Veritex (US:VBTX)2024-05-06 20:35PART I — FINANCIAL INFORMATION Financial Statements This section presents Veritex Holdings, Inc.'s unaudited consolidated financial statements for Q1 2024 and 2023, covering balance sheets, income, equity, and cash flows, with detailed accounting notes Consolidated Balance Sheets Total assets increased to $12.71 billion by March 31, 2024, driven by cash and loans, with liabilities and equity also growing due to increased deposits Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $12,708.4 | $12,394.3 | | Total cash and cash equivalents | $740.8 | $629.1 | | Total LHI, net | $9,587.1 | $9,474.5 | | Total Liabilities | $11,169.9 | $10,863.0 | | Total deposits | $10,653.8 | $10,338.2 | | Total Stockholders' Equity | $1,538.5 | $1,531.3 | Consolidated Statements of Income Net income for Q1 2024 decreased to $24.2 million from $38.4 million in Q1 2023, primarily due to lower net interest income and increased interest expense, resulting in diluted EPS of $0.44 Consolidated Income Statement Summary (in millions, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total interest and dividend income | $184.6 | $169.6 | | Total interest expense | $91.8 | $66.2 | | Net Interest Income | $92.8 | $103.4 | | Provision for credit losses | $7.5 | $9.4 | | Total noninterest income | $6.7 | $13.5 | | Total noninterest expense | $62.1 | $56.6 | | Net Income | $24.2 | $38.4 | | Diluted EPS | $0.44 | $0.70 | Consolidated Statements of Cash Flows Net cash provided by operating activities was $44.3 million in Q1 2024, while investing activities used $237.1 million, and financing activities provided $304.6 million, leading to a $111.7 million net increase in cash Cash Flow Summary (in millions) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $44.3 | $34.5 | | Net cash used in investing activities | ($237.1) | ($66.5) | | Net cash provided by financing activities | $304.6 | $404.3 | | Net increase in cash and cash equivalents | $111.7 | $372.3 | Notes to Consolidated Financial Statements These notes detail the company's accounting policies and financial items, covering securities and loan portfolios, ACL methodology, fair value measurements, derivatives, off-balance-sheet commitments, stock compensation, income taxes, and regulatory capital - Veritex is a Texas state banking organization with 19 branches in the Dallas-Fort Worth metroplex and 11 in the Houston metropolitan area, providing a full range of banking services22 Loan Portfolio Composition (in millions) | Loan Category | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Commercial | $2,786.0 | $2,752.1 | | NOOCRE | $2,353.0 | $2,350.7 | | Construction and land | $1,568.3 | $1,734.3 | | 1 - 4 family residential | $969.4 | $937.1 | | OOCRE | $788.4 | $794.1 | | Multi-family residential | $751.6 | $605.8 | | MW | $449.5 | $377.8 | | Total LHI, carried at amortized cost | $9,706.0 | $9,593.1 | Allowance for Credit Loss (ACL) Activity on LHI (in millions) | ACL Activity | Three Months Ended March 31, 2024 | | :--- | :--- | | Beginning Balance | $109.8 | | Credit loss expense (non-PCD) | $11.9 | | Credit (benefit) loss expense (PCD) | ($4.4) | | Charge-offs | ($5.4) | | Recoveries | $0.1 | | Ending Balance | $112.0 | Regulatory Capital Ratios (Company) | Ratio | March 31, 2024 | December 31, 2023 | Well Capitalized Minimum | | :--- | :--- | :--- | :--- | | CET1 (to RWA) | 10.37% | 10.29% | 6.5% (Bank) | | Tier 1 capital (to RWA) | 10.63% | 10.56% | 8.0% (Bank) | | Total capital (to RWA) | 13.33% | 13.18% | 10.0% (Bank) | | Tier 1 capital (to average assets) | 10.12% | 10.03% | 5.0% (Bank) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2024 financial results, noting a decrease in net income to $24.2 million due to net interest margin contraction, and discusses loan and deposit growth, credit quality, noninterest income/expense, and strong capital positions Results of Operations Q1 2024 net income decreased to $24.2 million with diluted EPS of $0.44, primarily due to a $10.6 million drop in net interest income from rising deposit costs, coupled with lower noninterest income and higher noninterest expenses Key Performance Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income (in millions) | $24.2 | $38.4 | | Diluted EPS | $0.44 | $0.70 | | Net Interest Margin | 3.24% | 3.69% | | Provision for Credit Losses (in millions) | $7.5 | $9.4 | - The decrease in net interest income was primarily due to a 137 basis point increase in the average cost of interest-bearing deposits, which rose to 4.43%134 - Noninterest income decreased by $6.9 million, largely due to a $7.1 million reduction in government guaranteed loan income143144 - Noninterest expense rose by $5.5 million, primarily due to a $1.5 million increase in salaries and a $1.7 million increase in professional and regulatory fees, including higher FDIC assessments147148 Financial Condition As of March 31, 2024, total assets grew to $12.71 billion, with LHI increasing to $9.71 billion and deposits to $10.65 billion, while credit quality metrics like nonperforming assets and ACL remained stable Financial Condition Highlights (in billions) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $12.71 | $12.39 | | Total LHI | $9.71 | $9.59 | | Total Deposits | $10.65 | $10.34 | Credit Quality Metrics | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Nonperforming assets to total assets | 0.82% | 0.77% | | Nonperforming loans to total loans | 0.88% | 1.00% | | ACL to total LHI | 1.15% | 1.14% | - The loan portfolio's largest segments are Commercial (28.8%), NOOCRE (24.2%), and Construction and land (16.2%), with multifamily loans seeing the largest quarterly growth at 24.1%156 - The company's out-of-state loan portfolio represents 26.8% of total loans, with significant concentrations in Commercial Real Estate and Lender Finance161 Liquidity and Capital Resources The company maintains strong liquidity, primarily funded by deposits, with $740.8 million in cash and significant borrowing capacity, while stockholders' equity increased slightly and a $50 million stock buyback program was authorized - Primary sources of funds are deposits, which comprised 83.3% of average total assets in Q1 2024189 Available Liquidity Sources (as of March 31, 2024) | Source | Availability (in billions) | | :--- | :--- | | FHLB Borrowing Capacity | $2.21 | | FRB Availability | $2.97 | | Unsecured Lines of Credit | $0.15 | - On March 28, 2024, the Board authorized a new stock buyback program for up to $50 million of its common stock, expiring March 31, 2025198 - The company and the bank remained in compliance with all regulatory capital requirements and were classified as 'well capitalized' as of March 31, 2024202 Quantitative and Qualitative Disclosures about Market Risk The company manages primary market risk from interest rate volatility using a simulation model, projecting that a 100 basis point rate increase would boost net interest income by 4.67%, while a decrease would lower it by 5.89% over 12 months - The primary component of market risk for the company is interest rate volatility, which impacts net interest income and the market value of assets and liabilities210 Net Interest Income Sensitivity Analysis (as of March 31, 2024) | Change in Interest Rates (Basis Points) | Simulated % Change in Net Interest Income (12-Month Horizon) | | :--- | :--- | | +300 | 13.54% | | +200 | 9.12% | | +100 | 4.67% | | Base | 0.00% | | -100 | (5.89)% | | -200 | (10.32)% | Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2024217 - No significant changes in internal control over financial reporting occurred during the quarter ended March 31, 2024218 PART II — OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings, with management deeming it remote that any current outcome would materially adversely affect financial condition or results of operations - In the opinion of management, the likelihood is remote that the impact of current legal proceedings would have a material adverse effect on the Company's financial position, liquidity, or results of operations221 Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - There has been no material change in the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023223 Unregistered Sales of Equity Securities and Use of Proceeds The Board authorized a $50 million stock buyback program on March 26, 2024, expiring March 31, 2025, though no shares were repurchased during Q1 2024 - A stock buyback program was authorized on March 26, 2024, for up to $50 million of common stock, expiring March 31, 2025224 - The Company did not repurchase any shares of its common stock under the program during the three months ended March 31, 2024224 Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including CEO/CFO certifications and Inline XBRL data files