DALLAS, Oct. 21, 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 September 30, 2019. The Company reported net income of $27.4 million, or $0.51 diluted earnings per share (“EPS”), compared to $26.9 million, or $0.49 diluted EPS, for the quarter ended June 30, 2019 and $8.9 million, or $0.36 diluted EPS, for the quarter ended September 30, 2018. Operating net income totaled $28.6 million, or $0.53 diluted operating EPS1, compared to $32.2 million, or $0.59 diluted operating EPS1, for the quarter ended June 30, 2019 and $10.4 million, or $0.42 diluted operating EPS1, for the quarter ended September 30, 2018.

C. Malcolm Holland, III, the Company’s Chairman and Chief Executive Officer said: “I am excited about the 3rd quarter and year-to-date financial results of Veritex. The quarterly earnings power of the Company has been consistent throughout the year. These results have been accomplished while integrating and converting Green Bank and now much of the execution risk is behind us. We are focused on rebuilding our growth momentum, maintaining our asset quality and returning our excess capital to our shareholders.”


Third Quarter 2019 Highlights:

• Diluted EPS was $0.51 and diluted operating EPS1 was $0.53 for the third quarter of 2019, resulting in a 26.2% increase in diluted operating EPS compared to the third quarter of 2018;

• Book value per common share was $23.02 and tangible book value per common share1 was $14.61 for the third quarter of 2019, reflecting operating net income, merger expenses, dividends and share repurchase activity;

• Return on average assets was 1.36%, operating return on average assets1 was 1.42% and pre-tax, pre-provision operating return on average assets1 was 2.26% for the third quarter of 2019;

• Efficiency ratio was 43.67% and operating efficiency ratio1 was 42.36% for the third quarter of 2019, reflecting three consecutive quarters of operating efficiency ratio1 below 44%;

• Increased and extended previously announced stock buyback program.  In the third quarter of 2019, Veritex repurchased 1,177,241 shares of its outstanding common stock under its stock buyback program for an aggregate of $29.0 million resulting in an aggregate of 2,349,103 shares as of September 30, 2019;

• Declared quarterly cash dividend of $0.125 payable on November 21, 2019; and

• Received American Banker’s “Best Banks to Work For” for the sixth consecutive year.

Summary of Financial Data

  QTD YTD
  Q3 2019 Q2 2019 Q3 2019 Q3 2018
  (Dollars in thousands)
GAAP        
Net income $27,405  $26,876  $61,688  $29,516 
Diluted EPS 0.51  0.49  1.13  1.20 
Return on average assets2 1.36% 1.36% 1.04% 1.28%
Efficiency ratio 43.67  51.49  59.42  55.15 
Book value per common share $23.02  $22.55  $23.02  $21.38 
Non-GAAP1        
Operating net income $28,629  $32,234  $93,542  $33,794 
Diluted operating EPS 0.53  0.59  1.71  1.37 
Pre-tax, pre-provision operating return on average assets 2.26% 2.22% 2.30% 2.05%
Operating return on average assets2 1.42  1.63  1.58  1.46 
Operating efficiency ratio 42.36  43.66  43.19  49.45 
Return on average tangible common equity2 15.15  15.26  11.93  12.36 
Operating return on average tangible common equity2 15.78  18.09  17.57  14.09 
Tangible book value per common share $14.61  $14.27  $14.61  $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.


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

Net Interest Income

For the three months ended September 30, 2019, net interest income before provision for loan losses was $70.9 million and net interest margin was 3.90% compared to $71.4 million and 4.00%, respectively, for the three months ended June 30, 2019. The $568 thousand decrease in net interest income was primarily due to a $1.0 million decrease in interest income on loans and a $894 thousand increase in interest expense on advances from the Federal Home Loan Bank (“FHLB”), and was partially offset by a $1.0 million decrease in interest expense on transaction and savings deposits. Net interest margin decreased 10 basis points from the three months ended June 30, 2019 primarily due to a decrease in yields earned on loan balances and an increase in the average rates paid on certificate and other time deposits, partially offset by a decrease in the average rate paid on interest-bearing demand and savings deposits during the three months ended September 30, 2019. As a result, the average cost of interest-bearing deposits was unchanged at 1.79% for the three months ended September 30, 2019 and June 30, 2019.

Net interest income before provision for loan losses increased by $41.6 million from $29.3 million to $70.9 million and net interest margin decreased by 9 basis points from 3.99% to 3.90% for the three months ended September 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 interest income resulting from loans acquired from Green Bancorp, Inc. (“Green”) and organic loan growth during the three months ended September 30, 2019 compared to the three months ended September 30, 2018. For the three months ended September 30, 2019, average loan balance increased by $3.3 billion compared to the three months ended September 30, 2018, which contributed to a $57.7 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 $12.9 million increase in interest on deposit accounts. Net interest margin decreased 9 basis points from the three months ended September 30, 2018 primarily due to an increase in the average rate paid on interest-bearing liabilities for the three months ended September 30, 2019 compared to the three months ended September 30, 2018. As a result, the average cost of interest-bearing deposits increased to 1.79% for the three months ended September 30, 2019 from 1.59% for the three months ended September 30, 2018.


Noninterest Income

Noninterest income for the three months ended September 30, 2019 was $8.4 million, an increase of $2.4 million, or 39.7%, compared to the three months ended June 30, 2019. The increase was primarily due to a $594 thousand increase in derivative income and a $245 thousand increase in service charges and fees on deposit accounts earned during the three months ended September 30, 2019. Further, the increase was due to a $642 thousand loss on sales of investment securities as a result of the Company’s repositioning strategy and a $434 thousand decrease in the value of investments in community development-oriented private equity funds used for Community Reinvestment Act purposes recorded for the three months ended June 30, 2019 with no corresponding loss or decrease in value for the three months ended September 30, 2019.

Compared to the three months ended September 30, 2018, noninterest income for the three months ended September 30, 2019 grew by $6.0 million, or 250.1%. The increase was primarily due to a $2.9 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 $1.8 million increase in loan fees, a $723 thousand increase in the gain on sale of Small Business Administration loans and a $578 thousand increase in derivative income earned during the three months ended September 30, 2019.


Noninterest Expense

Noninterest expense was $34.6 million for the three months ended September 30, 2019, compared to $39.9 million for the three months ended June 30, 2019, a decrease of $5.3 million, or 13.2%. The decrease was primarily driven by a $4.8 million decrease in merger and acquisition expenses related to our acquisition of Green, which were recorded in the second quarter of 2019. Merger and acquisition expenses recognized during the three months ended September 30, 2019 were primarily related to continued data processing expenses as a result of our system conversion, which was completed in the second quarter of 2019, conversion of our mobile banking platform and severance payments following our acquisition of Green.

Compared to the three months ended September 30, 2018, noninterest expense for the three months ended September 30, 2019 increased by $16.4 million, or 89.8%. The increase was primarily driven by a $10.1 million increase in salaries and employee benefits due to the addition of new Green employees, and a $1.9 million, $1.6 million, $1.2 million and  $857 thousand increase in amortization of intangibles, data processing and software expenses, occupancy and equipment expenses and professional fees, respectively, related to our acquisition of Green.


Financial Condition

Total loans were $5.9 billion at September 30, 2019, a decrease of $41.1 million, or 0.7%, compared to June 30, 2019 due to normal loan activity and paydowns.

Total deposits were $5.9 billion at September 30, 2019, a decrease of $287.2 million, or 4.7%, compared to June 30, 2019. The decrease was primarily the result of a decrease of $165.8 million in certificates and other time deposits, and decreases of $117.9 million and $3.5 million in interest-bearing accounts and noninterest-bearing demand deposits, respectively, due to normal course of business.


Asset Quality

Allowance for loan losses as a percentage of loans held for investment, including mortgage warehouse, was 0.45%, 0.42% and 0.73% of total loans at September 30, 2019, June 30, 2019 and September 30, 2018, respectively. The allowance for loan losses as a percentage of total loans for each of the three quarters was determined by evaluating the qualitative factors around the nature, volume and mix of the loan portfolio. The increase in the allowance for loan losses as a percentage of loans held for investment from June 30, 2019 was primarily attributable to the general provision required from an increase of loans acquired from Green that were re-underwritten in the third quarter of 2019. Once an acquired loan undergoes new underwriting and meets the criteria for a new loan, any remaining fair value adjustments become interest income and the loan becomes fully subject to our allowance for loan loss methodology. The decrease in the allowance for loan losses as a percentage of loans held for investment from September 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 1.44%, 1.77% and 1.28% of total loans at September 30, 2019, June 30, 2019 and September 30, 2018, respectively.

We recorded a provision for loan losses for the three months ended September 30, 2019 of $9.7 million compared to $3.3 million and $3.1 million for the three months ended June 30, 2019 and September 30, 2018, respectively. The increase in the recorded provision for loan losses for the three months ended September 30, 2019 was primarily attributable to a $6.1 million charge-off related to a commercial loan relationship acquired from Sovereign Bancshares, Inc. in 2017. The acquired commercial loan relationship consists of a $7.8 million loan to an independent oil and gas exploration company that filed for bankruptcy protection in 2018 and recently entered into a sales process pursuant to Section 363 of the Bankruptcy Code. Additionally, the increase in the recorded provision for loan losses for the three months ended September 30, 2019 was caused by a $937 thousand increase in specific reserves on certain non-performing loans and an increase in acquired loans that were re-underwritten (as discussed above) during the three months ended September 30, 2019.

Nonperforming assets totaled $17.0 million, or 0.21%, of total assets at September 30, 2019 compared to $43.3 million, or 0.54%, of total assets at June 30, 2019 and $26.1 million, or 0.80%, of total assets at September 30, 2018. The decrease of $26.3 million compared to June 30, 2019 was driven by a $11.9 million and $11.7 million decrease in originated accruing loans 90 days or more past due and acquired accruing loans 90 days or more past due, respectively, as well as $5.9 million decrease in acquired nonaccrual loans primarily driven by the $6.1 million charge-off discussed above. This decrease was partially offset by a $2.9 million increase in other real estate owned. For the quarter ended September 30, 2019, no purchased credit impaired loans were on non-accrual status.


Dividend Information

On October 21, 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 November 21, 2019 to stockholders of record as of the close of business on November 7, 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, operating net income, 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, October 22, 2019 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/9ewhfxdv 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 #3966936. This replay, as well as the webcast, will be available until October 29, 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

Investor Relations:
Susan Caudle
972-349-6132

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 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 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 Nine Months Ended
  Sep 30,
2019
 Jun 30,
2019
 Mar 31,
2019
 Dec 31,
2018
 Sep 30,
2018
 Sep 30,
2019
 Sep 30,
2018
  (Dollars and shares in thousands)    
Per Share Data (Common Stock):              
Basic EPS $0.52  $0.50  $0.14  $0.41  $0.37  $1.15  $1.22 
Diluted EPS 0.51  0.49  0.13  0.40  0.36  1.13  1.20 
Book value per common share 23.02  22.55  21.88  21.88  21.38  23.02  21.38 
Tangible book value per common share1 14.61  14.27  13.76  14.74  14.21  14.61  14.21 
               
Common Stock Data:              
Shares outstanding at period end 52,373  53,457  54,236  24,254  24,192  52,373  24,192 
Weighted average basic shares outstanding for the period 52,915  53,969  54,293  24,224  24,176  53,721  24,151 
Weighted average diluted shares outstanding for the period 53,873  54,929  55,439  24,532  24,613  54,633  24,587 
               
Summary Performance Ratios:              
Return on average assets2 1.36% 1.36% 0.38% 1.20% 1.10% 1.04% 1.28%
Return on average equity2 8.98  8.98  2.52  7.44  6.88  6.88  7.83 
Return on average tangible common equity1, 2 15.15  15.26  5.09  11.52  10.79  11.93  12.36 
Efficiency ratio 43.67  51.49  82.30  54.27  57.58  59.42  55.15 
               
Selected Performance Metrics - Operating:              
Diluted operating EPS1 0.53  0.59  0.59  0.47  0.42  1.71  1.37 
Pre-tax, pre-provision operating return on average assets1, 2 2.26  2.22  2.40  1.95  1.98  2.30  2.05 
Operating return on average assets1, 2 1.42% 1.63% 1.69% 1.40% 1.28% 1.58% 1.46%
Operating return on average tangible common equity1, 2 15.78  18.09  18.81  13.37  12.49  17.57  14.09 
Operating efficiency ratio1 42.36  43.66  43.54  50.65  49.09  43.19  49.45 
               
Veritex Holdings, Inc. Capital Ratios:              
Average stockholders' equity to average total assets 15.11% 15.13% 15.18% 16.14% 15.92% 15.13% 16.29%
Tier 1 capital to average assets (leverage) 10.33  10.47  10.57  12.04  11.74  10.35  11.74 
Common equity tier 1 capital 10.82  11.32  11.07  11.80  12.02  10.83  12.02 
Tier 1 capital to risk-weighted assets 11.26  11.77  11.50  12.18  12.43  11.28  12.43 
Total capital to risk-weighted assets 12.26  12.80  12.45  12.98  13.22  12.28  13.22 
Tangible common equity to tangible assets1 10.17  10.08  10.02  11.78  11.08  10.17  11.08 
               
Veritex Bank Capital Ratios:              
Tier 1 capital to average assets (leverage) 10.64% 10.80% 10.65% 10.87% 10.53% 10.65% 10.53%
Common equity tier 1 capital 11.61% 12.16% 11.61% 11.01% 11.13% 11.63% 11.13%
Tier 1 capital to risk-weighted assets 11.61% 12.16% 11.61% 11.01% 11.13% 11.63% 11.13%
Total capital to risk-weighted assets 12.00% 12.54% 11.93% 11.64% 11.75% 12.02% 11.75%

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)

  Sep 30, 2019 Jun 30, 2019 Mar 31, 2019 Dec 31, 2018 Sep 30, 2018
  (unaudited) (unaudited) (unaudited)   (unaudited)
ASSETS          
Cash and cash equivalents $252,592  $265,822  $339,473  $84,449  $261,790 
Securities 1,023,393  1,020,279  950,671  262,695  256,237 
Other investments 89,795  81,088  75,920  23,174  27,769 
           
Loans held for sale 10,715  7,524  8,002  1,258  1,425 
Loans held for investment, mortgage warehouse 233,577  200,017  114,158     
Loans held for investment 5,654,027  5,731,833  5,663,721  2,555,494  2,444,499 
Total loans 5,898,319  5,939,374  5,785,881  2,556,752  2,445,924 
Allowance for loan losses (26,243) (24,712) (21,603) (19,255) (17,909)
Bank-owned life insurance 80,411  79,899  79,397  22,064  21,915 
Bank premises, furniture and equipment, net 118,449  115,373  119,354  78,409  77,346 
Other real estate owned 4,625  1,748  151     
Intangible assets, net 75,363  78,347  81,245  15,896  16,603 
Goodwill 370,463  370,221  368,268  161,447  161,447 
Other assets 75,716  82,667  69,474  22,919  24,724 
Branch assets held for sale     83,516     
Total assets $7,962,883  $8,010,106  $7,931,747  $3,208,550  $3,275,846 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Deposits:          
Noninterest-bearing $1,473,126  $1,476,668  $1,439,630  $626,283  $661,754 
Interest-bearing 2,528,293  2,646,154  2,617,117  1,313,161  1,346,264 
Certificates and other time deposits 1,876,427  2,042,266  2,240,968  682,984  648,236 
Total deposits 5,877,846  6,165,088  6,297,715  2,622,428  2,656,254 
Accounts payable and accrued expenses 45,475  44,414  42,621  5,413  6,875 
Accrued interest payable and other liabilities 6,054  7,069  6,846  5,361  5,759 
Advances from FHLB 752,907  512,945  252,982  28,019  73,055 
Subordinated debentures and subordinated notes 72,284  72,486  72,719  16,691  16,691 
Securities sold under agreements to repurchase 2,787  2,811  2,778     
Branch liabilities held for sale     62,381     
Total liabilities 6,757,353  6,804,813  6,738,042  2,677,912  2,758,634 
Commitments and contingencies          
Stockholders’ equity:          
Common stock 524  535  546  243  242 
Additional paid-in capital 1,114,659  1,112,238  1,109,386  449,427  448,117 
Retained earnings 125,344  104,652  84,559  83,968  74,143 
Unallocated Employee Stock Ownership Plan shares         (106)
Accumulated other comprehensive income (loss) 23,837  17,741  7,016  (2,930) (5,114)
Treasury stock (58,834) (29,873) (7,802) (70) (70)
Total stockholders’ equity 1,205,530  1,205,293  1,193,705  530,638  517,212 
Total liabilities and stockholders’ equity $7,962,883  $8,010,106  $7,931,747  $3,208,550  $3,275,846 


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

  For the Three Months Ended For the Nine Months
Ended
  Sep 30,
2019
 Jun 30,
2019
 Mar 31,
2019
 Dec 31,
2018
 Sep 30,
2018
 Sep 30,
2019
 Sep 30,
2018
Interest income:              
Loans, including fees $85,811  $86,786  $85,747  $35,028  $35,074  $258,344  $99,432 
Securities 7,687  7,397  7,232  1,908  1,722  22,316  4,697 
Deposits in financial institutions and Fed Funds sold 1,329  1,372  1,554  833  1,016  4,255  2,316 
Other investments 816  622  691  413  108  2,129  442 
Total interest income 95,643  96,177  95,224  38,182  37,920  287,044  106,887 
Interest expense:              
Transaction and savings deposits 10,381  11,405  10,366  5,412  4,694  32,152  12,187 
Certificates and other time deposits 10,283  10,145  8,792  3,394  3,068  29,220  6,320 
Advances from FHLB 3,081  2,187  2,055  377  630  7,323  1,324 
Subordinated debentures and subordinated notes 1,024  998  1,094  304  250  3,116  727 
Total interest expense 24,769  24,735  22,307  9,487  8,642  71,811  20,558 
Net interest income 70,874  71,442  72,917  28,695  29,278  215,233  86,329 
Provision for loan losses 9,674  3,335  5,012  1,364  3,057  18,021  5,239 
Net interest income after provision for loan losses 61,200  68,107  67,905  27,331  26,221  197,212  81,090 
Noninterest income:              
Service charges and fees on deposit accounts 3,667  3,422  3,517  832  809  10,606  2,588 
Loan fees 2,252  1,932  1,677  387  410  5,861  945 
Loss on sales of investment securities   (642) (772) (42) (34) (1,414) (22)
Gain on sales of loans 853  1,104  2,370  1,789  270  4,327  1,267 
Rental income 369  373  368  310  414  1,110  1,343 
Other 1,289  (155) 1,324  343  539  2,458  1,335 
Total noninterest income 8,430  6,034  8,484  3,619  2,408  22,948  7,456 
Noninterest expense:              
Salaries and employee benefits 17,530  17,459  18,885  8,278  7,394  53,874  22,981 
Occupancy and equipment 4,044  4,014  4,129  2,412  2,890  12,187  8,267 
Professional and regulatory fees 2,750  2,814  3,418  1,889  1,893  8,982  5,525 
Data processing and software expense 2,252  2,309  1,924  888  697  6,485  2,214 
Marketing 708  961  619  570  306  2,288  1,213 
Amortization of intangibles 2,712  2,719  2,760  835  798  8,191  2,632 
Telephone and communications 361  625  395  223  236  1,381  1,076 
Merger and acquisition expense 1,035  5,790  31,217  1,150  2,692  38,042  4,070 
Other 3,238  3,205  3,646  1,293  1,340  10,089  3,743 
Total noninterest expense 34,630  39,896  66,993  17,538  18,246  141,519  51,721 
Net income from operations 35,000  34,245  9,396  13,412  10,383  78,641  36,825 
Income tax expense 7,595  7,369  1,989  3,587  1,448  16,953  7,309 
Net income $27,405  $26,876  $7,407  $9,825  $8,935  $61,688  $29,516 
               
Basic EPS $0.52  $0.50  $0.14  $0.41  $0.37  $1.15  $1.22 
Diluted EPS $0.51  $0.49  $0.13  $0.40  $0.36  $1.13  $1.20 
Weighted average basic shares outstanding 52,915  53,969  54,293  24,224  24,176  53,721  24,151 
Weighted average diluted shares outstanding 53,873  54,929  55,439  24,532  24,613  54,633  24,587 



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

  For the Three Months Ended
  September 30, 2019 June 30, 2019 September 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 $5,702,696  $84,022  5.85% $5,762,257  $85,030  5.92% $2,432,095  $35,074  5.72%
Loans held for investment, mortgage warehouse 182,793  1,789  3.88  154,586  1,756  4.56       
Securities 1,022,289  7,687  2.98  956,160  7,397  3.10  254,242  1,722  2.69 
Interest-bearing deposits in other banks 234,087  1,329  2.25  228,461  1,372  2.41  203,750  1,016  1.98 
Other investments2 71,901  816  4.50  59,508  622  4.19  20,044  108  2.14 
Total interest-earning assets 7,213,766  95,643  5.26  7,160,972  96,177  5.39  2,910,131  37,920  5.17 
Allowance for loan losses (22,539)     (23,891)     (16,160)    
Noninterest-earning assets 818,150      800,238      331,826     
Total assets $8,009,377      $7,937,319      $3,225,797     
                   
Liabilities and Stockholders’ Equity                  
Interest-bearing liabilities:                  
Interest-bearing demand and savings deposits $2,621,701  $10,381  1.57% $2,713,735  $11,405  1.69% $1,278,797  $4,694  1.46%
Certificates and other time deposits 1,953,084  10,283  2.09  2,107,567  10,145  1.93  655,035  3,068  1.86 
Advances from FHLB 632,754  3,081  1.93  334,926  2,187  2.62  120,114  630  2.08 
Subordinated debentures and subordinated notes 74,869  1,024  5.43  75,252  998  5.32  16,690  250  5.94 
Total interest-bearing liabilities 5,282,408  24,769  1.86  5,231,480  24,735  1.90  2,070,636  8,642  1.66 
                   
Noninterest-bearing liabilities:                  
Noninterest-bearing deposits 1,467,127      1,456,538      635,952     
Other liabilities 49,695      48,669      11,750     
Total liabilities 6,799,230      6,736,687      2,718,338     
Stockholders’ equity 1,210,147      1,200,632      514,876     
Total liabilities and stockholders’ equity $8,009,377      $7,937,319      $3,233,214     
                   
Net interest rate spread3     3.40%     3.49%     3.51%
Net interest income   $70,874      $71,442      $29,278   
Net interest margin4     3.90%     4.00%     3.99%

1 Includes average outstanding balances of loans held for sale of $8,525, $8,140 and $1,091 for the three months ended September 30, 2019, June 30, 2019, and September 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 $102 of dividend income into other investments as of September 30, 2018 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
(In thousands except percentages)

  For the Nine Months Ended
 
 September 30, 2019 September 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 $5,731,902  $253,247  5.91% $2,342,797  $99,432  5.67%
Loans held for investment, mortgage warehouse 152,617  5,097  4.47       
Securities 968,616  22,316  3.08  241,764  4,697  2.60 
Interest-bearing deposits in other banks 242,119  4,255  2.40  168,329  2,316  1.84 
Other investments2 56,438  2,129  5.04  16,390  442  3.61 
Total interest-earning assets 7,151,692  287,044  5.37  2,769,280  106,887  5.16 
Allowance for loan losses (22,173)     (14,309)    
Noninterest-earning assets 799,509      340,136     
Total assets $7,929,028      $3,095,107     
             
Liabilities and Stockholders’ Equity            
Interest-bearing liabilities:            
Interest-bearing demand and savings deposits $2,657,195  $32,152  1.62% $1,256,726  $12,187  1.30%
Certificates and other time deposits 2,067,032  29,220  1.89  591,953  6,320  1.43 
Advances from FHLB 427,306  7,323  2.29  99,138  1,324  1.79 
Subordinated debentures and subordinated notes 75,298  3,116  5.53  16,768  727  5.80 
Total interest-bearing liabilities 5,226,831  71,811  1.84  1,964,585  20,558  1.40 
             
Noninterest-bearing liabilities:            
Noninterest-bearing deposits 1,459,904      614,107     
Other liabilities 42,853      12,310     
Total liabilities 6,729,588      2,591,002     
Stockholders’ equity 1,199,440      504,105     
Total liabilities and stockholders’ equity $7,929,028      $3,095,107     
             
Net interest rate spread3     3.53%     3.76%
Net interest income   $215,233      $86,329   
Net interest margin4     4.02%     4.17%

1 Includes average outstanding balances of loans held for sale of $8,127 and $1,258 for the nine months ended September 30, 2019 and September 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 $427 of dividend income into other investments as of September 30, 2018 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
  September 30,
 2019
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
 2018
Average yield on interest-earning assets:          
Loans1 5.85% 5.92% 5.96% 5.55% 5.72%
Loans held for investment, mortgage warehouse 3.88  4.56  5.26     
Securities 2.98  3.10  3.17  2.88  2.69 
Interest-bearing deposits in other banks 2.25  2.41  2.39  2.41  1.98 
Other investments 4.50  4.19  4.92  6.36  2.14 
Total interest-earning assets 5.26% 5.39% 5.44% 5.17% 5.17%
           
Average rate on interest-bearing liabilities:          
Interest-bearing demand and savings deposits 1.57% 1.69% 1.64% 1.60% 1.46%
Certificates and other time deposits 2.09  1.93  1.59  2.05  1.86 
Advances from FHLB 1.93  2.62  2.68  2.85  2.08 
Subordinated debentures and subordinated notes 5.43  5.32  5.85  7.23  5.94 
Total interest-bearing liabilities 1.86% 1.90% 1.74% 1.82% 1.66%
           
Net interest rate spread2 3.40% 3.49% 3.70% 3.35% 3.51%
Net interest margin3 3.90% 4.00% 4.17% 3.89% 3.99%

  1Includes average outstanding balances of loans held for sale of $8,525, $8,140, $7,709, $1,019 and $1,091 for the three months ended September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018 and September 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
  September 30,
 2019
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
 2018
Average cost of interest-bearing deposits 1.79% 1.79% 1.62% 1.75% 1.59%
Average costs of total deposits, including noninterest-bearing 1.36  1.38  1.25  1.32  1.20 


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

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

  September 30,
 2019

 June 30,
2019

 March 31,
2019

 December 31,
2018

 September 30,
 2018

  (Dollars in thousands)
Loans Held for Investment2                    
Originated Loans                    
Commercial $1,027,433  33.4% $878,970  32.2% $836,792  33.3% $697,906  33.0% $646,978  33.3%
Real Estate:                    
Owner occupied commercial 253,043  8.2  229,243  8.4  215,088  8.6  188,847  8.9  179,422  9.2 
Commercial 877,669  28.5  800,506  29.3  752,628  30.0  636,200  30.0  592,959  30.5 
Construction and land 490,389  15.9  405,323  14.8  364,812  14.5  303,315  14.3  254,258  13.1 
Farmland 7,986  0.3  15,944  0.6  8,247  0.3  7,898  0.4  8,181  0.5 
1-4 family residential 315,839  10.3  290,808  10.7  274,880  10.9  235,092  11.0  210,702  10.9 
Multi-family residential 95,258  3.1  101,973  3.7  48,777  1.9  47,371  2.2  46,240  2.3 
Consumer 8,471  0.2  7,714  0.3  8,587  0.3  4,304  0.2  3,123  0.2 
Total originated LHI $3,076,088  100% $2,730,481  100% $2,509,811  100% $2,120,933  100% $1,941,863  100%
                     
Acquired Loans                    
Commercial $683,823  26.5% $909,074  30.3% $975,878  30.9% $62,866  14.4% $76,162  15.3%
Real Estate:                    
Owner occupied commercial 463,087  18.0  517,525  17.2  530,026  16.8  132,432  30.5  133,865  26.6 
Commercial 832,841  32.3  927,019  30.9  948,815  30.1  145,553  33.5  162,842  32.4 
Construction and land 133,233  5.2  138,527  4.6  149,897  4.8  21,548  5.0  39,885  7.9 
Farmland     1,528  0.1  1,781  0.1  2,630  0.6  2,672  0.5 
1-4 family residential 243,471  9.4  266,248  8.9  295,719  9.4  62,825  14.5  79,106  15.7 
Multi-family residential 211,708  8.2  228,904  7.6  238,936  7.6  3,914  0.9  4,077  0.8 
Consumer 9,642  0.4  12,848  0.4  13,180  0.4  2,808  0.6  4,043  0.8 
Total acquired LHI $2,577,805  100% $3,001,673  100% $3,154,232  100% $434,576  100% $502,652  100%
                     
Mortgage warehouse 233,577    200,017    114,157           
                     
Total LHI1 $5,887,470    $5,932,171    $5,778,200    $2,555,509    $2,444,515   
                     
Deposits2                    
Noninterest-bearing $1,473,126  25.1% $1,476,668  24.0% $1,439,630  22.9% $626,283  23.8% $661,754  24.9%
Interest-bearing transaction 373,997  6.4  373,982  6.1  334,868  5.3  146,969  5.6  144,328  5.4 
Money market 2,066,315  35.2  2,178,274  35.3  2,169,049  34.4  1,133,045  43.2  1,168,262  44.0 
Savings 87,981  1.5  93,898  1.5  113,200  1.8  33,147  1.3  33,674  1.3 
Certificates and other time deposits 1,876,427  31.8  2,042,266  33.1  2,240,968  35.6  682,984  26.1  648,236  24.4 
Total deposits $5,877,846  100% $6,165,088  100% $6,297,715  100% $2,622,428  100% $2,656,254  100%
                     
Loan to Deposit Ratio 100.2%   96.2%   91.8%   97.4%   92.0%  

1 Total LHI does not include deferred (costs) fees of ($134 thousand) at September 30, 2019, $321 thousand at June 30, 2019, $321 thousand at March 31, 2019, $15 thousand at December 31, 2018 and $16 thousand at September 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 Nine Months Ended
 
 Sep 30, 2019 Jun 30, 2019 Mar 31, 2019 Dec 31, 2018 Sep 30, 2018 Sep 30, 2019 Sep 30, 2018
 
 (Dollars in thousands) 
Nonperforming Assets (“NPAs”):             
Originated nonaccrual loans1$5,081  $4,751  $5,739  $5,358  $2,307  $5,081  $2,307 
Acquired nonaccrual loans15,091  10,982  12,944  19,387  19,515  5,091  19,515 
Originated accruing loans 90 or more days past due2815  12,738  2,329    4,302  815  4,302 
Acquired accruing loans 90 or more days past due21,379  13,036  1,974      1,379   
Total nonperforming loans held for investment (“NPLs”)12,366  41,507  22,986  24,745  26,124  12,366  26,124 
Other real estate owned4,625  1,748  151      4,625   
Total NPAs$16,991  $43,255  $23,137  $24,745  $26,124  $16,991  $26,124 
              
Charge-offs:             
Residential$  $(157) $  $  $  $(157) $ 
Commercial(8,101) (143) (2,654) (26)   (10,898) (149)
Consumer(113) (30) (74)     (217) (22)
Total charge-offs(8,214) (330) (2,728) (26)   (11,272) (171)
              
Recoveries:             
Residential  54  8      62   
Commercial71  10  10  7  10  91  34 
Consumer  40  46      86   
Total recoveries71  104  64  7  10  239  34 
              
Net charge-offs$(8,143) $(226) $(2,664) $(19) $10  $(11,033) $(137)
              
Allowance for loan losses (“ALLL”) at end of period$26,243  $24,712  $21,603  $19,255  $17,909  $26,243  $17,909 
              
Remaining purchase discount (“PD”) on acquired loans3$58,503  $80,365  $83,365  $12,098  $13,389  58,503  13,389 
              
Asset Quality Ratios:             
NPAs to total assets0.21% 0.54% 0.29% 0.77% 0.80% 0.21% 0.80%
NPLs to total LHI0.21  0.70  0.40  0.97  1.07  0.21  1.07 
ALLL to total LHI0.45  0.42  0.37  0.75  0.73  0.45  0.73 
ALLL and remaining PD on acquired loans to total LHI31.44  1.77  1.82  1.23  1.28  1.44  1.28 
Net charge-offs to average loans outstanding0.14    0.05      0.19  0.01 

1 The Company historically reported in the acquired nonaccrual loans line item in the table above only acquired purchased credit impaired (“PCI”) loans that were deemed to be on nonaccrual status subsequent to the respective acquisition date. The Company has reclassed $3,158, $5,040 and $2,485 for the three months ended June 30, 2019, March 31, 2019 and December 31, 2018, respectively, and $2,357 for the three and nine months ended September 30, 2018 of acquired non-PCI loans deemed to be on nonaccrual status subsequent to acquisition date from the originated nonaccrual line item into the acquired nonaccrual loans line item. As a result, both acquired PCI loans and acquired non-PCI loans are reflected in the acquired nonaccrual loans line item in order to align with industry peers for comparability purposes.
2 Accruing loans greater than 90 days past due exclude PCI loans greater than 90 days past due.
3 Remaining PD on acquired loans includes non-accretable and accretable purchase discount on purchased performing and purchased credit impaired loans for each quarter presented in the table.


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
 
 Sep 30, 2019 Jun 30, 2019 Mar 31, 2019 Dec 31, 2018 Sep 30, 2018
 
 (Dollars in thousands, except per share data)
Tangible Common Equity
          
Total stockholders' equity $1,205,530  $1,205,293  $1,193,705  $530,638  $517,212 
Adjustments:          
Goodwill (370,463) (370,221) (368,268) (161,447) (161,447)
Core deposit intangibles (70,014) (72,465) (74,916) (11,675) (12,107)
Tangible common equity $765,053  $762,607  $750,521  $357,516  $343,658 
Common shares outstanding 52,373  53,457  54,236  24,254  24,192 
           
Book value per common share $23.02  $22.55  $21.88  $21.88  $21.38 
Tangible book value per common share $14.61  $14.27  $13.76  $14.74  $14.21 


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
 
 Sep 30, 2019 Jun 30, 2019 Mar 31, 2019 Dec 31, 2018 Sep 30, 2018
 
 (Dollars in thousands)
Tangible Common Equity
          
Total stockholders' equity $1,205,530  $1,205,293  $1,193,705  $530,638  $517,212 
Adjustments:          
Goodwill (370,463) (370,221) (368,268) (161,447) (161,447)
Core deposit intangibles (70,014) (72,465) (74,916) (11,675) (12,107)
Tangible common equity $765,053  $762,607  $750,521  $357,516  $343,658 
Tangible Assets          
Total assets $7,962,883  $8,010,106  $7,931,747  $3,208,550  $3,275,846 
Adjustments:          
Goodwill (370,463) (370,221) (368,268) (161,447) (161,447)
Core deposit intangibles (70,014) (72,465) (74,916) (11,675) (12,107)
Tangible Assets $7,522,406  $7,567,420  $7,488,563  $3,035,428  $3,102,292 
Tangible Common Equity to Tangible Assets 10.17% 10.08% 10.02% 11.78% 11.08%


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 Nine Months Ended
 
 Sep 30, 2019 Jun 30, 2019 Mar 31, 2019 Dec 31, 2018 Sep 30, 2018 Sep 30, 2019 Sep 30, 2018
 
 (Dollars in thousands)    
Net income available for common stockholders adjusted for amortization of core deposit intangibles              
Net income $27,405  $26,876  $7,407  $9,825  $8,935  $61,688  $29,516 
Adjustments:              
Plus: Amortization of core deposit intangibles 2,451  2,451  2,477  432  431  7,379  1,250 
Less: Tax benefit at the statutory rate 515  515  520  91  91  1,550  263 
Net income available for common stockholders adjusted for amortization of intangibles $29,341  $28,812  $9,364  $10,166  $9,275  $67,517  $30,503 
               
Average Tangible Common Equity              
Total average stockholders' equity $1,210,147  $1,200,632  $1,190,266  $523,590  $514,876  $1,199,440  $504,105 
Adjustments:              
Average goodwill (370,224) (369,255) (366,795) (161,447) (161,447) (369,097) (160,725)
Average core deposit intangibles (71,355) (73,875) (76,727) (11,932) (12,354) (73,965) (13,370)
Average tangible common equity $768,568  $757,502  $746,744  $350,211  $341,075  $756,378  $330,010 
Return on Average Tangible Common Equity (Annualized) 15.15% 15.26% 5.09% 11.52% 10.79% 11.93% 12.36%



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

Operating Net Income, Pre-tax, Pre-provision Operating Earnings and performance metrics calculated using Operating Earnings and Pre-tax, Pre-provision Operating Net Income, 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 net income as net income plus loss on sale of securities available for sale, net, plus loss (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 net income and pre-tax, pre-provision operating earnings and related metrics:

  For the Three Months Ended
   For the Nine Months Ended
                     
 Sep 30, 2019  Jun 30, 2019  Mar 31, 2019  Dec 31, 2018  Sep 30, 2018  Sep 30, 2019  Sep 30, 2018 
  
 (Dollars in thousands)
Operating Net Income                            
                             
Net income $27,405  $26,876  $7,407  $9,825  $8,935  $61,688  $29,516 
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 
Plus: Merger and acquisition expenses 1,035  5,431  31,217  1,150  2,692  37,683  4,070 
Operating pre-tax income 28,440  33,308  39,396  11,017  11,627  101,144  34,862 
Less: Tax impact of adjustments3 217  1,351  6,717  (440) 538  8,285  1,073 
Plus: Tax Act re-measurement         (688)   5 
Plus: Other M&A tax items 406  277        683   
Operating net income $28,629  $32,234  $32,679  $11,457  $10,401  $93,542  $33,794 
               
Weighted average diluted shares outstanding 53,873  54,929  55,439  24,532  24,613  54,633  24,587 
Diluted EPS $0.51  $0.49  $0.13  $0.40  $0.36  $1.13  $1.20 
Diluted operating EPS 0.53  0.59  0.59  0.47  0.42  1.71  1.37 

1 Loss on sale of disposed branch assets for the nine months ended September 30, 2019 and for the three months ended June 30, 2019 is included in merger and acquisition expense in the condensed consolidated statements of income.
2 Lease exit costs, net for the nine months ended September 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 we 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, we 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 nine months ended September 30, 2018 tax impact of adjustments amounts reported. All other non-merger related adjustments to operating net income are taxed at the statutory rate.

  For the Three Months Ended
 For the Nine Months Ended
                   
 Sep 30, 2019 Jun 30, 2019  Mar 31, 2019 Dec 31, 2018  Sep 30, 2018  Sep 30, 2019  Sep 30, 2018 
  
 (Dollars in thousands)
Pre-Tax, Pre-Provision Operating Earnings                            
                             
Net income $27,405  $26,876  $7,407  $9,825  $8,935  $61,688  $29,516 
Plus: Provision for income taxes 7,595  7,369  1,989  3,587  1,448  16,953  7,309 
Pus: Provision for loan losses 9,674  3,335  5,012  1,364  3,057  18,021  5,239 
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 
Plus: Merger and acquisition expenses 1,035  5,431  31,217  1,150  2,692  37,683  4,070 
Pre-tax, pre-provision operating earnings $45,709  $44,012  $46,397  $15,968  $16,132  $136,118  $47,410 
               
Average total assets $8,009,377  $7,937,319  $7,841,267  $3,243,168  $3,225,797  $7,929,028  $3,095,107 
Pre-tax, pre-provision operating return on average assets3 2.26% 2.22% 2.40% 1.95% 1.98% 2.30% 2.05%
               
Average total assets $8,009,377  $7,937,319  $7,841,267  $3,243,168  $3,225,797  $7,929,028  $3,095,107 
Return on average assets3 1.36% 1.36% 0.38% 1.20% 1.10% 1.04% 1.28%
Operating return on average assets3 1.42  1.63  1.69  1.40  1.28  1.58  1.46 
               
Operating earnings adjusted for amortization of intangibles              
Operating net income $28,629  $32,234  $32,679  $11,457  $10,401  $93,542  $33,794 
Adjustments:              
Plus: Amortization of core deposit intangibles 2,451  2,451  2,477  432  431  7,379  1,250 
Less: Tax benefit at the statutory rate 515  515  520  91  91  1,550  263 
Operating earnings adjusted for amortization of intangibles $30,565  $34,170  $34,636  $11,798  $10,741  $99,371  $34,781 
               
Average Tangible Common Equity              
Total average stockholders' equity $1,210,147  $1,200,632  $1,190,266  $523,590  $514,876  $1,199,440  $504,105 
Adjustments:              
Less: Average goodwill (370,224) (369,255) (366,795) (161,447) (161,447) (369,097) (160,725)
Less: Average core deposit intangibles (71,355) (73,875) (76,727) (11,932) (12,354) (73,965) (13,370)
Average tangible common equity $768,568  $757,502  $746,744  $350,211  $341,075  $756,378  $330,010 
Operating return on average tangible common equity3 15.78% 18.09% 18.81% 13.37% 12.49% 17.57% 14.09%
               
Efficiency ratio 43.67% 51.49% 82.30% 54.27% 57.58% 59.42% 55.15%
Operating efficiency ratio 42.36% 43.66% 43.54% 50.65% 49.09% 43.19% 49.45%

1 Loss on sale of disposed branch assets for the nine months ended September 30, 2019 and for the three months ended June 30, 2019 is included in merger and acquisition expense in the condensed consolidated statements of income.
2 Lease exit costs, net for the nine months ended September 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 we ceased using in 2017 offset by the reversal of the corresponding assigned lease cease-use liability totaling $669 thousand.
3 Annualized ratio.