Veritex Holdings, Inc. Reports Fourth Quarter and Year-End 2021 Operating Results

DALLAS, Jan. 25, 2022 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. (“Veritex” or the “Company”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the fourth quarter and full year of 2021.

“We reported strong fourth quarter and 2021 results as the Texas economy continues to improve and we remained focused on our organic growth strategy," said President and Chief Executive Officer, Malcolm C. Holland, III. "Deposit growth remained strong and loan balances increased for the sixth quarter in a row with loan balances, excluding our mortgage warehouse and PPP loans, growing approximately 16% during 2021.”

"We remained laser focused and delivered on one of our main strategies as a company....be transformative and deliver top tier financial results. With our 49% investment in Thrive Mortgage, LLC ("Thrive"), which has contributed $6 million of increased noninterest income since July 2021, and our acquisition of North Avenue Capital, LLC ("NAC"), the nation’s leader in USDA lending, which has contributed $1.3 million of increased noninterest income since November 1, 2021, we transformed, delivered and positioned Veritex to further diversify revenue streams as we continue to organically grow."

"Asset quality continues to improve, with loss rates driven by economic forecasts approaching pre-pandemic levels, leading to a release in credit reserves. Nonperforming assets ("NPAs") to total assets improved 26 basis points to 0.51% during the fourth quarter, the lowest level since December 31, 2019."

"Business momentum, continued organic growth, investment in talent, revenue diversification, improving credit metrics, a recovering economy, maintaining our strong culture and pursuit of opportunities to further scale have me excited for 2022 and the future of this Company."

Financial Highlights		Quarter to Date								Year to Date
		Q4 2021				Q3 2021					2021				2020
		(Dollars in thousands, except per share data) (unaudited)
GAAP
Net income		$	41,506			$	36,835			$	139,584			$	73,883
Diluted EPS			0.82				0.73				2.77				1.48
Book value per common share			26.64				26.09				26.64				24.39
Return on average assets2			1.68	%			1.56	%			1.49	%			0.87	%
Efficiency ratio			48.53				47.55				49.45				50.90
Return on average equity2			12.65				11.32				11.01				6.34
Non-GAAP1
Operating earnings		$	42,410			$	35,072			$	139,647			$	77,980
Diluted operating EPS			0.84				0.70				2.77				1.56
Tangible book value per common share			17.49				17.53				17.49				15.70
Pre-tax, pre-provision operating earnings			48,640				43,858				171,205				162,447
Pre-tax, pre-provision operating return on average assets2			1.97	%			1.85	%			1.83	%			1.91	%
Operating return on average assets2			1.72				1.48				1.49				0.91
Operating efficiency ratio			47.64				48.51				49.27				47.69
Return on average tangible common equity2			20.06				17.72				17.57				11.16
Operating return on average tangible common equity2			20.48				16.92				17.58				11.72

¹ Refer to the section titled "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.
² Annualized ratio.

Other Fourth Quarter and 2021 Highlights:

• Total loans held for investment ("LHI"), excluding Paycheck Protection Program ("PPP") and mortgage warehouse ("MW") loans, grew $150.1 million, from the third quarter of 2021, or 9.1% annualized, and grew $918.1 million, or 15.7%, year-over-year;

• Total deposits grew $184.9 million for the fourth quarter of 2021, or 10.3% annualized, with the average cost of total deposits decreasing to 0.18% for the three months ended December 31, 2021 from 0.20% for the three months ended September 30, 2021. Total deposits grew $850.8 million, or 13.1%, year-over-year;

• NPAs to total assets decreased to 0.51% , or 26 basis points from September 30, 2021, and decreased 48 basis points from December 31, 2020;

• Announced the completion of the Company’s 49% investment in Thrive during the third quarter of 2021 and recognized $5.8 million of equity method investment income, which includes $1.9 million of PPP loan forgiveness income;

• Closed the acquisition of NAC on November 1, 2021; and

• Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on February 25, 2022.

Result of Operations for the Three Months Ended December 31, 2021

Net Interest Income

For the three months ended December 31, 2021, net interest income before provision for credit losses was $76.7 million and net interest margin was 3.37% compared to $71.3 million and 3.26%, respectively, for the three months ended September 30, 2021. The $5.4 million increase in net interest income before provision for credit losses was primarily due to a $3.0 million increase in interest income on loans driven by an increase in average balances and the recognition of $2.1 million of prepayment penalty income on debt securities during three months ended December 31, 2021. Net interest margin increased 11 basis points from the three months ended September 30, 2021 primarily due to the increase in yields earned on debt securities as a result of the recognition of $2.1 million of prepayment penalty income during three months ended December 31, 2021. The average cost of interest-bearing deposits decreased 4 basis points to 0.26% for the three months ended December 31, 2021 from 0.30% for the three months ended September 30, 2021.

Net interest income before provision for credit losses increased by $9.9 million from $66.8 million to $76.7 million and net interest margin increased 8 basis points from 3.29% to 3.37% for the three months ended December 31, 2021 as compared to the same period in 2020. The increase in net interest income before provision for credit losses was primarily due to a $4.6 million increase in interest income on loans driven by an increase in average balances, the recognition of $2.1 million of prepayment penalty income on debt securities and a $2.3 million decrease in interest expenses on certificates and other time deposits during the three months ended December 31, 2021 compared to the three months ended December 31, 2020. Net interest margin increased 8 basis points compared to the three months ended December 31, 2020 primarily due to an increase in yields earned on debt securities as a result of the recognition of $2.1 million of prepayment penalty income and decreases in the average rate paid on interest-bearing demand and savings deposits and certificates and other time deposits for the three months ended December 31, 2021. As a result, the average cost of interest-bearing deposits decreased to 0.26% for the three months ended December 31, 2021 from 0.55% for the three months ended December 31, 2020.

Noninterest Income

Noninterest income for the three months ended December 31, 2021 was $16.2 million, an increase of $523 thousand, or 3.3% compared to the three months ended September 30, 2021. The increase in noninterest income was primarily due to a $1.1 million increase in government guaranteed loan income, net, and a $951 thousand increase in loan fees. These increases were partially offset by a $3.2 million decrease in equity method investment income.

Compared to the three months ended December 31, 2020, noninterest income for the three months ended December 31, 2021 grew $7.1 million, or 79.2%. The increase was primarily due to a $3.0 million increase in government guaranteed loan income, a $2.0 million increase in loan fees, a $1.2 million increase in equity method investment income and a $811 thousand increase in service charges and fees on deposit accounts.

Noninterest Expense

Noninterest expense was $45.1 million for the three months ended December 31, 2021, compared to $41.3 million for the three months ended September 30, 2021, an increase of $3.8 million, or 9.1%. The increase was primarily driven by a $2.4 million increase in salaries and employee benefits and a $826 thousand increase in merger and acquisition expenses incurred as a result of the acquisition of NAC in November of 2021.

Noninterest expense was $45.1 million for the three months ended December 31, 2021, compared to $47.4 million for the three months ended December 31, 2020, a decrease of $2.3 million, or 4.8%. The decrease in noninterest expense was primarily due to debt extinguishment costs of $9.7 million incurred in the three months ended December 31, 2020 with no corresponding expense in the same period in 2021. The decrease was partially offset by an increase of $5.4 million in salaries and employee benefits, a $826 thousand increase in merger and acquisition expenses incurred related to the acquisition of NAC, a $498 thousand increase in marketing expense and a $359 thousand increase in data processing and software expense.

Financial Condition

Total LHI, excluding MW and PPP, were $6.8 billion at December 31, 2021, an increase of $150.1 million, or 9.1% annualized, compared to September 30, 2021, and an increase of $918.1 million, or 15.7%, compared to December 31, 2020. These increases were the result of the continued execution and success of our loan growth strategy.

Total deposits were $7.4 billion at December 31, 2021, an increase of $184.9 million, or 10.3% annualized, compared to September 30, 2021 and an increase of $850.8 million, or 13.1%, compared to December 31, 2020. The increase from September 30, 2021 was primarily the result of increase of $207.8 million in non-interest bearing demand deposits and an increase of $48.0 million in interest-bearing transaction and savings deposits accounts. The increase from December 31, 2020 was primarily the result of increases of $413.6 million, $317.9 million and $119.3 million in non-interest bearing demand deposits, interest-bearing transaction and savings deposits accounts and certificates and other time deposits, respectively.

Asset Quality

NPAs decreased to $50.1 million, or 0.51% of total assets, at December 31, 2021, compared to $74.0 million, or 0.77% of total assets, at September 30, 2021. The Company had net charge-offs of $12.7 million for the quarter, which were substantially reserved against in prior quarters under our allowance for credit loss model.

The Company recorded a benefit for credit losses of $3.3 million for the three months ended December 31, 2021, compared to no provision for credit losses for the three months ended September 30, 2021 and December 31, 2020. The benefit for credit losses reported for the three months ended December 31, 2021, compared to the three months ended September 30, 2021 and December 31, 2020, was attributable to improvement in the Texas economic forecasts used in the Current Expected Credit Losses (“CECL”) model in the fourth quarter of 2021 to reflect the expected impact of the COVID-19 pandemic as of December 31, 2021, as compared to our Texas economic forecasts and expected impact of the COVID-19 pandemic as of September 30, 2021 and December 31, 2020. During the three months ended December 31, 2021, we recorded a $1.0 million benefit for unfunded commitments, which was also attributable to improvement in the Texas economic forecasts.

Allowance for credit losses ("ACL") as a percentage of LHI, excluding MW and PPP loans, was 1.15%, 1.42% and 1.80% at December 31, 2021, September 30, 2021 and December 31, 2020, respectively.

Dividend Information

On January 25, 2022, Veritex's Board of Directors declared a quarterly cash dividend of $0.20 per share on its outstanding shares of common stock. The dividend will be paid on or after February 25, 2022 to stockholders of record as of the close of business on February 11, 2022.

Non-GAAP Financial Measures

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

Conference Call

The Company will host an investor conference call to review the results on Wednesday, January 26, 2021 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/rcmgsdby and will receive a unique PIN number, which can be used when dialing in for the call. This will allow attendees to enter 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, www.veritexbank.com. An audio replay will be available one hour after the conclusion of the call at (855) 859-2056, Conference #9296970. This replay, as well as the webcast, will be available until February 2, 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. Further, certain important factors could affect future results and cause actual results to differ materially from those expressed in the forward-looking statements, including, but not limited to, that the businesses of the Company and NAC will not be integrated successfully, that the cost savings and any synergies from the acquisition may not be fully realized or may take longer to realize than expected, disruption from the acquisition making it more difficult to maintain relationships with employees, customers or other parties with whom the Company or NAC have business relationships, diversion of management time on acquisition-related issues, the reaction to the transaction of the companies’ customers, employees and counterparties and other factors, many of which are beyond the control of the Company and NAC. Further, certain important factors could affect future results and cause actual results to differ materially from those expressed in the forward-looking statements, including, but not limited to, that the businesses of the Company and NAC will not be integrated successfully, that the cost savings and any synergies from the acquisition may not be fully realized or may take longer to realize than expected, disruption from the acquisition making it more difficult to maintain relationships with employees, customers or other parties with whom the Company or NAC have business relationships, diversion of management time on acquisition-related issues, the reaction to the transaction of the companies’ customers, employees and counterparties and other factors, many of which are beyond the control of the Company and NAC. 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 Quarter Ended																				For the Year Ended
		Dec 31, 2021				Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Dec 31, 2021				Dec 31, 2020
		(Dollars and shares in thousands, except per-share data)
Per Share Data (Common Stock):
Basic EPS		$	0.84			$	0.75			$	0.60			$	0.64			$	0.46			$	2.83			$	1.48
Diluted EPS			0.82				0.73				0.59				0.64				0.46				2.77				1.48
Book value per common share			26.64				26.09				25.72				24.96				24.39				26.64				24.39
Tangible book value per common share1			17.49				17.53				17.16				16.34				15.70				17.49				15.70
Dividends paid per common share outstanding2			0.20				0.20				0.20				0.17				0.17				0.77				0.68
Common Stock Data:
Shares outstanding at period end			49,372				49,229				49,498				49,433				49,340				49,372				49,340
Weighted average basic shares outstanding for the period			49,329				49,423				49,476				49,394				49,571				49,405				49,884
Weighted average diluted shares outstanding for the period			50,441				50,306				50,331				49,998				49,837				50,352				50,036
Summary of Credit Ratios:
ACL to total LHI, excluding MW and PPP loans			1.15	%			1.42	%			1.59	%			1.76	%			1.80	%			1.15	%			1.80	%
NPAs to total assets			0.51				0.77				0.85				0.92				0.99				0.51				0.99
Net charge-offs to average loans outstanding			0.19				0.09				0.09				—				0.28				0.38				0.36
Summary Performance Ratios:
Return on average assets3			1.68	%			1.56	%			1.27	%			1.44	%			1.04	%			1.49	%			0.87	%
Return on average equity3			12.65				11.32				9.42				10.53				7.58				11.01				6.34
Return on average tangible common equity1, 3			20.06				17.72				15.18				17.17				12.84				17.57				11.16
Efficiency ratio			48.53				47.55				52.42				49.62				62.52				49.45				50.90
Net interest margin			3.37	%			3.26	%			3.11	%			3.22	%			3.29	%			3.24	%			3.39	%
Selected Performance Metrics - Operating:
Diluted operating EPS1		$	0.84			$	0.70			$	0.60			$	0.64			$	0.60			$	2.77			$	1.56
Pre-tax, pre-provision operating return on average assets1, 2			1.97	%			1.85	%			1.66	%			1.82	%			1.75	%			1.83	%			1.91	%
Operating return on average assets1, 3			1.72				1.48				1.29				1.46				1.35				1.49				0.91
Operating return on average tangible common equity1, 3			20.48				16.92				15.42				17.39				16.44				17.58				11.72
Operating efficiency ratio1			47.64				48.51				51.63				49.62				49.49				49.27				47.69
Veritex Holdings, Inc. Capital Ratios:
Average stockholders' equity to average total assets			13.30	%			13.75	%			13.46	%			13.69	%			13.67	%			13.54	%			13.66	%
Tangible common equity to tangible assets1			9.28				9.43				9.51				9.17				9.23				9.28				9.23
Tier 1 capital to average assets (leverage)			9.05				9.54				9.38				9.50				9.43				9.05				9.43
Common equity tier 1 capital			8.58				8.75				9.03				9.27				9.30				8.58				9.30
Tier 1 capital to risk-weighted assets			8.89				9.06				9.36				9.61				9.66				8.89				9.66
Total capital to risk-weighted assets			11.60				12.31				12.86				13.38				13.56				11.60				13.56

¹ Refer to "Reconciliation of Non-GAAP Financial Measures" after the financial highlights for a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP measure.
² Dividend amount represents dividend paid per common share subsequent to each respective quarter end.
³ Annualized ratio for quarterly metrics.

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

		Dec 31, 2021				Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
ASSETS
Cash and cash equivalents		$	379,784			$	229,712			$	390,027			$	468,029			$	230,825
Debt securities			1,052,494				1,103,745				1,125,877				1,077,860				1,055,201
Other investments			190,591				191,786				87,558				87,226				87,192
Loans held for sale			26,007				18,896				12,065				19,864				21,414
LHI PPP loans, carried at fair value			53,369				135,842				291,401				407,353				358,042
LHI, MW			565,645				615,045				559,939				599,001				577,594
LHI, excluding MW and PPP			6,766,009				6,615,905				6,272,087				5,963,493				5,847,862
Total loans			7,411,030				7,385,688				7,135,492				6,989,711				6,804,912
ACL			(77,754	)			(93,771	)			(99,543	)			(104,936	)			(105,084	)
Bank-owned life insurance			83,194				83,781				83,304				83,318				82,855
Bank premises, furniture and equipment, net			109,271				116,063				123,504				114,585				115,063
Other real estate owned ("OREO")			—				—				2,467				2,337				2,337
Intangible assets, net of accumulated amortization			66,017				54,682				57,143				59,236				61,733
Goodwill			403,771				370,840				370,840				370,840				370,840
Other assets			138,851				129,774				72,856				89,304				114,997
Total assets		$	9,757,249			$	9,572,300			$	9,349,525			$	9,237,510			$	8,820,871
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing deposits		$	2,510,723			$	2,302,925			$	2,388,068			$	2,171,719			$	2,097,099
Interest-bearing transaction and savings deposits			3,276,312				3,228,306				3,112,974				3,189,693				2,958,456
Certificates and other time deposits			1,576,580				1,647,521				1,477,860				1,543,158				1,457,291
Total deposits			7,363,615				7,178,752				6,978,902				6,904,570				6,512,846
Accounts payable and other liabilities			69,160				66,571				55,499				55,902				61,928
Advances from Federal Home Loan Bank ("FHLB")			777,562				777,601				777,640				777,679				777,718
Subordinated debentures and subordinated notes			227,764				262,761				262,766				262,774				262,778
Securities sold under agreements to repurchase			4,069				2,455				1,811				2,777				2,225
Total liabilities			8,442,170				8,288,140				8,076,618				8,003,702				7,617,495
Commitments and contingencies
Stockholders’ equity:
Common stock			560				559				558				557				555
Additional paid-in capital			1,142,758				1,137,889				1,134,603				1,131,324				1,126,437
Retained earnings			275,273				243,633				216,704				195,661				172,232
Accumulated other comprehensive income			64,070				69,661				77,189				62,413				56,225
Treasury stock			(167,582	)			(167,582	)			(156,147	)			(156,147	)			(152,073	)
Total stockholders’ equity			1,315,079				1,284,160				1,272,907				1,233,808				1,203,376
Total liabilities and stockholders’ equity		$	9,757,249			$	9,572,300			$	9,349,525			$	9,237,510			$	8,820,871

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

		For the Quarter Ended																			For the Year Ended
		Dec 31, 2021				Sep 30, 2021				Jun 30, 2021			Mar 31, 2021				Dec 31, 2020				Dec 31, 2021				Dec 31, 2020
Interest income:
Loans, including fees		$	74,174			$	71,139			$	67,814		$	67,399			$	69,597			$	280,526			$	286,583
Debt securities			9,553				7,613				7,529			7,437				7,652				32,132				30,726
Deposits in financial institutions and Fed Funds sold			165				130				167			127