VERITEX HOLDINGS, INC. REPORTS SECOND QUARTER 2024 OPERATING RESULTS

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

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

1 Annualized ratio.

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

•Pre-tax, pre-provision operating return on average assets was 1.42% as of June 30, 2024;

•Nonperforming assets (“NPAs”) decreased 17 bps from the prior quarter to 0.65% of total assets;

•Net interest margin (“NIM”) increased to 3.29%, a 5 bps improvement from the prior quarter;

•Common equity tier 1 capital grew 12 bps from the prior quarter to 10.49%;

•Total deposits grew $71.0 million, or 2.67% annualized, compared to March 31, 2024;

•Total loans grew $70.3 million, or 2.88% annualized, compared to March 31, 2024;

•Loan to deposit ratio, excluding mortgage warehouse loans, decreased to 85.9% as of June 30, 2024 compared to 86.9% as of March 31, 2024 and 100.4% as of June 30, 2023;

•Tangible book value per common share increased to $20.62;

•Allowance for credit losses (“ACL”) to total loans held for investment (“LHI”) increased to 1.16%, compared to 1.15% as of March 31, 2024 and 1.05% as of June 30, 2023;

•Named one of the “Best Companies to Work For”, “Best in Banking” and “Best Companies in the South” by the 2024 - 2025 U.S. News & World Report which evaluates companies based on quality of pay, work/life balance, and opportunities for professional development and advancement; and

•Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on August 23, 2024.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

investorrelations@veritexbank.com

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

1Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” after the financial highlights for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.

2Dividend amount represents dividend paid per common share subsequent to each respective quarter end.

3Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 Financial Instruments - Credit Losses and were accounted for on a pooled basis that have subsequently been placed on nonaccrual status.

4Annualized ratio for quarterly metrics.

 

						Jun 30, 2024						Mar 31, 2024						Dec 31, 2023						Sep 30, 2023						Jun 30, 2023
						(unaudited)						(unaudited)												(unaudited)						(unaudited)
ASSETS
Cash and cash equivalents						$	651,837					$	740,769					$	629,063					$	713,408					$	663,921
Debt securities, net						1,349,354						1,344,930						1,257,042						1,060,629						1,144,020
Other investments						75,885						76,788						76,238						80,869						138,894
Loans held for sale (“LHFS”)						57,046						64,762						79,072						41,313						29,876
LHI, mortgage warehouse (“MW”)						568,047						449,531						377,796						390,767						436,255
LHI, excluding MW						9,209,094						9,249,551						9,206,544						9,237,447						9,257,183
Total loans						9,834,187						9,763,844						9,663,412						9,669,527						9,723,314
ACL						(113,431)						(112,032)						(109,816)						(109,831)						(102,150)
Bank-owned life insurance						84,233						85,359						84,833						84,867						84,375
Bank premises, furniture and equipment, net						105,222						105,299						105,727						106,118						105,986
Other real estate owned (“OREO”)						24,256						18,445						—						—						—
Intangible assets, net of accumulated amortization						35,817						38,679						41,753						44,294						48,293
Goodwill						404,452						404,452						404,452						404,452						404,452
Other assets						232,518						241,863						241,633						291,998						259,263
Total assets						$	12,684,330					$	12,708,396					$	12,394,337					$	12,346,331					$	12,470,368
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing deposits						$	2,416,727					$	2,349,211					$	2,218,036					$	2,363,340					$	2,234,109
Interest-bearing transaction and savings deposits						3,979,454						4,220,114						4,348,385						3,936,070						3,590,253
Certificates and other time deposits						3,744,596						3,486,805						3,191,737						3,403,427						2,928,949
Correspondent money market deposits						584,067						597,690						580,037						493,681						480,598
Total deposits						10,724,844						10,653,820						10,338,195						10,196,518						9,233,909
Accounts payable and other liabilities						180,585						186,027						195,036						229,116						190,900
Advances from FHLB						—						100,000						100,000						200,000						1,325,000
Subordinated debentures and subordinated notes						230,285						230,034						229,783						229,531						229,279
Total liabilities						11,135,714						11,169,881						10,863,014						10,855,165						10,979,088
Commitments and contingencies
Stockholders’ equity:
Common stock						612						611						610						609						609
Additional paid-in capital						1,321,995						1,319,144						1,317,516						1,314,459						1,311,687
Retained earnings						473,801						457,499						444,242						451,513						429,753
Accumulated other comprehensive loss						(76,713)						(71,157)						(63,463)						(107,833)						(83,187)
Treasury stock						(171,079)						(167,582)						(167,582)						(167,582)						(167,582)
Total stockholders’ equity						1,548,616						1,538,515						1,531,323						1,491,166						1,491,280
Total liabilities and stockholders’ equity						$	12,684,330					$	12,708,396					$	12,394,337					$	12,346,331					$	12,470,368

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

 

						For the Quarter Ended
						June 30, 2024																		March 31, 2024																		June 30, 2023
						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
						(Dollars in thousands)
Assets
Interest-earning assets:
Loans1						$	9,344,482					$	160,323					6.90		%				$	9,283,815					$	157,585					6.83		%				$	9,285,550					$	158,685					6.85		%
LHI, MW						420,946						6,656						6.36						279,557						4,357						6.27						371,763						5,042						5.44
Debt securities						1,352,293						15,408						4.58						1,294,994						13,695						4.25						1,133,845						10,166						3.60
Interest-bearing deposits in other banks						560,586						7,722						5.54						584,593						8,050						5.54						583,818						7,507						5.16
Equity securities and other investments						78,964						1,138						5.80						76,269						900						4.75						137,868						1,118						3.25
Total interest-earning assets						11,757,271						191,247						6.54						11,519,228						184,587						6.44						11,512,844						182,518						6.36
ACL						(115,978)																		(112,229)																		(102,559)
Noninterest-earning assets						937,413																		929,043																		939,938
Total assets						$	12,578,706																	$	12,336,042																	$	12,350,223
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand and savings deposits						$	4,570,329					$	45,619					4.01		%				$	4,639,445					$	46,784					4.06		%				$	3,919,745					$	32,957					3.37		%
Certificates and other time deposits						3,591,035						44,811						5.02						3,283,735						40,492						4.96						2,873,548						28,100						3.92
Advances from FHLB and Other						106,648						1,468						5.54						100,989						1,391						5.54						1,472,912						17,562						4.78
Subordinated debentures and subordinated notes						230,141						3,113						5.44						229,881						3,114						5.45						229,151						3,068						5.37
Total interest-bearing liabilities						8,498,153						95,011						4.50						8,254,050						91,781						4.47						8,495,356						81,687						3.86
Noninterest-bearing liabilities:
Noninterest-bearing deposits						2,346,908																		2,355,315																		2,175,002
Other liabilities						192,036																		192,809																		169,240
Total liabilities						11,037,097																		10,802,174																		10,839,598
Stockholders’ equity						1,541,609																		1,533,868																		1,510,625
Total liabilities and stockholders’ equity						$	12,578,706																	$	12,336,042																	$	12,350,223
Net interest rate spread2																		2.04		%																1.97		%																2.50		%
Net interest income and margin3												$	96,236					3.29		%										$	92,806					3.24		%										$	100,831					3.51		%

1 Includes average outstanding balances of LHFS of $58.5 million, $53.9 million and $23.4 million for the quarters ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively, and average balances of LHI, excluding MW.

2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

3 Net interest margin is equal to net interest income divided by average interest-earning assets.

1 Includes average outstanding balances of LHFS of $56.2 million and $21.5 million for the six months ended June 30, 2024 and 2023, respectively, and average balances of LHI, excluding MW.

2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

3 Net interest margin is equal to net interest income divided by average interest-earning assets.

1Includes average outstanding balances of LHFS of $58.5 million, $53.9 million, $31.2 million, $28.3 million and $23.4 million for the three months ended June 30, 2024, March 31, 2024, December 31, 2023, September 30, 2023, and June 30, 2023, respectively, and average balances of LHI, excluding MW.

2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

3 Net interest margin is equal to net interest income divided by average interest-earning assets.

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