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Veritex Holdings, Inc. Reports First Quarter Operating Results
Source: Nasdaq GlobeNewswire / 26 Apr 2022 16:35:02 America/New_York
DALLAS, April 26, 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 March 31, 2022.
“The first quarter of 2022 was another outstanding financial and growth quarter for our Company,” said President and CEO, C. Malcolm C. Holland, III. “We reported operating diluted EPS of $0.66 and delivered outstanding growth this quarter reflected by overall annualized loan growth of 21% and annualized deposit growth of 29%. We continue our focus on growth, investing in experienced and proven talent and maximizing shareholder returns.”
Quarter to Date Financial Highlights Q1 2022 Q4 2021 Q1 2021 (Dollars in thousands, except per share data) (unaudited) GAAP Net income $ 33,470 $ 41,506 $ 31,787 Diluted EPS 0.65 0.82 0.64 Book value per common share 26.86 26.64 24.96 Return on average assets2 1.36 % 1.68 % 1.44 % Efficiency ratio 52.84 48.53 49.62 Return on average equity2 10.00 12.65 10.53 Non-GAAP1 Operating earnings $ 34,014 $ 42,410 $ 32,213 Diluted operating EPS 0.66 0.84 0.64 Tangible book value per common share 18.51 17.49 16.34 Pre-tax, pre-provision operating earnings 42,265 48,640 40,210 Pre-tax, pre-provision operating return on average assets2 1.71 % 1.97 % 1.82 % Operating return on average assets2 1.38 1.72 1.46 Operating efficiency ratio 52.05 47.64 49.62 Return on average tangible common equity2 15.84 20.06 17.17 Operating return on average tangible common equity2 16.08 20.48 17.39 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- Total loans held for investment (“LHI”), excluding mortgage warehouse (“MW”) and paycheck protection program (“PPP”) loans, grew $359.4 million, or 21.2% annualized, during the three months ended March 31, 2022 from $6.8 billion at the end of the fourth quarter of 2021;
- Total deposits grew $526.0 million, or 28.6% annualized, with the average cost of total deposits decreasing to 0.17% for the three months ended March 31, 2022 from 0.18% and 0.31% from the three months ended December 31, 2021 and March 31, 2021, respectively;
- Non-performing assets (“NPAs”) to total assets decreased to 0.46%, or 5 bps from December 31, 2021 and 46 bps from March 31, 2021, respectively;
- Completed common stock offering with net proceeds, after deducting underwriting discounts and offering expenses, of approximately $153.8 million;
- Announced proposed transaction to acquire interLINK, a technology-enabled deposit gathering and processing platform, to (i) enhance liquidity with flexible and scalable access to approximately $5.7 billion in highly diversified, scalable core deposits and (ii) provide low-cost, stable core deposits to fund sustainable long-term growth. The acquisition is expected to close in the third quarter of 2022, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals from the FDIC and the Texas Department of Banking; and
- Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on May 27, 2022.
Results of Operations for the Three Months Ended March 31, 2022
Net Interest Income
For the three months ended March 31, 2022, net interest income before provision for credit losses was $73.0 million and net interest margin was 3.22% compared to $76.7 million and 3.37%, respectively, for the three months ended December 31, 2021. The $3.7 million decrease in net interest income before provision for credit losses was primarily due to a $2.7 million decrease in interest income on loans driven by a decrease in average balances during the three months ended March 31, 2022 and recovery income recognized on fully paid off nonaccrual loans during the three months ended December 31, 2021, with no corresponding recovery income during the three months ended March 31, 2022. Further, this decrease was due to the recognition of $2.1 million of prepayment penalty income on debt securities during the three months ended December 31, 2021, with no corresponding prepayment penalty income recognized during the three months ended March 31, 2022. The decrease in net interest income was slightly offset by a $359 thousand decrease in interest expense on subordinated debentures and subordinated notes and a $281 thousand decrease in interest expense on certificates and other time deposits during the three months ended March 31, 2022. Net interest margin decreased 15 basis points compared to the three months ended December 31, 2021, primarily due to the increase in yields earned on debt securities as a result of the recognition of $2.1 million of prepayment penalty income during three months ended December 31, 2021 with no corresponding prepayment penalty income during the three months ended March 31, 2022. There was no change in the average cost of interest-bearing deposits for the linked quarters.
Compared to the three months ended March 31, 2021, net interest income before provision for credit losses for the three months ended March 31, 2022 increased by $7.4 million, or 11.3%. The increase was primarily due to a $4.0 million increase in interest income on loans driven by an increase in average balances and a $1.7 million decrease in interest expenses on certificates and other time deposits. As a result, the average cost of interest-bearing deposits decreased 19 basis points to 0.26% for the three months ended March 31, 2022 from 0.45% for the three months ended March 31, 2021.
Noninterest Income
Noninterest income for the three months ended March 31, 2022 was $15.1 million, a decrease of $1.1 million, or 6.5%, compared to the three months ended December 31, 2021. The decrease was primarily due to a decrease of $1.4 million in insurance income from BOLI and a decrease of $870 thousand in equity method investment income, offset by a $1.5 million increase in government guaranteed loan income, net.
Compared to the three months ended March 31, 2021, noninterest income for the three months ended March 31, 2022 increased by $925 thousand, or 6.5%. The increase was primarily due to an increase of $1.5 million in loan fees and an increase of $1.1 million in service charges and fees on deposit accounts, offset by a decrease of $1.7 million in government guaranteed loan income, net.
Noninterest Expense
Noninterest expense was $46.6 million for the three months ended March 31, 2022, compared to $45.1 million for the three months ended December 31, 2021, an increase of $1.5 million, or 3.3%. This increase was primarily due to a $2.1 million increase in salaries and employee benefits primarily driven by (i) a $1.2 million increase in FICA taxes, (ii) a $960 thousand increase in stock-based compensation resulting from the vesting of February 1, 2019 performance restricted stock unit awards which vested at 150% due the Company performing at the top quartile of total shareholder return (as defined by the equity awards) and (iii) a $531 thousand increase in salaries as a result of our continued investment in talent which was slightly offset by a $333 thousand decrease in stock-based compensation associate with non-qualified stock options.
Compared to the three months ended March 31, 2021, noninterest expense for the three months ended March 31, 2022 increased by $7.0 million, or 17.6%. The increase was primarily driven by a $4.6 million increase in salaries and employee benefits as a result of a (i) $2.7 million increase in salaries resulting from continued investment in talent, (ii) a $960 thousand increase in stock-based compensation resulting from the vesting of February 1, 2019 performance restricted stock unit awards which vested at 150% due the Company performing at the top quartile of total shareholder return (as defined by the equity awards) and (iii) a $829 thousand increase in FICA taxes. The increase was also due to a $700 thousand increase in merger and acquisition expenses recognized during the three months ended March 31, 2022.
Financial Condition
Total LHI, excluding MW and PPP loans, were $7.1 billion at March 31, 2022, an increase of $359.4 million, or 21.2% annualized, compared to December 31, 2021. The increase was the result of the continued execution and success of our loan growth strategy.
Total deposits were $7.9 billion at March 31, 2022, an increase of $526.0 million, or 28.6% annualized, compared to December 31, 2021. The increase was primarily the result of increases of $412.0 million in interest-bearing transaction and savings deposits and an increase of $255.2 million in noninterest-bearing demand deposits, offset by a decrease of $141.2 million in certificates and other time deposits.
Asset Quality
Nonperforming assets totaled $48.0 million, or 0.46% of total assets at March 31, 2022, compared to $50.1 million, or 0.51% of total assets, at December 31, 2021. The Company had net charge-offs of $4.8 million for the quarter, which were fully reserved against in prior quarters under our allowance for credit loss (“ACL”) model.
The Company recorded a benefit for credit losses of $500 thousand and $3.3 million for the three months ended March 31, 2022 and December 31, 2021, respectively, compared to no provision for credit losses for the three months ended March 31, 2021. The recorded benefit for credit losses for the three months ended March 31, 2022, compared to the three months ended December 31, 2021, was primarily attributable to a decrease in specific reserves on certain nonaccrual loans slightly offset by an increase in general reserves as a result of continued loan growth. For the three months ended March 31, 2022, we also recorded a $493 thousand provision for unfunded commitments, which was attributable to higher unfunded balances. ACL as a percentage of LHI, excluding MW and PPP loans, was 1.02%, 1.15% and 1.76% at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
Dividend Information
On April 26, 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 May 27, 2022 to stockholders of record as of the close of business on May 13, 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 to review the results on Wednesday, April 27, 2022 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/chbsqqsh and will receive a unique PIN, which can be used when dialing in for the call. This will allow attendees to access the call immediately. Alternatively, participants may call toll-free at (877) 703-9880.
The call and corresponding presentation slides will be webcast live on the home page of the Company's website, https://ir.veritexbank.com/. An audio replay will be available one hour after the conclusion of the call at (855) 859-2056, Conference #9446379. This replay, as well as the webcast, will be available until May 4, 2022.
About Veritex Holdings, Inc.
Headquartered in Dallas, Texas, Veritex is a bank holding company that conducts banking activities through its wholly owned subsidiary, Veritex Community Bank, with locations throughout the Dallas-Fort Worth metroplex and in the Houston metropolitan area. Veritex Community Bank is a Texas state chartered bank regulated by the Texas Department of Banking and the Board of Governors of the Federal Reserve System. For more information, visit www.veritexbank.com.
Forward-Looking Statements
This earnings release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, statements relating to the expected payment date of Veritex’s quarterly cash dividend, the impact of certain changes in Veritex’s accounting policies, standards and interpretations, the effects of the COVID-19 pandemic and actions taken in response thereto, Veritex’s future financial performance, business and growth strategy, projected plans and objectives, as well as other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact broader economic and industry trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Veritex’s Annual Report on Form 10-K for the year ended December 31, 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 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, Dec 31, Sep 30, Jun 30, Mar 31, 2022 2021 2021 2021 2021 (Dollars and shares in thousands) Per Share Data (Common Stock): Basic EPS $ 0.66 $ 0.84 $ 0.75 $ 0.60 $ 0.64 Diluted EPS 0.65 0.82 0.73 0.59 0.64 Book value per common share 26.86 26.64 26.09 25.72 24.96 Tangible book value per common share1 18.51 17.49 17.53 17.16 16.34 Dividends paid per common share outstanding2 0.20 0.20 0.20 0.20 0.17 Common Stock Data: Shares outstanding at period end 53,907 49,372 49,229 49,498 49,433 Weighted average basic shares outstanding for the period 50,695 49,329 49,423 49,476 49,394 Weighted average diluted shares outstanding for the period 51,571 50,441 50,306 50,331 49,998 Summary of Credit Ratios: ACL to total LHI, excluding MW and PPP loans 1.02 % 1.15 % 1.42 % 1.59 % 1.76 % NPAs to total assets 0.46 0.51 0.77 0.85 0.92 Net charge-offs to average loans outstanding 0.07 0.19 0.09 0.09 — Summary Performance Ratios: Return on average assets3 1.36 1.68 1.56 1.27 1.44 Return on average equity3 10.00 12.65 11.32 9.42 10.53 Return on average tangible common equity1, 3 15.84 20.06 17.72 15.18 17.17 Efficiency ratio 52.84 48.53 47.55 52.42 49.62 Net interest margin 3.22 3.37 3.26 3.11 3.22 Selected Performance Metrics - Operating: Diluted operating EPS1 $ 0.66 $ 0.84 $ 0.70 $ 0.60 $ 0.64 Pre-tax, pre-provision operating return on average assets1, 2 1.71 % 1.97 % 1.85 % 1.66 % 1.82 % Operating return on average assets1, 3 1.38 1.72 1.48 1.29 1.46 Operating return on average tangible common equity1, 3 16.08 20.48 16.92 15.42 17.39 Operating efficiency ratio1 52.05 47.64 48.51 51.63 49.62 Veritex Holdings, Inc. Capital Ratios: Average stockholders' equity to average total assets 13.58 % 13.30 % 13.75 % 13.46 % 13.69 % Tangible common equity to tangible assets1 9.98 9.28 9.43 9.51 9.17 Tier 1 capital to average assets (leverage) 10.66 9.05 9.54 9.38 9.50 Common equity tier 1 capital 9.84 8.58 8.75 9.03 9.27 Tier 1 capital to risk-weighted assets 10.14 8.89 9.06 9.36 9.61 Total capital to risk-weighted assets 12.73 11.60 12.31 12.86 13.38 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)Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 (unaudited) (unaudited) (unaudited) (unaudited) ASSETS Cash and cash equivalents $ 551,573 $ 379,784 $ 229,712 $ 390,027 $ 468,029 Debt securities 1,244,514 1,052,494 1,103,745 1,125,877 1,077,860 Other investments 188,699 190,591 191,786 87,558 87,226 Loans held for sale 18,721 26,007 18,896 12,065 19,864 LHI, PPP loans, carried at fair value 18,512 53,369 135,842 291,401 407,353 LHI, MW 542,877 565,645 615,045 559,939 599,001 LHI, excluding MW and PPP 7,125,429 6,766,009 6,615,905 6,272,087 5,963,493 Total loans 7,705,539 7,411,030 7,385,688 7,135,492 6,989,711 ACL (72,485 ) (77,754 ) (93,771 ) (99,543 ) (104,936 ) Bank-owned life insurance 83,641 83,194 83,781 83,304 83,318 Bank premises, furniture and equipment, net 109,138 109,271 116,063 123,504 114,585 Other real estate owned (“OREO”) 1,062 — — 2,467 2,337 Intangible assets, net of accumulated amortization 63,986 66,017 54,682 57,143 59,236 Goodwill 404,452 403,771 370,840 370,840 370,840 Other assets 173,561 138,851 129,774 72,856 89,304 Total assets $ 10,453,680 $ 9,757,249 $ 9,572,300 $ 9,349,525 $ 9,237,510 LIABILITIES AND STOCKHOLDERS’ EQUITY Deposits: Noninterest-bearing deposits $ 2,765,895 $ 2,510,723 $ 2,302,925 $ 2,388,068 $ 2,171,719 Interest-bearing transaction and savings deposits 3,688,292 3,276,312 3,228,306 3,112,974 3,189,693 Certificates and other time deposits 1,435,409 1,576,580 1,647,521 1,477,860 1,543,158 Total deposits 7,889,596 7,363,615 7,178,752 6,978,902 6,904,570 Accounts payable and other liabilities 105,552 69,160 66,571 55,499 55,902 Advances from Federal Home Loan Bank (“FHLB”) 777,522 777,562 777,601 777,640 777,679 Subordinated debentures and subordinated notes 228,018 227,764 262,761 262,766 262,774 Securities sold under agreements to repurchase 4,996 4,069 2,455 1,811 2,777 Total liabilities 9,005,684 8,442,170 8,288,140 8,076,618 8,003,702 Commitments and contingencies Stockholders’ equity: Common stock 605 560 559 558 557 Additional paid-in capital 1,297,161 1,142,758 1,137,889 1,134,603 1,131,324 Retained earnings 298,830 275,273 243,633 216,704 195,661 Accumulated other comprehensive income 18,982 64,070 69,661 77,189 62,413 Treasury stock (167,582 ) (167,582 ) (167,582 ) (156,147 ) (156,147 ) Total stockholders’ equity 1,447,996 1,315,079 1,284,160 1,272,907 1,233,808 Total liabilities and stockholders’ equity $ 10,453,680 $ 9,757,249 $ 9,572,300 $ 9,349,525 $ 9,237,510 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands, except per share data)For the Quarter Ended Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, 2022 2021 2021 2021 2021 Interest income: Loans, including fees $ 71,443 $ 74,174 $ 71,139 $ 67,814 $ 67,399 Debt securities 7,762 9,553 7,613 7,529 7,437 Deposits in financial institutions and Fed Funds sold 262 165 130 167 127 Equity securities and other investments 910 1,004 898 672 663 Total interest income 80,377 84,896 79,780 76,182 75,626 Interest expense: Transaction and savings deposits 1,751 1,629 1,588 1,661 1,980 Certificates and other time deposits 1,380 1,661 1,934 2,423 3,061 Advances from FHLB 1,547 1,847 1,848 1,829 1,812 Subordinated debentures and subordinated notes 2,659 3,018 3,134 3,138 3,138 Total interest expense 7,337 8,155 8,504 9,051 9,991 Net interest income 73,040 76,741 71,276 67,131 65,635 (Benefit) provision for credit losses (500 ) (3,349 ) — — — Provision (benefit) for unfunded commitments 493 (1,040 ) (448 ) 577 (570 ) Net interest income after provisions 73,047 81,130 71,724 66,554 66,205 Noninterest income: Service charges and fees on deposit accounts 4,710 4,782 4,484 3,847 3,629 Loan fees 2,794 2,697 1,746 1,823 1,341 Loss on sales of investment securities — — (188 ) — — Gain on sales of mortgage loans held for sale 307 293 407 385 507 Government guaranteed loan income, net 4,891 3,423 2,341 3,448 6,548 Equity method investment income 367 1,238 4,522 — — Other 2,028 3,717 2,315 2,953 2,147 Total noninterest income 15,097 16,150 15,627 12,456 14,172 Noninterest expense: Salaries and employee benefits 27,513 25,401 22,964 23,451 22,932 Occupancy and equipment 4,517 4,398 4,536 4,233 4,096 Professional and regulatory fees 3,158 3,017 3,401 3,086 3,441 Data processing and software expense 2,921 2,597 2,494 2,536 2,319 Marketing 1,187 1,443 1,151 1,841 909 Amortization of intangibles 2,495 2,494 2,509 2,517 2,537 Telephone and communications 385 380 380 337 337 Merger and acquisition (“M&A”) expense 700 826 — — — Other 3,696 4,521 3,886 3,716 3,026 Total noninterest expense 46,572 45,077 41,321 41,717 39,597 Income before income tax expense 41,572 52,203 46,030 37,293 40,780 Income tax expense 8,102 10,697 9,195 7,837 8,993 Net income $ 33,470 $ 41,506 $ 36,835 $ 29,456 $ 31,787 Basic EPS $ 0.66 $ 0.84 $ 0.75 $ 0.60 $ 0.64 Diluted EPS $ 0.65 $ 0.82 $ 0.73 $ 0.59 $ 0.64 Weighted average basic shares outstanding 50,695 49,329 49,423 49,476 49,394 Weighted average diluted shares outstanding 51,571 50,441 50,306 50,331 49,998 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)For the Quarter Ended March 31, 2022 December 31, 2021 March 31, 2021 Interest Interest Interest Average Earned/ Average Average Earned/ Average Average Earned/ Average Outstanding Interest Yield/ Outstanding Interest Yield/ Outstanding Interest Yield/ Balance Paid Rate Balance Paid Rate Balance Paid Rate (In thousands, expect percentages) Assets Interest-earning assets: Loans1 $ 6,872,943 $ 68,297 4.03 % $ 6,777,397 $ 70,334 4.12 % $ 5,897,815 $ 62,702 4.31 % LHI, MW 421,680 3,069 2.95 483,850 3,629 2.98 510,678 3,815 3.03 PPP loans 31,335 77 1.00 83,553 211 1.00 356,356 882 1.00 Debt securities 1,140,834 7,762 2.76 1,092,089 9,553 3.47 1,063,538 7,437 2.84 Interest-bearing deposits in other banks 554,864 262 0.19 417,266 165 0.16 341,483 127 0.15 Equity securities and other investments 190,002 910 1.94 191,031 1,004 2.09 87,178 663 3.08 Total interest-earning assets 9,211,658 80,377 3.54 9,045,186 84,896 3.72 8,257,048 75,626 3.71 ACL (77,843 ) (95,218 ) (105,972 ) Noninterest-earning assets 865,107 838,703 790,195 Total assets $ 9,998,922 $ 9,788,671 $ 8,941,271 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Interest-bearing demand and savings deposits $ 3,471,645 $ 1,751 0.20 % $ 3,357,958 $ 1,629 0.19 % $ 3,038,586 $ 1,980 0.26 % Certificates and other time deposits 1,501,852 1,380 0.37 1,615,066 1,661 0.41 1,509,836 3,061 0.82 Advances from FHLB 777,538 1,547 0.81 777,577 1,847 0.94 777,694 1,812 0.94 Subordinated debentures and subordinated notes 231,875 2,659 4.65 259,191 3,018 4.62 265,356 3,138 4.80 Total interest-bearing liabilities 5,982,910 7,337 0.50 6,009,792 8,155 0.54 5,591,472 9,991 0.72 Noninterest-bearing liabilities: Noninterest-bearing deposits 2,591,504 2,413,443 2,069,233 Other liabilities 67,060 63,760 56,272 Total liabilities 8,641,474 8,486,995 7,716,977 Stockholders’ equity 1,357,448 1,301,676 1,224,294 Total liabilities and stockholders’ equity $ 9,998,922 $ 9,788,671 $ 8,941,271 Net interest rate spread2 3.04 % 3.18 % 2.99 % Net interest income and margin3 73,040 3.22 % 76,741 3.37 % 65,635 3.22 % 1 Includes average outstanding balances of loans held for sale of $12,769, $8,987 and $16,602 for the three months ended March 31, 2022, December 31, 2021, and March 31, 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 HighlightsYield Trend For the Quarter Ended Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, 2022 2021 2021 2021 2021 Average yield on interest-earning assets: Loans1 4.03 % 4.12 % 4.16 % 4.16 % 4.31 % LHI, MW 2.95 2.98 3.15 3.06 3.03 PPP loans 1.00 1.00 1.00 1.00 1.00 Debt securities 2.76 3.47 2.70 2.76 2.84 Interest-bearing deposits in other banks 0.19 0.16 0.15 0.12 0.15 Equity securities and other investments 1.94 2.09 2.13 3.08 3.08 Total interest-earning assets 3.54 % 3.72 % 3.64 % 3.53 % 3.71 % Average rate on interest-bearing liabilities: Interest-bearing demand and savings deposits 0.20 % 0.19 % 0.20 % 0.21 % 0.26 % Certificates and other time deposits 0.37 0.41 0.50 0.64 0.82 Advances from FHLB 0.81 0.94 0.94 0.94 0.94 Subordinated debentures and subordinated notes 4.65 4.62 4.70 4.75 4.80 Total interest-bearing liabilities 0.50 % 0.54 % 0.59 % 0.63 % 0.72 % Net interest rate spread2 3.04 % 3.18 % 3.05 % 2.90 % 2.99 % Net interest margin3 3.22 % 3.37 % 3.26 % 3.11 % 3.22 % 1Includes average outstanding balances of loans held for sale of $12,769, $8,987, $8,542, $14,364 and $16,602 for the three months ended March 31, 2022, December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 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 For the Quarter Ended Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, 2022 2021 2021 2021 2021 Average cost of interest-bearing deposits 0.26 % 0.26 % 0.30 % 0.35 % 0.45 % Average costs of total deposits, including noninterest-bearing 0.17 0.18 0.20 0.23 0.31 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)LHI and Deposit Portfolio Composition Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, 2022 2021 2021 2021 2021 (In thousands, expect percentages) LHI1 Commercial $ 2,125,900 29.8 % $ 2,006,876 29.6 % $ 1,793,740 27.1 % $ 1,771,100 28.2 % $ 1,632,040 27.4 % Real Estate: Owner occupied commercial (“OOCRE”) 633,615 8.9 665,537 9.8 711,476 10.7 744,899 11.9 733,310 12.3 Non-owner occupied commercial (“NOOCRE”) 2,145,826 30.0 2,120,309 31.3 2,194,438 33.1 1,986,538 31.6 1,970,945 33.0 Construction and land 1,297,338 18.2 1,062,144 15.7 936,174 14.1 871,765 13.9 723,444 12.1 Farmland 48,095 0.7 55,827 0.8 73,550 1.1 13,661 0.2 14,751 0.2 1-4 family residential 604,408 8.5 542,566 8.0 543,518 8.2 513,635 8.2 492,609 8.3 Multi-family residential 272,250 3.8 310,241 4.6 356,885 5.4 367,445 5.9 386,844 6.5 Consumer 9,533 0.1 11,998 0.2 14,266 0.3 10,530 0.1 12,431 0.2 Total LHI $ 7,136,965 100 % $ 6,775,498 100 % $ 6,624,047 100 % $ 6,279,573 100 % $ 5,966,374 100 % MW 542,877 565,645 615,045 559,939 599,001 PPP loans 18,512 53,369 135,842 291,401 407,353 Total LHI1 $ 7,698,354 $ 7,394,512 $ 7,374,934 $ 7,130,913 $ 6,972,728 Deposits Noninterest-bearing $ 2,765,895 35.1 % $ 2,510,723 34.1 % $ 2,302,925 32.1 % $ 2,388,068 34.1 % $ 2,171,719 31.6 % Interest-bearing transaction 599,580 7.6 579,408 7.9 514,537 7.2 451,307 6.5 463,343 6.7 Money market 2,958,790 37.5 2,568,843 34.9 2,585,926 36.0 2,539,061 36.4 2,602,903 37.7 Savings 129,922 1.6 128,061 1.7 127,843 1.8 122,606 1.8 123,447 1.8 Certificates and other time deposits 1,435,409 18.2 1,576,580 21.4 1,647,521 22.9 1,477,860 21.2 1,543,158 22.2 Total deposits $ 7,889,596 100 % $ 7,363,615 100 % $ 7,178,752 100 % $ 6,978,902 100 % $ 6,904,570 100 % Loan to Deposit Ratio 97.6 % 100.4 % 102.7 % 102.2 % 101.0 % Loan to Deposit Ratio, excluding MW and PPP loans 90.5 % 92.0 % 92.3 % 90.0 % 86.4 % 1 Total LHI does not include deferred fees of $11.5 million, $9.5 million, and $8.1 million at March 31, 2022, December 31, 2021 and September 30, 2021, respectively, deferred costs of $7.5 million and $2.9 million at June 30, 2021 and March 31, 2021, respectively. VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)Asset Quality For the Quarter Ended Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, 2022 2021 2021 2021 2021 (In thousands) NPAs: Nonaccrual loans $ 46,680 $ 49,687 $ 72,317 $ 76,994 $ 73,594 Accruing loans 90 or more days past due1 264 441 1,711 462 9,093 Total nonperforming loans held for investment (“NPLs”) 46,944 50,128 74,028 77,456 82,687 OREO 1,062 — — 2,467 2,337 Total NPAs $ 48,006 $ 50,128 $ 74,028 $ 79,923 $ 85,024 Charge-offs: 1-4 family residential $ — $ — $ (64 ) $ (300 ) $ (15 ) OOCRE (1,341 ) (898 ) (813 ) (689 ) — NOOCRE (553 ) (7,936 ) — — — Commercial (3,294 ) (4,114 ) (5,508 ) (5,608 ) (346 ) Consumer (134 ) (44 ) (17 ) (20 ) (18 ) Total charge-offs (5,322 ) (12,992 ) (6,402 ) (6,617 ) (379 ) Recoveries: 1-4 family residential — 6 26 29 3 OOCRE — — — 500 — NOOCRE 400 — — — — Commercial 144 61 596 659 226 Consumer 9 257 8 36 2 Total recoveries 553 324 630 1,224 231 Net charge-offs $ (4,769 ) $ (12,668 ) $ (5,772 ) $ (5,393 ) $ (148 ) ACL $ 72,485 $ 77,754 $ 93,771 $ 99,543 $ 104,936 Asset Quality Ratios: NPAs to total assets 0.46 % 0.51 % 0.77 % 0.85 % 0.92 % NPLs to total LHI, excluding MW and PPP loans 0.66 0.74 1.12 1.23 1.39 ACL to total LHI, excluding MW and PPP loans 1.02 1.15 1.42 1.59 1.76 Net charge-offs to average loans outstanding 0.07 0.19 0.09 0.09 — 1 Accruing loans greater than 90 days past due exclude purchase credit deteriorated loans greater than 90 days past due that are accounted for on a pooled basis. VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)We identify certain financial measures discussed in this earnings release as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles as in effect from time to time in the United States (“GAAP”), in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios calculated using exclusively either one or both of (i) financial measures calculated in accordance with GAAP and (ii) operating measures or other measures that are not non-GAAP financial measures.
The non-GAAP financial measures that we present in this earnings release should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we present in this earnings release may differ from that of other companies reporting measures with similar names. You should understand how such other financial institutions calculate their financial measures that appear to be similar or have similar names to the non-GAAP financial measures we have discussed in this earnings release when comparing such non-GAAP financial measures.
Tangible Book Value Per Common Share. Tangible book value is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total stockholders’ equity less goodwill and core deposit intangibles, net of accumulated amortization; and (b) tangible book value per common share as tangible common equity (as described in clause (a)) divided by number of common shares outstanding. For tangible book value per common share, the most directly comparable financial measure calculated in accordance with GAAP is book value per common share.
We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in core deposit intangibles. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.
The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and presents our tangible book value per common share compared with our book value per common share:
As of Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 (Dollars in thousands, except per share data) Tangible Common Equity Total stockholders' equity $ 1,447,996 $ 1,315,079 $ 1,284,160 $ 1,272,907 $ 1,233,808 Adjustments: Goodwill (404,452 ) (403,771 ) (370,840 ) (370,840 ) (370,840 ) Core deposit intangibles (45,560 ) (47,998 ) (50,436 ) (52,873 ) (55,311 ) Tangible common equity $ 997,984 $ 863,310 $ 862,884 $ 849,194 $ 807,657 Common shares outstanding 53,907 49,372 49,229 49,498 49,433 Book value per common share $ 26.86 $ 26.64 $ 26.09 $ 25.72 $ 24.96 Tangible book value per common share $ 18.51 $ 17.49 $ 17.53 $ 17.16 $ 16.34 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, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 (Dollars in thousands) Tangible Common Equity Total stockholders' equity $ 1,447,996 $ 1,315,079 $ 1,284,160 $ 1,272,907 $ 1,233,808 Adjustments: Goodwill (404,452 ) (403,771 ) (370,840 ) (370,840 ) (370,840 ) Core deposit intangibles (45,560 ) (47,998 ) (50,436 ) (52,873 ) (55,311 ) Tangible common equity $ 997,984 $ 863,310 $ 862,884 $ 849,194 $ 807,657 Tangible Assets Total assets $ 10,453,680 $ 9,757,249 $ 9,572,300 $ 9,349,525 $ 9,237,510 Adjustments: Goodwill (404,452 ) (403,771 ) (370,840 ) (370,840 ) (370,840 ) Core deposit intangibles (45,560 ) (47,998 ) (50,436 ) (52,873 ) (55,311 ) Tangible Assets $ 10,003,668 $ 9,305,480 $ 9,151,024 $ 8,925,812 $ 8,811,359 Tangible Common Equity to Tangible Assets 9.98 % 9.28 % 9.43 % 9.51 % 9.17 % 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, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 (Dollars in thousands) Net income available for common stockholders adjusted for amortization of core deposit intangibles Net income $ 33,470 $ 41,506 $ 36,835 $ 29,456 $ 31,787 Adjustments: Plus: Amortization of core deposit intangibles 2,438 2,438 2,438 2,438 2,447 Less: Tax benefit at the statutory rate 512 512 512 512 514 Net income available for common stockholders adjusted for amortization of core deposit intangibles $ 35,396 $ 43,432 $ 38,761 $ 31,382 $ 33,720 Average Tangible Common Equity Total average stockholders' equity $ 1,357,448 $ 1,301,676 $ 1,290,528 $ 1,254,371 $ 1,224,294 Adjustments: Average goodwill (404,014 ) (393,220 ) (370,840 ) (370,840 ) (370,840 ) Average core deposit intangibles (47,158 ) (49,596 ) (52,043 ) (54,471 ) (56,913 ) Average tangible common equity $ 906,276 $ 858,860 $ 867,645 $ 829,060 $ 796,541 Return on Average Tangible Common Equity (Annualized) 15.84 % 20.06 % 17.72 % 15.18 % 17.17 % VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)Operating Earnings, Pre-tax, Pre-provision Operating Earnings and performance metrics calculated using Operating Earnings and Pre-tax, Pre-provision Operating Earnings, including Diluted Operating Earnings per Share, Operating Return on Average Assets, Pre-tax, Pre-Provision Operating Return on Average Assets, Operating Return on Average Tangible Common Equity and Operating Efficiency Ratio. Operating earnings, pre-tax, pre-provision operating earnings and the performance metrics calculated using these metrics, listed below, are non-GAAP measures used by management to evaluate the Company’s financial performance. We calculate (a) operating earnings as net income plus severance payments, plus loss on sale of securities, net, less Thrive PPP loan forgiveness income, plus M&A expenses, 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 benefit (provision) 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 non interest expense plus adjustments to operating non interest expense divided by non interest income plus adjustments to operating non interest 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 Three Months Ended Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 (Dollars in thousands) Operating Earnings Net income $ 33,470 $ 41,506 $ 36,835 $ 29,456 $ 31,787 Plus: Severance payments1 — — — 627 — Plus: Loss on sale of securities available for sale, net — — 188 — — Less: Thrive PPP loan forgiveness income2 — — 1,912 — — Plus: M&A expenses 700 826 — — — Operating pre-tax income 34,170 42,332 35,111 30,083 31,787 Less: Tax impact of adjustments 156 (78 ) 39 131 — Plus: Nonrecurring tax adjustments3 — — — — 426 Operating earnings $ 34,014 $ 42,410 $ 35,072 $ 29,952 $ 32,213 Weighted average diluted shares outstanding 51,571 50,441 50,306 50,331 49,998 Diluted EPS $ 0.65 $ 0.82 $ 0.73 $ 0.59 $ 0.64 Diluted operating EPS $ 0.66 $ 0.84 $ 0.70 $ 0.60 $ 0.64 1 Severance payments relate to branch restructurings made during the three months ended June 30, 2021. 2 During the third quarter of 2021, Thrive’s PPP loan with another bank was 100% forgiven by the Small Business Administration. As a result of our 49% investment in Thrive, the $1.9 million represents our portion of the PPP loan forgiveness. PPP fee income is not taxable and as such has no tax impact. 3 A nonrecurring tax adjustment of $426 thousand recorded in the first quarter of 2021 was due to a true-up of a deferred tax liability. For the Quarter Ended Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 (Dollars in thousands) Pre-Tax, Pre-Provision Operating Earnings Net income $ 33,470 $ 41,506 $ 36,835 $ 29,456 $ 31,787 Plus: Provision for income taxes 8,102 10,697 9,195 7,837 8,993 Plus: (Benefit) provision for credit losses and unfunded commitments (7 ) (4,389 ) (448 ) 577 (570 ) Plus: Severance payments — — — 627 — Plus: Loss on sale of securities, net — — 188 — — Less: Thrive PPP loan forgiveness income — — 1,912 — — Plus: M&A expenses 700 826 — — — Pre-tax, pre-provision operating earnings $ 42,265 $ 48,640 $ 43,858 $ 38,497 $ 40,210 Average total assets $ 9,998,922 $ 9,788,671 $ 9,385,470 $ 9,321,279 $ 8,941,271 Pre-tax, pre-provision operating return on average assets1 1.71 % 1.97 % 1.85 % 1.66 % 1.82 % Average total assets $ 9,998,922 $ 9,788,671 $ 9,385,470 $ 9,321,279 $ 8,941,271 Return on average assets1 1.36 % 1.68 % 1.56 % 1.27 % 1.44 % Operating return on average assets1 1.38 1.72 1.48 1.29 1.46 Operating earnings adjusted for amortization of core deposit intangibles Operating earnings $ 34,014 $ 42,410 $ 35,072 $ 29,952 $ 32,213 Adjustments: Plus: Amortization of core deposit intangibles 2,438 2,438 2,438 2,438 2,447 Less: Tax benefit at the statutory rate 512 512 512 512 514 Operating earnings adjusted for amortization of core deposit intangibles $ 35,940 $ 44,336 $ 36,998 $ 31,878 $ 34,146 Average Tangible Common Equity Total average stockholders' equity $ 1,357,448 $ 1,301,676 $ 1,290,528 $ 1,254,371 $ 1,224,294 Adjustments: Less: Average goodwill (404,014 ) (393,220 ) (370,840 ) (370,840 ) (370,840 ) Less: Average core deposit intangibles (47,158 ) (49,596 ) (52,043 ) (54,471 ) (56,913 ) Average tangible common equity $ 906,276 $ 858,860 $ 867,645 $ 829,060 $ 796,541 Operating return on average tangible common equity1 16.08 % 20.48 % 16.92 % 15.42 % 17.39 % Efficiency ratio 52.84 % 48.53 % 47.55 % 52.42 % 49.62 % Operating efficiency ratio Net interest income $ 73,040 $ 76,741 $ 71,276 $ 67,131 $ 65,635 Noninterest income 15,097 16,150 15,627 12,456 14,172 Plus: Loss on sale of securities, net — — 188 — — Less: Thrive PPP loan forgiveness income — — 1,912 — — Operating noninterest income 15,097 16,150 13,903 12,456 14,172 Noninterest expense 46,572 45,077 41,321 41,717 39,597 Less: Severance payments — — — 627 — Less: M&A expenses 700 826 — — — Operating noninterest expense $ 45,872 $ 44,251 $ 41,321 $ 41,090 $ 39,597 Operating efficiency ratio 52.05 % 47.64 % 48.51 % 51.63 % 49.62 % 1 Annualized ratio for quarterly metrics. 
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