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8-K - 8-K - Veritex Holdings, Inc.vbtx-8kearningsreleasex930.htm
EX-99.2 - EXHIBIT 99.2 - Veritex Holdings, Inc.presentationmaterials.htm
Exhibit 99.1

VERITEX HOLDINGS, INC. REPORTS RECORD THIRD QUARTER FINANCIAL RESULTS
STRONG ORGANIC LOAN GROWTH CONTINUES THROUGH 2017
Dallas, TX — October 23, 2017 —Veritex Holdings, Inc. (“Veritex” or the “Company”) (NASDAQ: VBTX), the holding company for Veritex Community Bank, announced today the results for the quarter ended September 30, 2017. The Company reported net income available to common stockholders of $5.1 million, or $0.25 diluted earnings per share (“EPS”), compared to $3.6 million, or $0.23 diluted EPS, for the quarter ended June 30, 2017 and $3.4 million, or $0.31 diluted EPS, for the quarter ended September 30, 2016.
Core net income, calculated as net income adjusted for the impact of income recognized on acquired loans and merger and acquisition costs, totaled $5.7 million for the quarter ended September 30, 2017, an increase of $2.0 million and $2.2 million million from the quarters ended June 30, 2017 and September 30, 2016, respectively. Core diluted EPS for the quarter ended September 30, 2017 was $0.28, compared to $0.23 and $0.31 for the quarters ended June 30, 2017 and September 30, 2016, respectively.(1) 
C. Malcolm Holland, the Company’s Chairman and Chief Executive Officer, said, “I am thrilled with our third quarter accomplishments. We closed the acquisition of Sovereign Bancshares, Inc., announced the merger with Liberty Bancshares, Inc. and successfully completed a public offering of our common stock. Our organic growth continued to be strong. Loan balances, excluding acquired Sovereign loans, have grown $183.9 million over December 31, 2016 balances, or at a 24.8% annualized rate. As we finish out 2017, we are excited about all the opportunities in the thriving business communities we currently serve and the new partnerships we will create through our merger with Liberty.”
Third Quarter 2017 Highlights
Closed Sovereign Bancshares, Inc. (“Sovereign”) acquisition on August 1, 2017 and completed system conversion and integration during the third quarter
Announced acquisition of Liberty Bancshares, Inc. (“Liberty”) on August 1, 2017
Completed a public offering of 2,285,050 shares of Veritex common stock on August 7, 2017 with net proceeds of $56.7 million
Organic loan growth, excluding loans acquired from Sovereign, was 4.8% or 18.9% annualized compared to June 30, 2017 and 18.5% or 24.8% annualized compared to December 31, 2016
Received American Bankers’ “Best Bank to Work For” for the fourth consecutive year
Result of Operations for the Three Months Ended September 30, 2017
Net Interest Income
For the three months ended September 30, 2017, net interest income before provision for loan losses was $19.1 million and net interest margin was 3.78% compared to $12.4 million and 3.53%, respectively, for the three months ended June 30, 2017. The $6.7 million increase from the three months ended June 30, 2017 was primarily due to an increase in interest income on loans, which was driven by increased volume in all loan categories resulting from loans acquired from Sovereign on August 1, 2017 of $750.9 million, as well as organic loan growth during the third quarter of 2017 of $53.3 million. Net interest margin increased 25 basis points from the three months ended June 30, 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 such as investment securities and interest bearing deposits in other banks. Average loan balances represented 81.9% of average interest-earnings assets for the three months ended September 30, 2017 compared to 76.2% for the three months ended June 30, 2017. In addition, the average yield on loan balances increased to 5.00% from 4.88% for the three months ended September 30, 2017 compared to the three months ended June 30, 2017 which was primarily driven by $585 thousand in estimated accretion during the third quarter of 2017 on loans acquired from Sovereign. The estimated accretion on the estimated purchase discount for loans acquired from Sovereign increased the average yield on loans by approximately 14 basis points for the three months ended September 30, 2017.
(1) As used in this release, core net income and core diluted EPS are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to their comparable GAAP measures, see pages 10 and 11 of this release.


1


Net interest income before provision for loan losses increased by $8.6 million from $10.5 million to $19.1 million for the three months ended September 30, 2017 as compared to the same period during 2016. The increase in net interest income before provision for loan losses was primarily driven by higher loan balances resulting from the merger with Sovereign and organic loan growth. For the quarter ended September 30, 2017, the average loan balance increased by $689.0 million compared to the quarter ended September 30, 2016, which resulted in a $9.1 million increase in interest income. The net interest margin increased to 3.78% during the three months ended September 30, 2017 from 3.70% for the same three-month period in 2016. The 8 basis point increase in net interest margin was primarily due to a change in mix of earning assets resulting from increases in loan balances. The average yield on loan balances increased to 5.00% from 4.83% for the three months ended September 30, 2017 compared to the same period during 2016. The increase in the average yield for loans is due to the aforementioned 14 basis points attributable to the estimated accretion on loans acquired from Sovereign as well as the associated increases in the targeted Fed Funds rate which resulted in increases in yields in prime-based loans since September 30, 2016.
Noninterest Income
Noninterest income for the three months ended September 30, 2017 was $2.0 million, an increase of $211 thousand or 11.9% compared to the three months ended June 30, 2017. The net increase was primarily due to a $205 thousand increase in the gain on sale of securities which resulted from the sale of Sovereign investment securities that did not fit our investment strategy. In addition, the increase was due to a $114 thousand increase in services charges and fees on deposit accounts resulting from the additional acquired Sovereign deposit accounts and the associated income from these accounts. This increase was partially offset by a $102 thousand decrease in gain on sale of mortgage loans as a result in the decline in mortgage originations for the three months ended September 30, 2017 compared to the three months ended June 30, 2017.
Compared to the three months ended September 30, 2016, noninterest income for the three months ended September 30, 2017 grew $84 thousand or 4.4%. The increase was primarily due to a $205 thousand increase in gain on sale of securities as referenced above and a $236 thousand increase in services charges and fees on deposit accounts as described above. This increase was partially offset by a $331 thousand decrease in gain on sale of mortgage loans for the three months ended September 30, 2017 compared to the three months ended September 30, 2016.
Noninterest Expense
Noninterest expense was $12.5 million for the three months ended September 30, 2017, compared to $7.8 million for the three months ended June 30, 2017, an increase of $4.7 million or 60.9%. The increase was primarily driven by a $2.3 million increase in salaries and employee benefits expense, primarily due to the addition of 100 full-time equivalent employees related to the Sovereign acquisition. Compared to the second quarter of 2017, professional fees increased $785 thousand which were primarily a result of the use of legal and other professional services associated with the Sovereign and Liberty acquisitions. Occupancy and equipment expense increased $581 thousand primarily due to the addition of six owned buildings and five property leases from the Sovereign acquisition. Data processing and software expense increased by $347 thousand as the Company converted Sovereign’s operating systems into the Veritex information technology infrastructure.
Compared to the three months ended September 30, 2016, noninterest expense for the three months ended September 30, 2017 increased $5.5 million, or 78.1%. The increase was primarily related to the Sovereign acquisition for the reasons described in the preceding paragraph.
Income Taxes
Income tax expense for the three months ended September 30, 2017 totaled $2.7 million, an increase of $848 thousand, or 47.1%, compared to the three months ended June 30, 2017. The Company’s effective tax rate, before reporting the net impact of discrete items, was approximately 34.2% and 34.5% for the three months ended September 30, 2017 and the three months ended June 30, 2017, respectively. The change in income tax expense from the three months ended June 30, 2017 was primarily due to the $2.4 million increase in net operating income and decrease in net discrete tax benefit from $83 thousand for the three months ended June 30, 2017 to $30 thousand for the three months ended September 30, 2017. The net discrete tax benefit for the three months ended September 30, 2017 was primarily associated with the recognition of excess tax benefit realized on share-based payment awards. The Company’s effective tax rate, after including the net impact of discrete tax items, was approximately 33.8% and 32.0%, respectively for the three months ended September 30, 2017 and June 30, 2017, respectively.
Compared to the three months ended September 30, 2016, income tax expense increased $882 thousand, or 49.9%, to $2.7 million for the three months ended September 30, 2017. The Company’s effective tax rate, before reporting the net impact of discrete items, was approximately 34.2% for the three months ended September 30, 2017 compared to 34.4% for the three months ended September 30, 2016. There were no discrete tax items during the three months ended September 30, 2016. The change in income tax expense from the three months ended September 30, 2016 was primarily due to the increase in net operating income of $2.7 million offset by the impact of the net discrete tax benefit of $30 thousand during the three months ended September 30, 2017. The Company’s effective tax rate, after including the net impact of discrete tax items, was approximately 33.8% and 34.4% for the three months ended September 30, 2017 and 2016, respectively.

2


Financial Condition
Loans (excluding loans held for sale and deferred loan fees) at September 30, 2017 were $1.9 billion, an increase of $785.0 million or 69.9% compared to $1.1 billion at June 30, 2017, with $731.6 million of growth resulting from loans acquired from Sovereign. The below table details the components of linked quarter growth in loans compared to June 30, 2017:
 
Acquired from Sovereign
 
Change in Sovereign loan balances since acquisition
 
Organic growth (legacy Veritex balances)
 
Total linked-quarter growth
 
% Change excluding acquired loans
 
% Change including acquired loans
Real Estate
$
538,025

 
$
(23,134
)
 
$
38,788

 
$
553,679

 
5.0
 %
 
71.7
%
Commercial
211,588

 
4,071

 
15,262

 
230,921

 
4.4
 %
 
66.5
%
Consumer
1,243

 
$
(98
)
 
$
(704
)
 
441

 
(19.1
)%
 
12.0
%
Total linked-quarter growth
750,856

 
(19,161
)
 
53,346

 
785,041

 
4.8
 %
 
69.9
%
Loans (excluding loans held for sale and deferred loan fees) at September 30, 2017 increased $980.8 million, or 105.8%, compared to $926.7 million at September 30, 2016, with $731.6 million of growth resulting from loans acquired from Sovereign. The below table details the components of the year-over-year growth in loans compared to September 30, 2016:
 
Acquired from Sovereign
 
Change in Sovereign loan balances since acquisition
 
Organic growth (legacy Veritex balances)
 
Total year-over-year Growth
 
% Change excluding acquired loans
 
% Change including acquired loans
Real Estate
$
538,025

 
$
(23,134
)
 
$
161,541

 
$
676,432

 
24.9
 %
 
104.2
 %
Commercial
211,588

 
4,071

 
88,870

 
304,529

 
32.5
 %
 
111.4
 %
Consumer
1,243

 
$
(98
)
 
$
(1,309
)
 
(164
)
 
(30.5
)%
 
(3.8
)%
Total year-over-year growth
750,856

 
(19,161
)
 
249,102

 
980,797

 
26.9
 %
 
105.8
 %
Deposits at September 30, 2017 were $2.0 billion, an increase of $774.6 million, or 64.0%, compared to June 30, 2017 with $809.4 million resulting from deposits assumed from Sovereign. The table below breaks out the growth in deposits compared to June 30, 2017.
 
Acquired from Sovereign
 
Change in deposits balances from linked-quarter
 
Total linked-quarter Growth
 
% Change excluding acquired deposits
 
% Change including acquired deposits
Non-interest bearing
$
176,260

 
$
(17,690
)
 
$
158,570

 
(5.2
)%
 
47.0
%
Interest-bearing
633,106

 
(17,125
)
 
615,981

 
(2.0
)%
 
70.5
%
Total linked-quarter growth
809,366

 
(34,815
)
 
774,551

 
(2.9
)%
 
64.0
%
Deposits increased $908.4 million, or 84.3%, compared to $1.1 billion at September 30, 2016 with $809.4 million resulting from deposits assumed from Sovereign. The table below breaks out the growth in deposits compared to September 30, 2016.
 
Acquired from Sovereign
 
Change in deposits balances year-over-year
 
Total year-over-year Growth
 
% Change excluding acquired deposits
 
% Change including acquired deposits
Non-interest bearing
$
176,260

 
$
14,395

 
$
190,655

 
4.7
%
 
62.5
%
Interest-bearing
633,106

 
84,680

 
717,786

 
11.0
%
 
92.9
%
Total year-over-year growth
809,366

 
99,075

 
908,441

 
9.2
%
 
84.3
%
Asset Quality
The allowance for loan losses as a percentage of loans was 0.55%, 0.87%, and 0.87% of total loans at September 30, 2017, June 30, 2017, and September 30, 2016, respectively. The allowance for loan losses as a percentage of total loans over the three quarter periods was determined by the qualitative factors around the nature, volume and mix of the loan portfolio. The decrease in the allowance for loan loss as a percentage of loans was attributable to the Sovereign acquisition as acquired loans are recorded at fair value.

3


The provision for loan losses for the three months ended September 30, 2017 totaled $752 thousand compared to $943 thousand and $238 thousand for three months ended June 30, 2017 and September 30, 2016, respectively. The decrease in provision for loan losses for the three months ended September 30, 2017 compared to June 30, 2017 was due to the general provision required from a decrease in organic loan growth compared to the prior period. The increase of $514 thousand in provision for loan losses from September 30, 2016 to September 30, 2017 was due to the general provision required from an increase in organic loan growth compared to the same period in 2016.
Non-accrual loans were $1.9 million at September 30, 2017 compared to $1.5 million at June 30, 2017 and $1.1 million at September 30, 2016. At September 30, 2017 and June 30, 2017, non-accrual loans to our total loans held for investment was minimal at 0.10% and 0.13%, respectively.
Nonperforming assets totaled $2.6 million, or 0.11%, of total assets at September 30, 2017 compared to $2.0 million, or 0.13%, of total assets at June 30, 2017 and $2.1 million, or 0.17%, of total assets at September 30, 2016. The increase of $626 thousand in nonperforming assets compared to June 30, 2017 was primarily due to a net increase in other real estate owned of $245 thousand. The increase of $542 thousand in nonperforming assets compared to September 30, 2016 was primarily due to an increase of $466 thousand in nonperforming loans.
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 interest income, core non-interest expense, core net income, core basic and diluted earnings per share, core efficiency ratio, core net interest margin, 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.
Conference Call
The Company will also host an investor conference call to review the results on Tuesday, October 24, 2017 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting http://edge.media-server.com/m6/p/fbog48pq 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 (833) 696-8362.
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 #97830254. This replay, as well as the webcast, will be available until October 31, 2017.

4



About Veritex Holdings, Inc.
Headquartered in Dallas, Texas, Veritex Holdings, Inc. is a bank holding company that conducts banking activities through its wholly-owned subsidiary, Veritex Community Bank, with seventeen branch locations throughout the Dallas/Fort Worth metropolitan area, two branches in the Austin metropolitan area, two branches in the Houston metropolitan area and one mortgage office. 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

Media Contact:
LaVonda Renfro
972-349-6200
lrenfro@veritexbank.com

Investor Relations:
Susan Caudle
972-349-6132
scaudle@veritexbank.com

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release may contain certain forward-looking statements within the meaning of the securities laws that are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about the Company and its subsidiaries. Forward-looking statements include information regarding the Company’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. 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 the Company 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; continue to have access to debt and equity capital markets; 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 10, 2017 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.


5


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Consolidated Financial Highlights - (Unaudited)
(In thousands, except percentages)
 
 
At and For the Three Months Ended
 
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
Selected Financial Data:
 
 

 
 

 
 

 
 

 
 

Net income
 
$
5,182

 
$
3,615

 
$
3,098

 
$
3,190

 
$
3,375

Total assets
 
2,494,861

 
1,508,589

 
1,522,015

 
1,408,507

 
1,269,194

Total loans(1)
 
1,907,509

 
1,122,468

 
1,020,970

 
991,897

 
926,712

Provision for loan losses
 
752

 
943

 
890

 
440

 
238

Allowance for loan losses
 
10,492

 
9,740

 
8,816

 
8,524

 
8,102

Noninterest-bearing deposits
 
495,627

 
337,057

 
338,226

 
327,614

 
304,972

Total deposits
 
1,985,658

 
1,211,107

 
1,221,696

 
1,119,630

 
1,077,217

Total stockholders’ equity
 
445,929

 
247,602

 
242,725

 
239,088

 
142,423

Summary Performance Ratios:
 
 
 
 

 
 

 
 

 
 

Return on average assets(2)
 
0.94
%
 
0.97
%
 
0.83
%
 
0.97
%
 
1.10
%
Return on average equity(2)
 
5.44

 
5.89

 
5.20

 
8.11

 
9.50

Net interest margin(3)
 
3.78

 
3.53

 
3.21

 
3.44

 
3.70

Efficiency ratio(4)
 
59.33

 
55.03

 
58.26

 
57.39

 
56.64

Noninterest expense to average assets(2)
 
2.26

 
2.08

 
1.99

 
2.16

 
2.29

Summary Credit Quality Data:
 
 
 
 

 
 

 
 

 
 

Nonaccrual loans
 
$
1,856

 
$
1,514

 
$
1,686

 
$
941

 
$
1,087

Accruing loans 90 or more days past due(5)
 
54

 
15

 
212

 
835

 
357

Other real estate owned
 
738

 
493

 
998

 
662

 
662

Nonperforming assets to total assets
 
0.11
%
 
0.13
%
 
0.19
%
 
0.17
%
 
0.17
%
Nonperforming loans to total loans
 
0.10

 
0.14

 
0.19

 
0.18

 
0.16

Allowance for loan losses to total loans
 
0.55

 
0.87

 
0.86

 
0.86

 
0.87

Net charge-offs to average loans outstanding
 

 

 
0.06

 
0.03

 
0.03

Capital Ratios:
 
 
 
 

 
 

 
 

 
 

Total stockholders’ equity to total assets
 
17.87
%
 
16.41
%
 
15.95
%
 
16.97
%
 
11.22
%
Tangible common equity to tangible assets(6)
 
12.76

 
14.77

 
14.31

 
15.23

 
9.14

Tier 1 capital to average assets
 
15.26

 
15.09

 
14.65

 
16.82

 
9.82

Tier 1 capital to risk-weighted assets
 
14.17

 
18.17

 
19.94

 
20.72

 
12.04

Common equity tier 1 (to risk weighted assets)
 
13.65

 
17.92

 
19.66

 
20.42

 
11.72

Total capital to risk-weighted assets
 
14.87

 
19.37

 
21.20

 
22.02

 
13.38

___________________________
(1)
Total loans does not include loans held for sale and deferred fees. Loans held for sale were $2.2 million at September 30, 2017, $4.1 million at June 30, 2017, $1.9 million at March 31, 2017, $5.2 million at December 31, 2016 and $4.9 million at September 30, 2016. Deferred fees were $28 thousand at September 30, 2017, $40 thousand at June 30, 2017, $48 thousand at March 31, 2017, $55 thousand at December 31, 2016, and $51 thousand at September 30, 2016.
(2)
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.
(3)
Net interest margin represents net interest income, annualized on a fully tax equivalent basis, divided by average interest-earning assets.
(4)
Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.
(5)
Accruing loans 90 or more days past due excludes $3.3 million of PCI loans acquired from Sovereign as of September 30, 2017. No PCI loans were considered non-performing loans as of September 30, 2017.
(6)
We calculate tangible common equity as total stockholders’ equity less preferred stock, goodwill, core deposit intangibles and other intangible assets, net of accumulated amortization, and we calculate tangible assets as total assets less goodwill, and core deposit intangibles and other intangible assets, net of accumulated amortization. Tangible common equity to tangible assets is a non-GAAP financial measure, and, as we calculate tangible common equity to tangible assets, the most directly comparable GAAP financial measure is total stockholders’ equity to total assets. Our management believe that this measure is important to many investors in the market place who are interested in relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing both total stockholders’ equity and assets while not increasing our tangible common equity or tangible assets. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures in the table captioned “Reconciliation of Non-GAAP Financial Measures – (Unaudited).”

6


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets - (Unaudited)
(In thousands)
 
 
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
ASSETS
 
 

 
 

 
 

 
 

 
 

Cash and due from banks
 
$
21,879

 
$
28,687

 
$
23,021

 
$
15,631

 
$
15,837

Interest bearing deposits in other banks
 
129,497

 
144,459

 
262,714

 
219,160

 
162,750

Total cash and cash equivalents
 
151,376

 
173,146

 
285,735

 
234,791

 
178,587

Investment securities
 
204,788

 
134,708

 
138,698

 
102,559

 
86,772

Loans held for sale
 
2,179

 
4,118

 
1,925

 
5,208

 
4,856

Loans, net
 
1,896,989

 
1,112,688

 
1,012,106

 
983,318

 
918,559

Accrued interest receivable
 
6,387

 
3,333

 
2,845

 
2,907

 
2,414

Bank-owned life insurance
 
20,517

 
20,369

 
20,224

 
20,077

 
19,922

Bank premises, furniture and equipment, net
 
40,129

 
17,978

 
17,521

 
17,413

 
17,501

Non-marketable equity securities
 
10,283

 
7,407

 
7,375

 
7,366

 
7,358

Investment in unconsolidated subsidiary
 
352

 
93

 
93

 
93

 
93

Other real estate owned
 
738

 
493

 
998

 
662

 
662

Intangible assets, net
 
10,531

 
2,171

 
2,161

 
2,181

 
2,257

Goodwill
 
135,832

 
26,865

 
26,865

 
26,865

 
26,865

Other assets
 
14,760

 
5,220

 
5,469

 
5,067

 
3,348

Total assets
 
$
2,494,861

 
$
1,508,589

 
$
1,522,015

 
$
1,408,507

 
$
1,269,194

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 

 
 

 
 

 
 

 
 

Deposits:
 
 

 
 

 
 

 
 

 
 

Noninterest-bearing
 
$
495,627

 
$
337,057

 
$
338,226

 
$
327,614

 
$
304,972

Interest-bearing
 
1,490,031

 
874,050

 
883,470

 
792,016

 
772,245

Total deposits
 
1,985,658

 
1,211,107

 
1,221,696

 
1,119,630

 
1,077,217

Accounts payable and accrued expenses
 
4,017

 
2,574

 
1,631

 
2,914

 
2,082

Accrued interest payable and other liabilities
 
4,368

 
1,032

 
9,655

 
534

 
1,098

Advances from Federal Home Loan Bank
 
38,200

 
38,235

 
38,271

 
38,306

 
38,341

Junior subordinated debentures
 
11,702

 
3,093

 
3,093

 
3,093

 
3,093

Subordinated notes
 
4,987

 
4,946

 
4,944

 
4,942

 
4,940

Total liabilities
 
2,048,932

 
1,260,987

 
1,279,290

 
1,169,419

 
1,126,771

Commitments and contingencies
 
 
 
 

 
 

 
 

 
 

Stockholders’ equity:
 
 
 
 

 
 

 
 

 
 

Common stock
 
227

 
152

 
152

 
152

 
107

Additional paid-in capital
 
404,900

 
211,901

 
211,512

 
211,173

 
116,315

Retained earnings
 
41,143

 
36,003

 
32,388

 
29,290

 
26,101

Unallocated Employee Stock Ownership Plan shares
 
(209
)
 
(209
)
 
(209
)
 
(209
)
 
(309
)
Accumulated other comprehensive (loss) income
 
(62
)
 
(175
)
 
(1,048
)
 
(1,248
)
 
279

Treasury stock
 
(70
)
 
(70
)
 
(70
)
 
(70
)
 
(70
)
Total stockholders’ equity
 
445,929

 
247,602

 
242,725

 
239,088

 
142,423

Total liabilities and stockholders’ equity
 
$
2,494,861

 
$
1,508,589

 
$
1,522,015

 
$
1,408,507

 
$
1,269,194


7


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income - (Unaudited)
(In thousands, except per share data)
 
 
 
Nine Months Ended
 
 
September 30, 2017
 
September 30, 2016
Interest income:
 
 

 
 

Interest and fees on loans
 
$
45,613

 
$
32,996

Interest on investment securities
 
2,251

 
1,014

Interest on deposits in other banks
 
1,787

 
302

Interest on other
 
4

 
2

Total interest income
 
49,655

 
34,314

Interest expense:
 
 
 
 
Interest on deposit accounts
 
6,201

 
3,388

Interest on borrowings
 
696

 
491

Total interest expense
 
6,897

 
3,879

Net interest income
 
42,758

 
30,435

Provision for loan losses
 
2,585

 
1,610

Net interest income after provision for loan losses
 
40,173

 
28,825

Noninterest income:
 
 
 
 
Service charges and fees on deposit accounts
 
1,733

 
1,309

Gain on sales of investment securities
 
205

 
15

Gain on sales of loans
 
2,259

 
2,318

Bank-owned life insurance
 
561

 
577

Other
 
520

 
460

Total noninterest income
 
5,278

 
4,679

Noninterest expense:
 
 
 
 
Salaries and employee benefits
 
13,471

 
10,683

Occupancy and equipment
 
3,622

 
2,718

Professional fees
 
3,959

 
1,861

Data processing and software expense
 
1,451

 
850

FDIC assessment fees
 
1,061

 
447

Marketing
 
905

 
704

Other assets owned expenses and write-downs
 
109

 
139

Amortization of intangibles
 
413

 
285

Telephone and communications
 
438

 
295

Other
 
2,325

 
1,323

Total noninterest expense
 
27,754

 
19,305

Net income from operations
 
17,697

 
14,199

Income tax expense
 
5,802

 
4,837

Net income
 
$
11,895

 
$
9,362

Preferred stock dividends
 
42

 

Net income available to common stockholders
 
$
11,853

 
$
9,362

Basic earnings per share
 
$
0.70

 
$
0.88

Diluted earnings per share
 
$
0.69

 
$
0.85

Weighted average basic shares outstanding
 
16,813

 
10,698

Weighted average diluted shares outstanding
 
17,232

 
10,992


8


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income - (Unaudited)
(In thousands, except per share data)
 
 
For the Three Months Ended
 
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
Interest income:
 
 

 
 

 
 

 
 

 
 

Interest and fees on loans
 
$
20,706

 
$
13,024

 
$
11,883

 
$
11,684

 
$
11,589

Interest on investment securities
 
941

 
735

 
575

 
396

 
335

Interest on deposits in other banks
 
629

 
548

 
610

 
200

 
129

Interest on other
 
3

 

 
1

 
1

 
1

Total interest income
 
22,279

 
14,307

 
13,069

 
12,281

 
12,054

Interest expense:
 
 
 
 

 
 

 
 

 
 
Interest on deposit accounts
 
2,812

 
1,742

 
1,647

 
1,600

 
1,381

Interest on borrowings
 
338

 
189

 
169

 
161

 
156

Total interest expense
 
3,150

 
1,931

 
1,816

 
1,761

 
1,537

Net interest income
 
19,129

 
12,376

 
11,253

 
10,520

 
10,517

Provision for loan losses
 
752

 
943

 
890

 
440

 
238

Net interest income after provision for loan losses
 
18,377

 
11,433

 
10,363

 
10,080

 
10,279

Noninterest income:
 
 
 
 

 
 

 
 

 
 
Service charges and fees on deposit accounts
 
669

 
555

 
509

 
537

 
433

Gain on sales of investment securities
 
205

 

 

 

 

Gain on sales of loans
 
705

 
807

 
747

 
970

 
1,036

Bank-owned life insurance
 
188

 
186

 
187

 
194

 
193

Other
 
210

 
218

 
92

 
123

 
231

Total noninterest income
 
1,977

 
1,766

 
1,535

 
1,824

 
1,893

Noninterest expense:
 
 
 
 

 
 

 
 

 
 
Salaries and employee benefits
 
5,921

 
3,642

 
3,908

 
3,650

 
3,920

Occupancy and equipment
 
1,596

 
1,015

 
1,011

 
949

 
923

Professional fees
 
1,973

 
1,188

 
798

 
943

 
785

Data processing and software expense
 
719

 
372

 
360

 
308

 
296

FDIC assessment fees
 
410

 
393

 
258

 
213

 
179

Marketing
 
436

 
225

 
244

 
279

 
293

Other assets owned expenses and write-downs
 
71

 
13

 
25

 
24

 
9

Amortization of intangibles
 
223

 
95

 
95

 
95

 
95

Telephone and communications
 
230

 
106

 
102

 
107

 
98

Other
 
943

 
733

 
649

 
516

 
431

Total noninterest expense
 
12,522

 
7,782

 
7,450

 
7,084

 
7,029

Net income from operations
 
7,832

 
5,417

 
4,448

 
4,820

 
5,143

Income tax expense
 
2,650

 
1,802

 
1,350

 
1,630

 
1,768

Net income
 
$
5,182

 
$
3,615

 
$
3,098

 
$
3,190

 
$
3,375

Preferred stock dividends
 
42

 

 

 

 

Net income available to common stockholders
 
$
5,140

 
$
3,615

 
$
3,098

 
$
3,190

 
$
3,375

Basic earnings per share
 
$
0.26

 
$
0.24

 
$
0.20

 
$
0.28

 
$
0.32

Diluted earnings per share
 
$
0.25

 
$
0.23

 
$
0.20

 
$
0.27

 
$
0.31

Weighted average basic shares outstanding
 
19,976

 
15,211

 
15,200

 
11,299

 
10,705

Weighted average diluted shares outstanding
 
20,392

 
15,637

 
15,632

 
11,653

 
11,025


9


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 shareholders to core (non-GAAP) net income, core basic and diluted earnings per share and core efficiency ratio:
 
 
For the Three Months Ended
 
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
Net interest income (as reported)
 
$
19,129

 
$
12,376

 
$
11,253

 
$
10,520

 
$
10,517

Adjustment:
 
 
 
 
 
 
 
 
 
 
Income recognized on acquired loans
 
637

 
$
135

 
$
55

 
$
61

 
$
120

Core net interest income
 
18,492

 
12,241

 
11,198

 
10,459

 
10,397

Provision for loan losses (as reported)
 
752

 
$
943

 
$
890

 
$
440

 
$
238

Noninterest income (as reported)
 
1,977

 
1,766

 
1,535

 
1,824

 
1,893

Noninterest expense (as reported)
 
12,522

 
7,782

 
7,450

 
7,084

 
7,029

Adjustment:
 
 
 
 
 
 
 
 
 
 
Merger and acquisition costs(1)
 
(1,391
)
 
(193
)
 
(89
)
 
(279
)
 
(195
)
Core noninterest expense
 
11,131

 
7,589

 
7,361

 
6,805

 
6,834

Core net income from operations
 
8,586

 
5,475

 
4,482

 
5,038

 
5,218

Income tax expense (as reported)

 
2,650

 
1,802

 
1,350

 
1,630

 
1,768

Tax impact of adjustments
 
264


20



12


76


26

Core net income
 
$
5,672


$
3,653



$
3,120


$
3,332


$
3,424

Preferred stock dividends (as reported)
 
42









Core net income available to common stockholders
 
$
5,630


$
3,653


$
3,120


$
3,332


$
3,424

 
 
 
 
 
 
 
 
 
 
 
Weighted average diluted shares outstanding

 
20,392

 
15,637

 
15,632

 
11,653

 
11,025

 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share (as reported)
 
0.25


0.23



0.20


0.27


0.31

Core diluted earnings per share
 
0.28

 
0.23

 
0.20

 
0.29

 
0.31

 
 

 


 


 


 


Efficiency Ratio
 

 

 

 

 

Efficiency ratio (as reported)
 
61.52
%
 
58.96
%
 
62.62
%
 
59.51
%
 
57.75
%
Core efficiency ratio(2)
 
56.45
%
 
58.09
%
 
62.15
%
 
57.46
%
 
56.70
%
 
 
 
 
 
 
 
 
 
 
 
Net Interest Margin
 
 
 
 
 
 
 
 
 
 
Net interest margin (as reported)
 
3.78
%

3.53
%

3.21
%

3.44
%

3.70
%
Core net interest margin(3)
 
3.66
%

3.49
%

3.19
%

3.42
%

3.65
%
___________________________
(1)
Merger and acquisition costs for the quarters ended September 30, 2017, June 30, 2017 and March 31, 2017 include merger costs related to the Sovereign and Liberty acquisitions. Merger and acquisition costs for the quarters ended December 31, 2016 and September 30, 2016 only include merger costs related to the Sovereign acquisition.
(2)
We calculate core efficiency ratio as core noninterest expense divided by the sum of net interest income after provision for loan losses (as reported) and noninterest income (as reported).
(3)
Core net interest margin is equal to core net interest income divided by average interest-earning assets.

    



10




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
 
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
Tangible Common Equity
 
 

 
 

 
 

 
 

 
 

Total stockholders’ equity
 
$
445,929

 
$
247,602

 
$
242,725

 
$
239,088

 
$
142,423

Adjustments:
 
 

 
 

 
 

 
 

 
 

Goodwill
 
(135,832
)
 
(26,865
)
 
(26,865
)
 
(26,865
)
 
(26,865
)
Intangible assets, net
 
(10,531
)
 
(2,171
)
 
(2,161
)
 
(2,181
)
 
(2,257
)
Total tangible common equity
 
$
299,566

 
$
218,566

 
$
213,699

 
$
210,042

 
$
113,301

Tangible Assets
 
 

 
 

 
 

 
 

 
 

Total assets
 
$
2,494,861

 
$
1,508,589

 
$
1,522,015

 
$
1,408,507

 
$
1,269,194

Adjustments:
 
 

 
 

 
 

 
 

 
 

Goodwill
 
(135,832
)
 
(26,865
)
 
(26,865
)
 
(26,865
)
 
(26,865
)
Intangible assets
 
(10,531
)
 
(2,171
)
 
(2,161
)
 
(2,181
)
 
(2,257
)
Total tangible assets
 
$
2,348,498

 
$
1,479,553

 
$
1,492,989

 
$
1,379,461

 
$
1,240,072

Tangible Common Equity to Tangible Assets
 
12.76
%
 
14.77
%
 
14.31
%
 
15.23
%
 
9.14
%
Common shares outstanding
 
22,644

 
15,233

 
15,229

 
15,195

 
10,736

 
 
 
 
 
 
 
 
 
 
 
Book value per common share(1)
 
$
19.69

 
$
16.25

 
$
15.94

 
$
15.73

 
$
13.27

Tangible book value per common share(2)
 
$
13.23

 
$
14.35

 
$
14.03

 
$
13.82

 
$
10.55

 
___________________________
(1)
We calculate book value per common share as 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.
(2)
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. Tangible book value per common share is a non-GAAP financial measure, and, as we calculate tangible book value per common share, the most directly comparable GAAP financial measure is book value per common share. Our management believes that this measure is important to many investors in the market place who are interested in changes from period to period on book value per common share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.

11


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Net Interest Margin - (Unaudited)
(In thousands except percentages)
 
 
 
For the Three Months Ended
 
 
September 30, 2017
 
June 30, 2017
 
September 30, 2016
 
 
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)
 
$
1,643,077

 
$
20,706

 
5.00
%
 
$
1,070,436

 
$
13,024

 
4.88
%
 
$
954,053

 
$
11,589

 
4.83
%
Securities available for sale
 
191,265

 
941

 
1.95

 
135,795

 
735

 
2.17

 
83,233

 
335

 
1.60

Interest-bearing deposits in other banks
 
171,461

 
629

 
1.46

 
199,050

 
548

 
1.10

 
94,596

 
129

 
0.54

Investment in unconsolidated subsidiary
 
265

 
3

 
4.49

 
93

 

 

 
93

 
1

 
4.28

Total interest-earning assets
 
2,006,068

 
22,279

 
4.41

 
1,405,374

 
14,307

 
4.08

 
1,131,975

 
12,054

 
4.24

Allowance for loan losses
 
(9,910
)
 
 

 
 

 
(9,117
)
 
 

 
 

 
(8,115
)
 
 

 
 

Noninterest-earning assets
 
202,352

 
 

 
 

 
104,819

 
 

 
 

 
95,901

 
 

 
 

Total assets
 
$
2,198,510

 
 

 
 

 
$
1,501,076

 
 

 
 

 
$
1,219,761

 
 

 
 

Liabilities and Stockholders’ Equity
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest-bearing liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest-bearing deposits
 
$
1,294,187

 
$
2,812

 
0.86
%
 
$
870,542

 
$
1,742

 
0.80
%
 
$
726,958

 
$
1,381

 
0.76
%
Advances from FHLB
 
53,222

 
160

 
1.19

 
38,258

 
89

 
0.93

 
38,363

 
59

 
0.61

Other borrowings
 
13,793

 
178

 
5.12

 
8,067

 
100

 
4.97

 
8,078

 
97

 
4.78

Total interest-bearing liabilities
 
1,361,202

 
3,150

 
0.92

 
916,867

 
1,931

 
0.84

 
773,399

 
1,537

 
0.79

Noninterest-bearing liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Noninterest-bearing deposits
 
452,426

 
 

 
 

 
334,813

 
 

 
 

 
301,740

 
 

 
 

Other liabilities
 
6,898

 
 

 
 

 
3,156

 
 

 
 

 
3,284

 
 

 
 

Total noninterest-bearing liabilities
 
459,324

 
 

 
 

 
337,969

 
 

 
 

 
305,024

 
 

 
 

Stockholders’ equity
 
377,984

 
 

 
 

 
246,240

 
 

 
 

 
141,338

 
 

 
 

Total liabilities and stockholders’ equity
 
$
2,198,510

 
 

 
 

 
$
1,501,076

 
 

 
 

 
$
1,219,761

 
 

 
 

Net interest rate spread(2)
 
 

 
 

 
3.49
%
 
 

 
 

 
3.24
%
 
 

 
 

 
3.45
%
Net interest income
 
 

 
$
19,129

 
 

 
 

 
$
12,376

 
 

 
 

 
$
10,517

 
 

Net interest margin(3)
 
 

 
 

 
3.78
%
 
 

 
 

 
3.53
%
 
 

 
 

 
3.70
%
___________________________
(1)
Includes average outstanding balances of loans held for sale of $1,553, $3,169 and $6,047 for the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, 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.


12