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Veritex Holdings, Inc. Reports First Quarter Operating Results
Source: Nasdaq GlobeNewswire / 27 Apr 2021 17:00:01 America/New_York
DALLAS, April 27, 2021 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. (“Veritex” or the “Company”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the quarter ended March 31, 2021.
“We are very pleased with our operating results for the first quarter of 2021. Our business momentum continues to build as a result of our investments in talent and the accelerated reopening of the Texas economy,” said C. Malcolm Holland, III, the Company’s Chairman and Chief Executive Officer. “Our loan and deposit growth remains good, credit trends are improving and our balance sheet it strong. We couldn’t be more excited about the future of Veritex including today’s announcement of our partnership with Thrive Mortgage.”
First Quarter Highlights
- Net income of $31.8 million, or $0.64 diluted earnings per share (“EPS”), compared to $22.8 million, or $0.46 diluted EPS, for the quarter ended December 31, 2020 and $4.1 million, or $0.08 diluted EPS, for the quarter ended March 31, 2020;
- Pre-tax, pre-provision operating earnings1 totaled $40.2 million, compared to $38.4 million for the quarter ended December 31, 2020 and $39.1 million for the quarter ended March 31, 2020;
- Operating return on average tangible common equity1 of 17.39% for the three months ended March 31, 2021 compared to 16.44% for the three months ended December 31, 2020;
- Total loans held for investment, excluding PPP loans, grew $137.0 million from the fourth quarter of 2020, or 8.65% annualized. Total loans held for investment, excluding PPP loans, grew $337.6 million, or 5.42%, year over year;
- Total deposits grew $391.7 million from the fourth quarter of 2020, or 24.0% annualized, with the average cost of total deposits decreasing to 0.31% for the three months ended March 31, 2021 from 0.38% and 1.02% for the three months ended December 31, 2020 and March 31, 2020, respectively;
- Declared quarterly cash dividend of $0.17 payable on May 20, 2021;
- Extended the expiration date of the stock buyback program to December 31, 2021.
Financial Highlights Q1 2021 Q4 2020 (Dollars in thousands)
(unaudited)GAAP Net income $ 31,787 $ 22,801 Diluted EPS 0.64 0.46 Book value per common share 24.96 24.39 Return on average assets2 1.44 % 1.04 % Efficiency ratio 49.62 62.52 Non-GAAP1 Operating earnings $ 32,213 $ 29,730 Diluted operating EPS 0.64 0.60 Tangible book value per common share 16.34 15.70 Pre-tax, pre-provision operating earnings 40,210 38,407 Pre-tax, pre-provision operating return on average assets2 1.82 % 1.75 % Operating return on average assets2 1.46 1.35 Operating efficiency ratio 49.62 49.49 Return on average tangible common equity 17.17 12.84 Operating return on average tangible common equity 17.39 16.44 1 Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of these non-generally accepted accounting principles (“”GAAP”) financial measures to their most directly comparable GAAP measures.
2 Annualized ratio.Results of Operations for the Three Months Ended March 31, 2021
Net Interest Income
For the three months ended March 31, 2021, net interest income before provision for credit losses was $65.6 million and net interest margin was 3.22% compared to $66.8 million and 3.29%, respectively, for the three months ended December 31, 2020. Net interest margin decreased 7 basis point from the three months ended December 31, 2020 primarily due to a decrease in the average yields earned on loans slightly offset by the average rates paid on interest-bearing demand and savings deposits and certificate and other time deposits for the three months ended March 31, 2021. As a result, the average cost of interest-bearing deposits decreased 10 basis points to 0.45% for the three months ended March 31, 2021 from 0.55% for the three months ended December 31, 2020.
Net interest income before provision for credit losses decreased by $1.8 million from $67.4 million to $65.6 million and net interest margin decreased by 45 basis points from 3.67% to 3.22% for the three months ended March 31, 2021 as compared to the same period in 2020. The decrease in net interest income before provision for credit losses was primarily due to a $10.5 million decrease in interest income on loans and a $1.2 million increase in interest expense on subordinated debentures and subordinated notes, partially offset by $4.6 million and $5.2 million decrease in interest expenses on transaction and savings deposits and certificates and other time deposits, respectively, during the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Net interest margin decreased 45 basis points from the three months ended March 31, 2020 primarily due to a decrease in yields earned on loan balances, partially offset by decreases in the average rate paid on interest-bearing demand and savings deposits and certificates and other time deposits for the three months ended March 31, 2021. As a result, the average cost of interest-bearing deposits decreased 92 basis points to 0.45% for the three months ended March 31, 2021 from 1.37% for the three months ended March 31, 2020.
Noninterest Income
Noninterest income for the three months ended March 31, 2021 was $14.2 million, an increase of $5.2 million, or 57.3%, compared to the three months ended December 31, 2020. The increase was primarily due to a $6.1 million increase in government guaranteed loan income, net, driven by $6.6 million of fee income earned on PPP loans during the three months ended March 31, 2021 with no corresponding fee income earned on PPP loans earned during the three months ended December 31, 2020. This was partially offset by a $1.5 million decrease in derivative income.
Compared to the three months ended March 31, 2020, noninterest income for the three months ended March 31, 2021 increased by $6.9 million, or 95.6%. The increase was primarily due to a $6.1 million increase in government guaranteed loan income, net, as a result of the fee income earned on PPP loans for the three months ended March 31, 2021 with no corresponding fee income earned on PPP loans during the three months ended March 31, 2020.
Noninterest Expense
Noninterest expense was $39.6 million for the three months ended March 31, 2021, compared to $47.4 million for the three months ended December 31, 2020, a decrease of $7.8 million, or 16.4%. The decrease was primarily driven by a $9.7 million decrease in debt extinguishment costs on Federal Home Loan Bank ("FHLB") advances that were pre-paid during the three months ended December 31, 2020 with no corresponding FHLB advance prepayments during the three months ended March 31, 2021. This decrease was partially offset by a $2.9 million increase in salaries and employee benefits primarily driven by a $980 thousand decrease in deferred origination costs, a $515 thousand increase in FICA taxes and a $331 thousand increase in employee stock based compensation.
Compared to the three months ended March 31, 2020, noninterest expense for the three months ended March 31, 2021 increased by $4.1 million, or 11.4%. The increase was primarily driven by a $4.1 million increase in salaries and employee benefits as a result of a $1.9 million increase in accrued bonus, a $1.2 million increase in lender incentive and a $487 thousand increase in employee stock based compensation.
Financial Condition
Total loans were $7.0 billion at March 31, 2021, an increase of $184.8 million, or 10.9% annualized, compared to December 31, 2020. The increase was the result of the continued execution and success of our loan growth strategy.
Total deposits were $6.9 billion at March 31, 2021, an increase of $391.7 million, or 24.0% annualized, compared to December 31, 2020. The increase was primarily the result of increases of $231.2 million in interest-bearing transaction and savings deposits, $85.9 million in certificates and other time deposits, and $74.6 million in noninterest-bearing demand deposits.
Asset Quality
Nonperforming assets totaled $85.0 million, or 0.92% of total assets at March 31, 2021, compared to $87.6 million, or 0.99% of total assets, at December 31, 2020. Included in nonperforming assets is $9.1 million of accruing loans 90 or more days past due that are considered well-secured and in the process of collection. Excluding accruing loans 90 or more days past due, nonperforming assets represented 0.82% of total assets at March 31, 2021, a 13 basis point decrease compared to December 31, 2020. The Company’s net charge-offs for the three months ended March 31, 2021 were nominal.
The Company recorded no provision for credit losses for the three months ended March 31, 2021 and December 31, 2020, compared to $31.8 million for the three months ended March 31, 2020. The decrease in the recorded provision for credit losses for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, was primarily attributable to improvement in the Texas economic forecasts used in the Current Expected Credit Losses (“CECL”) model in the first quarter of 2021 to reflect the expected impact of the COVID-19 pandemic as of March 31, 2021, as compared to our Texas economic forecasts and expected impact of the COVID-19 pandemic as of March 31, 2020. In the first quarter of 2021, we also recorded a $570 thousand recovery in our provision for unfunded commitments which was attributable to improvement in the Texas economic forecasts compared to a $902 thousand provision for unfunded commitments recorded for the three months ended December 31, 2020. Allowance for credit losses as a percentage of LHI, excluding MW and PPP loans, was 1.76%, 1.80% and 1.73% at March 31, 2021, December 31, 2020 and March 31, 2020, respectively.
Dividend Information
On April 27, 2021, Veritex’s Board of Directors declared a quarterly cash dividend of $0.17 per share on its outstanding shares of common stock. The dividend will be paid on or after May 20, 2021 to stockholders of record as of the close of business on May 6, 2021.
Non-GAAP Financial Measures
Veritex’s management uses certain non-GAAP (U.S. generally accepted accounting principles) financial measures to evaluate its operating performance and provide information that is important to investors. However, non-GAAP financial measures are supplemental and should be viewed in addition to, and not as an alternative for, Veritex’s reported results prepared in accordance with GAAP. Specifically, Veritex reviews and reports tangible book value per common share, operating earnings, tangible common equity to tangible assets, return on average tangible common equity, pre-tax, pre-provision operating earnings, pre-tax, pre-provision operating return on average assets, diluted operating earnings per share, operating return on average assets, operating return on average tangible common equity and operating efficiency ratio. Veritex has included in this earnings release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to “Reconciliation of Non-GAAP Financial Measures” after the financial highlights at the end of this earnings release for a reconciliation of these non-GAAP financial measures.
Conference Call
The Company will host an investor conference call to review the results on Tuesday, April 27, 2021 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/vz2jxi3a and will receive a unique PIN, which can be used when dialing in for the call. This will allow attendees to access the call immediately. Alternatively, participants may call toll-free at (877) 703-9880.
The call and corresponding presentation slides will be webcast live on the home page of the Company's website, https://ir.veritexbank.com/. An audio replay will be available one hour after the conclusion of the call at (855) 859-2056, Conference #4978885. This replay, as well as the webcast, will be available until May 4, 2021.
About Veritex Holdings, Inc.
Headquartered in Dallas, Texas, Veritex is a bank holding company that conducts banking activities through its wholly owned subsidiary, Veritex Community Bank, with locations throughout the Dallas-Fort Worth metroplex and in the Houston metropolitan area. Veritex Community Bank is a Texas state chartered bank regulated by the Texas Department of Banking and the Board of Governors of the Federal Reserve System. For more information, visit www.veritexbank.com.
Forward-Looking Statements
This earnings release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, statements relating to the expected payment date of Veritex’s quarterly cash dividend, the impact of certain changes in Veritex’s accounting policies, standards and interpretations, the effects of the COVID-19 pandemic and actions taken in response thereto, Veritex’s future financial performance, business and growth strategy, projected plans and objectives, as well as other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact broader economic and industry trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Veritex’s Annual Report on Form 10-K for the year ended December 31, 2020 and any updates to those risk factors set forth in Veritex’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov. If one or more events related to these or other risks or uncertainties materialize, or if Veritex’s underlying assumptions prove to be incorrect, actual results may differ materially from what Veritex anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. Veritex does not undertake any obligation, and specifically declines any obligation, to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law. All forward-looking statements, expressed or implied, included in this earnings release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Veritex or persons acting on Veritex’s behalf may issue.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)For the Three Months Ended Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 (Dollars and shares in thousands) Per Share Data (Common Stock): Basic EPS $ 0.64 $ 0.46 $ 0.46 $ 0.48 $ 0.08 Diluted EPS 0.64 0.46 0.46 0.48 0.08 Book value per common share 24.96 24.39 23.87 23.45 23.19 Tangible book value per common share1 16.34 15.70 15.19 14.71 14.39 Common Stock Data: Shares outstanding at period end 49,433 49,340 49,650 49,633 49,557 Weighted average basic shares outstanding for the period 49,394 49,571 49,647 49,597 50,725 Weighted average diluted shares outstanding for the period 49,998 49,837 49,775 49,727 51,056 Summary of Credit Ratios: ACL to total LHI, excluding mortgage warehouse and PPP loans 1.76 % 1.80 % 2.10 % 2.01 % 1.73 % Nonperforming assets to total assets 0.92 0.99 1.11 0.62 0.60 Net charge-offs to average loans outstanding — 0.28 0.04 0.03 — Summary Performance Ratios: Return on average assets2 1.44 1.04 1.06 1.11 0.20 Return on average equity2 10.53 7.58 7.74 8.36 1.41 Return on average tangible common equity1, 2 17.17 12.84 13.27 14.49 3.27 Efficiency ratio 49.62 62.52 48.12 46.02 47.61 Selected Performance Metrics - Operating: Diluted operating EPS1 $ 0.64 $ 0.60 $ 0.46 $ 0.43 $ 0.08 Pre-tax, pre-provision operating return on average assets1, 2 1.82 % 1.75 % 1.82 % 2.11 % 1.94 % Operating return on average assets1, 2 1.46 1.35 1.06 0.98 0.20 Operating return on average tangible common equity1, 2 17.39 16.44 13.27 12.90 3.27 Operating efficiency ratio1 49.62 49.49 48.11 45.74 47.61 Veritex Holdings, Inc. Capital Ratios: Tier 1 capital to average assets (leverage) 9.50 9.43 9.54 9.16 9.49 Common equity tier 1 capital 9.27 9.30 9.67 9.66 9.53 Tier 1 capital to risk-weighted assets 9.61 9.66 10.05 10.05 9.92 Total capital to risk-weighted assets 13.38 13.56 12.70 12.71 12.48 Tangible common equity to tangible assets1 9.17 9.23 9.12 8.96 8.81 1 Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” after the financial highlights for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.
2 Annualized ratio for quarterly metrics.VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands)Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 (unaudited) (unaudited) (unaudited) (unaudited) ASSETS Cash and cash equivalents $ 468,029 $ 230,825 $ 128,767 $ 160,306 $ 430,842 Debt securities 1,077,860 1,055,201 1,091,440 1,112,061 1,117,804 Other investments 87,226 87,192 98,023 104,213 112,775 Loans held for sale 19,864 21,414 13,928 28,041 15,048 Loans held for investment, Paycheck Protection Program (“PPP”) loans, carried at fair value 407,353 358,042 405,465 398,949 — Loans held for investment, mortgage warehouse (“MW”) 599,001 577,594 544,845 441,992 371,161 Loans held for investment, excluding MW and PPP 5,963,493 5,847,862 5,789,293 5,726,873 5,853,735 Total loans 6,989,711 6,804,912 6,753,531 6,595,855 6,239,944 Allowance for credit losses (“ACL”) (104,936 ) (105,084 ) (121,591 ) (115,365 ) (100,983 ) Bank-owned life insurance 83,318 82,855 82,366 81,876 81,395 Bank premises, furniture and equipment, net 114,585 115,063 115,794 115,560 116,056 Other real estate owned (“OREO”) 2,337 2,337 5,796 7,716 7,720 Intangible assets, net of accumulated amortization 59,236 61,733 64,716 66,705 69,444 Goodwill 370,840 370,840 370,840 370,840 370,840 Other assets 89,304 114,997 112,693 88,091 85,787 Total assets $ 9,237,510 $ 8,820,871 $ 8,702,375 $ 8,587,858 $ 8,531,624 LIABILITIES AND STOCKHOLDERS’ EQUITY Deposits: Noninterest-bearing deposits $ 2,171,719 $ 2,097,099 $ 1,920,715 $ 1,907,697 $ 1,549,260 Interest-bearing transaction and savings deposits 3,189,693 2,958,456 2,821,945 2,714,149 2,536,865 Certificates and other time deposits 1,543,158 1,457,291 1,479,896 1,503,701 1,713,820 Total deposits 6,904,570 6,512,846 6,222,556 6,125,547 5,799,945 Accounts payable and other liabilities 55,902 61,928 69,540 68,713 61,746 Advances from Federal Home Loan Bank 777,679 777,718 1,082,756 1,087,794 1,377,832 Subordinated debentures and subordinated notes 262,774 262,778 140,158 140,283 140,406 Securities sold under agreements to repurchase 2,777 2,225 2,028 1,772 2,426 Total liabilities 8,003,702 7,617,495 7,517,038 7,424,109 7,382,355 Commitments and contingencies Stockholders’ equity: Common stock 557 555 555 555 554 Additional paid-in capital 1,131,324 1,126,437 1,124,148 1,122,063 1,119,757 Retained earnings 195,661 172,232 157,639 143,277 127,812 Accumulated other comprehensive income 62,413 56,225 47,155 42,014 45,306 Treasury stock (156,147 ) (152,073 ) (144,160 ) (144,160 ) (144,160 ) Total stockholders’ equity 1,233,808 1,203,376 1,185,337 1,163,749 1,149,269 Total liabilities and stockholders’ equity $ 9,237,510 $ 8,820,871 $ 8,702,375 $ 8,587,858 $ 8,531,624 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands, except per share data)For the Three Months Ended Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Interest income: Loans, including fees $ 67,399 $ 69,597 $ 68,685 $ 70,440 $ 77,861 Debt securities 7,437 7,652 7,852 7,825 7,397 Deposits in financial institutions and Fed Funds sold 127 99 65 186 871 Equity securities and other investments 663 752 827 891 850 Total interest income 75,626 78,100 77,429 79,342 86,979 Interest expense: Transaction and savings deposits 1,980 2,105 2,105 2,471 6,552 Certificates and other time deposits 3,061 3,919 5,004 6,515 8,240 Advances from FHLB 1,812 2,222 2,707 2,801 2,879 Subordinated debentures and subordinated notes 3,138 3,088 1,743 1,798 1,903 Total interest expense 9,991 11,334 11,559 13,585 19,574 Net interest income 65,635 66,766 65,870 65,757 67,405 Provision for credit losses — — 8,692 16,172 31,776 (Benefit) provision for unfunded commitments (570 ) 902 1,447 2,799 3,881 Net interest income after provisions 66,205 65,864 55,731 46,786 31,748 Noninterest income: Service charges and fees on deposit accounts 3,629 3,971 3,130 2,960 3,642 Loan fees 1,341 684 1,787 1,240 845 (Loss) gain on sales of investment securities — (256 ) (8 ) 2,879 — Gain on sales of mortgage loans held for sale 507 317 472 308 142 Government guaranteed loan income, net 6,548 448 2,257 11,006 439 Other 2,147 3,848 2,157 2,897 2,014 Total noninterest income 14,172 9,012 9,795 21,290 7,247 Noninterest expense: Salaries and employee benefits 22,932 20,011 20,553 20,019 18,870 Occupancy and equipment 4,096 4,116 3,980 3,994 4,273 Professional and regulatory fees 3,441 3,578 3,159 2,796 2,196 Data processing and software expense 2,319 2,238 2,452 2,434 2,089 Marketing 909 945 1,062 561 1,083 Amortization of intangibles 2,537 2,558 2,840 2,696 2,696 Telephone and communications 337 340 345 308 319 COVID expenses — — 132 1,245 — Debt extinguishment costs — 9,746 — 1,561 — Other 3,026 3,841 1,885 4,447 4,019 Total noninterest expense 39,597 47,373 36,408 40,061 35,545 Income before income tax expense 40,780 27,503 29,118 28,015 3,450 Income tax expense (benefit) 8,993 4,702 6,198 3,987 (684 ) Net income $ 31,787 $ 22,801 $ 22,920 $ 24,028 $ 4,134 Basic EPS $ 0.64 $ 0.46 $ 0.46 $ 0.48 $ 0.08 Diluted EPS $ 0.64 $ 0.46 $ 0.46 $ 0.48 $ 0.08 Weighted average basic shares outstanding 49,394 49,571 49,647 49,597 50,725 Weighted average diluted shares outstanding 49,998 49,837 49,775 49,727 51,056 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands except percentages)For the Three Months Ended March 31, 2021 December 31, 2020 March 31, 2020 Average
Outstanding
BalanceInterest
Earned/
Interest
PaidAverage
Yield/
RateAverage
Outstanding
BalanceInterest
Earned/
Interest
PaidAverage
Yield/
RateAverage
Outstanding
BalanceInterest
Earned/
Interest
PaidAverage
Yield/
RateAssets Interest-earning assets: Loans1 $ 5,897,815 $ 62,702 4.31 % $ 5,798,692 $ 65,259 4.48 % $ 5,784,965 $ 76,527 5.32 % Loans held for investment, MW 510,678 3,815 3.03 446,027 3,355 2.99 163,646 1,334 3.28 PPP loans 356,356 882 1.00 390,509 983 1.00 — — — Debt securities 1,063,538 7,437 2.84 1,076,031 7,652 2.83 1,038,954 7,397 2.86 Interest-bearing deposits in other banks 341,483 127 0.15 258,687 99 0.15 308,546 871 1.14 Equity securities and other investments 87,178 663 3.08 95,706 752 3.13 91,917 850 3.72 Total interest-earning assets 8,257,048 75,626 3.71 8,065,652 78,100 3.85 7,388,028 86,979 4.74 Allowance for credit losses (105,972 ) (121,162 ) (44,270 ) Noninterest-earning assets 790,195 805,651 782,024 Total assets $ 8,941,271 $ 8,750,141 $ 8,125,782 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Interest-bearing demand and savings deposits $ 3,038,586 $ 1,980 0.26 % $ 2,862,084 $ 2,105 0.29 % $ 2,638,633 $ 6,552 1.00 % Certificates and other time deposits 1,509,836 3,061 0.82 1,467,250 3,919 1.06 1,650,678 8,240 2.01 Advances from FHLB 777,694 1,812 0.94 885,014 2,222 1.00 937,901 2,879 1.23 Subordinated debentures and subordinated notes 265,356 3,138 4.80 259,581 3,088 4.73 145,189 1,903 5.27 Total interest-bearing liabilities 5,591,472 9,991 0.72 5,473,929 11,334 0.82 5,372,401 19,574 1.47 Noninterest-bearing liabilities: Noninterest-bearing deposits 2,069,233 2,011,995 1,523,702 Other liabilities 56,272 67,943 46,563 Total liabilities 7,716,977 7,553,867 6,942,666 Stockholders’ equity 1,224,294 1,196,274 1,183,116 Total liabilities and stockholders’ equity $ 8,941,271 $ 8,750,141 $ 8,125,782 Net interest rate spread2 2.99 % 3.03 % 3.27 % Net interest income $ 65,635 $ 66,766 $ 67,405 Net interest margin3 3.22 % 3.29 % 3.67 % 1 Includes average outstanding balances of loans held for sale of $16,602, $11,938 and $10,995 for the three months ended March 31, 2021, December 31, 2020, and March 31, 2020, respectively, and average balances of loans held for investment, excluding mortgage warehouse and PPP loans.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial HighlightsYield Trend
For the Three Months Ended March 31, 2021 December 31,
2020September 30,
2020June 30,
2020March 31, 2020 Average yield on interest-earning assets: Loans1 4.31 % 4.48 % 4.49 % 4.68 % 5.32 % Loans held for investment, MW 3.03 2.99 3.00 3.01 3.28 PPP loans 1.00 1.00 1.00 1.00 — Debt securities 2.84 2.83 2.84 2.82 2.86 Interest-bearing deposits in other banks 0.15 0.15 0.15 0.20 1.14 Equity securities and other investments 3.08 3.13 3.17 3.24 3.72 Total interest-earning assets 3.71 % 3.85 % 3.90 % 3.99 % 4.74 % Average rate on interest-bearing liabilities: Interest-bearing demand and savings deposits 0.26 % 0.29 % 0.31 % 0.37 % 1.00 % Certificates and other time deposits 0.82 1.06 1.36 1.61 2.01 Advances from FHLB 0.94 1.00 1.01 0.93 1.23 Subordinated debentures and subordinated notes 4.80 4.73 4.87 5.07 5.27 Total interest-bearing liabilities 0.72 % 0.82 % 0.85 % 0.97 % 1.47 % Net interest rate spread2 2.99 % 3.03 % 3.05 % 3.02 % 3.27 % Net interest margin3 3.22 % 3.29 % 3.32 % 3.31 % 3.67 % 1 Includes average outstanding balances of loans held for sale of $16,602, $11,938, $15,404, $22,958 and $10,995 for the three months ended March 31, 2021, December 31, 2020, September 30, 2020, June 30, 2020 and March 31, 2020, respectively, and average balances of loans held for investment, excluding mortgage warehouse and PPP loans.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.Supplemental Yield Trend
For the Three Months Ended March 31, 2021 December 31,
2020September 30,
2020June 30,
2020March 31, 2020 Average cost of interest-bearing deposits 0.45 % 0.55 % 0.67 % 0.84 % 1.37 % Average costs of total deposits, including noninterest-bearing 0.31 0.38 0.46 0.59 1.02 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands except percentages)Total LHI and Deposit Portfolio Composition
March 31, 2021 December 31,
2020September 30,
2020June 30,
2020March 31, 2020 (Dollars in thousands) LHI1 Commercial $ 1,632,040 27.4 % $ 1,559,546 26.7 % $ 1,623,249 28.0 % $ 1,555,300 27.2 % $ 1,777,603 30.4 % Real Estate: Owner occupied commercial 733,310 12.3 717,472 12.3 734,939 12.7 769,952 13.4 723,839 12.4 Commercial 1,970,945 33.0 1,904,132 32.5 1,817,013 31.4 1,847,480 32.3 1,828,386 31.2 Construction and land 723,444 12.1 693,030 11.8 623,496 10.8 599,510 10.5 566,470 9.7 Farmland 14,751 0.2 13,844 0.2 14,413 0.2 14,723 0.3 14,930 0.3 1-4 family residential 492,609 8.3 524,344 9.0 548,953 9.5 528,688 9.2 536,892 9.2 Multi-family residential 386,844 6.5 424,962 7.3 412,412 7.1 394,829 6.8 388,374 6.7 Consumer 12,431 0.2 13,000 0.2 14,127 0.1 14,932 0.3 15,771 0.3 Total LHI $ 5,966,374 100 % $ 5,850,330 100 % $ 5,788,602 100 % $ 5,725,414 100 % $ 5,852,265 100 % MW 599,001 577,594 544,845 441,992 373,161 PPP loans 407,353 358,042 405,465 398,949 — Total LHI1 $ 6,972,728 $ 6,785,966 $ 6,738,912 $ 6,566,355 $ 6,225,426 Deposits Noninterest-bearing $ 2,171,719 31.6 % $ 2,097,099 32.3 % $ 1,920,715 30.9 % $ 1,907,697 31.1 % $ 1,549,260 26.7 % Interest-bearing transaction 463,343 6.7 453,110 7.0 450,739 7.2 343,640 5.6 306,641 5.3 Money market 2,602,903 37.7 2,398,526 36.8 2,267,191 36.4 2,272,520 37.1 2,143,874 37.0 Savings 123,447 1.8 106,820 1.6 104,015 1.7 97,989 1.6 86,350 1.5 Certificates and other time deposits 1,543,158 22.2 1,457,291 22.4 1,479,896 23.7 1,503,701 24.5 1,713,820 29.6 Total deposits $ 6,904,570 100 % $ 6,512,846 100 % $ 6,222,556 100 % $ 6,125,547 100 % $ 5,799,945 100 % Loan to Deposit Ratio 101.0 % 104.2 % 108.3 % 107.2 % 107.3 % Loan to Deposit Ratio, excluding MW and PPP loans 86.4 % 89.8 % 93.0 % 93.5 % 100.9 % 1 Total LHI does not include deferred fees of $2.9 million, $2.5 million, and $691 thousand at March 31, 2021, December 31, 2020 and September 30, 2020, respectively, deferred costs of $1.5 million and $1.5 million at June 30, 2020 and March 31, 2020, respectively.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands except percentages)Asset Quality
For the Three Months Ended Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 (Dollars in thousands) Nonperforming Assets (“NPAs”): Nonaccrual loans $ 73,594 $ 81,096 $ 88,877 $ 43,594 $ 38,836 Accruing loans 90 or more days past due1 9,093 4,204 1,689 2,021 4,764 Total nonperforming loans held for investment (“NPLs”) 82,687 85,300 90,566 45,615 43,600 OREO 2,337 2,337 5,796 7,716 7,720 Total NPAs $ 85,024 $ 87,637 $ 96,362 $ 53,331 $ 51,320 Charge-offs: Residential $ (15 ) $ (18 ) $ — $ — $ — Owner occupied commercial real estate — — (2,421 ) — — Nonowner occupied commercial real estate — (2,865 ) — — — Commercial (346 ) (13,699 ) (68 ) (1,740 ) — Consumer (18 ) (26 ) (11 ) (57 ) (68 ) Total charge-offs (379 ) (16,608 ) (2,500 ) (1,797 ) (68 ) Recoveries: Residential 3 49 7 — 1 Commercial 226 52 14 7 29 Consumer 2 — 13 — 274 Total recoveries 231 101 34 7 304 Net charge-offs $ (148 ) $ (16,507 ) $ (2,466 ) $ (1,790 ) $ 236 CECL transition adjustment $ — $ — $ — $ — $ 39,137 Allowance for credit losses (“ACL”) at end of period $ 104,936 $ 105,084 $ 121,591 $ 115,365 $ 100,983 Asset Quality Ratios: NPAs to total assets 0.92 % 0.99 % 1.11 % 0.62 % 0.60 % NPLs to total LHI, excluding MW and PPP loans 1.39 1.46 1.56 0.80 0.75 ACL to total LHI, excluding MW and PPP loans 1.76 1.80 2.10 2.01 1.73 Net charge-offs to average loans outstanding — 0.28 0.04 0.03 — 1 Accruing loans greater than 90 days past due exclude purchase credit deteriorated loans greater than 90 days past due that are accounted for on a pooled basis.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)We identify certain financial measures discussed in this earnings release as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles as in effect from time to time in the United States (“GAAP”), in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios calculated using exclusively either one or both of (i) financial measures calculated in accordance with GAAP and (ii) operating measures or other measures that are not non-GAAP financial measures.
The non-GAAP financial measures that we present in this earnings release should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we present in this earnings release may differ from that of other companies reporting measures with similar names. You should understand how such other financial institutions calculate their financial measures that appear to be similar or have similar names to the non-GAAP financial measures we have discussed in this earnings release when comparing such non-GAAP financial measures.
Tangible Book Value Per Common Share. Tangible book value is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total stockholders’ equity less goodwill and core deposit intangibles, net of accumulated amortization; and (b) tangible book value per common share as tangible common equity (as described in clause (a)) divided by number of common shares outstanding. For tangible book value per common share, the most directly comparable financial measure calculated in accordance with GAAP is book value per common share.
We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in core deposit intangibles. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.
The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and presents our tangible book value per common share compared with our book value per common share:
As of Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 (Dollars in thousands, except per share data) Tangible Common Equity Total stockholders' equity $ 1,233,808 $ 1,203,376 $ 1,185,337 $ 1,163,749 $ 1,149,269 Adjustments: Goodwill (370,840 ) (370,840 ) (370,840 ) (370,840 ) (370,840 ) Core deposit intangibles (55,311 ) (57,758 ) (60,209 ) (62,661 ) (65,112 ) Tangible common equity $ 807,657 $ 774,778 $ 754,288 $ 730,248 $ 713,317 Common shares outstanding 49,433 49,340 49,650 49,633 49,557 Book value per common share $ 24.96 $ 24.39 $ 23.87 $ 23.45 $ 23.19 Tangible book value per common share $ 16.34 $ 15.70 $ 15.19 $ 14.71 $ 14.39 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)Tangible Common Equity to Tangible Assets. Tangible common equity to tangible assets is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total stockholders’ equity, less goodwill and core deposit intangibles, net of accumulated amortization; (b) tangible assets as total assets less goodwill and core deposit intangibles, net of accumulated amortization; and (c) tangible common equity to tangible assets as tangible common equity (as described in clause (a)) divided by tangible assets (as described in clause (b)). For tangible common equity to tangible assets, the most directly comparable financial measure calculated in accordance with GAAP is total stockholders’ equity to total assets.
We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, in each case, exclusive of changes in core deposit intangibles. Goodwill and other intangible assets have the effect of increasing both total stockholders’ equity and assets while not increasing our tangible common equity or tangible assets.
The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and total assets to tangible assets and presents our tangible common equity to tangible assets:
As of Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 (Dollars in thousands) Tangible Common Equity Total stockholders' equity $ 1,233,808 $ 1,203,376 $ 1,185,337 $ 1,163,749 $ 1,149,269 Adjustments: Goodwill (370,840 ) (370,840 ) (370,840 ) (370,840 ) (370,840 ) Core deposit intangibles (55,311 ) (57,758 ) (60,209 ) (62,661 ) (65,112 ) Tangible common equity $ 807,657 $ 774,778 $ 754,288 $ 730,248 $ 713,317 Tangible Assets Total assets $ 9,237,510 $ 8,820,871 $ 8,702,375 $ 8,587,858 $ 8,531,624 Adjustments: Goodwill (370,840 ) (370,840 ) (370,840 ) (370,840 ) (370,840 ) Core deposit intangibles (55,311 ) (57,758 ) (60,209 ) (62,661 ) (65,112 ) Tangible Assets $ 8,811,359 $ 8,392,273 $ 8,271,326 $ 8,154,357 $ 8,095,672 Tangible Common Equity to Tangible Assets 9.17 % 9.23 % 9.12 % 8.96 % 8.81 % VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)Return on Average Tangible Common Equity. Return on average tangible common equity is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) net income available for common stockholders adjusted for amortization of core deposit intangibles (which we refer to as “return”) as net income, plus amortization of core deposit intangibles, less tax benefit at the statutory rate; (b) average tangible common equity as total average stockholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization; and (c) return (as described in clause (a)) divided by average tangible common equity (as described in clause (b)). For return on average tangible common equity, the most directly comparable financial measure calculated in accordance with GAAP is return on average equity.
We believe that this measure is important to many investors in the marketplace who are interested in the return on common equity, exclusive of the impact of core deposit intangibles. Goodwill and core deposit intangibles have the effect of increasing total stockholders’ equity while not increasing our tangible common equity. This measure is particularly relevant to acquisitive institutions that may have higher balances in goodwill and core deposit intangibles than non-acquisitive institutions.
The following table reconciles, as of the dates set forth below, average tangible common equity to average common equity and net income available for common stockholders adjusted for amortization of core deposit intangibles, net of taxes to net income and presents our return on average tangible common equity:
For the Three Months Ended Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 (Dollars in thousands) Net income available for common stockholders adjusted for amortization of core deposit intangibles Net income $ 31,787 $ 22,801 $ 22,920 $ 24,028 $ 4,134 Adjustments: Plus: Amortization of core deposit intangibles 2,447 2,451 2,451 2,451 2,451 Less: Tax benefit at the statutory rate 514 515 515 515 515 Net income available for common stockholders adjusted for amortization of core deposit intangibles $ 33,720 $ 24,737 $ 24,856 $ 25,964 $ 6,070 Average Tangible Common Equity Total average stockholders' equity $ 1,224,294 $ 1,196,274 $ 1,177,882 $ 1,155,798 $ 1,183,116 Adjustments: Average goodwill (370,840 ) (370,840 ) (370,840 ) (370,840 ) (370,840 ) Average core deposit intangibles (56,913 ) (59,010 ) (61,666 ) (64,151 ) (66,439 ) Average tangible common equity $ 796,541 $ 766,424 $ 745,376 $ 720,807 $ 745,837 Return on Average Tangible Common Equity (Annualized) 17.17 % 12.84 % 13.27 % 14.49 % 3.27 % VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)Operating Earnings, Pre-tax, Pre-provision Operating Earnings and performance metrics calculated using Operating Earnings and Pre-tax, Pre-provision Operating Earnings, including Diluted Operating Earnings per Share, Operating Return on Average Assets, Pre-tax, Pre-Provision Operating Return on Average Assets, Operating Return on Average Tangible Common Equity and Operating Efficiency Ratio. Operating earnings, pre-tax, pre-provision operating earnings and the performance metrics calculated using these metrics, listed below, are non-GAAP measures used by management to evaluate the Company’s financial performance. We calculate (a) operating earnings as net income plus loss (gain) on sale of securities, net, plus loss (gain) on sale of disposed branch assets, plus FHLB pre-payment fees, plus merger and acquisition expenses, less tax impact of adjustments, plus other merger and acquisition tax items, plus re-measurement of deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. We calculate (b) diluted operating earnings per share as operating earnings as described in clause (a) divided by weighted average diluted shares outstanding. We calculate (c) pre-tax, pre-provision operating earnings as operating earnings as described in clause (a) plus provision for income taxes, plus provision for loan losses. We calculate (d) pre-tax, pre-provision operating return on average assets as pre-tax, pre-provision operating earnings as described in clause (a) divided by average total assets. We calculate (e) operating return on average assets as operating earnings as described in clause (a) divided by average total assets. We calculate (f) operating return on average tangible common equity as operating earnings as described in clause (a), adjusted for the amortization of intangibles and tax benefit at the statutory rate, divided by total average tangible common equity (average stockholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization). We calculate (g) operating efficiency ratio as non interest expense plus adjustments to operating non interest expense divided by (i) non interest income plus adjustments to operating non interest income plus (ii) net interest income.
We believe that these measures and the operating metrics calculated utilizing these measures are important to management and many investors in the marketplace who are interested in understanding the ongoing operating performance of the Company and provide meaningful comparisons to its peers.
The following tables reconcile, as of the dates set forth below, operating net income and pre-tax, pre-provision operating earnings and related metrics:
For the Three Months Ended Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 (Dollars in thousands) Operating Earnings Net income $ 31,787 $ 22,801 $ 22,920 $ 24,028 $ 4,134 Plus: Loss (gain) on sale of securities available for sale, net — 256 8 (2,879 ) — Plus: Debt extinguishment costs1 — 9,746 — 1,561 — Operating pre-tax income 31,787 32,803 22,928 22,710 4,134 Less: Tax impact of adjustments — 2,100 — (277 ) — Plus: Nonrecurring tax adjustments2 426 (973 ) — (1,799 ) — Operating earnings $ 32,213 $ 29,730 $ 22,928 $ 21,188 $ 4,134 Weighted average diluted shares outstanding 49,998 49,837 49,775 49,727 51,056 Diluted EPS $ 0.64 $ 0.46 $ 0.46 $ 0.48 $ 0.08 Diluted operating EPS 0.64 0.60 0.46 0.43 0.08 1 Debt extinguishment costs relate to prepayment penalties paid in connection with the early payoff of FHLB structured advances.
2 A nonrecurring tax adjustment of $426 thousand recorded in the first quarter of 2021 was due to a true-up of a deferred tax liability. A nonrecurring tax adjustment of $973 thousand recorded in the fourth quarter of 2020 was primarily due the reversal of acquired deferred tax liabilities resulting in a tax benefit of $1.2 million offset by tax expense of $281 thousand for the setup of an uncertain tax position liability relating to state tax exposure for tax years prior to the year ending December 31, 2020. A nonrecurring tax adjustment of $1,799 was recorded in the second quarter of 2020 as a result of the Company amending a prior year Green tax return to carry back a net operating loss ("NOL") incurred by Green on January 1, 2019. The Company was allowed to carry back this NOL as result of a provision in the CARES Act which permits NOLs generated in tax years 2018, 2019 or 2020 to be carried back five years.For the Three Months Ended Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 (Dollars in thousands) Pre-Tax, Pre-Provision Operating Earnings Net income $ 31,787 $ 22,801 $ 22,920 $ 24,028 $ 4,134 Plus: Provision (benefit) for income taxes 8,993 4,702 6,198 3,987 (684 ) Pus: (Benefit) provision for credit losses and unfunded commitments (570 ) 902 10,139 18,971 35,657 Plus: Loss (gain) on sale of securities, net — 256 8 (2,879 ) — Plus: Merger and acquisition expenses — — — — — Pre-tax, pre-provision operating earnings $ 40,210 $ 38,407 $ 39,265 $ 45,668 $ 39,107 Average total assets $ 8,941,271 $ 8,750,141 $ 8,585,926 $ 8,689,774 $ 8,125,782 Pre-tax, pre-provision operating return on average assets1 1.82 % 1.75 % 1.82 % 2.11 % 1.94 % Average total assets $ 8,941,271 $ 8,750,141 $ 8,585,926 $ 8,689,774 $ 8,125,782 Return on average assets1 1.44 % 1.04 % 1.06 % 1.11 % 0.20 % Operating return on average assets1 1.46 1.35 1.06 0.98 0.20 Operating earnings adjusted for amortization of core deposit intangibles Operating earnings $ 32,213 $ 29,730 $ 22,928 $ 21,188 $ 4,134 Adjustments: Plus: Amortization of core deposit intangibles 2,447 2,451 2,451 2,451 2,451 Less: Tax benefit at the statutory rate 514 515 515 515 515 Operating earnings adjusted for amortization of core deposit intangibles $ 34,146 $ 31,666 $ 24,864 $ 23,124 $ 6,070 Average Tangible Common Equity Total average stockholders' equity $ 1,224,294 $ 1,196,274 $ 1,177,882 $ 1,155,798 $ 1,183,116 Adjustments: Less: Average goodwill (370,840 ) (370,840 ) (370,840 ) (370,840 ) (370,840 ) Less: Average core deposit intangibles (56,913 ) (59,010 ) (61,666 ) (64,151 ) (66,439 ) Average tangible common equity $ 796,541 $ 766,424 $ 745,376 $ 720,807 $ 745,837 Operating return on average tangible common equity1 17.39 % 16.44 % 13.27 % 12.90 % 3.27 % Efficiency ratio 49.62 % 62.52 % 48.12 % 46.02 % 47.61 % Operating efficiency ratio 49.62 % 49.49 % 48.11 % 45.74 % 47.61 % 1 Annualized ratio.
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