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Veritex Holdings, Inc. Reports First Quarter Operating Results

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DALLAS, April 22, 2019 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. ("Veritex" or the "Company") (NASDAQ:VBTX), the holding company for Veritex Community Bank, today announced the results for the three months ended March 31, 2019. The Company reported net income of $7.4 million, or $0.13 diluted earnings per share ("EPS"), compared to $9.8 million, or $0.40 diluted EPS, for the three months ended December 31, 2018 and $10.4 million, or $0.42 diluted EPS, for the three months ended March 31, 2018. Operating net income totaled $32.7 million, or $0.59 diluted operating EPS1, compared to $11.5 million, or $0.47 diluted operating EPS, for the quarter ended December 31, 2018 and $12.2 million, or $0.50 diluted operating EPS, for the quarter ended March 31, 2018.

"First quarter operating results have far exceeded our expectations during the most transformational quarter in Veritex's short history," said C. Malcolm Holland, the Company's Chairman and Chief Executive Officer. "Our first quarter operating earnings highlight significant improvements in key performance metrics while also successfully integrating our people, processes and culture as a result of our merger with Green. I am excited about 2019 and the opportunities that are ahead of us. Our staff continues to be the reason why we stand apart from the competition. With continued focus on our employees and the Veritex culture, we will be able to exceed the goals we have set for ourselves."

First Quarter 2019 Financial Highlights:

  • On January 1, 2019, the Company completed its previously announced acquisition of Green Bancorp, Inc. ("Green") resulting in the fair value of assets acquired and liabilities assumed of approximately $4.6 billion and $3.9 billion, respectively;
  • Diluted EPS was $0.13 and diluted operating EPS was $0.59 for the first quarter of 2019;
  • Return on average assets was 0.38% and operating return on average asset was 1.69% for the first quarter of 2019;
  • Pre-tax, pre-provision operating return on average assets increased to 2.40% for the first quarter of 2019;
  • Efficiency ratio was 82.30% and operating efficiency ratio was 43.54% for the first quarter of 2019;1
  • Tangible book value ("TBV")1 was $13.76 for the first quarter of 2019, reflecting operating earnings, merger expenses, dividends, share repurchase activity and the impact of the merger with Green.
  • Net interest margin expanded to 4.17% for the first quarter 2019 compared to 3.89% for the fourth quarter of 2018;
  • Commenced stock buyback program and purchased 316,600 shares of outstanding Veritex common stock for  an aggregate of $7.7 million during the first quarter of 2019; and
  • Declared quarterly cash dividend of $0.125 payable in May 2019.

Summary of Financial Data

    Q1 2019   Q4 2018   % Change
    (Dollars in thousands)
GAAP            
Net income   $ 7,407     $ 9,825     (25 )%
Diluted EPS   0.13     0.40     (68 )%
Return on average assets2   0.38 %   1.20 %    
Efficiency ratio   82.30     54.27      
Book value per common share   $ 21.88     $ 21.88     %
Non-GAAP1            
Operating net income   $ 32,679     $ 11,457     185 %
Diluted operating EPS   0.59     0.47     26 %
Operating return on average assets2   1.69 %   1.40 %    
Operating efficiency ratio   43.54     50.65      
Return on average tangible common equity2   5.09     11.52      
Operating return on average tangible common equity2   18.81     13.37      
Tangible book value per common share   $ 13.76     $ 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.

Results of Operations for the Three Months Ended March 31, 2019

Net Interest Income

For the three months ended March 31, 2019, net interest income before provision for loan losses was $72.9 million and net interest margin was 4.17% compared to $28.7 million and 3.89%, respectively, for the three months ended December 31, 2018. The $44.2 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 loans acquired from Green effective January 1, 2019 of $3.2 billion, organic loan growth during the first quarter of 2019 and a $3.0 million increase in accretion during the three months ended March 31, 2019 compared to the three months ended December 31, 2018 on acquired loans. Net interest margin increased 28 basis points from the three months ended December 31, 2018 primarily due to a change in mix of interest-earning assets resulting from increases in loans, which generally yield higher interest rates than other interest-earning assets such as investment securities and interest-bearing deposits in other banks. Average interest-bearing deposits grew to $4.8 billion for the three months ended March 31, 2019 from $2.0 billion for the three months ended December 31, 2018, an increase that was primarily driven by an increase in volume of deposits acquired from Green.  Average cost of interest-bearing deposits decreased to 1.62% for the three months ended March 31, 2019 from 1.75% for the three months ended December 31, 2018 as interest on deposits decreased due to accretion recognized in respect to a premium paid on acquired time deposits.

Net interest income before provision for loan losses increased by $43.8 million from $29.1 million to $72.9 million and net interest margin decreased by 26 basis points from 4.43% to 4.17% for the three months ended March 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 yields resulting from loans acquired from Green and organic loan growth during the three months ended March 31, 2019 compared to the three months ended March 31, 2018. For the three months ended March 31, 2019, average loan balance increased by $3.6 billion compared to the three months ended March 31, 2018, which resulted in a $53.7 million increase in interest income. This was partially offset by an increase in the average rate paid on interest-bearing liabilities, which resulted in a $14.9 million increase in interest on deposit accounts. Net interest margin decreased 26 basis points from the three months ended March 31, 2018 primarily due to an increase in the average rate paid on interest-bearing liabilities compared to the three months ended March 31, 2018. As a result, the average cost of interest-bearing deposits increased to 1.62% for the three months ended March 31, 2019 from 1.00% for the three months ended March 31, 2018.

Noninterest Income

Noninterest income for the three months ended March 31, 2019 was $8.5 million, an increase of $4.9 million, or 134.4%, compared to the three months ended December 31, 2018. The increase was primarily due to a $2.7 million increase in service charges and fees on deposit accounts resulting from our acquisition of Green deposit accounts and the associated income from these accounts, a $891 thousand increase in loan fees, a $473 thousand increase in insurance income on bank owned life insurance ("BOLI"), a $352 thousand increase in prepayment fees and a $250 thousand increase in derivative income earned for the three months ended March 31, 2019 primarily resulting from our acquisition of Green. This was partially offset by a loss on securities sold of $772 thousand during the three months ended March 31, 2019.

Compared to the three months ended March 31, 2018, noninterest income for the three months ended March 31, 2019 grew by $5.7 million, or 207.6%. The increase was primarily due to a $2.6 million increase in service charges and fees on acquired deposit accounts as described above, a $1.8 million increase in the gain on sale of Small Business Administration loans, a $1.0 million increase in loan fees, a $479 thousand in insurance income on BOLI and a $250 thousand increase in derivative income earned during the three months ended March 31, 2019. This was partially offset by a loss on securities sold of $772 thousand during the three months ended March 31, 2019.

Noninterest Expense

Noninterest expense was $67.0 million for the three months ended March 31, 2019, compared to $17.5 million for the three months ended December 31, 2018, an increase of $49.5 million, or 282.0%. The increase was primarily driven by a $30.1 million increase in merger and acquisition expenses related to our acquisition of Green.  These expenses were mainly driven by an increase in stock-based compensation due to the accelerated vesting of outstanding restricted stock units and stock options of $17.7 million, severance payments of $7.6 million and legal and professional fees of $4.8 million in connection with our acquisition of Green.  The increase was also caused by a $10.6 million increase in salaries and employee benefits due to the addition of new Green employees, a $1.7 million increase in occupancy and equipment expense primarily due to the addition of nine buildings and 14 property leases in connection with the Green acquisition, and a $1.9 million and $1.0 million increase in amortization of intangibles and data processing and software expenses, respectively, related to our acquisition of Green.

Compared to the three months ended March 31, 2018, noninterest expense for the three months ended March 31, 2019 increased by $49.7 million, or 287.1%. The increase was caused by expenses incurred in connection with our acquisition of Green as described in the preceding paragraph.

Financial Condition

Total loans were $5.8 billion at March 31, 2019, an increase of $3.2 billion, or 126.3%, compared to December 31, 2018. The increase was the result of our acquisition of Green on January 1, 2019 as well as the continued execution and success of our loan growth strategy.

Total deposits were $6.3 billion at March 31, 2019, an increase of $3.7 billion, or 140.1%, compared to December 31, 2018. The increase was primarily the result of increases of $1.9 billion, $1.0 billion, and $868 thousand in time deposits, financial institution money market accounts and non-interest bearing demand deposits, respectively, related to our acquisition of Green and organic growth of our deposits.

Asset Quality

Allowance for loan losses as a percentage of loans held for investment, including mortgage warehouse, was 0.37%, 0.75% and 0.58% of total loans at March 31, 2019, December 31, 2018 and March 31, 2018, respectively. The allowance for loan losses as a percentage of total loans for each of the three quarters ended was determined by evaluating the qualitative factors around the nature, volume and mix of the loan portfolio. The decrease in the allowance for loan loss as a percentage of loans from December 31, 2018 and March 31, 2018 was attributable to our acquisition of Green as acquired loans are recorded at fair value. Our allowance for loan losses and remaining purchase discount on acquired loans as a percentage of loans held for investment, including mortgage warehouse, was 1.82%, 1.23% and 1.40% of total loans at March 31, 2019, December 31, 2018 and March 31, 2018, respectively.

The provision for loan losses for the three months ended March 31, 2019 totaled $5.0 million compared to $1.4 million and $678 thousand for the three months ended December 31, 2018 and March 31, 2018, respectively. The increase in provision for loan losses for the three months ended March 31, 2019 compared to the three months ended December 31, 2018 was primarily due to an increase in our originated and renewed loans as well as a $1.1 million increase in specific reserves on certain non-performing loans and a $1.5 increase on the recorded provision on a purchased credit impaired ("PCI") loan that was paid off as of March 31, 2019.  The increase in provision for loan losses for the three months ended March 31, 2019  compared to the three months ended March 31, 2018 was primarily due to an increase in our originated and renewed loans as well as a $1.4 million increase in specific reserves on certain non-performing loans and a $1.5 million increase on the recorded provision of a PCI loan that was paid off as of March 31, 2019.

Nonperforming assets totaled $23.1 million, or 0.29%, of total assets at March 31, 2019 compared to $24.7 million, or 0.77%, of total assets at December 31, 2018 and $3.8 million, or 0.12%, of total assets at March 31, 2018. The decrease of $1.6 million compared to December 31, 2018 was driven by the repayment in full of an $8.8 million PCI loan, and was offset by a $2.9 million increase in originated non-accrual loans and a $4.3 million increase in accruing loans 90 or more days past due. The increase in nonperforming assets of $19.3 million compared to March 31, 2018 was primarily due to the placement of a $7.9 million PCI loan on non-accrual status as a result of information the Company obtained that precluded the Company from reasonably estimating the timing and amount of future cash flows relating to this loan. Excluding this PCI loan compared to March 31, 2018, the increase of $11.4 million in nonperforming assets was a result of an increase in nonperforming loans of $11.3 million and an increase in other real estate owned of $141 thousand.

Dividend Information

On April 22, 2019, Veritex's Board of Directors declared a quarterly cash dividend of $0.125 per share on its outstanding shares of common stock.  The dividend will be paid on or after May 23, 2019 to stockholders of record as of the close of business on May 9, 2019.

Non-GAAP Financial Measures

Veritex's management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its operating performance and provide information that is important to investors. However, non-GAAP financial measures are supplemental and should be viewed in addition to, and not as an alternative for, Veritex's reported results prepared in accordance with GAAP. Specifically, Veritex reviews and reports tangible book value, tangible book value per common share, tangible common equity to tangible assets, return on average tangible common equity, operating net income, pre-tax, pre-provision operating earnings, pre-tax, pre-provision operating return on average assets, diluted operating earnings per share, operating return on average assets, operating return on average tangible common equity and operating efficiency ratio. Veritex has included in this earnings release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to "Reconciliation of Non-GAAP Financial Measures" after the financial highlights at the end of this earnings release for a reconciliation of these non-GAAP financial measures.

Business Combinations Measurement Period

The measurement period for the Company to determine the fair values of acquired identifiable assets and assumed liabilities for Green will end at the earlier of (i) twelve months from the date of the acquisition or (ii) as soon as the Company receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. Provisional estimates have been recorded for the Green acquisition as independent valuations have not been finalized. The Company does not expect any significant differences from estimated values upon completion of the valuations.

Conference Call

The Company will host an investor conference call to review the results on Tuesday, April 23, 2019 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/m6/p/gizfkp5c and will receive a unique PIN, which can be used when dialing in for the call. This will allow attendees to enter the call immediately. Alternatively, participants may call toll-free at (877) 703-9880.

The call and corresponding presentation slides will be webcast live on the home page of the Company's website, www.veritexbank.com. An audio replay will be available one hour after the conclusion of the call at (855) 859-2056, Conference #3584266. This replay, as well as the webcast, will be available until April 30, 2019.

About Veritex Holdings, Inc.

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

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

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

Forward-Looking Statements

This earnings release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Forward-looking statements include, without limitation, statements relating to the impact Veritex expects its recently completed acquisition of Green to have on its operations, financial condition and financial results and Veritex's expectations about its ability to successfully integrate the combined businesses of Veritex and Green and the amount of cost savings and overall operational efficiencies Veritex expects to realize as a result of the recently completed acquisition of Green.  The forward-looking statements in this earnings release also include statements about Veritex's future financial performance, business and growth strategy, projected plans and objectives, as well as other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact broader economic and industry trends, and any such variations may be material.  Statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "projects," "estimates," "plans" and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words.  Further, certain factors that could affect future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to, the possibility that the businesses of Veritex and Green will not be integrated successfully, that the cost savings and any synergies from the acquisition may not be fully realized or may take longer to realize than expected, disruption from the acquisition making it more difficult to maintain relationships with employees, customers or other parties with whom Veritex has (or Green had) business relationships, diversion of management time on integration-related issues, the reaction to the acquisition by Veritex's and Green's customers, employees and counterparties and other factors, many of which are beyond the control of Veritex.  We refer you to the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of Veritex's Annual Report on Form 10-K for the year ended December 31, 2018 and any updates to those risk factors set forth in Veritex's Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the SEC, which are available on the SEC's website at www.sec.gov.  If one or more events related to these or other risks or uncertainties materialize, or if Veritex's underlying assumptions prove to be incorrect, actual results may differ materially from what Veritex anticipates.  Accordingly, you should not place undue reliance on any such forward-looking statements.  Any forward-looking statement speaks only as of the date on which it is made.  Veritex does not undertake any obligation, and specifically declines any obligation, to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. All forward-looking statements, expressed or implied, included in this earnings release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Veritex or persons acting on Veritex's behalf may issue.


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

    For the Three Months Ended
    March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
    (Dollars and shares in thousands)
Per Share Data (Common Stock):                    
Basic EPS   $ 0.14     $ 0.41     $ 0.37     $ 0.42     $ 0.43  
Diluted EPS   0.13     0.40     0.36     0.42     0.42  
Book value per common share   21.88     21.88     21.38     21.03     20.60  
Tangible book value per common share1   13.76     14.74     14.21     13.83     13.37  
                     
Common Stock Data:                    
Shares outstanding at period end   54,563     24,254     24,192     24,181     24,149  
Weighted average basic shares outstanding for the period   54,293     24,224     24,176     24,148     24,120  
Weighted average diluted shares outstanding for the period   55,439     24,532     24,613     24,546     24,539  
                     
Summary Performance Ratios:                    
Return on average assets2   0.38 %   1.20 %   1.10 %   1.34 %   1.40 %
Return on average equity2   2.52     7.44     6.88     8.11     8.55  
Return on average tangible common equity1, 2   5.09     11.52     10.79     12.80     13.61  
Efficiency ratio   82.30     54.27     57.58     53.51     54.28  
                     
Selected Performance Metrics - Operating:                    
Diluted operating EPS1   0.59     0.47     0.42     0.46     0.50  
Pre-tax, pre-provision operating return on average assets1, 2   2.40     1.95     1.98     2.03     2.13  
Operating return on average assets1, 2   1.69 %   1.40 %   1.28 %   1.47 %   1.64 %
Operating return on average tangible common equity1, 2   18.81     13.37     12.49     14.07     15.86  
Operating efficiency ratio1   43.54     50.65     49.09     48.67     49.94  
                     
Veritex Holdings, Inc. Capital Ratios:                    
Average stockholders' equity to average total assets   15.18 %   16.14 %   15.92 %   16.48 %   16.39 %
Tier 1 capital to average assets (leverage)   10.57     12.04     11.74     12.08     11.84  
Common equity tier 1 capital   11.07     11.80     12.02     12.17     12.04  
Tier 1 capital to risk-weighted assets   11.50     12.18     12.43     12.60     12.48  
Total capital to risk-weighted assets   12.45     12.98     13.22     13.31     13.17  
Tangible common equity to tangible assets1   10.02     11.78     11.08     11.30     11.17  
                     
Veritex Bank Capital Ratios:                    
Tier 1 capital to average assets (leverage)   10.65 %   10.87 %   10.53 %   10.70 %   10.39 %
Common equity tier 1 capital   11.61 %   11.01 %   11.13 %   11.16 %   10.94 %
Tier 1 capital to risk-weighted assets   11.61 %   11.01 %   11.13 %   11.16 %   10.94 %
Total capital to risk-weighted assets   11.93 %   11.64 %   11.75 %   11.70 %   11.45 %

1Refer to the section titled"Reconciliation of Non-GAAP Financial Measures" after the financial highlights for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.
2Annualized ratio.


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

    Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Mar 31, 2018
    (unaudited)       (unaudited)   (unaudited)   (unaudited)
ASSETS                    
Cash and cash equivalents   $ 339,473     $ 84,449     $ 261,790     $ 146,740     $ 195,194  
Securities   950,671     262,695     256,237     252,187     243,164  
Other investments   75,920     23,174     27,769     27,438     21,158  
                     
Loans held for sale   8,002     1,258     1,425     453     893  
Loans held for investment, mortgage warehouse   114,158                  
Loans held for investment   5,663,721     2,555,494     2,444,499     2,418,886     2,316,065  
Total loans   5,785,881     2,556,752     2,445,924     2,419,339     2,316,958  
Allowance for loan losses   (21,603 )   (19,255 )   (17,909 )   (14,842 )   (13,401 )
Bank-owned life insurance   79,397     22,064     21,915     21,767     21,620  
Bank premises, furniture and equipment, net   119,354     78,409     77,346     76,348     76,045  
Other real estate owned   151                 10  
Intangible assets, net   81,245     15,896     16,603     17,482     18,372  
Goodwill   368,268     161,447     161,447     161,447     161,685  
Other assets   69,474     22,919     24,724     23,968     20,761  
Branch assets held for sale   83,516             1,753     1,753  
Total assets   $ 7,931,747     $ 3,208,550     $ 3,275,846     $ 3,133,627     $ 3,063,319  
LIABILITIES AND STOCKHOLDERS' EQUITY                    
Deposits:                    
Noninterest-bearing   $ 1,439,630     $ 626,283     $ 661,754     $ 611,315     $ 597,236  
Interest-bearing   2,617,117     1,313,161     1,346,264     1,252,774     1,354,757  
Certificates and other time deposits   2,240,968     682,984     648,236     626,329     541,801  
Total deposits   6,297,715     2,622,428     2,656,254     2,490,418     2,493,794  
Accounts payable and accrued expenses   42,621     5,413     6,875     4,130     3,862  
Accrued interest payable and other liabilities   6,846     5,361     5,759     5,856     3,412  
Advances from Federal Home Loan Bank   252,982     28,019     73,055     108,092     48,128  
Subordinated debentures and subordinated notes   72,719     16,691     16,691     16,690     16,690  
Other borrowings   2,778                  
Branch liabilities held for sale   62,381                  
Total liabilities   6,738,042     2,677,912     2,758,634     2,625,186     2,565,886  
Commitments and contingencies                    
Stockholders' equity:                    
Common stock   546     243     242     242     241  
Additional paid-in capital   1,109,386     449,427     448,117     447,234     445,964  
Retained earnings   84,559     83,968     74,143     65,208     55,015  
Unallocated Employee Stock Ownership Plan shares           (106 )   (106 )   (106 )
Accumulated other comprehensive income (loss)   7,016     (2,930 )   (5,114 )   (4,067 )   (3,611 )
Treasury stock   (7,802 )   (70 )   (70 )   (70 )   (70 )
Total stockholders' equity   1,193,705     530,638     517,212     508,441     497,433  
Total liabilities and stockholders' equity   $ 7,931,747     $ 3,208,550     $ 3,275,846     $ 3,133,627     $ 3,063,319  


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

    For the Three Months Ended
    Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Mar 31, 2018
Interest income:                    
Loans, including fees   $ 85,747     $ 35,028     $ 35,074     $ 32,291     $ 32,067  
Securities   7,232     1,908     1,722     1,647     1,328  
Deposits in financial institutions and Fed Funds sold   1,554     833     1,016     613     687  
Other investments1   691     413     108     306     28  
Total interest income   95,224     38,182     37,920     34,857     34,110  
Interest expense:                    
Transaction and savings deposits   10,366     5,412     4,694     4,204     3,289  
Certificates and other time deposits   8,792     3,394     3,068     2,248     1,004  
Advances from FHLB   2,055     377     630     234     460  
Subordinated debentures and subordinated notes   1,094     304     250     245     232  
Total interest expense   22,307     9,487     8,642     6,931     4,985  
Net interest income   72,917     28,695     29,278     27,926     29,125  
Provision for loan losses   5,012     1,364     3,057     1,504     678  
Net interest income after provision for loan losses   67,905     27,331     26,221     26,422     28,447  
Noninterest income:                    
Service charges and fees on deposit accounts   3,517     832     809     846     933  
Loan fees   1,278     387     410     261     274  
(Loss) gain on sales of investment securities   (772 )   (42 )   (34 )   4     8  
Gain on sales of loans   2,370     1,789     270     416     581  
Rental income   368     310     414     452     478  
Other1   1,723     343     539     311     484  
Total noninterest income   8,484     3,619     2,408     2,290     2,758  
Noninterest expense:                    
Salaries and employee benefits   18,885     8,278     7,394     7,657     7,930  
Occupancy and equipment   4,129     2,412     2,890     2,143     3,234  
Professional and regulatory fees   3,418     1,889     1,893     1,528     2,104  
Data processing and software expense   1,924     888     697     689     828  
Marketing   619     570     306     446     461  
Amortization of intangibles   2,760     835     798     856     978  
Telephone and communications   395     223     236     414     426  
Merger and acquisition expense   31,217     1,150     2,692     1,043     335  
Other   3,646     1,293     1,340     1,393     1,010  
Total noninterest expense   66,993     17,538     18,246     16,169     17,306  
Net income from operations   9,396     13,412     10,383     12,543     13,899  
Income tax expense   1,989     3,587     1,448     2,350     3,511  
Net income   $ 7,407     $ 9,825     $ 8,935     $ 10,193     $ 10,388  
                     
Basic earnings per share   $ 0.14     $ 0.41     $ 0.37     $ 0.42     $ 0.43  
Diluted earnings per share   $ 0.13     $ 0.40     $ 0.36     $ 0.42     $ 0.42  
Weighted average basic shares outstanding   54,293     24,224     24,176     24,148     24,120  
Weighted average diluted shares outstanding   55,439     24,532     24,613     24,546     24,539  

1 The Company historically reported dividend income in other noninterest income and has re-classed $678, $408, $102, $302 and $23 of dividend income into other investments as of March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, respectively, in order to align with industry peers for comparability purposes.


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

    For the Three Months Ended
    March 31, 2019   December 31, 2018   March 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
Assets                                    
Interest-earning assets:                                    
Loans1,5   $ 5,731,062     $ 84,194     5.96 %   $ 2,502,084     $ 35,028     5.55 %   $ 2,261,133     $ 32,067     5.75 %
Loans held for investment, mortgage warehouse   119,781     1,553     5.26                          
Securities   926,347     7,232     3.17     263,182     1,908     2.88     222,026     1,328     2.43  
Interest-bearing deposits in other banks   264,138     1,554     2.39     136,879     833     2.41     163,996     687     1.70  
Other investments2   56,909     691     4.92     25,772     413     6.36     16,782     28     0.68  
Total interest-earning assets   7,098,237     95,224     5.44     2,927,917     38,182     5.17     2,663,937     34,110     5.19  
Allowance for loan losses   (20,065 )           (18,338 )           (13,133 )        
Noninterest-earning assets5   763,095             333,589             355,625          
Total assets   $ 7,841,267             $ 3,243,168             $ 3,006,429          
                                     
Liabilities and Stockholders' Equity                                    
Interest-bearing liabilities:                                    
Interest-bearing demand and savings deposits5   $ 2,562,304     $ 10,366     1.64 %   $ 1,337,901     $ 5,412     1.60 %   $ 1,218,144     $ 3,289     1.10 %
Certificates and other time deposits5   2,244,194     8,792     1.59     655,776     3,394     2.05     527,051     1,004     0.77  
Advances from FHLB   310,697     2,055     2.68     52,436     377     2.85     117,507     460     1.59  
Subordinated debentures and subordinated notes   75,813     1,094     5.85     16,691     304     7.23     16,926     232     5.56  
Total interest-bearing liabilities   5,193,008     22,307     1.74     2,062,804     9,487     1.82     1,879,628     4,985     1.08  
                                     
Noninterest-bearing liabilities:                                    
Noninterest-bearing deposits5   1,427,970             643,958             600,215          
Other liabilities5   30,023             12,816             17,262          
Total liabilities   6,651,001             2,719,578             2,497,105          
Stockholders' equity   1,190,266             523,590             492,869          
Total liabilities and stockholders' equity   $ 7,841,267             $ 3,243,168             $ 2,989,974          
                                     
Net interest rate spread3           3.70 %           3.35 %           4.11 %
Net interest income       $ 72,917             $ 28,695             $ 29,125      
Net interest margin4           4.17 %           3.89 %           4.43 %

1 Includes average outstanding balances of loans held for sale of $7,709, $1,019 and $1,336 for the three months ended March 31, 2019, December 31, 2018, and March 31, 2018, respectively, and average balances of loans held for investment, excluding mortgage warehouse.
2 The Company historically reported dividend income in other noninterest income and has re-classed $678, $408 and $23 of dividend income into other investments as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively, in order to align with industry peers for comparability purposes.
3 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
4 Net interest margin is equal to net interest income divided by average interest-earning assets.
5 Includes average balances that are held for sale at March 31, 2019.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights

Yield Trend

    For the Three Months Ended
    March 31,
 2019
  December 31,
 2018
  September 30,
 2018
  June 30,
 2018
  March 31,
 2018
Average yield on interest-earning assets:                    
Loans1   5.96 %   5.55 %   5.72 %   5.55 %   5.75 %
Loans held for investment, mortgage warehouse   5.26                  
Securities   3.17     2.88     2.69     2.66     2.43  
Interest-bearing deposits in other banks   2.39     2.41     1.98     1.80     1.70  
Other investments   4.92     6.36     6.76     4.91     0.68  
Total interest-earning assets   5.44 %   5.17 %   5.19 %   5.10 %   5.19 %
                     
Average rate on interest-bearing liabilities:                    
Interest-bearing demand and savings deposits   1.64 %   1.60 %   1.46 %   1.33 %   1.10 %
Certificates and other time deposits   1.59     2.05     1.86     1.52     0.77  
Advances from FHLB   2.68     2.85     2.08     1.57     1.59  
Subordinated debentures and subordinated notes   5.85     7.23     5.94     5.89     5.56  
Total interest-bearing liabilities   1.74 %   1.82 %   1.66 %   1.43 %   1.08 %
                     
Net interest rate spread2   3.70 %   3.35 %   3.53 %   3.67 %   4.11 %
Net interest margin3   4.17 %   3.89 %   4.00 %   4.07 %   4.43 %

  1Includes average outstanding balances of loans held for sale of $7,709, $1,019, $1,091, $1,349 and $1,336 for the three months ended March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, respectively, and average balances of loans held for investment, excluding mortgage warehouse.
  2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
  3 Net interest margin is equal to net interest income divided by average interest-earning assets.

Supplemental Yield Trend

    For the Three Months Ended
    March 31,
 2019
  December 31,
 2018
  September 30,
 2018
  June 30,
 2018
  March 31,
 2018
Average cost of interest-bearing deposits   1.62 %   1.75 %   1.59 %   1.39 %   1.00 %
Average costs of total deposits, including noninterest-bearing   1.25     1.32     1.20     1.05     0.74  


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights

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

    For the Three Months Ended
    March 31,
 2019
  December 31,
 2018
  September 30,
 2018
  June 30,
 2018
  March 31,
 2018
    (Dollars in thousands)
Loans Held for Investment                                        
Originated Loans                                        
Commercial:                                        
Commercial   $ 836,792     33.3 %   $ 697,906     33.0 %   $ 646,978     33.3 %   $ 571,716     33.0 %   $ 516,598     34.1 %
Mortgage warehouse   1,988     0.1                                  
Real Estate:                                        
Owner occupied commercial   215,088     8.6     188,847     8.9     179,422     9.2     138,940     8.0     139,136     9.2  
Commercial   752,628     30.0     636,200     30.0     592,959     30.5     556,410     32.2     459,437     30.3  
Construction and land   364,812     14.5     303,315     14.3     254,258     13.1     215,266     12.5     173,514     11.5  
Farmland   8,247     0.3     7,898     0.4     8,181     0.5     8,102     0.5     5,819     0.4  
1-4 family residential   274,880     10.9     235,092     11.0     210,702     10.9     191,303     11.1     160,504     10.6  
Multi-family residential   48,777     1.9     47,371     2.2     46,240     2.3     43,643     2.5     56,481     3.7  
Consumer   8,587     0.3     4,304     0.2     3,123     0.2     2,716     0.2     2,371     0.2  
Total originated LHI   $ 2,511,799     100 %   $ 2,120,933     100 %   $ 1,941,863     100 %   $ 1,728,096     100 %   $ 1,513,860     100 %
                                         
Acquired Loans                                        
Commercial:                                        
Commercial   $ 975,878     29.9 %   $ 62,866     14.4 %   $ 76,162     15.3 %   $ 120,002     17.3 %   $ 156,222     19.5 %
Mortgage warehouse   112,169     3.3                                  
Real Estate:                                        
Owner occupied commercial   530,026     16.2     132,432     30.5     133,865     26.6     146,199     21.2     167,651     20.9  
Commercial   948,815     29.0     145,553     33.5     162,842     32.4     173,914     25.2     189,317     23.6  
Construction and land   149,897     4.6     21,548     5.0     39,885     7.9     84,996     12.3     127,509     15.9  
Farmland   1,781     0.1     2,630     0.6     2,672     0.5     2,713     0.4     3,547     0.4  
1-4 family residential   295,719     9.1     62,825     14.5     79,106     15.7     92,183     13.3     86,302     10.8  
Multi-family residential   238,936     7.3     3,914     0.9     4,077     0.8     65,978     9.6     66,001     8.2  
Consumer   13,180     0.4     2,808     0.6     4,043     0.8     4,827     0.7     5,680     0.7  
Total acquired  LHI   $ 3,266,401     100 %   $ 434,576     100 %   $ 502,652     100 %   $ 690,812     100 %   $ 802,229     100 %
                                         
Total LHI1   $ 5,778,200         $ 2,555,509         $ 2,444,515         $ 2,418,908         $ 2,316,089      
                                         
Deposits2                                        
Noninterest-bearing   $ 1,439,630     22.9 %   $ 626,283     23.8 %   $ 661,754     24.9 %   $ 611,315     24.5 %   $ 597,236     24.0 %
Interest-bearing transaction   334,868     5.3     146,969     5.6     144,328     5.4     143,561     5.8     156,174     6.3  
Money market   2,169,049     34.4     1,133,045     43.2     1,168,262     44.0     1,074,048     42.5     1,165,773     46.1  
Savings   113,200     1.8     33,147     1.3     33,674     1.3     35,165     1.4     32,810     1.3  
Certificates and other time deposits   2,240,968     35.6     682,984     26.1     648,236     24.4     626,329     25.8     541,801     22.3  
Total deposits   $ 6,297,715     100 %   $ 2,622,428     100 %   $ 2,656,254     100 %   $ 2,490,418     100 %   $ 2,493,794     100 %
                                         
Loan to Deposit Ratio   91.8 %       97.4 %       92.0 %       97.1 %       92.9 %    

1 Total LHI does not include deferred fees of $321 thousand at March 31, 2019, $15 thousand at December 31, 2018, $16 thousand at September 30, 2018, $22 thousand at June 30, 2018 and $24 thousand at March 31, 2018.
2 LHI and deposit portfolio compensation exclude assets and liabilities held for sale as of March 31, 2019.


VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights

Asset Quality

  For the Three Months Ended
  Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Mar 31, 2018
  (Dollars in thousands)
Nonperforming Assets ("NPAs"):                  
Originated nonaccrual loans $ 10,779     $ 7,843     $ 4,664     $ 4,252     $ 3,438  
Acquired nonaccrual loans 7,904     16,902     17,158          
Originated accruing loans 90 or more days past due 2,329         4,302     613     374  
Acquired accruing loans 90 or more days past due 1,974                  
Total nonperforming loans held for investment ("NPLs") 22,986     24,745     26,124     4,865     3,812  
Other real estate owned 151                 10  
Total NPAs $ 23,137     $ 24,745     $ 26,124     $ 4,865     $ 3,822  
                   
Charge-offs:                  
Commercial (2,654 )   (26 )       (77 )   (72 )
Consumer (74 )               (22 )
Total charge-offs (2,728 )   (26 )       (77 )   (94 )
                   
Recoveries:                  
Commercial 64     7     10     15     9  
Total recoveries 64     7     10     15     9  
                   
Net charge-offs $ (2,664 )   $ (19 )   $ 10     $ (62 )   $ (85 )
                   
Allowance for loan losses ("ALLL") at end of period $ 21,603     $ 19,255     $ 17,909     $ 14,842     $ 13,401  
                   
Remaining purchase discount ("PD") on acquired loans1 $ 83,365     $ 12,098     $ 13,389     $ 16,345     $ 18,914  
                   
Asset Quality Ratios:                  
NPAs to total assets 0.29 %   0.77 %   0.80 %   0.16 %   0.12 %
NPLs to total LHI 0.40     0.97     1.07     0.20     0.16  
ALLL to total LHI 0.37     0.75     0.73     0.61     0.58  
ALLL and remaining PD on acquired loans to total LHI1 1.82     1.23     1.28     1.29     1.40  
Net charge-offs to average loans outstanding 0.05                  

1 Remaining PD on acquired loans includes non-accretable and accretable purchase discount on purchased performing and PCI loans for each quarter presented in the table.


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

We identify certain financial measures discussed in this earnings release as being "non GAAP financial measures." In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles as in effect from time to time in the United States (GAAP), in our statements of income, balance sheets or statements of cash flows. Non GAAP financial measures do not include operating and other statistical measures or ratios calculated using exclusively either one or both of (i) financial measures calculated in accordance with GAAP and (ii) operating measures or other measures that are not non GAAP financial measures.

The non-GAAP financial measures that we present in this earnings release should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we present in this earnings release may differ from that of other companies reporting measures with similar names. You should understand how such other financial institutions calculate their financial measures that appear to be similar or have similar names to the non-GAAP financial measures we have discussed in this earnings release when comparing such non GAAP financial measures.

Tangible Book Value Per Common Share. Tangible book value is a non-GAAP measure generally used by financial analysts and
investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total stockholders' equity less goodwill and core deposit intangibles, net of accumulated amortization; and (b) tangible book value per common share as tangible common equity (as described in clause (a)) divided by number of common shares outstanding. For tangible book value per common share, the most directly comparable financial measure calculated in accordance with GAAP is our book value per common share.

We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in core deposit intangibles. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.

The following table reconciles, as of the dates set forth below, total stockholders' equity to tangible common equity and presents our tangible book value per common share compared with our book value per common share:

    For the Three Months Ended
    Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Mar 31, 2018
    (Dollars in thousands, except per share data)
Tangible Common Equity                    
Total stockholders' equity   $ 1,193,705     $ 530,638     $ 517,212     $ 508,441     $ 497,433  
Adjustments:                    
Goodwill   (368,268 )   (161,447 )   (161,447 )   (161,447 )   (161,685 )
Core deposit intangibles1   (74,916 )   (11,675 )   (12,107 )   (12,538 )   (12,970 )
Tangible common equity   $ 750,521     $ 357,516     $ 343,658     $ 334,456     $ 322,778  
Common shares outstanding   54,563     24,254     24,192     24,181     24,149  
                     
Book value per common share   $ 21.88     $ 21.88     $ 21.38     $ 21.03     $ 20.60  
Tangible book value per common share   $ 13.76     $ 14.74     $ 14.21     $ 13.83     $ 13.37  

1 The Company previously adjusted tangible common equity by excluding the impact of all other intangible assets. The Company has modified the metric to solely adjust for core deposit intangibles in order to align with industry peers for comparability purposes.


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

Tangible Common Equity to Tangible Assets. Tangible common equity to tangible assets is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total stockholders' equity, less goodwill and core deposit intangibles, net of accumulated amortization; (b) tangible assets as total assets less goodwill and core deposit intangibles, net of accumulated amortization; and (c) tangible common equity to tangible assets as tangible common equity (as described in clause (a)) divided by tangible assets (as described in clause (b)). For common equity to tangible assets, the most directly comparable financial measure calculated in accordance with GAAP is total stockholders' equity to total assets.

We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, in each case, exclusive of changes in core deposit intangibles. Goodwill and other intangible assets have the effect of increasing both total stockholders' equity and assets while not increasing our tangible common equity or tangible assets.

The following table reconciles, as of the dates set forth below, total stockholders' equity to tangible common equity and total assets to tangible assets and presents our tangible common equity to tangible assets:

    For the Three Months Ended
    Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Mar 31, 2018
    (Dollars in thousands)
Tangible Common Equity                    
Total stockholders' equity   $ 1,193,705     $ 530,638     $ 517,212     $ 508,441     $ 497,433  
Adjustments:                    
Goodwill   (368,268 )   (161,447 )   (161,447 )   (161,447 )   (161,685 )
Core deposit intangibles1   (74,916 )   (11,675 )   (12,107 )   (12,538 )   (12,970 )
Tangible common equity   $ 750,521     $ 357,516     $ 343,658     $ 334,456     $ 322,778  
Tangible Assets                    
Total assets   $ 7,931,747     $ 3,208,550     $ 3,275,846     $ 3,133,627     $ 3,063,319  
Adjustments:                    
Goodwill   (368,268 )   (161,447 )   (161,447 )   (161,447 )   (161,685 )
Core deposit intangibles1   (74,916 )   (11,675 )   (12,107 )   (12,538 )   (12,970 )
Tangible Assets   $ 7,488,563     $ 3,035,428     $ 3,102,292     $ 2,959,642     $ 2,888,664  
Tangible Common Equity to Tangible Assets   10.02 %   11.78 %   11.08 %   11.30 %   11.17 %

1 The Company previously adjusted tangible common equity by excluding the impact of all other intangible assets. The Company has modified the metric to solely adjust for core deposit intangibles in order to align with industry peers for comparability purposes.


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

Return on Average Tangible Common Equity. Return on average tangible common equity is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) return as net income less the effect of core deposit intangibles as net income, plus amortization of core deposit intangibles, net of taxes; (b) average tangible common equity as total average stockholders' equity less average goodwill and average core deposit intangibles, net of accumulated amortization; and (c) return (as described in clause (a)) divided by average tangible common equity (as described in clause (b)). For return on average tangible common equity, the most directly comparable financial measure calculated in accordance with GAAP is return on average equity.

We believe that this measure is important to many investors in the marketplace who are interested in the return on common equity, exclusive of the impact of core deposit intangibles. Goodwill and core deposit intangibles have the effect of increasing total stockholders' equity while not increasing our tangible common equity. This measure is particularly relevant to acquisitive institutions that may have higher balances in goodwill and core deposit intangibles than non-acquisitive institutions.

The following table reconciles, as of the dates set forth below, average tangible common equity to average common equity and net income available for common stockholders excluding amortization of core deposit intangibles, net of tax to net income and presents our return on average tangible common equity:

    For the Three Months Ended
    Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Mar 31, 2018
    (Dollars in thousands)
Net income available for common stockholders adjusted for amortization of core deposit intangibles                    
Net income   $ 7,407     $ 9,825     $ 8,935     $ 10,193     $ 10,388  
Adjustments:                    
Plus: Amortization of core deposit intangibles1   2,477     432     431     432     387  
Less: Tax benefit at the statutory rate   520     91     91     91     81  
Net income available for common stockholders adjusted for amortization of intangibles   $ 9,364     $ 10,166     $ 9,275     $ 10,534     $ 10,694  
                     
Average Tangible Common Equity                    
Total average stockholders' equity   $ 1,190,266     $ 523,590     $ 514,876     $ 504,328     $ 492,869  
Adjustments:                    
Average goodwill   (366,795 )   (161,447 )   (161,447 )   (161,433 )   (159,272 )
Average core deposit intangibles1   (76,727 )   (11,932 )   (12,354 )   (12,807 )   (14,978 )
Average tangible common equity   $ 746,744     $ 350,211     $ 341,075     $ 330,088     $ 318,619  
Return on Average Tangible Common Equity (Annualized)   5.09 %   11.52 %   10.79 %   12.80 %   13.61 %

1 The Company previously adjusted tangible common equity by excluding the impact of all other intangible assets. The Company has modified the metric to solely adjust for core deposit intangibles in order to align with industry peers for comparability purposes.


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

Operating Earnings, Pre-tax, Pre-provision Operating Earnings and performance metrics calculated using Operating Earnings and Pre-tax, Pre-provision Operating Earnings, including Diluted Operating Earnings per Share, Operating Return on Average Assets, 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 earnings as net income plus loss on sale of securities available-for-sale, net, less gain on sale of disposed branch assets, plus lease exit costs, net, plus branch closure expenses, plus one-time issuance of shares to all employees, plus merger and acquisition expenses, less tax impact of adjustments, plus re-measurement of deferred tax assets as a result of the reduction in the corporate income tax rate under the Tax Cuts and Jobs Act, plus other merger and acquisition discrete tax items. We calculate (b) pre-tax, pre-provision operating earnings as operating earnings as described in clause (a) plus provision for income taxes, plus provision for loan losses. We calculate (c) diluted operating earnings per share as operating earnings as described in clause (a) divided by weighted average diluted shares outstanding. We calculate (d) operating return on average tangible common equity as operating earnings as described in clause (a) divided by total average tangible common equity (average stockholders' equity less average goodwill and average core deposit intangibles, net of accumulated amortization.) We calculate (e) operating efficiency ratio as non interest expense plus adjustments to operating non interest expense divided by (i) non interest income plus adjustments to operating non interest income plus (ii) net interest income.

We believe that these measures and the operating metrics calculated utilizing these measures are important to management and many investors in the marketplace who are interested in understanding the ongoing operating performance of the Company and provide meaningful comparisons to its peers.

The following tables reconcile, as of the dates set forth below, operating earnings and pre-tax, pre-provision operating earnings and related metrics:

    For the Three Months Ended
    Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Mar 31, 2018
    (Dollars in thousands)
Operating Earnings                    
Net income   $ 7,407     $ 9,825     $ 8,935     $ 10,193     $ 10,388  
Plus: Loss on sale of securities available for sale, net   772     42              
Less: Gain on sale of disposed branch assets                   (388 )
Plus: Lease exit costs, net1                   1,071  
Plus: Branch closure expenses                   172  
Plus: One-time issuance of shares to all employees               421      
Plus: Merger and acquisition expenses   31,217     1,150     2,692     1,043     335  
Operating pre-tax income   39,396     11,017     11,627     11,657     11,578  
Less: Tax impact of adjustments2   6,717     (440 )   538     293     242  
Plus: Tax Act re-measurement           (688 )   (127 )   820  
Plus: Other M&A discrete tax items                    
Net operating earnings   $ 32,679     $ 11,457     $ 10,401     $ 11,237     $ 12,156  
                     
Weighted average diluted shares outstanding   55,439     24,532     24,613     24,546     24,539  
Diluted EPS   $ 0.13     $ 0.40     $ 0.36     $ 0.42     $ 0.42  
Diluted operating EPS   0.59     0.47     0.42     0.46     0.50  

1 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.
2 During the fourth quarter of 2018, the Company initiated a transaction cost study, which through December 31, 2018 resulted in $727 thousand of expenses paid that are non-deductible merger and acquisition expenses. As such, the $727 thousand of non-deductible expenses are reflected in the three months ended and year-ended December 31, 2018 tax impact of adjustments amounts reported. All other non-merger related adjustments to operating earnings are taxed at the statutory rate.

    For the Three Months Ended
    Mar 31, 2019   Dec 31, 2018   Sep 30, 2018   Jun 30, 2018   Mar 31, 2018
    (Dollars in thousands)
Pre-Tax, Pre-Provision Operating Earnings                    
Net income   $ 7,407     $ 9,825     $ 8,935     $ 10,193     $ 10,388  
Plus: Provision for income taxes   1,989     3,587     1,448     2,350     3,511  
Pus: Provision for loan losses   5,012     1,364     3,057     1,504     678  
Plus: Loss on sale of securities available for sale, net   772     42              
Plus: Loss (gain) on sale of disposed branch assets                   (388 )
Plus: Lease exit costs, net1                   1,071  
Plus: Branch closure expenses                   172  
Plus: One-time issuance of shares to all employees               421      
Plus: Merger and acquisition expenses   31,217     1,150     2,692     1,043     335  
Net pre-tax, pre-provision operating earnings   $ 46,397     $ 15,968     $ 16,132     $ 15,511     $ 15,767  
                     
Average total assets   $ 7,841,267     $ 3,243,168     $ 3,233,214     $ 3,059,456     $ 3,006,429  
Pre-tax, pre-provision operating return on average assets2   2.40 %   1.95 %   1.98 %   2.03 %   2.13 %
                     
Average total assets   $ 7,841,267     $ 3,243,168     $ 3,233,214     $ 3,059,456     $ 3,006,429  
Return on average assets2   0.38 %   1.20 %   1.10 %   1.34 %   1.40 %
Operating return on average assets2   1.69     1.40     1.28     1.47     1.64  
                     
Operating earnings adjusted for amortization of intangibles                    
Net operating earnings   $ 32,679     $ 11,457     $ 10,401     $ 11,237     $ 12,156  
Adjustments:                    
Plus: Amortization of core deposit intangibles3   2,477     432     431     432     387  
Less: Tax benefit at the statutory rate   520     91     91     91     81  
Operating earnings adjusted for amortization of intangibles   $ 34,636     $ 11,798     $ 10,741     $ 11,578     $ 12,462  
                     
Average Tangible Common Equity                    
Total average stockholders' equity   $ 1,190,266     $ 523,590     $ 514,876     $ 504,328     $ 492,869  
Adjustments:                    
Average goodwill   (366,795 )   (161,447 )   (161,447 )   (161,433 )   (159,272 )
Average core deposit intangibles3   (76,727 )   (11,932 )   (12,354 )   (12,807 )   (14,978 )
Average tangible common equity   $ 746,744     $ 350,211     $ 341,075     $ 330,088     $ 318,619  
Operating Return on average tangible common equity2   18.81 %   13.37 %   12.49 %   14.07 %   15.86 %
                     
Efficiency ratio   82.30 %   54.27 %   57.58 %   53.51 %   54.28 %
Operating efficiency ratio   43.54 %   50.65 %   49.09 %   48.67 %   49.94 %

1 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.
2 Annualized ratio.
3 The Company previously adjusted tangible common equity by excluding the impact of all other intangible assets. The Company has modified the metric to solely adjust for core deposit intangibles in order to align with industry peers for comparability purposes.

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