Veritex Holdings, Inc. Reports Fourth Quarter and Year-End 2020 Operating Results

Nachrichtenquelle: globenewswire
26.01.2021, 23:00  |  128   |   |   

DALLAS, Jan. 26, 2021 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. (“Veritex” or the “Company”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the fourth quarter and full year of 2020. Net income for the quarter ended December 31, 2020 totaled $22.8 million, or $0.46 diluted earnings per share ("EPS"), compared to $22.9 million, or $0.46 diluted EPS, for the quarter ended September 30, 2020 and $29.1 million, or $0.56 diluted EPS, for the quarter ended December 31, 2019. Operating earnings for the quarter ended December 31, 2020 totaled $29.7 million, or $0.60 diluted operating EPS1, compared to $22.9 million, or $0.46 diluted operating EPS1, for the quarter ended September 30, 2020 and $30.3 million, or $0.58 diluted operating EPS1, for the quarter ended December 31, 2019.

“2020 certainly proved to be a very challenging year given the economic disruption from the pandemic. Yet through it all, the team executed well and delivered strong results,” said C Malcolm Holland, III, the Company’s Chairman and Chief Executive Officer. The 4th quarter reflects continued loan growth, strong deposit results, higher capital levels and continued strong pre-tax, pre-provision operating earnings. Our business momentum and loan pipelines are the strongest we have seen since 2019. This momentum is supported by the recovering economy, the strength of the Texas economy and our significant investment during 2020 in new team members to support our continued success.”

Fourth Quarter and 2020 Highlights:

  • Net income of $22.8 million, or $0.46 diluted EPS, compared to $22.9 million, or $0.46 diluted EPS, for the quarter ended September 30, 2020 and $29.1 million, or $0.56 diluted EPS, for the quarter ended December 31, 2019. Net income of $73.9 million, or $1.48 diluted EPS, for the year ended December 31, 2020 compared to $90.7 million, or $1.68 diluted EPS, for the year ended December 31, 2019;
  • Pre-tax, pre-provision operating earnings1 totaled $38.4 million, compared to $39.3 million for the quarter ended September 30, 2020 and $42.1 million for the quarter ended December 31, 2019;
  • Total loans held for investment, excluding Paycheck Protection Program ("PPP") loans, grew $91.3 million, from the third quarter of 2020, or 5.8% annualized. Total loans held for investment, excluding PPP loans, grew $504.3 million, or 8.5%, year over year;
  • Total deposits grew $290.3 million for the fourth quarter of 2020, or 18.7% annualized, with the average cost of total deposits decreasing to 0.38% for the three months ended December 31, 2020 from 0.46% for the three months ended September 30, 2020. Total deposits grew $618.5 million, or 10.5%, year over year;
  • Return on average tangible common equity1 of 12.84% and operating return on average tangible common equity1 of 16.44% for the three months ended December 31, 2020;
  • Repurchased 347,428 shares of outstanding common stock under the stock buyback program during the three months ended December 31, 2020 at an average price of $22.90. Since inception, the Company has repurchased 11.1% of issued common stock under the stock buyback program;
  • Declared quarterly cash dividend of $0.17 payable on February 18, 2021.

Financial Highlights QTD   YTD
  Q4 2020   Q3 2020   Q4 2020   Q4 2019
   
  (Dollars in thousands)
(unaudited)
GAAP              
Net income $ 22,801     $ 22,920     $ 73,883     $ 90,739  
Diluted EPS 0.46     0.46     1.48     1.68  
Book value per common share 24.39     23.87     24.39     23.32  
Return on average assets2 1.04 %   1.06 %   0.87 %   1.14 %
Efficiency ratio 62.52     48.12     50.90     56.41  
Return on average tangible common equity 12.84     13.27     12.84     13.27  
Non-GAAP1              
Operating earnings $ 29,730     $ 22,928     $ 77,980     $ 123,836  
Diluted operating EPS 0.60     0.46     1.56     2.29  
Tangible book value per common share 15.70     15.19     15.70     14.73  
Pre-tax, pre-provision operating earnings 38,407     39,265     162,447     178,186  
Pre-tax, pre-provision operating return on average assets2 1.75 %   1.82 %   1.91 %   2.24 %
Operating return on average assets2 1.35     1.06     0.91     1.56  
Operating efficiency ratio 49.49     48.11     47.69     43.80  
Operating return on average tangible common equity 16.44     13.27     11.72     17.39  

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.

Result of Operations for the Three Months Ended December 31, 2020

Net Interest Income

For the three months ended December 31, 2020, net interest income before provision for loan losses was $66.8 million and net interest margin was 3.29% compared to $65.9 million and 3.32%, respectively, for the three months ended September 30, 2020. The $896 thousand increase in net interest income was primarily due to a $951 thousand increase in interest income on loans driven by an increase in average balances. Net interest margin decreased 3 basis points from the three months ended September 30, 2020, primarily due to a 1 basis point decrease in yields earned on loan balances. As a result, the average cost of interest-bearing deposits decreased to 0.55% for the three months ended December 31, 2020 from 0.67% for the three months ended September 30, 2020.

Net interest income before provision for loan losses decreased by $3.1 million from $69.9 million to $66.8 million and net interest margin decreased 52 basis points from 3.81% to 3.29% for the three months ended December 31, 2020 as compared to the same period in 2019. The decrease in net interest income before provision for loan losses was primarily due to a $15.5 million decrease in interest income on loans, excluding MW and PPP, partially offset by a $6.1 million and $5.5 million decrease in interest expenses on transaction and savings deposits and certificates and other time deposits, respectively, during the three months ended December 31, 2020 compared to the three months ended December 31, 2019. Net interest margin decreased 52 basis points compared to the three months ended December 31, 2019 primarily due to a decrease in yields earned on loan balances, partially offset by decreases in the average rate paid on interest-bearing demand and savings deposits and certificates and other time deposits for the three months ended December 31, 2020. As a result, the average cost of interest-bearing deposits decreased to 0.55% for the three months ended December 31, 2020 from 1.59% for the three months ended December 31, 2019.

Noninterest Income

Noninterest income for the three months ended December 31, 2020 was $9.0 million, a decrease of $783 thousand, or 8.0% compared to the three months ended September 30, 2020. The decrease in noninterest income is primarily due to a $1.8 million decrease in government guaranteed loan income, net, and a $1.1 million decrease in loan fees. This is partially offset by a $841 thousand increase in service fees and a $830 thousand net increase in derivative income.

Compared to the three months ended December 31, 2019, noninterest income for the three months ended December 31, 2020 grew $1.9 million or 26.4%. The increase was primarily due to a $1.1 million increase in derivative income and a $771 thousand increase in gain on sale of other real estate owned.

Noninterest Expense

Noninterest expense was $47.4 million for the three months ended December 31, 2020, compared to $36.4 million and $36.3 million for the three months ended September 30, 2020 and December 31, 2019, respectively. The increase was primarily driven by a $9.7 million increase in debt extinguishment costs on Federal Home Loan Bank ("FHLB") advances that were pre-paid in the fourth quarter of 2020 with no corresponding FHLB advance prepayments during the three months ended September 30, 2020 or December 31, 2019.

Financial Condition

Total loans were $6.8 billion at December 31, 2020, an increase of $51.4 million, or 3.04% annualized, compared to September 30, 2020 and an increase of $869.6 million, or 14.65%, compared to December 31, 2019. These increases were the result of the continued execution and success of our loan growth strategy.

Total deposits were $6.5 billion at December 31, 2020, an increase of $290.3 million, or 18.7% annualized, compared to September 30, 2020 and an increase of $618.5 million, or 10.49%, compared to December 31, 2019. The increase from September 30, 2020 was primarily the result of an increase of $176.4 million in non-interest bearing demand deposits and an increase of $136.5 million in interest-bearing transaction and savings deposits accounts. The increase from December 31, 2019 was primarily the result of an increase of $540.6 million in non-interest bearing demand deposits and an increase of $303.5 million in interest-bearing transaction and savings deposits accounts, partially offset by a decrease of $225.6 million in certificates and other time deposits.

Asset Quality

Nonperforming assets totaled $87.6 million, or 0.99% of total assets, at December 31, 2020, compared to $96.4 million, or 1.11% of total assets, at September 30, 2020. The Company had net charge-offs of $16.5 million for the quarter, which is primarily the result of one lending relationship.

The Company recorded no provision for credit losses for the three months ended December 31, 2020, compared to $8.7 million and $3.5 million for the three months ended September 30, 2020 and December 31, 2019, respectively. The decrease in the recorded provision for credit losses for the three months ended December 31, 2020, compared to the three months ended September 30, 2020, was primarily attributable to improvement in the Texas economic forecasts used in the Current Expected Credit Losses (“CECL”) model in the fourth quarter of 2020 to reflect the expected impact of the COVID-19 pandemic as of December 31, 2020, as compared to our Texas economic forecasts and expected impact of the COVID-19 pandemic as of September 30, 2020. In the fourth quarter of 2020, we recorded a $902 thousand provision for unfunded commitments which was attributable to higher unfunded balances compared to a $1.4 million provision for unfunded commitments recorded for the three months ended September 30, 2020. Allowance for credit losses ("ACL") as a percentage of loans held for investment ("LHI"), excluding mortgage warehouse and PPP loans, was 1.80%, 2.10% and 0.50% at December 31, 2020, September 30, 2020 and December 31, 2019, respectively.

Income Tax

Income tax expense for the three months ended December 31, 2020 totaled $4.7 million, a decrease of $1.5 million, or 24.1%, compared to the three months ended September 30, 2020. The Company’s effective tax rate was approximately 17.1% and 21.3% for the three months ended December 31, 2020 and the three months ended September 30, 2020, respectively. The change in the effective tax rate from the three months ended September 30, 2020 was primarily due to the reversal of acquired deferred tax liabilities resulting in a tax benefit of $1.2 million offset by tax expense of $550 thousand for setting up an uncertain tax position liability for state nexus tax exposure for the three months ended December 31, 2020.

Dividend Information

On January 26, 2021, Veritex's Board of Directors declared a quarterly cash dividend of $0.17 per share on its outstanding shares of common stock. The dividend will be paid on or after February 18, 2021 to stockholders of record as of the close of business on February 4, 2021.

Non-GAAP Financial Measures

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

Conference Call

The Company will host an investor conference call to review the results on Wednesday, January 27, 2021 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/pkxdjtjuzz 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 #4893521. This replay, as well as the webcast, will be available until February 3, 2021.

About Veritex Holdings, Inc.

Headquartered in Dallas, Texas, Veritex is a bank holding company that conducts banking activities through its wholly-owned subsidiary, Veritex Community Bank, with locations throughout the Dallas-Fort Worth metroplex and in the Houston metropolitan area. Veritex Community Bank is a Texas state chartered bank regulated by the Texas Department of Banking and the Board of Governors of the Federal Reserve System. For more information, visit www.veritexbank.com.

Forward-Looking Statements

This earnings release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, statements relating to the expected payment date of Veritex’s quarterly cash dividend, the impact of certain changes in Veritex’s accounting policies, standards and interpretations, the effects of the COVID-19 pandemic and actions taken in response thereto, Veritex’s future financial performance, business and growth strategy, projected plans and objectives, as well as other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact broader economic and industry trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Veritex’s Annual Report on Form 10-K for the year ended December 31, 2019 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 SUBSIDIARY
Financial Highlights
(Unaudited)

  For the Quarter Ended   For the Year Ended
  Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020   Dec 31, 2019   Dec 31, 2020   Dec 31, 2019
   
  (Dollars and shares in thousands)
Per Share Data (Common Stock):                          
Basic EPS $ 0.46     $ 0.46     $ 0.48     $ 0.08     $ 0.56     $ 1.48     $ 1.71  
Diluted EPS 0.46     0.46     0.48     0.08     0.56     1.48     1.68  
Book value per common share 24.39     23.87     23.45     23.19     23.32     24.39     23.32  
Tangible book value per common share1 15.70     15.19     14.71     14.39     14.73     15.70     14.73  
                           
Common Stock Data:                          
Shares outstanding at period end 49,340     49,650     49,633     49,557     51,064     49,340     51,064  
Weighted average basic shares outstanding for the period 49,571     49.647     49.597     50.725     51,472     49,884     53,154  
Weighted average diluted shares outstanding for the period 49,837     49,775     49,727     51,056     52,263     50,036     53,978  
                           
Summary of Credit Ratios:                          
ACL to total LHI, excluding mortgage warehouse and PPP loans 1.80 %   2.10 %   2.01 %   1.73 %   0.50 %   1.80 %   0.50 %
Nonperforming assets to total assets 0.99     1.11     0.62     0.60     0.50     0.99     0.50  
Net charge-offs to average loans outstanding 0.28     0.04     0.03             0.36     0.19  
                           
Summary Performance Ratios:                          
Return on average assets2 1.04 %   1.06 %   1.11 %   0.20 %   1.43 %   0.87 %   1.14 %
Return on average equity2 7.58     7.74     8.36     1.41     9.63     6.34     7.57  
Return on average tangible common equity1, 2 12.84     13.27     14.49     3.27     16.22     11.16     13.02  
Efficiency ratio 62.52     48.12     46.02     47.61     47.12     50.90     56.41  
                           
Selected Performance Metrics - Operating:                          
Diluted operating EPS1 $ 0.60     $ 0.46     $ 0.43     $ 0.08     $ 0.58     $ 1.56     $ 2.29  
Pre-tax, pre-provision operating return on average assets1, 2 1.75 %   1.82 %   2.11 %   1.94 %   2.07 %   1.91 %   2.24 %
Operating return on average assets1, 2 1.35     1.06     0.98     0.20     1.49     0.91     1.56  
Operating return on average tangible common equity1, 2 16.44     13.27     12.90     3.27     16.87     11.72     17.39  
Operating efficiency ratio1 49.49     48.11     45.74     47.61     45.67     47.69     43.80  
                           
Veritex Holdings, Inc. Capital Ratios:                          
Tier 1 capital to average assets (leverage) 9.43     9.54     9.16     9.49     10.17     9.43     10.17  
Common equity tier 1 capital 9.30     9.67     9.66     9.53     10.60     9.30     10.60  
Tier 1 capital to risk-weighted assets 9.66     10.05     10.05     9.92     11.02     9.66     11.02  
Total capital to risk-weighted assets 13.56     12.70     12.71     12.48     13.10     13.56     13.10  
Tangible common equity to tangible assets1 9.23     9.12     8.96     8.81     10.01     9.23     10.01  
                                         

1Refer 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.
2Annualized ratio for quarterly metrics.

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

  Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020   Dec 31, 2019
  (unaudited)   (unaudited)   (unaudited)   (unaudited)    
ASSETS                  
Cash and cash equivalents $ 230,825     $ 128,767     $ 160,306     $ 430,842     $ 251,550  
Debt securities 1,055,201     1,091,440     1,112,061     1,117,804     997,330  
Other investments 87,192     98,023     104,213     112,775     84,063  
                   
Loans held for sale 21,414     13,928     28,041     15,048     14,080  
PPP loans, at fair value 358,042     405,465     398,949          
Loans held for investment, mortgage warehouse ("MW") 577,594     544,845     441,992     371,161     183,628  
Loans held for investment, excluding MW and PPP 5,847,862     5,789,293     5,726,873     5,853,735     5,737,577  
Total loans 6,804,912     6,753,531     6,595,855     6,239,944     5,935,285  
Allowance for credit losses (105,084 )   (121,591 )   (115,365 )   (100,983 )   (29,834 )
Bank-owned life insurance 82,855     82,366     81,876     81,395     80,915  
Bank premises, furniture and equipment, net 115,063     115,794     115,560     116,056     118,536  
Other real estate owned 2,337     5,796     7,716     7,720     5,995  
Intangible assets, net 61,733     64,716     66,705     69,444     72,263  
Goodwill 370,840     370,840     370,840     370,840     370,840  
Other assets 114,997     112,693     88,091     85,787     67,994  
Total assets $ 8,820,871     $ 8,702,375     $ 8,587,858     $ 8,531,624     $ 7,954,937  
LIABILITIES AND STOCKHOLDERS’ EQUITY                  
Deposits:                  
Noninterest-bearing deposits $ 2,097,099     $ 1,920,715     $ 1,907,697     $ 1,549,260     $ 1,556,500  
Interest-bearing transaction and savings deposits 2,958,456     2,821,945     2,714,149     2,536,865     2,654,972  
Certificates and other time deposits 1,457,291     1,479,896     1,503,701     1,713,820     1,682,878  
Total deposits 6,512,846     6,222,556     6,125,547     5,799,945     5,894,350  
Accounts payable and other liabilities 59,263     66,096     64,625     56,339     37,427  
Accrued interest payable 2,665     3,444     4,088     5,407     6,569  
Advances from Federal Home Loan Bank 777,718     1,082,756     1,087,794     1,377,832     677,870  
Subordinated debentures and subordinated notes 262,778     140,158     140,283     140,406     145,571  
Securities sold under agreements to repurchase 2,225     2,028     1,772     2,426     2,353  
Total liabilities 7,617,495     7,517,038     7,424,109     7,382,355     6,764,140  
Commitments and contingencies                  
Stockholders’ equity:                  
Common stock 555     555     555     554     549  
Additional paid-in capital 1,126,437     1,124,148     1,122,063     1,119,757     1,117,879  
Retained earnings 172,232     157,639     143,277     127,812     147,911  
Accumulated other comprehensive income 56,225     47,155     42,014     45,306     19,061  
Treasury stock (152,073 )   (144,160 )   (144,160 )   (144,160 )   (94,603 )
Total stockholders’ equity 1,203,376     1,185,337     1,163,749     1,149,269     1,190,797  
Total liabilities and stockholders’ equity $ 8,820,871     $ 8,702,375     $ 8,587,858     $ 8,531,624     $ 7,954,937  
 

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

  For the Quarter Ended   For the Year Ended
  Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020   Dec 31, 2019   Dec 31, 2020   Dec 31, 2019
Interest income:                          
Loans, including fees $ 69,597     $ 68,685     $ 70,440     $ 77,861     $ 82,469     $ 286,583     $ 340,813  
Investment securities 7,652     7,852     7,825     7,397     7,168     30,726     29,484  
Deposits in financial institutions and Fed Funds sold 99     65     186     871     1,285     1,221     5,540  
Other investments 752     827     891     850     820     3,320     2,949  
Total interest income 78,100     77,429     79,342     86,979     91,742     321,850     378,786  
Interest expense:                          
Transaction and savings deposits 2,105     2,105     2,471     6,552     8,203     13,233     40,355  
Certificates and other time deposits 3,919     5,004     6,515     8,240     9,455     23,678     38,675  
Advances from FHLB 2,222     2,707     2,801     2,879     2,661     10,609     9,984  
Subordinated debentures and subordinated notes 3,088     1,743     1,798     1,903     1,559     8,532     4,675  
Total interest expense 11,334     11,559     13,585     19,574     21,878     56,052     93,689  
Net interest income 66,766     65,870     65,757     67,405     69,864     265,798     285,097  
Provision for credit losses     8,692     16,172     31,776     3,493     56,640     21,514  
Provision for unfunded commitments 902     1,447     2,799     3,881         9,029      
Net interest income after provisions 65,864     55,731     46,786     31,748     66,371     200,129     263,583  
Noninterest income:                          
Service charges and fees on deposit accounts 3,971     3,130     2,960     3,642     3,728     13,703     14,334  
Loan fees 684     1,787     1,240     845     1,921     4,556     7,782  
(Loss) gain on sales of investment securities (256 )   (8 )   2,879         (438 )   2,615     (1,852 )
Gain on sales of mortgage loans held for sale 317     472     308     142     81     1,239     475  
Government guaranteed loan income, net 448     2,257     11,006     439     560     14,150     4,709  
Rental income 579     502     547     551     371     2,179     2,172  
Other 3,269     1,655     2,350     1,628     909     8,902     2,460  
Total noninterest income 9,012     9,795     21,290     7,247     7,132     47,344     30,080  
Noninterest expense:                          
Salaries and employee benefits 20,011     20,553     20,019     18,870     18,917     79,453     72,791  
Occupancy and equipment 4,116     3,980     3,994     4,273     4,198     16,363     16,385  
Professional and regulatory fees 3,578     3,159     2,796     2,196     2,615     11,729     10,201  
Data processing and software expense 2,238     2,452     2,434     2,089     1,880     9,213     8,365  
Marketing 945     1,062     561     1,083     971     3,651     3,259  
Amortization of intangibles 2,558     2,840     2,696     2,696     2,696     10,790     10,887  
Telephone and communications 340     345     308     319     466     1,312     1,847  
Merger and acquisition expense                 918         38,960  
COVID expenses     132     1,245             1,377      
Debt extinguishment costs 9,746         1,561             11,307      
Other 3,841     1,885     4,447     4,019     3,623     14,192     13,712  
Total noninterest expense 47,373     36,408     40,061     35,545     36,284     159,387     177,803  
Income before income tax expense 27,503     29,118     28,015     3,450     37,219     88,086     115,860  
Income tax (benefit) expense 4,702     6,198     3,987     (684 )   8,168     14,203     25,121  
Net income $ 22,801     $ 22,920     $ 24,028     $ 4,134     $ 29,051     $ 73,883     $ 90,739  
                           
Basic EPS $ 0.46     $ 0.46     $ 0.48     $ 0.08     $ 0.56     $ 1.48     $ 1.71  
Diluted EPS $ 0.46     $ 0.46     $ 0.48     $ 0.08     $ 0.56     $ 1.48     $ 1.68  
Weighted average basic shares outstanding 49,571     49,647     49,597     50,725     51,472     49,884     53,154  
Weighted average diluted shares outstanding 49,837     49,775     49,727     51,056     52,263     50,036     53,978  
 

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

  For the Quarter Ended
  December 31, 2020   September 30, 2020   December 31, 2019
  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 $ 5,798,692     $ 65,259     4.48 %   $ 5,753,859     $ 64,958     4.49 %   $ 5,692,773     $ 80,779     5.63 %
Loans held for investment, mortgage warehouse 446,027     3,355     2.99     358,248     2,705     3.00     191,132     1,690     3.51  
PPP loans 390,509     983     1.00     407,112     1,022     1.00              
Debt securities 1,076,031     7,652     2.83     1,101,469     7,852     2.84     1,004,342     7,168     2.83  
Interest-earning deposits in other banks 258,687     99     0.15     175,201     65     0.15     312,530     1,285     1.63  
Equity securities and other investments 95,706     752     3.13     103,948     827     3.17     71,791     820     4.53  
Total interest-earning assets 8,065,652     78,100     3.85     7,899,837     77,429     3.90     7,272,568     91,742     5.00  
Allowance for loan losses (121,162 )           (116,859 )           (27,564 )        
Noninterest-earning assets 805,651             802,948             798,501          
Total assets $ 8,750,141             $ 8,585,926             $ 8,043,505          
                                   
Liabilities and Stockholders’ Equity                                  
Interest-bearing liabilities:                                  
Interest-bearing demand and savings deposits $ 2,862,084     2,105     0.29 %   $ 2,735,170     $ 2,105     0.31 %   $ 2,621,163     8,203     1.24 %
Certificates and other time deposits 1,467,250     3,919     1.06     1,459,046     5,004     1.36     1,789,544     9,455     2.10  
Advances from FHLB 885,014     2,222     1.00     1,067,771     2,707     1.01     726,352     2,661     1.45  
Subordinated debentures and subordinated notes 259,581     3,088     4.73     142,432     1,743     4.87     118,193     1,559     5.23  
Total interest-bearing liabilities 5,473,929     11,334     0.82     5,404,419     11,559     0.85     5,255,252     21,878     1.65  
                                   
Noninterest-bearing liabilities:                                  
Noninterest-bearing deposits 2,011,995             1,937,921             1,540,406          
Other liabilities 67,943             65,704             50,656          
Total liabilities 7,553,867             7,408,044             6,846,314          
Stockholders’ equity 1,196,274             1,177,882             1,197,191          
Total liabilities and stockholders’ equity $ 8,750,141             $ 8,585,926             $ 8,043,505          
                                   
Net interest rate spread2         3.03 %           3.05 %           3.35 %
Net interest income and margin3     $ 66,766     3.29 %       $ 65,870     3.32 %       $ 69,864     3.81 %
 

1 Includes average outstanding balances of loans held for sale of $11,938, $15,404 and $8,525 for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively, and average balances of loans held for investment, excluding mortgage warehouse and PPP loans.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.

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

  For the Year Ended December 31,
  2020   2019
  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 $ 5,770,228     $ 273,999     4.97 %   $ 5,722,039     $ 334,025     5.93 %
Loans held for investment, mortgage warehouse 318,657     9,672     3.04     162,325     6,788     4.28  
PPP loans 290,851     2,912     1.00              
Debt securities 1,083,633     30,726     2.84     977,621     29,484     3.02  
Interest-earning deposits in other banks 276,970     1,221     0.44     259,866     5,540     2.13  
Equity securities and other investments 100,556     3,320     3.30     60,308     2,949     4.89  
Total interest-earning assets 7,840,895     321,850     4.10     7,182,159     378,786     5.27  
Allowance for loan losses (98,527 )           (23,533 )        
Noninterest-earning assets 782,907             799,257          
Total assets $ 8,525,275             $ 7,957,883          
                       
Liabilities and Stockholders’ Equity                      
Interest-bearing liabilities:                      
Interest-bearing demand and savings deposits $ 2,726,462     13,233     0.49     $ 2,648,113     40,355     1.52  
Certificates and other time deposits 1,550,995     23,678     1.53     1,997,090     38,675     1.94  
Advances from FHLB 1,024,142     10,609     1.04     502,681     9,984     1.99  
Subordinated debentures and subordinated notes 172,594     8,532     4.94     86,110     4,675     5.43  
Total interest-bearing liabilities 5,474,193     56,052     1.02     5,233,994     93,689     1.79  
                       
Noninterest-bearing liabilities:                      
Noninterest-bearing deposits 1,825,806             1,480,207          
Other liabilities 60,303             44,809          
Total liabilities 7,360,302             6,759,010          
Stockholders’ equity 1,164,973             1,198,873          
Total liabilities and stockholders’ equity $ 8,525,275             $ 7,957,883          
                       
Net interest rate spread2         3.08 %           3.48 %
Net interest income and margin3     $ 265,798     3.39 %       $ 285,097     3.97 %
 

1Includes average outstanding balances of loans held for sale of $15,315 and $8,762 for the twelve months ended December 31, 2020 and 2019, respectively, and average balances of loans held for investment, excluding mortgage warehouse and PPP loans.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.

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

Yield Trend

  For the Quarter Ended
  Dec 31,
2020
  Sep 30,
2020
  Jun 30,
2020
  Mar 31,
2020
  Dec 31,
2019
Average yield on interest-earning assets:                  
Total loans1 4.48 %   4.49 %   4.68 %   5.32 %   5.63 %
Loans held for investment, mortgage warehouse 2.99     3.00     3.01     3.28     3.51  
PPP loans 1.00     1.00     1.00          
Debt securities 2.83     2.84     2.82     2.86     2.83  
Interest-bearing deposits in other banks 0.15     0.15     0.20     1.14     1.63  
Equity securities and other investments 3.13     3.17     3.24     3.72     4.53  
Total interest-earning assets 3.85 %   3.90 %   3.99 %   4.74 %   5.00 %
                   
Average rate on interest-bearing liabilities:                  
Interest-bearing demand and savings deposits 0.29 %   0.31 %   0.37 %   1.00 %   1.24 %
Certificates and other time deposits 1.06     1.36     1.61     2.01     2.10  
Advances from FHLB 1.00     1.01     0.93     1.23     1.45  
Subordinated debentures and subordinated notes 4.73     4.87     5.07     5.27     5.23  
Total interest-bearing liabilities 0.82 %   0.85 %   0.97 %   1.47 %   1.65 %
                   
Net interest rate spread2 3.03 %   3.05 %   3.02 %   3.27 %   3.35 %
Net interest margin3 3.29 %   3.32 %   3.31 %   3.67 %   3.81 %
                             

1 Includes average outstanding balances of loans held for sale of $11,938, $15,404, $22,958, $10,995 and $8,525 for the three months ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively, and average balances of loans held for investment, excluding mortgage warehouse and PPP loans.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.

Supplemental Yield Trend

  For the Quarter Ended
  Dec 31,
2020
  Sep 30,
2020
  Jun 30,
2020
  Mar 31,
2020
  Dec 31,
2019
Average cost of interest-bearing deposits 0.55 %   0.67 %   0.84 %   1.39 %   1.59 %
Average costs of total deposits, including noninterest-bearing 0.38     0.46     0.59     1.02     1.18  
                             

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

LHI and Deposit Portfolio Composition

  Dec 31, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020   Dec 31, 2019
   
  (Dollars in thousands)
LHI1                                      
Commercial $ 1,559,546     26.7 %   $ 1,623,249     28.0 %   $ 1,555,300     27.2 %   $ 1,777,603     30.4 %   $ 1,712,838     29.9 %
Real Estate:                                      
Owner occupied commercial 717,472     12.3     734,939     12.7     769,952     13.4     723,839     12.4     706,782     12.3  
Non-owner occupied commercial 1,904,132     32.5     1,817,013     31.4     1,847,480     32.3     1,828,386     31.2     1,784,201     31.1  
Construction and land 693,030     11.8     623,496     10.8     599,510     10.5     566,470     9.7     629,374     11.0  
Farmland 13,844     0.2     14,413     0.2     14,723     0.3     14,930     0.3     16,939     0.3  
1-4 family residential 524,344     9.0     548,953     9.5     528,688     9.2     536,892     9.2     549,811     9.6  
Multi-family residential 424,962     7.3     412,412     7.1     394,829     6.8     388,374     6.7     320,041     5.6  
Consumer 13,000     0.2     14,127     0.2     14,932     0.3     15,771     0.3     17,457     0.3  
Total LHI $ 5,850,330     100 %   $ 5,788,602     100 %   $ 5,725,414     100 %   $ 5,852,265     100 %   $ 5,737,443     100 %
                                       
Mortgage warehouse 577,594         544,845         441,992         371,161         183,628      
PPP loans 358,042         405,465         398,949                      
                                       
Total LHI1 $ 6,785,966         $ 6,738,912         $ 6,566,355         $ 6,223,426         $ 5,921,071      
                                       
Deposits                                      
Noninterest-bearing $ 2,097,099     32.2 %   $ 1,920,715     30.9 %   $ 1,907,697     31.1 %   $ 1,549,260     26.7 %   $ 1,556,500     26.4 %
Interest-bearing transaction 453,110     7.0     450,739     7.2     343,640     5.6     306,641     5.3     388,877     6.6  
Money market 2,398,526     36.8     2,267,191     36.4     2,272,520     37.1     2,143,874     37.0     2,180,017     37.0  
Savings 106,820     1.6     104,015     1.7     97,989     1.6     86,350     1.5     86,078     1.5  
Certificates and other time deposits 1,457,291     22.4     1,479,896     23.7     1,503,701     24.5     1,713,820     29.6     1,682,878     28.6  
Total deposits $ 6,512,846     100 %   $ 6,222,556     100 %   $ 6,125,547     100 %   $ 5,799,945     100 %   $ 5,894,350     100 %
                                       
Loan to Deposit Ratio 104.2 %       108.3 %       107.2 %       107.3 %       100.5 %    
Loan to Deposit Ratio, excluding mortgage warehouse and PPP loans 89.8 %       93.0 %       93.5 %       100.9 %       97.3 %    
                                                 

1 Total LHI does not include deferred fees of $2.5 million and $691 thousand at December 31, 2020 and September 30, 2020, respectively, deferred costs of $1.5 million, $1.5 million and $134 thousand at June 30, 2020, March 31, 2020 and December 31, 2019, respectively.

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

Asset Quality

  For the Quarter Ended   For the Year Ended
  Dec 31,
2020
  Sep 30,
2020
  Jun 30,
2020
  Mar 31,
2020
  Dec 31,
2019
  Dec 31,
2020
  Dec 31,
2019
   
  (Dollars in thousands)
Nonperforming Assets ("NPAs"):                          
Nonaccrual loans $ 81,096     $ 88,877     $ 43,594     $ 38,836     $ 29,799     $ 81,096     $ 29,799  
Accruing loans 90 or more days past due1 4,204     1,689     2,021     4,764     3,660     4,204     3,660  
Total nonperforming loans held for investment ("NPLs") 85,300     90,566     45,615     43,600     33,459     85,300     33,459  
Other real estate owned 2,337     5,796     7,716     7,720     5,995     2,337     5,995  
Total NPAs $ 87,637     $ 96,362     $ 53,331     $ 51,320     $ 39,454     $ 87,637     $ 39,454  
                           
Charge-offs:                          
Residential $ (18 )   $     $     $     $     $ (18 )   $ (157 )
Owner occupied commercial real estate     (2,421 )               (2,421 )    
Nonowner occupied commercial real estate (2,865 )                   (2,865 )    
Commercial (13,699 )   (68 )   (1,740 )           (15,507 )   (10,898 )
Consumer (26 )   (11 )   (57 )   (68 )   (48 )   (162 )   (265 )
Total charge-offs (16,608 )   (2,500 )   (1,797 )   (68 )   (48 )   (20,973 )   (11,320 )
                           
Recoveries:                          
Residential 49     7         1     5     57     67  
Commercial 52     14     7     29     135     102     226  
Consumer     13         274     6     287     92  
Total recoveries 101     34     7     304     146     446     385  
                           
Net charge-offs $ (16,507 )   $ (2,466 )   $ (1,790 )   $ 236     $ 98     $ (20,527 )   $ (10,935 )
                           
CECL transition adjustment $     $     $     $ 39,137     $     $ 39,137     $  
                           
Allowance for credit losses ("ACL") at end of period $ 105,084     $ 121,591     $ 115,365     $ 100,983     $ 29,834     $ 105,084     $ 29,834  
                           
Asset Quality Ratios:                          
NPAs to total assets 0.99 %   1.11 %   0.62 %   0.60 %   0.50 %   0.99 %   0.50 %
NPLs to total LHI, excluding mortgage warehouse and PPP loans 1.46     1.56     0.80     0.75     0.57     1.46     0.57  
ACL to total LHI, excluding mortgage warehouse and PPP loans 1.80     2.10     2.01     1.73     0.50     1.80     0.50  
Net charge-offs to average loans outstanding 0.28     0.04     0.03             0.36     0.19  
                                         

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 SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

We identify certain financial measures discussed in this earnings release as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles as in effect from time to time in the United States (“GAAP”), in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios calculated using exclusively either one or both of (i) financial measures calculated in accordance with GAAP and (ii) operating measures or other measures that are not non-GAAP financial measures.

The non-GAAP financial measures that we present in this earnings release should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we present in this earnings release may differ from that of other companies reporting measures with similar names. You should understand how such other financial institutions calculate their financial measures that appear to be similar or have similar names to the non-GAAP financial measures we have discussed in this earnings release when comparing such non-GAAP financial measures.

Tangible Book Value Per Common Share. Tangible book value 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, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020   Dec 31, 2019
   
  (Dollars in thousands, except per share data)
Tangible Common Equity                  
Total stockholders' equity $ 1,203,376      $ 1,185,337      $ 1,163,749      $ 1,149,269      $ 1,190,797   
Adjustments:                  
Goodwill (370,840 )   (370,840 )   (370,840 )   (370,840 )   (370,840 )
Core deposit intangibles (57,758 )   (60,209 )   (62,661 )   (65,112 )   (67,563 )
Tangible common equity $ 774,778      $ 754,288      $ 730,248      $ 713,317      $ 752,394   
Common shares outstanding 49,340      49,650      49,633      49,557      51,064   
                   
Book value per common share $ 24.39      $ 23.87      $ 23.45      $ 23.19      $ 23.32   
Tangible book value per common share $ 15.70      $ 15.19      $ 14.71      $ 14.39      $ 14.73   
                                       

VERITEX HOLDINGS, INC. AND SUBSIDIARY
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, 2020   Sep 30, 2020   Jun 30, 2020   Mar 31, 2020   Dec 31, 2019
   
  (Dollars in thousands)
Tangible Common Equity                  
Total stockholders' equity $ 1,203,376     $ 1,185,337     $ 1,163,749     $ 1,149,269     $ 1,190,797  
Adjustments:                  
Goodwill (370,840 )   (370,840 )   (370,840 )   (370,840 )   (370,840 )
Core deposit intangibles (57,758 )   (60,209 )   (62,661 )   (65,112 )   (67,563 )
Tangible common equity $ 774,778     $ 754,288     $ 730,248     $ 713,317     $ 752,394  
Tangible Assets                  
Total assets $ 8,820,871     $ 8,702,375     $ 8,587,858     $ 8,531,624     $ 7,954,937  
Adjustments:                  
Goodwill (370,840 )   (370,840 )   (370,840 )   (370,840 )   (370,840 )
Core deposit intangibles (57,758 )   (60,209 )   (62,661 )   (65,112 )   (67,563 )
Tangible Assets $ 8,392,273     $ 8,271,326     $ 8,154,357     $ 8,095,672     $ 7,516,534  
Tangible Common Equity to Tangible Assets 9.23 %   9.12 %   8.96 %   8.81 %   10.01 %
 

VERITEX HOLDINGS, INC. AND SUBSIDIARY
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,
2020
  Sep 30,
2020
  Jun 30,
2020
  Mar 31,
2020
  Dec 31,
2019
  Dec 31,
2020
  Dec 31,
2019
   
  (Dollars in thousands)
Net income available for common stockholders adjusted for amortization of core deposit intangibles                          
Net income $ 22,801      $ 22,920      $ 24,028      $ 4,134      $ 29,051      $ 73,883      $ 90,739   
Adjustments:                          
Plus: Amortization of core deposit intangibles 2,451      2,451      2,451      2,451      2,451      9,804      9,830   
Less: Tax benefit at the statutory rate 515      515      515      515      515      2,060      2,065   
Net income available for common stockholders adjusted for amortization of core deposit intangibles $ 24,737      $ 24,856      $ 25,964      $ 6,070      $ 30,987      $ 81,627      $ 98,504   
                           
Average Tangible Common Equity                          
Total average stockholders' equity $ 1,196,274      $ 1,177,882      $ 1,155,798      $ 1,183,116      $ 1,197,191      $ 1,164,973      $ 1,198,873   
Adjustments:                          
Average goodwill (370,840 )   (370,840 )   (370,840 )   (370,840 )   (370,463 )   (370,840 )   (369,441 )
Average core deposit intangibles (59,010 )   (61,666 )   (64,151 )   (66,439 )   (68,913 )   (62,803 )   (72,692 )
Average tangible common equity $ 766,424      $ 745,376      $ 720,807      $ 745,837      $ 757,815      $ 731,330      $ 756,740   
Return on Average Tangible Common Equity (Annualized) 12.84  %   13.27  %   14.49  %   3.27  %   16.22  %   11.16  %   13.02  %
 

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

Operating Earnings, Pre-tax, Pre-provision Operating Earnings and performance metrics calculated using Operating Earnings and Pre-tax, Pre-provision Operating Earnings, including Diluted Operating Earnings per Share, Operating Return on Average Assets, Pre-tax, Pre-Provision Operating Return on Average Assets, Operating Return on Average Tangible Common Equity and Operating Efficiency Ratio. Operating earnings, pre-tax, pre-provision operating earnings and the performance metrics calculated using these metrics, listed below, are non-GAAP measures used by management to evaluate the Company’s financial performance. We calculate (a) operating earnings as net income plus loss (gain) on sale of securities, net, plus loss on sale of disposed branch assets, plus debt extinguishment costs, plus merger and acquisition expenses, less tax impact of adjustments, plus other merger and acquisition tax items, plus re-measurement of deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. We calculate (b) diluted operating earnings per share as operating earnings as described in clause (a) divided by weighted average diluted shares outstanding. We calculate (c) pre-tax, pre-provision operating earnings as operating earnings as described in clause (a) plus provision for income taxes, plus provision for 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,
2020
  Sep 30,
2020
  Jun 30,
2020
  Mar 31,
2020
  Dec 31,
2019
  Dec 31,
2020
  Dec 31,
2019
   
  (Dollars in thousands)
Operating Earnings                          
Net income $ 22,801     $ 22,920     $ 24,028     $ 4,134     $ 29,051     $ 73,883     $ 90,739  
Plus: Loss (gain) on sale of securities available for sale, net 256     8     (2,879 )       438     (2,615 )   1,852  
Plus: Loss on sale of disposed branch assets1                         359  
Plus: Debt extinguishment costs2 9,746         1,561             11,307      
Plus: Merger and acquisition expenses                 918         38,601  
Operating pre-tax income 32,803     22,928     22,710     4,134     30,407     82,575     131,551  
Less: Tax impact of adjustments 2,100         (277 )       (23 )   1,823     8,262  
Plus: Other M&A tax items3                 829         1,512  
Plus: Nonrecurring tax adjustments4 (973 )       (1,799 )       (965 )   (2,772 )   (965 )
Operating earnings $ 29,730     $ 22,928     $ 21,188     $ 4,134     $ 30,294     $ 77,980     $ 123,836  
                           
Weighted average diluted shares outstanding 49,837     49,775     49,727     51,056     52,263     50,036     53,978  
Diluted EPS $ 0.46     $ 0.46     $ 0.48     $ 0.08     $ 0.56     $ 1.49     $ 1.68  
Diluted operating EPS $ 0.60     $ 0.46     $ 0.43     $ 0.08     $ 0.58     $ 1.56     $ 2.29  
                                                       

1 Loss on sale of disposed branch assets for the year ended December 31, 2019 is included in merger and acquisition expense in the condensed consolidated statements of income.
2 Debt extinguishment costs relate to prepayment penalties paid in connection with the early payoff of FHLB structured advances.
3 Other M&A tax items of $829 thousand recorded during the three months ended December 31, 2019 relate to permanent tax expense recognized by the Company as a result of deduction limitations on compensation paid to covered employees in excess of the 162(m) limitation directly due to change-in-control payments made to covered employees in connection with the Green acquisition.
4 A nonrecurring tax adjustment of $973 thousand recorded in the fourth quarter of 2020 was primarily due the reversal of acquired deferred tax liabilities resulting in a tax benefit of $1.2 million offset by tax expense of $281 thousand for the setup of an uncertain tax position liability relating to state tax exposure for tax years prior to the year ending December 31, 2020. A nonrecurring tax adjustment of $1,799 was recorded in the second quarter of 2020 as a result of the Company amending a prior year Green tax return to carry back a net operating loss ("NOL") incurred by Green on January 1, 2019. The Company was allowed to carry back this NOL as result of a provision in the CARES Act which permits NOLs generated in tax years 2018, 2019 or 2020 to be carried back five years. A nonrecurring tax adjustment of $965 thousand was recorded during the fourth quarter of 2019 primarily due to the Company recording a net tax benefit of $1.6 million as a result of the Company settling an audit with the IRS. The Company released an uncertain tax position reserve that was assumed in the Green acquisition resulting in a $2.2 million tax benefit, offset by tax expense totaling $598 thousand that were recorded due to the Tax Cuts and Jobs Act rate change on deferred tax assets resulting from the IRS audit settlement. The net IRS settlement was offset by various non-recurring tax expenses totaling $0.6 million.

  For the Quarter Ended   For the Year Ended
  Dec 31,
2020
  Sep 30,
2020
  Jun 30,
2020
  Mar 31,
2020
  Dec 31,
2019
  Dec 31,
2020
  Dec 31,
2019
   
  (Dollars in thousands)
Pre-Tax, Pre-Provision Operating Earnings                          
Net Income $ 22,801     $ 22,920     $ 24,028     $ 4,134     $ 29,051     $ 73,883     $ 90,739  
Plus: Provision for income taxes 4,702     6,198     3,987     (684 )   8,168     14,203     25,121  
Pus: Provision for credit losses and unfunded commitments 902     10,139     18,971     35,657     3,493     65,669     21,514  
Plus: Loss (gain) on sale of securities, net 256     8     (2,879 )       438     (2,615 )   1,852  
Plus: Loss on sale of disposed branch assets1                         359  
Plus: Debt extinguishment costs 9,746         1,561             11,307      
Plus: Merger and acquisition expenses                 918         38,601  
Net pre-tax, pre-provision operating earnings $ 38,407     $ 39,265     $ 45,668     $ 39,107     $ 42,068     $ 162,447     $ 178,186  
                           
Total average assets $ 8,750,141     $ 8,585,926     $ 8,689,774     $ 8,125,782     $ 8,043,505     $ 8,525,275     $ 7,957,883  
Pre-tax, pre-provision operating return on average assets2 1.75 %   1.82 %   2.11 %   1.94 %   2.07 %   1.91 %   2.24 %
                           
Average Total Assets $ 8,750,141     $ 8,585,926     $ 8,689,744     $ 8,125,782     $ 8,043,505     $ 8,525,275     $ 7,957,883  
Return on average assets2 1.04 %   1.06 %   1.11 %   0.20 %   1.43 %   0.87 %   1.14 %
Operating return on average assets2 1.35     1.06     0.98     0.20     1.49     0.91     1.56  
                           
Operating earnings adjusted for amortization of core deposit intangibles                          
Operating earnings $ 29,730     $ 22,928     $ 21,188     $ 4,134     $ 30,294     $ 77,980     $ 123,836  
Adjustments:                          
Plus: Amortization of core deposit intangibles 2,451     2,451     2,451     2,451     2,451     9,804     9,830  
Less: Tax benefit at the statutory rate 515     515     515     515     515     2,060     2,065  
Operating earnings adjusted for amortization of core deposit intangibles $ 31,666     $ 24,864     $ 23,124     $ 6,070     $ 32,230     $ 85,724     $ 131,601  
                           
Average Tangible Common Equity                          
Total average stockholders' equity $ 1,196,274     $ 1,177,882     $ 1,155,798     $ 1,183,116     $ 1,197,191     $ 1,164,973     $ 1,198,873  
Adjustments:                          
Average goodwill (370,840 )   (370,840 )   (370,840 )   (370,840 )   (370,463 )   (370,840 )   (369,441 )
Average core deposit intangibles (59,010 )   (61,666 )   (64,151 )   (66,439 )   (68,913 )   (62,803 )   (72,692 )
Average tangible common equity $ 766,424     $ 745,376     $ 720,807     $ 745,837     $ 757,815     $ 731,330     $ 756,740  
Operating return on average tangible common equity2 16.44 %   13.27 %   12.90 %   3.27 %   16.87 %   11.72 %   17.39 %
                           
Efficiency ratio 62.52 %   48.12 %   46.02 %   47.61 %   47.12 %   50.90 %   56.41 %
Operating efficiency ratio 49.49 %   48.11 %   45.74 %   47.61 %   45.67 %   47.69 %   43.80 %
                                         

1 Loss on sale of disposed branch assets for the year ended December 31, 2019 is included in merger and acquisition expense in the condensed consolidated statements of income.
2 Annualized ratio for quarterly metrics.

CONTACT: Media Contact:
LaVonda Renfro
972-349-6200
lrenfro@veritexbank.com

Investor Relations:
Susan Caudle
972-349-6132
scaudle@veritexbank.com



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Disclaimer

Veritex Holdings, Inc. Reports Fourth Quarter and Year-End 2020 Operating Results DALLAS, Jan. 26, 2021 (GLOBE NEWSWIRE) - Veritex Holdings, Inc. (“Veritex” or the “Company”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the fourth quarter and full year of 2020. Net income for …

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