Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Veritex Holdings, Inc. | vbtx-ex991x33118.htm |
| 8-K - 8-K - Veritex Holdings, Inc. | vbtx-8kearningsreleasex331.htm |
V E R I T E X
Earnings Presentation
First Quarter 2018
April 24, 2018
2
Safe Harbor Statement
NO OFFER OR SOLICITATION
This communication does not constitute an offer to sell, a solicitation of an offer to sell, the solicitation or an offer to buy any securities or a solicitation of any vote or approval. There will be no sale of securities in any
jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a
prospectus meeting the requirement of Section 10 of the Securities Act of 1933, as amended.
NON-GAAP FINANCIAL MEASURES
Veritex reports its results in accordance with United States generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP financial measures used in managing its business
may provide meaningful information to investors about underlying trends in its business. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, Veritex’s reported results
prepared in accordance with and management uses these non-GAAP measures to measure the Company’s performance and believes that these non-GAAP measures provide a greater understanding of ongoing
operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of unusual items or events that may
obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP. The following are the non-GAAP
measures used in this presentation:
• core net interest income adjusts net interest income as determined in accordance with GAAP to exclude income recognized on acquired loans
• core noninterest expense adjusts noninterest expense as determined in accordance with GAAP to exclude merger and acquisition costs
• core income tax expense adjusts income tax expense as determined in accordance with GAAP to exclude 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 items
• core net income adjusts net income as determined in accordance with GAAP to exclude the impact of income recognized on acquired loans, merger and acquisition costs and the tax impact of the adjustments to
core net interest income and core noninterest expense, exclude the re-measurement of our deferred tax asset as a result of the Tax Act and exclude the tax impact of other M&A discrete items
• Core diluted earnings per share (EPS) divides (i) core net income by (ii) weighted average diluted shares of common stock outstanding for the applicable period
• Core efficiency ratio is determined by dividing core noninterest expense by the sum of core net interest income and noninterest income
• Core return on average assets is determined by dividing core net income by average assets
• Tangible common equity is defined as total stockholders’ equity less goodwill and other intangible assets
• Tangible assets is defined as total assets less goodwill and other intangible assets
• Tangible common equity to tangible assets is a ratio that is determined by dividing tangible common equity by tangible assets
• Tangible book value per common share is determined by dividing tangible common equity by common shares outstanding
Please see Reconciliation of Non-GAAP Financial Measures at the end of this presentation for a reconciliation to the nearest GAAP financial measure.
FORWARD LOOKING STATEMENTS
This presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Such forward-
looking statements are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about the Company and its subsidiaries, any of which may change over time
and some of which may be beyond the Company’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 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; difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the market areas in which the
Company 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; the Company'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 the Company'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 the Company'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; the Company'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; and, 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.
Return on equity, return on assets and EPS results both on “as
reported” and core operating result basis represent record highs for
the Company
Continue to deploy excess capital into earning assets
CAPITAL STEWARDSHIP
3
Kicked-off operational efficiency projects in our loan operations,
accounts payable and human resource departments
Sublet a redundant branch in our Dallas market and completed the
sale of two non-core branch locations in Austin
OPERATIONAL
EXCELLENCE
First quarter 2018 organic loan growth was $82.6 million(1) or 14.8%
annualized compared to prior quarter
Record new loan commitments for the quarter of $357.7 million
STRATEGIC GROWTH
Focused efforts on executing a seamless integration of the Liberty
Bancshares, Inc. acquisition
Made good on our commitment to increase employee stock
ownership through distributions of shares and increased ESOP match
CULTURE
First Quarter 2018 Accomplishments
(1) Organic loan growth excludes $26.3 million of loans from the December 31, 2017 total loan balances that were sold in connection with the sale of two non-core branch locations in
Austin during the first quarter of 2018.
First Quarter 2018 Financial Highlights
(1) As used in this presentation, core net interest margin, core noninterest expense, core net income available to common, core diluted EPS, core efficiency ratio, core return on assets are non-GAAP financial
measures. For a reconciliation of these non-GAAP financial measures to their comparable GAAP measures, see slides 15 and 16 of this presentation. 4
As of and for the quarter ended
Mar 31, Dec 31, Mar 31,
Selected financial data 2018 2017 2017
Linked
Q Δ YoY Q Δ
Total loans $ 2,316,089 $ 2,259,831 $ 1,020,970 2.5 % 126.9%
Total deposits 2,493,794 2,342,912 1,221,696 6.4 104.1
Total assets 3,063,319 2,945,583 1,522,015 4.0 101.3
Total capital 497,433 488,929 242,725 1.7 104.9
Tangible common equity 317,376 307,312 213,699 3.3 48.5
Selected profitability 2018 2017 2017
Linked
Q Δ YoY Q Δ
Net interest income $ 29,102 $ 25,750 $ 11,253 13.0% 158.6%
Noninterest income 2,781 2,298 1,535 21.0 81.2
Noninterest expense 17,306 15,035 7,450 15.1 132.3
Core noninterest expense(1) 15,728 14,017 7,361 13.8 116.7
Net income available to common 10,388 3,257 3,098 218.9 235.3
Core net income available to common(1) 8,968 5,447 3,120 61.3 181.7
Selected ratios 2018 2017 2017
Linked
Q Δ YoY Q Δ
Net interest margin 4.46 % 4.24 % 3.21 % 5.2 % 38.9 %
Core net interest margin(1) 3.84 3.75 3.19 2.4 20.4
Reported diluted EPS $ 0.42 $ 0.14 $ 0.20 $ 0.28 $ 0.22
Core diluted EPS(1) 0.37 0.23 0.20 0.14 0.17
Reported efficiency ratio 54.28 % 53.60 % 58.26 % 1.3 % -6.8 %
Core reported efficiency ratio(1) 57.22 55.86 57.81 2.4 -1.0
Reported return on assets 1.41 0.48 0.83 193.8 69.9
Core return on assets(1) 1.22 0.80 0.83 52.5 47.0
Successful Growth of a Diversified Loan Portfolio
Total Loans(1)
$298
$398
$495
$603
$821
$992
$2,260 $2,316
Ending Balances
$ in millions
• First quarter loanyield is 5.75%
• Loan yield includes 72 basis points of purchase
discount accretion relating to acquired loans
• Excluding the impact of accretion, core loan
yield is 5.03% for 1Q18 vs 4.93% for 4Q17
5
Commercial
Real Estate
55%
Commercial
& Industrial
27%
Energy
2%
1-4 Family &
Consumer
16%
As of March 31, 2018
• For the period ended March 31, 2018, total loan balances increased $56.3 million, 2.5% or 10.0% annualized compared
to December 31, 2017.
• Excluding $26.3 million of loans that were sold in connection with the sale of two non-core branch locations, total loans
increased $82.6 million, 3.7% or 14.8% annualized compared to December 31,2017.
(1) Total loans does not includes loans held for sale and deferred fees.
Payoffs, Pay-downs and New Commitments
6
$885 $928 $927 $992 $1,021
$1,122
$1,908
$2,260 $2,316$143 $125 $131
$164 $158
$225
$163
$276
$358
1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018
Quarter-end Loan Balances
versus New Commitments
QTR End Balances New Commitments
Dollars in millions
$56 $67
$107 $82 $106 $73
$104
$172
$260
6% 7%
12%
8% 10% 6% 5% 8%
11%
1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018
Payoffs and Pay Downs
versus Loan Balances
Total Payoffs / Pay-downs Pay downs/offs % of ending balances
Superior Credit Quality
7
0.33%
0.23%
0.07% 0.08%
0.18%
0.02%
0.16%
2012 2013 2014 2015 2016 2017 1Q2018
0.21%
0.02%
0.08%
0.01%
0.03%
0.06%
0.00%
2012 2013 2014 2015 2016 2017 2018
Nonperforming Loans to Total Loans
Net Charge-offs to Average Loans
Deposit Mix
Total Funding Sources
.
$365
$448
$574 $639
$868
$1,120
$2,343
$2,494
Ending Balances
$ in millions
First quarter average rates:
• Interest-bearing deposits of 1.00%
• Total cost of funds of 0.82%
Total Deposits
8
Noninterest-bearing
24%
Money Market
31%
Correspondent
Money Market
15%
Wholesale/Borrowed
7%
Now/Savings
8%
Time
15%
As of March 31, 2018
• For the period ended March 31, 2018, deposit balances increased $150.9 million, 6.4% or 25.6% annualized over
balances at period ended December 31, 2017.
• Excluding $64.3 million of deposits that were sold in connection with the sale of two non-core branch locations, total
deposits increased $215.2 million, 9.4% or 37.6% annualized compared to December 31,2017.
Core Net Interest Income and Margin Growth
76%
14%
10%
82%
9%
9%
Interest-bearing deposits
in other banks
Investment Securities Loans
Quarterly Average Earning Asset Mix
Average 2Q2017 3Q2017 4Q2017 1Q2018
Loans 4.73% 4.85% 4.93% 5.03%
Deposits 0.78% 0.86 0.93 1.00%
(1)
9
86%
6%
8%
84%
6%
10%
$10,397 $10,459 $11,198 $12,241
$18,492
$22,795 $25,092
3.65%
3.42%
3.19%
3.49%
3.66%
3.75%
3.84%
3Q16 4Q16 1Q2017 2Q2017 3Q2017 4Q2017 1Q17
Quarterly Net Interest Trend
Core net interest income Core net interest margin
(1)
(1)Excludes 5 bps, 15 bps, 58 bps, and 72 of income recognized on acquired loans for 2Q2017, 3Q2017, 4Q2017, and 1Q2018, respectively. See Reconciliation of Non-GAAP Financial Measures for a reconciliation of
core net interest income and core net interest margin.
Impact of Acquisitions on Q1 2018
10
The effects of purchase accounting including accretion income on acquired loans, non-recurring merger
and acquisition costs, and the impact of fair value measurement continued to impact results in the first
quarter 2018. These items are isolated below:
For the three months ended March 31, 2018
A B C D E A-B-C-D-E
Dollars in thousands
Total
Income/Expense
(as reported)
Purchase
accounting
accretion
income on
acquired loans
Sale of Austin
and exit of
redundant
branches
M&A and
other related
one-time
expenses
1Tax Act Re-
measurement
impact from
fair value
adjustments
Income/Expense
less adjustments
Net interest income $ 29,102 $4,009 $ - $ - $ 25,093
Noninterest income 2,781 - 388 - 2,393
Noninterest expense 17,306 1,243 335 15,728
Income tax expense 3,511 (823) 175 69 (820) 2,112
1 The effective tax rate, excluding discrete items including Tax Act re-measurement from fair value adjustments, is 20.5%
Continue to leverage our strong capital through accretive organic
growth and strategic M&A opportunities
Focus on EPS, ROAA, and efficiency
CAPITAL STEWARDSHIP
11
Upgrade IT operational support resources, particularly network and
security to stay ahead of growth
Investment in technologies that will provide operational efficiencies
Dedication to maintaining excellence in compliance, BSA, and CRA
OPERATIONAL
EXCELLENCE
Continued emphasis on credit quality and relationship banking
Strategically grow lines of business: Community Banking, C&I, CRE,
Government Lending, and Correspondent Banking
STRATEGIC GROWTH
Continued commitment to provide employees with “best place to
work” experience
Commitment to employee stock ownership
CULTURE
Look Forward
12
Reconciliation of Non-GAAP Financial Measures
The Company’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. The
Company has included in this presentation information related to these non-GAAP financial measures for the applicable periods presented.
Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the table below.
(Dollars in Thousands, Except Per Share)
.
As of or For the Quarter 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 branch locations (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: Sublease one-time consent fee, net (1,071) - - - -
Branch closure expenses (172) - - - -
M&A and other related on-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
Adjustment: Tax impact of adjustments (579) (678) 264 20 12
Deferred tax asset re-measurement due to Tax Act (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
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
Earnings Per Share
Diluted earnings per share (as reported) $ 0.42 $ 0.14 $ 0.25 $ 0.23 $ 0.20
Core diluted earnings per share 0.37 0.23 0.28 0.23 0.20
Efficiency Ratio
Efficiency Ratio (as reported) 54.28% 53.60% 61.52% 58.96% 62.62%
Core Efficiency Ratio 57.22% 55.86% 56.45% 58.09% 62.15%
Net Interest Margin
Net interest margin (as reported) 4.46% 4.24% 3.78% 3.53% 3.21%
Core net interest margin 3.84% 3.75% 3.66% 3.49% 3.19%
Net Interest Margin
Return on average assets (as reported) 1.41% 0.48% 0.94% 0.97% 0.83%
Core return on average assets 1.22% 0.80% 1.02% 0.98% 0.83%
13
Reconciliation of Non-GAAP Financial Measures
The Company’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance
including tangible book value per common share and tangible common equity to tangible assets. The Company has included in this presentation
information related to these non-GAAP financial measures for the applicable periods presented. Reconciliation of these non-GAAP financial measures
to the most directly comparable GAAP financial measures are presented in the table below.
(Dollars in Thousands, Except Per Share)
For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2018 2017 2017 2017 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 (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 (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 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 $ 20.60 $ 20.28 $ 19.69 $ 16.25 $ 15.94
Tangible book value per common share 13.14 12.75 13.23 14.35 14.03
14