DALLAS, Oct. 27, 2020 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. (Veritex or the Company) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the quarter ended September 30, 2020.

Despite the economic headwinds resulting from the pandemic, we delivered a strong quarter.  Loans on active deferral have declined 87% since late July.  We remain optimistic about the current recovery and the long-term strength of the DFW and Houston economies, said C. Malcolm Holland, III, the Companys Chairman and Chief Executive Officer. Our quarterly results reflect strong pre-tax, pre-provision operating net revenue, slower building of our allowance for credit losses, higher capital levels and positive loan and deposit growth. I couldnt be more proud and encouraged by what the team has accomplished during 2020 which is proving to be a challenging operating period.

Third Quarter Highlights

• Net income of $22.9 million, or $0.46 diluted earnings per share (EPS), compared to $24.0 million, or $0.48 diluted EPS, for the quarter ended June 30, 2020 and $27.4 million, or $0.51 diluted EPS, for the quarter ended September 30, 2019;

• Pre-tax, pre-provision operating earnings ¹ totaled $39.3 million, compared to $45.7 million for the quarter ended June 30, 2020 and $45.7 million for the quarter ended September 30, 2019;

• Provision for credit losses and unfunded commitments was $10.1 million, compared to $19.0 million for the quarter ended June 30, 2020;

• Allowance for credit losses (ACL) to total loans held for investments (LHI), excluding mortgage warehouse and Paycheck Protection Program (PPP) loans, was 2.10% for the quarter ended September 30, 2020 compared to 2.01% for the quarter ended June 30, 2020.

• Total loans, excluding PPP loans, grew $165.3 million from the second quarter of 2020, or 10.7% annualized.

• Total deposits grew $97.0 million from the second quarter of 2020, or 6.3% annualized, with the average cost of total deposits decreasing to 0.46% for the three months ended September 30, 2020 from 0.59% for the three months ended June 30, 2020;

• Growth of $20.9 million in total common equity tier 1 capital for the three months ended September 30, 2020;

• Declared quarterly cash dividend of $0.17 payable on November 19, 2020;

• On October 5, 2020, issued $125 million in subordinated debt initially bearing a fixed interest rate of 4.125%; and

• On October 27, 2020, extended the expiration date of the Stock Buyback Program from December 31, 2020 to March 31, 2021.

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

Results of Operations for the Three Months Ended September 30, 2020

Net Interest Income

For the three months ended September 30, 2020, net interest income before provision for credit losses was $65.9 million and net interest margin was 3.32% compared to $65.8 million and 3.31%, respectively, for the three months ended June 30, 2020. Net interest margin increased 1 basis point from the three months ended June 30, 2020 primarily due to decreases in the average rates paid on interest-bearing demand and savings deposits and certificate and other time deposits which is slightly offset by decreases in the average yields earned on loans the three months ended September 30, 2020. As a result, the average cost of interest-bearing deposits decreased 17 basis points to 0.67% for the three months ended September 30, 2020 from 0.84% for the three months ended June 30, 2020.

Net interest income before provision for credit losses decreased by $5.0 million from $70.9 million to $65.9 million and net interest margin decreased by 58 basis points from 3.90% to 3.32% for the three months ended September 30, 2020 as compared to the same period in 2019. The decrease in net interest income before provision for credit losses was primarily due to a $17.1 million decrease in interest income on loans, partially offset by $8.3 million and $5.3 million decrease in interest expenses on transaction and savings deposits and certificates and other time deposits, respectively, during the three months ended September 30, 2020 compared to the three months ended September 30, 2019. Net interest margin decreased 58 basis points from the three months ended September 30, 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 September 30, 2020. As a result, the average cost of interest-bearing deposits decreased 112 basis points to 0.67% for the three months ended September 30, 2020 from 1.79% for the three months ended September 30, 2019.

Noninterest Income

Noninterest income for the three months ended September 30, 2020 was $9.8 million, a decrease of $11.5 million, or 54.0%, compared to the three months ended June 30, 2020. The decrease was primarily due to a $8.7 million decrease in government guaranteed loan income, net. In the second and third quarter of 2020, the Company earned fee income of 5% on PPP loans under $350 thousand, 3% on PPP loans between $350 thousand and $2 million and 1% on PPP loans greater than $2 million totaling fee income of $295 thousand in the third quarter of 2020 compared to $12.5 million in the second quarter of 2020. The recognized fee income on PPP loans was partially offset by a valuation allowance on the PPP loans of $2.0 million as the Company elected to carry these loans at fair value.

Compared to the three months ended September 30, 2019, noninterest income for the three months ended September 30, 2020 increased by $1.4 million, or 16.2%. The increase was primarily due to a $1.3 million increase in government guaranteed loan income, net, as a result of the fee income earned on PPP loans.

Noninterest Expense

Noninterest expense was $36.4 million for the three months ended September 30, 2020, compared to $40.1 million for the three months ended June 30, 2020, a decrease of $3.7 million, or 9.1%. The decrease was primarily driven by a $1.6 million decrease in pre-payment fees on Federal Home Loan Bank (FHLB) advances paid in the second quarter of 2020 with no corresponding  pre-payment fees during the three months ended September 30, 2020. The decrease was also driven by a $1.2 million decrease in COVID related expenses primarily related to Community Reinvestment Act donations, lender incentives, employee overtime and cleaning services that were paid in the second quarter of 2020 with nominal COVID expenses for the three months ended September 30, 2020.

Compared to the three months ended September 30, 2019, noninterest expense for the three months ended September 30, 2020 increased by $1.8 million, or 5.1%. The increase was primarily driven by a $3.0 million increase in salaries and employee benefits offset by a $1.0 million decrease in merger and acquisition expenses.

Financial Condition

Total loans were $6.8 billion at September 30, 2020, an increase of $157.7 million, or 9.6% annualized, compared to June 30, 2020. The increase was the result of the continued execution and success of our loan growth strategy.

Total deposits were $6.2 billion at September 30, 2020, an increase of $97.0 million, or 6.3% annualized, compared to June 30, 2020. The increase was primarily the result of increases of $107.8 million and $13.0 million in interest-bearing transaction and savings deposits and noninterest-bearing demand deposits, respectively, partially offset by a decrease of $23.8 million in certificates and other time deposits.

Asset Quality

Nonperforming assets totaled $96.4 million, or 1.11% of total assets at September 30, 2020, compared to $39.4 million, or 0.50% of total assets, at December 31, 2019. The Company had a net charge-off of $2.5 million for the quarter, which is primarily the result of one relationship charge-off that was fully reserved against in the second quarter of 2020.

The Company recorded a provision for credit losses for the three months ended September 30, 2020 of $8.7 million, compared to $16.2 million and $9.7 million for the three months ended June 30, 2020 and September 30, 2019, respectively. The decrease in the recorded provision for credit losses for the three months ended September 30, 2020, compared to the three months ended June 30, 2020, was primarily attributable to improvement in the Texas economic forecasts used in the Current Expected Credit Losses (CECL) model in the third quarter of 2020 to reflect the expected impact of the COVID-19 pandemic as of September 30, 2020, as compared to our Texas economic forecasts and expected impact of the COVID-19 pandemic as of June 30, 2020. Changes to the Texas economic forecasts were offset by a $13.2 million increase in specific reserves on certain lending relationships that moved onto nonaccrual status during the three months ended September 30, 2020. In the third quarter of 2020, we also recorded a $1.4 million provision for unfunded commitments which was attributable to higher unfunded balances compared to a $2.8 million provision for unfunded commitments recorded for the three months ended June 30, 2020. Allowance for credit losses as a percentage of LHI, excluding mortgage warehouse and PPP loans, was 2.10%, 2.01% and 0.46% of total loans at September 30, 2020, June 30, 2020 and September 30, 2019, respectively.

Dividend Information

On October 27, 2020, Veritexs 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 November 19, 2020 to stockholders of record as of the close of business on November 5, 2020.

Non-GAAP Financial Measures

Veritexs 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, Veritexs 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, October 28, 2020 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/yb2kmpoq and will receive a unique PIN, which can be used when dialing in for the call. This will allow attendees to access the call immediately. Alternatively, participants may call toll-free at (877) 703-9880.

The call and corresponding presentation slides will be webcast live on the home page of the Company's website, https://ir.veritexbank.com/. An audio replay will be available one hour after the conclusion of the call at (855) 859-2056, Conference
#1172928. This replay, as well as the webcast, will be available until November 4, 2020.

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 Veritexs quarterly cash dividend, the impact of certain changes in Veritexs accounting policies, standards and interpretations, the effects of the COVID-19 pandemic and actions taken in response thereto, Veritexs 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 Managements Discussion and Analysis of Financial Condition and Results of Operations sections of Veritexs Annual Report on Form 10-K for the year ended December 31, 2019 and any updates to those risk factors set forth in Veritexs 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 SECs website at www.sec.gov.  If one or more events related to these or other risks or uncertainties materialize, or if Veritexs 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 Veritexs behalf may issue.

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

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

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

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

VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights
(In thousands except percentages)

¹ Includes average outstanding balances of loans held for sale of $15,404, $22,958 and $8,525 for the three months ended September 30, 2020, June 30, 2020, and September 30, 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
(In thousands except percentages)

¹ Includes average outstanding balances of loans held for sale of $16,448 and $8,127 for the nine months ended September 30, 2020 and September 30, 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

Yield Trend

4.68 % 5.32 % 5.63 % 5.85 %Loans held for investment, mortgage warehouse3.00 3.01 3.28 3.51 3.88 PPP loans1.00 1.00 — — — Securities2.84 2.82 2.86 2.83 2.98 Interest-bearing deposits in other banks0.15 0.20 1.14 1.63 2.25 Other investments3.17 3.24 3.72 4.53 4.50 Total interest-earning assets3.90 % 3.99 % 4.74 % 5.00 % 5.26 % Average rate on interest-bearing liabilities: Interest-bearing demand and savings deposits0.31 % 0.37 % 1.00 % 1.24 % 1.57 %Certificates and other time deposits1.36 1.61 2.01 2.10 2.09 Advances from FHLB1.01 0.93 1.23 1.45 1.93 Subordinated debentures and subordinated notes4.87 5.07 5.27 5.23 5.43 Total interest-bearing liabilities0.85 % 0.97 % 1.47 % 1.65 % 1.86 % Net interest rate spread²3.05 % 3.02 % 3.27 % 3.35 % 3.40 %Net interest margin³3.32 % 3.31 % 3.67 % 3.81 % 3.90 %

¹Includes average outstanding balances of loans held for sale of $15,404, $22,958, $10,995, $10,643 and $8,525 for the three months ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 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