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Veritex Holdings, Inc. Reports Record First Quarter Financial Results

DALLAS, April 23, 2018 -- Veritex Holdings, Inc. (“Veritex” or the “Company”) (Nasdaq:VBTX), the holding company for Veritex Community Bank, today announced the results for the quarter ended March 31, 2018. The Company reported net income available to common stockholders of $10.4 million, or $0.42 diluted earnings per share (“EPS”), compared to $3.3 million, or $0.14 diluted EPS, for the quarter ended December 31, 2017 and $3.1 million, or $0.20 diluted EPS, for the quarter ended March 31, 2017.

C. Malcolm Holland, the Company’s Chairman and Chief Executive Officer, said, “I am excited to report record quarterly results. Our earnings reflect significant benefits achieved from the financially attractive acquisitions of Sovereign Bancshares, Inc. and Liberty Bancshares, Inc. completed over the prior two quarters. Integration of these acquisitions have gone well, and we completed the Liberty acquisition’s core system conversion earlier this month. We are currently on track for another good year with strong capital, exceptional credit quality and strong growth in both loans and deposits.”

2018 First Quarter Highlights

  • Net income available for common stockholders for the quarter ended March 31, 2018 was $10.4 million, or $0.42 diluted EPS, compared to $3.1 million, or $0.20 diluted EPS, for the quarter ended March 31, 2017.

  • Core (non-GAAP) net income available for common stockholders totaled $9.0 million, or $0.37 core diluted EPS, for the quarter ended March 31, 2018, compared to $3.1 million, or $0.20 core diluted EPS, for the quarter ended March 31, 2017.

  • Total loans, excluding $26.3 million in loans that were sold in connection with the sale of two branch locations discussed below, increased $82.6 million, or 14.8% annualized, to 2.3 billion compared to the quarter ended December 31, 2017.

  • Total deposits, excluding $64.3 million in deposits that were sold in connection with the sale of two branch locations discussed below, increased $215.2 million, or 37.6% annualized, to $2.5 billion compared to the quarter ended December 31, 2017.

  • We completed the previously announced sale of certain assets and liabilities associated with two branches in the Austin metropolitan market to Horizon Bank, SSB resulting in a $355 thousand gain on sale reported in other non-interest income. The completion of the sale results in us exiting the Austin metropolitan market.

Net income for the quarter ended March 31, 2018 was negatively impacted by an $820 thousand re-measurement of our deferred tax assets and deferred tax liabilities due to our new effective tax rate under the Tax Cuts and Jobs Act (the “Tax Act”), compared to a negative impact of $3.1 million for the quarter ended December 31, 2017.

The measurement period for Veritex to determine the fair values of acquired identifiable assets and assumed liabilities is the earlier of (i) twelve months from the date of the acquisition or (ii) as soon as Veritex receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. As Veritex had only recorded provisional estimates for the acquisition of Sovereign Bancshares, Inc. (“Sovereign”) and Liberty Bancshares, Inc. (“Liberty”) with respect to loans, bank premises, furniture and equipment, goodwill, intangible assets and deferred taxes for the quarter ended December 31, 2017, changes to these provisional estimates and re-measurement of deferred taxes negatively impacted net income for the quarter ended March 31, 2018. Changes to recorded provisional estimates for the Liberty acquisitions with respect to loans, goodwill, intangible assets, accrued expenses, deposits and deferred taxes could potentially have a further impact on our earnings.

As part of how we measure our results, we use certain non-GAAP financial measures to ascertain performance. These non-GAAP financial measures are reconciled in the section labeled “Reconciliation of Non-GAAP Financial Measures” at the end of this press release.

Result of Operations for the Three Months Ended March 31, 2018

Net Interest Income

For the three months ended March 31, 2018, net interest income before provision for loan losses was $29.1 million and net interest margin was 4.46% compared to $25.8 million and 4.24%, respectively, for the three months ended December 31, 2017. The $3.3 million increase in net interest income was primarily due to an increase in interest income on loans, which was driven by increased volume in all loan categories resulting from continued organic loan growth and a $1.0 million increase in accretion during the three months ended March 31, 2018 compared to the three months ended December 31, 2017 on loans acquired from Sovereign and Liberty. Net interest margin increased 22 basis points from the three months ended December 31, 2017 primarily due to a change in mix of earning assets resulting from increases in loans, which tend to yield greater interest rates than other interest earning assets. Average loan balances represented 85.4% of average interest-earnings assets for the three months ended March 31, 2018 compared to 84.3% for the three months ended December 31, 2017.

Net interest income before provision for loan losses increased by $17.8 million from $11.3 million to $29.1 million and net interest margin increased 125 basis points from 3.21% to 4.46% for the three months ended March 31, 2018 as compared to the same period in 2017. The increase in net interest income before provision for loan losses was primarily driven by higher loan balances resulting from loans acquired from Sovereign and Liberty and continued organic loan growth. For the three months ended March 31, 2018, average loan balance increased by $1.3 billion compared to the three months ended March 31, 2017, which resulted in a $20.2 million increase in interest income. Net interest margin increased 125 basis points from the three months ended March 31, 2017 primarily due to a change in mix of earning assets resulting from increased loan balances as well as benefits of increases in the prime rates in new and renewed loans. Average loan balances represented 85.4% of average interest-earnings assets for the three months ended March 31, 2018 compared to 70.8% for the three months ended March 31, 2017.

Noninterest Income

Noninterest income for the three months ended March 31, 2018 was $2.8 million, an increase of $483 thousand or 21.0% compared to the three months ended December 31, 2017. The increase was primarily due to a $355 thousand gain on sale of assets resulting from the completion of the sale of certain assets and liabilities associated with two branches in the Austin market. In addition, the increase was due to $339 thousand increase in rental income resulting from the purchase of our headquarter building on December 6, 2017. This increase was partially offset by a $267 thousand gain on the sale of an other real estate owned property during the fourth quarter of 2017 with no corresponding sale in the first quarter of 2018.

Compared to the three months ended March 31, 2017, noninterest income for the three months ended March 31, 2018 grew $1.2 million or 81.2%. The increase was primarily due to a $424 thousand increase in service charges and fees on deposit accounts resulting from the additional acquired Sovereign and Liberty deposit accounts and the associated income from these accounts, $478 thousand of rental income resulting from the purchase of our headquarter building and the $355 thousand gain on sale of assets referenced above resulting from the completion of the sale of the two branches in the Austin market. This increase was partially offset by a $152 thousand decrease in gain on sale of Small Business Administration loans.

Noninterest Expense

Noninterest expense was $17.3 million for the three months ended March 31, 2018, compared to $15.0 million for the three months ended December 31, 2017, an increase of $2.3 million or 15.1%. The increase was primarily driven by a $1.5 million consent fee paid in connection with the execution of an assignment agreement entered into in January 2018 to assign one of our branch leases  that the Company ceased using during the three months ended December 31, 2017, which was recorded in occupancy and equipment expense. Compared to the fourth quarter of 2017, salaries and employee benefits increased $573 thousand primarily due to two additional months of salaries and employee benefit expenses for employees associated with the Liberty acquisition that were recognized during the three months ended March 31, 2018, as the Liberty acquisition closed on December 1, 2017. Amortization of intangibles increased $427 thousand primarily due to a $336 thousand increase in amortization of intangible in-place lease assets associated with the purchase of our headquarter building in December 2017.

Compared to the three months ended March 31, 2017, noninterest expense for the three months ended March 31, 2018 increased $9.9 million, or 132.3%. The increase was primarily driven by a $4.0 million increase in salaries and employee benefits expense related to the additional full-time equivalent employees as a result of the Sovereign and Liberty acquisitions. Additionally, occupancy and equipment expense increased $2.2 million primarily due to the $1.5 million consent fee paid in connection with the lease assignment agreement referenced above. Professional fees increased $1.0 million primarily as a result of increased legal fees associated with closing of the sale of two branches in Austin and the execution of a sublease and a lease assignment agreement during the first quarter of 2018.  Amortization of intangibles increased $883 thousand primarily due to a $519 thousand increase in amortization of intangible in-place lease assets associated with the purchase of our headquarter building in December 2017.

Financial Condition

Total loans were $2.3 billion at March 31, 2018, an increase of $56.3 million, or 2.5%, compared to December 31, 2017. Excluding $26.3 million of loans that were sold in connection with the sale of two branch locations in the first quarter of 2018, total loans increased $82.6 million, or 3.7%. The net increase was primarily the result of the continued execution and success of our organic growth strategy.

Total deposits were $2.5 billion at March 31, 2018, an increase of $150.9 million, or 6.4%, compared to the fourth quarter of 2017. Excluding $64.3 million of deposits that were sold in connection with the sale of two branch locations in the first quarter of 2018, total deposits increased $215.2 million, or 9.4%. The increase was primarily due to an increase in financial institution money market accounts of $209.2 million, which includes organic growth in our correspondent money market accounts of $164.3 million. This growth was partially offset by a decrease in non-interest bearing deposits of $54.9 million.

Asset Quality

Our allowance for loan losses as a percentage of loans was 0.58% and 0.57% of total loans at March 31, 2018 and December 31, 2017, respectively. The allowance for loan losses as a percentage of total loans was determined by the qualitative factors around the nature, volume and mix of the loan portfolio. The increase in the allowance for loan loss as a percentage of loans was attributable to continued execution and success of our organic growth strategy. We recorded a provision for loan losses of $678 thousand for the quarter ended March 31, 2018 compared to a provision of $2.5 million for the quarter ended December 31, 2017, due to an increase in our loans as result of organic growth as compared to an increase in acquired loans due to the closing of the Liberty acquisition in December 2017.

Nonperforming assets totaled $3.8 million, or 0.12%, of total assets at March 31, 2018 compared to $932 thousand, or 0.03%, of total assets at December 31, 2017. The increase of $2.9 million in nonperforming assets compared to December 31, 2017 was primarily due to an increase in nonperforming loans of $3.3 million offset by a decrease in other real estate owned of $439 thousand.

Non-GAAP Financial Measures

The Company’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, the Company reviews and reports core net interest income, core non-interest expense, core net income from operations, core net income, core net income available to common stockholders, core diluted earnings per share, core efficiency ratio, core net interest margin, core return on average assets, tangible book value per common share and the tangible common equity to tangible assets ratio. The Company has included in this release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to “Reconciliation of Non-GAAP Financial Measures” at the end of this release for a reconciliation of these non-GAAP financial measures.

Business Combinations Measurement Period

The measurement period for the Company to determine the fair values of acquired identifiable assets and assumed liabilities for Liberty will end at the earlier of (i) twelve months from the date of the acquisition or (ii) as soon as the Company receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. Provisional estimates for loans, goodwill, intangible assets, accrued expenses, deposits and deferred taxes have been recorded for the Liberty acquisition as independent valuations have not been finalized. Changes to provisional estimates could potentially have an impact on the re-measurement of our deferred taxes.

Conference Call

The Company will also host an investor conference call to review the results on Tuesday, April 24, 2018 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/m6/p/wqr6oe3g and will receive a unique pin number, which can be used when dialing in for the call. This will allow attendees to enter the call immediately. Alternatively, participants may call toll-free at (877) 703-9880.

The call and corresponding presentation slides will be webcast live on the home page of the Company's website, www.veritexbank.com. An audio replay will be available one hour after the conclusion of the call at (855) 859-2056, Conference #5459708. This replay, as well as the webcast, will be available until May 1, 2018.

About Veritex Holdings, Inc.

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

This release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information regarding Veritex’s future financial performance, business and growth strategy, projected plans and objectives, and related transactions, integration of the acquired businesses, ability to recognize anticipated operational efficiencies, and other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Such forward-looking statements are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about Veritex and its subsidiaries, any of which may change over time and some of which may be beyond Veritex’s control. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to whether Veritex can: successfully implement its growth strategy, including identifying acquisition targets and consummating suitable acquisitions; continue to sustain internal growth rate; provide competitive products and services that appeal to its customers and target market; difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the market areas in which Veritex operates and in which its loans are concentrated, including the effects of declines in housing markets; an increase in unemployment levels and slowdowns in economic growth; Veritex's level of nonperforming assets and the costs associated with resolving any problem loans including litigation and other costs; changes in market interest rates may increase funding costs and reduce earning asset yields thus reducing margin; the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of Veritex's investment securities portfolio; the credit risk associated with the substantial amount of commercial real estate, construction and land development, and commercial loans in our loan portfolio; the extensive federal and state regulation, supervision and examination governing almost every aspect of Veritex's operations including changes in regulations affecting financial institutions, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations being issued in accordance with this statute and potential expenses associated with complying with such regulations; Veritex's ability to comply with applicable capital and liquidity requirements, including our ability to generate liquidity internally or raise capital on favorable terms, including continued access to the debt and equity capital markets; possible changes in trade, monetary and fiscal policies, laws and regulations and other activities of governments, agencies, and similar organizations; the effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability and manmade disasters including terrorist attacks;; and achieve its performance goals. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Special Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Veritex’s Annual Report on Form 10-K filed with the SEC on March 14, 2018 and any updates to those risk factors set forth in Veritex’s subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if Veritex’s underlying assumptions prove to be incorrect, actual results may differ materially from what Veritex anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and Veritex does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, and it is not possible for us to predict those events or how they may affect us. In addition, Veritex cannot assess the impact of each factor on Veritex’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements, expressed or implied, included in this communication are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Veritex or persons acting on Veritex’s behalf may issue. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.





VERITEX HOLDINGS, INC. AND SUBSIDIARY
Consolidated Financial Highlights - (Unaudited)
(In thousands, except percentages)
   
  At and For the Three Months Ended
  March 31,
 2018
 December 31,
 2017
 September 30,
 2017
 June 30,
 2017
 March 31,
 2017
Selected Financial Data:          
Net income $10,388  $3,257  $5,182  $3,615  $3,098 
Net income available to common stockholders 10,388  3,257  5,140  3,615  3,098 
Total assets 3,063,319  2,945,583  2,494,861  1,508,589  1,522,015 
Total loans(1) 2,316,089  2,259,831  1,907,509  1,122,468  1,020,970 
Provision for loan losses 678  2,529  752  943  890 
Allowance for loan losses 13,401  12,808  10,492  9,740  8,816 
Noninterest-bearing deposits(2) 597,236  652,218  495,627  337,057  338,226 
Total deposits(2) 2,493,794  2,342,912  1,985,658  1,211,107  1,221,696 
Total stockholders’ equity 497,433  488,929  445,929  247,602  242,725 
Summary Performance Ratios:          
Return on average assets(3) 1.41% 0.48% 0.94% 0.97% 0.83%
Return on average equity(3) 8.55  2.78  5.44  5.89  5.20 
Net interest margin(4) 4.46  4.24  3.78  3.53  3.21 
Efficiency ratio(5) 54.28  53.60  59.33  55.03  58.26 
Noninterest expense to average assets(3) 2.35  2.22  2.26  2.08  1.99 
Summary Credit Quality Data:          
Nonaccrual loans $3,438  $465  $1,856  $1,514  $1,686 
Accruing loans 90 or more days past due(6) 374  18  54  15  212 
Other real estate owned 10  449  738  493  998 
Nonperforming assets to total assets 0.12% 0.03% 0.11% 0.13% 0.19%
Nonperforming loans to total loans 0.16  0.02  0.10  0.14  0.19 
Allowance for loan losses to total loans 0.58  0.57  0.55  0.87  0.86 
Net charge-offs to average loans outstanding   0.01      0.06 
Capital Ratios:          
Total stockholders’ equity to total assets 16.24% 16.60% 17.87% 16.41% 15.95%
Tangible common equity to tangible assets 11.01  11.12  12.76  14.77  14.31 
Tier 1 capital to average assets 11.84  12.92  15.26  15.09  14.65 
Tier 1 capital to risk-weighted assets 12.53  12.48  14.17  18.17  19.94 
Common equity tier 1 (to risk weighted assets) 12.09  12.03  13.65  17.92  19.66 
Total capital to risk-weighted assets 13.22  13.16  14.87  19.37  21.20 
                
(1) Total loans does not include loans held for sale and deferred fees. Loans held for sale were $893 thousand at March 31, 2018, $841 thousand at December 31, 2017, $2.2 million at September 30, 2017, $4.1 million at June 30, 2017 and $1.9 million at March 31, 2017. Deferred fees were $24 thousand at March 31, 2018, $28 thousand at December 31, 2017, $28 thousand at September 30, 2017, $40 thousand at June 30, 2017, and $48 thousand at March 31, 2017. Total loans include branch assets held for sale of $26.3 million at December 31, 2017.
(2) Total noninterest-bearing deposits and total deposits at December 31, 2017 include branch liabilities held for sale of $39.4 million and $64.3 million, respectively.
(3) We calculate our average assets and average equity for a period by dividing the sum of our total assets or total stockholders’ equity, as the case may be, at the close of business on each day in the relevant period, by the number of days in the period. We have calculated our return on average assets and return on average equity for a period by dividing net income for that period by our average assets and average equity, as the case may be, for that period.
(4) Net interest margin represents net interest income, annualized on a fully tax equivalent basis, divided by average interest-earning assets.
(5) Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.
(6) Accruing loans 90 or more days past due excludes $2.0 million, $3.3 million and $3.3 million of PCI loans as of March 31, 2018, December 31, 2017 and September 30, 2017. No PCI loans were considered non-performing loans as of March 31, 2018, December 31, 2017 and September 30, 2017.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets - (Unaudited)
(In thousands)
 
  March 31,
 2018
 December 31,
 2017
 September 30,
 2017
 June 30,
 2017
 March 31,
 2017
ASSETS          
Cash and due from banks $26,861  $38,243  $21,879  $28,687  $23,021 
Interest bearing deposits in other banks 168,333  110,801  129,497  144,459  262,714 
Total cash and cash equivalents 195,194  149,044  151,376  173,146  285,735 
Investment securities 243,164  228,117  204,788  134,708  138,698 
Loans held for sale 893  841  2,179  4,118  1,925 
Loans, net 2,302,664  2,220,682  1,896,989  1,112,688  1,012,106 
Accrued interest receivable 7,127  7,676  6,387  3,333  2,845 
Bank-owned life insurance 21,620  21,476  20,517  20,369  20,224 
Bank premises, furniture and equipment, net 76,045  75,251  40,129  17,978  17,521 
Non-marketable equity securities 20,806  13,732  10,283  7,407  7,375 
Investment in unconsolidated subsidiary 352  352  352  93  93 
Other real estate owned 10  449  738  493  998 
Intangible assets, net 18,372  20,441  10,531  2,171  2,161 
Goodwill 161,685  159,452  135,832  26,865  26,865 
Other assets 13,634  14,518  14,760  5,220  5,469 
Branch assets held for sale 1,753  33,552       
Total assets $3,063,319  $2,945,583  $2,494,861  $1,508,589  $1,522,015 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Deposits:          
Noninterest-bearing $597,236  $612,830  $495,627  $337,057  $338,226 
Interest-bearing 1,896,558  1,665,800  1,490,031  874,050  883,470 
Total deposits 2,493,794  2,278,630  1,985,658  1,211,107  1,221,696 
Accounts payable and accrued expenses 3,862  5,098  4,017  2,574  1,631 
Accrued interest payable and other liabilities 3,412  5,446  4,368  1,032  9,655 
Advances from Federal Home Loan Bank 48,128  71,164  38,200  38,235  38,271 
Junior subordinated debentures 11,702  11,702  11,702  3,093  3,093 
Subordinated notes 4,988  4,987  4,987  4,946  4,944 
Other borrowings   15,000       
Branch liabilities held for sale   64,627       
Total liabilities 2,565,886  2,456,654  2,048,932  1,260,987  1,279,290 
Commitments and contingencies          
Stockholders’ equity:          
Common stock 241  241  227  152  152 
Additional paid-in capital 445,964  445,517  404,900  211,901  211,512 
Retained earnings 55,015  44,627  41,143  36,003  32,388 
Unallocated Employee Stock Ownership Plan shares (106) (106) (209) (209) (209)
Accumulated other comprehensive loss (3,611) (1,280) (62) (175) (1,048)
Treasury stock (70) (70) (70) (70) (70)
Total stockholders’ equity 497,433  488,929  445,929  247,602  242,725 
   Total liabilities and stockholders’ equity $3,063,319  $2,945,583  $2,494,861  $1,508,589  $1,522,015 


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income - (Unaudited)
(In thousands, except per share data)
   
  For the Three Months Ended
  March 31,
 2018
 December 31,
 2017
 September 30,
 2017
 June 30,
 2017
 March 31,
 2017
Interest income:          
Interest and fees on loans $32,067  $28,182  $20,706  $13,024  $11,883 
Interest on investment securities 1,328  1,211  941  735  575 
Interest on deposits in other banks 687  500  629  548  610 
Interest on other 5  4  3    1 
Total interest income 34,087  29,897  22,279  14,307  13,069 
Interest expense:          
Interest on deposit accounts 4,293  3,677  2,812  1,742  1,647 
Interest on borrowings 692  470  338  189  169 
Total interest expense 4,985  4,147  3,150  1,931  1,816 
Net interest income 29,102  25,750  19,129  12,376  11,253 
Provision for loan losses 678  2,529  752  943  890 
Net interest income after provision for loan losses 28,424  23,221  18,377  11,433  10,363 
Noninterest income:          
Service charges and fees on deposit accounts 933  769  669  555  509 
Gain on sales of investment securities 8  17  205     
Gain on sales of loans and other assets owned 581  882  705  807  747 
Bank-owned life insurance 189  192  188  186  187 
Other 1,070  438  210  218  92 
Total noninterest income 2,781  2,298  1,977  1,766  1,535 
Noninterest expense:          
Salaries and employee benefits 7,930  7,357  5,921  3,642  3,908 
Occupancy and equipment 3,234  1,996  1,596  1,015  1,011 
Professional fees 1,802  1,713  1,973  1,188  798 
Data processing and software expense 828  766  719  372  360 
FDIC assessment fees 302  116  410  393  258 
Marketing 461  388  436  225  244 
Other assets owned expenses and write-downs 172  73  71  13  25 
Amortization of intangibles 978  551  223  95  95 
Telephone and communications 426  282  230  106  102 
Other 1,173  1,793  943  733  649 
Total noninterest expense 17,306  15,035  12,522  7,782  7,450 
Net income from operations 13,899  10,484  7,832  5,417  4,448 
Income tax expense 3,511  7,227  2,650  1,802  1,350 
Net income $10,388  $3,257  $5,182  $3,615  $3,098 
Preferred stock dividends $  $  $42  $  $ 
Net income available to common stockholders $10,388  $3,257  $5,140  $3,615  $3,098 
Basic earnings per share $0.43  $0.14  $0.26  $0.24  $0.20 
Diluted earnings per share $0.42  $0.14  $0.25  $0.23  $0.20 
Weighted average basic shares outstanding 24,120  23,124  19,976  15,211  15,200 
Weighted average diluted shares outstanding 24,539  23,524  20,392  15,637  15,632 


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures - (Unaudited)
(In thousands except per share data and percentages)
 
The following table reconciles, at the dates set forth below, GAAP net income available to common stockholders to core (non-GAAP) net income available to common stockholders, core basic and diluted earnings per share, core efficiency ratio, core net interest margin and core return on average assets:
 
  For the Three Months Ended
  March 31,
 2018
 December 31,
 2017
 September 30,
 2017
 June 30,
 2017
 March 31,
 2017
Net interest income (as reported) $29,102  $25,750  $19,129  $12,376  $11,253 
Adjustment:          
Income recognized on acquired loans 4,009  $2,955  $637  $135  $55 
Core net interest income 25,093  22,795  18,492  12,241  11,198 
Provision for loan losses (as reported) 678  2,529  752  943  890 
Noninterest income (as reported) 2,781  2,298  1,977  1,766  1,535 
Adjustment:          
Gain on sale of disposed branch assets 388         
Core noninterest income 2,393  2,298  1,977  1,766  1,535 
Noninterest expense (as reported) 17,306  15,035  12,522  7,782  7,450 
Adjustment:          
Lease exit costs, net(1) (1,071)        
Branch closure expenses (172)        
M&A and other related one-time expenses (335) (1,018) (1,391) (193) (89)
Core noninterest expense 15,728  14,017  11,131  7,589  7,361 
Core net income from operations 11,080  8,547  8,586  5,475  4,482 
Income tax expense (as reported) 3,511  7,227  2,650  1,802  1,350 
Adjustments:          
Tax impact of adjustments (579) (678) 264  20  12 
Tax Act re-measurement (820) (3,051)      
Other M&A discrete tax items   (398)      
Core income tax expense $2,112  $3,100  $2,914  $1,822  $1,362 
Net income (as reported) $10,388  $3,257  $5,182  $3,615  $3,098 
Core net income $8,968  $5,447  $5,672  $3,653  $3,120 
Preferred stock dividends (as reported) $  $  $42  $  $ 
Core net income available to common stockholders $8,968  $5,447  $5,630  $3,653  $3,120 
Weighted average diluted shares outstanding 24,539  23,524  20,392  15,637  15,632 
Diluted earnings per share (as reported) 0.42  0.14  0.25  0.23  0.20 
Core diluted earnings per share(2) 0.37  0.23  0.28  0.23  0.20 
Efficiency Ratio          
Efficiency ratio (as reported) 54.28% 53.60% 59.33% 55.03% 58.26%
Core efficiency ratio(3) 57.22% 55.86% 54.38% 54.18% 57.81%
Net Interest Margin          
Net interest margin (as reported) 4.46% 4.24% 3.78% 3.53% 3.21%
Core net interest margin(4) 3.84% 3.75% 3.66% 3.49% 3.19%
Return on average assets          
Return on average assets (as reported) 1.41% 0.48% 0.94% 0.97% 0.83%
Core return on average assets(5) 1.22% 0.80% 1.02% 0.98% 0.83%
                
(1) Lease exit costs, net includes a $1.5 million consent fee and $240 thousand in professional services paid in January 2018 to separately assign and sublease two of our branch leases that the Company ceased using in 2017 offset by the reversal of the corresponding assigned lease cease-use liability totaling $669 thousand.
(2) Core diluted earnings per share is defined as core net income available to common stockholders divided by weighted average diluted shares outstanding. Excluded from net income available to common stockholders are income recognized on acquired loans, lease exit costs, net, branch closure expenses, M&A and other related one-time expenses, the tax impact of the adjustments to core net interest income and core noninterest expense, the re-measurement of our deferred tax asset as a result of the Tax Act and the tax impact of other M&A discrete tax items.
(3) We calculate core efficiency ratio as core noninterest expense divided by the sum of core net interest income and core noninterest income.
(4) Core net interest margin is equal to core net interest income divided by average interest-earning assets.
(5) Core return on average assets is equal to core net income divided by average assets


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures - (Unaudited)
(In thousands except per share data and percentages)
 
The following table reconciles, at the dates set forth below, total stockholders’ equity to tangible common equity and total assets to tangible assets and presents our book value per common share to our tangible book value per share:
 
  For the Three Months Ended
  March 31,
 2018
 December 31,
 2017
 September 30,
 2017
 June 30,
 2017
 March 31,
 2017
Tangible Common Equity          
Total stockholders’ equity $497,433  $488,929  $445,929  $247,602  $242,725 
Adjustments:          
Goodwill (161,685) (159,452) (135,832) (26,865) (26,865)
Intangible assets(1) (18,372) (22,165) (10,531) (2,171) (2,161)
Total tangible common equity $317,376  $307,312  $299,566  $218,566  $213,699 
Tangible Assets          
Total assets $3,063,319  $2,945,583  $2,494,861  $1,508,589  $1,522,015 
Adjustments:          
Goodwill (161,685) (159,452) (135,832) (26,865) (26,865)
Intangible assets(1) (18,372) (22,165) (10,531) (2,171) (2,161)
Total tangible assets $2,883,262  $2,763,966  $2,348,498  $1,479,553  $1,492,989 
Tangible Common Equity to Tangible Assets(2) 11.01% 11.12% 12.76% 14.77% 14.31%
Common shares outstanding 24,149  24,110  22,644  15,233  15,229 
           
Book value per common share(3) $20.60  $20.28  $19.69  $16.25  $15.94 
Tangible book value per common share(4) $13.14  $12.75  $13.23  $14.35  $14.03 
                     
(1) Intangible assets as of December 31, 2017 include branch intangible assets held for sale of $1.7 million.
(2) We calculate tangible common equity as total stockholders’ equity less goodwill and other intangible assets, net of accumulated amortization, and we calculate tangible assets as total assets less goodwill and other intangible assets, net of accumulated amortization.
(3) We calculate book value per common share as total stockholders’ equity at the end of the relevant period divided by the outstanding number of shares of our common stock at the end of the relevant period.
(4) We calculate tangible book value per common share as total tangible common equity, divided by the outstanding number of shares of our common stock at the end of the relevant period.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Net Interest Margin - (Unaudited)
(In thousands except percentages)
   
  For the Three Months Ended
  March 31, 2018 December 31, 2017 March 31, 2017
  Average
Outstanding
Balance
 Interest
Earned/
Interest
Paid
 Average
Yield/
Rate
 Average
Outstanding
Balance
 Interest
Earned/
Interest
Paid
 Average
Yield/
Rate
 Average
Outstanding
Balance
 Interest
Earned/
Interest
Paid
 Average
Yield/
Rate
Assets                  
Interest-earning assets:                  
Total loans(1)(4) $2,261,133  $32,067  5.75% $2,030,587  $28,182  5.51% $1,007,622  $11,883  4.78%
Securities available for sale 222,026  1,328  2.43  233,244  1,211  2.06  119,226  575  1.96 
Interest-bearing deposits in other banks 163,996  687  1.70  145,099  500  1.37  295,637  610  0.84 
Investment in unconsolidated  subsidiary 327  5  6.20  352  4  4.51  93  1  4.36 
Total interest-earning assets 2,647,482  34,087  5.22  2,409,282  29,897  4.92  1,422,578  13,069  3.73 
Allowance for loan losses (13,133)     (10,658)     (8,558)    
Noninterest-earning assets(4) 355,625      292,664      103,692     
Total assets $2,989,974      $2,691,288      $1,517,712     
Liabilities and Stockholders’ Equity                  
Interest-bearing liabilities:                  
Interest-bearing deposits(4) $1,745,195  $4,293  1.00% $1,569,950  $3,677  0.93% $858,420  $1,647  0.78%
Advances from FHLB 117,507  460  1.59  74,589  213  1.13  38,293  70  0.74 
Other borrowings 16,926  232  5.56  25,398  257  4.01  8,064  99  4.98 
Total interest-bearing liabilities 1,879,628  4,985  1.08  1,669,937  4,147  0.98  904,777  1,816  0.81 
Noninterest-bearing liabilities:                  
Noninterest-bearing deposits(4) 600,215      542,918      368,117     
Other liabilities(4) 17,262      13,819      3,209     
Total noninterest-bearing liabilities 617,477      556,737      371,326     
Stockholders’ equity 492,869      464,614      241,609     
Total liabilities and stockholders’ equity $2,989,974      $2,691,288      $1,517,712     
Net interest rate spread(2)     4.14%     3.94%     2.92%
Net interest income   $29,102      $25,750      $11,253   
Net interest margin(3)     4.46%     4.24%     3.21%
                      
(1) Includes average outstanding balances of loans held for sale of $1,336, $3,155 and $2,094 for the three months ended March 31, 2018, December 31, 2017, and March 31, 2017, respectively.
(2) Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
(3) Net interest margin is equal to net interest income divided by average interest-earning assets.
(4) Includes average outstanding balances of branch assets and liabilities held for sale in total loans, noninterest-bearing assets, interest-bearing deposits, noninterest-bearing deposits and other liabilities for the three months ended December 31, 2017.

 

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