UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): October 22, 2018
VERITEX HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Texas | 001-36682 | 27-0973566 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||
8214 Westchester Drive, Suite 800
Dallas, Texas 75225
(Address of principal executive offices)
(972) 349-6200
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☒ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Item 2.02 Results of Operations and Financial Condition
Item 7.01 Regulation FD Disclosure
On October 22, 2018, Veritex Holdings, Inc. (the “Company”), the holding company for Veritex Community Bank, a Texas state chartered bank, issued a press release describing its results of operations for the third quarter ended September 30, 2018. A copy of the press release is included as Exhibit 99.1 hereto and is incorporated herein by reference.
On Tuesday, October 23, 2018 at 8:30 a.m. Central Time, the Company will host an investor conference call and webcast to review their third quarter 2018 financial results. The webcast will include a slide presentation which consists of information regarding the Company’s operating and growth strategies and financial performance. The presentation materials will be posted on the Company’s website on October 22, 2018. The presentation materials are attached hereto as Exhibit 99.2, which is incorporated herein by reference.
As provided in General Instructions B.2 to Form 8-K, the information furnished in Items 2.02, 7.01, Exhibit 99.1 and Exhibit 99.2 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 8.01 Other Events
The only information contained in this Form 8-K being filed for the purposes of Rule 425 of the Securities Act is the information relating solely to the proposed merger between the Company and Green Bancorp, Inc. contained in the press release and presentation materials furnished herewith as Exhibit 99.1 and 99.2
Important Additional Information will be Filed with the SEC
This Current Report on Form 8-K does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval with respect to the proposed acquisition by Veritex of Green. No offer of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act of 1933, as amended, and no offer to sell or solicitation of an offer to buy shall be made in any jurisdiction in which such offer, solicitation or sale would be unlawful.
In connection with the proposed transaction, Veritex has filed with the U.S. Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 (File No. 333-227161) containing a joint proxy statement of Veritex and Green and a prospectus of Veritex (the “Joint Proxy/Prospectus”), and each of Veritex and Green may file with the SEC other documents regarding the proposed transaction. The definitive Joint Proxy/Prospectus has been mailed to shareholders of Veritex and Green. SHAREHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY/PROSPECTUS REGARDING THE TRANSACTION CAREFULLY AND IN THEIR ENTIRETY AND ANY OTHER DOCUMENTS FILED WITH THE SEC BY VERITEX AND GREEN, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors can obtain free copies of the Registration Statement and the Joint Proxy/Prospectus and other documents filed with the SEC by Veritex and Green through the website maintained by the SEC at www.sec.gov. Free copies of the Registration Statement and the Joint Proxy/Prospectus and other documents filed with the SEC can also be obtained by directing a request to Veritex Holdings, Inc., 8214 Westchester Drive, Suite 400, Dallas, Texas 75225, or by directing a request to Green Bancorp, Inc., 4000 Greenbriar Street, Houston, Texas 77098.
Participants in the Solicitation
Veritex, Green and their respective directors and certain of their executive officers and employees may be deemed to be participants in the solicitation of proxies from the shareholders of Green or Veritex in respect of the proposed transaction. Information regarding Veritex’s directors and executive officers is available in its proxy statement for its 2018 annual meeting of shareholders, which was filed with the SEC on April 3, 2018, and information regarding Green’s directors and executive officers is available in its proxy statement for its 2018 annual meeting of shareholders, which was filed with the SEC on April 13, 2018. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the Joint Proxy/Prospectus and other relevant materials to be filed with the SEC when they become available. Free copies of this document may be obtained as described in the preceding paragraph.
Forward-Looking Statements
This Current Report on Form 8-K includes “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, statements relating to the impact Veritex expects its proposed acquisition of Green to have on the combined entity’s operations, financial condition, and financial results, and Veritex’s expectations about its ability to successfully integrate the combined businesses and the amount of cost savings and overall operational efficiencies Veritex expects to realize as a result of the proposed acquisition. The forward-looking statements also include statements about 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 economic 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. Further, certain factors that could affect future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to, the possibility that the proposed acquisition does not close when expected or at all because required regulatory, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all, the failure to close for any other reason, changes in Veritex’s share price before closing, that the businesses of Veritex and Green will not be integrated successfully, that the cost savings and any synergies from the proposed acquisition may not be fully realized or may take longer to realize than expected, disruption from the proposed acquisition making it more difficult to maintain relationships with employees, customers or other parties with whom Veritex or Green have business relationships, diversion of management time on merger-related issues, risks relating to the potential dilutive effect of shares of Veritex common stock to be issued in the transaction, the reaction to the transaction of the companies’ customers, employees and counterparties and other factors, many of which are beyond the control of Veritex and Green. 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, 2017, the Annual Report on Form 10-K filed by Green for the year ended December 31, 2017 and any updates to those risk factors set forth in Veritex’s and Green’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings, which have been filed with the SEC and 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 or Green 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. Neither Veritex nor Green undertakes 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 Current Report on Form 8-K are expressly qualified in their entirety by the cautionary statements contained or referred to herein.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits. The following is furnished as an exhibit to this Current Report on Form 8-K:
Exhibit Number | Description | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Veritex Holdings, Inc. | ||
By: | /s/ C. Malcolm Holland, III | |
C. Malcolm Holland, III | ||
Chairman and Chief Executive Officer | ||
Date: October 22, 2018 | ||
Exhibit 99.1
VERITEX HOLDINGS, INC. REPORTS THIRD QUARTER RESULTS
FOCUS ON STRONG DEPOSIT GROWTH AND PROGRESS ON PREVIOUSLY ANNOUNCED GREEN ACQUISITION
Dallas, TX — October 22, 2018 —Veritex Holdings, Inc. (“Veritex” or the “Company”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the quarter ended September 30, 2018. The Company reported a record level of organic deposit growth of $165.8 million, or 6.7% from June 30, 2018, resulting in ending deposits of $2.7 billion at September 30, 2018 compared to the quarter ended June 30, 2018. Net income available to common stockholders of $8.9 million, or $0.36 diluted earnings per share (“EPS”), compared to $10.2 million, or $0.42 diluted EPS, for the quarter ended June 30, 2018 and $5.1 million, or $0.25 diluted EPS, for the quarter ended September 30, 2017. Core net income available to common stockholders1 totaled $8.3 million, or $0.34 core diluted EPS1, compared to $9.9 million, or $0.40 core diluted EPS, for the quarter ended June 30, 2018 and $5.6 million, or $0.28 diluted EPS, for the quarter ended September 30, 2017.
C. Malcolm Holland, the Company’s Chairman and Chief Executive Officer, said, “I am excited about the progress we’ve made with the strategic merger with Green Bank in creating a premier Texas community banking franchise. While our employees work diligently on a seamless and successful merger, organic growth continues to be our main focus as evidenced by our nine month annualized growth rate for total loans and deposits of 12.6% and 26.7%, respectively. Our focus on deposits has begun to show real results.”
2018 Third Quarter Summary
• | Announced merger with Green Bancshares, Inc. (“Green”) on July 24, 2018 and filed regulatory applications and registration statement with the U.S. Securities and Exchange Commission. |
• | Net income available to common stockholders of $8.9 million, or $0.36 diluted EPS, including $2.7 million of acquisition expense representing $0.09 diluted EPS. |
• | Total deposits increased $165.8 million, or 6.7%, to $2.7 billion compared to the quarter ended June 30, 2018. The record level of deposits growth represented 26.7% annualized growth. |
• | Noninterest-bearing deposits increased $50.4 million, or 8.3%, to $661.8 million compared to the quarter ended June 30, 2018. |
• | Total loans increased $25.6 million, or 1.1%, to $2.4 billion compared to the quarter ended June 30, 2018, and average loans increased $98.8 million, or 4.2%, to $2.4 billion compared to the quarter ended June 30, 2018. |
• | New loan commitments of $477.5 million represents the largest recorded quarterly activity life to date for the Company. Year to date new commitments exceed $1.2 billion. |
• | Nonaccrual loans and accruing loans greater than 90 days past due increased by $17.6 million and $3.7 million, respectively, due to three acquired loans. |
• | Tangible book value per share increased $0.79 to $14.02 at September 30, 2018 from $13.23 at September 30, 2017. |
• | Received American Bankers’ “Best Banks to Work For” for the fifth consecutive year. |
1As part of how we measure our results, we use certain non-GAAP financial measures to evaluate performance. These non-GAAP financial measures are reconciled in the section labeled “Reconciliation of Non-GAAP Financial Measures” at the end of this press release.
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Result of Operations for the Three Months Ended September 30, 2018
Net Interest Income
For the three months ended September 30, 2018, net interest income before provision for loan losses was $29.2 million and net interest margin was 4.00% compared to $27.6 million and 4.07%, respectively, for the three months ended June 30, 2018. The $1.6 million increase in net interest income was primarily due to an increase in interest income on loans, which was driven by increased volume in all loan categories resulting from continued organic loan growth. Net interest margin decreased 7 basis points from the three months ended June 30, 2018 primarily due to an increase in the average rate paid on interest-bearing liabilities during the three months ended September 30, 2018. Average interest-bearing deposits grew to $1.93 billion for the three months ended September 30, 2018 from $1.86 billion for the three months ended June 30, 2018 which was primarily due to increases in average outstanding correspondent money market and brokered deposit account balances which have interest rates above the average rate paid on our remaining interest-bearing deposits. As a result, the average interest-bearing deposit cost of funds increased to 1.59% for the three months ended September 30, 2018 from 1.39% for the three months ended June 30, 2018.
Net interest income before provision for loan losses increased $10.1 million from $19.1 million to $29.2 million and net interest margin increased 22 basis points from 3.78% to 4.00% for the three months ended September 30, 2018 as compared to the same period in 2017. The increase in net interest income before provision for loan losses was primarily driven by higher loan balances and yields resulting from loans acquired from the acquisitions of Sovereign Bancshares, Inc. (“Sovereign”) and Liberty Bancshares, Inc. (“Liberty”) and continued organic loan growth during the three months ended September 30, 2018 compared to the three months ended September 30, 2017. For the three months ended September 30, 2018, average loan balance increased by $789.0 million compared to the three months ended September 30, 2017, which resulted in a $14.4 million increase in interest income. This was partially offset by an increase in the average rate paid on interest-bearing liabilities discussed above which resulted in a $5.0 million increase in interest on deposit accounts. Net interest margin increased 22 basis points from the three months ended September 30, 2017 primarily due to increased loan balances and yields as discussed above and a change in mix of earning assets. Average loan balances represented 84.1% of average interest-earnings assets for the three months ended September 30, 2018 compared to 81.9% for the three months ended September 30, 2017.
Noninterest Income
Noninterest income for the three months ended September 30, 2018 was $2.5 million, a decrease of $82 thousand or 3.2% compared to the three months ended June 30, 2018. The decrease was primarily due to a $148 thousand decrease in the gain on sale of Small Business Administration loans for the three months ended September 30, 2018.
Compared to the three months ended September 30, 2017, noninterest income for the three months ended September 30, 2018 grew $533 thousand or 27.0%. The increase was primarily due to $414 thousand of rental income resulting from the purchase of our headquarter building on December 6, 2017 and a $140 thousand increase in service charges and fees on deposit accounts resulting from the additional income on acquired Sovereign and Liberty deposit accounts earned during the three months ended September 30, 2018.
Noninterest Expense
Noninterest expense was $18.2 million for the three months ended September 30, 2018, compared to $16.2 million for the three months ended June 30, 2018, an increase of $2.0 million or 12.8%. The increase was primarily driven by a $2.7 million increase in legal and professional fees paid in connection with the upcoming merger with Green. The increase was partially offset by a $379 thousand decrease in data processing and software expense as the Company converted Liberty’s operating systems into the Company’s information technology systems during the three months ended June 30, 2018 with no corresponding conversion expense for the three months ended September 30, 2018.
Compared to the three months ended September 30, 2017, noninterest expense for the three months ended September 30, 2018 increased $5.7 million, or 45.7%. The increase was primarily driven by a $2.7 million increase in legal and professional fees paid in connection with the upcoming merger with Green discussed above. The increase was also attributable to an increase of $1.5 million in salaries and employee benefits expense primarily related to the additional full-time equivalent employees retained in the Sovereign and Liberty acquisitions. Additionally, occupancy and equipment expense increased $1.3 million primarily due to increased lease payments, depreciation expense and property taxes incurred as a result of the Sovereign and Liberty acquisitions. Amortization of intangibles also increased $574 thousand primarily due to a $366 thousand increase in amortization of intangible in-place lease assets associated with the purchase of our headquarter building in December 2017.
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Income Taxes
Income tax expense for the three months ended September 30, 2018 totaled $1.4 million, a decrease of $902 thousand, or 38.4%, compared to the three months ended June 30, 2018. The Company’s effective tax rate was approximately 13.9% and 18.7% for the three months ended September 30, 2018 and June 30, 2018, respectively. The decrease in the effective tax rate across periods was primarily due to a net discrete tax benefit of $688 thousand resulting from the Company’s revised estimate of deferred taxes based on the preparation of our 2017 U.S. federal income tax return. The primary deferred taxes estimate change related to depreciation as the Company completed a cost segregation study in 2018 resulting in shorter tax depreciable lives than originally estimated. Excluding the net impact of discrete tax items, the Company’s effective tax rate was approximately 20.7% and 19.7% for the three months ended September 30, 2018 and June 30, 2018, respectively.
Compared to the three months ended September 30, 2017, income tax expense decreased $1.2 million, or 45.4%, to $1.4 million for the three months ended September 30, 2018. The Company’s effective tax rate was approximately 13.9% and 33.8% for the three months ended September 30, 2018 and 2017, respectively. The decrease in the effective tax rate for the period relative to the comparative period was primarily due to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”) on December 22, 2017 which lowered our federal statutory tax rate, effective on January 1, 2018. The Company’s provision for the three months ended September 30, 2018 was also impacted by discrete tax benefits of $688 thousand from revising its deferred taxes estimate as discussed above.
Financial Condition
Total loans were $2.4 billion at September 30, 2018, an increase of $25.6 million, or 1.1%, compared to June 30, 2018. The net increase was the result of the continued execution and success of our loan growth strategy.
Total deposits were $2.7 billion at September 30, 2018, an increase of $165.8 million, or 6.7%, compared to June 30, 2018. The increase was primarily the result of increases of $87.4 million and $50.4 million in financial institution money market accounts and non-interest bearing demand deposits, respectively.
Asset Quality
Our allowance for loan losses as a percentage of loans was 0.73%, 0.61% and 0.55% of total loans at September 30, 2018, June 30, 2018 and September 30, 2017, respectively. The allowance for loan losses as a percentage of total loans for each of the three quarters ended was determined by the qualitative factors around the nature, volume and mix of the loan portfolio. The increase in the allowance for loan loss as a percentage of loans from June 30, 2018 and September 30, 2017 was attributable to continued execution and success of our organic growth strategy offset by payoffs of acquired loans and an increase in specific reserves on certain non-performing loans. We recorded a provision for loan losses of $3.1 million for the quarter ended September 30, 2018 compared to a provision of $1.5 million and $752 thousand for the quarter ended June 30, 2018 and September 30, 2017, respectively. The increase in provision for loan losses is primarily due to an increase in our loans as well an increase on the recorded provision on purchased credit impaired loans of $1.0 million and $1.3 million compared to the quarter ended June 30, 2018 and September 30, 2017, respectively.
Nonperforming assets totaled $26.1 million, or 0.80%, of total assets at September 30, 2018 compared to $4.9 million, or 0.16%, of total assets at June 30, 2018 and $2.6 million, or 0.11%, of total assets at September 30, 2017. The increase of $21.2 million and $23.5 million in nonperforming assets compared to June 30, 2018 and September 30, 2017, respectively, was primarily due to $17.2 million of purchased credit impaired loans placed on non-accrual status resulting from information obtained during the three months ended September 30, 2018 which precluded the Company from reasonably estimating the timing and amount of future cash flows. Excluding these purchased credit impaired loans compared to June 30, 2018, the increase of $4.0 million in nonperforming assets was a result of an increase in nonperforming loans of $4.0 million which is primarily made up of a $3.8 million loan that is 90 days past due and still accruing that we consider well-secured and in the process of collection. Excluding these purchased credit impaired loans compared to September 30, 2017, the increase of $6.3 million in nonperforming assets was a result of an increase in nonperforming loans of $7.0 million which is primarily comprised of the $3.8 million accruing loan discussed above partially offset by a decrease in other real estate owned of $738 thousand.
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 core net interest income, core noninterest income, core noninterest expense, core net income from operations, core income tax expense, core net income, core net income available to common
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stockholders, core diluted earnings per share, core efficiency ratio, core net interest margin, core return on average assets, tangible common equity, tangible assets, tangible book value per common share and the ratio of tangible common equity to tangible assets. The Company has included in this release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to “Reconciliation of Non-GAAP Financial Measures” at the end of this 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 Tuesday, October 23, 2018 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/m6/p/zgngdw7i 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 #2178309. This replay, as well as the webcast, will be available until October 30, 2018.
About Veritex Holdings, Inc.
Headquartered in Dallas, Texas, Veritex is a bank holding company that conducts banking activities through its wholly-owned subsidiary, Veritex Community Bank, with locations throughout the Dallas-Fort Worth metroplex and in the Houston metropolitan area. Veritex Community Bank is a Texas state chartered bank regulated by the Texas Department of Banking and the Board of Governors of the Federal Reserve System. For more information, visit www.veritexbank.com.
Media Contact:
LaVonda Renfro
972-349-6200
lrenfro@veritexbank.com
Investor Relations:
Susan Caudle
972-349-6132
scaudle@veritexbank.com
Forward-Looking Statements
This 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 important assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, statements relating to the impact Veritex expects its proposed acquisition of Green to have on the combined entity’s operations, financial condition, and financial results, and Veritex’s expectations about its ability to successfully integrate the combined businesses and the amount of cost savings and overall operational efficiencies Veritex expects to realize as a result of the proposed acquisition. The forward-looking statements also include statements about 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 economic 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. Further, certain factors that could affect future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to, the possibility that the proposed acquisition does not close when expected or at all because required regulatory, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all, the failure to close for any other reason, changes in Veritex’s share price before closing, that the businesses of Veritex and Green will not be integrated successfully, that the cost savings and any synergies from the proposed acquisition may not be fully realized or may take longer to realize than expected, disruption from the proposed acquisition making it
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more difficult to maintain relationships with employees, customers or other parties with whom Veritex or Green have business relationships, diversion of management time on merger-related issues, risks relating to the potential dilutive effect of shares of Veritex common stock to be issued in the transaction, the reaction to the transaction of the companies’ customers, employees and counterparties and other factors, many of which are beyond the control of Veritex and Green. 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, 2017, the Annual Report on Form 10-K filed by Green for the year ended December 31, 2017 and any updates to those risk factors set forth in Veritex’s and Green’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings, which have been filed with the SEC and 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 or Green 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. Neither Veritex nor Green undertakes 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 communication 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. Annualized, pro forma, projected and estimated numbers are used for illustrative purposes only, are not forecasts and may not reflect actual results.
Important Additional Information will be Filed with the SEC
This release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval with respect to the proposed acquisition by Veritex of Green. No offer of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act of 1933, as amended, and no offer to sell or solicitation of an offer to buy shall be made in any jurisdiction in which such offer, solicitation or sale would be unlawful.
In connection with the proposed transaction, Veritex has filed with the U.S. Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 (File No. 333-227161) containing a joint proxy statement of Veritex and Green and a prospectus of Veritex (the “Joint Proxy/Prospectus”), and each of Veritex and Green may file with the SEC other documents regarding the proposed transaction. The definitive Joint Proxy/Prospectus has been mailed to shareholders of Veritex and Green. SHAREHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY/PROSPECTUS REGARDING THE TRANSACTION CAREFULLY AND IN THEIR ENTIRETY AND ANY OTHER DOCUMENTS FILED WITH THE SEC BY VERITEX AND GREEN, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors can obtain free copies of the Registration Statement and the Joint Proxy/Prospectus and other documents filed with the SEC by Veritex and Green through the website maintained by the SEC at www.sec.gov. Free copies of the Registration Statement and the Joint Proxy/Prospectus and other documents filed with the SEC can also be obtained by directing a request to Veritex Holdings, Inc., 8214 Westchester Drive, Suite 400, Dallas, Texas 75225, or by directing a request to Green Bancorp, Inc., 4000 Greenbriar Street, Houston, Texas 77098.
Participants in the Solicitation
Veritex, Green and their respective directors and certain of their executive officers and employees may be deemed to be participants in the solicitation of proxies from the shareholders of Green or Veritex in respect of the proposed transaction. Information regarding Veritex’s directors and executive officers is available in its proxy statement for its 2018 annual meeting of shareholders, which was filed with the SEC on April 3, 2018, and information regarding Green’s directors and executive officers is available in its proxy statement for its 2018 annual meeting of shareholders, which was filed with the SEC on April 13, 2018. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the Joint Proxy/Prospectus and other relevant materials to be filed with the SEC when they become available. Free copies of this document may be obtained as described in the preceding paragraph.
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VERITEX HOLDINGS, INC. AND SUBSIDIARY
Consolidated Financial Highlights - (Unaudited)
(In thousands, except percentages)
At and For the Three Months Ended | ||||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | ||||||||||||||||
Selected Financial Data: | ||||||||||||||||||||
Net income | $ | 8,935 | $ | 10,193 | $ | 10,388 | $ | 3,257 | $ | 5,182 | ||||||||||
Net income available to common stockholders | 8,935 | 10,193 | 10,388 | 3,257 | 5,140 | |||||||||||||||
Total assets | 3,275,846 | 3,133,627 | 3,063,319 | 2,945,583 | 2,494,861 | |||||||||||||||
Total loans(1) | 2,444,515 | 2,418,908 | 2,316,089 | 2,259,831 | 1,907,509 | |||||||||||||||
Provision for loan losses | 3,057 | 1,504 | 678 | 2,529 | 752 | |||||||||||||||
Allowance for loan losses | 17,909 | 14,842 | 13,401 | 12,808 | 10,492 | |||||||||||||||
Noninterest-bearing deposits(2) | 661,754 | 611,315 | 597,236 | 612,830 | 495,627 | |||||||||||||||
Total deposits(2) | 2,656,254 | 2,490,418 | 2,493,794 | 2,278,630 | 1,985,658 | |||||||||||||||
Total stockholders’ equity | 517,212 | 508,441 | 497,433 | 488,929 | 445,929 | |||||||||||||||
Summary Performance Ratios: | ||||||||||||||||||||
Return on average assets(3) | 1.10 | % | 1.34 | % | 1.41 | % | 0.48 | % | 0.94 | % | ||||||||||
Return on average equity(3) | 6.88 | 8.11 | 8.55 | 2.78 | 5.44 | |||||||||||||||
Net interest margin(4) | 4.00 | 4.07 | 4.46 | 4.24 | 3.78 | |||||||||||||||
Efficiency ratio(5) | 57.58 | 53.51 | 54.28 | 53.60 | 59.33 | |||||||||||||||
Noninterest expense to average assets(3) | 2.24 | 2.12 | 2.35 | 2.22 | 2.26 | |||||||||||||||
Summary Credit Quality Data: | ||||||||||||||||||||
Nonaccrual loans | $ | 21,822 | $ | 4,252 | $ | 3,438 | $ | 465 | $ | 1,856 | ||||||||||
Accruing loans 90 or more days past due(6) | 4,302 | 613 | 374 | 18 | 54 | |||||||||||||||
Other real estate owned | — | — | 10 | 449 | 738 | |||||||||||||||
Nonperforming assets to total assets | 0.80 | % | 0.16 | % | 0.12 | % | 0.03 | % | 0.11 | % | ||||||||||
Nonperforming loans to total loans | 1.07 | 0.20 | 0.16 | 0.02 | 0.10 | |||||||||||||||
Allowance for loan losses to total loans | 0.73 | 0.61 | 0.58 | 0.57 | 0.55 | |||||||||||||||
Net charge-offs to average loans outstanding | — | — | — | 0.01 | — | |||||||||||||||
Capital Ratios: | ||||||||||||||||||||
Total stockholders’ equity to total assets | 15.79 | % | 16.23 | % | 16.24 | % | 16.60 | % | 17.87 | % | ||||||||||
Tangible common equity to tangible assets | 10.95 | 11.15 | 11.01 | 11.12 | 12.76 | |||||||||||||||
Tier 1 capital to average assets | 11.47 | 12.08 | 11.84 | 12.92 | 15.26 | |||||||||||||||
Tier 1 capital to risk-weighted assets | 12.43 | 12.60 | 12.53 | 12.48 | 14.17 | |||||||||||||||
Common equity tier 1 (to risk weighted assets) | 12.02 | 12.17 | 12.09 | 12.03 | 13.65 | |||||||||||||||
Total capital to risk-weighted assets | 13.22 | 13.31 | 13.22 | 13.16 | 14.87 | |||||||||||||||
___________________________
(1) | Total loans does not include loans held for sale and deferred fees. Loans held for sale were $1.4 million at September 30, 2018, $453 thousand at June 30, 2018, $893 thousand at March 31, 2018, $841 thousand at December 31, 2017 and $2.2 million at September 30, 2017. Deferred fees were $16 thousand at September 30, 2018, $22 thousand at June 30, 2018, $24 thousand at March 31, 2018, $28 thousand at December 31, 2017, and $28 thousand at September 30, 2017. Total loans includes $26.3 million of loans within branch assets held for sale as of December 31, 2017. |
(2) | Total noninterest-bearing deposits and total deposits at December 31, 2017 include branch liabilities held for sale of $39.4 million and $64.3 million, respectively. |
(3) | 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. |
(4) | Net interest margin represents net interest income, annualized on a fully tax equivalent basis, divided by average interest-earning assets. |
(5) | Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income. |
(6) | Accruing loans 90 or more days past due excludes $2.0 million, and $3.3 million of purchased credit impaired (“PCI”) loans as of June 30, 2018, and March 31, 2018. There were no PCI loans 90 or more days past due accruing as of September 30, 2018, December 31, 2017 and September 30, 2017. |
6
VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets - (Unaudited)
(In thousands)
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Cash and due from banks | $ | 31,204 | $ | 30,130 | $ | 26,861 | $ | 38,243 | $ | 21,879 | ||||||||||
Interest bearing deposits in other banks | 230,586 | 116,610 | 168,333 | 110,801 | 129,497 | |||||||||||||||
Total cash and cash equivalents | 261,790 | 146,740 | 195,194 | 149,044 | 151,376 | |||||||||||||||
Investment securities | 256,237 | 252,187 | 243,164 | 228,117 | 204,788 | |||||||||||||||
Loans held for sale | 1,425 | 453 | 893 | 841 | 2,179 | |||||||||||||||
Loans, net | 2,426,590 | 2,404,044 | 2,302,664 | 2,220,682 | 1,896,989 | |||||||||||||||
Accrued interest receivable | 8,291 | 8,137 | 7,127 | 7,676 | 6,387 | |||||||||||||||
Bank-owned life insurance | 21,915 | 21,767 | 21,620 | 21,476 | 20,517 | |||||||||||||||
Bank premises, furniture and equipment, net | 77,346 | 76,348 | 76,045 | 75,251 | 40,129 | |||||||||||||||
Non-marketable equity securities | 27,417 | 27,086 | 20,806 | 13,732 | 10,283 | |||||||||||||||
Investment in unconsolidated subsidiary | 352 | 352 | 352 | 352 | 352 | |||||||||||||||
Other real estate owned | — | — | 10 | 449 | 738 | |||||||||||||||
Intangible assets, net | 16,603 | 17,482 | 18,372 | 20,441 | 10,531 | |||||||||||||||
Goodwill | 161,447 | 161,447 | 161,685 | 159,452 | 135,832 | |||||||||||||||
Other assets | 16,433 | 15,831 | 13,634 | 14,518 | 14,760 | |||||||||||||||
Branch assets held for sale | — | 1,753 | 1,753 | 33,552 | — | |||||||||||||||
Total assets | $ | 3,275,846 | $ | 3,133,627 | $ | 3,063,319 | $ | 2,945,583 | $ | 2,494,861 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Noninterest-bearing | $ | 661,754 | $ | 611,315 | $ | 597,236 | $ | 612,830 | $ | 495,627 | ||||||||||
Interest-bearing | 1,994,500 | 1,879,103 | 1,896,558 | 1,665,800 | 1,490,031 | |||||||||||||||
Total deposits | 2,656,254 | 2,490,418 | 2,493,794 | 2,278,630 | 1,985,658 | |||||||||||||||
Accounts payable and accrued expenses | 6,875 | 4,130 | 3,862 | 5,098 | 4,017 | |||||||||||||||
Accrued interest payable and other liabilities | 5,759 | 5,856 | 3,412 | 5,446 | 4,368 | |||||||||||||||
Advances from Federal Home Loan Bank | 73,055 | 108,092 | 48,128 | 71,164 | 38,200 | |||||||||||||||
Junior subordinated debentures | 11,702 | 11,702 | 11,702 | 11,702 | 11,702 | |||||||||||||||
Subordinated notes | 4,989 | 4,988 | 4,988 | 4,987 | 4,987 | |||||||||||||||
Other borrowings | — | — | — | 15,000 | — | |||||||||||||||
Branch liabilities held for sale | — | — | — | 64,627 | — | |||||||||||||||
Total liabilities | 2,758,634 | 2,625,186 | 2,565,886 | 2,456,654 | 2,048,932 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||
Common stock | 242 | 242 | 241 | 241 | 227 | |||||||||||||||
Additional paid-in capital | 448,117 | 447,234 | 445,964 | 445,517 | 404,900 | |||||||||||||||
Retained earnings | 74,143 | 65,208 | 55,015 | 44,627 | 41,143 | |||||||||||||||
Unallocated Employee Stock Ownership Plan shares | (106 | ) | (106 | ) | (106 | ) | (106 | ) | (209 | ) | ||||||||||
Accumulated other comprehensive loss | (5,114 | ) | (4,067 | ) | (3,611 | ) | (1,280 | ) | (62 | ) | ||||||||||
Treasury stock | (70 | ) | (70 | ) | (70 | ) | (70 | ) | (70 | ) | ||||||||||
Total stockholders’ equity | 517,212 | 508,441 | 497,433 | 488,929 | 445,929 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 3,275,846 | $ | 3,133,627 | $ | 3,063,319 | $ | 2,945,583 | $ | 2,494,861 | ||||||||||
7
VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income - (Unaudited)
(In thousands, except per share data)
For the Nine Months Ended | ||||||||
September 30, 2018 | September 30, 2017 | |||||||
Interest income: | ||||||||
Interest and fees on loans | $ | 99,432 | $ | 45,613 | ||||
Interest on investment securities | 4,697 | 2,251 | ||||||
Interest on deposits in other banks | 2,316 | 1,787 | ||||||
Interest on other | 15 | 4 | ||||||
Total interest income | 106,460 | 49,655 | ||||||
Interest expense: | ||||||||
Interest on deposit accounts | 18,507 | 6,201 | ||||||
Interest on borrowings | 2,051 | 696 | ||||||
Total interest expense | 20,558 | 6,897 | ||||||
Net interest income | 85,902 | 42,758 | ||||||
Provision for loan losses | 5,239 | 2,585 | ||||||
Net interest income after provision for loan losses | 80,663 | 40,173 | ||||||
Noninterest income: | ||||||||
Service charges and fees on deposit accounts | 2,588 | 1,733 | ||||||
(Loss) gain on sales of investment securities | (22 | ) | 205 | |||||
Gain (loss) on sales of loans and other assets owned | 1,267 | 2,259 | ||||||
Bank-owned life insurance | 575 | 561 | ||||||
Rental income | 1,343 | — | ||||||
Other | 2,132 | 520 | ||||||
Total noninterest income | 7,883 | 5,278 | ||||||
Noninterest expense: | ||||||||
Salaries and employee benefits | 23,225 | 13,471 | ||||||
Occupancy and equipment | 8,267 | 3,622 | ||||||
Professional fees | 7,803 | 3,959 | ||||||
Data processing and software expense | 2,601 | 1,451 | ||||||
FDIC assessment fees | 827 | 1,061 | ||||||
Marketing | 1,213 | 905 | ||||||
Amortization of intangibles | 2,632 | 413 | ||||||
Telephone and communications | 1,076 | 438 | ||||||
Other | 4,077 | 2,434 | ||||||
Total noninterest expense | 51,721 | 27,754 | ||||||
Net income from operations | 36,825 | 17,697 | ||||||
Income tax expense | 7,309 | 5,802 | ||||||
Net income | $ | 29,516 | $ | 11,895 | ||||
Preferred stock dividends | $ | — | $ | 42 | ||||
Net income available to common stockholders | $ | 29,516 | $ | 11,853 | ||||
Basic earnings per share | $ | 1.22 | $ | 0.70 | ||||
Diluted earnings per share | $ | 1.20 | $ | 0.69 | ||||
Weighted average basic shares outstanding | 24,151 | 16,813 | ||||||
Weighted average diluted shares outstanding | 24,587 | 17,232 | ||||||
8
VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income - (Unaudited)
(In thousands, except per share data)
For the Three Months Ended | ||||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | ||||||||||||||||
Interest income: | ||||||||||||||||||||
Interest and fees on loans | $ | 35,074 | $ | 32,291 | $ | 32,067 | $ | 28,182 | $ | 20,706 | ||||||||||
Interest on investment securities | 1,722 | 1,647 | 1,328 | 1,211 | 941 | |||||||||||||||
Interest on deposits in other banks | 1,016 | 613 | 687 | 500 | 629 | |||||||||||||||
Interest on other | 6 | 4 | 5 | 4 | 3 | |||||||||||||||
Total interest income | 37,818 | 34,555 | 34,087 | 29,897 | 22,279 | |||||||||||||||
Interest expense: | ||||||||||||||||||||
Interest on deposit accounts | 7,762 | 6,452 | 4,293 | 3,677 | 2,812 | |||||||||||||||
Interest on borrowings | 880 | 479 | 692 | 470 | 338 | |||||||||||||||
Total interest expense | 8,642 | 6,931 | 4,985 | 4,147 | 3,150 | |||||||||||||||
Net interest income | 29,176 | 27,624 | 29,102 | 25,750 | 19,129 | |||||||||||||||
Provision for loan losses | 3,057 | 1,504 | 678 | 2,529 | 752 | |||||||||||||||
Net interest income after provision for loan losses | 26,119 | 26,120 | 28,424 | 23,221 | 18,377 | |||||||||||||||
Noninterest income: | ||||||||||||||||||||
Service charges and fees on deposit accounts | 809 | 846 | 933 | 769 | 669 | |||||||||||||||
(Loss) gain on sales of investment securities | (34 | ) | 4 | 8 | 17 | 205 | ||||||||||||||
Gain (loss) on sales of loans and other assets owned | 270 | 416 | 581 | 882 | 705 | |||||||||||||||
Bank-owned life insurance | 194 | 192 | 189 | 192 | 188 | |||||||||||||||
Rental income | 414 | 452 | 478 | 139 | — | |||||||||||||||
Other | 857 | 682 | 592 | 299 | 210 | |||||||||||||||
Total noninterest income | 2,510 | 2,592 | 2,781 | 2,298 | 1,977 | |||||||||||||||
Noninterest expense: | ||||||||||||||||||||
Salaries and employee benefits | 7,394 | 7,902 | 7,930 | 7,357 | 5,921 | |||||||||||||||
Occupancy and equipment | 2,890 | 2,143 | 3,234 | 1,996 | 1,596 | |||||||||||||||
Professional fees | 4,297 | 1,703 | 1,802 | 1,713 | 1,973 | |||||||||||||||
Data processing and software expense | 697 | 1,076 | 828 | 766 | 719 | |||||||||||||||
FDIC assessment fees | 288 | 236 | 302 | 116 | 410 | |||||||||||||||
Marketing | 306 | 446 | 461 | 388 | 436 | |||||||||||||||
Amortization of intangibles | 798 | 856 | 978 | 551 | 223 | |||||||||||||||
Telephone and communications | 236 | 414 | 426 | 282 | 230 | |||||||||||||||
Other | 1,340 | 1,393 | 1,345 | 1,866 | 1,014 | |||||||||||||||
Total noninterest expense | 18,246 | 16,169 | 17,306 | 15,035 | 12,522 | |||||||||||||||
Net income from operations | 10,383 | 12,543 | 13,899 | 10,484 | 7,832 | |||||||||||||||
Income tax expense | 1,448 | 2,350 | 3,511 | 7,227 | 2,650 | |||||||||||||||
Net income | $ | 8,935 | $ | 10,193 | $ | 10,388 | $ | 3,257 | $ | 5,182 | ||||||||||
Preferred stock dividends | — | — | — | — | 42 | |||||||||||||||
Net income available to common stockholders | $ | 8,935 | $ | 10,193 | $ | 10,388 | $ | 3,257 | $ | 5,140 | ||||||||||
Basic earnings per share | $ | 0.37 | $ | 0.42 | $ | 0.43 | $ | 0.14 | $ | 0.26 | ||||||||||
Diluted earnings per share | $ | 0.36 | $ | 0.42 | $ | 0.42 | $ | 0.14 | $ | 0.25 | ||||||||||
Weighted average basic shares outstanding | 24,176 | 24,148 | 24,120 | 23,124 | 19,976 | |||||||||||||||
Weighted average diluted shares outstanding | 24,613 | 24,546 | 24,539 | 23,524 | 20,392 | |||||||||||||||
9
VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures - (Unaudited)
The following are the non-GAAP measures used in this release:
• | core net interest income adjusts net interest income as determined in accordance with GAAP to exclude income recognized on acquired loans |
• | core noninterest income adjusts noninterest income as determined in accordance with GAAP to exclude gain on sale of disposed branch assets |
• | core noninterest expense adjusts noninterest expense as determined in accordance with GAAP to exclude corporate development costs |
• | core net income from operations is calculated as the sum of core net interest income and core noninterest income less provision from loan losses and core noninterest expense |
• | core income tax expense adjusts income tax expense as determined in accordance with GAAP to exclude the tax impact of the adjustments to core net interest income and core noninterest expense, the re-measurement of our deferred tax asset as a result of the Tax Act and the tax impact of other corporate development discrete items |
• | core net income adjusts net income as determined in accordance with GAAP to exclude the impact of income recognized on acquired loans, corporate development costs and the tax impact of the adjustments to core net interest income and core noninterest expense, exclude the re-measurement of our deferred tax asset as a result of the Tax Cut and Jobs Act and exclude the tax impact of other corporate development discrete items |
• | core net income available to common stockholders adjusts core net income to exclude preferred stock dividends |
• | core diluted EPS divides (i) core net income by (ii) weighted average diluted shares of common stock outstanding for the applicable period |
• | core efficiency ratio is determined by dividing core noninterest expense by the sum of core net interest income and noninterest income |
• | core net interest margin is determined by dividing core net interest income by average interest-earning assets |
• | core return on average assets is determined by dividing core net income by average assets |
• | tangible common equity is defined as total stockholders’ equity less goodwill and other intangible assets |
• | tangible assets is defined as total assets less goodwill and other intangible assets |
• | tangible common equity to tangible assets is a ratio that is determined by dividing tangible common equity by tangible assets |
• | tangible book value per common share is determined by dividing tangible common equity by common shares outstanding |
Management believes that the non-GAAP financial measures above that are used in managing its business may provide meaningful information to investors about underlying trends in its business and management uses these non-GAAP measures to measure the Company’s performance and believes that these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of unusual items or events that may obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, Veritex’s reported results prepared in accordance with GAAP.
10
VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures - (Unaudited)
(In thousands except per share data and percentages)
The following tables reconcile, at the dates set forth below, the differences between these non-GAAP financial measures and their most directly comparable financial measures calculated in accordance with GAAP.
For the Three Months Ended | |||||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | |||||||||||||||||
Net interest income (as reported) | $ | 29,176 | $ | 27,624 | $ | 29,102 | $ | 25,750 | $ | 19,129 | |||||||||||
Adjustment: | |||||||||||||||||||||
Income recognized on acquired loans(1) | 2,591 | 1,664 | 4,009 | 2,955 | 637 | ||||||||||||||||
Core net interest income | 26,585 | 25,960 | 25,093 | 22,795 | 18,492 | ||||||||||||||||
Provision for loan losses (as reported) | 3,057 | 1,504 | 678 | 2,529 | 752 | ||||||||||||||||
Noninterest income (as reported) | 2,510 | 2,592 | 2,781 | 2,298 | 1,977 | ||||||||||||||||
Adjustment: | |||||||||||||||||||||
Gain on sale of disposed branch assets | — | — | 388 | — | — | ||||||||||||||||
Core noninterest income | 2,510 | 2,592 | 2,393 | 2,298 | 1,977 | ||||||||||||||||
Noninterest expense (as reported) | 18,246 | 16,169 | 17,306 | 15,035 | 12,522 | ||||||||||||||||
Adjustment: | |||||||||||||||||||||
Lease exit costs, net(2) | — | — | (1,071 | ) | — | — | |||||||||||||||
Branch closure expenses | — | — | (172 | ) | — | — | |||||||||||||||
One-time issuance of shares to all employees | — | (421 | ) | — | — | — | |||||||||||||||
Corporate development and other related expenses | (2,692 | ) | (1,043 | ) | (335 | ) | (1,018 | ) | (1,391 | ) | |||||||||||
Core noninterest expense | 15,554 | 14,705 | 15,728 | 14,017 | 11,131 | ||||||||||||||||
Core net income from operations | 10,484 | 12,343 | 11,080 | 8,547 | 8,586 | ||||||||||||||||
Income tax expense (as reported) | 1,448 | 2,350 | 3,511 | 7,227 | 2,650 | ||||||||||||||||
Adjustments: | |||||||||||||||||||||
Tax impact of adjustments | 20 | (40 | ) | (579 | ) | (678 | ) | 264 | |||||||||||||
Tax Act re-measurement | 688 | 127 | (820 | ) | (3,051 | ) | — | ||||||||||||||
Other corporate development discrete tax items | — | — | — | (398 | ) | — | |||||||||||||||
Core income tax expense | $ | 2,156 | $ | 2,437 | $ | 2,112 | $ | 3,100 | $ | 2,914 | |||||||||||
Net income (as reported) | $ | 8,935 | $ | 10,193 | $ | 10,388 | $ | 3,257 | $ | 5,182 | |||||||||||
Core net income | $ | 8,328 | $ | 9,906 | $ | 8,968 | $ | 5,447 | $ | 5,672 | |||||||||||
Preferred stock dividends (as reported) | $ | — | $ | — | $ | — | — | $ | — | $ | 42 | ||||||||||
Core net income available to common stockholders | $ | 8,328 | $ | 9,906 | $ | 8,968 | $ | 5,447 | $ | 5,630 | |||||||||||
Weighted average diluted shares outstanding | 24,613 | 24,546 | 24,539 | 23,524 | 20,392 | ||||||||||||||||
Diluted earnings per share (as reported) | 0.36 | 0.42 | 0.42 | 0.14 | 0.25 | ||||||||||||||||
Core diluted earnings per share | 0.34 | 0.40 | 0.37 | 0.23 | 0.28 | ||||||||||||||||
Efficiency Ratio | |||||||||||||||||||||
Efficiency ratio (as reported) | 57.58 | % | 53.51 | % | 54.28 | % | 53.60 | % | 59.33 | % | |||||||||||
Core efficiency ratio | 53.46 | % | 51.50 | % | 57.22 | % | 55.86 | % | 54.38 | % | |||||||||||
Net Interest Margin | |||||||||||||||||||||
Net interest margin (as reported) | 4.00 | % | 4.07 | % | 4.46 | % | 4.24 | % | 3.78 | % | |||||||||||
Core net interest margin | 3.69 | % | 3.83 | % | 3.84 | % | 3.75 | % | 3.66 | % | |||||||||||
Return on average assets | |||||||||||||||||||||
Return on average assets (as reported) | 1.10 | % | 1.34 | % | 1.41 | % | 0.48 | % | 0.94 | % | |||||||||||
Core return on average assets | 1.03 | % | 1.30 | % | 1.22 | % | 0.80 | % | 1.02 | % | |||||||||||
(1) | Income recognized on acquired loans is calculated as the sum of accretion on purchased performing loans and cash collections in excess of expected cash flows on PCI loans. |
(2) | Lease exit costs, net for the three months ended March 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 the Company ceased using in 2017 offset by the reversal of the corresponding assigned lease cease-use liability totaling $669 thousand. |
11
VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures - (Unaudited)
(In thousands except per share data and percentages)
For the Three Months Ended | ||||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | ||||||||||||||||
Tangible Common Equity | ||||||||||||||||||||
Total stockholders’ equity | $ | 517,212 | $ | 508,441 | $ | 497,433 | $ | 488,929 | $ | 445,929 | ||||||||||
Adjustments: | ||||||||||||||||||||
Goodwill | (161,447 | ) | (161,447 | ) | (161,685 | ) | (159,452 | ) | (135,832 | ) | ||||||||||
Intangible assets(1) | (16,603 | ) | (17,482 | ) | (18,372 | ) | (22,165 | ) | (10,531 | ) | ||||||||||
Total tangible common equity | $ | 339,162 | $ | 329,512 | $ | 317,376 | $ | 307,312 | $ | 299,566 | ||||||||||
Tangible Assets | ||||||||||||||||||||
Total assets | $ | 3,275,846 | $ | 3,133,627 | $ | 3,063,319 | $ | 2,945,583 | $ | 2,494,861 | ||||||||||
Adjustments: | ||||||||||||||||||||
Goodwill | (161,447 | ) | (161,447 | ) | (161,685 | ) | (159,452 | ) | (135,832 | ) | ||||||||||
Intangible assets(1) | (16,603 | ) | (17,482 | ) | (18,372 | ) | (22,165 | ) | (10,531 | ) | ||||||||||
Total tangible assets | $ | 3,097,796 | $ | 2,954,698 | $ | 2,883,262 | $ | 2,763,966 | $ | 2,348,498 | ||||||||||
Tangible Common Equity to Tangible Assets | 10.95 | % | 11.15 | % | 11.01 | % | 11.12 | % | 12.76 | % | ||||||||||
Common shares outstanding | 24,192 | 24,181 | 24,149 | 24,110 | 22,644 | |||||||||||||||
Book value per common share(2) | $ | 21.38 | $ | 21.03 | $ | 20.60 | $ | 20.28 | $ | 19.69 | ||||||||||
Tangible book value per common share | $ | 14.02 | $ | 13.63 | $ | 13.14 | $ | 12.75 | $ | 13.23 | ||||||||||
(1) | Intangible assets as of December 31, 2017 include branch intangible assets held for sale of $1.7 million. |
(2) | We calculate book value per common share as total stockholders’ equity 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. |
12
VERITEX HOLDINGS, INC. AND SUBSIDIARY
Net Interest Margin - (Unaudited)
(In thousands except percentages)
For the Three Months Ended | |||||||||||||||||||||||||||||||||
September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||||||||||||||||||||||||||||
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) | $ | 2,432,095 | $ | 35,074 | 5.72 | % | $ | 2,333,283 | $ | 32,291 | 5.55 | % | $ | 1,643,077 | $ | 20,706 | 5.00 | % | |||||||||||||||
Securities available for sale | 254,242 | 1,722 | 2.69 | 248,670 | 1,647 | 2.66 | 191,265 | 941 | 1.95 | ||||||||||||||||||||||||
Interest-bearing deposits in other banks | 203,750 | 1,016 | 1.98 | 136,803 | 613 | 1.80 | 171,461 | 629 | 1.46 | ||||||||||||||||||||||||
Investment in unconsolidated subsidiary | 352 | 6 | 6.76 | 327 | 4 | 4.91 | 265 | 3 | 4.49 | ||||||||||||||||||||||||
Total interest-earning assets | 2,890,439 | 37,818 | 5.19 | 2,719,083 | 34,555 | 5.10 | 2,006,068 | 22,279 | 4.41 | ||||||||||||||||||||||||
Allowance for loan losses | (16,160 | ) | (13,600 | ) | (9,910 | ) | |||||||||||||||||||||||||||
Noninterest-earning assets | 358,935 | 353,973 | 202,352 | ||||||||||||||||||||||||||||||
Total assets | $ | 3,233,214 | $ | 3,059,456 | $ | 2,198,510 | |||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||
Interest-bearing deposits | $ | 1,933,832 | $ | 7,762 | 1.59 | % | $ | 1,864,940 | $ | 6,452 | 1.39 | % | $ | 1,294,187 | $ | 2,812 | 0.86 | % | |||||||||||||||
Advances from FHLB | 120,114 | 630 | 2.08 | 59,762 | 234 | 1.57 | 53,222 | 160 | 1.19 | ||||||||||||||||||||||||
Other borrowings | 16,690 | 250 | 5.94 | 16,690 | 245 | 5.89 | 13,793 | 178 | 5.12 | ||||||||||||||||||||||||
Total interest-bearing liabilities | 2,070,636 | 8,642 | 1.66 | 1,941,392 | 6,931 | 1.43 | 1,361,202 | 3,150 | 0.92 | ||||||||||||||||||||||||
Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||
Noninterest-bearing deposits | 635,952 | 605,760 | 452,426 | ||||||||||||||||||||||||||||||
Other liabilities | 11,750 | 7,976 | 6,898 | ||||||||||||||||||||||||||||||
Total noninterest-bearing liabilities | 647,702 | 613,736 | 459,324 | ||||||||||||||||||||||||||||||
Stockholders’ equity | 514,876 | 504,328 | 377,984 | ||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 3,233,214 | $ | 3,059,456 | $ | 2,198,510 | |||||||||||||||||||||||||||
Net interest rate spread(2) | 3.53 | % | 3.67 | % | 3.49 | % | |||||||||||||||||||||||||||
Net interest income | $ | 29,176 | $ | 27,624 | $ | 19,129 | |||||||||||||||||||||||||||
Net interest margin(3) | 4.00 | % | 4.07 | % | 3.78 | % | |||||||||||||||||||||||||||
(1) | Includes average outstanding balances of loans held for sale of $1,091, $1,349 and $1,553 for the three months ended September 30, 2018, June 30, 2018, and September 30, 2017, 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. |
13
V E R I T E X Earnings Presentation Third Quarter 2018 October 23, 2018
Safe Harbor Statement NO OFFER OR SOLICITATION Important Additional Information will be Filed with the SEC This release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval with respect to the proposed acquisition by Veritex of Green. No offer of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act of 1933, as amended, and no offer to sell or solicitation of an offer to buy shall be made in any jurisdiction in which such offer, solicitation or sale would be unlawful. In connection with the proposed transaction, Veritex has filed with the U.S. Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 (File No. 333-227161) containing a joint proxy statement of Veritex and Green and a prospectus of Veritex (the “Joint Proxy/Prospectus”), and each of Veritex and Green may file with the SEC other documents regarding the proposed transaction. The definitive Joint Proxy/Prospectus has been mailed to shareholders of Veritex and Green. SHAREHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY/PROSPECTUS REGARDING THE TRANSACTION CAREFULLY AND IN THEIR ENTIRETY AND ANY OTHER DOCUMENTS FILED WITH THE SEC BY VERITEX AND GREEN, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors can obtain free copies of the Registration Statement and the Joint Proxy/Prospectus and other documents filed with the SEC by Veritex and Green through the website maintained by the SEC at www.sec.gov. Free copies of the Registration Statement and the Joint Proxy/Prospectus and other documents filed with the SEC can also be obtained by directing a request to Veritex Holdings, Inc., 8214 Westchester Drive, Suite 400, Dallas, Texas 75225, or by directing a request to Green Bancorp, Inc., 4000 Greenbriar Street, Houston, Texas 77098. Participants in the Solicitation Veritex, Green and their respective directors and certain of their executive officers and employees may be deemed to be participants in the solicitation of proxies from the shareholders of Green or Veritex in respect of the proposed transaction. Information regarding Veritex’s directors and executive officers is available in its proxy statement for its 2018 annual meeting of shareholders, which was filed with the SEC on April 3, 2018, and information regarding Green’s directors and executive officers is available in its proxy statement for its 2018 annual meeting of shareholders, which was filed with the SEC on April 13, 2018. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the Joint Proxy/Prospectus and other relevant materials to be filed with the SEC when they become available. Free copies of this document may be obtained as described in the preceding paragraph. 2
Safe Harbor Statement NON-GAAP FINANCIAL MEASURES Veritex reports its results in accordance with United States generally accepted accounting principles (“GAAP”). However, management believes that certain non- GAAP financial measures used in managing its business may provide meaningful information to investors about underlying trends in its business and management uses these non-GAAP measures to measure the Company’s performance and believes that these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of unusual items or events that may obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, Veritex’s reported results prepared in accordance with GAAP. The following are the non-GAAP measures used in this presentation: • core net interest income adjusts net interest income as determined in accordance with GAAP to exclude income recognized on acquired loans • core noninterest income adjusts noninterest income as determined in accordance with GAAP to exclude gain on sale of disposed branch assets • core noninterest expense adjusts noninterest expense as determined in accordance with GAAP to exclude corporate development costs • core income tax expense adjusts income tax expense as determined in accordance with GAAP to exclude the tax impact of the adjustments to core net interest income and core noninterest expense, the re-measurement of our deferred tax asset as a result of the Tax Act and the tax impact of other corporate development discrete items • core net income adjusts net income as determined in accordance with GAAP to exclude the impact of income recognized on acquired loans, corporate development costs and the tax impact of the adjustments to core net interest income and core noninterest expense, exclude the re-measurement of our deferred tax asset as a result of the Tax Act and exclude the tax impact of other corporate development discrete items • core diluted earnings per share (EPS) divides (i) core net income by (ii) weighted average diluted shares of common stock outstanding for the applicable period • core efficiency ratio is determined by dividing core noninterest expense by the sum of core net interest income and noninterest income • core net interest margin is determined by dividing core net interest income by average interest-earning assets • core return on average assets is determined by dividing core net income by average assets • tangible common equity is defined as total stockholders’ equity less goodwill and other intangible assets • tangible assets is defined as total assets less goodwill and other intangible assets • tangible common equity to tangible assets is a ratio that is determined by dividing tangible common equity by tangible assets • tangible book value per common share is determined by dividing tangible common equity by common shares outstanding Please see Reconciliation of Non-GAAP Financial Measures at the end of this presentation for a reconciliation to the nearest GAAP financial measure. 3
Forward Looking Statements This presentation 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 important assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, statements relating to the impact Veritex expects its proposed acquisition of Green to have on the combined entity’s operations, financial condition, and financial results, and Veritex’s expectations about its ability to successfully integrate the combined businesses and the amount of cost savings and overall operational efficiencies Veritex expects to realize as a result of the proposed acquisition. The forward-looking statements also include statements about 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 economic 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. Further, certain factors that could affect future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to, the possibility that the proposed acquisition does not close when expected or at all because required regulatory, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all, the failure to close for any other reason, changes in Veritex’s share price before closing, that the businesses of Veritex and Green will not be integrated successfully, that the cost savings and any synergies from the proposed acquisition may not be fully realized or may take longer to realize than expected, disruption from the proposed acquisition making it more difficult to maintain relationships with employees, customers or other parties with whom Veritex or Green have business relationships, diversion of management time on merger-related issues, risks relating to the potential dilutive effect of shares of Veritex common stock to be issued in the transaction, the reaction to the transaction of the companies’ customers, employees and counterparties and other factors, many of which are beyond the control of Veritex and Green. 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, 2017, the Annual Report on Form 10-K filed by Green for the year ended December 31, 2017 and any updates to those risk factors set forth in Veritex’s and Green’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings, which have been filed with the SEC and 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 or Green 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. Neither Veritex nor Green undertakes 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 communication 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. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. 4
Third Quarter 2018 Summary Organic deposit growth of $165.8 million, or 6.7% compared to prior quarter, STRATEGIC represents best quarterly increase in deposits life-to-date. GROWTH Record new loan commitments for the quarter and continued strong pipeline underscore ability to execute on organic growth strategy. Recovered $2.0 million in the quarter from non-accretable purchased loans previously discounted for credit impairment. CREDIT Increased loan loss provision by $0.9 million primarily due to a single acquired MANAGEMENT loan that demonstrated further credit impairment. Increase in nonperforming loans to total loans to 1.07% solely driven by three acquired loans. Reported net income of $8.9 million or $0.36 diluted earnings per share (EPS) was impacted by costs associated with the acquisition of Green Bancorp, Inc. EARNINGS (Green). Acquisition-related costs were $2.7 million in the quarter, representing a $0.09 impact to diluted EPS, net of taxes. Announced the Green acquisition on July 24, 2018. ACQUISITIONS Engaged teams in the integration and conversion planning process. 5
Third Quarter 2018 Financial Highlights As of and for the quarter ended Change September 30, June 30, September 30, Quarter over Year over 2018 2018 2017 Quarter Year Selected financial data Total loans $ 2,444,515 $ 2,418,908 $ 1,907,509 1.1% 28.2% Total deposits 2,656,254 2,490,418 1,985,658 6.7 33.8 Total assets 3,275,846 3,133,627 2,494,861 4.5 31.3 Total capital 517,212 508,441 445,929 1.7 16.0 Tangible common equity1 339,162 329,512 299,566 2.9 13.2 Selected profitability Net interest income $ 29,176 $ 27,624 $ 19,129 5.6% 52.5% Noninterest income 2,510 2,592 1,977 -3.2 27.0 Noninterest expense 18,246 16,169 12,522 12.8 45.7 Core noninterest expense1 15,554 14,705 11,131 5.8 39.7 Net income available to common 8,935 10,193 5,140 -12.3 73.8 Core net income available to common1 8,328 9,906 5,630 -15.9 47.9 Selected ratios Net interest margin 4.00% 4.07% 3.78% -1.7% 5.8% Core net interest margin1 3.69 3.83 3.66 -3.7 0.8 Reported diluted EPS $ 0.36 $ 0.42 $ 0.25 $ (0.06) $ 0.11 Core diluted EPS1 0.34 0.40 0.28 (0.06) 0.06 Reported efficiency ratio 57.58% 53.51% 59.33% 7.6% -2.9% Core efficiency ratio1 53.46 51.50 54.38 3.8 -1.7 Reported return on assets 1.10 1.34 0.94 -17.9 17.0 Core return on assets 1 1.03 1.30 1.02 -20.8 1.0 1 As used in this presentation, tangible common equity, core net interest margin, core noninterest expense, core net income available to common, core diluted EPS, core efficiency ratio and core return on assets are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to their comparable GAAP measures, see slides 15 and 6 16 of this presentation.
Continued Growth of a Diversified Loan Portfolio For the quarter ended September 30, 2018, total loan1 balances increased $25.6 million, or 1.1%, compared to June 30, 2018. For the nine months ended September 30, 2018, total loans increased $211.0 million, or 12.6% annualized. Total Loans1 As of September 30, 2018 Ending Balances $ in millions Consumer RE $2,445 Energy 12% $2,419 2% 3 $2,316 $2,260 Commercial RE 58% C&I 28% $1,908 • Quarterly yield: 5.72%2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 • Core quarterly yield: 5.30% 1 Total loans does not include loans held for sale and deferred fees. 2 Quarterly yield includes 42 basis points of purchase discount accretion relating to acquired loans. 7 3 Total loans includes $26.3 million of loans within branch assets held for sale as of December 31, 2017.
New Commitments, Payoffs and Pay-downs $ in millions Quarter-end Loan Balances vs. New Commitments 2018 YTD New Commitments: $1,279 $2,419 $2,445 $2,260 $2,316 $1,908 $358 $443 $478 $163 $276 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 Quarter-end Balances New Commitments Quarter-end Payoffs and Pay Downs vs. Loan Balances 2018 YTD Payoffs and Paydowns: $710 11% 9% 8% 10% 5% $260 $248 $211 $202 $104 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 Quarter-end Payoffs / Pay-downs Pay downs/offs % of ending balances 8
Strong Credit Nonperforming Loan Trends – Acquired vs Originated • Nonperforming loans increased 1.07% NPLs to Total Loans - Veritex Originated $21.3 million primarily due to three acquired loans. NPLs to Total Loans - Acquired Credits • All loans are properly reserved based on current valuations. • No charge-offs in third quarter 2018. 0.10% Dollars in Millions 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 NPLs to Total Loans - Acquired Credits 0.01% 0.01% 0.13% 0.13% 0.97% NPLs to Total Loans - Veritex Originated 0.09% 0.01% 0.03% 0.07% 0.10% 9
Deposit Mix For the quarter ended September 30, 2018, total deposits increased $165.8 million, or 6.7%, from balances at period ended June 30, 2018. For the nine months ended September 30, 2018, total deposits increased $441.9 million, or 26.7% annualized. Total Funding Sources Total Deposits As of September 30, 2018 $2,656 $2,494 $2,490 1 $2,279 Time $662 $597 17% Noninterest-bearing $1,986 $611 Now/Savings 25% $613 7% $496 Wholesale/Borrowed 7% Money Market 29% $1,897 $1,879 $1,994 Correspondent $1,666 Money Market $1,490 15% Quarterly average rates: • Interest-bearing deposits: 1.59% 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 • Total cost of funds: 1.27% Interest-bearing Noninterest-bearing 1 Total noninterest-bearing deposits and total deposits include $39.4 million and $64.3 million, respectively, within branch liabilities held for sale as of December 31, 2017. 10
Core Net Interest Income and Margin Growth Quarterly Net Interest Trend (1) Core net interest income Core net interest margin 3.84% 3.83% 3.75% 3.66% 3.69% $25,960 $26,585 $22,795 $25,093 $18,492 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 Quarterly Average Earning Asset Mix Interest-bearing deposits Investment Securities Loans in other banks 9% 9% 8% 9% 10% 7% 9% 6% 6% 5% 82% 84% 84% 86% 86% Average yield/rate 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 Loans 1 4.85% 4.93% 5.03% 5.27% 5.30% Deposits 0.86 0.93 1.00 1.39 1.59 1 Excludes 15 bps, 58 bps, 72 bps, 25 bps and 42 bps of income recognized on acquired loans for 3Q2017, 4Q2017, 1Q2018, 2Q2018 and 3Q2018, respectively. Reconciliation of Non-GAAP 11 Financial Measures for a reconciliation of core net interest income and core net interest margin on slide 15.
Impact of core adjustments on Q3 2018 The effects of core adjustments including accretion income on acquired loans, corporate development costs, and the impact of fair value measurement continued to impact results in the third quarter 2018. These items are isolated below: For the three months ended September 30, 2018 A B C D A-B-C-D Tax Act Re- Purchase Corporate measurement accounting development and Income/Expense Total impact from accretion income other related less adjustments Income/Expense return to on acquired loans expenses Dollars in thousands (as reported) provision Net interest income 29,176 (2,591) - - 26,585 Noninterest income 2,510 - - - 2,510 Noninterest expense 18,246 - (2,692) - 15,554 Income tax expense 1,448 (524) 544 688 2,156 Net income 8,935 (2,067) 2,148 (688) 8,328 12
Integrations Update – VBTX and GNBC Strategic and Financial Rationale1 VBTX (22) • Combination of two Texas banks focused primarily in the DFW and GNBC (21) Houston MSAs • Enhanced management team combines strengths from both banks • Complimentary business lines drive diversification and scale • 25%+ accretive to GAAP EPS in 2019 and beyond • TBV accretive in just under 3 years • Enhances ROATCE by ~ 400+ bps • Internal rate of return of ~20% Financial Highlights2 VBTX GNBC Market Capitalization ($mm): $ 666 $ 807 3 Total Assets ($bn) $ 3.3 $ 4.4 Summary of Transaction Terms Gross Loans ($bn) $ 2.4 $ 3.4 Transaction Value $ 1.0 bn / $25.89 per GNBC share YTD Loan Growth (Annualized) 12.6% 7.2% Price / TBV 2.50 x Deposits ($bn) $ 2.7 $ 3.4 Price / Est. 2019 EPS 13.0 x YTD Deposit Growth (Annualized) 26.7% 0.7% Ownership (VBTX / GNBC) 45 % / 55 % Tangible Common Equity ($mm) $ 339 $ 397 Est. Total Cost Savings $ 20mm Pre-Tax / 11 % of Combined Exp. Tangible Book Value Per Share $14.02 $10.63 Primary Consideration 0.79 VBTX shares for each share of Tier 1 Leverage Ratio (Bank) 10.5 % 10.7% GNBC 1Financial metrics as announced on July 24, 2018 2Financial data as of September 30, 2018; market data as of October 15, 2018 13 3Financial metrics and ratios as announced based on July 23, 2018 closing price
Integrations Update – VBTX and GNBC Integration Approach Integration Approach Town hall meetings with Green colleagues in DFW and Guiding Principles Houston • Leverage best people, practices and technology on both Highly successful talent and client retention to date; focused Veritex and Green teams on maintaining positive growth momentum through closing and conversion • Enterprise-wide focus on execution, customer experience, key employee retention and value creation Finalized critical business model decisions and leadership Talent selection underway • Strong risk oversight governance by Board and executive management steering committee Highly engaged and collaborative integration leadership teams representing both companies • Well-informed, quick and timely decisions Decision made to migrate to Green’s technology platform • Consistent messaging and communication between (Jack Henry) with select enhancements companies executive and management levels Re-confirmed net expense synergies (65% 2019; 100% 2020) Integration Management Office with Dedicated Enterprise Key Dates Integration and Technology Integration Coordinators July 24 • Dedicated project teams led by members of Veritex and 2018 Announcement Green Sept. 13 2018 Regulatory Application Submitted • Project teams include sales and service delivery, Oct. 12 technology, credit, operations, risk, finance and other 2018 S-4 Effective support teams. 4Q18 Regulatory Approval • Supported by third-party experts and resources Nov. 15 Disciplined approach to conversion 2018 VBTX and GNBC Shareholder Votes Early • Single conversion event for branches and core systems 1Q19 Expected Transaction Close • Optimize distribution network at conversion May 2019 Scheduled Core System Conversion 14
Reconciliation of Non-GAAP Financial Measures (S in Thousands, Except Per Share) As of or For the Quarter Ended September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017 Net interest income (as reported) $ 29,176 $ 27,624 $ 29,102 $ 25,750 $ 19,129 Adjustment: Income recognized on acquired loans (2,591) (1,664) (4,009) (2,955) (637) Core net interest income 26,585 25,960 25,093 22,795 18,492 Provision for loan losses (as reported) 3,057 1,504 678 2,529 752 Noninterest income (as reported) 2,510 2,592 2,781 2,298 1,977 Adjustment: Gain on sale of branch locations - - (388) - - Core noninterest income 2,510 2,592 2,393 2,298 1,977 Noninterest expense (as reported) 18,246 16,169 17,306 15,035 12,522 Adjustment: Sublease one-time consent fee, net - - (1,071) - - Branch closure expenses - - (172) - - One-time issuance of shares to all employees - (421) - - - Corporate development and other related expenses (2,692) (1,043) (335) (1,018) (1,391) Core noninterest expense 15,554 14,705 15,728 14,017 11,131 Core net income from operations 10,484 12,343 11,080 8,547 8,586 Income tax expense (as reported) 1,448 2,350 3,511 7,227 2,650 Adjustment: Tax impact of adjustments 20 (40) (579) (678) 264 Deferred tax asset re-measurement due to Tax Act 688 127 (820) (3,051) - Other corporate development discrete tax items - - - (398) - Core income tax expense 2,156 2,437 2,112 3,100 2,914 Net income (as reported) 8,935 10,193 10,388 3,257 5,182 Core net income 8,328 9,906 8,968 5,447 5,672 Core net income available to common stockholders 8,328 9,906 $ 8,968 $ 5,447 $ 5,630 Weighted average diluted shares outstanding 24,613 24,546 24,539 23,524 20,392 Earnings Per Share Diluted earnings per share (as reported) $ 0.36 $ 0.42 $ 0.42 $ 0.14 $ 0.25 Core diluted earnings per share 0.34 0.40 0.37 0.23 0.28 Efficiency Ratio Efficiency Ratio (as reported) 57.58% 53.51% 54.28% 53.60% 59.33% Core Efficiency Ratio 53.46% 51.50% 57.22% 55.86% 54.38% Net Interest Margin Net interest margin (as reported) 4.00% 4.07% 4.46% 4.24% 3.78% Core net interest margin 3.69% 3.83% 3.84% 3.75% 3.66% Net Interest Margin Return on average assets (as reported) 1.10% 1.34% 1.41% 0.48% 0.94% Core return on average assets 1.03% 1.30% 1.22% 0.80% 1.02% . 15
Reconciliation of Non-GAAP Financial Measures ($ in Thousands, Except Per Share) For the Three Months Ended September 30, June 30, March 31, December 31, September 30, 2018 2018 2018 2017 2017 Tangible Common Equity Total stockholders’ equity $ 517,212 $ 508,441 $ 497,433 $ 488,929 $ 445,929 Adjustments: Goodwill (161,447) (161,447) (161,685) (159,452) (135,832) Intangible assets (16,603) (17,482) (18,372) (22,165) (10,531) Total tangible common equity $ 339,162 $ 329,512 $ 317,376 $ 307,312 $ 299,566 Tangible Assets Total assets $ 3,275,846 $ 3,133,627 $ 3,063,319 $ 2,945,583 $ 2,494,861 Adjustments: Goodwill (161,447) (161,447) (161,685) (159,452) (135,832) Intangible assets (16,603) (17,482) (18,372) (22,165) (10,531) Total tangible assets $ 3,097,796 $ 2,954,698 $ 2,883,262 $ 2,763,966 $ 2,348,498 Tangible Common Equity to Tangible Assets 10.95% 11.15% 11.01% 11.12% 12.76% Common shares outstanding 24,192 24,181 24,149 24,110 22,644 Book value per common share $ 21.38 $ 21.03 $ 20.60 $ 20.28 $ 19.69 Tangible book value per common share 14.02 13.63 13.14 12.75 13.23 16
17