Veritex Holdings, Inc. Reports Third Quarter Operating Results

DALLAS, Oct. 25, 2022 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. (“Veritex”, the “Company”, “we” or “our”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the quarter ended September 30, 2022.

“The third quarter of 2022 resulted in record dollar earnings for our Company in a resilient Texas market” said President and CEO, C. Malcolm C. Holland, III. “We reported historical financial metrics with 2.2% in pre-tax, pre-provision operating return, 1.5% in return on average assets, return on average tangible common equity of 18% and an efficiency ratio of 44% coupled with continuing improved credit metrics noted by a 14 bp decrease in nonperforming assets. We remain focused on this positive momentum and deposit growth but more importantly our customers, the strong markets we serve and our shareholders”

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 Third Quarter Highlights

• Pre-tax, pre-provision operating return on average assets increased 44 bps from the second quarter of 2022 to 2.20%;
• Net interest margin increased to 3.77%, up 35 basis points from the second quarter of 2022;
• Non-performing assets (“NPAs”) to total assets decreased to 0.26%, or 14 bps from June 30, 2022 and 51 bps from September 30, 2021, respectively;
• Net charge-offs to average loans outstanding was 3 basis points for the third quarter of 2022;
• Total loans held for investment (“LHI”), excluding mortgage warehouse (“MW”) and paycheck protection program (“PPP”) loans, grew $594.6 million, or 30.0% annualized, during the three months ended September 30, 2022 from $8.5 billion at the end of the second quarter of 2022;
• Total deposits grew $230.7 million, or 10.8% annualized, during the three months ended September 30, 2022 from $8.5 billion at the end of the second quarter of 2022; and
• Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on November 25, 2022.
  

Results of Operations for the Three Months Ended September 30, 2022

Net Interest Income

For the three months ended September 30, 2022, net interest income before provision for credit losses was $101.0 million and net interest margin was 3.77% compared to $84.5 million and 3.42%, respectively, for the three months ended June 30, 2022. The $16.6 million increase in net interest income before provision for credit losses was primarily due to a $27.0 million increase in interest income on loans driven by an increase in average balances and loan yields during the three months ended September 30, 2022. Net interest margin increased 35 basis points compared to the three months ended June 30, 2022, primarily due to the increase in yields earned on loans during three months ended September 30, 2022, partially offset by an increase in funding costs.

Compared to the three months ended September 30, 2021, net interest income before provision for credit losses for the three months ended September 30, 2022 increased by $29.8 million, or 41.8%. The increase was primarily due to a $38.1 million increase in interest income on loans driven by an increase in average balances and loan yields. Net interest margin increased 51 basis points to 3.77% for the three months ended September 30, 2022 from 3.26% for the three months ended September 30, 2021. The increase was primarily due to the increase in average balances and loan yields during the three months ended September 30, 2022, partially offset by an increase in funding costs.

Noninterest Income

Noninterest income for the three months ended September 30, 2022 was $13.0 million, an increase of $2.6 million, or 25.5%, compared to the three months ended June 30, 2022. The increase was primarily due to a $2.0 million increase in customer swap income and a $2.2 million increase in the fair value of the servicing asset, partially offset by a $2.0 million decrease in equity method investment income.

Compared to the three months ended September 30, 2021, noninterest income for the three months ended September 30, 2022 decreased by $2.6 million, or 16.7%. The decrease was primarily due to a $5.6 million decrease in equity method investment income, partially offset by a $2.3 million increase in customer swap income and a $1.0 million increase in loan fees.

Noninterest Expense

Noninterest expense was $51.0 million for the three months ended September 30, 2022, compared to $48.2 million for the three months ended June 30, 2022, an increase of $2.8 million, or 5.9%. This increase was primarily due to a $2.7 million increase in salaries and employee benefits from continued investment in talent.

Compared to the three months ended September 30, 2021, noninterest expense for the three months ended September 30, 2022 increased by $9.7 million, or 23.4%. The increase was primarily driven by a $6.8 million increase in salaries and employee benefits as a result of a $4.1 million increase in salaries and employee benefits from continued investment in talent.

Financial Condition

Total LHI, excluding MW and PPP loans, were $8.5 billion at September 30, 2022, an increase of $594.6 million, or 30.0% annualized, compared to June 30, 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 $8.7 billion at September 30, 2022, an increase of $230.7 million, or 10.8% annualized, compared to June 30, 2022. The increase was primarily the result of an increase of $262.4 million in interest-bearing transaction and savings deposits and an increase of $104.7 million in certificates and other time deposits, partially offset by a $136.4 million decrease in non-interest bearing deposits.

Credit Quality

Nonperforming assets totaled $30.6 million, or 0.26% of total assets at September 30, 2022, compared to $45.0 million, or 0.40% of total assets, at June 30, 2022. The Company had net charge-offs of $2.2 million 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 $6.7 million for the three months ended September 30, 2022, a $9.0 million provision for credit losses for the three months ended June 30, 2022 and no provision for credit losses for the three months ended September 30, 2021. The recorded provision for credit losses for the three months ended September 30, 2022, compared to the three months ended June 30, 2022, was primarily attributable to an increase in general reserves as a result of changes in economic factors and loan growth. For the three months ended September 30, 2022, we recorded an $850 thousand provision for unfunded commitments, which was attributable to changes in economic factors and an increase of unfunded balances. ACL as a percentage of LHI, excluding MW and PPP loans, was 1.00%, 1.02% and 1.42% at September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

Dividend Information

After the close of the market on Tuesday, October 25, 2022, Veritex’s Board of Directors declared a quarterly cash dividend of $0.20 per share on its outstanding shares of common stock. The dividend will be paid on or after November 25, 2022 to stockholders of record as of the close of business on November 11, 2022.

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 and webcast to review the results on Wednesday, October 26, 2022, at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/w5hrkf8v 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/BIcf08415eefb54948a6cdbc60349b8e55. 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. 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; 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, 2021 and any updates to those risk factors set forth in Veritex’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov. If one or more events related to these or other risks or uncertainties materialize, or if Veritex’s underlying assumptions prove to be incorrect, actual results may differ materially from what Veritex anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. Veritex does not undertake any obligation, and specifically declines any obligation, to supplement, update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law. All forward-looking statements, expressed or implied, included in this earnings release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Veritex or persons acting on Veritex’s behalf may issue.

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

¹Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” after the financial highlights for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.
²Dividend amount represents dividend paid per common share subsequent to each respective quarter end.
³Annualized ratio for quarterly metrics.

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

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

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

¹ Includes average outstanding balances of loans held for sale of $14,023, $12,112 and $8,542 for the three months ended September 30, 2022, June 30, 2022, and September 30, 2021, respectively, and average balances of LHI, excluding MW 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 SUBSIDIARY
Financial Highlights
(In thousands except percentages)

¹ Includes average outstanding balances of loans held for sale of $12,973 and $13,140 for the nine months ended September 30, 2022 and 2021, respectively, and average balances of LHI, excluding MW 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

  
¹Includes average outstanding balances of loans held for sale of $14,023, $12,112, $12,769, $8,987 and $8,542 for the three months ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021, respectively, and average balances of LHI, excluding MW 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

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

LHI and Deposit Portfolio Composition

¹ Total LHI does not include deferred fees of $17.5 million, $15.0 million, $11.5 million, $9.5 million and $8.1 million at September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021, respectively.

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

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:

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: