Veritex Holdings, Inc. Reports Second Quarter Operating Results

DALLAS, July 28, 2020 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. (“Veritex” or the “Company”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the quarter ended June 30, 2020.

“The second quarter was dominated by significant pandemic and economic challenges. Despite those headwinds, we delivered solid results while supporting our employees, customers and communities,” said C. Malcolm Holland, III, the Company’s Chairman and Chief Executive Officer. “Our quarterly results reflect strong pre-tax, pre-provision operating net revenue, continued building of our allowance for credit losses and higher capital levels.  I couldn’t be more proud of what the team accomplished during such a disruptive operating period.”

Second Quarter Highlights

  • Net income of $24.0 million, or $0.48 diluted earnings per share (“EPS”), compared to $4.1 million, or $0.08 diluted EPS, for the quarter ended March 31, 2020 and $26.9 million, or $0.49 diluted EPS, for the quarter ended June 30, 2019;
  • Pre-tax, pre-provision operating earnings1 totaled $45.7 million, compared to $39.1 million for the quarter ended March 31, 2020 and $44.0 million for the quarter ended June 30, 2019;
  • Provision for credit losses and unfunded commitments was $19.0 million, compared to $35.7 million for the quarter ended March 31, 2020, as a result of continued disruptions in the global economy from the COVID-19 pandemic and its impact on the Texas economic forecasts that drive the Company’s current expected credit loss (“CECL”) model;
  • Allowance for credit losses (“ACL”) to total loans held for investments (“LHI”), excluding mortgage warehouse (“MW”) and Paycheck Protection Program (“PPP”) loans, was 2.01% for the quarter ended June 30, 2020 compared to 1.73% for the quarter ended March 31, 2020. Net charge-offs to average loans outstanding and nonperforming assets to total assets remained essentially flat quarter over quarter at 3 basis points and 62 basis points, respectively;
  • During the second quarter of 2020, the Company funded $400.9 million of PPP loans through the Small Business Administration (“SBA”) as a result of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The Company elected to carry these loans at fair value, and as a result, the Company recognized $12.5 million of PPP fee income, gross, during the second quarter of 2020;
  • Total deposits grew $325.6 million from the first quarter of 2020, or 22.4% annualized, with the average cost of interest-bearing deposits decreasing to 0.84% for the three months ended June 30, 2020 from 1.39% for the three months ended March 31, 2020;
  • Declared quarterly cash dividend of $0.17 payable on August 20, 2020.



Financial Highlights QTD YTD
  Q2 2020 Q1 2020 Q2 2020 Q2 2019
  (Dollars in thousands)
(unaudited)
GAAP        
Net income $24,028   $4,134   $28,162   $34,283  
Diluted EPS 0.48   0.08   0.56   0.62  
Return on average assets2 1.11 % 0.20 % 0.68 % 0.88 %
Efficiency ratio 46.02   47.61   46.76   67.28  
Book value per common share $23.45   $23.19   $23.45   $22.55  
Non-GAAP1        
Operating earnings $21,188   $4,134   $25,322   $64,913  
Diluted operating EPS 0.43   0.08   0.50   1.18  
Pre-tax, pre-provision operating earnings 45,668   39,107   84,775   90,409  
Pre-tax, pre-provision operating return on average assets 2.11 % 1.94 % 2.03 % 2.31 %
Operating return on average assets2 0.98   0.20   0.61   1.66  
Operating efficiency ratio 45.74   47.61   46.62   43.60  
Tangible book value per common share $14.71   $14.39   $14.71   $14.27  

1 Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.
2 Annualized ratio.

Second Quarter Global Economic Developments

The COVID-19 pandemic has caused significant disruptions to the global economy and the communities which we serve. In response to the pandemic, we have implemented our operational response and preparedness plan during the first and second quarters of 2020, which includes dispersion of critical operational processes, increased monitoring focused on higher risk operations, enhanced remote access security and further restricted internet access, enhanced security around wire transfer execution and flexible scheduling provided to employees who are unable to work from home. Additionally, we are focused on taking care of our clients and communities who may be experiencing financial hardship due to the pandemic, including through our loan deferment program and participation in the PPP designed to provide a direct incentive for small businesses.

Results of Operations for the Three Months Ended June 30, 2020

Net Interest Income

For the three months ended June 30, 2020, net interest income before provision for credit losses was $65.8 million and net interest margin was 3.31% compared to $67.4 million and 3.67%, respectively, for the three months ended March 31, 2020. The $1.6 million decrease in net interest income was primarily due to a $7.4 million decrease in interest income on loans, slightly offset by a $4.1 million decrease in interest expense on transaction and savings deposits. Net interest margin decreased 36 basis points from the three months ended March 31, 2020 primarily due to a decrease in yields earned on loan balances and an unfavorable increase in the mix of lower yielding assets, partially offset by decreases in the average rates paid on interest-bearing demand and savings deposits and certificate and other time deposits during the three months ended June 30, 2020. As a result, the average cost of interest-bearing deposits decreased 55 basis points to 0.84% for the three months ended June 30, 2020 from 1.39% for the three months ended March 31, 2020.

Net interest income before provision for credit losses decreased by $5.6 million from $71.4 million to $65.8 million and net interest margin decreased by 69 basis points from 4.00% to 3.31% for the three months ended June 30, 2020 as compared to the same period in 2019. The decrease in net interest income before provision for credit losses was primarily due to a $16.3 million decrease in interest income on loans, partially offset by an $8.9 million decrease in interest expenses on transaction and savings deposits during the three months ended June 30, 2020 compared to the three months ended June 30, 2019. Net interest margin decreased 69 basis points from the three months ended June 30, 2019 primarily due to a decrease in yields earned on loan balances, partially offset by decreases in the average rate paid on interest-bearing demand and savings deposits for the three months ended June 30, 2020 and an unfavorable shift in the mix of earning assets compared to the three months ended June 30, 2019. As a result, the average cost of interest-bearing deposits decreased 95 basis points to 0.84% for the three months ended June 30, 2020 from 1.79% for the three months ended June 30, 2019.

Noninterest Income

Noninterest income for the three months ended June 30, 2020 was $21.3 million, an increase of $14.0 million, or 193.8%, compared to the three months ended March 31, 2020. The increase was primarily due to a $10.6 million of increase in government guaranteed loan income, net. In the second quarter, the Company earned fee income of 5% on PPP loans under $350 thousand, 3% on PPP loans between $350 thousand and $2 million and 1% on PPP loans greater than $2 million totaling $12.5 million. The recognized fee was partially offset by a valuation allowance on the PPP loans of $2.0 million as the Company elected to carry these loans at fair value. 

Compared to the three months ended June 30, 2019, noninterest income for the three months ended June 30, 2020 increased by $15.3 million, or 252.8%. The increase was primarily due to a $10.0 million increase in government guaranteed loan income, net, as a result of the fee income earned PPP loans discussed above and a $3.5 million increase in gain on sales of investment securities.

Noninterest Expense

Noninterest expense was $40.1 million for the three months ended June 30, 2020, compared to $35.5 million for the three months ended March 31, 2020, an increase of $4.5 million, or 12.7%. The increase was primarily driven by a $1.1 million increase in salaries and employee benefits, a $0.6 million increase in Federal Deposit Insurance Corporation (“FDIC”) assessment fees, and a $1.6 million increase in bank service charges resulting from pre-payment fees on Federal Home Loan Bank (“FHLB”) advances paid off early in the second quarter of 2020. Noninterest expense for the three months ended June 30, 2020 includes $1.2 million of COVID related expenses primarily related to Community Reinvestment Act donations, lender incentives, employee overtime and cleaning services.

Compared to the three months ended June 30, 2019, noninterest expense for the three months ended June 30, 2020 increased by $165 thousand, or 0.4%.

Financial Condition

Total loans were $6.6 billion at June 30, 2020, an increase of $355.9 million, or 22.8% annualized, compared to March 31, 2020. The net increase was primarily the result of the Company’s origination of $400.9 million of loans in the second quarter of 2020 under the PPP. The Company has elected to carry such PPP loans at fair value, which represent $398.9 million of the Company’s outstanding loan balance as of the second quarter 2020.

Total deposits were $6.1 billion at June 30, 2020, an increase of $325.6 million, or 22.4% annualized, compared to March 31, 2020. The increase was primarily the result of increases of $177.3 million and $358.4 million in interest-bearing transaction and savings deposits and noninterest-bearing demand deposits, respectively, partially offset by a decrease of $210.1 million in certificates and other time deposits.

Goodwill

During the second quarter of 2020, the Company observed a significant decline in the market valuation of our common shares as a result of sustained economic disruption occurring after the first quarter of 2020, including but not limited to the COVID-19 pandemic. As a result of the sustained economic disruption, the Company determined a triggering event had occurred that required an interim quantitative impairment assessment for the Company’s reporting unit to determine if it is more likely than not that the fair value is less than the carrying value as a result of a sustained price decrease. The Company determined the fair value of its reporting unit using a combination of a market and income approach. The fair value of our reporting unit exceeded its related carrying value by approximately 26%.

Asset Quality and Adoption of ASU 2016-13

Nonperforming assets totaled $53.3 million, or 0.62% of total assets at June 30, 2020, compared to $39.4 million, or 0.50% of total assets, at December 31, 2019. The Company had a net charge-off of $1.8 million for the quarter, which is primarily the result of one relationship charge-off that was fully reserved against in the first quarter of 2020.

The Company recorded a provision for credit losses for the three months ended June 30, 2020 of $16.2 million, compared to $31.8 million and $3.3 million for the three months ended March 31, 2020 and June 30, 2019, respectively. The decrease in the recorded provision for credit losses for the three months ended June 30, 2020 was primarily attributable to changes in the Texas economic forecasts used in the CECL model in the second quarter of 2020 to reflect the expected impact of the COVID-19 pandemic as of June 30, 2020, as compared to our Texas economic forecasts and expected impact of the COVID-19 pandemic as of March 31, 2020. In the second quarter of 2020, we also recorded a $2.8 million provision for unfunded commitments which was also attributable to the change in the Texas economic forecasts as a result of the COVID-19 pandemic compared to a $3.9 million provision for unfunded commitments recorded for the three months ended March 31, 2020. Allowance for credit losses as a percentage of loans HFI, excluding MW and PPP loans, was 2.01%, 1.73% and 0.43% of total loans at June 30, 2020, March 31, 2020 and June 30, 2019, respectively.

Dividend Information

On July 28, 2020, Veritex’s Board of Directors declared a quarterly cash dividend of $0.17 per share on its outstanding shares of common stock.  The dividend will be paid on or after August 20, 2020 to stockholders of record as of the close of business on August 6, 2020.

Non-GAAP Financial Measures

Veritex’s management uses certain non-GAAP (U.S. generally accepted accounting principles) financial measures to evaluate its operating performance and provide information that is important to investors. However, non-GAAP financial measures are supplemental and should be viewed in addition to, and not as an alternative for, Veritex’s reported results prepared in accordance with GAAP. Specifically, Veritex reviews and reports tangible book value per common share, operating earnings, tangible common equity to tangible assets, return on average tangible common equity, pre-tax, pre-provision operating earnings, pre-tax, pre-provision operating return on average assets, diluted operating earnings per share, operating return on average assets, operating return on average tangible common equity and operating efficiency ratio. Veritex has included in this earnings release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to “Reconciliation of Non-GAAP Financial Measures” after the financial highlights at the end of this earnings release for a reconciliation of these non-GAAP financial measures.

Conference Call

The Company will host an investor conference call to review the results on Wednesday, July 29, 2020 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/pckpzcgt and will receive a unique PIN, which can be used when dialing in for the call. This will allow attendees to access 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, https://ir.veritexbank.com/. An audio replay will be available one hour after the conclusion of the call at (855) 859-2056, Conference #3693902. This replay, as well as the webcast, will be available until August 5, 2020.

About Veritex Holdings, Inc.

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

 

Forward-Looking Statements

This earnings release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Forward-looking statements include, without limitation, statements relating to the expected payment date of Veritex’s quarterly cash dividend, the impact of certain changes in Veritex’s accounting policies, standards and interpretations, the effects of the COVID-19 pandemic and actions taken in response thereto, Veritex’s future financial performance, business and growth strategy, projected plans and objectives, as well as other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact broader economic and industry 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 words. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Veritex’s Annual Report on Form 10-K for the year ended December 31, 2019 and any updates to those risk factors set forth in Veritex’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov.  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.  Veritex does not undertake any obligation, and specifically declines any obligation, to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law. All forward-looking statements, expressed or implied, included in this earnings release 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.


14.49- VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights
(Unaudited)

  For the Three Months Ended Six Months Ended
  June 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 June 30, 2019 June 30, 2020 June 30, 2019
  (Dollars and shares in thousands)    
Per Share Data (Common Stock):              
Basic EPS $0.48   $0.08   $0.56   $0.52   $0.50   $0.56   $0.63  
Diluted EPS 0.48   0.08   0.56   0.51   0.49   0.56   0.62  
Book value per common share 23.45   23.19   23.32   23.02   22.55   23.45   22.55  
Tangible book value per common share1 14.71   14.39   14.73   14.61   14.27   14.71   14.27  
               
Common Stock Data:              
Shares outstanding at period end 49,633   49,557   51,064   52,373   53,457   49,633   53,457  
Weighted average basic shares outstanding for the period 49,597   50,725   51,472   52,915   53,969   50,161   54,130  
Weighted average diluted shares outstanding for the period 49,727   51,056   52,263   53,873   54,929   50,383   54,929  
               
Summary of Credit Ratios:              
ACL to total LHI, excluding mortgage warehouse and PPP loans 2.01 % 1.73 % 0.52 % 0.46 % 0.43 % 2.01 % 0.43 %
Nonperforming assets to total assets 0.62 % 0.60 % 0.50 % 0.21 % 0.54 % 0.62 % 0.60 %
Net charge-offs to average loans outstanding 0.03   —   —   0.14   —   0.03   —  
               
Summary Performance Ratios:              
Return on average assets2 1.11   0.20   1.43   1.36   1.36   0.68   0.88  
Return on average equity2 8.36   1.41   9.63   8.98   8.98   4.96   5.79  
Return on average tangible common equity1, 2 14.49   3.27   16.22   15.15   15.26   9.12   10.26  
Efficiency ratio 46.02   47.61   47.12   43.67   51.49   46.76   67.28  
               
Selected Performance Metrics - Operating:              
Diluted operating EPS1 $0.43   $0.08   $0.58   $0.53   $0.59   $0.50   $1.18  
Pre-tax, pre-provision operating return on average assets1, 2 2.11 % 1.94 % 2.07 % 2.26 % 2.22 % 2.03 % 2.31 %
Operating return on average assets1, 2 0.98   0.20   1.49   1.42   1.63   0.61   1.66  
Operating return on average tangible common equity1, 2 12.90   3.27   16.87   15.78   18.09   8.31   18.50  
Operating efficiency ratio1 45.74   47.61   45.67   42.36   43.66   46.62   43.60  
               
Veritex Holdings, Inc. Capital Ratios:              
Tier 1 capital to average assets (leverage) 9.16   9.49   10.17   10.33   10.47   9.16   10.47  
Common equity tier 1 capital 9.66   9.53   10.60   10.82   11.32   9.66   11.32  
Tier 1 capital to risk-weighted assets 10.05   9.92   11.02   11.26   11.77   10.05   11.77  
Total capital to risk-weighted assets 12.71   12.48   13.10   12.26   12.80   12.71   12.80  
Tangible common equity to tangible assets1 8.96   8.81   10.01   10.17   10.08   8.96   10.08  

1Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” after the financial highlights for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.
2Annualized ratio.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights
(In thousands)

  June 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 June 30, 2019
  (unaudited) (unaudited)   (unaudited) (unaudited)
ASSETS          
Cash and cash equivalents $160,306    $430,842    $251,550    $252,592    $265,822   
Securities 1,112,061    1,117,804    997,330    1,023,393    1,020,279   
Other securities 104,213    112,775    84,063    85,007    76,016   
           
Loans held for sale 28,041    15,048    14,080    10,715    7,524   
PPP loans, at fair value 398,949    —    —    —    —   
Loans held for investment, mortgage warehouse 441,992    371,161    183,628    233,577    200,017   
Loans held for investment 5,726,873    5,853,735    5,737,577    5,654,027    5,731,833   
Total loans 6,595,855    6,239,944    5,935,285    5,898,319    5,939,374   
Allowance for credit losses (115,365)  (100,983)  (29,834)  (26,243)  (24,712) 
Bank-owned life insurance 81,876    81,395    80,915    80,411    79,899   
Bank premises, furniture and equipment, net 115,560    116,056    118,536    118,449    115,373   
Other real estate owned 7,716    7,720    5,995    4,625    1,748   
Intangible assets, net 66,705    69,444    72,263    75,363    78,347   
Goodwill 370,840    370,840    370,840    370,463    370,221   
Other assets 88,091    85,787    67,994    80,504    87,739   
Total assets $8,587,858    $8,531,624    $7,954,937    $7,962,883    $8,010,106   
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Deposits:          
Noninterest-bearing deposits $1,907,697    $1,549,260    $1,556,500    $1,473,126    $1,476,668   
Interest-bearing transaction and savings deposits 2,714,149    2,536,865    2,654,972    2,528,293    2,646,154   
Certificates and other time deposits 1,503,701    1,713,820    1,682,878    1,876,427    2,042,266   
Total deposits 6,125,547    5,799,945    5,894,350    5,877,846    6,165,088   
Accounts payable and other liabilities 64,625    56,339    37,427    45,475    44,414   
Accrued interest payable 4,088    5,407    6,569    6,054    7,069   
Advances from Federal Home Loan Bank 1,087,794    1,377,832    677,870    752,907    512,945   
Subordinated debentures and subordinated notes 140,283    140,406    145,571    72,284    72,486   
Securities sold under agreements to repurchase 1,772    2,426    2,353    2,787    2,811   
Total liabilities 7,424,109    7,382,355    6,764,140    6,757,353    6,804,813   
Commitments and contingencies          
Stockholders’ equity:          
Common stock 555    554    549    524    535   
Additional paid-in capital 1,122,063    1,119,757    1,117,879    1,114,659    1,112,238   
Retained earnings 143,277    127,812    147,911    125,344    104,652   
Accumulated other comprehensive income 42,014    45,306    19,061    23,837    17,741   
Treasury stock (144,160)  (144,160)  (94,603)  (58,834)  (29,873) 
Total stockholders’ equity 1,163,749    1,149,269    1,190,797    1,205,530    1,205,293   
  Total liabilities and stockholders’ equity $8,587,858    $8,531,624    $7,954,937    $7,962,883    $8,010,106   



VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights
(In thousands, except per share data)

  For the Three Months Ended For the Six Months Ended
  June 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 June 30, 2019 June 30, 2020 June 30, 2019
Interest income:              
Loans, including fees $70,440   $77,861    $82,469    $85,811   $86,786    $148,301   $172,533   
Investment securities 7,825   7,397    7,168    7,687   7,397    15,222   14,629   
Deposits in financial institutions and Fed Funds sold 186   871    1,285    1,329   1,372    1,057   2,926   
Other investments 891   850    820    816   622    1,741   1,313   
Total interest income 79,342   86,979    91,742    95,643   96,177    166,321   191,401   
Interest expense:              
Transaction and savings deposits 2,471   6,552    8,203    10,381   11,405    9,023   21,771   
Certificates and other time deposits 6,515   8,240    9,455    10,283   10,145    14,755   18,937   
Advances from FHLB 2,801   2,879    2,661    3,081   2,187    5,680   4,242   
Subordinated debentures and subordinated notes 1,798   1,903    1,559    1,024   998    3,701   2,092   
Total interest expense 13,585   19,574    21,878    24,769   24,735    33,159   47,042   
Net interest income 65,757   67,405    69,864    70,874   71,442    133,162   144,359   
Provision for credit losses 16,172   31,776    3,493    9,674   3,335    47,948   8,347   
Provision for unfunded commitments 2,799   3,881    —    —   —    6,680   —   
Net interest income after provisions 46,786   31,748    66,371    61,200   68,107    78,534   136,012   
Noninterest income:              
Service charges and fees on deposit accounts 2,960   3,642    3,728    3,667   3,422    6,602   6,939   
Loan fees 1,240   845    1,921    2,252   1,932    2,085   3,609   
Gain (loss) on sales of investment securities 2,879   —    (438)  —   (642)  2,879   (1,414) 
Gain on sales of mortgage loans held for sale 308   142    81    138   143    450   256   
Government guaranteed loan income, net 11,006   439    560    930   961    11,445   3,218   
Rental income 547   551    371    369   373    1,098   741   
Other 2,350   1,628    909    1,074   (155)  3,978   1,169   
Total noninterest income 21,290   7,247    7,132    8,430   6,034    28,537   14,518   
Noninterest expense:              
Salaries and employee benefits 20,019   18,870    18,917    17,530   17,459    38,889   36,344   
Occupancy and equipment 3,994   4,273    4,198    4,044   4,014    8,267   8,143   
Professional and regulatory fees 2,796   2,196    2,615    2,750   2,814    4,992   6,232   
Data processing and software expense 2,434   2,089    1,880    2,252   2,309    4,523   4,233   
Marketing 561   1,083    971    708   961    1,644   1,580   
Amortization of intangibles 2,696   2,696    2,696    2,712   2,719    5,392   5,479   
Telephone and communications 308   319    466    361   625    627   1,020   
Merger and acquisition expense —   —    918    1,035   5,790    —   37,007   
COVID expenses 1,245   —    —    —   —    1,245   —   
Other 6,008   4,019    3,623    3,238   3,205    10,027   6,851   
Total noninterest expense 40,061   35,545    36,284    34,630   39,896    75,606   106,889   
Income before income tax expense 28,015   3,450    37,219    35,000   34,245    31,465   43,641   
Income tax (benefit) expense 3,987   (684)  8,168    7,595   7,369    3,303   9,358   
Net income $24,028   $4,134    $29,051    $27,405   $26,876    $28,162   $34,283   
               
Basic EPS $0.48   $0.08    $0.56    $0.52   $0.50    $0.56   $0.63   
Diluted EPS $0.48   $0.08    $0.56    $0.51   $0.49    $0.56   $0.62   
Weighted average basic shares outstanding 49,597   50,725    51,472    52,915   53,969    50,161   54,130   
Weighted average diluted shares outstanding 49,727   51,056    52,263    53,873   54,929    50,383   54,929   



VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights
(In thousands except percentages)

  For the Three Months Ended
  June 30, 2020 March 31, 2020 June 30, 2019
  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:                  
Loans1 $5,797,989    $67,404   4.68 % $5,784,965    $76,527   5.32 % $5,762,257    $85,030   5.92 %
Loans held for investment, mortgage warehouse 304,873    2,279   3.01   163,646    1,334   3.28   154,586    1,756   4.56  
PPP loans 303,223    757   1.00   —    —   —   —      —  
Securities 1,117,964    7,825   2.82   1,038,954    7,397   2.86   956,160    7,397   3.10  
Interest-bearing deposits in other banks 366,764    186   0.20   308,546    871   1.14   228,461    1,372   2.41  
Other investments2 110,672    891   3.24   91,917    850   3.72   59,508    622   4.19  
Total interest-earning assets 8,001,485    79,342   3.99   7,388,028    86,979   4.74   7,160,972    96,177   5.39  
Allowance for loan losses (110,483)      (44,270)      (23,891)     
Noninterest-earning assets 798,772        782,024        800,238       
Total assets $8,689,774        $8,125,782        $7,937,319       
                   
Liabilities and Stockholders’ Equity                  
Interest-bearing liabilities:                  
Interest-bearing demand and savings deposits $2,684,897    $2,471   0.37 % $2,638,633    $6,552   1.00 % $2,713,735    $11,405   1.69 %
Certificates and other time deposits 1,625,971    6,515   1.61   1,650,678    8,240   2.01   2,107,567    10,145   1.93  
Advances from FHLB 1,206,930    2,801   0.93   937,901    2,879   1.23   334,926    2,187   2.62  
Subordinated debentures and subordinated notes 142,549    1,798   5.07   145,189    1,903   5.27   75,252    998   5.32  
Total interest-bearing liabilities 5,660,347    13,585   0.97   5,372,401    19,574   1.47   5,231,480    24,735   1.90  
                   
Noninterest-bearing liabilities:                  
Noninterest-bearing deposits 1,826,327        1,523,702        1,456,538       
Other liabilities 47,302        46,563        48,669       
Total liabilities 7,533,976        6,942,666        6,736,687       
Stockholders’ equity 1,155,798        1,183,116        1,200,632       
Total liabilities and stockholders’ equity $8,689,774        $8,125,782        $7,937,319       
                   
Net interest rate spread2     3.02 %     3.27 %     3.49 %
Net interest income   $65,757       $67,405       $71,442    
Net interest margin3     3.31 %     3.67 %     4.00 %

1 Includes average outstanding balances of loans held for sale of $22,958, $10,995 and $8,140 for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively, and average balances of loans held for investment, excluding mortgage warehouse.
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.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights
(In thousands except percentages)

  Six Months Ended 
  June 30, 2020 June 30, 2019 
  Average Outstanding Balance Interest Earned/ Interest Paid Average Yield/ Rate Average Outstanding Balance Interest Earned/ Interest Paid Average Yield/ Rate 
Assets             
Interest-earning assets:             
Loans1 $5,790,227   $143,931   5.00 % $5,746,746   $169,224   5.94 % 
Loans held for investment, mortgage warehouse 234,260  3,613 3.10   137,280  3,309 4.86   
PPP loans 152,861  757 1.00   —   —   —   
Securities 1,078,459  15,222 2.84   941,336  14,629 3.13   
Interest-bearing deposits in other banks 337,655  1,057 0.63   246,201  2,926 2.40   
Other investments2 101,294  1,741 3.46   48,578  1,313 5.45   
Total interest-earning assets 7,694,756  166,321 4.35   7,120,141  191,401 5.42   
Allowance for loan losses (77,376)     (21,988)     
Noninterest-earning assets 763,567      789,890      
Total assets $8,380,947       $7,888,043       
              
Liabilities and Stockholders’ Equity             
Interest-bearing liabilities:             
Interest-bearing demand and savings deposits $2,668,726   $9,023   0.68 % $2,675,237   $21,771   1.64 % 
Certificates and other time deposits 1,639,807  14,755   1.81   2,124,951  18,937 1.80   
Advances from FHLB 1,072,416  5,680   1.07   322,879  4,242 2.65   
Subordinated debentures and subordinated notes 143,869  3,701   5.17   75,515  2,092 5.59   
Total interest-bearing liabilities 5,524,818  33,159 1.21   5,198,582  47,042 1.82   
              
Noninterest-bearing liabilities:             
Noninterest-bearing deposits 1,675,015      1,456,086      
Other liabilities 38,488      39,385      
Total liabilities 7,238,321      6,694,053      
Stockholders’ equity 1,142,626      1,193,990      
Total liabilities and stockholders’ equity $8,380,947       $7,888,043       
              
Net interest rate spread3     3.14 %     3.60 % 
Net interest income   $133,162       $144,359     
Net interest margin4     3.48 %     4.09 % 

1 Includes average outstanding balances of loans held for sale of $16,977 and $7,925 for the six months ended June 30, 2020 and June 30, 2019, respectively, and average balances of loans held for investment, excluding mortgage warehouse.
2 The Company historically reported dividend income in other noninterest income and has re-classed $1,287 of dividend income into other investments as of June 30, 2019 in order to align with industry peers for comparability purposes.
3 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
4 Net interest margin is equal to net interest income divided by average interest-earning assets.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights

Yield Trend

  For the Three Months Ended
  June 30, 2020 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30, 2019
Average yield on interest-earning assets:          
Loans1 4.68 % 5.32 % 5.63 % 5.85 % 5.92 %
Loans held for investment, mortgage warehouse 3.01   3.28   3.51   3.88   4.56  
PPP loans 1.00   —   —   —   —  
Securities 2.82   2.86   2.83   2.98   3.10  
Interest-bearing deposits in other banks 0.20   1.14   1.63   2.25   2.41  
Other investments 3.24   3.72   4.53   4.50   4.19  
Total interest-earning assets 3.99 % 4.74 % 5.00 % 5.26 % 5.39 %
           
Average rate on interest-bearing liabilities:          
Interest-bearing demand and savings deposits 0.37 % 1.00 % 1.24 % 1.57 % 1.69 %
Certificates and other time deposits 1.61   2.01   2.10   2.09   1.93  
Advances from FHLB 0.93   1.23   1.45   1.93   2.62  
Subordinated debentures and subordinated notes 5.07   5.27   5.23   5.43   5.32  
Total interest-bearing liabilities 0.97 % 1.47 % 1.65 % 1.86 % 1.90 %
           
Net interest rate spread2 3.02 % 3.27 % 3.35 % 3.40 % 3.49 %
Net interest margin3 3.31 % 3.67 % 3.81 % 3.90 % 4.00 %

  1Includes average outstanding balances of loans held for sale of $22,958, $10,995, $10,643, $8,525 and $8,140 for the three months ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively, and average balances of loans held for investment, excluding mortgage warehouse.
  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.

Supplemental Yield Trend

  For the Three Months Ended
  June 30, 2020 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30, 2019
Average cost of interest-bearing deposits 0.84 % 1.39 % 1.59 % 1.79 % 1.79 %
Average costs of total deposits, including noninterest-bearing 0.59   1.02   1.18   1.36   1.38  


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights
(In thousands except percentages)

Total LHI and Deposit Portfolio Composition

  June 30, 2020 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30, 2019
  (Dollars in thousands)
LHI1                    
Commercial $1,555,300   27.2 % $1,777,603   30.4 % $1,712,838   29.9 % $1,711,256   30.3 % $1,788,044   31.2 %
Real Estate:                    
Owner occupied commercial 769,952   13.4   723,839   12.4   706,782   12.3   716,130   12.7   746,768   13.0  
Commercial 1,847,480   32.3   1,828,386   31.2   1,784,201   31.1   1,710,510   30.3   1,727,525   30.1  
Construction and land 599,510   10.5   566,470   9.7   629,374   11.0   623,622   11.0   543,850   9.5  
Farmland 14,723   0.3   14,930   0.3   16,939   0.3   7,986   0.1   17,472   0.3  
1-4 family residential 528,688   9.2   536,892   9.2   549,811   9.6   559,310   9.9   557,056   9.7  
Multi-family residential 394,829   6.9   388,374   6.6   320,041   5.6   306,966   5.4   330,877   5.8  
Consumer 14,932   0.2   15,771   0.2   17,457   0.2   18,113   0.3   20,562   0.4  
Total LHI $5,725,414   100 % $5,852,265   100 % $5,737,443   100 % $5,653,893   100 % $5,732,154   100 %
                     
Mortgage warehouse 441,992     373,161     183,628     233,577     200,017    
PPP loans 398,949     —     —     —     —    
                     
Total LHI1 $6,566,355     $6,225,426     $5,921,071     $5,887,470     $5,932,171    
                     
Deposits                    
Noninterest-bearing $1,907,697   31.2 % $1,549,260   26.7 % $1,556,500   26.4 % $1,473,126   25.1 % $1,476,668   24.0 %
Interest-bearing transaction 343,640   5.6   306,641   5.3   388,877   6.6   373,997   6.4   373,982   6.1  
Money market 2,272,520   37.1   2,143,874   37.0   2,180,017   37.0   2,066,315   35.2   2,178,274   35.3  
Savings 97,989   1.6   86,350   1.5   86,078   1.5   87,981   1.5   93,898   1.5  
Certificates and other time deposits 1,503,701   24.5   1,713,820   29.5   1,682,878   28.6   1,876,427   31.8   2,042,266   33.1  
Total deposits $6,125,547   100 % $5,799,945   100 % $5,894,350   100 % $5,877,846   100 % $6,165,088   100 %
                     
Loan to Deposit Ratio 107.2 %   107.3 %   100.5 %   100.2 %   96.2 %  
Loan to Deposit Ratio, excluding mortgage warehouse and PPP loans 93.5 %   100.9 %   97.3 %   96.2 %   93.0 %  

1 Total LHI does not include deferred costs of $1.5 million at June 30, 2020 and $1.5 million at March 31, 2020, deferred fees of $134 thousand at December 31, 2019 and September 30, 2019, respectively, and $321 thousand at June 30, 2019.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights
(In thousands except percentages)

Asset Quality

 For the Three Months Ended For the Six Months Ended
 June 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 June 30, 2019 June 30, 2020 June 30, 2019
 (Dollars in thousands)    
Nonperforming Assets (“NPAs”):             
Nonaccrual loans$43,594    $38,836    $29,779    $10,172    $15,733    $43,594    $15,733   
Accruing loans 90 or more days past due12,021    4,764    3,660    2,194    25,774    2,021    25,774   
Total nonperforming loans held for investment (“NPLs”)45,615    43,600    33,439    12,366    41,507    45,615    41,507   
Other real estate owned7,716    7,720    5,995    4,625    1,748    7,716    1,748   
Total NPAs$53,331    $51,320    $39,434    $16,991    $43,255    $53,331    $43,255   
              
Charge-offs:             
Residential$—    $—    $—    $—    $(157)  $—    $(157) 
Commercial(1,740)  —    —    (8,101)  (143)  (1,740)  (2,797) 
Consumer(57)  (68)  (48)  (113)  (30)  (125)  (104) 
Total charge-offs(1,797)  (68)  (48)  (8,214)  (330)  (1,865)  (3,058) 
              
Recoveries:             
Residential—          —    54       62   
Commercial   29    135    71    10    36    20   
Consumer—    274       —    40    274    86   
Total recoveries   304    146    71    104    311    168   
              
Net charge-offs$(1,790)  $236    $98    $(8,143)  $(226)  $(1,554)  $(2,890) 
              
CECL transition adjustment$—    $39,137    $—    $—    $—    $39,137    $—   
              
Allowance for credit  losses (“ACL”) at end of period$115,365    $100,983    $29,834    $26,243    $24,712    $115,365    $24,712   
              
Asset Quality Ratios:             
NPAs to total assets0.62  % 0.60  % 0.50  % 0.21  % 0.54  % 0.62  % 0.54  %
NPLs to total LHI, excluding mortgage warehouse and PPP loans0.80    0.75    0.58    0.22    0.72    0.80    0.72   
ACL to total LHI, excluding mortgage warehouse and PPP loans2.01    1.73    0.52    0.46    0.43    2.01    0.43   
Net charge-offs to average loans outstanding0.03    —    —    0.14    —    0.03    0.05   

1 Accruing loans greater than 90 days past due exclude purchase credit deteriorated loans greater than 90 days past due that are accounted for on a pooled basis.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

We identify certain financial measures discussed in this earnings release as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles as in effect from time to time in the United States (“GAAP”), in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios calculated using exclusively either one or both of (i) financial measures calculated in accordance with GAAP and (ii) operating measures or other measures that are not non-GAAP financial measures.

The non-GAAP financial measures that we present in this earnings release should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we present in this earnings release may differ from that of other companies reporting measures with similar names. You should understand how such other financial institutions calculate their financial measures that appear to be similar or have similar names to the non-GAAP financial measures we have discussed in this earnings release when comparing such non-GAAP financial measures.

Tangible Book Value Per Common Share. Tangible book value is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total stockholders’ equity less goodwill and core deposit intangibles, net of accumulated amortization; and (b) tangible book value per common share as tangible common equity (as described in clause (a)) divided by number of common shares outstanding. For tangible book value per common share, the most directly comparable financial measure calculated in accordance with GAAP is book value per common share.

We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in core deposit intangibles. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.

The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and presents our tangible book value per common share compared with our book value per common share:

  As of
  June 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 June 30, 2019
  (Dollars in thousands, except per share data)
Tangible Common Equity          
Total stockholders' equity $1,163,749    $1,149,269    $1,190,797    $1,205,530    $1,205,293   
Adjustments:          
Goodwill (370,840)  (370,840)  (370,840)  (370,463)  (370,221) 
Core deposit intangibles (62,661)  (65,112)  (67,563)  (70,014)  (72,465) 
Tangible common equity $730,248    $713,317    $752,394    $765,053    $762,607   
Common shares outstanding 49,633    49,557    51,064    52,373    53,457   
           
Book value per common share $23.45    $23.19    $23.32    $23.02    $22.55   
Tangible book value per common share $14.71    $14.39    $14.73    $14.61    $14.27   


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

Tangible Common Equity to Tangible Assets. Tangible common equity to tangible assets is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total stockholders’ equity, less goodwill and core deposit intangibles, net of accumulated amortization; (b) tangible assets as total assets less goodwill and core deposit intangibles, net of accumulated amortization; and (c) tangible common equity to tangible assets as tangible common equity (as described in clause (a)) divided by tangible assets (as described in clause (b)). For tangible common equity to tangible assets, the most directly comparable financial measure calculated in accordance with GAAP is total stockholders’ equity to total assets.

We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, in each case, exclusive of changes in core deposit intangibles. 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.

The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and total assets to tangible assets and presents our tangible common equity to tangible assets:

  As of
  June 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 June 30, 2019
  (Dollars in thousands)
Tangible Common Equity          
Total stockholders' equity $1,163,749    $1,149,269    $1,190,797    $1,205,530    $1,205,293   
Adjustments:          
Goodwill (370,840)  (370,840)  (370,840)  (370,463)  (370,221) 
Core deposit intangibles (62,661)  (65,112)  (67,563)  (70,014)  (72,465) 
Tangible common equity $730,248    $713,317    $752,394    $765,053    $762,607   
Tangible Assets          
Total assets $8,587,858    $8,531,624    $7,954,937    $7,962,883    $8,010,106   
Adjustments:          
Goodwill (370,840)  (370,840)  (370,840)  (370,463)  (370,221) 
Core deposit intangibles (62,661)  (65,112)  (67,563)  (70,014)  (72,465) 
Tangible Assets $8,154,357    $8,095,672    $7,516,534    $7,522,406    $7,567,420   
Tangible Common Equity to Tangible Assets 8.96  % 8.81  % 10.01  % 10.17  % 10.08  %


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

Return on Average Tangible Common Equity. Return on average tangible common equity is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) return as net income available for common stockholders adjusted for amortization of core deposit intangibles as net income, plus amortization of core deposit intangibles, less tax benefit at the statutory rate; (b) average tangible common equity as total average stockholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization; and (c) return (as described in clause (a)) divided by average tangible common equity (as described in clause (b)). For return on average tangible common equity, the most directly comparable financial measure calculated in accordance with GAAP is return on average equity.

We believe that this measure is important to many investors in the marketplace who are interested in the return on common equity, exclusive of the impact of core deposit intangibles. Goodwill and core deposit intangibles have the effect of increasing total stockholders’ equity while not increasing our tangible common equity. This measure is particularly relevant to acquisitive institutions that may have higher balances in goodwill and core deposit intangibles than non-acquisitive institutions.

The following table reconciles, as of the dates set forth below, average tangible common equity to average common equity and net income available for common stockholders adjusted for amortization of core deposit intangibles, net of taxes to net income and presents our return on average tangible common equity:

  For the Three Months Ended For the Six Months Ended
  June 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 June 30, 2019 June 30, 2020 June 30, 2019
  (Dollars in thousands)    
Net income available for common stockholders adjusted for amortization of core deposit intangibles              
Net income $24,028    $4,134    $29,051    $27,405    $26,876    $28,162    $34,283   
Adjustments:              
Plus: Amortization of core deposit intangibles 2,451    2,451    2,451    2,451    2,451    4,902    4,928   
Less: Tax benefit at the statutory rate 515    515    515    515    515    1,030    1,035   
Net income available for common stockholders adjusted for amortization of core deposit intangibles $25,964    $6,070    $30,987    $29,341    $28,812    $32,034    $38,176   
               
Average Tangible Common Equity              
Total average stockholders' equity $1,155,798    $1,183,116    $1,197,191    $1,210,147    $1,200,632    $1,142,626    $1,193,990   
Adjustments:              
Average goodwill (370,840)  (370,840)  (370,463)  (370,224)  (369,255)  (370,840)  (368,524) 
Average core deposit intangibles (64,151)  (66,439)  (68,913)  (71,355)  (73,875)  (65,296)  (75,293) 
Average tangible common equity $720,807    $745,837    $757,815    $768,568    $757,502    $706,490    $750,173   
Return on Average Tangible Common Equity (Annualized) 14.49  % 3.27  % 16.22  % 15.15  % 15.26  % 9.12  % 10.26  %



VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

Operating Earnings, Pre-tax, Pre-provision Operating Earnings and performance metrics calculated using Operating Earnings and Pre-tax, Pre-provision Operating Earnings, including Diluted Operating Earnings per Share, Operating Return on Average Assets, Pre-tax, Pre-Provision Operating Return on Average Assets, Operating Return on Average Tangible Common Equity and Operating Efficiency Ratio. Operating earnings and pre-tax, pre-provision operating earnings are non-GAAP measures used by management to evaluate the Company’s financial performance. We calculate (a) operating earnings as net income plus loss(gain) on sale of securities available for sale, net, plus loss (gain) on sale of disposed branch assets, plus FHLB pre-payment fees, plus merger and acquisition expenses, less tax impact of adjustments, plus other merger and acquisition tax items, plus re-measurement of deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act. We calculate (b) pre-tax, pre-provision operating earnings as operating earnings as described in clause (a) plus provision for income taxes, plus provision for loan losses. We calculate (c) diluted operating earnings per share as operating earnings as described in clause (a) divided by weighted average diluted shares outstanding. We calculate (d) operating return on average tangible common equity as operating earnings as described in clause (a), adjusted for the amortization of intangibles, divided by total average tangible common equity (average stockholders' equity less average goodwill and average core deposit intangibles, ((net of accumulated amortization.) We calculate (e) operating efficiency ratio as non interest expense plus adjustments to operating non interest expense divided by (i) non interest income plus adjustments to operating non interest income plus (ii) net interest income.

We believe that these measures and the operating metrics calculated utilizing these measures are important to management and many investors in the marketplace who are interested in understanding the ongoing operating performance of the Company and provide meaningful comparisons to its peers.

The following tables reconcile, as of the dates set forth below, operating net income and pre-tax, pre-provision operating earnings and related metrics:

  For the Three Months Ended For the Six Months Ended
  June 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 June 30, 2019 June 30, 2020 June 30, 2019
  (Dollars in thousands)
Operating Earnings              
Net income $24,028    $4,134   $29,051    $27,405   $26,876   $28,162    $34,283  
Plus: (Gain) loss on sale of securities available for sale, net (2,879)  —   438    —   642   (2,879)  1,414  
Plus: Loss on sale of disposed branch assets1 —    —   —    —   359   —    359  
Plus: FHLB pre-payment fees 1,561    —   —    —   —   1,561    —  
Plus: Merger and acquisition expenses —    —   918    1,035   5,431   —    36,648  
Operating pre-tax income 22,710    4,134   30,407    28,440   33,308   26,844    72,704  
Less: Tax impact of adjustments (277)  —   (23)  217   1,351   (277)  8,068  
Plus: Other M&A tax items2 —    —   829    406   277   —    277  
Plus: Discrete tax adjustments3 (1,799)  —   (965)  —   —   (1,799)  —  
Operating earnings $21,188    $4,134   $30,294    $28,629   $32,234   $25,322    $64,913  
               
Weighted average diluted shares outstanding 49,727    51,056   52,263    53,873   54,929   50,383    54,929  
Diluted EPS $0.48    $0.08   $0.56    $0.51   $0.49   $0.56    $0.62  
Diluted operating EPS 0.43    0.08   0.58    0.53   0.59   0.50    1.18  

1 Loss on sale of disposed branch assets for the three months ended June 30, 2019 is included in merger and acquisition expense in the condensed consolidated statements of income.
2 Other M&A tax items of $829 thousand, $406 thousand and $277 thousand recorded during the three months ended December 31, 2019, September 30, 2019 and June 30, 2019, respectively, relate to permanent tax expense recognized by the Company as a result of deduction limitations on compensation paid to covered employees in excess of the 162(m) limitation directly due to change-in-control payments made to covered employees in connection with the Green acquisition.
3 Discrete tax adjustments of $965 thousand were recorded during the fourth quarter of 2019 primarily due to the Company recording a net tax benefit of $1.6 million as a result of the Company settling an audit with the IRS. The Company released an uncertain tax position reserve that was assumed in the Green acquisition resulting in a $2.2 million tax benefit, offset by tax expense totaling $598 thousand that were recorded due to the Tax Cuts and Jobs Act rate change on deferred tax assets resulting from the IRS audit settlement.  The net IRS settlement was offset by various discrete, non-recurring tax expenses totaling $0.6 million. A discrete tax benefit of $1,799 was recorded in the second quarter of 2020 as a result of the Company amending a prior year Green tax return to carry back a net operating loss ("NOL") incurred by Green on January 1, 2019.  The Company was allowed to carry back this NOL as result of a provision in the CARES Act which permits NOLs generated in tax years 2018, 2019 or 2020 to be carried back five years.

  For the Three Months Ended For the Six Months Ended
  June 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 June 30, 2019 June 30, 2020 June 30, 2019
  (Dollars in thousands)
Pre-Tax, Pre-Provision Operating Earnings              
Net income $24,028    $4,134    $29,051    $27,405    $26,876    $28,162    $34,283   
Plus: Provision (benefit) for income taxes 3,987    (684)  8,168    7,595    7,369    3,303    9,358   
Pus: Provision for credit losses and unfunded commitments 18,971    35,657    3,493    9,674    3,335    54,628    8,347   
Plus: (Gain) loss on sale of securities available for sale, net (2,879)  —    438    —    642    (2,879)  1,414   
Plus: Loss on sale of disposed branch assets1 —    —    —    —    359    —    359   
Plus: FHLB pre-payment fees 1,561    —    —    —    —    1,561    —   
Plus: Merger and acquisition expenses —    —    918    1,035    5,431    —    36,648   
Pre-tax, pre-provision operating earnings $45,668    $39,107    $42,068    $45,709    $44,012    $84,775    $90,409   
               
Average total assets $8,689,774    $8,125,782    $8,043,505    $8,009,377    $7,937,319    $8,380,947    $7,888,043   
Pre-tax, pre-provision operating return on average assets2 2.11  % 1.94  % 2.07  % 2.26  % 2.22  % 2.03  % 2.31  %
               
Average total assets $8,689,774    $8,125,782    $8,043,505    $8,009,377    $7,937,319    $8,380,947    $7,888,043   
Return on average assets2 1.11  % 0.20  % 1.43  % 1.36  % 1.36  % 0.68  % 0.88  %
Operating return on average assets2 0.98    0.20    1.49    1.42    1.63    0.61    1.66   
               
Operating earnings adjusted for amortization of core deposit intangibles              
Operating earnings $21,188    $4,134    $30,294    $28,629    $32,234    $25,322    $64,913   
Adjustments:              
Plus: Amortization of core deposit intangibles 2,451    2,451    2,451    2,451    2,451    4,902    4,928   
Less: Tax benefit at the statutory rate 515    515    515    515    515    1,030    1,035   
Operating earnings adjusted for amortization of core deposit intangibles $23,124    $6,070    $32,230    $30,565    $34,170    $29,194    $68,806   
               
Average Tangible Common Equity              
Total average stockholders' equity $1,155,798    $1,183,116    $1,197,191    $1,210,147    $1,200,632    $1,142,626    $1,193,990   
Adjustments:              
Less: Average goodwill (370,840)  (370,840)  (370,463)  (370,224)  (369,255)  (370,840)  (368,524) 
Less: Average core deposit intangibles (64,151)  (66,439)  (68,913)  (71,355)  (73,875)  (65,296)  (75,293) 
Average tangible common equity $720,807    $745,837    $757,815    $768,568    $757,502    $706,490    $750,173   
Operating return on average tangible common equity2 12.90  % 3.27  % 16.87  % 15.78  % 18.09  % 8.31  % 18.50  %
               
Efficiency ratio 46.02  % 47.61  % 47.12  % 43.67  % 51.49  % 46.76  % 67.28  %
Operating efficiency ratio 45.74  % 47.61  % 45.67  % 42.36  % 43.66  % 46.62  % 43.60  %

1 Loss on sale of disposed branch assets for the three months ended June 30, 2019 is included in merger and acquisition expense in the condensed consolidated statements of income.
2 Annualized ratio.

 

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

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

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