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

Rhea-AI Summary

Veritex Holdings (Nasdaq: VBTX) reported strong financial results for Q4 2021 and the full year, with net income of $41.5 million and diluted EPS of $0.82. The Company achieved a 16% growth in loan balances during 2021, while total deposits increased by 13.1% year-over-year. Notably, nonperforming assets improved to 0.51%, the lowest level since 2019. The 49% investment in Thrive Mortgage contributed $6 million to noninterest income, while the North Avenue Capital acquisition added $1.3 million. A quarterly cash dividend of $0.20 per share was declared, payable on February 25, 2022.

Positive

• Q4 2021 net income increased to $41.5 million compared to $36.8 million in Q3 2021.
• Loan balances grew by approximately 16% in 2021, marking six consecutive quarters of increase.
• Total deposits increased by $850.8 million or 13.1% year-over-year.
• Nonperforming assets decreased to 0.51%, a 26 basis point improvement from Q3 2021.
• Thrive Mortgage investment added $6 million in noninterest income since July 2021.
• Acquisition of North Avenue Capital contributed $1.3 million in noninterest income since November 2021.
• Declared a quarterly cash dividend of $0.20 per share, payable on February 25, 2022.

Negative

• Noninterest expense rose to $45.1 million in Q4 2021, up from $41.3 million in Q3 2021.
• Net charge-offs were at $12.7 million for the quarter.

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				99				589				1,221
Equity securities and other investments			1,004				898				672			663				752				3,237				3,320
Total interest income			84,896				79,780				76,182			75,626				78,100				316,484				321,850
Interest expense:
Transaction and savings deposits			1,629				1,588				1,661			1,980				2,105				6,858				13,233
Certificates and other time deposits			1,661				1,934				2,423			3,061				3,919				9,079				23,678
Advances from FHLB			1,847				1,848				1,829			1,812				2,222				7,336				10,609
Subordinated debentures and subordinated notes			3,018				3,134				3,138			3,138				3,088				12,428				8,532
Total interest expense			8,155				8,504				9,051			9,991				11,334				35,701				56,052
Net interest income			76,741				71,276				67,131			65,635				66,766				280,783				265,798
(Benefit) provision for credit losses			(3,349	)			—				—			—				—				(3,349	)			56,640
(Benefit) provision for unfunded commitments			(1,040	)			(448	)			577			(570	)			902				(1,481	)			9,029
Net interest income after provisions			81,130				71,724				66,554			66,205				65,864				285,613				200,129
Noninterest income:
Service charges and fees on deposit accounts			4,782				4,484				3,847			3,629				3,971				16,742				13,703
Loan fees			2,697				1,746				1,823			1,341				684				7,607				4,556
(Loss) gain on sales of investment securities			—				(188	)			—			—				(256	)			(188	)			2,615
Gain on sales of mortgage loans held for sale			293				407				385			507				317				1,592				1,239
Government guaranteed loan income, net			3,423				2,341				3,448			6,548				448				15,760				14,150
Equity method investment income			1,238				4,522				—			—				—				5,760				—
Other			3,717				2,315				2,953			2,147				3,848				11,132				11,081
Total noninterest income			16,150				15,627				12,456			14,172				9,012				58,405				47,344
Noninterest expense:
Salaries and employee benefits			25,401				22,964				23,451			22,932				20,011				94,748				79,453
Occupancy and equipment			4,398				4,536				4,233			4,096				4,116				17,263				16,363
Professional and regulatory fees			3,017				3,401				3,086			3,441				3,578				12,945				11,729
Data processing and software expense			2,597				2,494				2,536			2,319				2,238				9,946				9,213
Marketing			1,443				1,151				1,841			909				945				5,344				3,651
Amortization of intangibles			2,494				2,509				2,517			2,537				2,558				10,057				10,790
Telephone and communications			380				380				337			337				340				1,434				1,312
Merger and acquisition expense			826				—				—			—				—				826				—
COVID expenses			—				—				—			—				—				—				1,377
Debt extinguishment costs			—				—				—			—				9,746				—				11,307
Other			4,521				3,886				3,716			3,026				3,841				15,149				14,192
Total noninterest expense			45,077				41,321				41,717			39,597				47,373				167,712				159,387
Income before income tax expense			52,203				46,030				37,293			40,780				27,503				176,306				88,086
Income tax expense			10,697				9,195				7,837			8,993				4,702				36,722				14,203
Net income		$	41,506			$	36,835			$	29,456		$	31,787			$	22,801			$	139,584			$	73,883
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
Weighted average basic shares outstanding			49,329				49,423				49,476			49,394				49,571				49,405				49,884
Weighted average diluted shares outstanding			50,441				50,306				50,331			49,998				49,837				50,352				50,036

 

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)

		For the Quarter Ended
		December 31, 2021										September 30, 2021										December 31, 2020
		Average Outstanding Balance				Interest Earned/ Interest Paid			Average Yield/ Rate			Average Outstanding Balance				Interest Earned/ Interest Paid			Average Yield/ Rate			Average Outstanding Balance				Interest Earned/ Interest Paid			Average Yield/ Rate
		(Dollars in thousands)
Assets
Interest-earning assets:
Loans1		$	6,777,397			$	70,334		4.12	%		$	6,384,856			$	66,911		4.16	%		$	5,798,692			$	65,259		4.48	%
LHI, MW			483,850				3,629		2.98				465,945				3,697		3.15				446,027				3,355		2.99
PPP loans			83,553				211		1.00				210,092				531		1.00				390,509				983		1.00
Debt securities			1,092,089				9,553		3.47				1,119,952				7,613		2.70				1,076,031				7,652		2.83
Interest-earning deposits in other banks			417,266				165		0.16				336,289				130		0.15				258,687				99		0.15
Equity securities and other investments			191,031				1,004		2.09				167,242				898		2.13				95,706				752		3.13
Total interest-earning assets			9,045,186				84,896		3.72				8,684,376				79,780		3.64				8,065,652				78,100		3.85
ACL			(95,218	)									(99,482	)									(121,162	)
Noninterest-earning assets			838,703										800,576										805,651
Total assets		$	9,788,671									$	9,385,470									$	8,750,141
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand and savings deposits		$	3,357,958				1,629		0.19	%		$	3,201,409			$	1,588		0.20	%		$	2,862,084				2,105		0.29	%
Certificates and other time deposits			1,615,066				1,661		0.41				1,519,824				1,934		0.50				1,467,250				3,919		1.06
Advances from FHLB			777,577				1,847		0.94				777,617				1,848		0.94				885,014				2,222		1.00
Subordinated debentures and subordinated notes			259,191				3,018		4.62				264,714				3,134		4.70				259,581				3,088		4.73
Total interest-bearing liabilities			6,009,792				8,155		0.54				5,763,564				8,504		0.59				5,473,929				11,334		0.82
Noninterest-bearing liabilities:
Noninterest-bearing deposits			2,413,443										2,271,197										2,011,995
Other liabilities			63,760										60,181										67,943
Total liabilities			8,486,995										8,094,942										7,553,867
Stockholders’ equity			1,301,676										1,290,528										1,196,274
Total liabilities and stockholders’ equity		$	9,788,671									$	9,385,470									$	8,750,141
Net interest rate spread2									3.18	%									3.05	%									3.03	%
Net interest income and margin3						$	76,741		3.37	%						$	71,276		3.26	%						$	66,766		3.29	%

¹ Includes average outstanding balances of loans held for sale of $8,987, $8,542 and $11,938 for the three months ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively, and average balances of LHI, excluding MW and PPP loans.
² Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
³ Net interest margin is equal to net interest income divided by average interest-earning assets.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)

		For the Year Ended December 31,
			2021										2020
		Average Outstanding Balance				Interest Earned/ Interest Paid			Average Yield/ Rate			Average Outstanding Balance				Interest Earned/ Interest Paid			Average Yield/ Rate
		(Dollars in thousands)
Assets
Interest-earning assets:
Loans1		$	6,285,510			$	263,583		4.19	%		$	5,770,228			$	273,999		4.97	%
LHI, MW			468,001				14,219		3.04				318,657				9,672		3.04
PPP loans			272,770				2,724		1.00				290,851				2,912		1.00
Debt securities			1,092,967				32,132		2.94				1,083,633				30,726		2.84
Interest-earning deposits in other banks			410,785				589		0.14				276,970				1,221		0.44
Equity securities and other investments			133,594				3,237		2.42				100,556				3,320		3.30
Total interest-earning assets			8,663,627				316,484		3.65				7,840,895				321,850		4.10
ACL			(101,383	)									(98,527	)
Noninterest-earning assets			799,334										782,907
Total assets		$	9,361,578									$	8,525,275
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand and savings deposits		$	3,198,225				6,858		0.21			$	2,726,462				13,233		0.49
Certificates and other time deposits			1,540,188				9,079		0.59				1,550,995				23,678		1.53
Advances from FHLB			777,635				7,336		0.94				1,024,142				10,609		1.04
Subordinated debentures and subordinated notes			263,535				12,428		4.72				172,594				8,532		4.94
Total interest-bearing liabilities			5,779,583				35,701		0.62				5,474,193				56,052		1.02
Noninterest-bearing liabilities:
Noninterest-bearing deposits			2,256,546										1,825,806
Other liabilities			57,457										60,303
Total liabilities			8,093,586										7,360,302
Stockholders’ equity			1,267,992										1,164,973
Total liabilities and stockholders’ equity		$	9,361,578									$	8,525,275
Net interest rate spread2									3.03	%									3.08	%
Net interest income and margin3						$	280,783		3.24	%						$	265,798		3.39	%

¹Includes average outstanding balances of loans held for sale of $12,093 and $15,315 for the twelve months ended December 31, 2021 and 2020, respectively, and average balances of LHI, excluding MW and PPP loans.
² Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
³ Net interest margin is equal to net interest income divided by average interest-earning assets.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)

Yield Trend

		For the Quarter Ended
		Dec 31, 2021			Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020
Average yield on interest-earning assets:
Loans1		4.12	%		4.16	%		4.16	%		4.31	%		4.48	%
LHI, MW		2.98			3.15			3.06			3.03			2.99
PPP loans		1.00			1.00			1.00			1.00			1.00
Debt securities		3.47			2.70			2.76			2.84			2.83
Interest-bearing deposits in other banks		0.16			0.15			0.12			0.15			0.15
Equity securities and other investments		2.09			2.13			3.08			3.08			3.13
Total interest-earning assets		3.72	%		3.64	%		3.53	%		3.71	%		3.85	%
Average rate on interest-bearing liabilities:
Interest-bearing demand and savings deposits		0.19	%		0.20	%		0.21	%		0.26	%		0.29	%
Certificates and other time deposits		0.41			0.50			0.64			0.82			1.06
Advances from FHLB		0.94			0.94			0.94			0.94			1.00
Subordinated debentures and subordinated notes		4.62			4.70			4.75			4.80			4.73
Total interest-bearing liabilities		0.54	%		0.59	%		0.63	%		0.72	%		0.82	%
Net interest rate spread2		3.18	%		3.05	%		2.90	%		2.99	%		3.03	%
Net interest margin3		3.37	%		3.26	%		3.11	%		3.22	%		3.29	%

¹ Includes average outstanding balances of loans held for sale of $8,987, $8,542, $14,364, $16,602 and $11,938 for the three months ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively, and average balances of LHI, excluding MW and PPP loans.
² Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
³ Net interest margin is equal to net interest income divided by average interest-earning assets.

Supplemental Yield Trend

		For the Quarter Ended
		Dec 31, 2021			Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020
Average cost of interest-bearing deposits		0.26	%		0.30	%		0.35	%		0.45	%		0.55	%
Average costs of total deposits, including noninterest-bearing		0.18			0.20			0.23			0.31			0.38

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)

LHI and Deposit Portfolio Composition

		Dec 31, 2021							Sep 30, 2021							Jun 30, 2021							Mar 31, 2021							Dec 31, 2020
		(Dollars in thousands)
LHI1
Commercial		$	2,006,876			29.6	%		$	1,793,740			27.1	%		$	1,771,100			28.2	%		$	1,632,040			27.4	%		$	1,559,546			26.7	%
Real Estate:
Owner occupied commercial ("OOCRE")			665,537			9.8				711,476			10.7				744,899			11.9				733,310			12.3				717,472			12.3
Non-owner occupied commercial ("NOOCRE")			2,120,309			31.3				2,194,438			33.1				1,986,538			31.6				1,970,945			33.0				1,904,132			32.5
Construction and land			1,062,144			15.7				936,174			14.1				871,765			13.9				723,444			12.1				693,030			11.8
Farmland			55,827			0.8				73,550			1.1				13,661			0.2				14,751			0.2				13,844			0.2
1-4 family residential			542,566			8.0				543,518			8.2				513,635			8.2				492,609			8.3				524,344			9.0
Multi-family residential			310,241			4.6				356,885			5.4				367,445			5.9				386,844			6.5				424,962			7.3
Consumer			11,998			0.2				14,266			0.2				10,530			0.1				12,431			0.2				13,000			0.2
Total LHI		$	6,775,498			100	%		$	6,624,047			100	%		$	6,279,573			100	%		$	5,966,374			100	%		$	5,850,330			100	%
MW			565,645							615,045							559,939							599,001							577,594
PPP loans			53,369							135,842							291,401							407,353							358,042
Total LHI1		$	7,394,512						$	7,374,934						$	7,130,913						$	6,972,728						$	6,785,966
Deposits
Noninterest-bearing		$	2,510,723			34.1	%		$	2,302,925			32.1	%		$	2,388,068			34.3	%		$	2,171,719			31.6	%		$	2,097,099			32.2	%
Interest-bearing transaction			579,408			7.9				514,537			7.2				451,307			6.5				463,343			6.7				453,110			7.0
Money market			2,568,843			34.9				2,585,926			36.0				2,539,061			36.4				2,602,903			37.7				2,398,526			36.8
Savings			128,061			1.7				127,843			1.8				122,606			1.8				123,447			1.8				106,820			1.6
Certificates and other time deposits			1,576,580			21.4				1,647,521			22.9				1,477,860			21.2				1,543,158			22.2				1,457,291			22.4
Total deposits		$	7,363,615			100	%		$	7,178,752			100	%		$	6,978,902			100	%		$	6,904,570			100	%		$	6,512,846			100	%
Loan to Deposit Ratio			100.4	%						102.7	%						102.2	%						101.0	%						104.2	%
Loan to Deposit Ratio, excluding MW and PPP loans			92.0	%						92.3	%						90.0	%						86.4	%						89.8	%

¹ Total LHI does not include deferred fees of $8.1 million September 30, 2021 and deferred costs of $9.5 million, $7.5 million, $2.9 million and $2.5 million at December 31, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)

Asset Quality

	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 in thousands)
NPAs:
Nonaccrual loans	$	49,687			$	72,317			$	76,994			$	73,594			$	81,096			$	49,687			$	81,096
Accruing loans 90 or more days past due1		441				1,711				462				9,093				4,204				441				4,204
Total nonperforming loans held for investment ("NPLs")		50,128				74,028				77,456				82,687				85,300				50,128				85,300
OREO		—				—				2,467				2,337				2,337				—				2,337
Total NPAs	$	50,128			$	74,028			$	79,923			$	85,024			$	87,637			$	50,128			$	87,637
Charge-offs:
Residential	$	—			$	(64	)		$	(300	)		$	(15	)		$	(18	)		$	(379	)		$	(18	)
OOCRE		(898	)			(813	)			(689	)			—				—				(2,400	)			(2,421	)
NOOCRE		(7,936	)			—				—				—				(2,865	)			(7,936	)			(2,865	)
Commercial		(4,114	)			(5,508	)			(5,608	)			(346	)			(13,699	)			(15,576	)			(15,507	)
Consumer		(44	)			(17	)			(20	)			(18	)			(26	)			(99	)			(162	)
Total charge-offs		(12,992	)			(6,402	)			(6,617	)			(379	)			(16,608	)			(26,390	)			(20,973	)
Recoveries:
Residential		6				26				29				3				49				64				57
OOCRE		—				—				500				—				—				500				—
Commercial		61				596				659				226				52				1,542				102
Consumer		257				8				36				2				—				303				287
Total recoveries		324				630				1,224				231				101				2,409				446
Net charge-offs	$	(12,668	)		$	(5,772	)		$	(5,393	)		$	(148	)		$	(16,507	)		$	(23,981	)		$	(20,527	)
CECL transition adjustment	$	—			$	—			$	—			$	—			$	—			$	—			$	39,137
ACL at end of period	$	77,754			$	93,771			$	99,543			$	104,936			$	105,084			$	77,754			$	105,084
Asset Quality Ratios:
NPAs to total assets		0.51	%			0.77	%			0.85	%			0.92	%			0.99	%			0.51	%			0.99	%
NPLs to total LHI, excluding MW and PPP loans		0.74				1.12				1.23				1.39				1.46				0.74				1.46
ACL to total LHI, excluding MW and PPP loans		1.15				1.42				1.59				1.76				1.80				1.15				1.80
Net charge-offs to average loans outstanding		0.19				0.09				0.09				—				0.28				0.38				0.36

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 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 per common share 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
		Dec 31, 2021				Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020
		(Dollars in thousands, except per share data)
Tangible Common Equity
Total stockholders' equity		$	1,315,079			$	1,284,160			$	1,272,907			$	1,233,808			$	1,203,376
Adjustments:
Goodwill			(403,771	)			(370,840	)			(370,840	)			(370,840	)			(370,840	)
Core deposit intangibles			(47,998	)			(50,436	)			(52,873	)			(55,311	)			(57,758	)
Tangible common equity		$	863,310			$	862,884			$	849,194			$	807,657			$	774,778
Common shares outstanding			49,372				49,229				49,498				49,433				49,340
Book value per common share		$	26.64			$	26.09			$	25.72			$	24.96			$	24.39
Tangible book value per common share		$	17.49			$	17.53			$	17.16			$	16.34			$	15.70

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
		Dec 31, 2021				Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020
		(Dollars in thousands)
Tangible Common Equity
Total stockholders' equity		$	1,315,079			$	1,284,160			$	1,272,907			$	1,233,808			$	1,203,376
Adjustments:
Goodwill			(403,771	)			(370,840	)			(370,840	)			(370,840	)			(370,840	)
Core deposit intangibles			(47,998	)			(50,436	)			(52,873	)			(55,311	)			(57,758	)
Tangible common equity		$	863,310			$	862,884			$	849,194			$	807,657			$	774,778
Tangible Assets
Total assets		$	9,757,249			$	9,572,300			$	9,349,525			$	9,237,510			$	8,820,871
Adjustments:
Goodwill			(403,771	)			(370,840	)			(370,840	)			(370,840	)			(370,840	)
Core deposit intangibles			(47,998	)			(50,436	)			(52,873	)			(55,311	)			(57,758	)
Tangible Assets		$	9,305,480			$	9,151,024			$	8,925,812			$	8,811,359			$	8,392,273
Tangible Common Equity to Tangible Assets			9.28	%			9.43	%			9.51	%			9.17	%			9.23	%

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 Year Ended
		Dec 31, 2021				Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Dec 31, 2021				Dec 31, 2020
		(Dollars in thousands)
Net income available for common stockholders adjusted for amortization of core deposit intangibles
Net income		$	41,506			$	36,835			$	29,456			$	31,787			$	22,801			$	139,584			$	73,883
Adjustments:
Plus: Amortization of core deposit intangibles			2,438				2,438				2,438				2,447				2,451				9,761				9,804
Less: Tax benefit at the statutory rate			512				512				512				514				515				2,050				2,060
Net income available for common stockholders adjusted for amortization of core deposit intangibles		$	43,432			$	38,761			$	31,382			$	33,720			$	24,737			$	147,295			$	81,627
Average Tangible Common Equity
Total average stockholders' equity		$	1,301,676			$	1,290,528			$	1,254,371			$	1,224,294			$	1,196,274			$	1,267,992			$	1,164,973
Adjustments:
Average goodwill			(393,220	)			(370,840	)			(370,840	)			(370,840	)			(370,840	)			(376,480	)			(370,840	)
Average core deposit intangibles			(49,596	)			(52,043	)			(54,471	)			(56,913	)			(59,010	)			(53,233	)			(62,803	)
Average tangible common equity		$	858,860			$	867,645			$	829,060			$	796,541			$	766,424			$	838,279			$	731,330
Return on Average Tangible Common Equity (Annualized)			20.06	%			17.72	%			15.18	%			17.17	%			12.84	%			17.57	%			11.16	%

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

Operating Earnings, Pre-tax, Pre-provision Operating Earnings and performance metrics calculated using Operating Earnings and Pre-tax, Pre-provision Operating Earnings, including Diluted Operating Earnings per Share, Operating Return on Average Assets, Pre-tax, Pre-Provision Operating Return on Average Assets, Operating Return on Average Tangible Common Equity and Operating Efficiency Ratio. Operating earnings, pre-tax, pre-provision operating earnings and the performance metrics calculated using these metrics, listed below, are non-GAAP measures used by management to evaluate the Company’s financial performance. We calculate (a) operating earnings as net income plus severance payments, plus loss (gain) on sale of securities, net, plus debt extinguishment costs, less Thrive PPP loan forgiveness income, plus merger and acquisition expenses, less tax impact of adjustments, plus nonrecurring tax adjustments. We calculate (b) diluted operating earnings per share as operating earnings as described in clause (a) divided by weighted average diluted shares outstanding. We calculate (c) pre-tax, pre-provision operating earnings as operating earnings as described in clause (a) plus provision for income taxes, plus benefit (provision) for credit losses and unfunded commitments. We calculate (d) pre-tax, pre-provision operating return on average assets as pre-tax, pre-provision operating earnings as described in clause (a) divided by total average assets. We calculate (e) operating return on average assets as operating earnings as described in clause (a) divided by total average assets. We calculate (f) operating return on average tangible common equity as operating earnings as described in clause (a), adjusted for the amortization of intangibles and tax benefit at the statutory rate, divided by total average tangible common equity (average stockholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization). We calculate (g) operating efficiency ratio as non interest expense plus adjustments to operating non interest expense divided by non interest income plus adjustments to operating non interest income, plus net interest income.

We believe that these measures and the operating metrics calculated utilizing these measures are important to management and many investors in the marketplace who are interested in understanding the ongoing operating performance of the Company and provide meaningful comparisons to its peers.

The following tables reconcile, as of the dates set forth below, operating net income and pre-tax, pre-provision operating earnings and related metrics:

		For the 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 in thousands)
Operating Earnings
Net income		$	41,506			$	36,835		$	29,456		$	31,787		$	22,801			$	139,584		$	73,883
Plus: Severance payments1			—				—			627			—			—				627			—
Plus: Loss (gain) on sale of securities available for sale, net			—				188			—			—			256				188			(2,615	)
Plus: Debt extinguishment costs2			—				—			—			—			9,746				—			11,307
Less: Thrive PPP loan forgiveness income3			—				1,912			—			—			—				1,912			—
Plus: Merger and acquisition expenses			826				—			—			—			—				826			—
Operating pre-tax income			42,332				35,111			30,083			31,787			32,803				139,313			82,575
Less: Tax impact of adjustments			(78	)			39			131			—			2,100				92			1,823
Plus: Nonrecurring tax adjustments4			—				—			—			426			(973	)			426			(2,772	)
Operating earnings		$	42,410			$	35,072		$	29,952		$	32,213		$	29,730			$	139,647		$	77,980
Weighted average diluted shares outstanding			50,441				50,306			50,331			49,998			49,837				50,352			50,036
Diluted EPS		$	0.82			$	0.73		$	0.59		$	0.64		$	0.46			$	2.77		$	1.48
Diluted operating EPS		$	0.84			$	0.70		$	0.60		$	0.64		$	0.60			$	2.77		$	1.56

¹ Severance payments relate to branch restructurings made during the three months ended June 30, 2021.
² Debt extinguishment costs relate to prepayment penalties paid in connection with the early payoff of FHLB structured advances.
³ During the third quarter of 2021, Thrive’s PPP loan with another bank was 100% forgiven by the Small Business Administration. As a result of our 49% investment in Thrive, the $1.9 million represents our portion of the PPP loan forgiveness. PPP fee income is not taxable and as such has no tax impact.
⁴ 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 Bancorp, Inc. tax return to carry back a net operating loss ("NOL") incurred by Green Bancorp, Inc. on January 1, 2019. The Company was allowed to carry back this NOL as result of a provision in the Coronavirus Aid, Relief, and Economic Security Act, which permits NOL generated in tax years 2018, 2019 or 2020 to be carried back five years.

		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 in thousands)
Pre-Tax, Pre-Provision Operating Earnings
Net Income		$	41,506			$	36,835			$	29,456			$	31,787			$	22,801			$	139,584			$	73,883
Plus: Provision for income taxes			10,697				9,195				7,837				8,993				4,702				36,722				14,203
Plus: (Benefit) provision for credit losses and unfunded commitments			(4,389	)			(448	)			577				(570	)			902				(4,830	)			65,669
Plus: Severance payments			—				—				627				—				—				627				—
Plus: Loss (gain) on sale of securities, net			—				188				—				—				256				188				(2,615	)
Less: Thrive PPP loan forgiveness income			—				1,912				—				—				—				1,912				—
Plus: Debt extinguishment costs			—				—				—				—				9,746				—				11,307
Plus: Merger and acquisition expenses			826				—				—				—				—				826				—
Net pre-tax, pre-provision operating earnings		$	48,640			$	43,858			$	38,497			$	40,210			$	38,407			$	171,205			$	162,447
Total average assets		$	9,788,671			$	9,385,470			$	9,321,279			$	8,941,271			$	8,750,141			$	9,361,578			$	8,525,275
Pre-tax, pre-provision operating return on average assets1			1.97	%			1.85	%			1.66	%			1.82	%			1.75	%			1.83	%			1.91	%
Average Total Assets		$	9,788,671			$	9,385,470			$	9,321,279			$	8,941,271			$	8,750,141			$	9,361,578			$	8,525,275
Return on average assets1			1.68	%			1.56	%			1.27	%			1.44	%			1.04	%			1.49	%			0.87	%
Operating return on average assets1			1.72				1.48				1.29				1.46				1.35				1.49				0.91
Operating earnings adjusted for amortization of core deposit intangibles
Operating earnings		$	42,410			$	35,072			$	29,952			$	32,213			$	29,730			$	139,647			$	77,980
Adjustments:
Plus: Amortization of core deposit intangibles			2,438				2,438				2,438				2,447				2,451				9,761				9,804
Less: Tax benefit at the statutory rate			512				512				512				514				515				2,050				2,060
Operating earnings adjusted for amortization of core deposit intangibles		$	44,336			$	36,998			$	31,878			$	34,146			$	31,666			$	147,358			$	85,724
Average Tangible Common Equity
Total average stockholders' equity		$	1,301,676			$	1,290,528			$	1,254,371			$	1,224,294			$	1,196,274			$	1,267,992			$	1,164,973
Adjustments:
Average goodwill			(393,220	)			(370,840	)			(370,840	)			(370,840	)			(370,840	)			(376,480	)			(370,840	)
Average core deposit intangibles			(49,596	)			(52,043	)			(54,471	)			(56,913	)			(59,010	)			(53,233	)			(62,803	)
Average tangible common equity		$	858,860			$	867,645			$	829,060			$	796,541			$	766,424			$	838,279			$	731,330
Operating return on average tangible common equity1			20.48	%			16.92	%			15.42	%			17.39	%			16.44	%			17.58	%			11.72	%
Efficiency ratio			48.53	%			47.55	%			52.42	%			49.62	%			62.52	%			49.45	%			50.90	%
Operating efficiency ratio
Net interest income		$	76,741			$	71,276			$	67,131			$	65,635			$	66,766			$	280,783			$	265,798
Noninterest income			16,150				15,627				12,456				14,172				9,012				58,405				47,344
Plus: Loss (gain) on sale of securities available for sale, net			—				188				—				—				256				188				(2,615	)
Less: Thrive's PPP loan forgiveness income			—				1,912				—				—				—				1,912				—
Operating noninterest income			16,150				13,903				12,456				14,172				9,268				56,681				49,959
Noninterest expense			45,077				41,321				41,717				39,597				47,373				167,712				159,387
Less: Severance payments			—				—				627				—				—				627				—
Less: Debt extinguishment costs			—				—				—				—				9,746				—				11,307
Less: Merger and acquisition expenses			826				—				—				—				—				826				—
Operating noninterest expense		$	44,251			$	41,321			$	41,090			$	39,597			$	37,627			$	166,259			$	148,080
Operating efficiency ratio			47.64	%			48.51	%			51.63	%			49.62	%			49.49	%			49.27	%			47.69	%

¹ Annualized ratio for quarterly metrics.

FAQ

What were Veritex Holdings' Q4 2021 financial results?

Veritex Holdings reported Q4 2021 net income of $41.5 million and diluted EPS of $0.82.

How did loan balances perform for Veritex Holdings in 2021?

Loan balances increased approximately 16% during 2021.

What is the status of Veritex Holdings' nonperforming assets?

Nonperforming assets decreased to 0.51% of total assets, the lowest since 2019.

What is the dividend declared by Veritex Holdings?

Veritex declared a quarterly cash dividend of $0.20 per share, payable on February 25, 2022.

How did total deposits change for Veritex Holdings in 2021?

Total deposits grew by $850.8 million or 13.1% year-over-year.