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Veritex Holdings, Inc. Reports Second Quarter 2024 Operating Results
Source: Nasdaq GlobeNewswire / 23 Jul 2024 16:00:01 America/Chicago
DALLAS, July 23, 2024 (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 June 30, 2024.
“We are pleased with the second quarter results, highlighted by improved credit quality, stabilized NIM and continued repositioning of our balance sheet,” said C. Malcolm Holland, III, the Company’s Chairman and Chief Executive Officer. “Our LDR, excluding mortgage warehouse, dropped below 86%, we built capital and continue to execute on our strategic plan.”
Quarter to Date Year to Date Financial Highlights Q2 2024 Q1 2024 Q2 2024 Q2 2023 (Dollars in thousands, except per share data)
(unaudited)GAAP Net income $ 27,202 $ 24,156 $ 51,358 $ 72,141 Diluted EPS 0.50 0.44 0.94 1.32 Book value per common share 28.49 28.23 28.49 27.48 Return on average assets1 0.87 % 0.79 % 0.83 % 1.18 % Return on average equity1 7.10 6.33 6.72 9.74 Net interest margin 3.29 3.24 3.27 3.60 Efficiency ratio 59.11 62.45 60.72 49.17 Non-GAAP2 Operating earnings $ 28,310 $ 29,137 $ 57,447 $ 77,947 Diluted operating EPS 0.52 0.53 1.05 1.43 Tangible book value per common share 20.62 20.33 20.62 19.41 Pre-tax, pre-provision operating earnings 44,420 43,656 88,076 124,981 Pre-tax, pre-provision operating return on average assets1 1.42 % 1.42 % 1.42 % 2.05 % Pre-tax, pre-provision operating return on average loans1 1.83 1.84 1.83 2.63 Operating return on average assets1 0.91 0.95 0.93 1.28 Return on average tangible common equity1 10.54 9.52 10.03 14.55 Operating return on average tangible common equity1 10.94 11.34 11.14 15.66 Operating efficiency ratio 58.41 58.73 58.57 47.21 1 Annualized ratio.
2 Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of these non-generally accepted accounting principles (“GAAP”) financial measures to their most directly comparable GAAP measures.
Other Second Quarter Financial, Credit and Company Highlights- Pre-tax, pre-provision operating return on average assets was 1.42% as of June 30, 2024;
- Nonperforming assets (“NPAs”) decreased 17 bps from the prior quarter to 0.65% of total assets;
- Net interest margin (“NIM”) increased to 3.29%, a 5 bps improvement from the prior quarter;
- Common equity tier 1 capital grew 12 bps from the prior quarter to 10.49%;
- Total deposits grew $71.0 million, or 2.67% annualized, compared to March 31, 2024;
- Total loans grew $70.3 million, or 2.88% annualized, compared to March 31, 2024;
- Loan to deposit ratio, excluding mortgage warehouse loans, decreased to 85.9% as of June 30, 2024 compared to 86.9% as of March 31, 2024 and 100.4% as of June 30, 2023;
- Tangible book value per common share increased to $20.62;
- Allowance for credit losses (“ACL”) to total loans held for investment (“LHI”) increased to 1.16%, compared to 1.15% as of March 31, 2024 and 1.05% as of June 30, 2023;
- Named one of the “Best Companies to Work For”, “Best in Banking” and “Best Companies in the South” by the 2024 - 2025 U.S. News & World Report which evaluates companies based on quality of pay, work/life balance, and opportunities for professional development and advancement; and
- Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on August 23, 2024.
Results of Operations for the Three Months Ended June 30, 2024
Net Interest Income
For the three months ended June 30, 2024, net interest income before provision for credit losses was $96.2 million and net interest margin was 3.29% compared to $92.8 million and 3.24%, respectively, for the three months ended March 31, 2024. The $3.4 million increase, or 3.7%, in net interest income before provision for credit losses was primarily due to a $5.0 million increase in interest income on loans driven by an increase in loan yields, a $1.7 million increase in interest income on debt securities and other investments and a $1.2 million decrease in interest expense on transaction and savings deposits. The increase in net interest income was partially offset by a $4.3 million increase in interest expense on certificates and other time deposits, during the three months ended June 30, 2024. NIM increased 5 bps compared to the three months ended March 31, 2024, primarily due to an increase in loan yields during the three months ended June 30, 2024, partially offset by an increase in rates on certificates and other time deposits.
Compared to the three months ended June 30, 2023, net interest income before provision for credit losses for the three months ended June 30, 2024 decreased by $4.6 million, or 4.6%. The decrease was primarily due to a $16.7 million increase in interest expense on certificates and other time deposits and a $12.7 million increase in interest expense on transaction and savings deposits. The decrease was partially offset by a $16.1 million decrease in interest expense on advances from the Federal Home Loan Bank (“FHLB”), a $5.2 million increase in interest income on debt securities and a $3.3 million increase in interest income on loans driven by an increase in loan yields and average balances. NIM decreased 22 bps from 3.51% for the three months ended June 30, 2023. The decrease was primarily due to the increase in funding costs on deposits during the three months ended June 30, 2024, partially offset by an increase in loan yields and debt securities.
Noninterest Income
Noninterest income for the three months ended June 30, 2024 was $10.6 million, an increase of $3.9 million, or 58.8%, compared to the three months ended March 31, 2024. The increase was primarily due to a $6.3 million loss on sales of investment securities in the prior quarter as a result of a strategic restructuring, in which we sold $120.1 million of lower-yielding available for sale (“AFS”) securities, at amortized cost, with a 3.11% average yield, and reinvested the proceeds in higher yielding AFS securities with a 6.24% average yield, which occurred in March of 2024, with no corresponding transaction in the three months ended June 30, 2024. The increase was partially offset by a $1.3 million decrease in government guaranteed loan income, primarily driven by a decrease in the Company’s SBA and USDA sales, a $746 thousand decrease in other income and a $303 thousand decrease in loan fees.
Compared to the three months ended June 30, 2023, noninterest income for the three months ended June 30, 2024 decreased by $3.1 million, or 22.7%. The decrease was primarily due to a $2.8 million decrease in government guaranteed loan income, primarily driven by a decrease in the Company’s USDA sales, a $657 thousand decrease in customer swap income and a $485 thousand decrease in equity method investment income. Additionally, the decrease was related to a $298 thousand decrease in service charges and fees on deposit accounts. The decrease was partially offset by a $687 thousand increase in loan fees and a $463 thousand increase in other income.
Noninterest Expense
Noninterest expense was $63.1 million for the three months ended June 30, 2024, compared to $62.1 million for the three months ended March 31, 2024, an increase of $1.0 million, or 1.7%. The increase was primarily due to a $1.4 million increase in other noninterest expense, a $430 thousand increase in marketing expenses and a $241 thousand increase in data processing and software expense. The increase is partially offset by a $575 thousand decrease in salaries and employee benefits and a decrease of $436 thousand in professional and regulatory fees driven by FDIC insurance assessment expense, which decreased $203 thousand compared to the three months ended March 31, 2024.
Compared to the three months ended June 30, 2023, noninterest expense for the three months ended June 30, 2024 increased by $5.9 million, or 10.4%. The increase was primarily due to a $4.1 million increase in salaries and employee benefits and a $3.6 million increase in other noninterest expense. The increase was partially offset by a $1.3 million decrease in professional and regulatory fees driven by FDIC insurance assessment expense, which decreased $937 thousand compared to the three months ended June 30, 2023 and a $651 thousand decrease in marketing expense.
Financial Condition
Total LHI was $9.21 billion at June 30, 2024, a decrease of $40.5 million, or 1.7% annualized, compared to March 31, 2024.
Total deposits were $10.72 billion at June 30, 2024, an increase of $71.0 million, or 2.7% annualized, compared to March 31, 2024. The increase was primarily the result of an increase of $257.8 million in certificates and other time deposits and an increase of $67.5 million in noninterest-bearing deposits. The increase was partially offset by a decrease of $13.6 million in correspondent money market account balances and a decrease of $240.7 million in interest-bearing transaction and savings deposits.
Credit Quality
NPAs totaled $83.0 million, or 0.65% of total assets, of which $58.8 million represents LHI and $24.3 million represents other real estate owned (“OREO”) at June 30, 2024, compared to $103.8 million, or 0.82% of total assets, at March 31, 2024. The Company had net charge-offs of $6.9 million for the three months ended June 30, 2024. Annualized net charge-offs to average loans outstanding were 28 bps, of which 16 bps were acquired credits, for the three months ended June 30, 2024, compared to 22 bps and 48 bps for the three months ended March 31, 2024 and June 30, 2023, respectively.
ACL as a percentage of LHI was 1.16%, 1.15% and 1.05% at June 30, 2024, March 31, 2024 and June 30, 2023, respectively. The Company recorded a provision for credit losses of $8.3 million, $7.5 million and $15.0 million for the three months ended June 30, 2024, March 31, 2024 and June 30, 2023, respectively. The recorded provision for credit losses for the three months ended June 30, 2024, compared to the three months ended March 31, 2024, was primarily attributable to an increase in general reserves as a result of changes in economic factors. As the balance for unfunded commitments for the three months ended June 30, 2024 remained stable compared to the three months ended March 31, 2024, the Company recorded no benefit or provision for unfunded commitments for the three months ended June 30, 2024. The Company recorded a $1.5 million and a $1.1 million benefit for unfunded commitments for the three months ended March 31, 2024, and June 30, 2023, respectively.
Income Tax
Income tax expense for the three months ended June 30, 2024 totaled $8.2 million, an increase of $1.0 million, or 13.6%, compared to the three months ended March 31, 2024. The Company’s effective tax rate was approximately 23.2% for the three months ended June 30, 2024. The increase was primarily due to an one-time tax expense of $527 thousand, which is excluded from operating earnings, and a net discrete tax expense of $410 thousand associated with the recognition of an excess tax expense realized on share-based payment awards.
Dividend Information
After the close of the market on Tuesday, July 23, 2024, Veritex’s Board of Directors declared a quarterly cash dividend of $0.20 per share on its outstanding shares of common stock. The dividend will be paid on or after August 23, 2024 to stockholders of record as of the close of business on August 9, 2024.
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 of the Company; operating earnings; tangible common equity to tangible assets; return on average tangible common equity; pre-tax, pre-provision operating earnings; pre-tax, pre-provision operating return on average assets; pre-tax, pre-provision operating return on average loans; diluted operating earnings per share; operating return on average assets; operating return on average tangible common equity; and operating efficiency ratio. Veritex has included in this earnings release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to “Reconciliation of Non-GAAP Financial Measures” after the financial highlights at the end of this earnings release for a reconciliation of these non-GAAP financial measures.
Conference Call
The Company will host an investor conference call and webcast to review the results on Wednesday, July 24, 2024, at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/kp9m28ir and will receive a unique PIN, which can be used when dialing in for the call.
Participants may also register via teleconference: https://register.vevent.com/register/BIc18141b3387848439444d3060b38d779. Once registration is completed, participants will be provided with a dial-in number containing a personalized conference code to access the call. All participants are instructed to dial-in 15 minutes prior to the start time.
A replay will be available within approximately two hours after the completion of the call, and made accessible for one week thereafter. You may access the replay via webcast through the investor relations section of Veritex’s website.
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.
Media and Investor Relations:
investorrelations@veritexbank.comForward-Looking Statements
This earnings release includes “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors, which change over time and are beyond our control, that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, statements relating to the expected payment of Veritex Holdings, Inc.’s (“Veritex”) quarterly cash dividend; the impact of certain changes in Veritex’s accounting policies, standards and interpretations; turmoil in the banking industry, responsive measures to mitigate and manage such turmoil and related supervisory and regulatory actions and costs; and Veritex’s future financial performance, business and growth strategy, projected plans and objectives, as well as other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact broader economic and industry trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “seeks,” “targets,” “outlooks,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Veritex’s Annual Report on Form 10-K for the year ended December 31, 2023 and any updates to those risk factors set forth in Veritex’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov. If one or more events related to these or other risks or uncertainties materialize, or if Veritex’s underlying assumptions prove to be incorrect, actual results may differ materially from what Veritex anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. Veritex does not undertake any obligation, and specifically declines any obligation, to supplement, update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law. All forward-looking statements, expressed or implied, included in this earnings release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Veritex or persons acting on Veritex’s behalf may issue.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)For the Quarter Ended For the Six Months Ended Jun 30,
2024Mar 31,
2024Dec 31,
2023Sep 30,
2023Jun 30,
2023Jun 30,
2024Jun 30,
2023(Dollars and shares in thousands, except per share data) Per Share Data (Common Stock): Basic EPS $ 0.50 $ 0.44 $ 0.06 $ 0.60 $ 0.62 $ 0.94 $ 1.33 Diluted EPS 0.50 0.44 0.06 0.60 0.62 0.94 1.32 Book value per common share 28.49 28.23 28.18 27.46 27.48 28.49 27.48 Tangible book value per common share1 20.62 20.33 20.21 19.44 19.41 20.62 19.41 Dividends paid per common share outstanding2 0.20 0.20 0.20 0.20 0.20 0.40 0.40 Common Stock Data: Shares outstanding at period end 54,350 54,496 54,338 54,305 54,261 54,350 54,261 Weighted average basic shares outstanding for the period 54,457 54,444 54,327 54,300 54,247 54,451 54,199 Weighted average diluted shares outstanding for the period 54,823 54,842 54,691 54,597 54,486 54,832 54,546 Summary of Credit Ratios: ACL to total LHI 1.16 % 1.15 % 1.14 % 1.14 % 1.05 % 1.16 % 1.05 % NPAs to total assets 0.65 0.82 0.77 0.65 0.55 0.65 0.55 NPAs to total loans and OREO 0.85 1.06 0.99 0.83 0.70 0.85 0.70 Net charge-offs to average loans outstanding4 0.28 0.22 0.40 0.08 0.48 0.25 0.26 Summary Performance Ratios: Return on average assets4 0.87 % 0.79 % 0.11 % 1.06 % 1.10 % 0.83 % 1.18 % Return on average equity4 7.10 6.33 0.92 8.58 8.96 6.72 9.74 Return on average tangible common equity1, 4 10.54 9.52 2.00 12.80 13.35 10.03 14.55 Efficiency ratio 59.11 62.45 77.49 54.49 49.94 60.72 49.17 Net interest margin 3.29 3.24 3.31 3.46 3.51 3.27 3.60 Selected Performance Metrics - Operating: Diluted operating EPS1 $ 0.52 $ 0.53 $ 0.58 $ 0.60 $ 0.64 $ 1.05 $ 1.43 Pre-tax, pre-provision operating return on average assets1, 4 1.42 % 1.42 % 1.54 % 1.61 % 1.90 % 1.42 % 2.05 % Pre-tax, pre-provision operating return on average loans1, 4 1.83 1.84 1.97 2.05 2.43 1.83 2.63 Operating return on average assets1,4 0.91 0.95 1.02 1.06 1.13 0.93 1.28 Operating return on average tangible common equity1,4 10.94 11.34 12.37 12.80 13.70 11.14 15.66 Operating efficiency ratio1 58.41 58.73 55.50 54.49 48.90 58.57 47.21 Veritex Holdings, Inc. Capital Ratios: Average stockholders' equity to average total assets 12.26 % 12.43 % 12.27 % 12.30 % 12.23 % 12.34 % 12.16 % Tangible common equity to tangible assets1 9.14 9.02 9.18 8.86 8.76 9.14 8.76 Tier 1 capital to average assets (leverage) 10.06 10.12 10.03 10.10 9.80 10.06 9.80 Common equity tier 1 capital 10.49 10.37 10.29 10.11 9.76 10.49 9.76 Tier 1 capital to risk-weighted assets 10.75 10.63 10.56 10.37 10.01 10.75 10.01 Total capital to risk-weighted assets 13.45 13.33 13.18 12.95 12.51 13.45 12.51 Risk weighted assets $ 11,450,997 $ 11,407,446 $ 11,387,825 $ 11,617,229 $ 11,742,321 $ 11,450,997 $ 11,742,321 1Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” after the financial highlights for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.
2Dividend amount represents dividend paid per common share subsequent to each respective quarter end.
3Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 Financial Instruments - Credit Losses and were accounted for on a pooled basis that have subsequently been placed on nonaccrual status.
4Annualized ratio for quarterly metrics.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands)Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 (unaudited) (unaudited) (unaudited) (unaudited) ASSETS Cash and cash equivalents $ 651,837 $ 740,769 $ 629,063 $ 713,408 $ 663,921 Debt securities, net 1,349,354 1,344,930 1,257,042 1,060,629 1,144,020 Other investments 75,885 76,788 76,238 80,869 138,894 Loans held for sale (“LHFS”) 57,046 64,762 79,072 41,313 29,876 LHI, mortgage warehouse (“MW”) 568,047 449,531 377,796 390,767 436,255 LHI, excluding MW 9,209,094 9,249,551 9,206,544 9,237,447 9,257,183 Total loans 9,834,187 9,763,844 9,663,412 9,669,527 9,723,314 ACL (113,431 ) (112,032 ) (109,816 ) (109,831 ) (102,150 ) Bank-owned life insurance 84,233 85,359 84,833 84,867 84,375 Bank premises, furniture and equipment, net 105,222 105,299 105,727 106,118 105,986 Other real estate owned (“OREO”) 24,256 18,445 — — — Intangible assets, net of accumulated amortization 35,817 38,679 41,753 44,294 48,293 Goodwill 404,452 404,452 404,452 404,452 404,452 Other assets 232,518 241,863 241,633 291,998 259,263 Total assets $ 12,684,330 $ 12,708,396 $ 12,394,337 $ 12,346,331 $ 12,470,368 LIABILITIES AND STOCKHOLDERS’ EQUITY Deposits: Noninterest-bearing deposits $ 2,416,727 $ 2,349,211 $ 2,218,036 $ 2,363,340 $ 2,234,109 Interest-bearing transaction and savings deposits 3,979,454 4,220,114 4,348,385 3,936,070 3,590,253 Certificates and other time deposits 3,744,596 3,486,805 3,191,737 3,403,427 2,928,949 Correspondent money market deposits 584,067 597,690 580,037 493,681 480,598 Total deposits 10,724,844 10,653,820 10,338,195 10,196,518 9,233,909 Accounts payable and other liabilities 180,585 186,027 195,036 229,116 190,900 Advances from FHLB — 100,000 100,000 200,000 1,325,000 Subordinated debentures and subordinated notes 230,285 230,034 229,783 229,531 229,279 Total liabilities 11,135,714 11,169,881 10,863,014 10,855,165 10,979,088 Commitments and contingencies Stockholders’ equity: Common stock 612 611 610 609 609 Additional paid-in capital 1,321,995 1,319,144 1,317,516 1,314,459 1,311,687 Retained earnings 473,801 457,499 444,242 451,513 429,753 Accumulated other comprehensive loss (76,713 ) (71,157 ) (63,463 ) (107,833 ) (83,187 ) Treasury stock (171,079 ) (167,582 ) (167,582 ) (167,582 ) (167,582 ) Total stockholders’ equity 1,548,616 1,538,515 1,531,323 1,491,166 1,491,280 Total liabilities and stockholders’ equity $ 12,684,330 $ 12,708,396 $ 12,394,337 $ 12,346,331 $ 12,470,368
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands, except per share data)For the Quarter Ended For the Six Months Ended Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Jun 30, 2024 Jun 30, 2023 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Interest income: Loans, including fees $ 166,979 $ 161,942 $ 165,443 $ 167,368 $ 163,727 $ 328,921 $ 315,434 Debt securities 15,408 13,695 12,282 10,928 10,166 29,103 21,154 Deposits in financial institutions and Fed Funds sold 7,722 8,050 8,162 7,128 7,507 15,772 13,041 Equity securities and other investments 1,138 900 1,717 1,691 1,118 2,038 2,526 Total interest income 191,247 184,587 187,604 187,115 182,518 375,834 352,155 Interest expense: Transaction and savings deposits 45,619 46,784 46,225 39,936 32,957 92,403 62,814 Certificates and other time deposits 44,811 40,492 40,165 36,177 28,100 85,303 49,067 Advances from FHLB 1,468 1,391 2,581 8,523 17,562 2,859 29,920 Subordinated debentures and subordinated notes 3,113 3,114 3,100 3,118 3,068 6,227 6,134 Total interest expense 95,011 91,781 92,071 87,754 81,687 186,792 147,935 Net interest income 96,236 92,806 95,533 99,361 100,831 189,042 204,220 Provision for credit losses1 8,250 7,500 9,500 8,627 15,000 15,750 24,385 (Benefit) provision for unfunded commitments — (1,541 ) (1,500 ) (909 ) (1,129 ) (1,541 ) 368 Net interest income after provisions 87,986 86,847 87,533 91,643 86,960 174,833 179,467 Noninterest income: Service charges and fees on deposit accounts 4,974 4,896 4,800 5,159 5,272 9,870 10,289 Loan fees 2,207 2,510 1,200 1,564 1,520 4,717 3,584 Loss on sales of debt securities — (6,304 ) — — — (6,304 ) (5,321 ) Government guaranteed loan income, net 1,320 2,614 4,378 1,772 4,144 3,934 13,832 Equity method investment (loss) income — — (29,417 ) (136 ) 485 — (1,036 ) Customer swap income 326 449 258 180 983 775 1,196 Other income 1,751 2,497 989 1,135 1,288 4,248 4,679 Total noninterest income (loss) 10,578 6,662 (17,792 ) 9,674 13,692 17,240 27,223 Noninterest expense: Salaries and employee benefits 32,790 33,365 30,606 30,949 28,650 66,155 60,515 Occupancy and equipment 4,585 4,677 4,670 4,881 4,827 9,262 9,800 Professional and regulatory fees 5,617 6,053 7,626 7,283 6,868 11,670 11,257 Data processing and software expense 5,097 4,856 4,569 4,541 4,709 9,953 9,429 Marketing 1,976 1,546 1,945 2,353 2,627 3,522 4,406 Amortization of intangibles 2,438 2,438 2,438 2,437 2,468 4,876 4,963 Telephone and communications 365 261 356 362 355 626 833 Other 10,273 8,920 8,028 6,608 6,693 19,193 12,609 Total noninterest expense 63,141 62,116 60,238 59,414 57,197 125,257 113,812 Income before income tax expense 35,423 31,393 9,503 41,903 43,455 66,816 92,878 Income tax expense 8,221 7,237 6,004 9,282 9,725 15,458 20,737 Net income $ 27,202 $ 24,156 $ 3,499 $ 32,621 $ 33,730 $ 51,358 $ 72,141 Basic EPS $ 0.50 $ 0.44 $ 0.06 $ 0.60 $ 0.62 $ 0.94 $ 1.33 Diluted EPS $ 0.50 $ 0.44 $ 0.06 $ 0.60 $ 0.62 $ 0.94 $ 1.32 Weighted average basic shares outstanding 54,457 54,444 54,327 54,300 54,247 54,451 54,199 Weighted average diluted shares outstanding 54,823 54,842 54,691 54,597 54,486 54,832 54,546 1 Includes provision for credit losses on AFS securities of $885 thousand for the six months ended June 30, 2023.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)For the Quarter Ended June 30, 2024 March 31, 2024 June 30, 2023 Average
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PaidAverage
Yield/
Rate(Dollars in thousands) Assets Interest-earning assets: Loans1 $ 9,344,482 $ 160,323 6.90 % $ 9,283,815 $ 157,585 6.83 % $ 9,285,550 $ 158,685 6.85 % LHI, MW 420,946 6,656 6.36 279,557 4,357 6.27 371,763 5,042 5.44 Debt securities 1,352,293 15,408 4.58 1,294,994 13,695 4.25 1,133,845 10,166 3.60 Interest-bearing deposits in other banks 560,586 7,722 5.54 584,593 8,050 5.54 583,818 7,507 5.16 Equity securities and other investments 78,964 1,138 5.80 76,269 900 4.75 137,868 1,118 3.25 Total interest-earning assets 11,757,271 191,247 6.54 11,519,228 184,587 6.44 11,512,844 182,518 6.36 ACL (115,978 ) (112,229 ) (102,559 ) Noninterest-earning assets 937,413 929,043 939,938 Total assets $ 12,578,706 $ 12,336,042 $ 12,350,223 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Interest-bearing demand and savings deposits $ 4,570,329 $ 45,619 4.01 % $ 4,639,445 $ 46,784 4.06 % $ 3,919,745 $ 32,957 3.37 % Certificates and other time deposits 3,591,035 44,811 5.02 3,283,735 40,492 4.96 2,873,548 28,100 3.92 Advances from FHLB and Other 106,648 1,468 5.54 100,989 1,391 5.54 1,472,912 17,562 4.78 Subordinated debentures and subordinated notes 230,141 3,113 5.44 229,881 3,114 5.45 229,151 3,068 5.37 Total interest-bearing liabilities 8,498,153 95,011 4.50 8,254,050 91,781 4.47 8,495,356 81,687 3.86 Noninterest-bearing liabilities: Noninterest-bearing deposits 2,346,908 2,355,315 2,175,002 Other liabilities 192,036 192,809 169,240 Total liabilities 11,037,097 10,802,174 10,839,598 Stockholders’ equity 1,541,609 1,533,868 1,510,625 Total liabilities and stockholders’ equity $ 12,578,706 $ 12,336,042 $ 12,350,223 Net interest rate spread2 2.04 % 1.97 % 2.50 % Net interest income and margin3 $ 96,236 3.29 % $ 92,806 3.24 % $ 100,831 3.51 % 1 Includes average outstanding balances of LHFS of $58.5 million, $53.9 million and $23.4 million for the quarters ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively, and average balances of LHI, excluding MW.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands, except percentages)For the Six Months Ended June 30, 2024 June 30, 2023 Average Outstanding Balance Interest Earned/ Interest Paid Average Yield/ Rate Average Outstanding Balance Interest Earned/ Interest Paid Average Yield/ Rate Assets Interest-earning assets: Loans1 $ 9,314,148 $ 317,908 6.86 % $ 9,213,742 $ 305,486 6.69 % LHI, MW 350,252 11,013 6.32 366,000 9,948 5.48 Debt securities 1,323,644 29,103 4.42 1,192,823 21,154 3.58 Interest-bearing deposits in other banks 572,589 15,772 5.54 531,373 13,041 4.95 Equity securities and other investments 77,616 2,038 5.28 131,462 2,526 3.87 Total interest-earning assets 11,638,249 375,834 6.49 11,435,400 352,155 6.21 ACL (114,104 ) (97,639 ) Noninterest-earning assets 933,229 944,883 Total assets $ 12,457,374 $ 12,282,644 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Interest-bearing demand and savings deposits $ 4,604,887 $ 92,403 4.04 % $ 4,033,975 $ 62,814 3.14 % Certificates and other time deposits 3,437,385 85,303 4.99 2,731,925 49,067 3.62 Advances from FHLB and Other 103,819 2,859 5.54 1,298,765 29,920 4.65 Subordinated debentures and subordinated notes 230,011 6,227 5.44 230,195 6,134 5.37 Total interest-bearing liabilities 8,376,102 186,792 4.48 8,294,860 147,935 3.60 Noninterest-bearing liabilities: Noninterest-bearing deposits 2,351,112 2,322,790 Other liabilities 192,422 171,299 Total liabilities 10,919,636 10,788,949 Stockholders’ equity 1,537,738 1,493,695 Total liabilities and stockholders’ equity $ 12,457,374 $ 12,282,644 Net interest rate spread2 2.01 % 2.61 % Net interest income and margin3 $ 189,042 3.27 % $ 204,220 3.60 % 1 Includes average outstanding balances of LHFS of $56.2 million and $21.5 million for the six months ended June 30, 2024 and 2023, respectively, and average balances of LHI, excluding MW.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
Yield TrendFor the Quarter Ended Jun 30,
2024Mar 31,
2024Dec 31,
2023Sep 30,
2023Jun 30,
2023Average yield on interest-earning assets: Loans1 6.90 % 6.83 % 6.88 % 6.92 % 6.85 % LHI, MW 6.36 6.27 5.82 6.38 5.44 Total Loans 6.88 6.81 6.85 6.90 6.80 Debt securities 4.58 4.25 4.10 3.87 3.60 Interest-bearing deposits in other banks 5.54 5.54 5.51 5.43 5.16 Equity securities and other investments 5.80 4.75 8.28 4.94 3.25 Total interest-earning assets 6.54 % 6.44 % 6.51 % 6.51 % 6.36 % Average rate on interest-bearing liabilities: Interest-bearing demand and savings deposits 4.01 % 4.06 % 4.03 % 3.80 % 3.37 % Certificates and other time deposits 5.02 4.96 4.85 4.55 3.92 Advances from FHLB 5.54 5.54 5.60 4.66 4.78 Subordinated debentures and subordinated notes 5.44 5.45 5.36 5.39 5.37 Total interest-bearing liabilities 4.50 % 4.47 % 4.43 % 4.21 % 3.86 % Net interest rate spread2 2.04 % 1.97 % 2.08 % 2.30 % 2.50 % Net interest margin3 3.29 % 3.24 % 3.31 % 3.46 % 3.51 %
1Includes average outstanding balances of LHFS of $58.5 million, $53.9 million, $31.2 million, $28.3 million and $23.4 million for the three months ended June 30, 2024, March 31, 2024, December 31, 2023, September 30, 2023, and June 30, 2023, respectively, and average balances of LHI, excluding MW.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.Supplemental Yield Trend
For the Quarter Ended For the Six Months Ended Jun 30,
2024Mar 31,
2024Dec 31,
2023Sep 30,
2023Jun 30,
2023Jun 30,
2024Jun 30,
2023Average cost of interest-bearing deposits 4.46 % 4.43 % 4.38 % 4.12 % 3.61 % 4.44 % 3.33 % Average costs of total deposits, including noninterest-bearing 3.46 3.42 3.37 3.15 2.73 3.44 2.48
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)LHI and Deposit Portfolio Composition
Jun 30,
2024Mar 31,
2024Dec 31,
2023Sep 30,
2023Jun 30,
2023(In thousands, except percentages) LHI1 Commercial and Industrial (“C&I”) $ 2,798,260 30.4 % $ 2,785,987 30.1 % $ 2,752,063 29.9 % $ 2,841,024 30.7 % $ 2,850,084 30.7 % Real Estate: Owner occupied commercial (“OOCRE”) 806,285 8.7 788,376 8.5 794,088 8.6 697,299 7.5 671,602 7.2 Non-owner occupied commercial (“NOOCRE”) 2,369,848 25.7 2,352,993 25.5 2,350,725 25.5 2,398,060 26.1 2,509,731 27.1 Construction and land 1,536,580 16.7 1,568,257 16.9 1,734,254 18.8 1,705,053 18.4 1,659,700 17.9 Farmland 30,512 0.3 30,979 0.3 31,114 0.3 59,684 0.6 51,663 0.6 1-4 family residential 917,402 10.0 969,401 10.5 937,119 10.2 933,225 10.1 923,442 10.0 Multi-family residential 748,740 8.1 751,607 8.1 605,817 6.6 603,395 6.5 592,473 6.4 Consumer 9,245 0.1 8,882 0.1 10,149 0.1 9,845 0.1 11,189 0.1 Total LHI $ 9,216,872 100 % $ 9,256,482 100 % $ 9,215,329 100 % $ 9,247,585 100 % $ 9,269,884 100 % MW 568,047 449,531 377,796 390,767 436,255 Total LHI1 $ 9,784,919 $ 9,706,013 $ 9,593,125 $ 9,638,352 $ 9,706,139 Total LHFS 57,046 64,762 79,072 41,313 29,876 Total Loans $ 9,841,965 $ 9,770,775 $ 9,672,197 $ 9,679,665 $ 9,736,015 Deposits Noninterest-bearing $ 2,416,727 22.5 % $ 2,349,211 22.1 % $ 2,218,036 21.5 % $ 2,363,340 23.2 % $ 2,234,109 24.2 % Interest-bearing transaction 523,272 4.9 724,171 6.8 927,193 8.9 739,098 7.2 676,653 7.3 Money market 3,268,286 30.5 3,326,742 31.2 3,284,324 31.8 3,096,498 30.4 2,816,769 30.5 Savings 187,896 1.8 169,201 1.6 136,868 1.3 100,474 1.0 96,831 1.0 Certificates and other time deposits 3,744,596 34.9 3,486,805 32.7 3,191,737 30.9 3,403,427 33.4 2,928,949 31.7 Correspondent money market accounts 584,067 5.4 597,690 5.6 580,037 5.6 493,681 4.8 480,598 5.3 Total deposits $ 10,724,844 100 % $ 10,653,820 100 % $ 10,338,195 100 % $ 10,196,518 100 % $ 9,233,909 100 % Total Loans to Deposits Ratio 91.8 % 91.7 % 93.6 % 94.9 % 105.4 % Total Loans to Deposit Ratio, excluding MW loans and LHFS 85.9 % 86.9 % 89.1 % 90.7 % 100.4 % 1 Total LHI does not include deferred fees of $7.8 million, $6.9 million, $8.8 million, $10.1 million and $12.7 million at June 30, 2024, March 31, 2024, December 31, 2023, September 30, 2023 and June 30, 2023, respectively.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
Asset QualityFor the Quarter Ended For the Six Months Ended Jun 30,
2024Mar 31,
2024Dec 31,
2023Sep 30,
2023Jun 30,
2023Jun 30,
2024Jun 30,
2023(In thousands, except percentages) NPAs: Nonaccrual loans $ 58,537 $ 75,721 $ 79,133 $ 65,676 $ 54,055 $ 58,537 $ 54,055 Nonaccrual PCD loans1 73 9,419 13,715 13,718 13,721 73 13,721 Accruing loans 90 or more days past due2 143 220 2,975 474 528 143 528 Total nonperforming loans held for investment (“NPLs”) 58,753 85,360 95,823 79,868 68,304 58,753 68,304 Other real estate owned 24,256 18,445 — — — 24,256 — Total NPAs $ 83,009 $ 103,805 $ 95,823 $ 79,868 $ 68,304 $ 83,009 $ 68,304 Charge-offs: 1-4 family residential $ (31 ) $ — $ (21 ) $ — $ — $ (31 ) $ — Multifamily (198 ) — (192 ) — — (198 ) — OOCRE — (120 ) (364 ) (375 ) — (120 ) (116 ) NOOCRE (1,969 ) (4,293 ) (5,434 ) — (8,215 ) (6,262 ) (8,215 ) C&I (5,601 ) (946 ) (3,893 ) (1,929 ) (3,540 ) (6,547 ) (4,591 ) Consumer (30 ) (71 ) (33 ) (49 ) (92 ) (101 ) (154 ) Total charge-offs $ (7,829 ) $ (5,430 ) $ (9,937 ) $ (2,353 ) $ (11,847 ) $ (13,259 ) $ (13,076 ) Recoveries: 1-4 family residential $ — $ 1 $ 1 $ — $ 1 $ 1 $ 2 OOCRE 120 — — — — 120 — NOOCRE — — — 200 150 — 150 C&I 361 96 387 308 106 457 470 Consumer 497 49 34 14 46 546 52 Total recoveries $ 978 $ 146 $ 422 $ 522 $ 303 $ 1,124 $ 674 Net charge-offs $ (6,851 ) $ (5,284 ) $ (9,515 ) $ (1,831 ) $ (11,544 ) $ (12,135 ) $ (12,402 ) Provision for credit losses $ 8,250 $ 7,500 $ 9,500 $ 8,627 $ 15,000 $ 15,750 $ 24,385 ACL $ 113,431 $ 112,032 $ 109,816 $ 109,831 $ 102,150 $ 113,431 $ 102,150 Asset Quality Ratios: NPAs to total assets 0.65 % 0.82 % 0.77 % 0.65 % 0.55 % 0.65 % 0.55 % NPAs, excluding nonaccrual PCD loans, to total assets 0.65 0.74 0.66 0.54 0.44 0.65 0.44 NPAs to total loans and OREO 0.85 1.06 0.99 0.83 0.70 0.85 0.70 NPLs to total LHI 0.60 0.88 1.00 0.83 0.70 0.60 0.70 NPLs, excluding nonaccrual PCD loans, to total LHI 0.60 0.78 0.86 0.69 0.56 0.60 0.56 ACL to total LHI 1.16 1.15 1.14 1.14 1.05 1.16 1.05 ACL to total loans, excluding MW and LHFS 1.23 1.21 1.19 1.19 1.10 1.23 1.10 Net charge-offs to average loans outstanding3 0.28 0.22 0.40 0.08 0.48 0.25 0.26 1 Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 Financial Instruments - Credit Losses and were accounted for on a pooled basis that have subsequently been placed on nonaccrual status.
2 Accruing loans greater than 90 days past due exclude purchase credit deteriorated loans greater than 90 days past due that are accounted for on a pooled basis.
3Annualized ratio for quarterly metrics.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)We identify certain financial measures discussed in this earnings release as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with 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 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 (Dollars in thousands, except per share data) Tangible Common Equity Total stockholders' equity $ 1,548,616 $ 1,538,515 $ 1,531,323 $ 1,491,166 $ 1,491,280 Adjustments: Goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) Core deposit intangibles (23,619 ) (26,057 ) (28,495 ) (30,933 ) (33,371 ) Tangible common equity $ 1,120,545 $ 1,108,006 $ 1,098,376 $ 1,055,781 $ 1,053,457 Common shares outstanding 54,350 54,496 54,338 54,305 54,261 Book value per common share $ 28.49 $ 28.23 $ 28.18 $ 27.46 $ 27.48 Tangible book value per common share $ 20.62 $ 20.33 $ 20.21 $ 19.44 $ 19.41
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 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 (Dollars in thousands) Tangible Common Equity Total stockholders' equity $ 1,548,616 $ 1,538,515 $ 1,531,323 $ 1,491,166 $ 1,491,280 Adjustments: Goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) Core deposit intangibles (23,619 ) (26,057 ) (28,495 ) (30,933 ) (33,371 ) Tangible common equity $ 1,120,545 $ 1,108,006 $ 1,098,376 $ 1,055,781 $ 1,053,457 Tangible Assets Total assets $ 12,684,330 $ 12,708,396 $ 12,394,337 $ 12,346,331 $ 12,470,368 Adjustments: Goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) Core deposit intangibles (23,619 ) (26,057 ) (28,495 ) (30,933 ) (33,371 ) Tangible Assets $ 12,256,259 $ 12,277,887 $ 11,961,390 $ 11,910,946 $ 12,032,545 Tangible Common Equity to Tangible Assets 9.14 % 9.02 % 9.18 % 8.86 % 8.76 %
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 For the Six Months Ended Jun 30,
2024Mar 31,
2024Dec 31,
2023Sep 30,
2023Jun 30,
2023Jun 30,
2024Jun 30,
2023(Dollars in thousands) Net income available for common stockholders adjusted for amortization of core deposit intangibles Net income $ 27,202 $ 24,156 $ 3,499 $ 32,621 $ 33,730 $ 51,358 $ 72,141 Adjustments: Plus: Amortization of core deposit intangibles 2,438 2,438 2,438 2,438 2,438 4,876 4,876 Less: Tax benefit at the statutory rate 512 512 512 512 512 1,024 1,024 Net income available for common stockholders adjusted for amortization of core deposit intangibles $ 29,128 $ 26,082 $ 5,425 $ 34,547 $ 35,656 $ 55,210 $ 75,993 Average Tangible Common Equity Total average stockholders' equity $ 1,541,609 $ 1,533,868 $ 1,510,286 $ 1,508,170 $ 1,510,625 $ 1,537,738 $ 1,493,695 Adjustments: Average goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) Average core deposit intangibles (25,218 ) (27,656 ) (30,093 ) (32,540 ) (34,969 ) (26,437 ) (36,159 ) Average tangible common equity $ 1,111,939 $ 1,101,760 $ 1,075,741 $ 1,071,178 $ 1,071,204 $ 1,106,849 $ 1,053,084 Return on Average Tangible Common Equity (Annualized) 10.54 % 9.52 % 2.00 % 12.80 % 13.35 % 10.03 % 14.55 %
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)Operating Earnings, Pre-tax, Pre-provision Operating Earnings and performance metrics calculated using Operating Earnings and Pre-tax, Pre-provision Operating Earnings, including Diluted Operating Earnings per Share, Operating Return on Average Assets, Pre-tax, Pre-Provision Operating Return on Average Assets, Pre-tax, Pre-Provision Operating Return on Average Loans, Operating Return on Average Tangible Common Equity and Operating Efficiency Ratio. Operating earnings, pre-tax, pre-provision operating earnings and the performance metrics calculated using these metrics, listed below, are non-GAAP measures used by management to evaluate the Company’s financial performance. We calculate (a) operating earnings as net income plus severance payments, plus loss on sale of debt securities AFS, net, 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 provision (benefit) for credit losses and unfunded commitments. We calculate (d) pre-tax, pre-provision operating return on average assets as pre-tax, pre-provision operating earnings as described in clause (a) divided by total average assets. We calculate (e) operating return on average assets as operating earnings as described in clause (a) divided by total average assets. We calculate (f) operating return on average tangible common equity as operating earnings as described in clause (a), adjusted for the amortization of intangibles and tax benefit at the statutory rate, divided by total average tangible common equity (average stockholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization). We calculate (g) operating efficiency ratio as noninterest expense plus adjustments to operating noninterest expense divided by noninterest income plus adjustments to operating noninterest income, plus net interest income.
We believe that these measures and the operating metrics calculated utilizing these measures are important to management and many investors in the marketplace who are interested in understanding the ongoing operating performance of the Company and provide meaningful comparisons to its peers.
The following tables reconcile, as of the dates set forth below, operating net income and pre-tax, pre-provision operating earnings and related metrics:
For the Quarter Ended For the Six Months Ended Jun 30,
2024Mar 31,
2024Dec 31,
2023Sep 30,
2023Jun 30,
2023June 30,
2024Jun 30,
2023(Dollars in thousands, except per share data) Operating Earnings Net income $ 27,202 $ 24,156 $ 3,499 $ 32,621 $ 33,730 $ 51,358 $ 72,141 Plus: Severance payments1 613 — — — 1,194 613 2,029 Plus: Loss on sale of AFS securities, net — 6,304 — — — 6,304 5,321 Plus: Equity method investment write-down — — 29,417 — — — — Plus: FDIC special assessment 134 — 768 — — 134 — Operating pre-tax income 27,949 30,460 33,684 32,621 34,924 58,409 79,491 Less: Tax impact of adjustments 166 1,323 2,059 — 251 1,489 1,544 Plus: Nonrecurring tax adjustments 527 — — — — 527 — Operating earnings $ 28,310 $ 29,137 $ 31,625 $ 32,621 $ 34,673 $ 57,447 $ 77,947 Weighted average diluted shares outstanding 54,823 54,842 54,691 54,597 54,486 54,832 54,546 Diluted EPS $ 0.50 $ 0.44 $ 0.06 $ 0.60 $ 0.62 $ 0.94 $ 1.32 Diluted operating EPS $ 0.52 $ 0.53 $ 0.58 $ 0.60 $ 0.64 $ 1.05 $ 1.43 1 Severance payments relate to certain restructurings made during the periods disclosed.
For the Quarter Ended For the Six Months
EndedJun 30,
2024Mar 31,
2024Dec 31,
2023Sep 30,
2023Jun 30,
2023Jun 30,
2024Jun 30,
2023(Dollars in thousands) Pre-Tax, Pre-Provision Operating Earnings Net income $ 27,202 $ 24,156 $ 3,499 $ 32,621 $ 33,730 $ 51,358 $ 72,141 Plus: Provision for income taxes 8,221 7,237 6,004 9,282 9,725 15,458 20,737 Plus: Provision for credit losses and unfunded commitments 8,250 5,959 8,000 7,718 13,871 14,209 24,753 Plus: Severance payments 613 — — — 1,194 613 2,029 Plus: Loss on sale of AFS securities, net — 6,304 — — — 6,304 5,321 Plus: Equity method investment write-down — — 29,417 — — — — Plus: FDIC special assessment 134 — 768 — — 134 — Pre-tax, pre-provision operating earnings $ 44,420 $ 43,656 $ 47,688 $ 49,621 $ 58,520 $ 88,076 $ 124,981 Average total assets $ 12,578,706 $ 12,336,042 $ 12,306,634 $ 12,259,062 $ 12,350,223 $ 12,457,374 $ 12,282,644 Pre-tax, pre-provision operating return on average assets1 1.42 % 1.42 % 1.54 % 1.61 % 1.90 % 1.42 % 2.05 % Average loans $ 9,765,428 $ 9,563,372 $ 9,581,784 $ 9,625,005 $ 9,657,313 $ 9,664,400 $ 9,579,742 Pre-tax, pre-provision operating return on average loans1 1.83 % 1.84 % 1.97 % 2.05 % 2.43 % 1.83 % 2.63 % Average total assets $ 12,578,706 $ 12,336,042 $ 12,306,634 $ 12,259,062 $ 12,350,223 $ 12,457,374 $ 12,282,644 Return on average assets1 0.87 % 0.79 % 0.11 % 1.06 % 1.10 % 0.83 % 1.18 % Operating return on average assets1 0.91 0.95 1.02 1.06 1.13 0.93 1.28 Operating earnings adjusted for amortization of core deposit intangibles Operating earnings $ 28,310 $ 29,137 $ 31,625 $ 32,621 $ 34,673 $ 57,447 $ 77,947 Adjustments: Plus: Amortization of core deposit intangibles 2,438 2,438 2,438 2,438 2,438 4,876 4,876 Less: Tax benefit at the statutory rate 512 512 512 512 512 1,024 1,024 Operating earnings adjusted for amortization of core deposit intangibles $ 30,236 $ 31,063 $ 33,551 $ 34,547 $ 36,599 $ 61,299 $ 81,799 Average Tangible Common Equity Total average stockholders' equity $ 1,541,609 $ 1,533,868 $ 1,510,286 $ 1,508,170 $ 1,510,625 $ 1,537,738 $ 1,493,695 Adjustments: Less: Average goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) Less: Average core deposit intangibles (25,218 ) (27,656 ) (30,093 ) (32,540 ) (34,969 ) (26,437 ) (36,159 ) Average tangible common equity $ 1,111,939 $ 1,101,760 $ 1,075,741 $ 1,071,178 $ 1,071,204 $ 1,106,849 $ 1,053,084 Operating return on average tangible common equity1 10.94 % 11.34 % 12.37 % 12.80 % 13.70 % 11.14 % 15.66 % Efficiency ratio 59.11 % 62.45 % 77.49 % 54.49 % 49.94 % 60.72 % 49.17 % Operating efficiency ratio Net interest income $ 96,236 $ 92,806 $ 95,533 $ 99,361 $ 100,831 $ 189,042 $ 204,220 Noninterest income 10,578 6,662 (17,792 ) 9,674 13,692 17,240 27,223 Plus: Loss on sale of AFS securities, net — 6,304 — — — 6,304 5,321 Plus: Equity method investment write-down — — 29,417 — — — — Operating noninterest income 10,578 12,966 11,625 9,674 13,692 23,544 32,544 Noninterest expense 63,141 62,116 60,238 59,414 57,197 125,257 113,812 Less: FDIC special assessment 134 — 768 — — 134 — Less: Severance payments 613 — — — 1,194 613 2,029 Operating noninterest expense $ 62,394 $ 62,116 $ 59,470 $ 59,414 $ 56,003 $ 124,510 $ 111,783 Operating efficiency ratio 58.41 % 58.73 % 55.50 % 54.49 % 48.90 % 58.57 % 47.21 % 1 Annualized ratio for quarterly metrics.
