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Press Release

Veritex Holdings, Inc. Reports Fourth Quarter and Year-End 2016 Results

DALLAS, Jan. 24, 2017 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. (NASDAQ:VBTX), the holding company for Veritex Community Bank, announced the results today for the quarter and year ended December 31, 2016. The Company reported net income for the year ended December 31, 2016 of $12.6 million and $1.13 diluted earnings per common share, compared to net income of $8.8 million and $0.84 diluted earnings per common share for the year ended December 31, 2015, an increase of $3.8 million or 42.8% over the prior year. The Company also reported net income of $3.2 million and $0.27 diluted earnings per common share for the quarter ended December 31, 2016 compared to the net income of $3.4 million and $0.31 diluted earnings per common share for the quarter ended September 30, 2016, a decrease of $184 thousand or 5.5%, over the prior quarter.

C. Malcolm Holland, the Company’s Chairman and Chief Executive Officer said, “I am pleased to announce the results of another great year for Veritex. This year has been extremely productive: we continued to increase earnings per share, significantly grew loans and deposits, and were recognized once again as one of the best places to work. 2016 was another example of our success in focusing on our organic growth strategy and our ability to grow through strategic and disciplined acquisitions. Our efforts resulted in our announcement in December of our merger with Sovereign Bancshares expected to close during the second quarter of 2017. The combined company will have assets over $2.4 billion and will be one of the ten largest banks headquartered in Dallas-Fort Worth. We are very excited about the year ahead as it promises to be transformative for Veritex Community Bank.”

Full Year 2016 Highlights

  • Entered into a definitive agreement on December 14, 2016 to merge with Dallas-based Sovereign Bancshares, Inc. and wholly-owned subsidiary Sovereign Bank which is expected to close the second quarter of 2017. As of September 30, 2016, Sovereign Bancshares reported, on a consolidated basis, total assets of $1.1 billion and total deposits of $858.6 million.
  • Successfully completed a public offering of 4,444,750 shares of common stock at a price to the public of $22.50 per share.
  • Full year 2016 diluted earnings per common share increased to $1.13, or 34.5%, compared to $0.84 for the full year 2015.
  • Net income was $12.6 million for 2016, an increase of $3.8 million, or 42.8%, compared to $8.8 million for the full year 2015.
  • Average loan balances increased $227.0 million, or 32.6%, compared to the full year 2015.
  • Average noninterest deposits increased $35.0 million, or 13.1%, compared to the full year 2015.
  • Credit quality remained excellent with nonperforming assets to total assets at 0.17% and net charge-offs for the full year 2016 at $298 thousand.

2016 Fourth Quarter Highlights

  • Pre-tax, pre-provision income was $5.3 million, an increase of $812 thousand, or 18.1%, compared to $4.5 million for the same period in 2015. The quarter included pre-tax noninterest expense of $277.8 thousand related to the definitive agreement of merger with Sovereign Bancshares, Inc.
  • Diluted EPS of $0.27 increased $0.04, or 17.4%, compared to the same period in 2015.
  • Net interest income increased $1.5 million, or 16.7%, compared to the same period in 2015.
  • Noninterest income increased $617 thousand, or 51.1%, compared to the same period in 2015.
  • Noninterest expense increased $1.3 million, or 22.9% compared to the same period in 2015. Excluding merger expenses, noninterest expense increased $1.1 million or 19.0% compared to the same period in 2015.
  • Total loans increased $171.3 million, or 20.9%, to $991.9 million compared to the same period in 2015.
  • Total deposits increased $251.2 million, or 28.9%, to $1.1 billion compared to the same period in 2015.
  • In November 2016, Veritex Bank was named in the list of The Dallas Morning News’ Top 100 Places to Work 2016.

Result of Operations for the Three Months Ended December 31, 2016

Net Interest Income

For the three months ended December 31, 2016, net interest income before provision for loan losses was $10.5 million and net interest margin was 3.44% compared to $10.5 million and 3.70%, respectively, for the three months ended September 30, 2016. While net interest income was flat for the three months ended December 31, 2016 compared to the three months ended September 30, 2016, the net interest margin decreased 26 basis points from the three months ended September 30, 2016. The decrease in net interest margin was partially due to a decrease in the average yield in interest-earning assets to 4.02% for the three months ended December 31, 2016 from 4.24% for the three months ended September 30, 2016.  This was a result of $148.0 million in interest-earning deposits in financial institutions with an average yield of 0.54% representing 12.2% of average earning assets for the three months ending December 31, 2016 compared to $94.6 million with an average yield of 0.54% representing 8.4% of average earning assets for the three months ending September 30, 2016. This increase in interest-earning deposits in financial institutions was primarily driven by the proceeds of the public offering of $95.0 million which settled on December 20, 2016 and from seasonal increases in deposit accounts. In addition, average yield on loans decreased 5 basis points  to 4.78% for the quarter ended December 31, 2016  from 4.83% for the three months ended September 30, 2016. Competitive pricing pressure resulted in overall market yields for loan originations and renewals to be below the average yield of amortizing or paid-off loans. The average rate paid on interest-bearing liabilities increased 5 basis points to 0.84% for the three months ended December 31, 2016 from 0.79% for the three months ended September 30, 2016.  The increase in the rate is primarily due to an increase in premium rate money market accounts with an average rate of 0.82%.

Compared to the three months ended December 31, 2015, net interest income before provision for loan losses increased by $1.5 million from $9.0 million to $10.5 million for the three months ended December 31, 2016. The increase in net interest income before provision for loan losses was primarily due to increased interest and fees as average loan balances increased $180.2 million compared to average loans for the three months ended December 31, 2015. Net interest margin decreased 34 basis points from 3.78% the three months ended December 31, 2015 to 3.44% for the same period in 2016. The decrease in net interest margin was partially due to a decrease in the average yield in interest-earning assets to 4.02% for the three months ended December 31, 2016 from 4.20% for the three months ended December 31, 2016.  This was a result of increases in interest-earning deposits in financial institutions and a resulting change in mix as described above for the three months ending December 31, 2016 compared to interest-earning deposits in financial institutions of $86.1 million with an average yield of 0.34% representing 9.1% of average earning assets for the three months ending December 31, 2015. This increase in interest-earning deposits in financial institutions was primarily driven by the proceeds of the public offering of $95.0 million which settled on December 20, 2016 and increases in institutional money market deposit accounts. In addition, average yield on loans decreased 5 basis points to 4.78% for the quarter ended December 31, 2016 from 4.83% for the three months ended December 31, 2015. Competitive pricing pressure resulted in overall market yields for loan originations and renewals to be below the average yield of amortizing or paid-off loans. The rate paid on interest-bearing liabilities increased from 0.69% for the three months ended December 31, 2015 to 0.84% for the three months ended December 31, 2016. The 15 basis point increase was related to an increase in premium money market accounts with an average rate of 0.82%.

Noninterest Income

Noninterest income for the three months ended December 31, 2016 was $1.8 million, a decrease of $69 thousand, or 3.6%, compared to the three months ended September 30, 2016. The decrease was primarily a result of a $132 thousand decrease in gain on sales of mortgage loans from $478 thousand to $346 thousand. This decrease was partially offset by a $66 thousand increase of gains on sale of Small Business Administrations ("SBA") loans from $558 thousand to $624 thousand.

Compared to the three months ended December 31, 2015, noninterest income grew $617 thousand, or 51.1%, primarily as a result of gains on sale of SBA and mortgage loans of $540 thousand and an increase in ATM and debit card fees of $80 thousand.

Noninterest Expense

Noninterest expense was $7.0 million for the three months ended December 31, 2016, an increase of $17 thousand, or 0.2%, compared to the three months ended September 30, 2016. The increase was primarily due to decreases in salaries and employee benefits offset by increases in professional fees.

Salaries and employee benefits expense was $3.6 million for the three months ended December 31, 2016, compared to $3.9 million for the three months ended September 30, 2016, a decrease of $308 thousand or 7.9%. This decrease was primarily attributable to reduced employee expense resulting from increases in deferred origination costs of $326 thousand. In addition, noninterest expense included $278 thousand and $195 thousand of acquisition expenses for the three months ended December 31, 2016 and September 30, 2016, respectively, related to the announcement of the Sovereign merger which is expected to close the second quarter of 2017. Excluding acquisition related expenses, professional fees increased $75 thousand for the three months ended December 31, 2016. This was primarily an increase of audit and accounting expenses of $119 thousand offset by a decrease of SEC printing costs of $48 thousand.

Compared to the three months ended December 31, 2015, noninterest expense increased $1.3 million or 22.9%.  The increase was primarily due to increases in salaries and employee benefits and professional fees.

Salaries and employee benefits expense was $3.6 million for the three months ended December 31, 2016, compared to $3.0 million for the three months ended December 31, 2015, an increase of $593 thousand or 19.6%. The increase was attributable to employee compensation increases of $409 thousand resulting from the addition of a Chief Credit Officer and several other senior level positions as well as annual merit increases. Mortgage commissions increased $134 thousand as the result of increased mortgage loan fundings for the same period. Professional fees expense was $943 thousand for the three months ended December 31, 2016, compared to $487 thousand for the three months ended December 31, 2015, an increase of $456 thousand or 93.6%.  In addition, noninterest expense included $278 thousand of acquisition expenses for the three months ended December 31, 2016 related to the announcement of the Sovereign merger. Excluding acquisition related expenses, professional fees increased $178 thousand for the three months ended December 31, 2016. This was primarily an increase of professional services of $58 thousand, SEC printing costs of $11 thousand, and audit and accounting expenses of $102 thousand.

Income Taxes

Income tax expense for the three months ended December 31, 2016 totaled $1.7 million, a decrease of $101 thousand or 5.7% compared to the three months ended September 30, 2016. The Company’s effective tax rate was approximately 34.3% for the three months ended December 31, 2016 and 34.4% the three months ended September 30, 2016.

Compared to the three months ended December 31, 2015, income tax expense increased $364 thousand, or 27.9%, for the three months ended December 31, 2016. The increase was primarily due to the $982 thousand increase in net operating income from $3.9 million for the three months ended December 31, 2015 to $4.9 million for the three months ended December 31, 2016. The Company’s effective tax rate was approximately 34.3% for the three months ended December 31, 2016 compared to 33.6% for the three months ended December 31, 2015. The increase in effective tax rates from the three months ended December 31, 2015 was affected primarily by increases in our federal statutory rate from 34% to 35%.

Financial Condition

Loans (excluding loans held for sale and deferred loan fees) at December 31, 2016 were $991.9 million, an increase of $65.2 million, or 7.0%, compared to $926.7 million at September 30, 2016. The increase from September 30, 2016 was primarily the result of the continued execution and success of our organic growth strategy.

Loans (excluding loans held for sale and deferred loan fees) increased $171.3 million, or 20.9%, compared to $820.6 million at December 31, 2015. The increase from December 31, 2015 was primarily the result of the continued execution and success of our organic growth strategy.

Deposits at December 31, 2016 were $1.1 billion, an increase of $42.4 million, or 3.9%, compared to $1.1 billion at September 30, 2016 due to growth in non-maturity deposit accounts which was partially offset by a reduction in wholesale deposits.

Deposits increased $251.2 million, or 28.9%, compared to $868.4 million at December 31, 2015. The increase from December 31, 2015 was primarily due to an increase in non-interest bearing deposits and money market accounts from our correspondent banking department as well as our organic growth strategy and was partially offset by a reduction in wholesale deposits.

Advances from the Federal Home Loan Bank were $38.3 million at December 31, 2016 and September 30, 2016, and $28.4 million at December 31, 2015.

Asset Quality

Nonperforming assets totaled $2.4 million, or 0.17%, of total assets at December 31, 2016 compared to $2.1 million, or 0.17%, at September 30, 2016.  Nonperforming assets were $1.2 million, or 0.11%, of total assets at December 31, 2015. The allowance for loan losses was 0.86% of total loans at December 31, 2016 compared to 0.87% of total loans at September 30, 2016 and 0.83% of total loans at December 31, 2015. The decrease in allowance for loan losses as a percentage of total loans compared to September 30, 2016 was minimal as credit quality remained strong.  The increase in allowance for loan losses as a percentage of total loans compared to December 31, 2015 was primarily due to pay downs of IBT acquired loans originally recorded at an estimated fair value.

Other real estate owned totaled $662 thousand at December 31, 2016 and September 30, 2016 compared to $493 thousand at December 31, 2015. Nonaccrual loans were $941 thousand at December 31, 2016 compared to $1.1 million at September 30, 2016 and $591 thousand at December 31, 2015.

The provision for loan losses for the three months ended December 31, 2016 totaled $440 thousand compared to $238 thousand for three months ended September 30, 2016 and $610 thousand for the three months ended December 31, 2015.  The increase of $202 thousand in provision of loan losses compared to the three months ended September 30, 2016 was primarily related to general provision requirements related to loan growth as credit quality remained strong.  The decrease of $170 thousand in provision of loan losses compared to the three months ended December 31, 2015 was primarily related to general provision requirements related to moderate improvement in certain qualitative factors as credit quality remained strong.

Non-GAAP Financial Measures

The Company’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, the Company reviews and reports tangible book value per common share, the tangible common equity to tangible assets ratio and pre-tax, pre-provision income. The Company has included in this release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to “Consolidated Financial Highlights” at the end of this release for a reconciliation of these non-GAAP financial measures.

About Veritex Holdings, Inc.

Headquartered in Dallas, Texas, Veritex Holdings, Inc. is a bank holding company that conducts banking activities through its wholly-owned subsidiary, Veritex Community Bank, with eleven locations throughout the Dallas 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

Special Cautionary Notice Regarding ForwardLooking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the current views of the Company’s management with respect to, among other things, future events and the Company’s financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative variations of those words or other comparable words of a future or forward-looking nature.  The Company cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Factors that could cause actual results to differ materially from the Company’s expectations include costs associated with its acquisition of Sovereign Bancshares, Inc.; successfully implementing its growth strategy, including identifying acquisition targets, consummating suitable acquisitions and integrating acquired businesses; continuing to sustain internal growth rate; providing competitive products and services that appeal to its customers and target market; continuing access to debt and equity capital markets; and achieving its performance goals. The foregoing list of factors is not exhaustive. If one or more events related to these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may differ materially from what the Company anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.  For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Special Cautionary Notice Regarding Forward‑Looking Statements” and “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2016 and any updates to those risk factors set forth in the Company’s subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. Copies of such filings are available for download free of charge from www.veritexbank.com under the Investor Relations tab.

Important Additional Information

The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger of the Company and Sovereign Bancshares, Inc., the Company will file a registration statement on Form S-4 with the Securities and Exchange Commission (the “SEC”). The registration statement will include a joint proxy statement of the Company and Sovereign Bancshares, Inc., which also will constitute a prospectus of the Company, which the Company and Sovereign Bancshares, Inc. will send to their respective shareholders. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS OF SOVEREIGN BANCSHARES, INC. AND THE COMPANY ARE URGED TO CAREFULLY READ THE ENTIRE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS, WHEN THEY BECOME AVAILABLE, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. These documents will contain important information relating to the proposed transaction. When filed, this document and other documents relating to the merger filed by the Company can be obtained free of charge from the SEC’s website at www.sec.gov.

The Company and Sovereign Bancshares and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from their stockholders in connection with the proposed transaction. Information about the Company’s participants may be found in the definitive proxy statement of the Company relating to its 2016 Annual Meeting of Stockholders filed with the SEC on April 7, 2016. The definitive proxy statement can be obtained free of charge from the sources indicated above. Additional information regarding the interests of such participants will be included in the joint proxy statement and other relevant documents regarding the proposed merger transaction filed with the SEC when they become available, copies of which may also be obtained free of charge from the sources indicated above.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Consolidated Financial Highlights - (Unaudited)
(In thousands, except share and per share data)
 
    At and For the Three Months Ended
    December 31,
 2016
  September 30,
 2016
  June 30,
 2016
  March 31,
 2016
  December 31,
 2015
Selected Financial Data:                    
Net income   $ 3,191     $ 3,375     $ 3,173     $ 2,813     $ 2,573  
Net income available to common stockholders   3,191     3,375     3,173     2,813     2,535  
Total assets   1,408,350     1,269,238     1,215,497     1,130,480     1,039,600  
Total loans(1)   991,897     926,712     928,000     885,415     820,567  
Provision for loan losses   440     238     527     845     610  
Allowance for loan losses   8,524     8,102     7,910     7,372     6,772  
Noninterest-bearing deposits   327,614     304,972     354,570     296,481     301,367  
Total deposits   1,119,630     1,077,217     1,027,729     946,058     868,410  
Total stockholders’ equity   238,888     142,423     138,850     135,241     132,046  
Summary Performance Ratios:                    
Return on average assets(2)   0.97 %   1.10 %   1.12 %   1.04 %   0.99 %
Return on average equity(2)   8.11     9.50     9.26     8.39     7.37  
Net interest margin(3)   3.44     3.70     3.90     3.87     3.78  
Efficiency ratio(4)   57.08     56.64     54.13     54.01     56.11  
Noninterest expense to average assets(2)   2.14     2.29     2.23     2.20     2.22  
Summary Credit Quality Data:                    
Nonaccrual loans   $ 941     $ 1,087     $ 1,028     $ 525     $ 591  
Accruing loans 90 or more days past due   835     357     5,634     141     84  
Other real estate owned   662     662     493     493     493  
Nonperforming assets to total assets   0.17 %   0.17 %   0.59 %   0.11 %   0.11 %
Nonperforming loans to total loans   0.18 %   0.16 %   0.72 %   0.08 %   0.08 %
Allowance for loan losses to total loans   0.86 %   0.87 %   0.85 %   0.83 %   0.83 %
Net (recoveries) charge-offs to average loans outstanding   0.03 %   0.03 %   0.03 %   0.03 %   0.01 %
Capital Ratios:                    
Total stockholders’ equity to total assets   16.96 %   11.22 %   11.42 %   11.96 %   12.70 %
Tangible common equity to tangible assets(5)   15.21 %   9.14 %   9.25 %   9.63 %   10.17 %
Tier 1 capital to average assets   16.82 %   9.82 %   10.21 %   10.38 %   10.75 %
Tier 1 capital to risk-weighted assets   20.72 %   12.04 %   11.88 %   12.03 %   12.85 %
Common equity tier 1 (to risk weighted assets)   20.42 %   11.72 %   11.56 %   11.69 %   12.48 %
Total capital to risk-weighted assets   22.02 %   13.38 %   13.23 %   13.38 %   14.25 %
                               

(1)  Total loans does not include loans held for sale and deferred fees. Loans held for sale were $5.2 million at December 31, 2016, $4.9 million at September 30, 2016, $4.8 million at June 30, 2016, $3.6 million at March 31, 2016, $2.8 million at December 31, 2015. Deferred fees were $55 thousand at December 31, 2016, $51 thousand at September 30, 2016, $52 thousand at June 30, 2016, $65 thousand at March 31, 2016, $61 thousand at December 31, 2015.

(2)  We calculate our average assets and average equity for a period by dividing the sum of our total assets or total stockholders’ equity, as the case may be, at the close of business on each day in the relevant period, by the number of days in the period. We have calculated our return on average assets and return on average equity for a period by dividing net income for that period by our average assets and average equity, as the case may be, for that period.

(3)  Net interest margin represents net interest income, annualized on a fully tax equivalent basis, divided by average interest-earning assets.

(4)  Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.

(5)  We calculate tangible common equity as total stockholders’ equity less preferred stock, goodwill, core deposit intangibles and other intangible assets, net of accumulated amortization, and we calculate tangible assets as total assets less goodwill and core deposit intangibles and other intangible assets, net of accumulated amortization. Tangible common equity to tangible assets is a non-GAAP financial measure, and, as we calculate tangible common equity to tangible assets, the most directly comparable GAAP financial measure is total stockholders’ equity to total assets. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures in the table captioned “Reconciliation GAAP —NON-GAAP (Unaudited)”.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets - (Unaudited)
(In thousands, except share and per share data)
 
    December 31,
 2016
  September 30,
 2016
  June 30,
 2016
  March 31,
 2016
  December 31,
 2015
ASSETS                    
Cash and due from banks   $ 15,631     $ 15,837     $ 12,951     $ 12,416     $ 10,989  
Interest bearing deposits in other banks   219,160     162,750     114,293     79,967     60,562  
Total cash and cash equivalents   234,791     178,587     127,244     92,383     71,551  
Investment securities   102,559     86,772     83,677     79,146     75,813  
Loans held for sale   5,208     4,856     4,793     3,597     2,831  
Loans, net   983,318     918,559     920,039     877,978     813,733  
Accrued interest receivable   2,907     2,414     2,259     2,252     2,216  
Bank-owned life insurance   20,077     19,922     19,767     19,614     19,459  
Bank premises, furniture and equipment, net   17,413     17,501     17,243     17,248     17,449  
Non-marketable equity securities   7,366     7,358     7,035     5,541     4,167  
Investment in unconsolidated subsidiary   93     93     93     93     93  
Other real estate owned   662     662     493     493     493  
Intangible assets, net   2,181     2,257     2,264     2,347     2,410  
Goodwill   26,865     26,865     26,865     26,865     26,865  
Other assets   4,910     3,392     3,725     2,923     2,520  
Total assets   $ 1,408,350     $ 1,269,238     $ 1,215,497     $ 1,130,480     $ 1,039,600  
LIABILITIES AND STOCKHOLDERS’ EQUITY                    
Deposits:                    
Noninterest-bearing   $ 327,614     $ 304,972     $ 354,570     $ 296,481     $ 301,367  
Interest-bearing   792,016     772,245     673,159     649,577     567,043  
Total deposits   1,119,630     1,077,217     1,027,729     946,058     868,410  
Accounts payable and accrued expenses   2,914     2,082     1,611     2,122     1,776  
Accrued interest payable and other liabilities   534     1,098     855     573     848  
Advances from Federal Home Loan Bank   38,306     38,341     38,375     38,410     28,444  
Junior subordinated debentures   3,093     3,093     3,093     3,093     3,093  
Subordinated notes   4,985     4,984     4,984     4,983     4,983  
Total liabilities   1,169,462     1,126,815     1,076,647     995,239     907,554  
Commitments and contingencies                    
Stockholders’ equity:                    
Preferred stock                    
Common stock   152     107     107     107     107  
Additional paid-in capital   210,973     116,315     116,111     115,876     115,721  
Retained earnings   29,290     26,101     22,725     19,552     16,739  
Unallocated Employee Stock Ownership Plan shares   (209 )   (309 )   (309 )   (309 )   (309 )
Accumulated other comprehensive income (loss)   (1,248 )   279     286     85     (142 )
Treasury stock, 10,000 shares at cost   (70 )   (70 )   (70 )   (70 )   (70 )
Total stockholders’ equity   238,888     142,423     138,850     135,241     132,046  
Total liabilities and stockholders’ equity   $ 1,408,350     $ 1,269,238     $ 1,215,497     $ 1,130,480     $ 1,039,600  
 


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income - (Unaudited)
(In thousands, except share and per share data)
 
    For the Year Ended
    December 31,
2016
  December 31,
2015
Interest income:        
Interest and fees on loans   $ 44,681     $ 33,680  
Interest on investment securities   1,409     997  
Interest on deposits in other banks   503     241  
Interest on other   2     2  
Total interest income   46,595     34,920  
Interest expense:        
Interest on deposit accounts   4,988     2,918  
Interest on borrowings   652     543  
Total interest expense   5,640     3,461  
Net interest income   40,955     31,459  
Provision for loan losses   2,050     868  
Net interest income after provision for loan losses   38,905     30,591  
Noninterest income:        
Service charges and fees on deposit accounts   1,846     1,326  
Gain on sales of investment securities   15     7  
Gain on sales of loans   3,288     1,254  
Loss on sales of other assets owned       19  
Bank-owned life insurance   771     747  
Other   583     351  
Total noninterest income   6,503     3,704  
Noninterest expense:        
Salaries and employee benefits   14,295     11,265  
Occupancy and equipment   3,667     3,477  
Professional fees   2,804     2,023  
Data processing and software expense   1,158     1,216  
FDIC assessment fees   661     448  
Marketing   983     799  
Other assets owned expenses and write-downs   163     53  
Amortization of intangibles   380     338  
Telephone and communications   402     263  
Other   1,839     1,506  
Total noninterest expense   26,352     21,388  
Net income from operations   19,056     12,907  
Income tax expense   6,505     4,117  
Net income   $ 12,551     $ 8,790  
Preferred stock dividends   $     $ 98  
Net income available to common stockholders   $ 12,551     $ 8,692  
Basic earnings per share   $ 1.16     $ 0.86  
Diluted earnings per share   $ 1.13     $ 0.84  
Weighted average basic shares outstanding   10,849,331     10,061,015  
Weighted average diluted shares outstanding   11,153,393     10,332,158  
 


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income - (Unaudited)
(In thousands, except share and per share data)
 
    For the Three Months Ended
    December 31,
 2016
  September 30,
 2016
  June 30,
 2016
  March 31,
 2016
  December 31,
 2015
Interest income:                    
Interest and fees on loans   $ 11,684     $ 11,589     $ 11,052     $ 10,355     $ 9,648  
Interest on investment securities   396     335     344     335     285  
Interest on deposits in other banks   200     129     80     92     73  
Interest on other   1     1     1     1     1  
Total interest income   12,281     12,054     11,477     10,783     10,007  
Interest expense:                    
Interest on deposit accounts   1,600     1,381     1,072     935     843  
Interest on borrowings   161     156     177     158     151  
Total interest expense   1,761     1,537     1,249     1,093     994  
Net interest income   10,520     10,517     10,228     9,690     9,013  
Provision for loan losses   440     238     527     845     610  
Net interest income after provision for loan losses   10,080     10,279     9,701     8,845     8,403  
Noninterest income:                    
Service charges and fees on deposit accounts   537     433     443     434     419  
Gain on sales of investment securities               15      
Gain on sales of loans   970     1,036     620     662     430  
Bank-owned life insurance   194     193     191     193     195  
Other   123     231     158     69     163  
Total noninterest income   1,824     1,893     1,412     1,373     1,207  
Noninterest expense:                    
Salaries and employee benefits   3,612     3,920     3,589     3,174     3,019  
Occupancy and equipment   949     923     894     901     917  
Professional fees   943     785     503     573     487  
Data processing and software expense   308     296     270     284     313  
FDIC assessment fees   213     179     132     137     131  
Marketing   279     293     211     200     205  
Other assets owned expenses and write-downs   24     9     55     75     24  
Amortization of intangibles   95     95     95     95     95  
Telephone and communications   107     98     100     97     81  
Other   516     431     452     439     462  
Total noninterest expense   7,046     7,029     6,301     5,975     5,734  
Net income from operations   4,858     5,143     4,812     4,243     3,876  
Income tax expense   1,667     1,768     1,639     1,430     1,303  
Net income   $ 3,191     $ 3,375     $ 3,173     $ 2,813     $ 2,573  
Preferred stock dividends   $     $     $     $     $ 38  
Net income available to common stockholders   $ 3,191     $ 3,375     $ 3,173     $ 2,813     $ 2,535  
Basic earnings per share   $ 0.28     $ 0.32     $ 0.30     $ 0.26     $ 0.24  
Diluted earnings per share   $ 0.27     $ 0.31     $ 0.29     $ 0.26     $ 0.23  
Weighted average basic shares outstanding   11,298,689     10,705,115     10,696,366     10,693,800     10,675,948  
Weighted average diluted shares outstanding   11,652,651     11,024,695     10,993,921     10,963,986     10,954,920  
 


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation GAAP — NON GAAP - (Unaudited)
(In thousands, except share and per share data)
 
The following table reconciles, at the dates set forth below, total stockholders’ equity to tangible common equity and total assets to tangible assets:
 
    December 31,
 2016
  September 30,
 2016
  June 30,
 2016
  March 31,
 2016
  December 31,
 2015
Tangible Common Equity                    
Total stockholders’ equity   $ 238,888     $ 142,423     $ 138,850     $ 135,241     $ 132,046  
Adjustments:                    
Preferred stock                    
Goodwill   (26,865 )   (26,865 )   (26,865 )   (26,865 )   (26,865 )
Intangible assets   (2,181 )   (2,257 )   (2,264 )   (2,347 )   (2,410 )
Total tangible common equity   $ 209,842     $ 113,301     $ 109,721     $ 106,029     $ 102,771  
Tangible Assets                    
Total assets   $ 1,408,350     $ 1,269,238     $ 1,215,497     $ 1,130,480     $ 1,039,600  
Adjustments:                    
Goodwill   (26,865 )   (26,865 )   (26,865 )   (26,865 )   (26,865 )
Intangible assets   (2,181 )   (2,257 )   (2,264 )   (2,347 )   (2,410 )
Total tangible assets   $ 1,379,304     $ 1,240,116     $ 1,186,368     $ 1,101,268     $ 1,010,325  
Tangible Common Equity to Tangible Assets   15.21 %   9.14 %   9.25 %   9.63 %   10.17 %
Common shares outstanding   15,195     10,736     10,728     10,724     10,712  
                     
Book value per common share(1)   $ 15.72     $ 13.27     $ 12.94     $ 12.61     $ 12.33  
Tangible book value per common share(2)   $ 13.81     $ 10.55     $ 10.23     $ 9.89     $ 9.59  
                                         

(1)  We calculate book value per common share as stockholders’ equity less preferred stock at the end of the relevant period divided by the outstanding number of shares of our common stock at the end of the relevant period.

(2)  We calculate tangible book value per common share as total stockholders’ equity less preferred stock, goodwill, and intangible assets, net of accumulated amortization at the end of the relevant period, divided by the outstanding number of shares of our common stock at the end of the relevant period. Tangible book value per common share is a non-GAAP financial measure, and, as we calculate tangible book value per common share, the most directly comparable GAAP financial measure is total stockholders’ equity per common share.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation GAAP — NON GAAP - (Unaudited)
(In thousands)
 
The following table reconciles net income from operations to pre-tax, pre-provision income:
 
    For the Three Months Ended
    December 31,
 2016
  September 30,
 2016
  June 30,
 2016
  March 31,
 2016
  December 31,
 2015
Pre-Tax, Pre-Provision Income                    
Provision for loan losses   440     238     527     845     610  
Net income from operations   4,858     5,143     4,812     4,243     3,876  
Total pre-tax, pre-provision income(1)   $ 5,298     $ 5,381     $ 5,339     $ 5,088     $ 4,486  
                                         

(1)  We calculate pre-tax, pre-provision income by adding the total provision for loan losses to net income from operations for the relevant period.

The following table reconciles net income from operations to pre-tax, pre-provision income:
 
    For the Year Ended
    December 31,
 2016
  December 31,
2015
Pre-Tax, Pre-Provision Income        
Provision for loan losses   2,050     868  
Net income from operations   19,056     12,907  
Total pre-tax, pre-provision income(1)   $ 21,106     $ 13,775  
                 

(1)   We calculate pre-tax, pre-provision income by adding the total provision for loan losses to net income from operations for the relevant period.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Net Interest Margin - (Unaudited)
(In thousands)
 
    For the Three Months Ended
    December 31, 2016   September 30, 2016   December 31, 2015
    Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
Assets                                    
Interest-earning assets:                                    
Total loans(1)   $ 971,977     $ 11,684     4.78 %   $ 954,053     $ 11,589     4.83 %   $ 791,799     $ 9,648     4.83 %
Securities available for sale   96,814     396     1.63     83,233     335     1.60     67,062     285     1.69  
Investment in subsidiary   93     1     4.28     93     1     4.28     93     1     4.27  
Interest-earning deposits in financial institutions   147,974     200     0.54     94,596     129     0.54     86,079     73     0.34  
Total interest-earning assets   1,216,858     12,281     4.02     1,131,975     12,054     4.24     945,033     10,007     4.20  
Allowance for loan losses   (8,353 )           (8,115 )           (6,436 )        
Noninterest-earning assets   98,379             95,901             88,382          
Total assets   $ 1,306,884             $ 1,219,761             $ 1,026,979          
Liabilities and Stockholders’ Equity                                    
Interest-bearing liabilities:                                    
Interest-bearing deposits   $ 784,778     1,600     0.81 %   $ 726,958     $ 1,381     0.76 %   $ 540,311     843     0.62 %
Advances from FHLB   38,328     58     0.60     38,363     59     0.61     20,748     55     1.05  
Other borrowings   8,078     103     5.07     8,078     97     4.78     11,272     96     3.38  
Total interest-bearing liabilities   831,184     1,761     0.84     773,399     1,537     0.79     572,331     994     0.69  
Noninterest-bearing liabilities:                                    
Noninterest-bearing deposits   315,988             301,740             312,783          
Other liabilities   3,153             3,284             3,419          
Total noninterest-bearing liabilities   319,141             305,024             316,202          
Stockholders’ equity   156,559             141,338             138,446          
Total liabilities and stockholders’ equity   $ 1,306,884             $ 1,219,761             $ 1,026,979          
Net interest rate spread(2)           3.18 %           3.45 %           3.51 %
Net interest income       $ 10,520             $ 10,517             $ 9,013      
Net interest margin(3)           3.44 %           3.70 %           3.78 %
                                           

(1)  Includes average outstanding balances of loans held for sale of $5,517, $6,047, and $2,482 for three months ended December 31, 2016, September 30, 2016, and December 31, 2015, respectively.

(2)  Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

(3)  Net interest margin is equal to net interest income divided by average interest-earning assets.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Net Interest Margin - (Unaudited)
(In thousands)
 
    For the Year Ended December 31,
    2016   2015
    Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
Assets                        
Interest-earning assets:                        
Total loans(1)   $ 924,465     $ 44,681     4.83 %   $ 697,439     $ 33,680     4.83 %
Securities available for sale   84,558     1,409     1.67 %   59,088     997     1.69 %
Investment in subsidiary   93     2     2.15 %   93     2     2.15 %
Interest-earning deposits in financial institutions   93,199     503     0.54 %   70,630     241     0.34 %
Total interest-earning assets   1,102,315     46,595     4.23 %   827,250     34,920     4.22 %
Allowance for loan losses   (7,743 )           (6,419 )        
Noninterest-earning assets   94,199             78,006          
Total assets   $ 1,188,771             $ 898,837          
Liabilities and Stockholders’ Equity                        
Interest-bearing liabilities:                        
Interest-bearing deposits   $ 688,978     4,988     0.72 %   $ 475,034     2,918     0.61 %
Advances from FHLB   43,649     260     0.60 %   18,055     25     0.14 %
Other borrowings   8,077     392     4.85 %   9,212     518     5.62 %
Total interest-bearing liabilities   740,704     5,640     0.76 %   502,301     3,461     0.69 %
Noninterest-bearing liabilities:                        
Noninterest-bearing deposits   302,548             267,550          
Other liabilities   2,937             2,408          
Total noninterest-bearing liabilities   305,485             269,958          
Stockholders’ equity   142,582             126,578          
Total liabilities and stockholders’ equity   $ 1,188,771             $ 898,837          
Net interest rate spread(2)           3.47 %           3.53 %
Net interest income       $ 40,955             $ 31,459      
Net interest margin(3)           3.72 %           3.80 %
                             

(1)  Includes average outstanding balances of loans held for sale of $5,078 and $3,134 for the twelve months ended December 31, 2016 and 2015, respectively.

(2)  Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

(3)  Net interest margin is equal to net interest income divided by average interest-earning assets.

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

Investor Relations:
972-349-6200
scaudle@veritexbank.com

Veritex Holdings, Inc.