Press Release Details

DALLAS, Jan. 28, 2020 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. (“Veritex” or the “Company”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the fourth quarter and full year of 2019. Net income for the quarter ended December 31, 2019 was $29.1 million, or $0.56 diluted earnings per share (“EPS”), compared to $27.4 million, or $0.51 diluted EPS, for the quarter ended September 30, 2019 and $9.8 million, or $0.40 diluted EPS, for the quarter ended December 31, 2018. Operating net income for the quarter ended December 31, 2019 totaled $30.3 million, or $0.58 diluted operating EPS¹, compared to $28.6 million, or $0.53 diluted operating EPS¹, for the quarter ended September 30, 2019 and $11.5 million, or $0.47 diluted operating EPS¹, for the quarter ended December 31, 2018.

C. Malcolm Holland, III, the Company’s Chairman and Chief Executive Officer said: “2019 was a transformational year for Veritex.  We are not only a bigger company, but more importantly a better company, as a result of the Green merger and all the work that was completed in 2019.  The fourth quarter loan growth, excluding mortgage warehouse, and deposit growth, excluding time deposits, gives us substantial momentum heading into 2020 where we will look to exploit the merger disruption in Dallas-Fort Worth and Houston while continuing to return excess capital to our shareholders.”

Fourth Quarter 2019 Financial Highlights:

• Diluted EPS was $0.56 and diluted operating EPS was $0.58 for the fourth quarter of 2019, resulting in a 23.4% increase in diluted operating EPS compared to the fourth quarter of 2018;
• Return on average assets was 1.43%, operating return on average assets¹ was 1.49% and pre-tax, pre-provision operating return on average assets¹ was 2.07% for the fourth quarter of 2019;
• Return on average tangible common equity was 16.22% and operating return on average tangible common equity¹ was 16.87% for the fourth quarter of  2019;
• Total loans, excluding mortgage warehouse, increased $86.9 million, or 6.1% annualized, and total deposits, excluding time deposits, increased $210.1 million, or 21.0% annualized, during the fourth quarter of  2019;
• Increased and extended the previously announced stock buyback program during the fourth quarter of 2019.  During the fourth quarter and full year of 2019, Veritex repurchased 1,453,608 and 3,802,711 shares, respectively, of its outstanding common stock under its stock buyback program for an aggregate of $35.7 million and $94.5 million, respectively. Since inception, the buyback program has repurchased 7% of outstanding common stock;
• Declared quarterly cash dividend of $0.17 payable on February 20, 2020 representing a 20% increase in the declared cash dividend from prior quarters.

Summary of Financial Data		Quarter Ended December 31,								Year Ended December 31,
		2019				2018				2019				2018
		(Dollars in thousands)
GAAP
Net income		$	29,051			$	9,825			$	90,739			$	39,341
Diluted EPS		0.56				0.40				1.68				1.60
Return on average assets2		1.43		%		1.20		%		1.14		%		1.26		%
Efficiency ratio		47.12				54.27				56.41				54.92
Book value per common share		$	23.32			$	21.88			$	23.32			$	21.88
Non-GAAP1
Operating net income		$	30,294			$	11,457			$	123,836			$	45,251
Diluted operating EPS		0.58				0.47				2.29				1.84
Pre-tax, pre-provision operating return on average assets		2.07		%		1.95		%		2.24		%		2.02		%
Operating return on average assets2		1.49				1.40				1.56				1.44
Operating efficiency ratio		45.67				50.65				43.80				49.76
Return on average tangible common equity2		16.22				11.52				13.02				12.89
Operating return on average tangible common equity2		16.87				13.37				17.39				14.68
Tangible book value per common share		$	14.74			$	14.74			$	14.74			$	14.74

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.

Result of Operations for the Three Months Ended December 31, 2019

Net Interest Income

For the three months ended December 31, 2019, net interest income before provision for loan losses was $69.9 million and net interest margin was 3.81% compared to $70.9 million and 3.90%, respectively, for the three months ended September 30, 2019. The $1.0 million decrease in net interest income was primarily due to a $3.2 million decrease in interest income on loans driven by a decrease in loan yields and was partially offset by a $2.2 million decrease in interest expense on interest-bearing transaction and savings deposits.  Net interest margin decreased 9 basis points from the three months ended September 30, 2019, primarily due to a 22 basis point decrease in yields earned on loan balances, exceeded by a 33 basis point decrease in the average rate paid on interest-bearing demand and savings deposits during the three months ended December 31, 2019.  As a result, the average cost of interest-bearing deposits decreased to 1.59% for the three months ended December 31, 2019 from 1.79% for the three months ended September 30, 2019.

Net interest income before provision for loan losses increased by $41.2 million from $28.7 million to $69.9 million and net interest margin decreased 8 basis points from 3.89% to 3.81% for the three months ended December 31, 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 ("Green") in connection with Veritex's acquisition of Green in January 2019 and organic loan growth. For the three months ended December 31, 2019, average loan balances increased by $3.2 billion compared to the three months ended December 31, 2018, which resulted in a $45.8 million increase in interest income. Net interest margin decreased 8 basis points compared to the three months ended December 31, 2018 primarily due to a decrease in the average yield on interest-earning assets during the three months ended December 31, 2019. Average interest-bearing deposit accounts grew to $4.4 billion for the three months ended December 31, 2019 compared to $2.0 billion for the three months ended December 31, 2018, primarily due to the acquisition of Green. The average cost of interest-bearing deposits decreased to 1.59% for the three months ended December 31, 2019 from 1.75% for the three months ended December 31, 2018.

Noninterest Income

Noninterest income for the three months ended December 31, 2019 was $7.1 million, a decrease of $1.3 million, or 15.4% compared to the three months ended September 30, 2019. The decrease was primarily due to a $438 thousand loss on sales of certain investment securities, a $331 thousand decrease in loan fees, and a $349 thousand decrease in the gain on sale of Small Business Administration ("SBA") loans for the three months ended December 31, 2019.

Compared to the three months ended December 31, 2018, noninterest income for the three months ended December 31, 2019 grew $3.5 million or 97.1%. The increase was primarily due to a $2.9 million increase in service charges and fees on acquired deposit accounts resulting from the acquisition of Green deposit accounts and the associated income from these accounts and a $1.5 million increase in loan fees, partially offset by a $1.3 million decrease in the gain on sale of SBA loans.

Noninterest Expense

Noninterest expense was $36.3 million for the three months ended December 31, 2019, compared to $34.6 million for the three months ended September 30, 2019, an increase of $1.7 million, or 4.8%. The increase was primarily driven by a $1.4 million increase in salaries and employee benefits in the three months ended December 31, 2019 as compared to the three months ended September 30, 2019.

Compared to the three months ended December 31, 2018, noninterest expense for the three months ended December 31, 2019 increased $18.7 million, or 106.9%. The increase was primarily driven by a $10.6 million increase in salaries and employee benefits due to the addition of new Green employees as a result of the merger, and a $1.9 million, $1.8 million and $1.0 million  increase in amortization of intangibles, occupancy and equipment expenses, and data processing and software expenses, respectively, related to the acquisition of Green.

Financial Condition

Total loans were $5.9 billion at December 31, 2019, an increase of $37.0 million, or 2.51% annualized, compared to September 30, 2019 and $3.4 billion, or 132.14%, compared to December 31, 2018. The net increase was the result of Veritex's growth strategy and the acquisition of Green.

Total deposits were $5.9 billion at December 31, 2019, an increase of $16.5 million, or 0.3%, compared to September 30, 2019 and an increase of $3.3 billion, or 124.77%, compared to December 31, 2018. The increase from September 30, 2019 was primarily the result of an increase of $83.4 million in non-interest bearing demand deposits, which was offset by a decrease of $66.9 million in interest bearing accounts. The increase from December 31, 2018 was primarily the result of the acquisition of Green.

Asset Quality

Allowance for loan losses as a percentage of loans was 0.50%, 0.45% and 0.75% of total loans held for investment at December 31, 2019, September 30, 2019 and December 31, 2018, respectively. The allowance for loan losses as a percentage of total loans for each of the three quarters ended was determined by an evaluation of the qualitative factors around the nature, volume and mix of the loan portfolio. The increase at December 31, 2019 in the allowance for loan losses as a percentage of loans from September 30, 2019 was primarily attributable to the general provision required from an increase of loans acquired from Green that were re-underwritten in the fourth quarter of 2019. Once an acquired loan undergoes new underwriting and meets the criteria for a new loan, the loan becomes fully subject to Veritex's allowance for loan loss methodology.  The decrease in the allowance for loan losses as a percentage of loans held for investment from December 31, 2018 was attributable to the 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 1.31%, 1.44% and 1.23% of total loans at December 31, 2019, September 30, 2019 and December 31, 2018, respectively.

Veritex recorded a provision for loan losses of $3.5 million for the quarter ended December 31, 2019 compared to a provision of $9.7 million and $1.4 million for the quarter ended September 30, 2019 and December 31, 2018, respectively, which reflects adjustments to provision for loan losses as a result of Veritex's continued organic growth and timing of charge-offs and recoveries recorded during the respective quarters. The decrease in the recorded provision for loan losses compared to the three months ended September 30, 2019 was primarily attributable to a $6.1 million charge-off during the third quarter of 2019 related to a commercial loan relationship acquired from Sovereign Bancshares, Inc. in 2017. The acquired commercial loan relationship consisted 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. The increase in the recorded provision for loan losses compared to the three months ended December 31, 2018 was primarily attributable to continued organic growth and loans acquired from Green that were re-underwritten in the fourth quarter of 2019.

Nonperforming assets totaled $39.4 million, or 0.50%, of total assets at December 31, 2019 compared to $17.0 million, or 0.21%, of total assets at September 30, 2019 and $24.7 million, or 0.77%, of total assets at December 31, 2018. The increase of $22.4 million compared to September 30, 2019 was primarily due to a $19.6 million increase in certain acquired non-purchased credit impaired loans that moved to nonaccrual status during the fourth quarter 2019  and a $2.9 million increase in other real estate owned. The $19.6 million increase in acquired nonaccrual loans due was primarily related to a single commercial loan relationship which required no provision for loan loss after it was individually analyzed for impairment.

Dividend Information

On January 28, 2020, Veritex's Board of Directors declared a quarterly cash dividend of $0.17 per share on its outstanding shares of common stock, payable on February 20, 2020, to stockholders of record as of February 6, 2020.

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.

Conference Call

The Company will host an investor conference call to review the results on Wednesday, January 29, 2020 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/8groyitg and will receive a unique PIN number, which can be used when dialing in for the call. This will allow attendees to enter the call immediately. Alternatively, participants may call toll-free at (877) 703-9880.

The call and corresponding presentation slides will be webcast live on the home page of the Company's website, www.veritexbank.com. An audio replay will be available one hour after the conclusion of the call at (855) 859-2056, Conference #8717068. This replay, as well as the webcast, will be available until February 5, 2020.

About Veritex Holdings, Inc.

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

Forward-Looking Statements

This earnings release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Forward-looking statements include, without limitation, statements relating to  the expected payment date of Veritex’s quarterly cash dividend, Veritex’s future financial performance, business and growth strategy, projected plans and objectives, as well as other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact broader economic and industry trends, and any such variations may be material.  Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words.  We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Veritex’s Annual Report on Form 10-K for the year ended December 31, 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 Quarter Ended																				For the Year Ended
		Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Dec 31, 2019				Dec 31, 2018
		(Dollars and shares in thousands)
Per Share Data (Common Stock):
Basic EPS		$	0.56			$	0.52			$	0.50			$	0.14			$	0.41			$	1.71			$	1.63
Diluted EPS		0.56				0.51				0.49				0.13				0.40				1.68				1.60
Book value per common share		23.32				23.02				22.55				21.88				21.88				23.32				21.88
Tangible book value per common share1		14.74				14.61				14.27				13.76				14.74				14.74				14.74
Common Stock Data:
Shares outstanding at period end		51,064				52,373				53,457				54,563				24,254				51,064				24,254
Weighted average basic shares outstanding for the period		51,472				52.915				53.969				54.293				24,224				53,154				24,169
Weighted average diluted shares outstanding for the period		52,263				53,873				54,929				55,439				24,532				53,978				24,590
Summary Performance Ratios:
Return on average assets2		1.43		%		1.36		%		1.36		%		0.38		%		1.20		%		1.14		%		1.26		%
Return on average equity2		9.63				8.98				8.98				2.52				7.44				7.57				7.73
Return on average tangible common equity1, 2		16.22				15.15				15.26				5.09				11.52				13.02				12.89
Efficiency ratio		47.12				43.67				51.49				82.30				54.27				56.41				54.92
Selected Performance Metrics - Operating:
Diluted operating EPS1		$	0.58			$	0.53			$	0.59			$	0.59			$	0.47			$	2.29			$	1.84
Pre-tax, pre-provision operating return on average assets1, 2		2.07		%		2.26		%		2.22		%		2.40		%		1.95		%		2.24		%		2.02		%
Operating return on average assets1, 2		1.49				1.42				1.63				1.69				1.40				1.56				1.44
Operating return on average tangible common equity1, 2		16.87				15.78				18.09				18.81				13.37				17.39				14.68
Operating efficiency ratio1		45.67				42.36				43.66				43.54				50.65				43.80				49.60
Veritex Holdings, Inc. Capital Ratios:
Average stockholders' equity to average total assets		14.88		%		15.11		%		15.13		%		15.18		%		16.14		%		15.07		%		16.25		%
Tier 1 capital to average assets (leverage)		10.17				10.33				10.47				10.57				12.04				10.17				12.04
Common equity tier 1 capital		10.60				10.82				11.32				11.07				11.80				10.60				11.80
Tier 1 capital to risk-weighted assets		11.02				11.26				11.77				11.50				12.18				11.02				12.18
Total capital to risk-weighted assets		13.10				12.26				12.80				12.45				12.98				13.10				12.98
Tangible common equity to tangible assets1		10.01				10.17				10.08				10.02				11.78				10.01				11.78
Veritex Bank Capital Ratios:
Tier 1 capital to average assets (leverage)		11.07		%		10.64		%		10.80		%		10.65		%		10.87		%		11.07		%		10.87		%
Common equity tier 1 capital		12.00				11.61				12.16				11.61				11.01				12.00				11.01
Tier 1 capital to risk-weighted assets		12.00				11.61				12.16				11.61				11.01				12.00				11.01
Total capital to risk-weighted assets		12.44				12.00				12.54				11.93				11.64				12.44				11.64

¹Refer to "Reconciliation of Non-GAAP Financial Measures" after the financial highlights for a reconciliation of this non-GAAP financial measure to their most directly comparable GAAP measure.
²Annualized ratio for quarterly metrics.

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

		Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
ASSETS
Cash and cash equivalents		$	251,550			$	252,592			$	265,822			$	339,473			$	84,449
Securities		997,330				1,023,393				1,020,279				950,671				262,695
Other investments		89,923				89,795				81,088				75,920				23,174
Loans held for sale		14,080				10,715				7,524				8,002				1,258
Loans held for investment, mortgage warehouse		183,628				233,577				200,017				114,158				—
Loans held for investment		5,737,577				5,654,027				5,731,833				5,663,721				2,555,494
Total Loans		5,935,285				5,898,319				5,939,374				5,785,881				2,556,752
Allowance for loan losses		(29,834		)		(26,243		)		(24,712		)		(21,603		)		(19,255		)
Bank-owned life insurance		80,915				80,411				79,899				79,397				22,064
Bank premises, furniture and equipment, net		118,536				118,449				115,373				119,354				78,409
Other real estate owned		5,995				4,625				1,748				151				—
Intangible assets, net		72,263				75,363				78,347				81,245				15,896
Goodwill		370,658				370,463				370,221				368,268				161,447
Other assets		62,086				75,716				82,667				69,474				22,919
Branch assets held for sale		—				—				—				83,516				—
Total assets		$	7,954,707			$	7,962,883			$	8,010,106			$	7,931,747			$	3,208,550
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing deposits		$	1,556,500			$	1,473,126			$	1,476,668			$	1,439,630			$	626,283
Interest-bearing transaction and savings deposits		2,654,972				2,528,293				2,646,154				2,617,117				1,313,161
Certificates and other time deposits		1,682,878				1,876,427				2,042,266				2,240,968				682,984
Total deposits		5,894,350				5,877,846				6,165,088				6,297,715				2,622,428
Accounts payable and accrued expenses		37,197				45,475				44,414				42,621				5,413
Accrued interest payable		6,569				6,054				7,069				6,846				5,361
Advances from Federal Home Loan Bank		677,870				752,907				512,945				252,982				28,019
Subordinated debentures and subordinated notes		145,571				72,284				72,486				72,719				16,691
Other borrowings		2,353				2,787				2,811				2,778				—
Branch liabilities held for sale		—				—				—				62,381				—
Total liabilities		6,763,910				6,757,353				6,804,813				6,738,042				2,677,912
Commitments and contingencies
Stockholders’ equity:
Common stock		511				524				535				546				243
Additional paid-in capital		1,117,879				1,114,659				1,112,238				1,109,386				449,427
Retained earnings		147,911				125,344				104,652				84,559				83,968
Accumulated other comprehensive (loss)		19,061				23,837				17,741				7,016				(2,930		)
Treasury stock		(94,565		)		(58,834		)		(29,873		)		(7,802		)		(70		)
Total stockholders’ equity		1,190,797				1,205,530				1,205,293				1,193,705				530,638
Total liabilities and stockholders’ equity		$	7,954,707			$	7,962,883			$	8,010,106			$	7,931,747			$	3,208,550

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

		For the Quarter Ended																				For the Year Ended
		Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Dec 31, 2019				Dec 31, 2018
Interest income:
Loans, including fees		$	82,469			$	85,811			$	86,786			$	85,747			$	35,028			$	340,813			$	134,460
Securities		7,168				7,687				7,397				7,232				1,908				29,484				6,605
Deposits in financial institutions and Fed Funds sold		1,285				1,329				1,372				1,554				833				5,540				3,149
Other investments		820				816				622				691				413				2,949				855
Total interest income		91,742				95,643				96,177				95,224				38,182				378,786				145,069
Interest expense:
Transaction and savings deposits		8,203				10,381				11,405				10,366				5,412				40,355				17,599
Certificates and other time deposits		9,455				10,283				10,145				8,792				3,394				38,675				9,714
Advances from FHLB		2,661				3,081				2,187				2,055				377				9,984				1,701
Subordinated debentures and subordinated notes		1,559				1,024				998				1,094				304				4,675				1,031
Total interest expense		21,878				24,769				24,735				22,307				9,487				93,689				30,045
Net interest income		69,864				70,874				71,442				72,917				28,695				285,097				115,024
Provision for loan losses		3,493				9,674				3,335				5,012				1,364				21,514				6,603
Net interest income after provision for loan losses		66,371				61,200				68,107				67,905				27,331				263,583				108,421
Noninterest income:
Service charges and fees on deposit accounts		3,728				3,667				3,422				3,517				832				14,334				3,420
Loan fees		1,921				2,252				1,932				1,677				387				7,782				1,332
Loss on sales of investment securities		(438		)		—				(642		)		(772		)		(42		)		(1,852		)		(64		)
Gain on sales of loans		536				853				1,104				2,370				1,789				4,863				3,056
Rental income		371				369				373				368				310				1,481				1,654
Other		1,014				1,289				(155		)		1,324				343				3,472				1,677
Total noninterest income		7,132				8,430				6,034				8,484				3,619				30,080				11,075
Noninterest expense:
Salaries and employee benefits		18,917				17,530				17,459				18,885				8,278				72,791				31,138
Occupancy and equipment		4,198				4,044				4,014				4,129				2,412				16,385				10,679
Professional and regulatory fees		2,615				2,750				2,814				3,418				1,889				11,597				7,282
Data processing and software expense		1,880				2,252				2,309				1,924				888				8,365				3,020
Marketing		971				708				961				619				570				3,259				1,783
Amortization of intangibles		2,696				2,712				2,719				2,760				835				10,887				3,467
Telephone and communications		466				361				625				395				223				1,847				1,299
Merger and acquisition expense		918				1,035				5,790				31,217				1,150				38,960				5,220
Other		3,623				3,238				3,205				3,646				1,293				13,712				5,371
Total noninterest expense		36,284				34,630				39,896				66,993				17,538				177,803				69,259
Income before income tax expense		37,219				35,000				34,245				9,396				13,412				115,860				50,237
Income tax expense		8,168				7,595				7,369				1,989				3,587				25,121				10,896
Net income		$	29,051			$	27,405			$	26,876			$	7,407			$	9,825			$	90,739			$	39,341
Basic EPS		$	0.56			$	0.52			$	0.50			$	0.14			$	0.41			$	1.71			$	1.63
Diluted EPS		$	0.56			$	0.51			$	0.49			$	0.13			$	0.40			$	1.68			$	1.60
Weighted average basic shares outstanding		51,472				52,915				53,969				54,293				24,224				53,154				24,169
Weighted average diluted shares outstanding		52,263				53,873				54,929				55,439				24,532				53,978				24,590

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

		For the Quarter Ended
		December 31, 2019											September 30, 2019											December 31, 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
		(Dollars in thousands)
Assets
Interest-earning assets:
Loans1		$	5,692,773			$	80,779			5.63	%		$	5,702,696			$	84,022			5.85	%		$	2,502,084			$	35,028			5.55	%
Loans held for investment, mortgage warehouse		191,132				1,690				3.51			182,793				1,789				3.88			—				—				—
Securities		1,004,342				7,168				2.83			1,022,289				7,687				2.98			263,182				1,908				2.88
Interest-earning deposits in other banks		312,530				1,285				1.63			234,087				1,329				2.25			136,879				833				2.41
Other investments2		71,791				820				4.53			71,901				816				4.50			25,772				413				6.36
Total interest-earning assets		7,272,568				91,742				5.00			7,213,766				95,643				5.26			2,927,917				38,182				5.17
Allowance for loan losses		(27,564		)									(22,539		)									(18,338		)
Noninterest-earning assets		798,501											818,150											333,589
Total assets		$	8,043,505										$	8,009,377										$	3,243,168
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand and savings deposits		$	2,621,163			8,203				1.24	%		$	2,621,701			$	10,381			1.57	%		$	1,337,901			5,412				1.60	%
Certificates and other time deposits		1,789,544				9,455				2.10			1,953,084				10,283				2.09			655,776				3,394				2.05
Advances from FHLB		726,352				2,661				1.45			632,754				3,081				1.93			52,436				377				2.85
Subordinated debentures and subordinated notes		118,193				1,559				5.23			74,869				1,024				5.43			16,691				304				7.23
Total interest-bearing liabilities		5,255,252				21,878				1.65			5,282,408				24,769				1.86			2,062,804				9,487				1.82
Noninterest-bearing liabilities:
Noninterest-bearing deposits		1,540,406											1,467,127											643,958
Other liabilities		50,656											49,695											12,816
Total liabilities		6,846,314											6,799,230											2,719,578
Stockholders’ equity		1,197,191											1,210,147											523,590
Total liabilities and stockholders’ equity		$	8,043,505										$	8,009,377										$	3,243,168
Net interest rate spread3										3.35	%										3.40	%										3.35	%
Net interest income and margin4						$	69,864			3.81	%						$	70,874			3.90	%						$	28,695			3.89	%

¹ Includes average outstanding balances of loans held for sale of $10,643, $8,525, and $1,019 for the three months ended December 31, 2019, September 30, 2019 and December 31, 2018, respectively.
² The Company historically reported dividend income in the "other noninterest income" line item and has reclassified $408 of dividend income into other investments as of December 31, 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
(Unaudited)

		For the Year Ended December 31,
		2019												2018
		Average Outstanding Balance					Interest Earned/ Interest Paid				Average Yield/ Rate			Average Outstanding Balance					Interest Earned/ Interest Paid				Average Yield/ Rate
		(Dollars in thousands)
Assets
Interest-earning assets:
Loans1		$	5,722,039				$	334,025			5.96	%		$	2,382,946				$	134,460			5.64	%
Loans held for investment, mortgage warehouse		162,325					6,788				4.18			—					—				—
Securities		977,621					29,484				3.02			247,163					6,605				2.67
Interest-earning deposits in other banks		259,866					5,540				2.13			160,402					3,149				1.96
Other investments2		60,308					2,949				4.89			17,326					855				4.93
Total interest-earning assets		7,182,159					378,786				5.27			2,807,837					145,069				5.17
Allowance for loan losses		(23,533		)										(15,324		)
Noninterest-earning assets		799,257												339,915
Total assets		$	7,957,883											$	3,132,428
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand and savings deposits		$	2,648,113				40,355				1.52			$	1,277,186				17,599				1.38
Certificates and other time deposits		1,997,090					38,675				1.94			608,041					9,714				1.60
Advances from FHLB		502,681					9,984				1.99			87,366					1,701				1.95
Subordinated debentures and subordinated notes		86,110					4,675				5.43			16,748					1,031				6.16
Total interest-bearing liabilities		5,233,994					93,689				1.79			1,989,341					30,045				1.51
Noninterest-bearing liabilities:
Noninterest-bearing deposits		1,480,207												621,613
Other liabilities		44,809												12,456
Total liabilities		6,759,010												2,623,410
Stockholders’ equity		1,198,873												509,018
Total liabilities and stockholders’ equity		$	7,957,883											$	3,132,428
Net interest rate spread3											3.48	%											3.66	%
Net interest income and margin4							$	285,097			3.97	%							$	115,024			4.10	%

¹Includes average outstanding balances of loans held for sale of $8,762 and $1,198 for the twelve months ended December 31, 2019 and 2018, respectively.
² The Company historically reported dividend income in the "other noninterest income" line item and has reclassified $835 of dividend income into other investments as of December 31, 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
(Unaudited)

Yield Trend

		For the Quarter Ended
		Dec 31, 2019			Sep 30, 2019			Jun 30, 2019			Mar 31, 2019			Dec 31, 2018
Average yield on interest-earning assets:
Total loans1		5.63	%		5.85	%		5.92	%		5.96	%		5.55	%
Loans held for investment, mortgage warehouse		3.51			3.88			4.56			5.26			—
Securities		2.83			2.98			3.10			3.17			2.88
Interest-bearing deposits in other banks		1.63			2.25			2.41			2.39			2.41
Other investments		4.53			4.50			4.19			4.92			6.36
Total interest-earning assets		5.00	%		5.26	%		5.39	%		5.44	%		5.17	%
Average rate on interest-bearing liabilities:
Interest-bearing demand and savings deposits		1.24	%		1.57	%		1.69	%		1.64	%		1.60	%
Certificates and other time deposits		2.10			2.09			1.93			1.59			2.05
Advances from FHLB		1.45			1.93			2.62			2.68			2.85
Subordinated debentures and subordinated notes		5.23			5.43			5.32			5.85			7.23
Total interest-bearing liabilities		1.65	%		1.86	%		1.90	%		1.74	%		1.82	%
Net interest rate spread2		3.35	%		3.40	%		3.49	%		3.70	%		3.35	%
Net interest margin3		3.81	%		3.90	%		4.00	%		4.17	%		3.89	%

¹ Includes average outstanding balances of loans held for sale of $10,643, $8,525, $8,140, $7,709 and $1,019 for the three months ended December 31, 2019,   September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018, 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.

Supplemental Yield Trend

		For the Quarter Ended
		Dec 31, 2019			Sep 30, 2019			Jun 30, 2019			Mar 31, 2019			Dec 31, 2018
Average cost of interest-bearing deposits		1.59	%		1.79	%		1.79	%		1.62	%		1.75	%
Average costs of total deposits, including noninterest-bearing		1.18			1.36			1.38			1.25			1.32

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

Loans Held for Investment ("LHI") and Deposit Portfolio Composition

		Dec 31, 2019							Sep 30, 2019							Jun 30, 2019							Mar 31, 2019							Dec 31, 2018
		(Dollars in thousands)
Loans Held for Investment2
Originated Loans
Commercial		$	1,190,552			33.9	%		$	1,027,433			33.4	%		$	878,970			32.2	%		$	836,792			33.3	%		$	697,906			32.9	%
Real Estate:
Owner occupied commercial		276,508				7.9			253,043				8.2			229,243				8.4			215,088				8.6			188,847				8.9
Commercial		1,024,635				29.2			877,669				28.5			800,506				29.3			752,628				30.0			636,200				30.0
Construction and land		527,985				15.0			490,389				15.9			405,323				14.8			364,812				14.5			303,315				14.3
Farmland		16,939				0.5			7,986				0.3			15,944				0.6			8,247				0.3			7,898				0.4
1-4 family residential		324,725				9.2			315,839				10.3			290,808				10.7			274,880				11.0			235,092				11.1
Multi-family residential		141,414				4.0			95,258				3.1			101,973				3.7			48,777				2.0			47,371				2.2
Consumer		10,096				0.3			8,471				0.3			7,714				0.3			8,587				0.3			4,304				0.2
Total originated LHI		$	3,512,854			100	%		$	3,076,088			100	%		$	2,730,481			100	%		$	2,509,811			100	%		$	2,120,933			100	%
Acquired Loans
Commercial		$	522,286			23.5	%		$	683,823			26.5	%		$	909,074			30.3	%		$	975,878			30.9	%		$	62,866			14.4	%
Real Estate:
Owner occupied commercial		430,274				19.3			463,087				18.0			517,525				17.2			530,026				16.8			132,432				30.5
Commercial		759,566				34.1			832,841				32.3			927,019				30.9			948,815				30.0			145,553				33.5
Construction and land		101,389				4.6			133,233				5.2			138,527				4.6			149,897				4.8			21,548				5.0
Farmland		—				—			—				—			1,528				0.1			1,781				0.1			2,630				0.6
1-4 family residential		225,086				10.1			243,471				9.4			266,248				8.9			295,719				9.4			62,825				14.5
Multi-family residential		178,627				8.0			211,708				8.2			228,904				7.6			238,936				7.6			3,914				0.9
Consumer		7,361				0.4			9,642				0.4			12,848				0.4			13,180				0.4			2,808				0.6
Total acquired LHI		$	2,224,589			100	%		$	2,577,805			100	%		$	3,001,673			100	%		$	3,154,232			100	%		$	434,576			100	%
Mortgage warehouse		183,628							233,577							200,017							114,158							—
Total LHI1		$	5,921,071						$	5,887,470						$	5,932,171						$	5,778,201						$	2,555,509
Deposits2
Noninterest-bearing		$	1,556,500			26.4	%		$	1,473,126			25.1	%		$	1,476,668			24.0	%		$	1,439,630			22.9	%		$	626,283			23.8	%
Interest-bearing transaction		388,877				6.6			373,997				6.4			373,982				6.1			334,868				5.3			146,969				5.6
Money market		2,180,017				37.0			2,066,315				35.2			2,178,274				35.3			2,169,049				34.4			1,133,045				43.2
Savings		86,078				1.5			87,981				1.5			93,898				1.5			113,200				1.8			33,147				1.3
Certificates and other time deposits		1,682,878				28.5			1,876,427				31.8			2,042,266				33.1			2,240,968				35.6			682,984				26.1
Total deposits		$	5,894,350			100	%		$	5,877,846			100	%		$	6,165,088			100	%		$	6,297,715			100	%		$	2,622,428			100	%
Loan to Deposit Ratio		100.5		%					100.2		%					96.2		%					91.8		%					97.4		%

¹ Total loans held for investment does not include deferred costs of $134 thousand at December 31, 2019 and  September 30, 2019, respectively,  deferred fees of $321 thousand at June 30, 2019 and  March 31, 2019, respectively, and deferred fees of $15 thousand at December 31, 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
(Unaudited)

Asset Quality

	For the Quarter Ended																				For the Year Ended
	Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Dec 31, 2019				Dec 31, 2018
	(Dollars in thousands)
Nonperforming Assets ("NPAs"):
Originated nonaccrual loans1	$	5,100			$	5,081			$	4,751			$	5,739			$	5,358			$	5,100			$	5,358
Acquired nonaccrual loans1	24,679				5,091				10,982				12,944				19,387				24,679				19,387
Originated accruing loans 90 or more days past due	2,039				815				12,738				2,329				—				2,039				—
Acquired accruing loans 90 or more days past due2	1,621				1,379				13,036				1,974				—				1,621				—
Total nonperforming loans held for investment ("NPLs")	33,439				12,366				41,507				22,986				24,745				33,439				24,745
Other real estate owned	5,995				4,625				1,748				151				—				5,995				—
Total NPAs	$	39,434			$	16,991			$	43,255			$	23,137			$	24,745			$	39,434			$	24,745
Charge-offs:
Residential	$	—			$	—			$	(157	)		$	—			$	—			$	(157	)		$	—
Commercial	—				(8,101		)		(143		)		(2,654		)		(26		)		(10,898		)		(175		)
Consumer	(48		)		(113		)		(30		)		(74		)		—				(265		)		(22		)
Total charge-offs	(48		)		(8,214		)		(330		)		(2,728		)		(26		)		(11,320		)		(197		)
Recoveries:
Residential	5				—				54				8				—				67				—
Commercial	135				71				10				10				7				226				41
Consumer	6				—				40				46				—				92				—
Total recoveries	146				71				104				64				7				385				41
Net charge-offs	$	98			$	(8,143	)		$	(226	)		$	(2,664	)		$	(19	)		$	(10,935	)		$	(156	)
Allowance for loan losses ("ALLL") at end of period	$	29,834			$	26,243			$	24,712			$	21,603			$	19,255			$	29,834			$	19,255
Remaining purchase discount ("PD") on acquired loans3	$	47,774			$	58,503			$	80,365			$	83,365			$	12,098			$	47,774			$	12,098
Asset Quality Ratios:
NPAs to total assets	0.50		%		0.21		%		0.54		%		0.29		%		0.77		%		0.50		%		0.77		%
NPLs to total LHI	0.56				0.21				0.70				0.40				0.97				0.56				0.97
ALLL to total LHI	0.50				0.45				0.42				0.37				0.75				0.50				0.75
ALLL and remaining PD on acquired loans to LHI3	1.31				1.44				1.77				1.82				1.23				1.31				1.23
Net charge-offs to average loans outstanding	—				0.14				—				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 re-classified $3,158, $5,040 and $2,485 for the three months ended June 30, 2019, March 31, 2019 and December 31, 2018, respectively, and $2,485 for the year ended December 31, 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 the 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
		Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018
		(Dollars in thousands, except per share data)
Tangible Common Equity
Total stockholders' equity		$	1,190,797			$	1,205,530			$	1,205,293			$	1,193,705			$	530,638
Adjustments:
Goodwill		(370,658		)		(370,463		)		(370,221		)		(368,268		)		(161,447		)
Core deposit intangibles		(67,563		)		(70,014		)		(72,465		)		(74,916		)		(11,675		)
Tangible common equity		$	752,576			$	765,053			$	762,607			$	750,521			$	357,516
Common shares outstanding		51,064				52,373				53,457				54,563				24,254
Book value per common share		$	23.32			$	23.02			$	22.55			$	21.88			$	21.88
Tangible book value per common share		$	14.74			$	14.61			$	14.27			$	13.76			$	14.74

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
		Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018
		(Dollars in thousands)
Tangible Common Equity
Total stockholders' equity		$	1,190,797			$	1,205,530			$	1,205,293			$	1,193,705			$	530,638
Adjustments:
Goodwill		(370,658		)		(370,463		)		(370,221		)		(368,268		)		(161,447		)
Core deposit intangibles		(67,563		)		(70,014		)		(72,465		)		(74,916		)		(11,675		)
Tangible common equity		$	752,576			$	765,053			$	762,607			$	750,521			$	357,516
Tangible Assets
Total assets		$	7,954,707			$	7,962,883			$	8,010,106			$	7,931,747			$	3,208,550
Adjustments:
Goodwill		(370,658		)		(370,463		)		(370,221		)		(368,268		)		(161,447		)
Core deposit intangibles		(67,563		)		(70,014		)		(72,465		)		(74,916		)		(11,675		)
Tangible Assets		$	7,516,486			$	7,522,406			$	7,567,420			$	7,488,563			$	3,035,428
Tangible Common Equity to Tangible Assets		10.01		%		10.17		%		10.08		%		10.02		%		11.78		%

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) net income adjusted for amortization of core deposit intangibles as net income available for common stockholders, 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 on average tangible common equity as net income adjusted for amortization of core deposit intangibles (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 common 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 common equity to average tangible common equity and net income to net income adjusted for amortization of core deposit intangibles, net of taxes and presents our return on average tangible common equity:

		For the Quarter Ended																				For the Year Ended
		Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Dec 31, 2019				Dec 31, 2018
		(Dollars in thousands)
Net income adjusted for amortization of core deposit intangibles
Net income		$	29,051			$	27,405			$	26,876			$	7,407			$	9,825			$	90,739			$	39,341
Adjustments:
Plus: Amortization of core deposit intangibles		2,451				2,451				2,451				2,477				432				9,830				4,060
Less: Tax benefit at the statutory rate		515				515				515				520				91				2,065				859
Net income adjusted for amortization of core deposit intangibles		$	30,987			$	29,341			$	28,812			$	9,364			$	10,166			$	98,504			$	42,542
Average Tangible Common Equity
Total average stockholders' equity		$	1,197,191			$	1,210,147			$	1,200,632			$	1,190,266			$	523,590			$	1,198,873			$	509,018
Adjustments:
Average goodwill		(370,463		)		(370,224		)		(369,255		)		(366,795		)		(161,447		)		(369,441		)		(160,907		)
Average core deposit intangibles		(68,913		)		(71,355		)		(73,875		)		(76,727		)		(11,932		)		(72,692		)		(18,005		)
Average tangible common equity		$	757,815			$	768,568			$	757,502			$	746,744			$	350,211			$	756,740			$	330,106
Return on Average Tangible Common Equity (Annualized)		16.22		%		15.15		%		15.26		%		5.09		%		11.52		%		13.02		%		12.89		%

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 net income 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 Quarter Ended																				For the Year Ended
		Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Dec 31, 2019				Dec 31, 2018
		(Dollars in thousands)
Operating Earnings
Net income		$	29,051			$	27,405			$	26,876			$	7,407			$	9,825			$	90,739			$	39,341
Plus: Loss on sale of securities available for sale, net		438				—				642				772				42				1,852				42
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		918				1,035				5,431				31,217				1,150				38,601				5,220
Operating pre-tax income		30,407				28,440				33,308				39,396				11,017				131,551				45,879
Less: Tax impact of adjustments3		(23		)		217				1,351				6,717				(440		)		8,262				633
Plus: Tax Act re-measurement		—				—				—				—				—				—				5
Plus: Other M&A tax items4		829				406				277				—				—				1,512				—
Plus: Discrete tax adjustments5		(965		)		—				—				—				—				(965		)		—
Operating net income		$	30,294			$	28,629			$	32,234			$	32,679			$	11,457			$	123,836			$	45,251
Weighted average diluted shares outstanding		52,263				53,873				54,929				55,439				24,532				53,978				24,590
Diluted EPS		$	0.56			$	0.51			$	0.49			$	0.13			$	0.40			$	1.68			$	1.60
Diluted operating EPS		$	0.58			$	0.53			$	0.59			$	0.59			$	0.47			$	2.29			$	1.84

¹ Loss on sale of disposed branch assets for the year ended December 31, 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 year ended December 31, 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 A 2019 and 2018 transaction cost study were completed during the fourth quarter of 2019 and 2018, respectively, resulting in $1,468 thousand and $3,460 thousand of expenses paid that are non-deductible merger and acquisition expenses for the year ended December 31, 2019 and 2018, respectively. As such, $308 thousand and $727 thousand is the tax impact of these non-deductible expenses that are reflected in the year ended December 31, 2019 and December 31, 2018 tax impact of adjustments amounts reported, respectively. All other adjustments to operating net income are taxed at the statutory rate.
⁴ Other M&A tax items of $829 thousand, $406 thousand and $277 thousand recorded during the three months ended December 31, 2019, September 30, 2019 and June 30, 2019, respectively, relate to permanent tax expense recognized by the Company as a result of deduction limitations on compensation paid to covered employees in excess of the 162(m) limitation directly due to change-in-control payments made to covered employees in connection with the Green acquisition.
⁵ Discrete tax adjustments of $965 thousand were recorded during the fourth quarter of 2019 primarily due to the Company recording a net tax benefit of $1.6 million as a result of the Company settling an audit with the IRS. The Company released an uncertain tax position reserve that was assumed in the Green acquisition resulting in a $2.2 million tax benefit, offset by tax expense totaling $598 thousand that were recorded due to the Tax Cuts and Jobs Act rate change on deferred tax assets resulting from the IRS audit settlement.  The net IRS settlement was offset by various discrete, non-recurring tax expenses totaling $0.6 million.

		For the Quarter Ended																				For the Year Ended
		Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Dec 31, 2019				Dec 31, 2018
		(Dollars in thousands)
Pre-Tax, Pre-Provision Operating Earnings
Net Income		$	29,051			$	27,405			$	26,876			$	7,407			$	9,825			$	90,739			$	39,341
Plus: Provision for income taxes		8,168				7,595				7,369				1,989				3,587				25,121				10,896
Pus: Provision for loan losses		3,493				9,674				3,335				5,012				1,364				21,514				6,603
Plus: Loss on sale of securities available for sale, net		438				—				642				772				42				1,852				42
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		918				1,035				5,431				31,217				1,150				38,601				5,220
Net pre-tax, pre-provision operating earnings		$	42,068			$	45,709			$	44,012			$	46,397			$	15,968			$	178,186			$	63,378
Total average assets		$	8,043,505			$	8,009,377			$	3,059,456			$	2,989,974			$	3,243,168			$	7,957,883			$	3,132,428
Pre-tax, pre-provision operating return on average assets3		2.07		%		2.26		%		2.22		%		2.40		%		1.95		%		2.24		%		2.02		%
Average Total Assets		$	8,043,505			$	8,009,377			$	7,937,319			$	7,841,267			$	3,243,168			$	7,957,883			$	3,132,428
Return on average assets3		1.43		%		1.36		%		1.36		%		0.38		%		1.20		%		1.14		%		1.26		%
Operating return on average assets3		1.49				1.42				1.63				1.69				1.40				1.56				1.44
Operating earnings adjusted for amortization of intangibles
Net operating earnings		$	30,294			$	28,629			$	32,234			$	32,679			$	11,457			$	123,836			$	45,251
Adjustments:
Plus: Amortization of core deposit intangibles		2,451				2,451				2,451				2,477				432				9,830				4,060
Less: Tax benefit at the statutory rate		515				515				515				520				91				2,065				859
Operating earnings adjusted for amortization of intangibles		$	32,230			$	30,565			$	34,170			$	34,636			$	11,798			$	131,601			$	48,452
Average Tangible Common Equity
Total average stockholders' equity		$	1,197,191			$	1,210,147			$	1,200,632			$	1,190,266			$	523,590			$	1,198,873			$	509,018
Adjustments:
Average goodwill		(370,463		)		(370,224		)		(369,255		)		(366,795		)		(161,447		)		(369,441		)		(160,907		)
Average core deposit intangibles		(68,913		)		(71,355		)		(73,875		)		(76,727		)		(11,932		)		(72,692		)		(18,005		)
Average tangible common equity		$	757,815			$	768,568			$	757,502			$	746,744			$	350,211			$	756,740			$	330,106
Operating return on average tangible common equity3		16.87		%		15.78		%		18.09		%		18.81		%		13.37		%		17.39		%		14.68		%
Efficiency ratio		47.12		%		43.67		%		51.49		%		82.30		%		54.27		%		56.41		%		54.92		%
Operating efficiency ratio		45.67		%		42.36		%		43.66		%		43.54		%		50.65		%		43.80		%		49.60		%

¹ Loss on sale of disposed branch assets for the year ended December 31, 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 year ended December 31, 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 for quarterly metrics.

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

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

Source: Veritex Holdings, Inc.