1 Past due loans exclude purchased credit deteriorated loans that are accounted for on a pooled basis and non-accrual loans. 2 Total loans excludes Loans Held for Sale, MW and PPP loans. Totals: 0.19% 0.36% 0.38% 0.16% 0.25% 15 Credit Quality (continued) Total CRE Criticized $341.7 MM Summary • Criticized loans = $506.6 MM, down 4% from 3Q23 • 7% decrease in criticized loans compared to December 31, 2022 Quarterly Criticized Loans ($ in millions, excluding PCD loans) $297.7 $204.8 $287.1 $304.5 $293.4 $175. ...

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements – Unaudited](index=3&type=section&id=Item%201.%20Financial%20Statements%20%E2%80%93%20Unaudited) This section presents the unaudited consolidated financial statements of Veritex Holdings, Inc. and its subsidiaries, including the balance sheets, statements of income, comprehensive income, changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies and financial instrument specifics [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights ($ thousands) | Metric | September 30, 2023 | December 31, 2022 | Change (%) | | :-------------------------------- | :------------------- | :------------------ | :--------- | | Total Assets | $12,346,331 | $12,154,361 | 1.58% | | Total Liabilities | $10,855,165 | $10,704,588 | 1.41% | | Total Stockholders' Equity | $1,491,166 | $1,449,773 | 2.86% | | Total Deposits | $10,196,518 | $9,123,234 | 11.76% | | Total LHI, net | $9,518,383 | $9,391,599 | 1.35% | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Statements of Income Highlights ($ thousands, except per share amounts) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Interest Income | $99,361 | $101,040 | $303,581 | $258,560 | | Provision for credit losses | $8,627 | $6,650 | $33,012 | $15,150 | | Total Noninterest Income | $9,674 | $13,021 | $36,897 | $38,496 | | Total Noninterest Expense | $59,414 | $50,991 | $173,226 | $145,716 | | Net Income | $32,621 | $43,322 | $104,762 | $106,418 | | Basic EPS | $0.60 | $0.80 | $1.93 | $2.01 | | Diluted EPS | $0.60 | $0.79 | $1.92 | $1.98 | [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Consolidated Statements of Comprehensive Income (Loss) Highlights ($ thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income | $32,621 | $43,322 | $104,762 | $106,418 | | Other comprehensive loss, net of tax | $(24,646) | $(53,075) | $(38,430) | $(138,561) | | Comprehensive Income (Loss) | $7,975 | $(9,753) | $66,332 | $(32,143) | [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Changes in Stockholders' Equity (Nine Months Ended September 30, 2023) ($ thousands) | Item | Amount | | :-------------------------------- | :------- | | Balance at December 31, 2022 | $1,449,773 | | Net income | $104,762 | | Dividends paid | $(32,548) | | Other comprehensive loss | $(38,430) | | Balance at September 30, 2023 | $1,491,166 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (Nine Months Ended September 30) ($ thousands) | Activity | 2023 | 2022 | | :-------------------------------- | :------- | :--------- | | Net cash provided by operating activities | $138,068 | $149,388 | | Net cash provided by (used in) investing activities | $74,898 | $(1,970,773) | | Net cash provided by financing activities | $64,365 | $1,875,498 | | Net increase in cash and cash equivalents | $277,331 | $54,113 | | Cash and cash equivalents at end of period | $713,408 | $433,897 | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) - Veritex Holdings, Inc. and its subsidiaries, including Veritex Community Bank, operate as a Texas state banking organization, providing commercial and retail banking services primarily in the Dallas-Fort Worth metroplex and Houston metropolitan area[27](index=27&type=chunk)[28](index=28&type=chunk) Earnings Per Share (EPS) ($ thousands, except per share amounts) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $0.60 | $0.80 | $1.93 | $2.01 | | Diluted EPS | $0.60 | $0.79 | $1.92 | $1.98 | - An interim quantitative impairment test for goodwill was performed in Q2 2023 due to significant volatility in the banking industry, concluding that goodwill was not impaired as the fair value of the reporting unit exceeded its carrying value, with no significant changes observed in Q3 2023[38](index=38&type=chunk) [2. Supplemental Statement of Cash Flows](index=12&type=section&id=2.%20Supplemental%20Statement%20of%20Cash%20Flows) Supplemental Cash Flow Information (Nine Months Ended September 30) ($ thousands) | Item | 2023 | 2022 | | :-------------------------------- | :------- | :------- | | Cash paid for interest | $208,668 | $34,647 | | Cash paid for income taxes | $38,893 | $26,000 | | Transfer of AFS debt securities to HTM debt securities | $0 | $117,001 | [3. Securities](index=12&type=section&id=3.%20Securities) Equity Securities with Readily Determinable Fair Value ($ thousands) | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Fair Value | $9,457 | $9,792 | | Unrealized loss recognized (9M) | $(335) | $(1,299) | - Equity securities without readily determinable fair values, measured at cost, increased to **$11,256 thousand** as of September 30, 2023, from **$10,072 thousand** as of December 31, 2022[41](index=41&type=chunk) Debt Securities Fair Value ($ thousands) | Category | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | AFS Debt Securities (Fair Value) | $879,083 | $1,096,292 | | HTM Debt Securities (Fair Value) | $147,836 | $158,781 | | Gross Unrealized Losses (AFS) | $130,357 | $101,162 | - The number of AFS debt securities in an unrealized loss position decreased to **148** at September 30, 2023, from **175** at December 31, 2022, with management attributing these losses to noncredit-related factors and not intending to sell these securities before recovery[49](index=49&type=chunk) Sales of AFS Debt Securities (Nine Months Ended September 30) ($ thousands) | Metric | 2023 | 2022 | | :-------------------------------- | :------- | :------- | | Proceeds from sales | $109,793 | $0 | | Gross realized losses | $5,321 | $0 | [4. LHI and ACL](index=18&type=section&id=4.%20LHI%20and%20ACL) Loans Held for Investment (LHI) and Allowance for Credit Losses (ACL) ($ thousands) | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Total LHI, carried at amortized cost | $9,638,352 | $9,501,624 | | Less: Allowance for credit losses (ACL) | $(109,831) | $(91,052) | | Total LHI, net | $9,518,383 | $9,391,599 | Provision for Credit Losses on LHI ($ thousands) | Period | 2023 | 2022 | | :-------------------------------- | :------- | :------- | | 3 Months Ended Sep 30 (non-PCD loans) | $8,730 | $9,203 | | 9 Months Ended Sep 30 (non-PCD loans) | $32,947 | $20,908 | Nonaccrual Loans ($ thousands) | Category | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Total Nonaccrual Loans | $79,394 | $43,542 | | Interest income not recognized (3M) | $1,921 | $434 | | Interest income not recognized (9M) | $4,689 | $1,912 | Loan Modifications to Borrowers Experiencing Financial Difficulty (Nine Months Ended September 30, 2023) ($ thousands) | Type of Concession | Loan Class | Amortized Cost Basis | | :-------------------------------- | :------------------- | :------------------- | | Interest Rate Reduction | 1-4 Family Residential Rentals | $41,066 | | Term Extension | NOOCRE | $22,524 | | Term Extension | Commercial | $26,036 | Loans Held for Sale (LHFS) ($ thousands) | Category | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Total LHFS | $41,313 | $20,641 | [5. Fair Value](index=29&type=section&id=5.%20Fair%20Value) Financial Assets Measured at Fair Value on a Recurring Basis (Level 2 Inputs) ($ thousands) | Asset | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | AFS debt securities | $879,083 | $1,096,292 | | Interest rate swap designated as hedging instruments | $20,893 | $26,523 | Financial Assets Measured at Fair Value on a Non-Recurring Basis (Level 3 Inputs) ($ thousands) | Asset | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Collateral dependent loans with an ACL | $11,050 | $7,969 | | Servicing assets with a valuation allowance | $7,088 | $10,984 | Fair Value of Financial Instruments Not Measured at Fair Value (September 30, 2023) ($ thousands) | Instrument | Carrying Amount | Fair Value (Level 2/3) | | :-------------------------------- | :------------------- | :--------------------- | | HTM debt securities | $181,546 | $147,836 | | LHI | $9,507,333 | $9,326,018 | | Deposits | $10,196,518 | $9,418,008 | [6. Derivative Financial Instruments](index=31&type=section&id=6.%20Derivative%20Financial%20Instruments) Derivatives Designated as Hedging Instruments (Cash Flow Hedges) ($ thousands) | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Total Notional Amount | $1,275,000 | $1,175,000 | | Total Asset Derivative Fair Value | $20,893 | $26,523 | | Total Liability Derivative Fair Value | $62,077 | $54,171 | | 9M (Loss) recognized in OCI on derivative | $(19,872) | $(43,370) | Derivatives Not Designated as Hedging Instruments ($ thousands) | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Total Notional Amount | $2,284,768 | $1,747,362 | | 9M Net gain recognized in other noninterest income | $1,375 | $5,165 | [7. Off-Balance Sheet Loan Commitments](index=36&type=section&id=7.%20Off-Balance%20Sheet%20Loan%20Commitments) Off-Balance Sheet Financial Instruments ($ thousands) | Commitment Type | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Commitments to extend credit | $3,325,075 | $4,511,671 | | MW commitments | $974,941 | $1,088,558 | | Standby and commercial letters of credit | $101,602 | $98,179 | | Total | $4,401,618 | $5,698,408 | Allowance for Unfunded Commitment Credit Losses ($ thousands) | Metric | September 30, 2023 | September 30, 2022 | | :-------------------------------- | :------------------- | :------------------- | | Ending balance of ACL on unfunded commitments | $9,545 | $10,609 | | 9M (Benefit) provision for credit losses on unfunded commitments | $(541) | $1,343 | [8. Stock-Based Awards](index=37&type=section&id=8.%20Stock-Based%20Awards) Stock Compensation Expense ($ thousands) | Plan | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | 2022 Equity Plan | $2,471 | $2,918 | $7,616 | $8,266 | | Veritex (Green) 2014 Plan | $489 | $197 | $1,398 | $811 | | Total | $2,960 | $3,115 | $9,014 | $9,077 | Outstanding Stock-Based Awards (Units) | Plan/Award Type | September 30, 2023 | September 30, 2022 | | :-------------------------------- | :------------------- | :------------------- | | 2022 Equity Plan - Stock Options | 634,739 | 667,494 | | 2022 Equity Plan - RSUs | 975,883 | 962,956 | | 2022 Equity Plan - PSUs | 129,768 | 132,564 | | Veritex (Green) 2014 Plan - Stock Options | 132,229 | 158,372 | | Veritex (Green) 2014 Plan - RSUs | 64,719 | 85,883 | | Veritex (Green) 2014 Plan - PSUs | 10,642 | 19,173 | | Green 2010 Plan - Stock Options | 10,784 | 43,162 | - Unrecognized compensation expense for RSUs and PSUs under the 2022 Equity Plan totaled **$16,869 thousand** as of September 30, 2023, expected to be recognized over **1.83 years**, while for the Veritex (Green) 2014 Plan, unrecognized expense was **$2,232 thousand**, to be recognized over **0.87 years**[119](index=119&type=chunk)[123](index=123&type=chunk) [9. Income Taxes](index=42&type=section&id=9.%20Income%20Taxes) Income Tax Expense and Effective Tax Rate ($ thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Income tax expense | $9,282 | $12,248 | $30,019 | $28,429 | | Effective tax rate | 22.2% | 22.0% | 22.3% | 21.1% | - Excluding discrete tax items, the effective tax rate was **20.9%** for the three months ended September 30, 2023 (due to **$505 thousand** net discrete tax expense) and **21.8%** for the nine months ended September 30, 2023 (due to **$658 thousand** net discrete tax expense)[126](index=126&type=chunk)[128](index=128&type=chunk) [10. Legal Contingencies](index=43&type=section&id=10.%20Legal%20Contingencies) - Management believes that the likelihood of a material adverse outcome on the Company's financial position, liquidity, or results of operations from legal actions arising in the normal course of business is remote[130](index=130&type=chunk) [11. Capital Requirements and Restrictions on Retained Earnings](index=43&type=section&id=11.%20Capital%20Requirements%20and%20Restrictions%20on%20Retained%20Earnings) - Both Veritex Holdings, Inc. and Veritex Community Bank exceeded the capital levels necessary to be categorized as 'well capitalized' as of September 30, 2023, and December 31, 2022[134](index=134&type=chunk) Regulatory Capital Ratios (Company) ($ thousands) | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Total capital (to RWA) | 12.95% | 11.63% | | Tier 1 capital (to RWA) | 10.37% | 9.34% | | Common equity tier 1 (to RWA) | 10.11% | 9.09% | | Tier 1 capital (to average assets) | 10.10% | 9.82% | Regulatory Capital Ratios (Bank) ($ thousands) | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Total capital (to RWA) | 12.73% | 11.41% | | Tier 1 capital (to RWA) | 11.86% | 10.77% | | Common equity tier 1 (to RWA) | 11.86% | 10.77% | | Tier 1 capital (to average assets) | 11.56% | 11.32% | Dividends Paid ($ thousands) | Recipient | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Bank to Holdco | $40,000 | $17,500 | | Company (to shareholders) | $32,548 | $31,496 | - The Bank's capital conservation buffer was **4.73%** as of September 30, 2023, exceeding the **2.5%** minimum, indicating strong capital adequacy[140](index=140&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of Veritex Holdings, Inc.'s financial condition and results of operations, highlighting its community banking segment, recent industry developments, and performance for the three and nine months ended September 30, 2023, emphasizing the company's robust liquidity and well-capitalized status despite banking sector volatility [Overview](index=46&type=section&id=Overview) - Veritex is a Texas state banking organization focused on relationship-driven commercial banking products and services for small to medium-sized businesses and professionals in the Dallas-Fort Worth metroplex and Houston metropolitan area[144](index=144&type=chunk) - The Company's primary revenue sources include interest income on loans and securities, customer service and loan fees, and gains on sale of government guaranteed and mortgage loans[145](index=145&type=chunk) [Recent Industry Developments](index=46&type=section&id=Recent%20Industry%20Developments) - Despite significant banking industry volatility in early 2023, the Company's liquidity and balance sheet remain robust[147](index=147&type=chunk) Key Financial Metrics Post-Industry Volatility ($ billions) | Metric | September 30, 2023 | | :-------------------------------- | :------------------- | | Total Deposits | $10.20 | | Common Equity Tier 1 (CET1) Capital | 10.11% (up 102 bps from Dec 31, 2022) | - FHLB borrowings decreased by **$1.13 billion** during Q3 2023, and the Company has no outstanding borrowings under the Federal Reserve's Bank Term Funding Program (BTFP)[147](index=147&type=chunk) [Results of Operations for the Three Months Ended September 30, 2023 and June 30, 2023](index=47&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20September%2030%2C%202023%20and%20June%2030%2C%202023) [General](index=47&type=section&id=General_QoQ) Net Income and EPS (QoQ) ($ millions, except per share amounts) | Metric | Q3 2023 | Q2 2023 | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | | Net Income | $32.6 | $33.7 | (3.3)% | | Basic EPS | $0.60 | $0.62 | (3.2)% | | Diluted EPS | $0.60 | $0.62 | (3.2)% | [Net Interest Income](index=47&type=section&id=Net%20Interest%20Income_QoQ) Net Interest Income and Margin (QoQ) | Metric | Q3 2023 | Q2 2023 | Change (basis points) | | :-------------------------------- | :------ | :------ | :----------- | | Net Interest Income (in millions) | $99.4 | $100.8 | (1.4) | | Net Interest Margin | 3.46% | 3.51% | (5) | | Net Interest Spread | 2.30% | 2.50% | (20) | | Average Cost of Interest-Bearing Deposits | 4.12% | 3.61% | 51 | - The decrease in net interest income was primarily driven by an **$8.1 million** increase in interest expense on certificates and other time deposits and a **$7.0 million** increase in transaction and savings deposits, partially offset by a **$9.0 million** decrease in FHLB advances interest expense and a **$3.6 million** increase in loan interest income[152](index=152&type=chunk) [Provision for Credit Losses](index=49&type=section&id=Provision%20for%20Credit%20Losses_QoQ) Provision for Credit Losses (QoQ) ($ millions) | Metric | Q3 2023 | Q2 2023 | | :-------------------------------- | :------ | :------ | | Provision for credit losses | $8.6 | $15.0 | | Benefit for unfunded commitments | $(0.9) | $(1.1) | - The decrease in provision for credit losses was mainly due to an increase in general reserves from changes in economic factors and specific reserves on individually analyzed loans, while the benefit for unfunded commitments resulted from a reduction in unfunded commitment balances[159](index=159&type=chunk) [Noninterest Income](index=50&type=section&id=Noninterest%20Income_QoQ) Noninterest Income (QoQ) ($ thousands) | Category | Q3 2023 | Q2 2023 | Change ($) | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | :--------- | | Total Noninterest Income | $9,674 | $13,692 | $(4,018) | (29.3)% | | Government guaranteed loan income, net | $1,772 | $4,144 | $(2,372) | (57.2)% | | Equity method investment (loss) income | $(136) | $485 | $(621) | (128.0)% | | Customer swap income | $202 | $961 | $(759) | (79.0)% | - The decrease in government guaranteed loan income was primarily due to a **$5.4 million** decrease in gain on sale of SBA and USDA loans, and the equity method investment shifted to a loss due to the negative impact of rising interest rates on Thrive Mortgage, LLC[162](index=162&type=chunk)[163](index=163&type=chunk) [Noninterest Expense](index=51&type=section&id=Noninterest%20Expense_QoQ) Noninterest Expense (QoQ) ($ thousands) | Category | Q3 2023 | Q2 2023 | Change ($) | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | :--------- | | Total Noninterest Expense | $59,414 | $57,197 | $2,217 | 3.9% | | Salaries and employee benefits | $30,949 | $28,650 | $2,299 | 8.0% | - The increase in salaries and employee benefits was primarily driven by higher lender incentives, contra origination costs, spot bonuses (including for a new Bank President and Chief Banking Officer), and officer salaries, partially offset by a decrease in severance costs[167](index=167&type=chunk) [Income Tax Expense](index=51&type=section&id=Income%20Tax%20Expense_QoQ) Income Tax Expense (QoQ) ($ millions) | Metric | Q3 2023 | Q2 2023 | | :-------------------------------- | :------ | :------ | | Income Tax Expense | $9.3 | $9.7 | | Effective Tax Rate | 22.2% | 22.0% | - The effective tax rate for Q3 2023 was **22.2%**, or **20.9%** excluding a net discrete tax expense of **$505 thousand** related to a return to provision adjustment[169](index=169&type=chunk) [Results of Operations for the Nine Months Ended September 30, 2023 and September 30, 2022](index=52&type=section&id=Results%20of%20Operations%20for%20the%20Nine%20Months%20Ended%20September%2030%2C%202023%20and%20September%2030%2C%202022) [General](index=52&type=section&id=General_YoY) Net Income and EPS (YoY) ($ millions, except per share amounts) | Metric | 9M 2023 | 9M 2022 | Change ($) | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | :--------- | | Net Income | $104.8 | $106.4 | $(1.6) | (1.6)% | | Basic EPS | $1.93 | $2.01 | $(0.08) | (4.0)% | | Diluted EPS | $1.92 | $1.98 | $(0.06) | (3.0)% | [Net Interest Income](index=52&type=section&id=Net%20Interest%20Income_YoY) Net Interest Income and Margin (YoY) | Metric | 9M 2023 | 9M 2022 | Change ($ millions) | Change (basis points) | | :-------------------------------- | :------ | :------ | :--------- | :----------- | | Net Interest Income (in millions) | $303.6 | $258.6 | $45.0 | | | Net Interest Margin | 3.55% | 3.48% | | 7 | | Net Interest Spread | 2.51% | 3.20% | | (69) | | Average Cost of Interest-Bearing Liabilities | 3.80% | 0.81% | | 299 | | Average Cost of Interest-Bearing Deposits | 3.62% | 0.64% | | 298 | - The **$45.0 million** increase in net interest income was primarily driven by a **$220.0 million** increase in interest income on loans and a **$17.3 million** increase in interest income on deposits in financial institutions, largely offset by a **$162.5 million** increase in interest expense on deposit accounts due to higher funding costs[172](index=172&type=chunk) [Provision for Credit Losses](index=54&type=section&id=Provision%20for%20Credit%20Losses_YoY) Provision for Credit Losses (YoY) ($ millions) | Metric | 9M 2023 | 9M 2022 | Change ($) | | :-------------------------------- | :------ | :------ | :--------- | | Provision for credit loan losses | $33.0 | $15.2 | $17.9 | | (Benefit) provision for unfunded commitments | $(0.5) | $1.3 | $(1.8) | - The increase in provision for credit losses was primarily due to changes in the Texas economic forecast and an increase in loan growth[178](index=178&type=chunk) [Noninterest Income](index=55&type=section&id=Noninterest%20Income_YoY) Noninterest Income (YoY) ($ thousands) | Category | 9M 2023 | 9M 2022 | Change ($) | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | :--------- | | Total Noninterest Income | $36,897 | $38,496 | $(1,599) | (4.2)% | | Loan fees | $5,148 | $7,965 | $(2,817) | (35.4)% | | Loss on sales of debt securities | $(5,321) | $0 | $(5,321) | N/A | | Government guaranteed loan income, net | $15,604 | $6,252 | $9,352 | 149.6% | | Equity method investment (loss) income | $(1,172) | $275 | $(1,447) | (526.2)% | | Customer swap income | $1,380 | $5,625 | $(4,245) | (75.5)% | | Other | $5,743 | $2,867 | $2,876 | 100.3% | - The **$5.3 million** loss on sales of debt securities in 9M 2023 was due to the sale of **$116.2 million** of debt securities, while government guaranteed loan income increased significantly due to higher gains on USDA and SBA loans[181](index=181&type=chunk)[182](index=182&type=chunk) - Equity method investment shifted to a loss of **$1.2 million** due to the negative impact of rising interest rates on Thrive Mortgage, and other noninterest income doubled, driven by servicing asset valuation adjustments and BOLI income[183](index=183&type=chunk)[185](index=185&type=chunk) [Noninterest Expense](index=56&type=section&id=Noninterest%20Expense_YoY) Noninterest Expense (YoY) ($ thousands) | Category | 9M 2023 | 9M 2022 | Change ($) | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | :--------- | | Total Noninterest Expense | $173,226 | $145,716 | $27,510 | 18.9% | | Salaries and employee benefits | $91,464 | $84,151 | $7,313 | 8.7% | | Professional and regulatory fees | $18,540 | $9,741 | $8,799 | 90.3% | | Data processing and software expense | $13,970 | $9,816 | $4,154 | 42.3% | | M&A expense | $0 | $1,379 | $(1,379) | (100.0)% | - Professional and regulatory fees increased significantly due to a **$5.6 million** rise in FDIC assessment fees and higher legal, professional, audit, and regulatory services, while data processing and software expense increased due to system enhancement software expenses[187](index=187&type=chunk)[188](index=188&type=chunk) [Income Tax Expense](index=57&type=section&id=Income%20Tax%20Expense_YoY) Income Tax Expense (YoY) ($ millions) | Metric | 9M 2023 | 9M 2022 | | :-------------------------------- | :------ | :------ | | Income Tax Expense | $30.0 | $28.4 | | Effective Tax Rate | 22.3% | 21.1% | - The effective tax rate for 9M 2023 was **22.3%**, or **21.8%** excluding a net discrete tax expense of **$658 thousand**, while for 9M 2022, it was **21.1%**, or **21.9%** excluding a net discrete tax benefit of **$1.1 million**[193](index=193&type=chunk) [Financial Condition](index=58&type=section&id=Financial%20Condition) [Loan Portfolio](index=58&type=section&id=Loan%20Portfolio) - Total assets increased by **1.6%** to **$12.35 billion** as of September 30, 2023, from **$12.15 billion** as of December 31, 2022, driven by continued execution of the Company's growth strategy[195](index=195&type=chunk) Loan Portfolio Summary ($ thousands) | Metric | September 30, 2023 | December 31, 2022 | Change (%) | | :-------------------------------- | :------------------- | :------------------ | :--------- | | Total LHI, excluding ACL | $9,638,352 | $9,501,624 | 1.4% | | Total LHFS | $41,313 | $20,641 | 100.1% | | LHI as % of deposits | 94.5% | 104.1% | | | Multifamily LHI | $603,395 | $322,679 | 87.0% | [Nonperforming Assets](index=59&type=section&id=Nonperforming%20Assets) Nonperforming Assets ($ thousands) | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Total Nonperforming Assets | $79,868 | $43,667 | | Nonperforming Assets to Total Assets | 0.65% | 0.36% | | Nonperforming Loans to Total Loans | 0.83% | 0.48% | [Potential Problem Loans](index=60&type=section&id=Potential%20Problem%20Loans) Loan Internal Ratings (September 30, 2023) ($ thousands) | Category | Pass | Special Mention | Substandard | PCD | Total | | :-------------------------------- | :------- | :-------------- | :---------- | :---- | :---------- | | Construction and land | $1,630,155 | $46,376 | $28,522 | $0 | $1,705,053 | | NOOCRE | $2,109,280 | $175,671 | $99,004 | $14,105 | $2,398,060 | | Commercial | $2,744,013 | $31,984 | $61,862 | $3,165 | $2,841,024 | | Total | $9,083,990 | $304,538 | $213,518 | $36,306 | $9,638,352 | [ACL on LHI](index=60&type=section&id=ACL%20on%20LHI) - The Allowance for Credit Losses (ACL) increased by **$18.8 million** to **$109.8 million** as of September 30, 2023, from December 31, 2022, primarily due to changes in economic factors, increases in specific reserves, and loan growth, partially offset by charge-offs[206](index=206&type=chunk) Net Charge-offs (Nine Months Ended September 30) ($ thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Total Net Charge-offs | $(14,233) | $(7,867) | $(6,366) | 80.9% | [Off-Balance Sheet Credit exposure](index=62&type=section&id=Off-Balance%20Sheet%20Credit%20exposure) - The Allowance for Credit Losses (ACL) on off-balance-sheet credit exposures decreased to **$9.5 million** at September 30, 2023, from **$10.1 million** at December 31, 2022[209](index=209&type=chunk) [Equity Securities](index=62&type=section&id=Equity%20Securities_FC) Equity Securities ($ millions) | Category | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Readily Determinable Fair Value | $9.5 | $9.8 | | Without Readily Determinable Fair Value (at cost) | $11.3 | $10.1 | [FHLB Stock and FRB Stock](index=63&type=section&id=FHLB%20Stock%20and%20FRB%20Stock) FHLB Stock and FRB Stock ($ millions) | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Total FHLB and FRB Stock | $59.1 | $101.6 | [Debt Securities](index=63&type=section&id=Debt%20Securities_FC) Debt Securities ($ billions) | Metric | September 30, 2023 | December 31, 2022 | Change (%) | | :-------------------------------- | :------------------- | :------------------ | :--------- | | Carrying Amount | $1.06 | $1.28 | (17.3)% | | As % of Total Assets | 8.6% | 10.6% | | - The decrease in debt securities was primarily due to the sale of **$109.8 million** of debt securities, resulting in a net loss of **$5.3 million**, with no ACL on debt securities recognized[213](index=213&type=chunk)[215](index=215&type=chunk) [Equity Method Investments](index=63&type=section&id=Equity%20Method%20Investments) - The Company held **$54.4 million** in equity method investments as of September 30, 2023, reporting a **$1.2 million** loss for the nine months ended September 30, 2023, primarily due to the negative impact of rising interest rates on Thrive Mortgage, LLC[217](index=217&type=chunk) [Deposits](index=63&type=section&id=Deposits) Total Deposits ($ billions) | Metric | September 30, 2023 | December 31, 2022 | Change (%) | | :-------------------------------- | :------------------- | :------------------ | :--------- | | Total Deposits | $10.20 | $9.12 | 11.8% | Deposit Composition (as % of Total Deposits) | Deposit Type | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Noninterest-bearing | 23.2% | 28.9% | | Certificates and other time deposits | 33.4% | 22.9% | - The increase in total deposits was primarily driven by a **$1.32 billion** increase in certificates and other time deposits and a **$421.3 million** increase in interest-bearing transaction deposits, partially offset by decreases in noninterest-bearing demand deposits and correspondent money market deposits[218](index=218&type=chunk) [Borrowings](index=64&type=section&id=Borrowings) [FHLB Advances](index=64&type=section&id=FHLB%20Advances) FHLB Advances ($ millions) | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Outstanding Balances | $200.0 | $1,175.0 | | Total Available Borrowing Capacity | $2,240.0 | $787.3 | | Weighted Average Interest Rate (9M) | 4.65% (2023) | 1.73% (2022) | [FRB](index=64&type=section&id=FRB) FRB Borrowing Capacity ($ millions) | Program | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | FRB Discount Window | $2,650.0 | $1,140.0 | | BTFP | $434.3 | N/A | | Outstanding Borrowings | $0 | $0 | [Junior subordinated debentures and subordinated notes](index=65&type=section&id=Junior%20subordinated%20debentures%20and%20subordinated%20notes) Junior Subordinated Debentures and Subordinated Notes (September 30, 2023) ($ thousands) | Instrument | Balance | Rate | | :-------------------------------- | :------ | :----- | | Parkway National Capital Trust I | $3,093 | 7.52% | | SovDallas Capital Trust I | $8,609 | 9.53% | | Patriot Bancshares Capital Trust I | $5,155 | 7.42% | | Patriot Bancshares Capital Trust II | $17,011 | 7.47% | | 4.75% Fixed-to-Floating Rate Subordinated Notes | $75,000 | 4.75% | | 4.125% Fixed-to-Floating Rate Subordinated Notes | $125,000 | 4.13% | [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) [Liquidity](index=65&type=section&id=Liquidity) - The Company's liquidity needs are primarily met by core deposits, wholesale borrowings, and asset maturities, maintaining lines of credit with commercial banks with no outstanding advances as of September 30, 2023[226](index=226&type=chunk) Key Liquidity Ratios | Metric | 9 Months Ended Sep 30, 2023 | Year Ended Dec 31, 2022 | | :-------------------------------- | :-------------------------- | :------------------------ | | Average noninterest-bearing deposits to average deposits | 24.9% | 33.4% | | Average loans to average deposits | 99.7% | 94.6% | Cash and Cash Equivalents ($ millions) | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Cash and Cash Equivalents | $713.4 | $436.1 | [Analysis of Cash Flows](index=67&type=section&id=Analysis%20of%20Cash%20Flows) Net Change in Cash and Cash Equivalents (Nine Months Ended September 30) ($ thousands) | Activity | 2023 | 2022 | | :-------------------------------- | :------- | :------- | | Net cash provided by operating activities | $138,068 | $149,388 | | Net cash provided by (used in) investing activities | $74,898 | $(1,970,773) | | Net cash provided by financing activities | $64,365 | $1,875,498 | | Net change in cash and cash equivalents | $277,331 | $54,113 | - Net cash provided by investing activities significantly improved in 2023, primarily due to a **$1.46 billion** decrease in originations of net LHI and increased proceeds from sales and maturities of AFS debt securities[235](index=235&type=chunk) - Net cash provided by financing activities decreased substantially in 2023, mainly due to a **$1.35 billion** decrease in FHLB advances and a **$311.5 million** decrease in new deposits[236](index=236&type=chunk) [Capital Resources](index=67&type=section&id=Capital%20Resources) Total Stockholders' Equity ($ billions) | Metric | September 30, 2023 | December 31, 2022 | Change (%) | | :-------------------------------- | :------------------- | :------------------ | :--------- | | Total Stockholders' Equity | $1.49 | $1.45 | 2.9% | - The increase in stockholders' equity was primarily driven by **$104.8 million** in net income, **$9.0 million** in stock-based compensation, and **$803 thousand** from employee stock option exercises, partially offset by **$32.5 million** in dividends and **$38.4 million** in accumulated other comprehensive income[238](index=238&type=chunk) - Both the Company and the Bank were in compliance with all applicable regulatory capital requirements and classified as 'well capitalized' as of September 30, 2023[240](index=240&type=chunk) [Contractual Obligations](index=68&type=section&id=Contractual%20Obligations) - There have been no significant changes in the types or amounts of contractual obligations since December 31, 2022, other than normal changes in the ordinary course of business and those discussed under 'Financial Condition—Borrowings'[243](index=243&type=chunk) [Critical Accounting Policies](index=68&type=section&id=Critical%20Accounting%20Policies) - No changes in critical accounting policies since December 31, 2022, except for updates discussed in Note 1, which include Allowance for Credit Losses (ACL), business combinations, debt securities, and goodwill[244](index=244&type=chunk) [Goodwill](index=68&type=section&id=Goodwill_MD%26A) - Goodwill is not amortized but is reviewed annually for potential impairment, or when a triggering event occurs, with the Company performing a qualitative or quantitative assessment[245](index=245&type=chunk)[246](index=246&type=chunk) - An interim quantitative impairment test was performed in Q2 2023 due to significant banking industry volatility, concluding that the fair value of the reporting unit exceeded its carrying value, and thus goodwill was not impaired, with no significant changes observed in Q3 2023[249](index=249&type=chunk) [Special Cautionary Notice Regarding Forward-Looking Statements](index=70&type=section&id=Special%20Cautionary%20Notice%20Regarding%20Forward-Looking%20Statements) - The report contains forward-looking statements subject to risks and uncertainties, including those related to business concentration in Texas, market interest rate changes, lending to small-to-medium businesses, sufficiency of loan loss reserves, growth strategy, and regulatory compliance[250](index=250&type=chunk)[251](index=251&type=chunk) - The Company assumes no obligation to update any forward-looking statements unless required by law[251](index=251&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=72&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company manages interest rate risk as its primary market risk component, utilizing an asset, liability, and funds management policy, employing an interest rate risk simulation model and shock analysis to assess the potential impact of interest rate changes on net interest income and the fair value of equity, adhering to internal policy limits for acceptable declines - The Company's primary market risk is interest rate volatility, managed through its Asset-Liability Committee and a measurement system for net interest rate sensitivity[252](index=252&type=chunk)[255](index=255&type=chunk) Simulated Change in Net Interest Income and Fair Value of Equity (12-month horizon) | Change in Interest Rates (Basis Points) | % Change in Net Interest Income (Sep 30, 2023) | % Change in Fair Value of Equity (Sep 30, 2023) | | :-------------------------------- | :--------------------------------------------- | :-------------------------------------------- | | +300 | 14.38% | 3.72% | | +200 | 9.67% | 2.72% | | +100 | 4.90% | 1.49% | | Base | —% | —% | | -100 | (5.19)% | (1.82)% | | -200 | (10.31)% | (4.13)% | - Internal policy specifies that estimated net income at risk for the subsequent one-year period should not decline by more than **5.0%** for a **100 basis point** shift, **10.0%** for a **200 basis point** shift, and **15.0%** for a **300 basis point** shift[257](index=257&type=chunk) [Item 4. Controls and Procedures](index=73&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2023, with no significant changes in internal control over financial reporting occurring during the quarter - The Company's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2023[260](index=260&type=chunk) - No significant changes in internal control over financial reporting occurred during the quarter ended September 30, 2023[261](index=261&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=74&type=section&id=Item%201.%20Legal%20Proceedings) The Company is subject to various claims and litigation in the ordinary course of business, and management believes that the likelihood of any material adverse effect on the Company's financial position, liquidity, or results of operations from these proceedings is remote - Management assesses the likelihood of a material adverse effect from legal proceedings as remote[263](index=263&type=chunk) [Item 1A. Risk Factors](index=74&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, emphasizing the adverse impact of recent negative developments in the banking industry, including market volatility, increased competition for deposits, potential losses from securities sales, and heightened regulatory scrutiny, with a special assessment on banks for FDIC Deposit Insurance Fund losses also expected - Recent bank failures and industry volatility have negatively impacted customer confidence in regional banks, leading to increased competition for deposits and higher funding costs, which pressure net interest margin[266](index=266&type=chunk) - The Company anticipates increased regulatory scrutiny and initiatives, which may raise costs and reduce profitability, and a special assessment for FDIC Deposit Insurance Fund losses from recent bank failures is expected to negatively impact operating results[267](index=267&type=chunk) - There has been no material change in previously disclosed risk factors, other than the new risk factor related to recent negative developments in the banking industry[265](index=265&type=chunk)[266](index=266&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=74&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company reported no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds were reported[268](index=268&type=chunk) [Item 5. Other Information](index=75&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2023 - No directors or officers adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended September 30, 2023[269](index=269&type=chunk) [Item 6. Exhibits](index=75&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, certifications, and financial statements in Inline XBRL format - Key exhibits include the Agreement and Plan of Reorganization, Third Amended and Restated Bylaws, Certifications of Principal Executive and Financial Officers (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL formatted financial statements[270](index=270&type=chunk) SIGNATURES

Veritex Holdings, Inc. (NASDAQ:VBTX) Q3 2023 Earnings Conference Call October 25, 2023 9:30 AM ET Company Participants Susan Caudle - Investor Relations Officer and Secretary of the Board Malcolm Holland - Chairman and Chief Executive Officer Terry Earley - Chief Financial Officer Clay Riebe - Chief Credit Officer Conference Call Participants Stephen Scouten - Piper Sandler Brady Gailey - KBW Gary Tenner - D.A. Davidson Michael Rose - Raymond James Matt Olney - Stephens Operator Good morning, and welcome to ...

Veritex Holdings, Inc. Third Quarter 2023 Results Earnings Release October 24, 2023 NASDAQ: VBTX A BETTER STATE OF BANKING Forward-Looking Statements This presentation includes "forward-looking statements", within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors, which change ov ...

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements – Unaudited](index=4&type=section&id=Item%201.%20Financial%20Statements%20%E2%80%93%20Unaudited) This section presents the unaudited consolidated financial statements of Veritex Holdings, Inc. and its subsidiaries for the periods ended June 30, 2023, and December 31, 2022, including balance sheets, income statements, comprehensive income, changes in stockholders' equity, cash flows, and detailed notes on significant accounting policies, securities, loans, fair value measurements, derivatives, stock-based awards, income taxes, legal contingencies, and capital requirements [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The balance sheets show the company's financial position, including assets, liabilities, and equity, at specific dates | Metric | June 30, 2023 (Unaudited) ($ thousands) | December 31, 2022 ($ thousands) | | :----------------------------------- | :-------------------------------------- | :------------------------------------ | | Total assets | 12,470,368 | 12,154,361 | | Total cash and cash equivalents | 663,921 | 436,077 | | Total investments | 1,282,914 | 1,404,910 | | Total LHI, net | 9,591,288 | 9,391,599 | | Total liabilities | 10,979,088 | 10,704,588 | | Total deposits | 9,233,909 | 9,123,234 | | Noninterest-bearing deposits | 2,234,109 | 2,640,617 | | Total stockholders' equity | 1,491,280 | 1,449,773 | - Total assets increased by **$316 million** (2.6%) from December 31, 2022, to June 30, 2023, reaching **$12.47 billion**. Total deposits saw a modest increase of **$110.7 million** (1.2%) to **$9.23 billion**, while noninterest-bearing deposits decreased by **$406.5 million**[8](index=8&type=chunk)[186](index=186&type=chunk)[210](index=210&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) The income statements detail the company's revenues, expenses, and net income over specific reporting periods | Metric | Three Months Ended June 30, 2023 ($ thousands) | Three Months Ended June 30, 2022 ($ thousands) | Six Months Ended June 30, 2023 ($ thousands) | Six Months Ended June 30, 2022 ($ thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total interest and dividend income | 182,518 | 93,594 | 352,155 | 173,971 | | Total interest expense | 81,687 | 9,114 | 147,935 | 16,451 | | NET INTEREST INCOME | 100,831 | 84,480 | 204,220 | 157,520 | | Provision for credit losses | 15,000 | 9,000 | 24,385 | 8,500 | | Total noninterest income | 13,692 | 10,378 | 27,223 | 25,475 | | Total noninterest expense | 57,197 | 48,153 | 113,812 | 94,725 | | NET INCOME | 33,730 | 29,626 | 72,141 | 63,096 | | Basic earnings per share ("EPS") | 0.62 | 0.55 | 1.33 | 1.21 | | Diluted EPS | 0.62 | 0.54 | 1.32 | 1.19 | - Net income for the three months ended June 30, 2023, increased by **$4.1 million** (13.8%) year-over-year to **$33.7 million**, driven by a significant rise in net interest income, despite higher provision for credit losses and noninterest expenses. For the six months ended June 30, 2023, net income grew by **$9.0 million** (14.3%) to **$72.1 million**[10](index=10&type=chunk)[162](index=162&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The comprehensive income statements present net income and other comprehensive income (loss) components, reflecting total non-owner changes in equity | Metric | Three Months Ended June 30, 2023 ($ thousands) | Three Months Ended June 30, 2022 ($ thousands) | Six Months Ended June 30, 2023 ($ thousands) | Six Months Ended June 30, 2022 ($ thousands) | | :------------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | NET INCOME | 33,730 | 29,626 | 72,141 | 63,096 | | Other comprehensive loss, net of tax | (28,679) | (40,398) | (13,784) | (85,486) | | COMPREHENSIVE INCOME (LOSS) | 5,051 | (10,772) | 58,357 | (22,390) | - Comprehensive income for the three months ended June 30, 2023, was **$5.1 million**, a significant improvement from a comprehensive loss of **$10.8 million** in the prior year, primarily due to a reduced other comprehensive loss. For the six months, comprehensive income was **$58.4 million**, reversing a **$22.4 million** loss from the previous year[12](index=12&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement outlines changes in equity components, including net income, dividends, and other comprehensive income, over the reporting period | Metric | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :----------------------------------- | :---------------------------- | :------------------------------ | | Total Stockholders' Equity | 1,491,280 | 1,449,773 | | Retained earnings | 429,753 | 379,299 | | Accumulated other comprehensive (loss) income ("AOCI") | (83,187) | (69,403) | | Dividends paid (six months) | (21,687) | (20,705) | | Net income (six months) | 72,141 | 63,096 | - Total stockholders' equity increased by **$41.5 million** (2.9%) from December 31, 2022, to June 30, 2023, primarily driven by net income of **$72.1 million** and stock-based compensation, partially offset by dividends paid and accumulated other comprehensive loss[8](index=8&type=chunk)[17](index=17&type=chunk)[229](index=229&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The cash flow statements categorize cash movements into operating, investing, and financing activities, showing liquidity changes | Metric | Six Months Ended June 30, 2023 ($ thousands) | Six Months Ended June 30, 2022 ($ thousands) | | :----------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | 98,317 | 99,241 | | Net cash used in investing activities | (108,270) | (1,573,493) | | Net cash provided by financing activities | 237,797 | 1,505,184 | | Net increase in cash and cash equivalents | 227,844 | 30,932 | | Cash and cash equivalents at end of period | 663,921 | 410,716 | - Net cash provided by operating activities remained stable at **$98.3 million** for the six months ended June 30, 2023. Net cash used in investing activities significantly decreased by **$1.47 billion**, primarily due to lower net loan originations and reduced purchases of AFS debt securities. Net cash provided by financing activities decreased by **$1.27 billion**, mainly due to a decrease in new deposits and the absence of common stock offering proceeds seen in the prior year[20](index=20&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information on the figures presented in the primary financial statements [1. Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the key accounting principles, methods, and estimates used in preparing the financial statements - The Company operates as a Texas state banking organization with **18 branches** in Dallas-Fort Worth and **11** in Houston, providing commercial and retail banking services. Financial statements are prepared in accordance with GAAP for interim information, relying on estimates and assumptions[24](index=24&type=chunk)[26](index=26&type=chunk)[28](index=28&type=chunk) | EPS Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.62 | $0.55 | $1.33 | $1.21 | | Diluted EPS | $0.62 | $0.54 | $1.32 | $1.19 | - Goodwill was not impaired as of May 31, 2023, despite a sustained decline in market valuation due to banking industry volatility. The fair value of the reporting unit exceeded its carrying value by approximately **26%**[34](index=34&type=chunk) [2. Supplemental Statement of Cash Flows](index=12&type=section&id=2.%20Supplemental%20Statement%20of%20Cash%20Flows) This supplemental statement provides additional details on non-cash investing and financing activities and cash paid for interest and income taxes | Supplemental Disclosure | Six Months Ended June 30, 2023 ($ thousands) | Six Months Ended June 30, 2022 ($ thousands) | | :----------------------------------- | :------------------------------------------- | :------------------------------------------- | | Cash paid for interest | 127,174 | 16,572 | | Cash paid for income taxes | 23,500 | 10,000 | | Transfer of AFS debt securities to HTM debt securities | — | 117,001 | - Cash paid for interest significantly increased to **$127.2 million** for the six months ended June 30, 2023, from **$16.6 million** in the prior year, reflecting rising interest rates. Cash paid for income taxes also rose to **$23.5 million** from **$10.0 million**[35](index=35&type=chunk) [3. Securities](index=12&type=section&id=3.%20Securities) This section details the company's investment securities portfolio, including available-for-sale and held-to-maturity debt securities | Debt Securities (AFS) | June 30, 2023 Fair Value ($ thousands) | December 31, 2022 Fair Value ($ thousands) | | :----------------------------------- | :------------------------------------- | :--------------------------------------- | | Corporate bonds | 207,987 | 252,245 | | Municipal securities | 43,165 | 45,691 | | Mortgage-backed securities | 110,541 | 139,011 | | Collateralized mortgage obligations | 455,824 | 553,606 | | Total AFS Debt Securities | 961,045 | 1,096,292 | | Total HTM Debt Securities | 158,767 | 158,781 | - Total AFS debt securities decreased by **$135.2 million** to **$961.0 million** at June 30, 2023, primarily due to sales of **$109.8 million** with a net loss of **$5.3 million**. The Company held **148** AFS debt securities in an unrealized loss position totaling **$111.3 million**, with an ACL of **$885 thousand** recognized[40](index=40&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[49](index=49&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk) [4. LHI and ACL](index=18&type=section&id=4.%20LHI%20and%20ACL) This section provides details on loans held for investment and the allowance for credit losses, including nonperforming assets and loan modifications | Loan Category | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :----------------------------------- | :---------------------------- | :------------------------------ | | Construction and land | 1,659,700 | 1,787,400 | | Multi-family residential | 592,473 | 322,679 | | NOOCRE | 2,509,731 | 2,341,379 | | Commercial | 2,850,084 | 2,942,348 | | Total LHI, carried at amortized cost | 9,706,139 | 9,501,624 | | Allowance for credit losses ("ACL") | (102,150) | (91,052) | | Total LHI, net | 9,591,288 | 9,391,599 | - Total Loans Held for Investment (LHI) increased by **$204.5 million** (2.2%) to **$9.71 billion** at June 30, 2023. Multi-family residential loans saw an **83.6%** increase, while construction and land loans decreased by **7.1%**. The Allowance for Credit Losses (ACL) increased by **$11.1 million** (12.2%) to **$102.2 million**, primarily due to changes in economic factors, increased specific reserves, and loan growth[8](index=8&type=chunk)[51](index=51&type=chunk)[190](index=190&type=chunk)[198](index=198&type=chunk) | Nonaccrual Loans | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :----------------------------------- | :---------------------------- | :------------------------------ | | NOOCRE | 32,981 | 21,377 | | Commercial | 23,007 | 11,397 | | Total nonaccrual loans | 67,776 | 43,542 | | Total nonperforming assets | 68,304 | 43,667 | | Nonperforming assets to total assets | 0.55% | 0.36% | | Nonperforming loans to total loans | 0.71% | 0.48% | - Nonperforming assets increased to **$68.3 million** (**0.55%** of total assets) at June 30, 2023, from **$43.7 million** (**0.36%** of total assets) at December 31, 2022. This rise was mainly driven by increases in nonaccrual NOOCRE and commercial loans[57](index=57&type=chunk)[192](index=192&type=chunk) | Loan Modifications (Six Months Ended June 30, 2023) | Amortized Cost Basis ($ thousands) | % of Loan Class | | :------------------------------------------------ | :--------------------------------- | :-------------- | | 1-4 Family Residential Rentals (Interest Rate Reduction) | 41,497 | 4.5% | | NOOCRE (Term Extension) | 8,887 | 0.4% | | Commercial (Term Extension) | 873 | —% | | Total Term Extension | 9,760 | | - The Company modified **$41.5 million** in 1-4 Family Residential Rentals loans with interest rate reductions and **$9.8 million** in NOOCRE and Commercial loans with term extensions for borrowers experiencing financial difficulty during the six months ended June 30, 2023. No payment defaults occurred within **12 months** of these modifications[62](index=62&type=chunk)[63](index=63&type=chunk) [5. Fair Value](index=27&type=section&id=5.%20Fair%20Value) This section describes the fair value measurements of financial assets and liabilities, distinguishing between recurring and non-recurring valuations | Financial Assets (Recurring Fair Value) | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :-------------------------------------- | :---------------------------- | :------------------------------ | | AFS debt securities | 961,045 | 1,096,292 | | Equity securities with a readily determinable fair value | 9,761 | 9,792 | | LHFS | 28,691 | 19,775 | | Interest rate swap designated as hedging instruments | 25,041 | 26,523 | | Correspondent interest rate swaps not designated as hedging instruments | 41,369 | 38,839 | | Financial Liabilities (Recurring Fair Value) | | | | Interest rate swap designated as hedging instruments | 55,057 | 54,171 | | Customer interest rate swaps not designated as hedging instruments | 40,755 | 38,188 | - AFS debt securities, measured at fair value on a recurring basis, decreased to **$961.0 million** at June 30, 2023, from **$1.10 billion** at December 31, 2022. Loans held for sale (LHFS) increased to **$28.7 million** from **$19.8 million**[79](index=79&type=chunk)[80](index=80&type=chunk) | Non-Recurring Fair Value Assets | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :-------------------------------------- | :---------------------------- | :------------------------------ | | Collateral dependent loans with an ACL | 7,674 | 7,969 | | Servicing assets with a valuation allowance | 7,396 | 10,984 | - Collateral-dependent loans with an ACL and servicing assets with a valuation allowance are measured at fair value on a non-recurring basis. Collateral-dependent loans with an ACL decreased slightly to **$7.7 million**, while servicing assets with a valuation allowance decreased to **$7.4 million** at June 30, 2023[81](index=81&type=chunk) [6. Derivative Financial Instruments](index=30&type=section&id=6.%20Derivative%20Financial%20Instruments) This section details the company's use of derivative instruments for managing market risk and accommodating customer needs | Derivative Type | June 30, 2023 Notional Amount ($ thousands) | December 31, 2022 Notional Amount ($ thousands) | | :----------------------------------- | :------------------------------------------ | :-------------------------------------------- | | Total derivatives designated as hedging instruments | 1,275,000 | 1,175,000 | | Total derivatives not designated as hedging instruments | 1,970,984 | 1,747,362 | | Total derivatives | 3,245,984 | 2,922,362 | - The Company uses derivatives to manage market risk and accommodate customers. Total notional amount of derivatives increased to **$3.25 billion** at June 30, 2023, from **$2.92 billion** at December 31, 2022. Derivatives designated as hedging instruments increased by **$100 million**, while non-designated derivatives increased by **$223.6 million**[86](index=86&type=chunk)[88](index=88&type=chunk) | Pre-tax (Loss) Gain (Three Months Ended June 30) | 2023 ($ thousands) | 2022 ($ thousands) | | :----------------------------------------------- | :----------------- | :----------------- | | Derivatives designated as hedging instruments | (15,033) | (11,572) | | Derivatives not designated as hedging instruments | 983 | 1,407 | | Pre-tax (Loss) Gain (Six Months Ended June 30) | | | | Derivatives designated as hedging instruments | (7,954) | (24,953) | | Derivatives not designated as hedging instruments | 1,196 | 2,126 | - For the six months ended June 30, 2023, pre-tax loss from hedging instruments significantly decreased to **$7.95 million** from **$24.95 million** in the prior year. Pre-tax gain from non-designated derivatives decreased to **$1.20 million** from **$2.13 million**[90](index=90&type=chunk)[91](index=91&type=chunk) [7. Off-Balance Sheet Loan Commitments](index=34&type=section&id=7.%20Off-Balance%20Sheet%20Loan%20Commitments) This section outlines the company's commitments to extend credit and other off-balance sheet arrangements, including related credit loss allowances | Off-Balance Sheet Commitments | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :----------------------------------- | :---------------------------- | :------------------------------ | | Commitments to extend credit | 3,606,714 | 4,511,671 | | MW commitments | 984,453 | 1,088,558 | | Standby and commercial letters of credit | 102,935 | 98,179 | | Total | 4,694,102 | 5,698,408 | - Total off-balance sheet loan commitments decreased by **$1.00 billion** (17.6%) to **$4.69 billion** at June 30, 2023, from **$5.70 billion** at December 31, 2022. This was primarily driven by a **$904.9 million** decrease in commitments to extend credit and a **$104.1 million** decrease in mortgage warehouse (MW) commitments[98](index=98&type=chunk) | ACL on Unfunded Commitments | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :----------------------------------- | :---------------------------- | :------------------------------ | | Ending balance of ACL on unfunded commitments | 10,454 | 10,086 | | (Benefit) provision for credit losses on unfunded commitments (six months) | 368 | 493 | - The Allowance for Credit Losses (ACL) on unfunded commitments increased to **$10.5 million** at June 30, 2023, from **$10.1 million** at December 31, 2022. The provision for credit losses on unfunded commitments for the six months ended June 30, 2023, was **$368 thousand**, a decrease from **$493 thousand** in the prior year[101](index=101&type=chunk)[201](index=201&type=chunk) [8. Stock-Based Awards](index=35&type=section&id=8.%20Stock-Based%20Awards) This section details the company's stock-based compensation plans, including expense recognition and outstanding awards | Stock Compensation Expense | Three Months Ended June 30, 2023 ($ thousands) | Three Months Ended June 30, 2022 ($ thousands) | Six Months Ended June 30, 2023 ($ thousands) | Six Months Ended June 30, 2022 ($ thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | 2022 Equity Plan | 2,680 | 2,444 | 5,145 | 5,348 | | Veritex (Green) 2014 Plan | 487 | 200 | 909 | 614 | | Total Stock Compensation Expense | 3,167 | 2,644 | 6,054 | 5,962 | - Total stock compensation expense for the six months ended June 30, 2023, was **$6.05 million**, a slight increase from **$5.96 million** in the prior year. Unrecognized compensation expense for RSUs and PSUs under the 2022 Equity Plan was **$19.07 million**, expected to be recognized over **0.90 years**[107](index=107&type=chunk)[109](index=109&type=chunk) - The 2010 Incentive Plan had no outstanding options at June 30, 2023, as all **1,000** options were exercised during the six months ended June 30, 2023. The 2022 Equity Plan had **634,739** options outstanding, with a weighted average exercise price of **$24.63** and a remaining contractual term of **5.09 years**[102](index=102&type=chunk)[108](index=108&type=chunk) [9. Income Taxes](index=40&type=section&id=9.%20Income%20Taxes) This section provides information on income tax expense, effective tax rates, and deferred tax assets and liabilities | Income Tax Expense | Three Months Ended June 30, 2023 ($ thousands) | Three Months Ended June 30, 2022 ($ thousands) | Six Months Ended June 30, 2023 ($ thousands) | Six Months Ended June 30, 2022 ($ thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Income tax expense for the period | 9,725 | 8,079 | 20,737 | 16,181 | | Effective tax rate | 22.4% | 21.4% | 22.3% | 20.4% | - Income tax expense for the six months ended June 30, 2023, increased by **$4.6 million** to **$20.7 million**, with an effective tax rate of **22.3%**, up from **20.4%** in the prior year. This increase was primarily due to higher pre-tax income and a net discrete tax expense related to share-based payment awards[116](index=116&type=chunk)[118](index=118&type=chunk)[184](index=184&type=chunk) [10. Legal Contingencies](index=41&type=section&id=10.%20Legal%20Contingencies) This section discusses potential legal actions and claims against the company and management's assessment of their financial impact - Management believes that the likelihood of an adverse outcome from current legal actions having a material effect on the Company's financial position, liquidity, or results of operations is remote. No material unasserted claims are currently known[120](index=120&type=chunk) [11. Capital Requirements and Restrictions on Retained Earnings](index=41&type=section&id=11.%20Capital%20Requirements%20and%20Restrictions%20on%20Retained%20Earnings) This section details the company's regulatory capital ratios and any restrictions on its ability to pay dividends from retained earnings | Capital Ratios (Company) | June 30, 2023 Actual Ratio | December 31, 2022 Actual Ratio | | :----------------------------------- | :--------------------------- | :----------------------------- | | Total capital (to RWA) | 12.51% | 11.63% | | Tier 1 capital (to RWA) | 10.01% | 9.34% | | Common equity tier 1 (to RWA) | 9.76% | 9.09% | | Tier 1 capital (to average assets) | 9.80% | 9.82% | | Capital Ratios (Bank) | | | | Total capital (to RWA) | 12.35% | 11.41% | | Tier 1 capital (to RWA) | 11.54% | 10.77% | | Common equity tier 1 (to RWA) | 11.54% | 10.77% | | Tier 1 capital (to average assets) | 11.30% | 11.32% | - Both the Company and the Bank exceeded all minimum regulatory capital requirements and were categorized as 'well capitalized' as of June 30, 2023. The Company's Common Equity Tier 1 (CET1) ratio was **9.76%**, and the Bank's CET1 ratio was **11.54%**. The Bank maintained a capital conservation buffer of **4.35%**[124](index=124&type=chunk)[129](index=129&type=chunk)[126](index=126&type=chunk)[233](index=233&type=chunk) - The Company elected to utilize the **five-year** CECL transition, delaying the impact on regulatory capital through **2021**, with effects phased-in from January 1, **2022**, through December 31, **2024**[125](index=125&type=chunk) - Dividends of **$20.0 million** were paid by the Bank to the Holdco during the three and six months ended June 30, 2023. The Company paid dividends of **$0.20 per share** (**$10.85 million** total) for the quarter and **$0.40 per share** (**$21.69 million** total) for the six months ended June 30, 2023[127](index=127&type=chunk)[128](index=128&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed discussion and analysis of Veritex Holdings, Inc.'s financial condition and results of operations, focusing on the three and six months ended June 30, 2023, compared to prior periods. It covers net interest income, noninterest income and expense, provision for credit losses, and key aspects of the balance sheet, including loan portfolio, deposits, borrowings, liquidity, and capital resources [Overview](index=45&type=section&id=Overview) This section provides a general introduction to the company's business model, primary operations, and key revenue drivers - Veritex is a Texas state banking organization primarily serving small to medium-sized businesses and professionals in the Dallas-Fort Worth metroplex and Houston metropolitan area. Its main revenue sources are interest income on loans and securities, customer service, and loan fees[133](index=133&type=chunk)[134](index=134&type=chunk) - Net interest margin, the difference between interest income and expense, is a key metric, significantly influenced by market interest rates, governmental monetary policies, and economic conditions in its target markets[134](index=134&type=chunk)[135](index=135&type=chunk) [Recent Industry Developments](index=45&type=section&id=Recent%20Industry%20Developments) This section discusses the impact of recent banking industry events on the company's liquidity, capital, and operational strategies - Despite significant banking industry volatility in early 2023, Veritex maintained a robust liquidity position and balance sheet. Total deposits increased by **1.2%** to **$9.23 billion** at June 30, 2023, with minimal deposit outflow in Q2 2023[136](index=136&type=chunk) - The Company proactively engaged clients and maximized funding sources, remaining well-capitalized with a CET1 ratio of **9.76%** as of June 30, 2023. It signed up for the Federal Reserve's Bank Term Funding Program but has not utilized it[136](index=136&type=chunk) [Results of Operations for the Three Months Ended June 30, 2023 and March 31, 2023](index=46&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030,%202023%20and%20March%2031,%202023) This section analyzes the company's financial performance for the second quarter of 2023 compared to the first quarter of 2023 | Metric | Q2 2023 ($ millions) | Q1 2023 ($ millions) | Change ($ millions) | Change (%) | | :----------------------------------- | :------------------- | :------------------- | :------------------ | :--------- | | Net income | 33.7 | 38.4 | (4.7) | (12.2)% | | Basic EPS | 0.62 | 0.71 | (0.09) | (12.7)% | | Diluted EPS | 0.62 | 0.70 | (0.08) | (11.4)% | - Net income decreased by **$4.7 million** (12.2%) sequentially to **$33.7 million** in Q2 2023, with basic EPS falling to **$0.62** from **$0.71**[138](index=138&type=chunk)[139](index=139&type=chunk) | Net Interest Income | Q2 2023 ($ millions) | Q1 2023 ($ millions) | Change ($ millions) | Change (%) | | :----------------------------------- | :------------------- | :------------------- | :------------------ | :--------- | | Net interest income | 100.8 | 103.4 | (2.6) | (2.5)% | | Net interest margin | 3.51% | 3.69% | (0.18)% | | | Average cost of interest-bearing deposits | 3.61% | 2.92% | 0.69% | | | Total interest expense | 81.7 | 66.2 | 15.5 | 23.4% | - Net interest income decreased by **$2.6 million** (2.5%) sequentially to **$100.8 million**, and net interest margin declined by **18 bps** to **3.51%**. This was primarily due to a **$15.5 million** (23.4%) increase in interest expense, driven by higher funding costs on deposits and FHLB borrowings, partially offset by a **$12.0 million** increase in loan interest income[140](index=140&type=chunk)[141](index=141&type=chunk)[146](index=146&type=chunk) | Noninterest Income | Q2 2023 ($ thousands) | Q1 2023 ($ thousands) | Change ($ thousands) | Change (%) | | :----------------------------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Total noninterest income | 13,692 | 13,531 | 161 | 1.2% | | Loss on sales of debt securities | — | (5,321) | 5,321 | (100.0)% | | Government guaranteed loan income, net | 4,144 | 9,688 | (5,544) | (57.2)% | | Equity method investment income (loss) | 485 | (1,521) | 2,006 | 131.9% | | Customer swap income | 961 | 217 | 744 | 342.9% | - Noninterest income increased by **$161 thousand** (1.2%) sequentially to **$13.7 million**. Key drivers included the absence of a **$5.3 million** loss on debt securities sales (recorded in Q1), a **$5.5 million** decrease in government guaranteed loan income, and a **$2.0 million** improvement in equity method investment income (from a loss to a gain)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) | Noninterest Expense | Q2 2023 ($ thousands) | Q1 2023 ($ thousands) | Change ($ thousands) | Change (%) | | :----------------------------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Total noninterest expense | 57,197 | 56,615 | 582 | 1.0% | | Salaries and employee benefits | 28,650 | 31,865 | (3,215) | (10.1)% | | Professional and regulatory fees | 6,868 | 4,389 | 2,479 | 56.5% | | Marketing | 2,627 | 1,779 | 848 | 47.7% | - Noninterest expense increased by **$582 thousand** (1.0%) sequentially to **$57.2 million**. This was primarily due to a **$2.5 million** increase in professional and regulatory fees (driven by FDIC assessment fees and legal fees) and an **$848 thousand** increase in marketing expenses, partially offset by a **$3.2 million** decrease in salaries and employee benefits (due to lower lender incentives and payroll taxes)[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) [Results of Operations for the Six Months Ended June 30, 2023 and June 30, 2022](index=52&type=section&id=Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20June%2030,%202023%20and%20June%2030,%202022) This section analyzes the company's financial performance for the first half of 2023 compared to the first half of 2022 | Metric | H1 2023 ($ millions) | H1 2022 ($ millions) | Change ($ millions) | Change (%) | | :----------------------------------- | :------------------- | :------------------- | :------------------ | :--------- | | Net income | 72.1 | 63.1 | 9.0 | 14.3% | | Basic EPS | 1.33 | 1.21 | 0.12 | 9.9% | | Diluted EPS | 1.32 | 1.19 | 0.13 | 10.9% | - Net income for the six months ended June 30, 2023, increased by **$9.0 million** (14.3%) year-over-year to **$72.1 million**, with basic EPS rising to **$1.33** from **$1.21**[162](index=162&type=chunk)[163](index=163&type=chunk) | Net Interest Income | H1 2023 ($ millions) | H1 2022 ($ millions) | Change ($ millions) | Change (%) | | :----------------------------------- | :------------------- | :------------------- | :------------------ | :--------- | | Net interest income | 204.2 | 157.5 | 46.7 | 29.7% | | Net interest margin | 3.60% | 3.32% | 0.28% | | | Average cost of interest-bearing deposits | 3.33% | 0.34% | 2.99% | | | Total interest expense | 147.9 | 16.5 | 131.4 | 798.2% | - Net interest income increased by **$46.7 million** (29.7%) year-over-year to **$204.2 million**, and net interest margin improved by **28 bps** to **3.60%**. This was driven by a **$131.4 million** (798.2%) increase in interest expense, primarily due to higher average rates paid on deposits and FHLB advances, largely offset by a **$161.8 million** increase in loan interest income[164](index=164&type=chunk)[165](index=165&type=chunk)[171](index=171&type=chunk) | Noninterest Income | H1 2023 ($ thousands) | H1 2022 ($ thousands) | Change ($ thousands) | Change (%) | | :----------------------------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Total noninterest income | 27,223 | 25,475 | 1,748 | 6.9% | | Loss on sales of debt securities | (5,321) | — | (5,321) | (100.0)% | | Government guaranteed loan income, net | 13,832 | 5,680 | 8,152 | 143.5% | | Equity method investment (loss) income | (1,036) | 1,333 | (2,369) | (177.7)% | | Customer swap income | 1,178 | 2,267 | (1,089) | (48.0)% | | Other | 4,651 | 737 | 3,914 | 531.1% | - Noninterest income increased by **$1.7 million** (6.9%) year-over-year to **$27.2 million**. This was primarily due to an **$8.2 million** increase in government guaranteed loan income and a **$3.9 million** increase in other noninterest income, partially offset by a **$5.3 million** loss on debt securities sales (no comparable sale in prior year) and a **$2.4 million** decrease in equity method investment income (from a gain to a loss)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk) | Noninterest Expense | H1 2023 ($ thousands) | H1 2022 ($ thousands) | Change ($ thousands) | Change (%) | | :----------------------------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Total noninterest expense | 113,812 | 94,725 | 19,087 | 20.1% | | Salaries and employee benefits | 60,515 | 54,437 | 6,078 | 11.2% | | Professional and regulatory fees | 11,257 | 6,023 | 5,234 | 86.9% | | Data processing and software expense | 9,429 | 6,307 | 3,122 | 49.5% | | Other | 12,609 | 8,730 | 3,879 | 44.4% | - Noninterest expense increased by **$19.1 million** (20.1%) year-over-year to **$113.8 million**. Key drivers included a **$6.1 million** increase in salaries and employee benefits (due to higher officer salaries, bonuses, and employee group insurance), a **$5.2 million** increase in professional and regulatory fees (mainly FDIC assessment fees), a **$3.1 million** increase in data processing and software expense, and a **$3.9 million** increase in other noninterest expense[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) [Financial Condition](index=58&type=section&id=Financial%20Condition) This section reviews the company's balance sheet components, including assets, liabilities, and equity, and their changes over time - Total assets increased by **$306.0 million** (2.5%) to **$12.47 billion** at June 30, 2023, driven by continued loan growth and customer relationships in the Dallas-Fort Worth and Houston metropolitan areas[186](index=186&type=chunk) | Loan Portfolio (LHI) | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | Change ($ thousands) | Change (%) | | :----------------------------------- | :---------------------------- | :------------------------------ | :------------------- | :--------- | | Total LHI, carried at amortized cost | 9,706,139 | 9,501,624 | 204,515 | 2.2% | | Multi-family residential | 592,473 | 322,679 | 269,794 | 83.6% | | NOOCRE | 2,509,731 | 2,341,379 | 168,352 | 7.2% | | Construction and land | 1,659,700 | 1,787,400 | (127,700) | (7.1)% | | Commercial | 2,850,084 | 2,942,348 | (92,264) | (3.1)% | | Total LHFS | 29,876 | 20,641 | 9,235 | 44.7% | - Total LHI, excluding ACL, increased by **$220.0 million** (2.3%) to **$9.72 billion**. Multi-family residential loans grew significantly by **83.6%**, and NOOCRE increased by **7.2%**, while construction and land loans decreased by **7.1%**[188](index=188&type=chunk)[190](index=190&type=chunk) | Deposits | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | Change ($ thousands) | Change (%) | | :----------------------------------- | :---------------------------- | :------------------------------ | :------------------- | :--------- | | Total deposits | 9,233,909 | 9,123,234 | 110,675 | 1.2% | | Noninterest-bearing | 2,234,109 | 2,640,617 | (406,508) | (15.4)% | | Certificates and other time deposits | 2,928,949 | 2,086,642 | 842,307 | 40.4% | | Correspondent money market accounts | 480,598 | 881,245 | (400,647) | (45.5)% | - Total deposits increased by **$110.7 million** (1.2%) to **$9.23 billion**. This was driven by an **$842.3 million** increase in certificates and other time deposits, partially offset by a **$406.5 million** decrease in noninterest-bearing deposits and a **$400.6 million** decrease in correspondent money market deposits[210](index=210&type=chunk)[211](index=211&type=chunk) | Borrowings | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :----------------------------------- | :---------------------------- | :------------------------------ | | Advances from FHLB | 1,325,000 | 1,175,000 | | Total available FHLB borrowing capacity | 1,120,000 | 787,300 | | Total available FRB discount window | 2,720,000 | 1,140,000 | | Available BTFP capacity | 463,600 | N/A | - FHLB advances increased by **$150.0 million** to **$1.33 billion**. The Company had **$1.12 billion** in available FHLB borrowing capacity and **$2.72 billion** under the FRB discount window, with an additional **$463.6 million** available under the new Bank Term Funding Program (BTFP), none of which were utilized as of June 30, 2023[213](index=213&type=chunk)[214](index=214&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its financial obligations and its capital adequacy to support operations and growth - Liquidity needs were primarily met by core deposits, wholesale borrowings, and security/loan maturities. The Company maintained **$100.0 million** in commercial bank lines of credit, none of which were drawn upon[218](index=218&type=chunk) | Funding Sources (Average % of Total Assets) | H1 2023 | FY 2022 | | :------------------------------------------ | :------ | :------ | | Noninterest-bearing deposits | 18.8% | 25.3% | | Interest-bearing deposits | 32.9% | 35.8% | | Certificates and other time deposits | 22.2% | 14.6% | | Advances from FHLB | 10.5% | 8.1% | | Stockholders' equity | 12.2% | 13.0% | | Uses of Funds (Average % of Total Assets) | | | | Loans | 77.2% | 74.9% | | Debt Securities | 9.7% | 11.6% | | Interest-bearing deposits in other banks | 4.3% | 1.5% | - Noninterest-bearing deposits as a percentage of total deposits decreased to **25.4%** from **33.4%**, while average loans to average deposits increased to **101.4%** from **94.6%**[221](index=221&type=chunk) | Cash Flow Summary (Six Months Ended June 30) | 2023 ($ thousands) | 2022 ($ thousands) | | :------------------------------------------- | :----------------- | :----------------- | | Net cash provided by operating activities | 98,317 | 99,241 | | Net cash used in investing activities | (108,270) | (1,573,493) | | Net cash provided by financing activities | 237,797 | 1,505,184 | | Net change in cash and cash equivalents | 227,844 | 30,932 | - Net cash used in investing activities decreased by **$1.47 billion**, primarily due to lower net loan originations and reduced purchases of AFS debt securities. Net cash provided by financing activities decreased by **$1.27 billion**, mainly due to lower new deposits and the absence of common stock offering proceeds from the prior year[226](index=226&type=chunk)[227](index=227&type=chunk) - Total stockholders' equity increased by **$41.5 million** (2.9%) to **$1.49 billion** at June 30, 2023, driven by net income and stock-based compensation, partially offset by dividends and AOCI[229](index=229&type=chunk) [Contractual Obligations](index=68&type=section&id=Contractual%20Obligations) This section outlines the company's future cash payment commitments under various contractual agreements - No significant changes in contractual obligations or amounts due occurred as of June 30, 2023, compared to December 31, 2022, other than normal changes in the ordinary course of business and those discussed under 'Borrowings'[234](index=234&type=chunk) [Critical Accounting Policies](index=68&type=section&id=Critical%20Accounting%20Policies) This section describes the accounting policies that require significant judgment and estimates, which are crucial to financial reporting - Critical accounting policies include Allowance for Credit Losses (ACL), business combinations, debt securities, and goodwill. No changes in critical accounting policies since December 31, 2022, except for updates in Note 1[235](index=235&type=chunk) - Goodwill is reviewed annually for impairment or when a triggering event occurs. An interim quantitative impairment test was performed as of May 31, 2023, due to banking industry volatility, and it was determined that goodwill was not impaired, with the reporting unit's fair value exceeding its carrying value by approximately **26%**[236](index=236&type=chunk)[240](index=240&type=chunk) [Special Cautionary Notice Regarding Forward-Looking Statements](index=70&type=section&id=Special%20Cautionary%20Notice%20Regarding%20Forward-Looking%20Statements) This section advises readers about the inherent uncertainties and risks associated with forward-looking statements in the report - The report contains forward-looking statements subject to various risks and uncertainties, including concentration in Texas, changes in market interest rates, sufficiency of loan loss reserves, ability to implement growth strategy, and risks related to CRE and commercial loan portfolios[241](index=241&type=chunk) - Other factors that could affect future results include liquidity maintenance, market value fluctuations of debt securities, competition, data security threats, potential goodwill impairment, and regulatory changes[241](index=241&type=chunk)[242](index=242&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=69&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section details Veritex's management of market risk, primarily interest rate volatility, through its asset, liability, and funds management policy. It outlines the use of an Asset-Liability Committee, interest rate risk simulation models, and shock analysis to assess the impact of interest rate changes on net interest income and fair value of equity, while noting the Company's limited use of derivatives for hedging purposes - Veritex's primary market risk is interest rate volatility, managed by the Asset-Liability Committee through guidelines for effective funds management and a measurement system for net interest rate sensitivity[243](index=243&type=chunk)[246](index=246&type=chunk) - The Company uses interest rate risk simulation models and shock analysis to test the sensitivity of net interest income and the balance sheet to interest rate changes. Internal policy limits estimated net income at risk for a **100 bps** shift to **5.0%**, **200 bps** to **10.0%**, and **300 bps** to **15.0%**[247](index=247&type=chunk)[248](index=248&type=chunk) | Change in Interest Rates (Basis Points) | June 30, 2023 Percent Change in Net Interest Income | June 30, 2023 Percent Change in Fair Value of Equity | December 31, 2022 Percent Change in Net Interest Income | December 31, 2022 Percent Change in Fair Value of Equity | | :-------------------------------------- | :-------------------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | :---------------------------------------------------- | | +300 | 10.52% | 1.85% | 13.00% | 4.65% | | +200 | 7.13% | 1.45% | 8.88% | 3.36% | | +100 | 3.61% | 0.84% | 4.46% | 1.77% | | Base | —% | —% | —% | —% | | −100 | (3.63)% | (1.29)% | (4.72)% | (2.55)% | - As of June 30, 2023, a **+300 basis point** shift in interest rates was simulated to increase net interest income by **10.52%** and fair value of equity by **1.85%**. A **-100 basis point** shift was projected to decrease net interest income by (**3.63%**) and fair value of equity by (**1.29%**)[249](index=249&type=chunk) [Item 4. Controls and Procedures](index=71&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms that Veritex's management, including the CEO and CFO, evaluated the effectiveness of its disclosure controls and procedures as of June 30, 2023, concluding they were effective. It also states that there were no significant changes in internal control over financial reporting during the quarter - The Company's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2023, providing reasonable assurance of achieving control objectives[250](index=250&type=chunk) - No significant changes in internal control over financial reporting occurred during the quarter ended June 30, 2023, that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting[251](index=251&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=72&type=section&id=Item%201.%20Legal%20Proceedings) This section states that Veritex is occasionally involved in legal actions arising from normal business activities. Management believes that the likelihood of any current proceedings having a material adverse effect on the Company's financial condition or results of operations is remote, though such matters can be costly and impact reputation - The Company is subject to claims and litigation in the ordinary course of business, including allegations of regulatory violations, competition law, labor laws, and consumer protection laws[253](index=253&type=chunk) - Management believes the likelihood of a material adverse effect on consolidated results, financial condition, or cash flows from current legal proceedings is remote. However, unfavorable outcomes or the costs of defense could still impact the Company[254](index=254&type=chunk) [Item 1A. Risk Factors](index=72&type=section&id=Item%201A.%20Risk%20Factors) This section highlights that investors should consider risk factors previously disclosed in the Annual Report on Form 10-K, with a specific emphasis on recent negative developments in the banking industry. These developments could adversely affect business operations, financial condition, and results, leading to increased regulatory scrutiny, higher funding costs, potential losses on securities sales, and special assessments - Recent negative developments in the banking industry, including bank failures and market volatility, could adversely affect Veritex's business operations and financial condition[257](index=257&type=chunk) - Increased competition for deposits and higher funding costs are pressuring net interest margins. Forced sales of securities to address liquidity could result in losses due to rising interest rates[257](index=257&type=chunk) - Anticipated increased regulatory scrutiny and new initiatives are expected to raise the Company's costs of doing business and reduce profitability. Potential special assessments from FDIC losses due to recent bank failures are also a concern[258](index=258&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=72&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds during the reporting period - No unregistered sales of equity securities or use of proceeds occurred during the period[259](index=259&type=chunk) [Item 5. Other Information](index=73&type=section&id=Item%205.%20Other%20Information) This section confirms that no directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2023 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2023[260](index=260&type=chunk) [Item 6. Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, certifications from the Principal Executive Officer and Principal Financial Officer, and Inline XBRL formatted financial statements - Exhibits include certifications (**31.1, 31.2, 32.1, 32.2**) from the Principal Executive Officer and Principal Financial Officer, and financial statements formatted in Inline XBRL (**101, 104**)[261](index=261&type=chunk) [SIGNATURES](index=74&type=section&id=SIGNATURES) This section contains the signatures of the registrant's Chairman and Chief Executive Officer, C. Malcolm Holland, III, and Chief Financial Officer, Terry S. Earley, certifying the filing of the report on August 8, 2023 - The report is duly signed by C. Malcolm Holland, III, Chairman and Chief Executive Officer, and Terry S. Earley, Chief Financial Officer, on August 8, 2023[264](index=264&type=chunk)[265](index=265&type=chunk)

Financial Data and Key Metrics Changes - For Q2 2023, the company reported net operating income of $34.7 million or $0.64 per share, with a pre-tax pre-provision of $58.5 million or 1.9% [6] - The company experienced a decline in income due to two charge-offs totaling $11.4 million and a lack of USDA fee income, but still achieved a 1.13% return on average assets and a 13.7% return on total common equity [7][8] - Operating earnings increased by 23% to $78 million from 2022 to 2023, with operating EPS up 19% and pre-tax pre-provision operating earnings rising 41% to $125 million [14] Business Line Data and Key Metrics Changes - Loan growth was flat for the first time in many years, with pay-offs reaching $400 million, up 58% from the previous quarter, primarily in commercial real estate [10][11] - The company shifted focus from commercial real estate to C&I and small businesses, with a goal to improve deposit relationships [16] - The loan portfolio saw a decline in acquisition, development, and construction (ADC) loans by $172 million or 9.4% during Q2 [20] Market Data and Key Metrics Changes - Deposits grew by $200 million or 8.8% annualized in Q2, with a reduction in reliance on wholesale funding from 32% to 29% [9] - The average deposit account balance was around $124,000, with uninsured and uncollateralized deposits at about 33% [19] - The net interest margin decreased by 18 basis points to 3.51%, impacted by higher cash balances and interest reversals on problem credits [22] Company Strategy and Development Direction - The company has focused on improving its deposit funding side, with strategies showing positive results in a challenging market [9] - Marketing spend has been reallocated to deposit products, and a direct marketing campaign launched in February has yielded impressive results [17] - The company aims to continue reducing its concentration in commercial real estate and improve its liquidity profile [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the marketplace but noted progress in various areas, with expectations for mid-single-digit loan growth in Q3 [6][11] - The company anticipates that deposit betas will continue to increase due to competitive pressures [19] - Management expressed confidence that the net interest margin is nearing the bottom, assuming stable deposit mix [22] Other Important Information - The company has grown CET1 by 51 basis points to 9.76% over the last year while growing loans by $1.1 billion [14] - The company’s liquidity capacity exceeds uninsured deposits by $2.2 billion, representing over 70% of uninsured [17] Q&A Session Summary - The conference call was concluded prematurely due to technical difficulties, and no questions were addressed during the Q&A session [24][25]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number: 001-36682 VERITEX HOLDINGS, INC. (Exact name of registrant as specified in its charter) Texas 27-0973566 (State or other jurisdiction of (I.R ...

Financial Data and Key Metrics Changes - For Q1 2023, the company reported net operating income of $43.3 million or $0.79 per share [6] - The pretax pre-provision income was $66.4 million, representing a 2.2% return on average assets [7] - Return on average tangible common equity exceeded 17.7%, while return on average assets was 1.44% [7] - Efficiency ratio remained at 45.6% [7] - Tangible book value per share increased by 5.1% quarter-over-quarter and 9.3% year-over-year to $19.43 [14] - Net interest income decreased by $2.7 million or 2.6% to $103.4 million [23] - Net interest margin decreased by 18 basis points to 3.69% [24] Business Line Data and Key Metrics Changes - Loan production declined by 73% from Q4 to Q1 due to rising interest rates and economic uncertainty [22] - C&I and owner-occupied real estate accounted for 48% of loan production, up from 41% in Q4 [22] - Non-interest income increased by $4.5 million to $18.9 million, excluding losses from investment portfolio trades [27] - Non-interest expense decreased by $949,000 to just under $56 million [28] Market Data and Key Metrics Changes - Overall deposits decreased by $88 million or 1% for the quarter, with a significant loss of 51% in correspondent money market deposits [17] - Uninsured and uncollateralized deposits decreased to 38.4% from 44.1% at the end of Q4 2022 [21] - The average account balance for deposits was $132,000 [21] Company Strategy and Development Direction - The company is focusing on transforming its balance sheet by slowing loan growth and shifting focus from commercial real estate (CRE) to C&I and small business [18] - A new banking incentive program was implemented to prioritize deposit value and volume [18] - The company aims to achieve a CET1 ratio of over 10% by the end of 2023 [34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the market but emphasized the importance of liquidity management [8] - The company expects loan growth to decline to mid-single digits going forward [10] - Management expressed optimism about the USDA business and the potential for revenue growth in the second half of the year [45] Other Important Information - The company has reduced non-core funding by $258 million, improving liquidity capacity [19] - The allowance for credit losses increased by 5 basis points to 1.07% due to economic uncertainty [35] Q&A Session Summary Question: Concerns about USDA funding running out - Management indicated that there is a lobbying effort to prevent funding issues and expressed optimism for Q2 compared to last year [44] Question: Pressure on net interest margin (NIM) - Management expects most pressure on NIM to occur in Q2, depending on Fed actions and deposit returns [48] Question: Stock buyback considerations - Management is considering stock buybacks but believes it is not prudent to act at this time [52] Question: Changes in criticized assets - A significant reduction in criticized assets was noted, primarily due to surveillance efforts [54] Question: Confidence in multifamily construction - Management expressed confidence in the multifamily construction portfolio due to high-quality products and strong metrics [56] Question: Strategy for deposit growth - The company is focusing on digital marketing for money market accounts and shorter-term CDs, aiming to reduce reliance on brokered deposits [59] Question: Expense control and future trajectory - Management believes expenses will remain stable, with no significant increases expected [68] Question: Breakeven volume for Thrive - Thrive needs approximately $450 million in funded volume to reach breakeven [80]

Exhibit 99.2 1 4/25/2023 First Quarter Earnings TRUTH | INTEGRITY | TRANSPARENCY Safe Harbor and Non-GAAP Measures Forward-looking statements This presentation includes "forward-looking statements", within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors, which change over time ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ Annual Report to Section 13 OR 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2022 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File No. 001-36682 | Texas | 27-0973566 | | --- | --- | | (State or other jurisdiction of | (I.R.S. Employer | | incorporation or organization) | Identification No.) | | ...