutions and Fed Funds sold  5,534   3,401   1,898   714   262 
Equity securities and other investments  1,408   1,087   1,666   1,057   910 
Total interest income  169,637   152,214   123,225   93,594   80,377 
Interest expense:          
Transaction and savings deposits  29,857   24,043   12,897   4,094   1,751 
Certificates and other time deposits  20,967   8,543   3,919   1,465   1,380 
Advances from FHLB  12,358   10,577   2,543   834   1,547 
Subordinated debentures and subordinated notes  3,066   2,954   2,826   2,721   2,659 
Total interest expense  66,248   46,117   22,185   9,114   7,337 
Net interest income  103,389   106,097   101,040   84,480   73,040 
Provision (benefit) for credit losses1  9,385   11,800   6,650   9,000   (500)
Provision (benefit) for unfunded commitments  1,497   (523)  850      493 
Net interest income after provisions  92,507   94,820   93,540   75,480   73,047 
Noninterest income:          
Service charges and fees on deposit accounts  5,017   5,173   5,217   5,039   4,710 
Loan fees  2,064   2,477   2,786   2,385   2,794 
Loss on sales of investment securities  (5,321)            
Gain on sales of mortgage loans held for sale  6   4   16   223   307 
Government guaranteed loan income, net  9,688   7,808   572   789   4,891 
Equity method investment (loss) income  (1,521)  (5,416)  (1,058)  966   367 
Customer swap income  217   2,273   3,358   1,321   946 
Other income (loss)  3,381   2,007   2,130   (345)  1,082 
Total noninterest income  13,531   14,326   13,021   10,378   15,097 
Noninterest expense:          
Salaries and employee benefits  31,865   33,690   29,714   26,924   27,513 
Occupancy and equipment  4,973   5,116   4,615   4,496   4,517 
Professional and regulatory fees  4,389   4,401   3,718   2,865   3,158 
Data processing and software expense  4,720   4,197   3,509   3,386   2,921 
Marketing  1,779   1,841   1,845   2,306   1,187 
Amortization of intangibles  2,495   2,495   2,494   2,495   2,495 
Telephone and communications  478   358   389   352   385 
Merger and acquisition (“M&A”) expense        384   295   700 
Other  5,916   5,261   4,323   5,034   3,696 
Total noninterest expense  56,615   57,359   50,991   48,153   46,572 
Income before income tax expense  49,423   51,787   55,570   37,705   41,572 
Income tax expense  11,012   11,890   12,248   8,079   8,102 
Net income $38,411  $39,897  $43,322  $29,626  $33,470 
Net income available to common stockholders $38,411  $39,897  $43,322  $29,626  $33,470 
           
Basic EPS $0.71  $0.74  $0.80  $0.55  $0.66 
Diluted EPS $0.70  $0.73  $0.79  $0.54  $0.65 
Weighted average basic shares outstanding  54,149   54,011   53,979   53,949   50,695 
Weighted average diluted shares outstanding  54,606   54,780   54,633   54,646   51,571 

1 Includes provision for credit losses on loans of $8.5 million and available for sale (“AFS”) securities of $885 thousand for the three months ended March 31, 2023.

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

  For the Quarter Ended
  March 31, 2023 December 31, 2022 March 31, 2022
  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
  (In thousands, except percentages)
Assets                  
Interest-earning assets:                  
Loans1 $9,141,137  $146,801 6.51% $8,743,380  $131,823 5.98% $6,904,278  $68,374 4.02%
LHI, MW  360,172   4,906 5.52   383,080   5,024 5.20   421,680   3,069 2.95 
Debt securities  1,252,457   10,988 3.56   1,286,342   10,880 3.36   1,140,834   7,762 2.76 
Interest-bearing deposits in other banks  478,345   5,534 4.69   353,737   3,401 3.81   554,864   262 0.19 
Equity securities and other investments  124,985   1,408 4.57   119,054   1,087 3.62   190,002   910 1.94 
Total interest-earning assets  11,357,096   169,637 6.06   10,885,593   152,215 5.55   9,211,658   80,377 3.54 
ACL, loans  (92,664)      (85,275)      (77,843)    
Noninterest-earning assets  949,881       960,726       865,107     
Total assets $12,214,313      $11,761,044      $9,998,922     
                   
Liabilities and Stockholders’ Equity                  
Interest-bearing liabilities:                  
Interest-bearing demand and savings deposits $4,150,995  $29,857 2.92% $4,321,936  $24,043 2.21% $3,471,645  $1,751 0.20%
Certificates and other time deposits  2,588,728   20,967 3.28   1,785,152   8,543 1.90   1,501,852   1,380 0.37 
Advances from FHLB  1,122,683   12,358 4.46   1,073,049   10,577 3.91   777,538   1,547 0.81 
Subordinated debentures and subordinated notes  231,251   3,066 5.38   229,037   2,954 5.12   231,875   2,659 4.65 
Total interest-bearing liabilities  8,093,657   66,248 3.32   7,409,174   46,117 2.47   5,982,910   7,337 0.50 
                   
Noninterest-bearing liabilities:                  
Noninterest-bearing deposits  2,470,700       2,737,468       2,591,504     
Other liabilities  173,380       179,584       67,060     
Total liabilities  10,737,737       10,326,226       8,641,474     
Stockholders’ equity  1,476,576       1,434,818       1,357,448     
Total liabilities and stockholders’ equity $12,214,313      $11,761,044      $9,998,922     
                   
Net interest rate spread2     2.74%     3.08%     3.04%
Net interest income and margin3   $103,389 3.69%   $106,098 3.87%   $73,040 3.22%

1 Includes average outstanding balances of loans held for sale of $19,679, $15,296 and $12,769 for the three months ended March 31, 2023, December 31, 2022, and March 31, 2022, 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
  For the Quarter Ended
  Mar 31,
2023
 Dec 31,
2022
 Sep 30,
2022
 Jun 30,
2022
 Mar 31,
2022
Average yield on interest-earning assets:          
Loans1 6.51% 5.98% 5.01% 4.16% 4.02%
LHI, MW 5.52  5.20  4.11  3.29  2.95 
Debt securities 3.56  3.36  3.05  2.93  2.76 
Interest-bearing deposits in other banks 4.69  3.81  2.17  0.77  0.19 
Equity securities and other investments 4.57  3.62  3.25  2.53  1.94 
Total interest-earning assets 6.06% 5.55% 4.59% 3.79% 3.54%
           
Average rate on interest-bearing liabilities:          
Interest-bearing demand and savings deposits 2.92% 2.21% 1.23% 0.44% 0.20%
Certificates and other time deposits 3.28  1.90  0.94  0.40  0.37 
Advances from FHLB 4.46  3.91  1.12  0.40  0.81 
Subordinated debentures and subordinated notes 5.38  5.12  4.85  4.70  4.65 
Total interest-bearing liabilities 3.32% 2.47% 1.27% 0.58% 0.50%
           
Net interest rate spread2 2.74% 3.08% 3.32% 3.21% 3.04%
Net interest margin3 3.69% 3.87% 3.77% 3.42% 3.22%

  
1Includes average outstanding balances of loans held for sale of $19,679, $15,296, $14,023, $12,112 and $12,769 for the three months ended March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, 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

  For the Quarter Ended
  Mar 31,
2023
 Dec 31,
2022
 Sep 30,
2022
 Jun 30,
2022
 Mar 31,
2022
Average cost of interest-bearing deposits 3.06% 2.12% 1.15% 0.43% 0.26%
Average costs of total deposits, including noninterest-bearing 2.24  1.46  0.76  0.28  0.17 


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

LHI and Deposit Portfolio Composition
  Mar 31,
2023
 Dec 31,
2022
 Sep 30,
2022
 Jun 30,
2022
 Mar 31,
2022
  (In thousands, except percentages)
LHI1                    
Commercial $2,895,957  31.3% $2,942,348  32.4% $2,743,769  32.2% $2,457,742  31.0% $2,144,412  30.0%
Real Estate:                    
Owner occupied commercial (“OOCRE”)  631,563  6.8   715,829  7.9   677,705  7.9   646,723  8.1   633,615  8.9 
Non-owner occupied commercial (“NOOCRE”)  2,505,344  27.1   2,341,379  25.9   2,273,305  26.6   2,203,970  27.8   2,145,826  29.9 
Construction and land  1,831,349  19.8   1,787,400  19.7   1,673,997  19.6   1,532,997  19.3   1,297,338  18.1 
Farmland  51,680  0.6   43,500  0.5   43,569  0.5   47,319  0.6   48,095  0.7 
1-4 family residential  896,252  9.7   894,456  9.9   858,693  10.1   765,260  9.6   604,408  8.4 
Multi-family residential  432,209  4.6   322,679  3.6   252,244  3.0   276,632  3.5   272,250  3.8 
Consumer  8,316  0.1   7,806  0.1   7,465  0.1   7,520  0.1   9,533  0.1 
Total LHI $9,252,670  100% $9,055,397  100% $8,530,747  100% $7,938,163  100% $7,155,477  100%
                     
MW  437,501     446,227     523,805     629,291     542,877   
                     
Total LHI1 $9,690,171    $9,501,624    $9,054,552    $8,567,454    $7,698,354   
                     
Deposits                    
Noninterest-bearing $2,212,389  24.5% $2,640,617  28.9% $2,811,412  32.1% $2,947,830  34.6% $2,765,895  35.1%
Interest-bearing transaction  866,609  9.6   622,814  6.8   603,729  6.9   660,557  7.8   599,580  7.6 
Money market  2,518,922  27.9   2,773,622  30.4   2,701,762  30.9   2,443,748  28.7   2,301,350  29.2 
Savings  106,480  1.2   118,293  1.3   132,407  1.5   129,498  1.5   129,922  1.6 
Certificates and other time deposits  2,896,870  32.1   2,086,642  22.9   1,667,364  19.1   1,562,626  18.3   1,435,409  18.2 
Correspondent money market accounts  433,468  4.8   881,246  9.7   831,770  9.5   773,447  9.1   657,440  8.3 
Total deposits $9,034,738  100% $9,123,234  100% $8,748,444  100% $8,517,706  100% $7,889,596  100%
                     
Loan to Deposit Ratio  107.3%    104.1%    103.5%    100.6%    97.6%  
                     
Loan to Deposit Ratio, excluding MW  102.4%    99.3%    97.5%    93.2%    90.7%  

1 Total LHI does not include deferred fees of $15.5 million, $19.0 million, $17.5 million, $15.0 million and $11.5 million at March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, respectively.

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


Asset Quality
 For the Quarter Ended
 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022
 (In thousands, except percentages)
NPAs:         
Nonaccrual loans$31,452  $30,364  $30,592  $42,242  $46,680 
Nonaccrual PCD loans1 12,784   13,178          
Accruing loans 90 or more days past due2 296   125      1,753   264 
Total nonperforming loans held for investment (“NPLs”) 44,532   43,667   30,592   43,995   46,944 
OREO          1,032   1,062 
Total NPAs$44,532  $43,667  $30,592  $45,027  $48,006 
          
Charge-offs:         
OOCRE$(116) $  $(1,061) $(244) $(1,341)
NOOCRE    (1,019)  (838)     (553)
Commercial (1,051)  (5,449)  (460)  (528)  (3,294)
Consumer (62)  (41)  (19)  (1,091)  (134)
Total charge-offs (1,229)  (6,509)  (2,378)  (1,863)  (5,322)
          
Recoveries:         
1-4 family residential 1   24   4   3    
OOCRE    26      245    
NOOCRE    229   3   93   400 
Commercial 364   415   177   572   144 
Consumer 6   30   5   41   9 
Total recoveries 371   724   189   954   553 
          
Net charge-offs$(858) $(5,785) $(2,189) $(909) $(4,769)
          
          
ACL$98,694  $91,052  $85,037  $80,576  $72,485 
          
Asset Quality Ratios:         
NPAs to total assets 0.35%  0.36%  0.26%  0.40%  0.46%
NPAs, excluding nonaccrual PCD loans, to total assets 0.25   0.25   0.26   0.40   0.46 
NPLs to total LHI, excluding MW 0.49   0.50   0.37   0.55   0.66 
NPLs, excluding nonaccrual PCD loans, to total LHI, excluding MW 0.34   0.34   0.36   0.55   0.66 
ACL to total LHI, excluding MW 1.07   1.01   1.00   1.02   1.02 
Net charge-offs to average loans outstanding3 0.04   0.28   0.12   0.04   0.28 

1 Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 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 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, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022
  (Dollars in thousands, except per share data)
Tangible Common Equity          
Total stockholders' equity $1,493,737  $1,449,773  $1,411,899  $1,429,442  $1,447,996 
Adjustments:          
Goodwill  (404,452)  (404,452)  (404,452)  (404,452)  (404,452)
Core deposit intangibles  (35,808)  (38,247)  (40,684)  (43,122)  (45,560)
Tangible common equity $1,053,477  $1,007,074  $966,763  $981,868  $997,984 
Common shares outstanding  54,229   54,030   53,988   53,951   53,907 
           
Book value per common share $27.54  $26.83  $26.15  $26.50  $26.86 
Tangible book value per common share $19.43  $18.64  $17.91  $18.20  $18.51 


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, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022
  (Dollars in thousands)
Tangible Common Equity          
Total stockholders' equity $1,493,737  $1,449,773  $1,411,899  $1,429,442  $1,447,996 
Adjustments:          
Goodwill  (404,452)  (404,452)  (404,452)  (404,452)  (404,452)
Core deposit intangibles  (35,808)  (38,247)  (40,684)  (43,122)  (45,560)
Tangible common equity $1,053,477  $1,007,074  $966,763  $981,868  $997,984 
Tangible Assets          
Total assets $12,609,487  $12,154,361  $11,714,454  $11,304,811  $10,453,680 
Adjustments:          
Goodwill  (404,452)  (404,452)  (404,452)  (404,452)  (404,452)
Core deposit intangibles  (35,808)  (38,247)  (40,684)  (43,122)  (45,560)
Tangible Assets $12,169,227  $11,711,662  $11,269,318  $10,857,237  $10,003,668 
Tangible Common Equity to Tangible Assets  8.66%  8.60%  8.58%  9.04%  9.98%


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 Quarter Ended
  Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022
  (Dollars in thousands)
Net income available for common stockholders adjusted for amortization of core deposit intangibles          
Net income $38,411  $39,897  $43,322  $29,626  $33,470 
Adjustments:          
Plus: Amortization of core deposit intangibles  2,438   2,438   2,438   2,438   2,438 
Less: Tax benefit at the statutory rate  512   512   512   512   512 
Net income available for common stockholders adjusted for amortization of core deposit intangibles $40,337  $41,823  $45,248  $31,552  $35,396 
           
Average Tangible Common Equity          
Total average stockholders' equity $1,476,576  $1,434,818  $1,453,816  $1,447,377  $1,357,448 
Adjustments:          
Average goodwill  (404,452)  (404,452)  (404,452)  (404,452)  (404,014)
Average core deposit intangibles  (37,361)  (39,792)  (42,230)  (44,720)  (47,158)
Average tangible common equity $1,034,763  $990,574  $1,007,134  $998,205  $906,276 
Return on Average Tangible Common Equity (Annualized)  15.81%  16.75%  17.82%  12.68%  15.84%


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, Pre-tax, Pre-Provision Operating Return on Average Loans, 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 severance payments, plus loss on sale of debt securities AFS, net, less tax impact of adjustments, plus nonrecurring tax adjustments. 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 (benefit) for credit losses and unfunded commitments. 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 total average assets. We calculate (e) operating return on average assets as operating earnings as described in clause (a) divided by total average 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 noninterest expense plus adjustments to operating noninterest expense divided by noninterest income plus adjustments to operating noninterest income, plus 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 Quarter Ended
  Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022
  (Dollars in thousands, except per share data)
Operating Earnings          
Net income $38,411 $39,897 $43,322 $29,626 $33,470
           
Plus: Severance payments1  835  630      
Plus: Loss on sale of debt securities AFS, net  5,321        
Plus: M&A expenses      384  295  700
Operating pre-tax income  44,567  40,527  43,706  29,921  34,170
Less: Tax impact of adjustments  1,293  132  81  66  156
Operating earnings $43,274 $40,395 $43,625 $29,855 $34,014
           
Weighted average diluted shares outstanding  54,606  54,780  54,633  54,646  51,571
Diluted EPS $0.70 $0.73 $0.79 $0.54 $0.65
Diluted operating EPS $0.79 $0.74 $0.80 $0.55 $0.66

1 Severance payments relate to certain restructurings made during the periods disclosed.

  For the Quarter Ended
  Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022
  (Dollars in thousands)
Pre-Tax, Pre-Provision Operating Earnings          
Net income $38,411  $39,897  $43,322  $29,626  $33,470 
Plus: Provision for income taxes  11,012   11,890   12,248   8,079   8,102 
Plus: Provision (benefit) for credit losses and unfunded commitments  10,882   11,277   7,500   9,000   (7)
Plus: Severance payments  835   630          
Plus: Loss on sale of debt securities AFS, net  5,321             
Plus: M&A expenses        384   295   700 
Pre-tax, pre-provision operating earnings $66,461  $63,694  $63,454  $47,000  $42,265 
           
Average total assets $12,214,313  $11,761,044  $11,460,857  $10,711,663  $9,998,922 
Pre-tax, pre-provision operating return on average assets1  2.21%  2.15%  2.20%  1.76%  1.71%
           
Average loans $9,501,309  $9,103,552  $8,729,093  $8,038,153  $7,325,958 
Pre-tax, pre-provision operating return on average loans1  2.84%  2.78%  2.88%  2.35%  2.34%
           
Average total assets $12,214,313  $11,761,044  $11,460,857  $10,711,663  $9,998,922 
Return on average assets1  1.28%  1.35%  1.50%  1.11%  1.36%
Operating return on average assets1  1.44   1.36   1.51   1.12   1.38 
           
Operating earnings adjusted for amortization of core deposit intangibles          
Operating earnings $43,274  $40,395  $43,625  $29,855  $34,014 
Adjustments:          
Plus: Amortization of core deposit intangibles  2,438   2,438   2,438   2,438   2,438 
Less: Tax benefit at the statutory rate  512   512   512   512   512 
Operating earnings adjusted for amortization of core deposit intangibles $45,200  $42,321  $45,551  $31,781  $35,940 
           
Average Tangible Common Equity          
Total average stockholders' equity $1,476,576  $1,434,818  $1,453,816  $1,447,377  $1,357,448 
Adjustments:          
Less: Average goodwill  (404,452)  (404,452)  (404,452)  (404,452)  (404,014)
Less: Average core deposit intangibles  (37,361)  (39,792)  (42,230)  (44,720)  (47,158)
Average tangible common equity $1,034,763  $990,574  $1,007,134  $998,205  $906,276 
Operating return on average tangible common equity1  17.72%  16.95%  17.94%  12.77%  16.08%
           
Efficiency ratio  48.42%  47.63%  44.71%  50.76%  52.84%
Net interest income $103,389  $106,097  $101,040  $84,480  $73,040 
Noninterest income  13,531   14,326   13,021   10,378   15,097 
Plus: Loss on sale of AFS securities, net  5,321             
Operating noninterest income  18,852   14,326   13,021   10,378   15,097 
Noninterest expense  56,615   57,359   50,991   48,153   46,572 
Less: Severance payments  835   630          
Less: M&A expenses        384   295   700 
Operating noninterest expense $55,780  $56,729  $50,607  $47,858  $45,872 
Operating efficiency ratio  45.63%  47.11%  44.37%  50.45%  52.05%

1 Annualized ratio for quarterly metrics.


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