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CST: 22/08/2019 07:11:42   

Veritex Holdings, Inc. Reports Second Quarter Operating Results

30 Days ago

DALLAS, July 22, 2019 (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, 2019. The Company reported net income of $26.9 million, or $0.49 diluted earnings per share (“EPS”), compared to $7.4 million, or $0.13 diluted EPS, for the quarter ended March 31, 2019 and $10.2 million, or $0.42 diluted EPS, for the quarter ended June 30, 2018. Operating net income totaled $32.2 million, or $0.59 diluted operating EPS1, compared to $32.7 million, or $0.59 diluted operating EPS1, for the quarter ended March 31, 2019 and $11.2 million, or $0.46 diluted operating EPS1, for the quarter ended June 30, 2018.

“We are extremely pleased with our operating results for the first half of 2019.  We have struck the right balance between focusing on short-term financial results and long-term shareholder value creation” said C. Malcolm Holland, III, the Company’s Chairman and Chief Executive Officer.  “The financial metrics speak for themselves; but, I am equally excited about the investments we are making in culture, key employee retention, talent acquisition, branding, technology and core system conversion.  These investments will help drive long-term shareholder value creation and top quartile financial results.”

Second Quarter 2019 Highlights:

  • Diluted EPS was $0.49 and diluted operating EPS1 was $0.59 for the second quarter of 2019, resulting in a 28.3% increase in diluted operating EPS compared to the second quarter of 2018;
  • Book value per common share was $22.55 and tangible book value per common share (“TBV”)1 was $14.27 for the second quarter of 2019, reflecting operating earnings, merger expenses, dividends and share repurchase activity;
  • Return on average assets was 1.36%, operating return on average assets1 was 1.63% and pre-tax, pre-provision operating return on average assets1 was 2.22% for the second quarter of 2019;
  • Efficiency ratio was 51.49% and operating efficiency ratio1 was 43.66% for the second quarter of 2019, reflecting two consecutive quarters of operating efficiency ratio1 below 44%;
  • Purchased 855,262 shares of our outstanding common stock under our stock buyback program for an aggregate of $22.1 million during the second quarter of 2019, resulting in an aggregate of 1,171,862 shares of our outstanding common stock purchased as of June 30, 2019;
  • Declared quarterly cash dividend of $0.125 payable on August 22, 2019;
  • Successfully converted systems, customers, branches and branding in June 2019 in connection with our acquisition of Green Bancorp, Inc. (“Green”);
  • Veritex Community Bank completed its previously announced sale of certain assets and liabilities associated with a branch in the Austin metropolitan market to Keystone Bank, N.A., thereby exiting the Austin metropolitan market.

Summary of Financial Data

    Q2 2019   Q1 2019   % Change
    (Dollars in thousands)
GAAP            
Net income   $ 26,876     $ 7,407     263 %
Diluted EPS   0.49     0.13     277 %
Return on average assets2   1.36 %   0.38 %    
Efficiency ratio   51.49     82.30      
Book value per common share   $ 22.55     $ 21.88     3.06 %
Non-GAAP1            
Operating net income   $ 32,234     $ 32,679     (1 )%
Diluted operating EPS   0.59     0.59     %
Operating return on average assets2   1.63 %   1.69 %    
Operating efficiency ratio   43.66     43.54      
Return on average tangible common equity2   15.26     5.09      
Operating return on average tangible common equity2   18.09     18.81      
Tangible book value per common share   $ 14.27     $ 13.76      

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.

Results of Operations for the Three Months Ended June 30, 2019

Net Interest Income

For the three months ended June 30, 2019, net interest income before provision for loan losses was $71.4 million and net interest margin was 4.00% compared to $72.9 million and 4.17%, respectively, for the three months ended March 31, 2019. The $1.5 million decrease in net interest income was primarily due to a $1.0 million increase in interest expense on transaction and savings deposits and a $1.4 million increase in interest expense on certificates and time deposits, and was partially offset by a $1.0 million increase in interest income on loans. Net interest margin decreased 17 basis points from the three months ended March 31, 2019 primarily due to an increase in the average rate paid on interest-bearing demand and savings deposits and certificate and other time deposits during the three months ended June 30, 2019. As a result, the average cost of interest-bearing deposits increased to 1.79% for the three months ended June 30, 2019 from 1.62% for the three months ended March 31, 2019.

Net interest income before provision for loan losses increased by $43.5 million from $27.9 million to $71.4 million and net interest margin decreased by 9 basis points from 4.09% to 4.00% for the three months ended June 30, 2019 as compared to the same period in 2018. The increase in net interest income before provision for loan losses was primarily driven by higher loan balances and yields resulting from loans acquired from Green and organic loan growth during the three months ended June 30, 2019 compared to the three months ended June 30, 2018. For the three months ended June 30, 2019, average loan balance increased by $3.4 billion compared to the three months ended June 30, 2018, which resulted in a $61.3 million increase in interest income. This was partially offset by an increase in the average rate paid on interest-bearing liabilities, which resulted in a $15.1 million increase in interest on deposit accounts. Net interest margin decreased 9 basis points from the three months ended June 30, 2018 primarily due to an increase in the average rate paid on interest-bearing liabilities for the three months ended June 30, 2019 compared to the three months ended June 30, 2018. As a result, the average cost of interest-bearing deposits increased to 1.79% for the three months ended June 30, 2019 from 1.39% for the three months ended June 30, 2018.

Noninterest Income

Noninterest income for the three months ended June 30, 2019 was $6.0 million, a decrease of $2.5 million, or 28.9%, compared to the three months ended March 31, 2019. The decrease was primarily due to a $1.3 million decrease in the gain on sale of Small Business Administration (“SBA”) loans, a $434 thousand decrease in the value of investments in community development-oriented private equity funds used for Community Reinvestment Act (“CRA”) purposes, a $352 thousand decrease in prepayment fees and a $370 thousand decrease in derivative income earned during the three months ended June 30, 2019. This was partially offset by a $255 thousand increase in loan fees during the three months ended June 30, 2019.

Compared to the three months ended June 30, 2018, noninterest income for the three months ended June 30, 2019 grew by $3.7 million, or 163.5%. The increase was primarily due to a $2.6 million increase in service charges and fees on acquired deposit accounts resulting from our acquisition of Green deposit accounts and the associated income from these accounts, a $1.7 million increase in loan fees and a $671 thousand increase in the gain on sale of SBA loans during the three months ended June 30, 2019. This was partially offset by a $642 thousand loss on securities sold and a $434 thousand decrease in the value of CRA investments discussed in the paragraph above during the three months ended June 30, 2019.

Noninterest Expense

Noninterest expense was $39.9 million for the three months ended June 30, 2019, compared to $67.0 million for the three months ended March 31, 2019, a decrease of $27.1 million, or 40.4%. The decrease was primarily driven by a $25.4 million decrease in merger and acquisition expenses related to our acquisition of Green, which were recorded in the first quarter of 2019. Merger and acquisition expenses recognized during the three months ended June 30, 2019 were primarily related to data processing expenses as a result of our system conversion and severance payments following our acquisition of Green.

Compared to the three months ended June 30, 2018, noninterest expense for the three months ended June 30, 2019 increased by $23.7 million, or 146.7%. The increase was primarily driven by a $9.8 million increase in salaries and employee benefits due to the addition of new Green employees, a $4.7 million increase in merger and acquisition expenses paid in connection with our acquisition of Green, and a $1.9 million, $1.9 million and $1.6 million increase in occupancy and equipment, amortization of intangibles and data processing and software expenses, respectively, related to our acquisition of Green.

Financial Condition

Total loans were $5.9 billion at June 30, 2019, an increase of $153.5 million, or 2.7%, compared to March 31, 2019. The increase was the result of the continued execution and success of our loan growth strategy.

Total deposits were $6.2 billion at June 30, 2019, a decrease of $132.6 million, or 2.1%, compared to March 31, 2019. The decrease was primarily the result of a decrease of $198.7 million in certificates and other time deposits, which was partially offset by increases of $29.0 million and $37.0 million in interest-bearing accounts and noninterest-bearing demand deposits, respectively.

Asset Quality

Allowance for loan losses as a percentage of loans held for investment, including mortgage warehouse, was 0.42%, 0.37% and 0.61% of total loans at June 30, 2019, March 31, 2019 and June 30, 2018, respectively. The allowance for loan losses as a percentage of total loans for each of the three quarters ended was determined by evaluating the qualitative factors around the nature, volume and mix of the loan portfolio. The increase in the allowance for loan loss as a percentage of loans held for investment from March 31, 2019 was attributable to the continued execution and success of our organic growth strategy, and was partially offset by payoffs of acquired loans and an increase in specific reserves on certain non-performing loans. The decrease in the allowance for loan losses as a percentage of loans held for investment from June 30, 2018 was attributable to our acquisition of Green as acquired loans are recorded at fair value. Our allowance for loan losses and remaining purchase discount on acquired loans as a percentage of loans held for investment, including mortgage warehouse, was 1.77%, 1.82% and 1.29% of total loans at June 30, 2019, March 31, 2019 and June 30, 2018, respectively. We recorded a provision for loan losses for the three months ended June 30, 2019 of $3.3 million compared to $5.0 million and $1.5 million for the three months ended March 31, 2019 and June 30, 2018, respectively.

Nonperforming assets totaled $43.3 million, or 0.54%, of total assets at June 30, 2019 compared to $23.1 million, or 0.29%, of total assets at March 31, 2019 and $4.9 million, or 0.16%, of total assets at June 30, 2018. The increase of $20.1 million compared to March 31, 2019 was driven by a $10.4 million and $11.1 million increase in originated accruing loans 90 days or more past due and acquired accruing loans 90 days or more past due, respectively. The increase in nonperforming assets of $38.4 million compared to June 30, 2018 was due in part to the placement of a $7.8 million purchased credit impaired (“PCI”) loan on non-accrual status as a result of information the Company obtained that precluded the Company from reasonably estimating the timing and amount of future cash flows relating to this loan. Excluding this PCI loan compared to June 30, 2018, the increase of $30.8 million in nonperforming assets was primarily the result of an increase in nonperforming loans of $29.0 million and an increase in other real estate owned of $1.8 million.

Dividend Information

On July 22, 2019, Veritex’s Board of Directors declared a quarterly cash dividend of $0.125 per share on its outstanding shares of common stock.  The dividend will be paid on or after August 22, 2019 to stockholders of record as of the close of business on August 8, 2019.

Non-GAAP Financial Measures

Veritex’s management uses certain non-GAAP (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, tangible book value per common share, 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.

Business Combinations Measurement Period

The measurement period for the Company to determine the fair values of acquired identifiable assets and assumed liabilities for Green 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 have been recorded for the Green acquisition as independent valuations have not been finalized. The Company does not expect any significant differences from estimated values upon completion of the valuations.

Conference Call

The Company will host an investor conference call to review the results on Tuesday, July 23, 2019 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/m6/p/j68vyip2 and will receive a unique PIN, 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, https://veritexholdingsinc.gcs-web.com. An audio replay will be available one hour after the conclusion of the call at (855) 859-2056, Conference #7495018. This replay, as well as the webcast, will be available until July 30, 2019.

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


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

Investor Relations:
Susan Caudle
972-349-6132
scaudle@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 impact Veritex expects its recently completed acquisition of Green to have on its operations, financial condition and financial results and Veritex’s expectations about its ability to successfully integrate the combined businesses of Veritex and Green and the amount of cost savings and overall operational efficiencies Veritex expects to realize as a result of the recently completed acquisition of Green.  The forward-looking statements in this earnings release also include statements about the expected payment date of Veritex’s quarterly cash dividend, 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.  Further, certain factors that could affect future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to, the possibility that the businesses of Veritex and Green will not be integrated successfully, that the cost savings and any synergies from the acquisition may not be fully realized or may take longer to realize than expected, disruption from the acquisition making it more difficult to maintain relationships with employees, customers or other parties with whom Veritex has (or Green had) business relationships, diversion of management time on integration-related issues, the reaction to the acquisition by Veritex’s and Green’s customers, employees and counterparties and other factors, many of which are beyond the control of Veritex.  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, 2018 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. 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.


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

  For the Three Months Ended   Six Months Ended
    Jun 30, 2019   Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Jun 30, 2019   Jun 30, 2018
(Dollars and shares in thousands)
Per Share Data (Common Stock):                            
Basic EPS   $ 0.50     $ 0.14     $ 0.41     $ 0.37     $ 0.42     $ 0.63     $ 0.85  
Diluted EPS   0.49     0.13     0.40     0.36     0.42     0.62     0.84  
Book value per common share   22.55     21.88     21.88     21.38     21.03     22.55     21.03  
Tangible book value per common share1   14.27     13.76     14.74     14.21     13.83     14.27     13.83  
                             
Common Stock Data:                            
Shares outstanding at period end   53,457     54,236     24,254     24,192     24,181     53,457     24,181  
Weighted average basic shares outstanding for the period   53,969     54,293     24,224     24,176     24,148     54,130     24,139  
Weighted average diluted shares outstanding for the period   54,929     55,439     24,532     24,613     24,546     55,031     24,527  
                             
Summary Performance Ratios:                            
Return on average assets2   1.36 %   0.38 %   1.20 %   1.10 %   1.34 %   0.88 %   1.37 %
Return on average equity2   8.98     2.52     7.44     6.88     8.11     5.79     8.32  
Return on average tangible common equity1, 2   15.26     5.09     11.52     10.79     12.80     10.26     13.20  
Efficiency ratio   51.49     82.30     54.27     57.58     53.51     67.28     53.91  
                             
Selected Performance Metrics - Operating:                            
Diluted operating EPS1   0.59     0.59     0.47     0.42     0.46     1.18     0.95  
Pre-tax, pre-provision operating return on average assets1, 2   2.22     2.40     1.95     1.98     2.03     2.31     2.09  
Operating return on average assets1, 2   1.63 %   1.69 %   1.40 %   1.28 %   1.47 %   1.66 %   1.56 %
Operating return on average tangible common equity1, 2   18.09     18.81     13.37     12.49     14.07     18.50     14.94  
Operating efficiency ratio1   43.66     43.54     50.65     49.09     48.67     43.60     49.32  
                             
Veritex Holdings, Inc. Capital Ratios:                            
Average stockholders' equity to average total assets   15.13 %   15.18 %   16.14 %   15.92 %   16.48 %   15.14 %   16.48 %
Tier 1 capital to average assets (leverage)   10.47     10.57     12.04     11.74     12.08     10.47     12.08  
Common equity tier 1 capital   11.26     11.07     11.80     12.02     12.17     11.26     12.17  
Tier 1 capital to risk-weighted assets   11.71     11.50     12.18     12.43     12.60     11.71     12.60  
Total capital to risk-weighted assets   12.71     12.45     12.98     13.22     13.31     12.71     13.31  
Tangible common equity to tangible assets1   10.08     10.02     11.78     11.08     11.30     10.08     11.30  
                             
Veritex Bank Capital Ratios:                            
Tier 1 capital to average assets (leverage)   10.80 %   10.65 %   10.87 %   10.53 %   10.70 %   10.80 %   10.70 %
Common equity tier 1 capital   12.09 %   11.61 %   11.01 %   11.13 %   11.16 %   12.09 %   11.16 %
Tier 1 capital to risk-weighted assets   12.09 %   11.61 %   11.01 %   11.13 %   11.16 %   12.09 %   11.16 %
Total capital to risk-weighted assets   12.46 %   11.93 %   11.64 %   11.75 %   11.70 %   12.46 %   11.70 %

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)

    Jun 30, 2019   Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018
      (unaudited)       (unaudited)               (unaudited)       (unaudited)  
ASSETS                                        
Cash and cash equivalents   $ 265,822     $ 339,473     $ 84,449     $ 261,790     $ 146,740  
Securities   1,020,279     950,671     262,695     256,237     252,187  
Other investments   81,088     75,920     23,174     27,769     27,438  
                     
Loans held for sale   7,524     8,002     1,258     1,425     453  
Loans held for investment, mortgage warehouse   200,017     114,158              
Loans held for investment   5,731,833     5,663,721     2,555,494     2,444,499     2,418,886  
Total loans   5,939,374     5,785,881     2,556,752     2,445,924     2,419,339  
Allowance for loan losses   (24,712 )   (21,603 )   (19,255 )   (17,909 )   (14,842 )
Bank-owned life insurance   79,899     79,397     22,064     21,915     21,767  
Bank premises, furniture and equipment, net   115,373     119,354     78,409     77,346     76,348  
Other real estate owned   1,748     151              
Intangible assets, net   78,347     81,245     15,896     16,603     17,482  
Goodwill   370,221     368,268     161,447     161,447     161,447  
Other assets   82,667     69,474     22,919     24,724     23,968  
Branch assets held for sale       83,516             1,753  
Total assets   $ 8,010,106     $ 7,931,747     $ 3,208,550     $ 3,275,846     $ 3,133,627  
LIABILITIES AND STOCKHOLDERS’ EQUITY                    
Deposits:                    
Noninterest-bearing   $ 1,476,668     $ 1,439,630     $ 626,283     $ 661,754     $ 611,315  
Interest-bearing   2,646,154     2,617,117     1,313,161     1,346,264     1,252,774  
Certificates and other time deposits   2,042,266     2,240,968     682,984     648,236     626,329  
Total deposits   6,165,088     6,297,715     2,622,428     2,656,254     2,490,418  
Accounts payable and accrued expenses   44,414     42,621     5,413     6,875     4,130  
Accrued interest payable and other liabilities   7,069     6,846     5,361     5,759     5,856  
Advances from Federal Home Loan Bank   512,945     252,982     28,019     73,055     108,092  
Subordinated debentures and subordinated notes   72,486     72,719     16,691     16,691     16,690  
Securities sold under agreements to repurchase   2,811     2,778              
Branch liabilities held for sale       62,381              
Total liabilities   6,804,813     6,738,042     2,677,912     2,758,634     2,625,186  
Commitments and contingencies                    
Stockholders’ equity:                    
Common stock   535     546     243     242     242  
Additional paid-in capital   1,112,238     1,109,386     449,427     448,117     447,234  
Retained earnings   104,652     84,559     83,968     74,143     65,208  
Unallocated Employee Stock Ownership Plan shares               (106 )   (106 )
Accumulated other comprehensive income (loss)   17,741     7,016     (2,930 )   (5,114 )   (4,067 )
Treasury stock   (29,873 )   (7,802 )   (70 )   (70 )   (70 )
Total stockholders’ equity   1,205,293     1,193,705     530,638     517,212     508,441  
Total liabilities and stockholders’ equity   $ 8,010,106     $ 7,931,747     $ 3,208,550     $ 3,275,846     $ 3,133,627  


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

    For the Three Months Ended   For the Six Months Ended
    Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
  Sep 30,
2018
  Jun 30,
2018
  Jun 30,
2019
  Jun 30,
2018
Interest income:                                                        
Loans, including fees   $ 86,786     $ 85,747     $ 35,028     $ 35,074     $ 32,291     $ 172,533     $ 64,358  
Securities   7,397     7,232     1,908     1,722     1,647     14,629     2,975  
Deposits in financial institutions and Fed Funds sold   1,372     1,554     833     1,016     613     2,926     1,300  
Other investments   622     691     413     108     306     1,313     334  
Total interest income   96,177     95,224     38,182     37,920     34,857     191,401     68,967  
Interest expense:                            
Transaction and savings deposits   11,405     10,366     5,412     4,694     4,204     21,771     7,493  
Certificates and other time deposits   10,145     8,792     3,394     3,068     2,248     18,937     3,252  
Advances from FHLB   2,187     2,055     377     630     234     4,242     694  
Subordinated debentures and subordinated notes   998     1,094     304     250     245     2,092     477  
Total interest expense   24,735     22,307     9,487     8,642     6,931     47,042     11,916  
Net interest income   71,442     72,917     28,695     29,278     27,926     144,359     57,051  
Provision for loan losses   3,335     5,012     1,364     3,057     1,504     8,347     2,182  
Net interest income after provision for loan losses   68,107     67,905     27,331     26,221     26,422     136,012     54,869  
Noninterest income:                            
Service charges and fees on deposit accounts   3,422     3,517     832     809     846     6,939     1,779  
Loan fees   1,932     1,677     387     410     261     3,609     535  
(Loss) gain on sales of investment securities   (642 )   (772 )   (42 )   (34 )   4     (1,414 )   12  
Gain on sales of loans   1,104     2,370     1,789     270     416     3,474     997  
Rental income   373     368     310     414     452     741     930  
Other   (155 )   1,324     343     539     311     1,169     795  
Total noninterest income   6,034     8,484     3,619     2,408     2,290     14,518     5,048  
Noninterest expense:                            
Salaries and employee benefits   17,459     18,885     8,278     7,394     7,657     36,344     15,587  
Occupancy and equipment   4,014     4,129     2,412     2,890     2,143     8,143     5,377  
Professional and regulatory fees   2,814     3,418     1,889     1,893     1,528     6,232     3,632  
Data processing and software expense   2,309     1,924     888     697     689     4,233     1,517  
Marketing   961     619     570     306     446     1,580     907  
Amortization of intangibles   2,719     2,760     835     798     856     5,479     1,834  
Telephone and communications   625     395     223     236     414     1,020     840  
Merger and acquisition expense   5,790     31,217     1,150     2,692     1,043     37,007     1,378  
Other   3,205     3,646     1,293     1,340     1,393     6,851     2,403  
Total noninterest expense   39,896     66,993     17,538     18,246     16,169     106,889     33,475  
Net income from operations   34,245     9,396     13,412     10,383     12,543     43,641     26,442  
Income tax expense   7,369     1,989     3,587     1,448     2,350     9,358     5,861  
Net income   $ 26,876     $ 7,407     $ 9,825     $ 8,935     $ 10,193     $ 34,283     $ 20,581  
                             
Basic EPS   $ 0.50     $ 0.14     $ 0.41     $ 0.37     $ 0.42     $ 0.63     $ 0.85  
Diluted EPS   $ 0.49     $ 0.13     $ 0.40     $ 0.36     $ 0.42     $ 0.62     $ 0.84  
Weighted average basic shares outstanding   53,969     54,293     24,224     24,176     24,148     54,130     24,139  
Weighted average diluted shares outstanding   54,929     55,439     24,532     24,613     24,546     55,031     24,527  


VERITEX HOLDINGS, INC. AND SUBSIDIARY

Financial Highlights
(In thousands except percentages)

    For the Three Months Ended
    June 30, 2019
  March 31, 2019   June 30, 2018
    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   $ 5,762,257     $ 85,030     5.92 %   $ 5,731,062     $ 84,194     5.96 %   $ 2,333,283     $ 32,291     5.55 %
Loans held for investment, mortgage warehouse   154,586     1,756     4.56     119,781     1,553     5.26              
Securities   956,160     7,397     3.10     926,347     7,232     3.17     248,670     1,647     2.66  
Interest-bearing deposits in other banks   228,461     1,372     2.41     264,138     1,554     2.39     136,803     613     1.80  
Other investments2   59,508     622     4.19     56,909     691     4.92     22,486     306     5.46  
Total interest-earning assets   7,160,972     96,177     5.39     7,098,237     95,224     5.44     2,741,242     34,857     5.10  
Allowance for loan losses   (23,891 )           (20,065 )           (13,600 )        
Noninterest-earning assets5   800,238             763,095             331,814          
Total assets   $ 7,937,319             $ 7,841,267             $ 3,059,456          
                                     
Liabilities and Stockholders’ Equity                                    
Interest-bearing liabilities:                                    
Interest-bearing demand and savings deposits5   $ 2,713,735     $ 11,405     1.69 %   $ 2,562,304     $ 10,366     1.64 %   $ 1,272,569     $ 4,204     1.33 %
Certificates and other time deposits5   2,107,567     10,145     1.93     2,244,194     8,792     1.59     592,371     2,248     1.52  
Advances from FHLB   334,926     2,187     2.62     310,697     2,055     2.68     59,762     234     1.57  
Subordinated debentures and subordinated notes   75,252     998     5.32     75,813     1,094     5.85     16,690     245     5.89  
Total interest-bearing liabilities   5,231,480     24,735     1.90     5,193,008     22,307     1.74     1,941,392     6,931     1.43  
                                     
Noninterest-bearing liabilities:                                    
Noninterest-bearing deposits5   1,456,538             1,427,970             605,760          
Other liabilities5   48,669             30,023             7,976          
Total liabilities   6,736,687             6,651,001             2,555,128          
Stockholders’ equity   1,200,632             1,190,266             504,328          
Total liabilities and stockholders’ equity   $ 7,937,319             $ 7,841,267             $ 3,059,456          
                                     
Net interest rate spread3           3.49 %           3.70 %           3.67 %
Net interest income       $ 71,442             $ 72,917             $ 27,926      
Net interest margin4           4.00 %           4.17 %           4.09 %

1 Includes average outstanding balances of loans held for sale of $8,140, $7,709 and $1,349 for the three months ended June 30, 2019, March 31, 2019, and June 30, 2018, 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 $609, $678 and $302 of dividend income into other investments as of June 30, 2019, March 31, 2019 and June 30, 2018, respectively, 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.
5 Includes average balances that are held for sale at March 31, 2019.

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

    For the Six Months Ended
    June 30, 2019   June 30, 2018
  
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   $ 5,746,746     $ 169,224     5.94 %   $ 2,297,407     $ 64,358     5.65 %
Loans held for investment, mortgage warehouse   137,280     3,309     4.86              
Securities   941,336     14,629     3.13     235,422     2,975     2.55  
Interest-bearing deposits in other banks   246,201     2,926     2.40     150,324     1,300     1.74  
Other investments2   48,578     1,313     5.45     14,532     334     4.63  
Total interest-earning assets   7,120,141     191,401     5.42     2,697,685     68,967     5.16  
Allowance for loan losses   (21,988 )           (13,367 )        
Noninterest-earning assets5   789,890             340,560          
Total assets   $ 7,888,043             $ 3,024,878          
                         
Liabilities and Stockholders’ Equity                        
Interest-bearing liabilities:                        
Interest-bearing demand and savings deposits5   $ 2,675,237     $ 21,771     1.64 %   $ 1,245,506     $ 7,493     1.21 %
Certificates and other time deposits5   2,124,951     18,937     1.80     559,891     3,252     1.17  
Advances from FHLB   322,879     4,242     2.65     88,475     694     1.58  
Subordinated debentures and subordinated notes   75,515     2,092     5.59     16,772     477     5.74  
Total interest-bearing liabilities   5,198,582     47,042     1.82     1,910,644     11,916     1.26  
                         
Noninterest-bearing liabilities:                        
Noninterest-bearing deposits5   1,456,086             603,003          
Other liabilities5   39,385             12,595          
Total liabilities   6,694,053             2,526,242          
Stockholders’ equity   1,193,990             498,636          
Total liabilities and stockholders’ equity   $ 7,888,043             $ 3,024,878          
                         
Net interest rate spread3           3.60 %           3.90 %
Net interest income       $ 144,359             $ 57,051      
Net interest margin4           4.09 %           4.26 %

1 Includes average outstanding balances of loans held for sale of $7,925 and $1,343 for the six months ended June 30, 2019 and June 30, 2018, 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 and $325 of dividend income into other investments as of June 30, 2019 and June 30, 2018, respectively, 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.
5 Includes average balances that are held for sale during the six months ended June 30, 2019.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights

Yield Trend

    For the Three Months Ended
    June 30,
 2019
  March 31,
 2019
  December 31,
 2018
  September 30,
 2018
  June 30,
 2018
Average yield on interest-earning assets:                    
Loans1   5.92 %   5.96 %   5.55 %   5.72 %   5.55 %
Loans held for investment, mortgage warehouse   4.56     5.26              
Securities   3.10     3.17     2.88     2.69     2.66  
Interest-bearing deposits in other banks   2.41     2.39     2.41     1.98     1.80  
Other investments   4.19     4.92     6.36     6.76     5.46  
Total interest-earning assets   5.39 %   5.44 %   5.17 %   5.19 %   5.10 %
                     
Average rate on interest-bearing liabilities:                    
Interest-bearing demand and savings deposits   1.69 %   1.64 %   1.60 %   1.46 %   1.33 %
Certificates and other time deposits   1.93     1.59     2.05     1.86     1.52  
Advances from FHLB   2.62     2.68     2.85     2.08     1.57  
Subordinated debentures and subordinated notes   5.32     5.85     7.23     5.94     5.89  
Total interest-bearing liabilities   1.90 %   1.74 %   1.82 %   1.66 %   1.43 %
                     
Net interest rate spread2   3.49 %   3.70 %   3.35 %   3.53 %   3.67 %
Net interest margin3   4.00 %   4.17 %   3.89 %   4.00 %   4.09 %

  1Includes average outstanding balances of loans held for sale of $8,140, $7,709, $1,019, $1,091 and $1,349 for the three months ended June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018, 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,
 2019
  March 31,
 2019
  December 31,
 2018
  September 30,
 2018
  June 30,
 2018
Average cost of interest-bearing deposits   1.79 %   1.62 %   1.75 %   1.59 %   1.39 %
Average costs of total deposits, including noninterest-bearing   1.38     1.25     1.32     1.20     1.05  


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

Loans Held for Investment (“LHI”) and Deposit Portfolio Composition

    June 30,
 2019
  March 31,
 2019
  December 31,
 2018
  September 30,
 2018
  June 30,
 2018
(Dollars in thousands)
Loans Held for Investment2                                        
Originated Loans                                        
Commercial   $ 878,970     32.2 %   $ 836,792     33.3 %   $ 697,906     33.0 %   $ 646,978     33.3 %   $ 571,716     33.0 %
Real Estate:                                        
Owner occupied commercial   229,243     8.4     215,088     8.6     188,847     8.9     179,422     9.2     138,940     8.0  
Commercial   800,506     29.3     752,628     30.0     636,200     30.0     592,959     30.5     556,410     32.2  
Construction and land   405,323     14.8     364,812     14.5     303,315     14.3     254,258     13.1     215,266     12.5  
Farmland   15,944     0.6     8,247     0.3     7,898     0.4     8,181     0.5     8,102     0.5  
1-4 family residential   290,808     10.7     274,880     10.9     235,092     11.0     210,702     10.9     191,303     11.1  
Multi-family residential   101,973     3.7     48,777     1.9     47,371     2.2     46,240     2.3     43,643     2.5  
Consumer   7,714     0.3     8,587     0.3     4,304     0.2     3,123     0.2     2,716     0.2  
Total originated LHI   $ 2,730,481     100 %   $ 2,509,811     100 %   $ 2,120,933     100 %   $ 1,941,863     100 %   $ 1,728,096     100 %
                                         
Acquired Loans                                        
Commercial   $ 909,074     30.3 %   $ 975,878     30.9 %   $ 62,866     14.4 %   $ 76,162     15.3 %   $ 120,002     17.3 %
Real Estate:                                        
Owner occupied commercial   517,525     17.2     530,026     16.8     132,432     30.5     133,865     26.6     146,199     21.2  
Commercial   927,019     30.9     948,815     30.1     145,553     33.5     162,842     32.4     173,914     25.2  
Construction and land   138,527     4.6     149,897     4.8     21,548     5.0     39,885     7.9     84,996     12.3  
Farmland   1,528     0.1     1,781     0.1     2,630     0.6     2,672     0.5     2,713     0.4  
1-4 family residential   266,248     8.9     295,719     9.4     62,825     14.5     79,106     15.7     92,183     13.3  
Multi-family residential   228,904     7.6     238,936     7.6     3,914     0.9     4,077     0.8     65,978     9.6  
Consumer   12,848     0.4     13,180     0.4     2,808     0.6     4,043     0.8     4,827     0.7  
Total acquired LHI   $ 3,001,673     100 %   $ 3,154,232     100 %   $ 434,576     100 %   $ 502,652     100 %   $ 690,812     100 %
                                         
Mortgage warehouse   200,017         114,157                              
                                         
Total LHI1   $ 5,932,171         $ 5,778,200         $ 2,555,509         $ 2,444,515         $ 2,418,908      
                                         
Deposits2                                        
Noninterest-bearing   $ 1,476,668     24.0 %   $ 1,439,630     22.9 %   $ 626,283     23.8 %   $ 661,754     24.9 %   $ 611,315     24.5 %
Interest-bearing transaction   373,982     6.1     334,868     5.3     146,969     5.6     144,328     5.4     143,561     5.8  
Money market   2,178,274     35.3     2,169,049     34.4     1,133,045     43.2     1,168,262     44.0     1,074,048     42.5  
Savings   93,898     1.5     113,200     1.8     33,147     1.3     33,674     1.3     35,165     1.4  
Certificates and other time deposits   2,042,266     33.1     2,240,968     35.6     682,984     26.1     648,236     24.4     626,329     25.8  
Total deposits   $ 6,165,088     100 %   $ 6,297,715     100 %   $ 2,622,428     100 %   $ 2,656,254     100 %   $ 2,490,418     100 %
                                         
Loan to Deposit Ratio   96.2 %       91.8 %       97.4 %       92.0 %       97.1 %    

1 Total LHI does not include deferred fees of $321 thousand at June 30, 2019, $321 thousand at March 31, 2019, $15 thousand at December 31, 2018, $16 thousand at September 30, 2018 and $22 thousand at June 30, 2018.
2 LHI and deposit portfolio composition exclude assets and liabilities held for sale as of March 31, 2019.


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

Asset Quality

  For the Three Months Ended   For the Six Months Ended
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
  Sep 30,
2018
  Jun 30,
2018
  June 30,
2019
  June 30,
2018
(Dollars in thousands)
Nonperforming Assets (“NPAs”):                          
Originated nonaccrual loans $ 7,909     $ 10,779     $ 7,843     $ 4,664     $ 4,252     $ 7,909     $ 4,252  
Acquired nonaccrual loans 7,824     7,904     16,902     17,158         7,824      
Originated accruing loans 90 or more days past due2 12,738     2,329         4,302     613     12,738     613  
Acquired accruing loans 90 or more days past due2 13,036     1,974                 13,036      
Total nonperforming loans held for investment (“NPLs”) 41,507     22,986     24,745     26,124     4,865     41,507     4,865  
Other real estate owned 1,748     151                 1,748      
Total NPAs $ 43,255     $ 23,137     $ 24,745     $ 26,124     $ 4,865     $ 43,255     $ 4,865  
                           
Charge-offs:                          
Residential $ (157 )   $     $     $     $     $ (157 )   $  
Commercial (143 )   (2,654 )   (26 )       (77 )   (2,797 )   (149 )
Consumer (30 )   (74 )               (104 )   (22 )
Total charge-offs (330 )   (2,728 )   (26 )       (77 )   (3,058 )   (171 )
                           
Recoveries:                          
Residential 54     8                 62      
Commercial 10     10     7     10     15     20     24  
Consumer 40     46                 86      
Total recoveries 104     64     7     10     15     168     24  
                           
Net charge-offs $ (226 )   $ (2,664 )   $ (19 )   $ 10     $ (62 )   $ (2,890 )   $ (147 )
                           
Allowance for loan losses (“ALLL”) at end of period $ 24,712     $ 21,603     $ 19,255     $ 17,909     $ 14,842     $ 24,712     $ 14,842  
                           
Remaining purchase discount (“PD”) on acquired loans1 $ 80,365     $ 83,365     $ 12,098     $ 13,389     $ 16,345     80,365     16,345  
                           
Asset Quality Ratios:                          
NPAs to total assets 0.54 %   0.29 %   0.77 %   0.80 %   0.16 %   0.54 %   0.16 %
NPLs to total LHI 0.70     0.40     0.97     1.07     0.20     0.70     0.20  
ALLL to total LHI 0.42     0.37     0.75     0.73     0.61     0.42     0.61  
ALLL and remaining PD on acquired loans to total LHI1 1.77     1.82     1.23     1.28     1.29     1.77     1.29  
Net charge-offs to average loans outstanding     0.05                 0.05     0.01  

1 Remaining PD on acquired loans includes non-accretable and accretable purchase discount on purchased performing and PCI loans for each quarter presented in the table.
2 Accruing loans greater than 90 days past due exclude purchase credit impaired loans greater than 90 days past due.


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 our 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
    Jun 30, 2019   Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018
  (Dollars in thousands, except per share data)
Tangible Common Equity                                        
Total stockholders' equity   $ 1,205,293     $ 1,193,705     $ 530,638     $ 517,212     $ 508,441  
Adjustments:                    
Goodwill   (370,221 )   (368,268 )   (161,447 )   (161,447 )   (161,447 )
Core deposit intangibles   (72,465 )   (74,916 )   (11,675 )   (12,107 )   (12,538 )
Tangible common equity   $ 762,607     $ 750,521     $ 357,516     $ 343,658     $ 334,456  
Common shares outstanding   53,457     54,236     24,254     24,192     24,181  
                     
Book value per common share   $ 22.55     $ 21.88     $ 21.88     $ 21.38     $ 21.03  
Tangible book value per common share   $ 14.27     $ 13.76     $ 14.74     $ 14.21     $ 13.83  


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 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
    Jun 30, 2019   Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018
  (Dollars in thousands)
Tangible Common Equity                                        
Total stockholders' equity   $ 1,205,293     $ 1,193,705     $ 530,638     $ 517,212     $ 508,441  
Adjustments:                    
Goodwill   (370,221 )   (368,268 )   (161,447 )   (161,447 )   (161,447 )
Core deposit intangibles   (72,465 )   (74,916 )   (11,675 )   (12,107 )   (12,538 )
Tangible common equity   $ 762,607     $ 750,521     $ 357,516     $ 343,658     $ 334,456  
Tangible Assets                    
Total assets   $ 8,010,106     $ 7,931,747     $ 3,208,550     $ 3,275,846     $ 3,133,627  
Adjustments:                    
Goodwill   (370,221 )   (368,268 )   (161,447 )   (161,447 )   (161,447 )
Core deposit intangibles   (72,465 )   (74,916 )   (11,675 )   (12,107 )   (12,538 )
Tangible Assets   $ 7,567,420     $ 7,488,563     $ 3,035,428     $ 3,102,292     $ 2,959,642  
Tangible Common Equity to Tangible Assets   10.08 %   10.02 %   11.78 %   11.08 %   11.30 %


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 less the effect of core deposit intangibles as net income, plus amortization of core deposit intangibles, net of taxes; (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
    Jun 30, 2019    Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Jun 30, 2019   Jun 30, 2018
  (Dollars in thousands)
Net income available for common stockholders adjusted for amortization of core deposit intangibles                            
Net income   $ 26,876     $ 7,407     $ 9,825     $ 8,935     $ 10,193     $ 34,283     $ 20,581  
Adjustments:                            
Plus: Amortization of core deposit intangibles   2,451     2,477     432     431     432     4,928     819  
Less: Tax benefit at the statutory rate   515     520     91     91     91     1,035     172  
Net income available for common stockholders adjusted for amortization of intangibles   $ 28,812     $ 9,364     $ 10,166     $ 9,275     $ 10,534     $ 38,176     $ 21,228  
                             
Average Tangible Common Equity                            
Total average stockholders' equity   $ 1,200,632     $ 1,190,266     $ 523,590     $ 514,876     $ 504,328     $ 1,193,990     $ 498,636  
Adjustments:                            
Average goodwill   (369,255 )   (366,795 )   (161,447 )   (161,447 )   (161,433 )   (368,524 )   (160,358 )
Average core deposit intangibles   (73,875 )   (76,727 )   (11,932 )   (12,354 )   (12,807 )   (75,293 )   (13,886 )
Average tangible common equity   $ 757,502     $ 746,744     $ 350,211     $ 341,075     $ 330,088     $ 750,173     $ 324,392  
Return on Average Tangible Common Equity (Annualized)   15.26 %   5.09 %   11.52 %   10.79 %   12.80 %   10.26 %   13.20 %


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) net operating earnings as net income plus loss on sale of securities available-for-sale, net, less gain on sale of disposed branch assets, plus lease exit costs, net, plus branch closure expenses, plus one-time issuance of shares to all employees, plus merger and acquisition expenses, less tax impact of adjustments, 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, plus other merger and acquisition discrete tax items. 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) 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 earnings and pre-tax, pre-provision operating earnings and related metrics:

    For the Three Months Ended
  For the Six Months Ended
    Jun 30, 2019   Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Jun 30, 2019   Jun 30, 2018
  (Dollars in thousands)
Operating Earnings                                                        
Net income   $ 26,876     $ 7,407     $ 9,825     $ 8,935     $ 10,193     $ 34,283     $ 20,581  
Plus: Loss on sale of securities available for sale, net   642     772     42             1,414      
Plus: Loss (gain) on sale of disposed branch assets1   359                     359     (388 )
Plus: Lease exit costs, net2                           1,071  
Plus: Branch closure expenses                           172  
Plus: One-time issuance of shares to all employees                   421         421  
Plus: Merger and acquisition expenses   5,431     31,217     1,150     2,692     1,043     36,648     1,378  
Operating pre-tax income   33,308     39,396     11,017     11,627     11,657     72,704     23,235  
Less: Tax impact of adjustments3   1,351     6,717     (440 )   538     293     8,068     535  
Plus: Tax Act re-measurement               (688 )   (127 )       693  
Plus: Other M&A tax items   277                     277      
Net operating earnings   $ 32,234     $ 32,679     $ 11,457     $ 10,401     $ 11,237     $ 64,913     $ 23,393  
                             
Weighted average diluted shares outstanding   54,929     55,439     24,532     24,613     24,546     54,929     24,546  
Diluted EPS   $ 0.49     $ 0.13     $ 0.40     $ 0.36     $ 0.42     $ 0.62     $ 0.84  
Diluted operating EPS   0.59     0.59     0.47     0.42     0.46     1.18     0.95  

1 Loss on sale of disposed branch assets for the three months ended June 30, 2019 is included in merger and acquisition expense within the condensed consolidated statements of income.
2 Lease exit costs, net for the six months ended June 30, 2018 includes a $1.5 million consent fee and $240 thousand in professional services paid in January 2018 to separately assign and sublease two of our branch leases that the Company ceased using in 2017 offset by the reversal of the corresponding assigned lease cease-use liability totaling $669 thousand.
3 During the fourth quarter of 2018, the Company initiated a transaction cost study, which through December 31, 2018 resulted in $727 thousand of expenses paid that are non-deductible merger and acquisition expenses. As such, the $727 thousand of non-deductible expenses are reflected in the six months ended June 30, 2018 tax impact of adjustments amounts reported. All other non-merger related adjustments to operating earnings are taxed at the statutory rate.

    For the Three Months Ended   For the Six Months Ended
    Jun 30, 2019   Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Jun 30, 2019   Jun 30, 2018
    (Dollars in thousands)
Pre-Tax, Pre-Provision Operating Earnings                                                        
Net income   $ 26,876     $ 7,407     $ 9,825     $ 8,935     $ 10,193     $ 34,283     $ 20,581  
Plus: Provision for income taxes   7,369     1,989     3,587     1,448     2,350     9,358     5,861  
Pus: Provision for loan losses   3,335     5,012     1,364     3,057     1,504     8,347     2,182  
Plus: Loss on sale of securities available for sale, net   642     772     42             1,414      
Plus: Loss (gain) on sale of disposed branch assets   359                     359     (388 )
Plus: Lease exit costs, net1                           1,071  
Plus: Branch closure expenses                           172  
Plus: One-time issuance of shares to all employees                   421         421  
Plus: Merger and acquisition expenses   5,431     31,217     1,150     2,692     1,043     36,648     1,378  
Net pre-tax, pre-provision operating earnings   $ 44,012     $ 46,397     $ 15,968     $ 16,132     $ 15,511     $ 90,409     $ 31,278  
                             
Average total assets   $ 7,937,319     $ 7,841,267     $ 3,243,168     $ 3,233,214     $ 3,059,456     $ 7,888,043     $ 3,024,878  
Pre-tax, pre-provision operating return on average assets2   2.22 %   2.40 %   1.95 %   1.98 %   2.03 %   2.31 %   2.09 %
                             
Average total assets   $ 7,937,319     $ 7,841,267     $ 3,243,168     $ 3,233,214     $ 3,059,456     $ 7,888,043     $ 3,024,878  
Return on average assets2   1.36 %   0.38 %   1.20 %   1.10 %   1.34 %   0.88 %   1.37 %
Operating return on average assets2   1.63     1.69     1.40     1.28     1.47     1.66     1.56  
                             
Operating earnings adjusted for amortization of intangibles                            
Net operating earnings   $ 32,234     $ 32,679     $ 11,457     $ 10,401     $ 11,237     $ 64,913     $ 23,393  
Adjustments:                            
Plus: Amortization of core deposit intangibles   2,451     2,477     432     431     432     4,928     819  
Less: Tax benefit at the statutory rate   515     520     91     91     91     1,035     172  
Operating earnings adjusted for amortization of intangibles   $ 34,170     $ 34,636     $ 11,798     $ 10,741     $ 11,578     $ 68,806     $ 24,040  
                             
Average Tangible Common Equity                            
Total average stockholders' equity   $ 1,200,632     $ 1,190,266     $ 523,590     $ 514,876     $ 504,328     $ 1,193,990     $ 498,636  
Adjustments:                            
Average goodwill   (369,255 )   (366,795 )   (161,447 )   (161,447 )   (161,433 )   (368,524 )   (160,358 )
Average core deposit intangibles   (73,875 )   (76,727 )   (11,932 )   (12,354 )   (12,807 )   (75,293 )   (13,886 )
Average tangible common equity   $ 757,502     $ 746,744     $ 350,211     $ 341,075     $ 330,088     $ 750,173     $ 324,392  
Operating Return on average tangible common equity2   18.09 %   18.81 %   13.37 %   12.49 %   14.07 %   18.50 %   14.94 %
                             
Efficiency ratio   51.49 %   82.30 %   54.27 %   57.58 %   53.51 %   67.28 %   53.91 %
Operating efficiency ratio   43.66 %   43.54 %   50.65 %   49.09 %   48.67 %   43.60 %   49.32 %

1 Lease exit costs, net for the six months ended June 30, 2018 includes a $1.5 million consent fee and $240 thousand in professional services paid in January 2018 to separately assign and sublease two of our branch leases that the Company ceased using in 2017 offset by the reversal of the corresponding assigned lease cease-use liability totaling $669 thousand.
2 Annualized ratio.

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