Veritex (VBTX) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Glossary of Acronyms, Abbreviations, and Terms This section defines key financial and regulatory acronyms, abbreviations, and terms for clarity - The glossary defines key financial and regulatory terms such as ACL (Allowance for Credit Loss), AFS (Available-For-Sale), HTM (Held-To-Maturity), CET1 (Common Equity Tier 1), CRE (Commercial Real Estate), EPS (Earnings Per Share), and RWA (Risk-Weighted Assets)[7] Item 1. Financial Statements – Unaudited This section presents the unaudited consolidated financial statements for the period ended June 30, 2025 Consolidated Balance Sheets The balance sheets show a slight decrease in total assets and deposits, while stockholders' equity increased Consolidated Balance Sheet Highlights (Dollars in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Total assets | $12,527,868 | $12,768,341 | $(240,473) | -1.88% | | Total cash and cash equivalents | $770,565 | $855,200 | $(84,635) | -9.89% | | Total investments | $1,492,790 | $1,548,176 | $(55,386) | -3.58% | | Total LHI, net | $9,340,778 | $9,392,799 | $(52,021) | -0.55% | | Total deposits | $10,417,920 | $10,752,592 | $(334,672) | -3.11% | | Total liabilities | $10,878,649 | $11,167,272 | $(288,623) | -2.58% | | Total stockholders' equity | $1,649,219 | $1,601,069 | $48,150 | 3.01% | Consolidated Statements of Income Net income increased for the three and six-month periods due to higher net interest and noninterest income Consolidated Statements of Income Highlights (Dollars in thousands, except per share amounts) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Total interest and dividend income | $175,123 | $191,247 | $(16,124) | -8.43% | | Total interest expense | $78,788 | $95,011 | $(16,223) | -17.07% | | NET INTEREST INCOME | $96,335 | $96,236 | $99 | 0.10% | | Provision for credit losses on loans | $1,750 | $8,250 | $(6,500) | -78.79% | | Total noninterest income | $13,499 | $10,578 | $2,921 | 27.61% | | Total noninterest expense | $67,162 | $63,141 | $4,021 | 6.37% | | NET INCOME | $30,906 | $27,202 | $3,704 | 13.62% | | Basic EPS | $0.57 | $0.50 | $0.07 | 14.00% | | Diluted EPS | $0.56 | $0.50 | $0.06 | 12.00% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Total interest and dividend income | $348,848 | $375,834 | $(26,986) | -7.18% | | Total interest expense | $157,072 | $186,792 | $(29,720) | -15.91% | | NET INTEREST INCOME | $191,776 | $189,042 | $2,734 | 1.45% | | Provision for credit losses on loans | $5,750 | $15,750 | $(10,000) | -63.49% | | Total noninterest income | $27,788 | $17,240 | $10,548 | 61.18% | | Total noninterest expense | $133,996 | $125,257 | $8,739 | 6.98% | | NET INCOME | $59,976 | $51,358 | $8,618 | 16.78% | | Basic EPS | $1.10 | $0.94 | $0.16 | 17.02% | | Diluted EPS | $1.09 | $0.94 | $0.15 | 15.96% | Consolidated Statements of Comprehensive Income Comprehensive income rose significantly due to net income growth and positive other comprehensive income Consolidated Statements of Comprehensive Income Highlights (Dollars in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | NET INCOME | $30,906 | $27,202 | $3,704 | 13.62% | | Net unrealized (losses) gains on debt securities AFS | $(1,955) | $(4,762) | $2,807 | -58.95% | | Net unrealized gains (losses) on derivative instruments | $6,565 | $(2,228) | $8,793 | -394.66% | | Other comprehensive income (loss), net of tax | $3,642 | $(5,556) | $9,198 | -165.55% | | COMPREHENSIVE INCOME | $34,548 | $21,646 | $12,902 | 59.61% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | NET INCOME | $59,976 | $51,358 | $8,618 | 16.78% | | Net unrealized (losses) gains on debt securities AFS | $20,324 | $(5,954) | $26,278 | -441.35% | | Net unrealized gains (losses) on derivative instruments | $13,281 | $(10,723) | $24,004 | -223.85% | | Other comprehensive income (loss), net of tax | $26,548 | $(13,250) | $39,798 | -300.36% | | COMPREHENSIVE INCOME | $86,524 | $38,108 | $48,416 | 127.05% | Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity increased due to net income and other comprehensive income Changes in Stockholders' Equity (Six Months Ended June 30, 2025 vs. December 31, 2024) (Dollars in thousands) | Item | Balance at Dec 31, 2024 | Net Income | Dividends Paid | Stock Buyback | Other Comprehensive Income, net of tax | Balance at Jun 30, 2025 | |:---|:---|:---|:---|:---|:---|:---| | Total Stockholders' Equity | $1,601,069 | $59,976 | $(22,864) | $(16,569) | $26,548 | $1,649,219 | Changes in Stockholders' Equity (Six Months Ended June 30, 2024 vs. December 31, 2023) (Dollars in thousands) | Item | Balance at Dec 31, 2023 | Net Income | Dividends Paid | Stock Buyback | Other Comprehensive Loss, net of tax | Balance at Jun 30, 2024 | |:---|:---|:---|:---|:---|:---|:---| | Total Stockholders' Equity | $1,531,323 | $51,358 | $(21,799) | $(3,497) | $(13,250) | $1,548,616 | Consolidated Statements of Cash Flows A net decrease in cash resulted from financing activities, partially offset by cash from investing activities Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) (Dollars in thousands) | Cash Flow Activity | 2025 | 2024 | |:---|:---|:---| | Net cash provided by operating activities | $70,972 | $85,560 | | Net cash provided by (used in) investing activities | $126,382 | $(324,751) | | Net cash (used in) provided by financing activities | $(281,989) | $261,965 | | Net change in cash and cash equivalents | $(84,635) | $22,774 | | Cash and cash equivalents at end of period | $770,565 | $651,837 | Notes to Consolidated Financial Statements This section provides detailed notes on accounting policies, securities, loans, capital, and a subsequent merger event 1. Operations and Summary of Significant Accounting Policies This note outlines the Company's banking operations and the basis of presentation for its interim financial statements - Veritex Holdings, Inc. operates 19 branches in the DFW metroplex and 12 branches in the Houston metropolitan area, offering a full range of banking services[25] - The financial statements are unaudited and prepared in accordance with GAAP for interim financial information, with intercompany transactions eliminated in consolidation[27] - The Company operates as a single reportable segment, community banking, with all significant operating decisions based on the consolidated results of the Bank[32][33][34] EPS Reconciliation (Three and Six Months Ended June 30) (In thousands, except per share amounts) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | |:---|:---|:---|:---|:---| | Net income | $30,906 | $27,202 | $59,976 | $51,358 | | Weighted average shares outstanding for basic EPS | 54,251 | 54,457 | 54,368 | 54,451 | | Dilutive effect of employee stock-based awards | 515 | 366 | 576 | 381 | | Adjusted weighted average shares outstanding | $54,766 | $54,823 | $54,944 | $54,832 | | Basic EPS | $0.57 | $0.50 | $1.10 | $0.94 | | Diluted EPS | $0.56 | $0.50 | $1.09 | $0.94 | 2. Supplemental Statement of Cash Flows This note details supplemental cash flow information, including cash paid for interest and taxes and noncash transactions Supplemental Cash Flow Information (Six Months Ended June 30) (Dollars in thousands) | Item | 2025 | 2024 | |:---|:---|:---| | Cash paid for interest | $176,065 | $194,144 | | Cash paid for income taxes | $20,879 | $1,826 | | Right-of-use assets obtained in exchange for lease liabilities | $774 | $1,087 | | Transfer of loans to other real estate | $3,330 | $26,650 | 3. Share Transactions This note details the Company's stock buyback program, which was extended through March 31, 2026 - The Board authorized the extension of the Stock Buyback Program through March 31, 2026, allowing for purchases up to $50,000 in aggregate[38] Stock Buyback Program (Three and Six Months Ended June 30) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | |:---|:---|:---|:---|:---| | Numbers of shares repurchased | 286,291 | 175,688 | 663,637 | 175,688 | | Weighted average price per share | $24.06 | $19.90 | $24.72 | $19.90 | 4. Securities This note provides a breakdown of the Company's equity and debt securities, including fair values and unrealized losses - As of June 30, 2025, 127 AFS debt securities were in an unrealized loss position totaling $61.6 million, and 55 HTM securities were in an unrealized loss position totaling $24.2 million; Management believes these unrealized losses are due to noncredit-related factors and no ACL has been recognized[48] Equity Securities with Readily Determinable Fair Value (Dollars in thousands) | Date | Fair Value | |:---|:---| | June 30, 2025 | $9,980 | | December 31, 2024 | $9,781 | Debt Securities AFS and HTM (June 30, 2025) (Dollars in thousands) | Category | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |:---|:---|:---|:---|:---| | AFS | $1,295,684 | $8,230 | $61,629 | $1,242,285 | | HTM | $176,519 | $0 | $24,200 | $152,319 | Debt Securities AFS and HTM (December 31, 2024) (Dollars in thousands) | Category | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |:---|:---|:---|:---|:---| | AFS | $1,368,669 | $6,474 | $80,631 | $1,294,512 | | HTM | $184,026 | $0 | $23,466 | $160,560 | 5. LHI and ACL This note details the loan portfolio, allowance for credit losses, and credit quality indicators - The Company modified $34.7 million in payment deferrals and $26.5 million in combination concessions for borrowers experiencing financial difficulty during the six months ended June 30, 2025[63] LHI, carried at amortized cost (Dollars in thousands) | Loan Type | June 30, 2025 | December 31, 2024 | |:---|:---|:---| | Construction and land | $1,142,457 | $1,303,711 | | 1 - 4 family residential | $1,086,342 | $957,341 | | Multi-family residential | $718,946 | $750,218 | | OOCRE | $800,881 | $780,003 | | NOOCRE | $2,311,466 | $2,382,499 | | Commercial | $2,692,209 | $2,693,538 | | MW | $669,052 | $605,411 | | Total LHI, gross | $9,461,738 | $9,513,526 | | Less: ACL | $(112,262) | $(111,745) | | Total LHI, net | $9,340,778 | $9,392,799 | ACL Activity (Three Months Ended June 30, 2025) (Dollars in thousands) | Loan Type | Balance at beginning of period | Credit loss expense (non-PCD) | Credit loss expense (PCD) | Charge-offs | Recoveries | Ending Balance | |:---|:---|:---|:---|:---|:---|:---| | Construction and Land | $19,419 | $962 | $0 | $0 | $0 | $20,381 | | Residential | $16,823 | $1,664 | $65 | $0 | $1 | $18,553 | | NOOCRE | $35,491 | $(497) | $0 | $(215) | $0 | $34,779 | | Commercial | $16,728 | $1,653 | $0 | $(1,571) | $131 | $16,941 | | Total | $111,773 | $1,528 | $222 | $(1,841) | $580 | $112,262 | Nonaccrual Loans (Dollars in thousands) | Loan Type | June 30, 2025 | December 31, 2024 | |:---|:---|:---| | Construction and land | $6,120 | $6,373 | | NOOCRE | $27,486 | $10,967 | | Commercial | $17,550 | $24,680 | | Total Nonaccrual | $61,338 | $52,521 | 6. Borrowings This note details borrowings from the FHLB and subordinated debt, including a recent redemption of subordinated notes - Advances from FHLB totaled $169.0 million at June 30, 2025, with a weighted average rate of 4.75% and a maturity date of July 1, 2025; There were no outstanding FHLB advances as of December 31, 2024[83] - The Company redeemed $75.0 million of its 4.75% fixed-to-floating subordinated notes in the first quarter of 2025[84] Subordinated Debentures and Notes (Dollars in thousands) | Item | June 30, 2025 | December 31, 2024 | |:---|:---|:---| | Subordinated notes, net | $124,843 | $199,607 | | Subordinated debentures, net | $31,239 | $31,129 | | Total | $156,082 | $230,736 | 7. Fair Value This note summarizes assets and liabilities measured at fair value, categorized by the fair value hierarchy Assets Measured at Fair Value on a Recurring Basis (June 30, 2025) (Dollars in thousands) | Financial Assets | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | |:---|:---|:---|:---|:---| | AFS debt securities | $0 | $1,242,285 | $0 | $1,242,285 | | Equity securities with a readily determinable fair value | $9,980 | $0 | $0 | $9,980 | | LHFS | $0 | $68,798 | $0 | $68,798 | | Interest rate derivatives designated as hedging instruments | $0 | $9,735 | $0 | $9,735 | Assets Measured at Fair Value on a Non-Recurring Basis (Dollars in thousands) | Assets | June 30, 2025 (Level 3 Inputs) | December 31, 2024 (Level 3 Inputs) | |:---|:---|:---| | Collateral dependent loans with an ACL | $1,531 | $4,182 | | Servicing assets with a valuation allowance | $3,675 | $3,356 | | OREO | $9,218 | $24,737 | 8. Derivative Financial Instruments This note describes the use of derivatives to manage interest rate risk, categorized as hedging or non-designated instruments - The Company uses interest rate swaps, floors, caps, and collars as cash flow hedges to mitigate exposure to future cash flow variability from interest rate risk, with changes in fair value recorded in AOCI[98] - Non-designated derivatives, primarily customer-related interest rate agreements, are offset with correspondent bank counterparties, and changes in their net fair value are recognized in noninterest income, with minimal impact on operations[99] Notional Amounts and Estimated Fair Values of Derivatives (June 30, 2025) (Dollars in thousands) | Derivative Type | Notional Amount | Asset Derivative | Liability Derivative | |:---|:---|:---|:---| | Designated as hedging instruments | $1,550,000 | $9,735 | $30,196 | | Not designated as hedging instruments | $1,810,116 | $19,658 | $19,462 | | Total Derivatives | $3,360,116 | $6,814 | $27,079 | 9. OBS Loan Commitments This note outlines off-balance sheet loan commitments and the allowance for unfunded commitment credit losses OBS Financial Instruments (Dollars in thousands) | Commitment Type | June 30, 2025 | December 31, 2024 | |:---|:---|:---| | Commitments to extend credit | $3,677,573 | $3,115,682 | | MW commitments | $650,948 | $562,589 | | Standby and commercial letters of credit | $112,686 | $111,930 | | Total | $4,441,207 | $3,790,201 | ACL on Unfunded Commitments (Dollars in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | |:---|:---|:---|:---|:---| | Beginning balance | $7,403 | $6,504 | $6,103 | $8,045 | | Provision (benefit) for credit losses | $1,500 | $0 | $2,800 | $(1,541) | | Ending balance | $8,903 | $6,504 | $8,903 | $6,504 | 10. Income Taxes This note presents the income tax expense and effective tax rates for the reported periods - The effective income tax rates differ from the 21% U.S. statutory federal income tax rate primarily due to tax-exempt income from investment securities and bank-owned life insurance, as well as nondeductible compensation and state income taxes[110] Income Tax Expense and Effective Tax Rate (Dollars in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | |:---|:---|:---|:---|:---| | Income tax expense | $8,516 | $8,221 | $17,042 | $15,458 | | Effective tax rate | 21.6% | 23.2% | 22.1% | 23.1% | 11. Legal Contingencies This note states that current legal actions are not expected to have a material adverse effect on the Company - Management believes that the likelihood is remote that any adverse outcome from legal proceedings would have a material effect on the Company's financial position, liquidity, or results of operations[111] 12. Capital Requirements and Restrictions on Retained Earnings This note details compliance with regulatory capital requirements, confirming the Company is 'well capitalized' - As of June 30, 2025 and December 31, 2024, the Company and the Bank's capital ratios exceeded the levels necessary to be categorized as 'well capitalized' under PCA regulations[115] - The Bank had a capital conservation buffer of 4.84% as of June 30, 2025, exceeding the 2.5% limitation on dividend payouts[119] Capital Ratios (June 30, 2025) (Dollars in thousands) | Capital Ratio | Company Actual Amount | Company Actual Ratio | Bank Actual Amount | Bank Actual Ratio | Required for Capital Adequacy | To Be Well Capitalized | |:---|:---|:---|:---|:---|:---|:---| | Total capital (to RWA) | $1,539,632 | 13.46% | $1,462,950 | 12.84% | 8.0% | 10.0% | | Tier 1 capital (to RWA) | $1,294,270 | 11.31% | $1,342,431 | 11.78% | 6.0% | 8.0% | | CET1 (to RWA) | $1,264,049 | 11.05% | $1,342,431 | 11.78% | 4.5% | 6.5% | | Tier 1 leverage ratio | $1,294,270 | 10.73% | $1,342,431 | 11.17% | 4.0% | 5.0% | 13. Subsequent Event This note discloses a definitive merger agreement with Huntington Bancshares Incorporated signed on July 13, 2025 - Veritex Holdings, Inc. and Huntington Bancshares Incorporated signed a definitive merger agreement on July 13, 2025[120] - Veritex shareholders will receive 1.95 shares of Huntington's common stock for each share of Company common stock[121] - The merger is anticipated to close in the fourth quarter of 2025, subject to regulatory and stockholder approvals[122] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition, operating results, and recent developments - The Company's primary markets are the DFW metroplex and Houston metropolitan area, generating revenue mainly from interest income on loans, customer service, loan fees, and gains on government-guaranteed loans[126][127] - A definitive merger agreement with Huntington Bancshares Incorporated was signed on July 13, 2025, with Veritex shareholders to receive 1.95 shares of Huntington's common stock per share[129] Results of Operations This section analyzes financial performance, comparing recent quarters and six-month periods Results of Operations for the Three Months Ended June 30, 2025 and March 31, 2025 Net income increased by $1.8 million sequentially, driven by higher net interest income and lower credit loss provisions - Net interest margin increased by 2 basis points to 3.33%, primarily due to decreased funding costs on certificates of deposits and subordinated debt, and a shift from lower-yielding to higher-yielding assets, partially offset by higher deposit funding costs[135] - Net charge-offs decreased by $2.7 million to $1.3 million, mainly due to lower net charge-offs of NOOCRE loans[143] Key Financial Highlights (Three Months Ended June 30, 2025 vs. March 31, 2025) (Dollars in thousands, except per share amounts) | Item | June 30, 2025 | March 31, 2025 | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Net income | $30,906 | $29,100 | $1,806 | 6.21% | | Basic EPS | $0.57 | $0.53 | $0.04 | 7.55% | | Diluted EPS | $0.56 | $0.53 | $0.03 | 5.66% | | Net interest income | $96,335 | $95,441 | $894 | 0.94% | | Net interest margin | 3.33% | 3.31% | 0.02% | 0.60% | | Provision for credit losses on loans | $1,750 | $4,000 | $(2,250) | -56.25% | | Total noninterest income | $13,499 | $14,289 | $(790) | -5.53% | | Total noninterest expense | $67,162 | $66,834 | $328 | 0.49% | | Income tax expense | $8,516 | $8,526 | $(10) | -0.12% | Results of Operations for the Six Months Ended June 30, 2025 and June 30, 2024 Net income increased by $8.6 million year-over-year, driven by higher noninterest income and lower credit loss provisions - Noninterest income increased significantly by $10.5 million (61.2%), primarily due to the absence of a $6.3 million loss on sales of debt securities recorded in 2024, higher service charges on deposit accounts, increased government-guaranteed loan income, and higher customer swap income[166][167][168][169] - Salaries and employee benefits increased by $5.4 million (8.2%), mainly due to higher salaries, incentive accruals, and payroll taxes, driven by increased headcount, partially offset by lower stock grant expense[171] Key Financial Highlights (Six Months Ended June 30, 2025 vs. 2024) (Dollars in thousands, except per share amounts) | Item | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Net income | $59,976 | $51,358 | $8,618 | 16.78% | | Basic EPS | $1.10 | $0.94 | $0.16 | 17.02% | | Diluted EPS | $1.09 | $0.94 | $0.15 | 15.96% | | Net interest income | $191,776 | $189,042 | $2,734 | 1.45% | | Net interest margin | 3.32% | 3.27% | 0.05% | 1.53% | | Provision for credit losses on loans | $5,750 | $15,750 | $(10,000) | -63.49% | | Total noninterest income | $27,788 | $17,240 | $10,548 | 61.18% | | Total noninterest expense | $133,996 | $125,257 | $8,739 | 6.98% | | Income tax expense | $17,042 | $15,458 | $1,584 | 10.25% | Financial Condition This section details the Company's financial position, loan portfolio, credit quality, and changes in deposits - Total assets decreased by $240.5 million (1.9%) to $12.53 billion as of June 30, 2025, from $12.77 billion at December 31, 2024, primarily due to declines in cash balances, securities, and loan portfolios[178] - The increase in nonperforming loans was primarily due to two NOOCRE relationships totaling $18.5 million being added to nonaccrual status[186] - Total deposits decreased by $334.7 million (3.1%) to $10.42 billion as of June 30, 2025, from $10.75 billion at December 31, 2024, with decreases across all deposit categories[202] Loan Portfolio by Type (Dollars in thousands) | Loan Type | June 30, 2025 | % of Total | December 31, 2024 | % of Total | Change ($) | % Change | |:---|:---|:---|:---|:---|:---|:---| | Commercial | $2,692,209 | 28.4% | $2,693,538 | 28.3% | $(1,329) | 0.0% | | MW | $669,052 | 7.1% | $605,411 | 6.4% | $63,641 | 10.5% | | OOCRE | $800,881 | 8.5% | $780,003 | 8.2% | $20,878 | 2.7% | | NOOCRE | $2,311,466 | 24.4% | $2,382,499 | 25.0% | $(71,033) | -3.0% | | Construction and land | $1,142,457 | 12.1% | $1,303,711 | 13.7% | $(161,254) | -12.4% | | 1-4 family residential | $1,086,342 | 11.5% | $957,341 | 10.1% | $129,001 | 13.5% | | Total LHI, gross | $9,461,738 | 100.0% | $9,513,526 | 100.0% | $(51,788) | -0.5% | Nonperforming Assets (Dollars in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Total nonperforming loans | $65,979 | $54,435 | $11,544 | 21.21% | | OREO | $9,218 | $24,737 | $(15,519) | -62.74% | | Total nonperforming assets | $75,197 | $79,172 | $(3,975) | -5.02% | | Nonperforming assets to total assets | 0.60% | 0.62% | -0.02% | -3.23% | | Nonperforming loans to total LHI | 0.70% | 0.57% | 0.13% | 22.81% | Liquidity and Capital Resources This section discusses liquidity management, capital resources, and compliance with regulatory capital requirements - Liquidity needs are primarily met by core deposits, wholesale borrowings, and security and loan amortization and maturities[206] - The Company had a total remaining borrowing capacity of $2.18 billion with FHLB and $2.99 billion with FRB as of June 30, 2025[207][208] - Total stockholders' equity increased by $48.2 million (3.0%) to $1.65 billion as of June 30, 2025, driven by net income and an increase in AOCI, partially offset by dividends and stock buybacks[218] - The Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was classified as 'well capitalized' as of June 30, 2025[219] Sources and Uses of Funds (Average as % of Total Assets) | Category | Six Months Ended June 30, 2025 | Year Ended December 31, 2024 | |:---|:---|:---| | Sources of Funds: ||| | Noninterest-bearing deposits | 18.4% | 19.0% | | Interest-bearing deposits | 43.9% | 37.4% | | Certificates and other time deposits | 21.9% | 27.5% | | Uses of Funds: ||| | Loans | 74.1% | 75.2% | | Debt Securities | 11.7% | 10.9% | | Interest-bearing deposits in other banks | 6.2% | 0.6% | Critical Accounting Policies This section identifies the Allowance for Credit Losses and goodwill as critical accounting policies involving significant judgment - The critical accounting policies are the Allowance for Credit Losses (ACL) and goodwill, which require a high degree of judgment and estimation[221] - No changes have occurred in these critical accounting policies since December 31, 2024[221] Cautionary Notice Regarding Forward-Looking Statements This section provides a cautionary notice regarding forward-looking statements and associated risks and uncertainties - Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from projections[222] - Key risks include those related to the proposed merger with Huntington (e.g., integration difficulties, regulatory approvals, termination risks), concentration of business in Texas, uncertain market conditions, changes in interest rates, and regulatory requirements[222][223] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses the Company's primary market risk from interest rate volatility and its management strategies - The Company's primary market risk is interest rate volatility, managed by the Asset-Liability Committee to minimize risk while maximizing income[225][228] - An interest rate risk simulation model and shock analysis are used to test sensitivity, with internal policy limiting net income at risk to a 5.0% decline for a 100 bps shift over a one-year period[229][230] Simulated Change in Net Interest Income and Fair Value of Equity (June 30, 2025) | Change in Interest Rates (BPS) | Percent Change in Net Interest Income | Percent Change in Fair Value of Equity | |:---|:---|:---| | +300 | 8.41% | (12.10)% | | +200 | 6.06% | (7.51)% | | +100 | 3.29% | (3.41)% | | Base | — | — | | -100 | (2.78)% | 0.34% | | -200 | (5.52)% | (2.63)% | Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures as of June 30, 2025 - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[232] - No significant changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[233] PART II — OTHER INFORMATION Item 1. Legal Proceedings This section states that current legal proceedings are not likely to have a material adverse effect on the Company - The Company is involved in legal actions arising from normal business activities, including allegations of banking regulation violations, competition law, labor laws, and consumer protection laws[234] - Management believes the likelihood is remote that any individual or aggregate legal proceeding would have a material adverse effect on the Company's financial position, liquidity, or results of operations[235] Item 1A. Risk Factors This section updates risk factors, emphasizing new risks related to the pending merger with Huntington Bancshares - New risk factors primarily relate to the proposed merger with Huntington, including the possibility of integration being more difficult, costly, or time-consuming than expected[238] - Risks include potential loss of key employees, disruption of ongoing businesses, and adverse effects on client, customer, depositor, and employee relationships due to the integration process[239] - Termination of the merger agreement could negatively affect Veritex, potentially leading to adverse market reactions, loss of other beneficial opportunities, and a required termination fee of $56 million to Huntington under certain circumstances[240][241] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Company's stock buyback program and shares repurchased during the second quarter of 2025 - The Board extended the stock buyback program through March 31, 2026, authorizing purchases up to $50.0 million of outstanding common stock[247] Stock Buyback Activity (Three Months Ended June 30, 2025) | Period | Total number of shares purchased | Average price paid per share | Approximate dollar value of shares that may yet be purchased (in thousands) | |:---|:---|:---|:---| | April 1 - April 30, 2025 | 36,000 | $23.15 | $36,113 | | May 1 - May 31, 2025 | 169,597 | $24.18 | $32,012 | | June 1 - June 30, 2025 | 80,694 | $24.22 | $30,057 | | Quarterly totals | 286,291 | $24.06 | $30,057 | Item 6. Exhibits This section lists the exhibits filed with the report, including the merger agreement and executive certifications - Key exhibits include the Agreement and Plan of Merger with Huntington Bancshares Incorporated (Exhibit 2.1), the 2025 Amended and Restated Omnibus Incentive Plan (Exhibit 10.1), and certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[249]