Veritex Holdings, Inc. Reports Fourth Quarter and Record Year-End 2017 Results

DALLAS, Jan. 29, 2018 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. ("Veritex" or "the Company") (Nasdaq:VBTX), the holding company for Veritex Community Bank ("Veritex Bank"), today announced the year end results including record year over year earnings and growth. The Company ended the year with strong capital levels and is poised to further leverage its capital position. Net income available to common stockholders was $4.4 million for the fourth quarter of 2017, a decrease of $0.8 million from the third quarter of 2017, and an increase of $1.2 million from the fourth quarter of 2016. Net income available to common stockholders for the year ended December 31, 2017 was $16.2 million, up $3.7 million, or 29.2%, from the year ended December 31, 2016. Net income for the quarter and year ended December 31, 2017 were negatively impacted by a $1.9 million 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").

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.

C. Malcolm Holland, the Company’s Chairman and Chief Executive Officer said, “I am delighted with our accomplishments this year. Our company has grown from $1.4 billion in assets at December 31, 2016 with 11 branches in the Dallas market to $3.0 billion in assets at December 31, 2017 with 21 continuing branches in the Dallas, Fort Worth and Houston markets."

Mr. Holland continued "The fourth quarter has been a particularly busy time for our company, even by Veritex standards. We completed the acquisition of Liberty Bancshares, Inc. and continued to manage cost savings by closing two redundant branches and we sold two Austin area branches on January 1, 2018, thus exiting that market. We continued to increase earnings per share, significantly grew the balance sheet, and were recognized once again as one of the best places to work."

Mr. Holland concluded, "I am excited about 2018 and the opportunities that are ahead of us. Our staff continues to be the reason why we stand apart from the competition. With continued focus on our employees and the Veritex culture, we will be able to achieve the goals we have set for ourselves in 2018."


2017 Fourth Quarter Highlights

  • Net income available for common stockholders for the quarter ended December 31, 2017 was $4.4 million, or $0.19 diluted earnings per share ("EPS"), compared to $5.1 million, or $0.25 diluted EPS, for the quarter ended September 30, 2017.
  • Core net income available for common stockholders totaled $5.4 million, or $0.23 core diluted EPS, for the quarter ended December 31, 2017, compared to $5.6 million, or $0.28 core diluted EPS, for the quarter ended September 30, 2017. The decrease in core net income available for common stockholders is primarily due to an increase in the provision for loan losses further discussed in the "Asset Quality" section of this release.
  • Net income available for common stockholders for the quarter ended December 31, 2017 was impacted by an income tax charge of $1.9 million related to the re-measurement of our deferred tax assets and deferred tax liabilities at our new expected tax rate due to the enactment of the Tax Act.
  • Net interest margin ("NIM") improved to 4.24% and core NIM improved to 3.75% for the quarter ended December 31, 2017, compared to a NIM of 3.78% and core NIM of 3.66% for the third quarter of 2017.
  • Total loans increased $352.3 million, or 18.5%, to $2.3 billion compared to the third quarter of 2017. Excluding acquired loans from the Liberty acquisition, loans grew $39.7 million, or 13.8% annualized.
  • Total deposits increased $357.3 million, or 18.0%, to $2.3 billion compared to the third quarter of 2017.
  • In November 2017, Veritex Bank was named in the list of The Dallas Morning News’ Top 100 Places to Work 2017.


Full Year 2017 Highlights

  • Net income available for common stockholders for the year ended December 31, 2017 was $16.2 million, or $0.86 diluted EPS, compared to $12.6 million, or $1.13 diluted EPS, for the year ended December 31, 2016.

  • Core net income available for common stockholders totaled $17.9 million, or $0.95 core diluted EPS, for the year ended December 31, 2017, compared to $12.6 million, or $1.13 core diluted EPS, for the year ended December 31, 2016.

  • Total loans as of December 31, 2017 grew $1.3 billion, or 127.8%, compared to December 31, 2016. Excluding acquired loans from Sovereign and Liberty of $1.1 billion, loans grew $203.0 million, or 20.5% compared to December 31, 2016.

  • Noninterest-bearing deposits as of December 31, 2017, which includes branch deposits held for sale, increased $324.6 million, or 99.1%, compared to December 31, 2016.

  • Closed acquisitions with Sovereign Bancshares, Inc. ("Sovereign") on August 1, 2017 and Liberty Bancshares, Inc. ("Liberty") on December 1, 2017.

  • Completed a public offering of 2,285,050 shares of common stock with net proceeds of $56.7 million.

  • Received American Bankers' "Best Bank to Work For" for the fourth consecutive year.

Result of Operations for the Three Months Ended December 31, 2017

Net Interest Income

For the three months ended December 31, 2017, net interest income before provision for loan losses was $25.8 million and net interest margin was 4.24% compared to $19.1 million and 3.78%, respectively, for the three months ended September 30, 2017. The $6.7 million increase from the three months ended September 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 Liberty on December 1, 2017, and continued organic loan growth. Net interest margin increased 46 basis points from the three months ended September 30, 2017, primarily due to a change in mix of earnings assets resulting from increases in loans, which tend to yield greater interest rates than other interest earning assets. Average loan balances represented 84.3% of average interest-earning assets for the three months ended December 31, 2017 compared to 81.9% for the three months ended September 30, 2017.

Net interest income before provision for loan losses increased by $15.3 million from $10.5 million to $25.8 million for the three months ended December 31, 2017 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 loans acquired from Sovereign and Liberty and continued organic loan growth. For the three months ended December 31, 2017, average loan balances increased by $1.1 billion compared to the three months ended December 31, 2016, which resulted in a $16.5 million increase in interest income. Net interest margin increased 80 basis points from the three months ended December 31, 2016 primarily due to a change in mix of earnings 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 84.3% of average interest-earning assets for the three months ended December 31, 2017 compared to 79.9% for the three months ended December 31, 2016.

Noninterest Income

Noninterest income for the three months ended December 31, 2017 was $2.3 million, an increase of $321 thousand compared to the three months ended September 30, 2017. The net increase was primarily due to 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 third quarter of 2017. In addition, the increase was due to $138 thousand of rental income resulting from the purchase of our headquarter building on December 6, 2017 and an increase of $100 thousand in dividend income as a result of bi-annual Federal Reserve Bank stock dividends. This increase was partially offset by a $136 thousand decrease in gain on sale of SBA loans.

Compared to the three months ended December 31, 2016, noninterest income grew $474 thousand. The increase was primarily due to the $267 thousand gain on the sale of other real estate owned referenced above with no corresponding sale in the fourth quarter of 2016, a $232 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 and $136 thousand of rental income resulting from the purchase of our headquarter building.

Noninterest Expense

Noninterest expense was $15.0 million for the three months ended December 31, 2017, compared to $12.5 million for the three months ended September 30, 2017, an increase of $2.5 million. The increase was primarily driven by a $1.4 million increase in salaries and employee benefits expense, primarily due to one month of additional salaries and employee benefit expenses related to the addition of full-time equivalent employees associated with the Liberty acquisition which closed on December 1, 2017 and one additional month of salaries and employee benefit expenses for employees associated with the Sovereign acquisition compared to the three months ended September 30, 2017. Due to the Sovereign acquisition closing on August 1, 2017, two months of salaries and employee benefit expense related to Sovereign employees were included for the three months ended September 30, 2017 compared to three months of expense related to Sovereign employees for the three months ended December 31, 2017.

Compared to the three months ended December 31, 2016, noninterest expense for the three months ended December 31, 2017 increased $8.0 million. The increase was primarily driven by a $3.7 million increase in salaries and employee benefits expense related to the additional full-time equivalent employees as result of the Sovereign and Liberty acquisitions. Additionally, occupancy and equipment expense increased $1.0 million primarily due to the addition of eight owned buildings and eight property leases from the Sovereign and Liberty acquisitions and professional fees increased $770 thousand which were primarily a result of the use of legal and other professional services association with the Sovereign and Liberty acquisitions.

Financial Condition

Total loans were $2.3 billion at December 31, 2017, an increase of $352.3 million, or 18.5%, compared to the third quarter of 2017 and $1.3 billion, or 127.8%, compared to December 31, 2016. We acquired loans from Sovereign and Liberty with an acquisition date fair value of $752.5 million and $312.6 million, respectively. For the fourth quarter of 2017, excluding acquired loans from the Liberty acquisition, loans grew $39.7 million, or 13.8% annualized.

Total deposits were $2.3 billion at December 31, 2017, an increase of $357.3 million, or 18.0%, compared to the third quarter of 2017 and $1.2 billion, or 109.3%, compared the year ended December 31, 2016. We assumed deposits with an acquisition date fair value of $809.4 million and estimated $395.9 million in the Sovereign and Liberty acquisitions, respectively.

Asset Quality

Our allowance for loan losses as a percentage of loans was 0.57%, 0.55%, and 0.86% of total loans at December 31, 2017, September 30, 2017, and December 31, 2016, respectively. The allowance for loan losses as a percentage of total loans for each of the three quarters ended 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 total loans from December 31, 2016 was attributable to the completion of the Sovereign acquisition on August 1, 2017 and the Liberty acquisition on December 1, 2017, as acquired loans are recorded at fair value.

The provision for loan losses for the three months ended December 31, 2017 totaled $2.5 million compared to $752 thousand and $440 thousand for three months ended September 30, 2017 and December 31, 2016, respectively. The increase in provision for loan losses compared to September 30, 2017 and December 31, 2016 was primarily due to the general provision required from an increase of loans acquired through the acquisitions of Sovereign and Liberty that were re-underwritten following completion of the respective acquisitions as well as an increase in organic loan growth. Once an acquired loan undergoes new underwriting and meets the criteria for a new loan, any remaining fair value adjustments are taken into interest income and the loan becomes fully subject to our allowance for loan loss methodology. In addition, a provision of $629 thousand was taken for an energy loan moved into nonperforming status discussed below.

Nonperforming assets totaled $14.4 million, or 0.49%, of total assets at December 31, 2017 compared to $2.6 million, or 0.11%, of total assets at September 30, 2017 and $2.4 million, or 0.17%, of total assets at December 31, 2016. The increase of $11.8 million in nonperforming assets compared to September 30, 2017 was primarily due to the addition of a $13.4 million energy loan resulting from a decline in collateral value and deteriorating performance of the borrower.

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, 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 Sovereign and 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 bank premises, furniture and equipment, goodwill, intangible assets and deferred taxes have been recorded for the Sovereign acquisition and provisional estimates for loans, bank premises, furniture and equipment, goodwill, intangible assets, deferred taxes and deposits 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, January 30, 2018 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/m6/p/s7inoejd 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 #9875609. This replay, as well as the webcast, will be available until February 6, 2018.

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 nineteen branch locations and a mortgage office throughout the Dallas/Fort Worth metropolitan area and one branch 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 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.



VERITEX HOLDINGS, INC. AND SUBSIDIARY
Consolidated Financial Highlights - (Unaudited)
(Dollars in thousands)
At and For the Three Months Ended
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
Selected Financial Data:
Net income $4,368 $5,182 $3,615 $3,098 $3,190
Net income available to common stockholders 4,368 5,140 3,615 3,098 3,190
Total assets 2,946,693 2,494,861 1,508,589 1,522,015 1,408,507
Total loans(1) 2,259,831 1,907,509 1,122,468 1,020,970 991,897
Provision for loan losses 2,529 752 943 890 440
Allowance for loan losses 12,808 10,492 9,740 8,816 8,524
Noninterest-bearing deposits(2) 652,218 495,627 337,057 338,226 327,614
Total deposits(2) 2,342,912 1,985,658 1,211,107 1,221,696 1,119,630
Total stockholders’ equity 490,039 445,929 247,602 242,725 239,088
Summary Performance Ratios:
Return on average assets(3) 0.64% 0.94% 0.97% 0.83% 0.97%
Return on average equity(3) 3.73 5.44 5.89 5.20 8.11
Net interest margin(4) 4.24 3.78 3.53 3.21 3.44
Efficiency ratio(5) 53.60 59.33 55.03 58.26 57.39
Noninterest expense to average assets(3) 2.22 2.26 2.08 1.99 2.16
Summary Credit Quality Data:
Nonaccrual loans $13,905 $1,856 $1,514 $1,686 $941
Accruing loans 90 or more days past due(6) 18 54 15 212 835
Other real estate owned 449 738 493 998 662
Nonperforming assets to total assets 0.49% 0.11% 0.13% 0.19% 0.17%
Nonperforming loans to total loans 0.62 0.10 0.14 0.19 0.18
Allowance for loan losses to total loans 0.57 0.55 0.87 0.86 0.86
Net charge-offs to average loans outstanding 0.01 0.06 0.03
Capital Ratios:
Total stockholders’ equity to total assets 16.63% 17.87% 16.41% 15.95% 16.97%
Tangible common equity to tangible assets 11.06 12.76 14.77 14.31 15.23
Tier 1 capital to average assets 12.85 15.26 15.09 14.65 16.82
Tier 1 capital to risk-weighted assets 12.41 14.17 18.17 19.94 20.72
Common equity tier 1 (to risk weighted assets) 12.23 13.65 17.92 19.66 20.42
Total capital to risk-weighted assets 13.10 14.87 19.37 21.20 22.02

__________________________

(1) Total loans does not include loans held for sale and deferred fees. Loans held for sale were $0.8 million at December 31, 2017, $2.2 million at September 30, 2017, $4.1 million at June 30, 2017, $1.9 million at March 31, 2017, and $5.2 million at December 31, 2016. Deferred fees were $28 thousand at December 31, 2017, $28 thousand at September 30, 2016, $40 thousand at June 30, 2017, $48 thousand at March 31, 2017, and $55 thousand at December 31, 2016. Total loans include branch assets held for sale of $26.3 million at December 31, 2017.

(2) Total noninterest-bearings 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 $3.3 million of PCI loans acquired from Sovereign as of December 31, 2017 and September 30, 2017. No PCI loans were considered non-performing loans as of December 31, 2017.

VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets - (Unaudited)
(In thousands)
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
ASSETS
Cash and due from banks $38,243 $21,879 $28,687 $23,021 $15,631
Interest bearing deposits in other banks 110,801 129,497 144,459 262,714 219,160
Total cash and cash equivalents 149,044 151,376 173,146 285,735 234,791
Investment securities 228,117 204,788 134,708 138,698 102,559
Loans held for sale 841 2,179 4,118 1,925 5,208
Loans, net 2,220,682 1,896,989 1,112,688 1,012,106 983,318
Accrued interest receivable 7,676 6,387 3,333 2,845 2,907
Bank-owned life insurance 21,476 20,517 20,369 20,224 20,077
Bank premises, furniture and equipment, net 75,251 40,129 17,978 17,521 17,413
Non-marketable equity securities 13,732 10,283 7,407 7,375 7,366
Investment in unconsolidated subsidiary 352 352 93 93 93
Other real estate owned 449 738 493 998 662
Intangible assets, net 20,441 10,531 2,171 2,161 2,181
Goodwill 162,265 135,832 26,865 26,865 26,865
Branch assets held for sale 33,552
Other assets 12,815 14,760 5,220 5,469 5,067
Total assets $2,946,693 $2,494,861 $1,508,589 $1,522,015 $1,408,507
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing $612,830 $495,627 $337,057 $338,226 $327,614
Interest-bearing 1,665,800 1,490,031 874,050 883,470 792,016
Total deposits 2,278,630 1,985,658 1,211,107 1,221,696 1,119,630
Accounts payable and accrued expenses 5,098 4,017 2,574 1,631 2,914
Accrued interest payable and other liabilities 5,446 4,368 1,032 9,655 534
Advances from Federal Home Loan Bank 71,164 38,200 38,235 38,271 38,306
Junior subordinated debentures 11,702 11,702 3,093 3,093 3,093
Subordinated notes 4,987 4,987 4,946 4,944 4,942
Branch liabilities held for sale 64,627
Other borrowings 15,000
Total liabilities 2,456,654 2,048,932 1,260,987 1,279,290 1,169,419
Commitments and contingencies
Stockholders’ equity:
Common stock 241 227 152 152 152
Additional paid-in capital 445,517 404,900 211,901 211,512 211,173
Retained earnings 45,510 41,143 36,003 32,388 29,290
Unallocated Employee Stock Ownership Plan shares (106) (209) (209) (209) (209)
Accumulated other comprehensive (loss) (1,053) (62) (175) (1,048) (1,248)
Treasury stock, 10,000 shares at cost (70) (70) (70) (70) (70)
Total stockholders’ equity 490,039 445,929 247,602 242,725 239,088
Total liabilities and stockholders’ equity $2,946,693 $2,494,861 $1,508,589 $1,522,015 $1,408,507



VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income - (Unaudited)
(In thousands, except per share data)
For the Year Ended
December 31,
2017
December 31,
2016
Interest income:
Interest and fees on loans $73,795 $44,681
Interest on investment securities 3,462 1,409
Interest on deposits in other banks 2,287 503
Interest on other 8 2
Total interest income 79,552 46,595
Interest expense:
Interest on deposit accounts 9,878 4,988
Interest on borrowings 1,166 652
Total interest expense 11,044 5,640
Net interest income 68,508 40,955
Provision for loan losses 5,114 2,050
Net interest income after provision for loan losses 63,394 38,905
Noninterest income:
Service charges and fees on deposit accounts 2,502 1,846
Gain on sales of investment securities 222 15
Gain on sales of loans and other assets owned 3,141 3,288
Bank-owned life insurance 753 771
Other 958 583
Total noninterest income 7,576 6,503
Noninterest expense:
Salaries and employee benefits 20,828 14,332
Occupancy and equipment 5,618 3,667
Professional fees 5,672 2,804
Data processing and software expense 2,217 1,158
FDIC assessment fees 1,177 661
Marketing 1,293 983
Other assets owned expenses and write-downs 182 163
Amortization of intangibles 964 380
Telephone and communications 720 402
Other 4,118 1,840
Total noninterest expense 42,789 26,390
Net income from operations 28,181 19,018
Income tax expense 11,918 6,467
Net income $16,263 $12,551
Preferred stock dividends $42 $
Net income available to common stockholders $16,221 $12,551
Basic earnings per share $0.88 $1.16
Diluted earnings per share $0.86 $1.13
Weighted average basic shares outstanding 18,404 10,849
Weighted average diluted shares outstanding 18,810 11,153



VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income - (Unaudited)
(In thousands, except per share data)
For the Three Months Ended
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
Interest income:
Interest and fees on loans $28,182 $20,706 $13,024 $11,883 $11,684
Interest on investment securities 1,211 941 735 575 396
Interest on deposits in other banks 500 629 548 610 200
Interest on other 4 3 1 1
Total interest income 29,897 22,279 14,307 13,069 12,281
Interest expense:
Interest on deposit accounts 3,677 2,812 1,742 1,647 1,600
Interest on borrowings 470 338 189 169 161
Total interest expense 4,147 3,150 1,931 1,816 1,761
Net interest income 25,750 19,129 12,376 11,253 10,520
Provision for loan losses 2,529 752 943 890 440
Net interest income after provision for loan losses 23,221 18,377 11,433 10,363 10,080
Noninterest income:
Service charges and fees on deposit accounts 769 669 555 509 537
Gain on sales of investment securities 17 205
Gain on sales of loans and other assets owned 882 705 807 747 970
Bank-owned life insurance 192 188 186 187 194
Other 438 210 218 92 123
Total noninterest income 2,298 1,977 1,766 1,535 1,824
Noninterest expense:
Salaries and employee benefits 7,357 5,921 3,642 3,908 3,650
Occupancy and equipment 1,996 1,596 1,015 1,011 949
Professional fees 1,713 1,973 1,188 798 943
Data processing and software expense 766 719 372 360 308
FDIC assessment fees 116 410 393 258 213
Marketing 388 436 225 244 279
Other assets owned expenses and write-downs 73 71 13 25 24
Amortization of intangibles 551 223 95 95 95
Telephone and communications 282 230 106 102 107
Other 1,793 943 733 649 516
Total noninterest expense 15,035 12,522 7,782 7,450 7,084
Net income from operations 10,484 7,832 5,417 4,448 4,820
Income tax expense 6,116 2,650 1,802 1,350 1,630
Net income $4,368 $5,182 $3,615 $3,098 $3,190
Preferred stock dividends $ $42 $ $ $
Net income available to common stockholders $4,368 $5,140 $3,615 $3,098 $3,190
Basic earnings per share $0.19 $0.26 $0.24 $0.20 $0.28
Diluted earnings per share $0.19 $0.25 $0.23 $0.20 $0.27
Weighted average basic shares outstanding 23,124 19,976 15,211 15,200 11,299
Weighted average diluted shares outstanding 23,524 20,392 15,637 15,632 11,653


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 diluted earnings per share, core efficiency ratio and core net interest margin:
For the Three Months Ended
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
Net interest income (as reported) $25,750 $19,129 $12,376 $11,253 $10,520
Adjustment:
Income recognized on acquired loans 2,955 637 135 55 61
Core net interest income 22,795 18,492 12,241 11,198 10,459
Provision for loan losses (as reported) 2,529 752 943 890 440
Noninterest income (as reported) 2,298 1,977 1,766 1,535 1,824
Noninterest expense (as reported) 15,035 12,522 7,782 7,450 7,084
Adjustment:
Merger and acquisition ("M&A") costs (1,018) (1,391) (193) (89) (279)
Core noninterest expense 14,017 11,131 7,589 7,361 6,805
Core net income from operations 8,547 8,586 5,475 4,482 5,038
Income tax expense (as reported) 6,116 2,650 1,802 1,350 1,630
Adjustments:
Tax impact of adjustments (678) 264 20 12 76
Tax Act re-measurement (1,940)
Other M&A discrete tax items (398)
Core income tax expense 3,100 2,914 1,822 1,362 1,706
Core net income $5,447 $5,672 $3,653 $3,120 $3,332
Preferred stock dividends (as reported) 42
Core net income available to common stockholders $5,447 $5,630 $3,653 $3,120 $3,332
Weighted average diluted shares outstanding

23,524 20,392 15,637 15,632 11,653
Diluted earnings per share (as reported) 0.19 0.25 0.23 0.20 0.27
Core diluted earnings per share(1) 0.23 0.28 0.23 0.20 0.29
Efficiency Ratio
Efficiency ratio (as reported) 53.60% 59.33% 55.03% 58.26% 57.39%
Core efficiency ratio(2) 55.86% 54.38% 54.18% 57.81% 55.40%
Net Interest Margin
Net interest margin (as reported) 4.24% 3.78% 3.53% 3.21% 3.44%
Core net interest margin(3) 3.75% 3.66% 3.49% 3.19% 3.42%

___________________________

(1) 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, merger and acquisition costs, 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.

(2) We calculate core efficiency ratio as core noninterest expense divided by the sum of core net interest income and noninterest income (as reported).

(3) Core net interest margin is equal to core net interest income divided by average interest-earning 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, GAAP net income available to common stockholders to core (non-GAAP) net income available to common stockholders, core diluted earnings per share, core efficiency ratio and core net interest margin:
For the Years Ended
December 31,
2017
December 31,
2016
Net interest income (as reported) $68,508 $40,955
Adjustment:
Income recognized on acquired loans 3,782 425
Core net interest income 64,726 40,530
Provision for loan losses (as reported) 5,114 2,050
Noninterest income (as reported) 7,576 6,503
Noninterest expense (as reported) 42,789 26,390
Adjustment:
Merger and acquisition costs (2,691) (472)
Core noninterest expense 40,098 25,918
Core net income from operations 27,090 19,065
Income tax expense (as reported) 11,918 6,467
Adjustment:
Tax impact of adjustments (382) 16
Tax Act re-measurement (1,940)
Other M&A discrete tax items (398)
Core income tax expense 9,198 6,483
Core net income $17,892 $12,582
Preferred stock dividends (as reported) 42
Core net income available to common stockholders $17,850 $12,582
Weighted average diluted shares outstanding 18,810 11,153
Diluted earnings per share (as reported) 0.86 1.13
Core diluted earnings per share 0.95 1.13
Efficiency Ratio
Efficiency ratio (as reported) 56.24% 55.61%
Core efficiency ratio 55.46% 55.11%
Net Interest Margin
Net interest margin (as reported) 3.77% 3.72%
Core net interest margin 3.56% 3.68%


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:
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
Tangible Common Equity
Total stockholders’ equity $490,039 $445,929 $247,602 $242,725 $239,088
Adjustments:
Goodwill (162,265) (135,832) (26,865) (26,865) (26,865)
Intangible assets(1) (22,165) (10,531) (2,171) (2,161) (2,181)
Total tangible common equity $305,609 $299,566 $218,566 $213,699 $210,042
Tangible Assets
Total assets $2,946,693 $2,494,861 $1,508,589 $1,522,015 $1,408,507
Adjustments:
Goodwill (162,265) (135,832) (26,865) (26,865) (26,865)
Intangible assets(1) (22,165) (10,531) (2,171) (2,161) (2,181)
Total tangible assets $2,762,263 $2,348,498 $1,479,553 $1,492,989 $1,379,461
Tangible Common Equity to Tangible Assets(2) 11.06% 12.76% 14.77% 14.31% 15.23%
Common shares outstanding 24,110 22,644 15,233 15,229 15,195
Book value per common share(3) $20.33 $19.69 $16.25 $15.94 $15.73
Tangible book value per common share(4) $12.68 $13.23 $14.35 $14.03 $13.82

___________________________

(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
December 31, 2017 September 30, 2017 December 31, 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)(4) $2,030,587 $28,182 5.51% $1,643,077 $20,706 5.00% $971,977 $11,684 4.78%
Securities available for sale 233,244 1,211 2.06 191,265 941 1.95 96,814 396 1.63
Interest-earning deposits in financial institutions 145,099 500 1.37 171,461 629 1.46 147,974 200 0.54
Investment in subsidiary 352 4 4.51 265 3 4.49 93 1 4.28
Total interest-earning assets 2,409,282 29,897 4.92 2,006,068 22,279 4.41 1,216,858 12,281 4.02
Allowance for loan losses (10,658) (9,910) (8,353)
Noninterest-earning assets(4) 294,298 202,352 98,379
Total assets $2,692,922 $2,198,510 $1,306,884
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits(4) $1,571,573 3,677 0.93% $1,294,187 $2,812 0.86% $784,778 1,600 0.81%
Advances from FHLB 74,589 213 1.13 53,222 160 1.19 38,328 58 0.60
Other borrowings 25,398 257 4.01 13,793 178 5.12 8,078 103 5.07
Total interest-bearing liabilities 1,671,560 4,147 0.98 1,361,202 3,150 0.92 831,184 1,761 0.84
Noninterest-bearing liabilities:
Noninterest-bearing deposits(4) 542,918 452,426 315,988
Other liabilities(4) 13,819 6,898 3,153
Total noninterest-bearing liabilities 556,737 459,324 319,141
Stockholders’ equity 464,625 377,984 156,559
Total liabilities and stockholders’ equity $2,692,922 $2,198,510 $1,306,884
Net interest rate spread(2) 3.94% 3.49% 3.18%
Net interest income $25,750 $19,129 $10,520
Net interest margin(3) 4.24% 3.78% 3.44%

___________________________

(1) Includes average outstanding balances of loans held for sale of $3,155, $1,553, and $5,517 for three months ended December 31, 2017, September 30, 2017, and December 31, 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.

(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.



VERITEX HOLDINGS, INC. AND SUBSIDIARY
Net Interest Margin - (Unaudited)
(In thousands, except percentages)
For the Year Ended December 31,
2017 2016
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)(2) $1,441,295 $73,795 5.12% $924,465 $44,681 4.83%
Securities available for sale 170,253 3,462 2.03% 84,558 1,409 1.67%
Interest-earning deposits in financial institutions 202,314 2,287 1.13% 93,199 503 0.54%
Investment in subsidiary 202 8 3.96% 93 2 2.15%
Total interest-earning assets 1,814,064 79,552 4.39% 1,102,315 46,595 4.23%
Allowance for loan losses (9,567) (7,743)
Noninterest-earning assets(2) 176,883 94,199
Total assets $1,981,380 $1,188,771
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits(2) $1,151,033 9,878 0.86% $688,978 4,988 0.72%
Advances from FHLB 51,196 531 1.04% 43,649 260 0.60%
Other borrowings 13,878 635 4.58% 8,077 392 4.85%
Total interest-bearing liabilities 1,216,107 11,044 0.91% 740,704 5,640 0.76%
Noninterest-bearing liabilities:
Noninterest-bearing deposits(2) 425,124 302,548
Other liabilities(2) 6,802 2,937
Total noninterest-bearing liabilities 431,926 305,485
Stockholders’ equity 333,347 142,582
Total liabilities and stockholders’ equity $1,981,380 $1,188,771
Net interest rate spread 3.48% 3.47%
Net interest income $68,508 $40,955
Net interest margin 3.78% 3.72%

___________________________

(1) Includes average outstanding balances of loans held for sale of $2,493 and $5,078 for the twelve months ended December 31, 2017 and 2016, respectively.

(2) 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.

Media Contact: LaVonda Renfro 972-349-6200 lrenfro@veritexbank.com Investor Relations: Susan Caudle 972-349-6132 scaudle@veritexbank.com

Source:Veritex Holdings, Inc.