Document

“Our second quarter of 2021 was another outstanding financial and growth quarter for our Company. The investments made over the last two plus years, including our strategic merger with Green in 2019 and targeted talent hires, continue to deliver the benefits we expected. Our 21% Q2-21 annualized loan growth, record Q2-21 loan production of $1.4 billion, strengthening loan pipelines and improving credit profile make us optimistic about the second half of the year. In addition to a strong quarter, we are pleased to announce the completion of our 49% investment in Thrive Mortgage and an 18% increase in our quarterly dividend.”


	QTD						YTD
Financial Highlights	Q2 2021			Q1 2021			Q2 2021			Q2 2020
	(Dollars in thousands) (unaudited)
GAAP
Net income	$	29,456		$	31,787		$	61,243		$	28,162
Diluted EPS	0.59			0.64			1.22			0.56
Book value per common share	25.72			24.96			25.72			23.45
Return on average assets2	1.27		%	1.44		%	1.35		%	0.68		%
Efficiency ratio	52.42			49.62			51.01			46.76

Non-GAAP1
Operating earnings	$	29,952		$	32,213		$	62,165		$	25,322
Diluted operating EPS	0.60			0.64			1.24			0.50
Tangible book value per common share	17.16			16.34			17.16			14.71
Pre-tax, pre-provision operating earnings	38,497			40,210			78,707			84,775
Pre-tax, pre-provision operating return on average assets2	1.66		%	1.82		%	1.74		%	2.03		%
Operating return on average assets2	1.29			1.46			1.37			0.61
Operating efficiency ratio	51.63			49.62			50.62			46.62
Return on average tangible common equity2	15.18			17.17			16.15			9.12
Operating return on average tangible common equity2	15.42			17.39			16.38			8.31

1 Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of these non-generally accepted accounting principles (“GAAP”) financial measures to their most directly comparable GAAP measures.

For the three months ended June 30, 2021, net interest income before provision for credit losses was $67.1 million and net interest margin was 3.11% compared to $65.6 million and 3.22%, respectively, for the three months ended March 31, 2021. Net interest margin decreased 11 basis points from the three months ended March 31, 2021 primarily due to a decrease in the average yields earned on loans, partially offset by a decrease in the average rates paid on interest-bearing demand and savings deposits and certificate and other time deposits for the three months ended June 30, 2021. As a result, the average cost of interest-bearing deposits decreased 10 basis points to 0.35% for the three months ended June 30, 2021 from 0.45% for the three months ended March 31, 2021.

Net interest income before provision for credit losses increased by $1.4 million from $65.8 million to $67.1 million and net interest margin decreased by 20 basis points from 3.31% to 3.11% for the three months ended June 30, 2021 as compared to the same period in 2020. The increase in net interest income before provision for credit losses was primarily due to a $4.1 million decrease in interest expense on certificate and other time deposits, partially offset by a $2.6 million decrease in interest income on loans during the three months ended June 30, 2021 compared to the three months ended June 30, 2020. Net interest margin decreased 20 basis points from the three months ended June 30, 2020 primarily due to a decrease in the average yields earned on loans, partially offset by decreases in the average rate paid on interest-bearing demand and savings deposits and certificates and other time deposits for the three months ended June 30, 2021. As a result, the average cost of interest-bearing deposits decreased 49 basis points to 0.35% for the three months ended June 30, 2021 from 0.84% for the three months ended June 30, 2020.

Noninterest income for the three months ended June 30, 2021 was $12.5 million, a decrease of $1.7 million, or 12.1%, compared to the three months ended March 31, 2021. The decrease was primarily due to a $3.1 million decrease in government guaranteed loan income, net, driven by a $5.6 million decrease in fee income earned on PPP loans during the three months ended June 30, 2021 compared to the three months ended March 31, 2021. This decrease was partially offset by a $2.0 million increase in gain on sale of Small Business Administration (“SBA”) loans during the three months ended June 30, 2021. The decrease in noninterest income was partially offset by a $663 thousand increase in insurance income recognized during the three months ended June 30, 2021 associated with the Company’s bank owned life insurance policy.

Compared to the three months ended June 30, 2020, noninterest income for the three months ended June 30, 2021 decreased by $8.8 million, or 41.5%. The decrease was primarily due to a $7.6 million decrease in government guaranteed loan income, net, driven by an $11.5 million decrease in fee income earned on PPP loans during the three months ended June 30, 2021 compared the same period in 2020, partially offset by a $2.6 million increase in the valuation of PPP loans held at fair value and a $2.0 million increase in gain on sale of SBA loans during the three months ended June 30, 2021 compared to the same period in 2020. The decrease was also due in part to a $2.9 million decrease in gain on sales of investment securities during the three months ended June 30, 2021 compared to the same period in 2020. This decrease was partially offset by $811 thousand increase in insurance income recognized during the three months ended June 30, 2021 associated with the Company’s bank owned life insurance policy.

Noninterest expense was $41.7 million for the three months ended June 30, 2021, compared to $39.6 million for the three months ended March 31, 2021, an increase of $2.1 million, or 5.4%. The increase was primarily driven by a $932 thousand increase in marketing expenses as a result of increased advertising and Community Reinvestment Act donations, a $627 thousand increase in severance payments made as a result of branch restructurings, a $203 thousand increase in write downs of certain other real estate owned properties and a $194 thousand increase in loan related legal expenses during the three months ended June 30, 2021 compared to the three months ended March 31, 2021.

Compared to the three months ended June 30, 2020, noninterest expense for the three months ended June 30, 2021 increased by $1.7 million, or 4.1%. The increase was primarily driven by a $3.4 million increase in salaries and employee benefits as a result of a $1.6 million increase in accrued employee bonus, a $1.4 million increase in salaries and a $786 thousand increase in employee stock based compensation during the three months ended June 30, 2021 compared to the same period in 2020. The increase was also driven by a $1.3 million increase in marketing expenses as a result of increased advertising during the three months ended June 30, 2021 compared to the same period in 2020. These increases were partially offset by a $1.2 million decrease in COVID-19 expenses and a $1.6 million decrease in debt extinguishment costs, which were both incurred during the three months ended June 30, 2020 with no corresponding expense during the same period in 2021.

The Company recorded no provision for credit losses for the three months ended June 30, 2021 and March 31, 2021, compared to $16.2 million for the three months ended June 30, 2020. The decrease in the recorded provision for credit losses for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, was primarily attributable to improvement in the Texas economic forecasts used in the Current Expected Credit Losses (“CECL”) model in the second quarter of 2021 to reflect the expected impact of the COVID-19 pandemic as of June 30, 2021, as compared to our Texas economic forecasts and expected impact of the COVID-19 pandemic as of June 30, 2020. In the second quarter of 2021, we also recorded a $577 thousand provision for unfunded commitments, which was attributable to higher unfunded balances.

Veritex’s management uses certain non-GAAP (U.S. 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 per common share, operating earnings, tangible common equity to tangible assets, return on average tangible common equity, pre-tax, pre-provision operating earnings, pre-tax, pre-provision operating return on average assets, diluted operating earnings per share, operating return on average assets, operating return on average tangible common equity and operating efficiency ratio. Veritex has included in this earnings release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to “Reconciliation of Non-GAAP Financial Measures” after the financial highlights at the end of this earnings release for a reconciliation of these non-GAAP financial measures.

This earnings release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, statements relating to the expected payment date of the Company’s quarterly cash dividend, the impact of certain changes in the Company’s accounting policies, standards and interpretations, the effects of the COVID-19 pandemic and actions taken in response thereto, the Company’s future financial performance, business and growth strategy, projected plans and objectives, as well as other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact broader economic and industry trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and any updates to those risk factors set forth in the Company’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov. If one or more events related to these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may differ materially from what the Company anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. The Company 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, except as required by law. 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 the Company or persons acting on the Company’s behalf may issue.


	For the Three Months Ended															For the Six Months Ended
	Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020			Jun 30, 2020			Jun 30, 2021			Jun 30, 2020
	(Dollars and shares in thousands, except per-share data)
Per Share Data (Common Stock):
Basic EPS	$	0.60		$	0.64		$	0.46		$	0.46		$	0.48		$	1.24		$	0.56
Diluted EPS	0.59			0.64			0.46			0.46			0.48			1.22			0.56
Book value per common share	25.72			24.96			24.39			23.87			23.45			25.72			23.45
Tangible book value per common share1	17.16			16.34			15.70			15.19			14.71			17.16			14.71

Common Stock Data:
Shares outstanding at period end	49,498			49,433			49,340			49,650			49,633			49,498			49,633
Weighted average basic shares outstanding for the period	49,476			49,394			49,571			49,647			49,597			49,435			50,161
Weighted average diluted shares outstanding for the period	50,331			49,998			49,837			49,775			49,727			50,187			50,383

Summary of Credit Ratios:
ACL to total LHI, excluding MW and PPP loans	1.59		%	1.76		%	1.80		%	2.10		%	2.01		%	1.59		%	2.01		%
NPAs to total assets	0.85			0.92			0.99			1.11			0.62			0.85			0.62
Net charge-offs to average loans outstanding	0.09			—			0.28			0.04			0.03			0.09			0.03

Summary Performance Ratios:
Return on average assets2	1.27			1.44			1.04			1.06			1.11			1.35			0.68
Return on average equity2	9.42			10.53			7.58			7.74			8.36			9.96			4.96
Return on average tangible common equity1, 2	15.18			17.17			12.84			13.27			14.49			16.15			9.12
Efficiency ratio	52.42			49.62			62.52			48.12			46.02			51.01			46.76

Selected Performance Metrics - Operating:
Diluted operating EPS1	$	0.60		$	0.64		$	0.60		$	0.46		$	0.43		$	1.24		$	0.50
Pre-tax, pre-provision operating return on average assets1, 2	1.66		%	1.82		%	1.75		%	1.82		%	2.11		%	1.74		%	2.03		%
Operating return on average assets1, 2	1.29			1.46			1.35			1.06			0.98			1.37			0.61
Operating return on average tangible common equity1, 2	15.42			17.39			16.44			13.27			12.90			16.38			8.31
Operating efficiency ratio1	51.63			49.62			49.49			48.11			45.74			50.62			46.62

Veritex Holdings, Inc. Capital Ratios:

Tier 1 capital to average assets (leverage)	9.38			9.50			9.43			9.54			9.16			9.38			9.16
Common equity tier 1 capital	9.03			9.27			9.30			9.67			9.66			9.03			9.66
Tier 1 capital to risk-weighted assets	9.36			9.61			9.66			10.05			10.05			9.36			10.05
Total capital to risk-weighted assets	12.86			13.38			13.56			12.70			12.71			12.86			12.71
Tangible common equity to tangible assets1	9.51			9.17			9.23			9.12			8.96			9.51			8.96


	Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		Jun 30, 2020
	(unaudited)		(unaudited)				(unaudited)		(unaudited)
ASSETS


Cash and cash equivalents	$	390,027	$	468,029	$	230,825	$	128,767	$	160,306






Debt securities	1,125,877		1,077,860		1,055,201		1,091,440		1,112,061
Other investments	87,558		87,226		87,192		98,023		104,213

Loans held for sale	12,065		19,864		21,414		13,928		28,041
LHI, PPP loans, carried at fair value	291,401		407,353		358,042		405,465		398,949
LHI, MW	559,939		599,001		577,594		544,845		441,992
LHI, excluding MW and PPP	6,272,087		5,963,493		5,847,862		5,789,293		5,726,873
Total loans	7,135,492		6,989,711		6,804,912		6,753,531		6,595,855
ACL	(99,543)		(104,936)		(105,084)		(121,591)		(115,365)
Bank-owned life insurance	83,304		83,318		82,855		82,366		81,876
Bank premises, furniture and equipment, net	123,504		114,585		115,063		115,794		115,560
Other real estate owned (“OREO”)	2,467		2,337		2,337		5,796		7,716
Intangible assets, net of accumulated amortization	57,143		59,236		61,733		64,716		66,705
Goodwill	370,840		370,840		370,840		370,840		370,840
Other assets	72,856		89,304		114,997		112,693		88,091

Total assets	$	9,349,525	$	9,237,510	$	8,820,871	$	8,702,375	$	8,587,858
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing deposits	$	2,388,068	$	2,171,719	$	2,097,099	$	1,920,715	$	1,907,697
Interest-bearing transaction and savings deposits	3,112,974		3,189,693		2,958,456		2,821,945		2,714,149
Certificates and other time deposits	1,477,860		1,543,158		1,457,291		1,479,896		1,503,701
Total deposits	6,978,902		6,904,570		6,512,846		6,222,556		6,125,547
Accounts payable and other liabilities	55,499		55,902		61,928		69,540		68,713

Advances from Federal Home Loan Bank (“FHLB”)	777,640		777,679		777,718		1,082,756		1,087,794
Subordinated debentures and subordinated notes	262,766		262,774		262,778		140,158		140,283
Securities sold under agreements to repurchase	1,811		2,777		2,225		2,028		1,772

Total liabilities	8,076,618		8,003,702		7,617,495		7,517,038		7,424,109
Commitments and contingencies
Stockholders’ equity:
Common stock	558		557		555		555		555
Additional paid-in capital	1,134,603		1,131,324		1,126,437		1,124,148		1,122,063
Retained earnings	216,704		195,661		172,232		157,639		143,277

Accumulated other comprehensive income	77,189		62,413		56,225		47,155		42,014
Treasury stock	(156,147)		(156,147)		(152,073)		(144,160)		(144,160)
Total stockholders’ equity	1,272,907		1,233,808		1,203,376		1,185,337		1,163,749
Total liabilities and stockholders’ equity	$	9,349,525	$	9,237,510	$	8,820,871	$	8,702,375	$	8,587,858

(In thousands, except per share data)


	For the Three Months Ended										For the Six Months Ended
	Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Jun 30, 2021		Jun 30, 2020
Interest income:
Loans, including fees	$	67,814	$	67,399	$	69,597	$	68,685	$	70,440	$	135,213	$	148,301
Debt securities	7,529		7,437		7,652		7,852		7,825		14,966		15,222
Deposits in financial institutions and Fed Funds sold	167		127		99		65		186		294		1,057
Equity securities and other investments	672		663		752		827		891		1,335		1,741
Total interest income	76,182		75,626		78,100		77,429		79,342		151,808		166,321
Interest expense:
Transaction and savings deposits	1,661		1,980		2,105		2,105		2,471		3,641		9,023
Certificates and other time deposits	2,423		3,061		3,919		5,004		6,515		5,484		14,755
Advances from FHLB	1,829		1,812		2,222		2,707		2,801		3,641		5,680
Subordinated debentures and subordinated notes	3,138		3,138		3,088		1,743		1,798		6,276		3,701
Total interest expense	9,051		9,991		11,334		11,559		13,585		19,042		33,159
Net interest income	67,131		65,635		66,766		65,870		65,757		132,766		133,162
Provision for credit losses	—		—		—		8,692		16,172		—		47,948
Provision (benefit) for unfunded commitments	577		(570)		902		1,447		2,799		7		6,680
Net interest income after provisions	66,554		66,205		65,864		55,731		46,786		132,759		78,534
Noninterest income:
Service charges and fees on deposit accounts	3,847		3,629		3,971		3,130		2,960		7,476		6,602
Loan fees	1,823		1,341		684		1,787		1,240		3,164		2,085
(Loss) gain on sales of investment securities	—		—		(256)		(8)		2,879		—		2,879
Gain on sales of mortgage loans held for sale	385		507		317		472		308		892		450
Government guaranteed loan income, net	3,448		6,548		448		2,257		11,006		9,996		11,445

Other	2,953		2,147		3,848		2,157		2,897		5,100		5,076
Total noninterest income	12,456		14,172		9,012		9,795		21,290		26,628		28,537
Noninterest expense:
Salaries and employee benefits	23,451		22,932		20,011		20,553		20,019		46,383		38,889
Occupancy and equipment	4,233		4,096		4,116		3,980		3,994		8,329		8,267
Professional and regulatory fees	3,086		3,441		3,578		3,159		2,796		6,527		4,992
Data processing and software expense	2,536		2,319		2,238		2,452		2,434		4,855		4,523
Marketing	1,841		909		945		1,062		561		2,750		1,644
Amortization of intangibles	2,517		2,537		2,558		2,840		2,696		5,054		5,392
Telephone and communications	337		337		340		345		308		674		627

COVID expenses	—		—		—		132		1,245		—		1,245
Debt extinguishment costs	—		—		9,746		—		1,561		—		—
Other	3,716		3,026		3,841		1,885		4,447		6,742		10,027
Total noninterest expense	41,717		39,597		47,373		36,408		40,061		81,314		75,606
Income before income tax expense	37,293		40,780		27,503		29,118		28,015		78,073		31,465
Income tax expense	7,837		8,993		4,702		6,198		3,987		16,830		3,303
Net income	$	29,456	$	31,787	$	22,801	$	22,920	$	24,028	$	61,243	$	28,162



Basic EPS	$	0.60	$	0.64	$	0.46	$	0.46	$	0.48	$	1.24	$	0.56
Diluted EPS	$	0.59	$	0.64	$	0.46	$	0.46	$	0.48	$	1.22	$	0.56
Weighted average basic shares outstanding	49,476		49,394		49,571		49,647		49,597		49,435		50,161
Weighted average diluted shares outstanding	50,331		49,998		49,837		49,775		49,727		50,187		50,383


	For the Three Months Ended
	June 30, 2021						March 31, 2021						June 30, 2020
	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	$	6,108,527	$	63,427	4.16	%	$	5,897,815	$	62,702	4.31	%	$	5,797,989	$	67,404	4.68	%
LHI, MW	455,334		3,476		3.06		510,678		3,815		3.03		304,873		2,279		3.01
PPP loans	364,020		911		1.00		356,356		882		1.00		303,223		757		1.00
Debt securities	1,095,678		7,529		2.76		1,063,538		7,437		2.84		1,117,964		7,825		2.82
Interest-bearing deposits in other banks	548,087		167		0.12		341,483		127		0.15		366,764		186		0.20
Equity securities and other investments	87,413		672		3.08		87,178		663		3.08		110,672		891		3.24
Total interest-earning assets	8,659,059		76,182		3.53		8,257,048		75,626		3.71		8,001,485		79,342		3.99
ACL	(105,050)						(105,972)						(110,483)
Noninterest-earning assets	767,270						790,195						798,772
Total assets	$	9,321,279					$	8,941,271					$	8,689,774

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand and savings deposits	$	3,191,405	$	1,661	0.21	%	$	3,038,586	$	1,980	0.26	%	$	2,684,897	$	2,471	0.37	%
Certificates and other time deposits	1,515,092		2,423		0.64		1,509,836		3,061		0.82		1,625,971		6,515		1.61
Advances from FHLB	777,655		1,829		0.94		777,694		1,812		0.94		1,206,930		2,801		0.93
Subordinated debentures and subordinated notes	264,931		3,138		4.75		265,356		3,138		4.80		142,549		1,798		5.07
Total interest-bearing liabilities	5,749,083		9,051		0.63		5,591,472		9,991		0.72		5,660,347		13,585		0.97

Noninterest-bearing liabilities:
Noninterest-bearing deposits	2,266,470						2,069,233						1,826,327
Other liabilities	51,355						56,272						47,302
Total liabilities	8,066,908						7,716,977						7,533,976
Stockholders’ equity	1,254,371						1,224,294						1,155,798
Total liabilities and stockholders’ equity	$	9,321,279					$	8,941,271					$	8,689,774

Net interest rate spread2					2.90	%					2.99	%					3.02	%
Net interest income			$	67,131					$	65,635					$	65,757
Net interest margin3					3.11	%					3.22	%					3.31	%


	Six Months Ended
	June 30, 2021						June 30, 2020
	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	$	6,003,754	$	126,128	4.24	%	$	5,790,227	$	143,931	5.00	%
LHI, MW	482,853		7,292		3.05		234,260		3,613		3.10
PPP loans	360,209		1,793		1.00		152,861		757		1.00
Debt securities	1,079,697		14,966		2.80		1,078,459		15,222		2.84
Interest-bearing deposits in other banks	445,356		294		0.13		337,655		1,057		0.63
Equity securities and other investments	87,296		1,335		3.08		101,294		1,741		3.46
Total interest-earning assets	8,459,165		151,808		3.62		7,694,756		166,321		4.35
ACL	(105,509)						(77,376)
Noninterest-earning assets	778,691						763,567
Total assets	$	9,132,347					$	8,380,947

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand and savings deposits	$	3,115,417	$	3,641	0.24	%	$	2,668,726	$	9,023	0.68	%
Certificates and other time deposits	1,512,479		5,484		0.73		1,639,807		14,755		1.81
Advances from FHLB	777,675		3,641		0.94		1,072,416		5,680		1.07
Subordinated debentures and subordinated notes	265,142		6,276		4.77		143,869		3,701		5.17
Total interest-bearing liabilities	5,670,713		19,042		0.68		5,524,818		33,159		1.21

Noninterest-bearing liabilities:
Noninterest-bearing deposits	2,168,396						1,675,015
Other liabilities	53,823						38,488
Total liabilities	7,892,932						7,238,321
Stockholders’ equity	1,239,415						1,142,626
Total liabilities and stockholders’ equity	$	9,132,347					$	8,380,947

Net interest rate spread2					2.94	%					3.14	%
Net interest income			$	132,766					$	133,162
Net interest margin3					3.16	%					3.48	%

Yield Trend


	For the Three Months Ended
	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020
Average yield on interest-earning assets:
Loans1	4.16	%	4.31	%	4.48	%	4.49	%	4.68	%
LHI, MW	3.06		3.03		2.99		3.00		3.01
PPP loans	1.00		1.00		1.00		1.00		1.00
Debt securities	2.76		2.84		2.83		2.84		2.82
Interest-bearing deposits in other banks	0.12		0.15		0.15		0.15		0.20
Equity securities and other investments	3.08		3.08		3.13		3.17		3.24
Total interest-earning assets	3.53	%	3.71	%	3.85	%	3.90	%	3.99	%

Average rate on interest-bearing liabilities:
Interest-bearing demand and savings deposits	0.21	%	0.26	%	0.29	%	0.31	%	0.37	%
Certificates and other time deposits	0.64		0.82		1.06		1.36		1.61
Advances from FHLB	0.94		0.94		1.00		1.01		0.93
Subordinated debentures and subordinated notes	4.75		4.80		4.73		4.87		5.07
Total interest-bearing liabilities	0.63	%	0.72	%	0.82	%	0.85	%	0.97	%

Net interest rate spread2	2.90	%	2.99	%	3.03	%	3.05	%	3.02	%
Net interest margin3	3.11	%	3.22	%	3.29	%	3.32	%	3.31	%

Total LHI and Deposit Portfolio Composition


	June 30, 2021					March 31, 2021					December 31, 2020					September 30, 2020					June 30, 2020
	(Dollars in thousands)
LHI1

Commercial	$	1,771,100		28.2	%	$	1,632,040		27.4	%	$	1,559,546		26.7	%	$	1,623,249		28.0	%	$	1,555,300		27.2	%

Real Estate:
Owner occupied commercial (“OOCRE”)	744,899			11.9		733,310			12.3		717,472			12.3		734,939			12.7		769,952			13.4
Non-owner occupied commercial (“NOOCRE)	1,986,538			31.6		1,970,945			33.0		1,904,132			32.5		1,817,013			31.4		1,847,480			32.3
Construction and land	871,765			13.9		723,444			12.1		693,030			11.8		623,496			10.8		599,510			10.5
Farmland	13,661			0.2		14,751			0.2		13,844			0.2		14,413			0.2		14,723			0.3
1-4 family residential	513,635			8.2		492,609			8.3		524,344			9.0		548,953			9.5		528,688			9.2
Multi-family residential	367,445			5.9		386,844			6.5		424,962			7.3		412,412			7.0		394,829			6.8
Consumer	10,530			0.1		12,431			0.2		13,000			0.1		14,127			0.2		14,932			0.3
Total LHI	$	6,279,573		100	%	$	5,966,374		100	%	$	5,850,330		100	%	$	5,788,602		100	%	$	5,725,414		100	%

MW	559,939					599,001					577,594					544,845					441,992
PPP loans	291,401					407,353					358,042					405,465					398,949

Total LHI1	$	7,130,913				$	6,972,728				$	6,785,966				$	6,738,912				$	6,566,355

Deposits
Noninterest-bearing	$	2,388,068		34.3	%	$	2,171,719		31.6	%	$	2,097,099		32.2	%	$	1,920,715		30.9	%	$	1,907,697		31.1	%
Interest-bearing transaction	451,307			6.5		463,343			6.7		453,110			7.0		450,739			7.2		343,640			5.6
Money market	2,539,061			36.4		2,602,903			37.7		2,398,526			36.8		2,267,191			36.4		2,272,520			37.1
Savings	122,606			1.8		123,447			1.8		106,820			1.6		104,015			1.7		97,989			1.6
Certificates and other time deposits	1,477,860			22.2		1,543,158			22.3		1,457,291			22.3		1,479,896			23.7		1,503,701			24.5
Total deposits	$	6,978,902		100	%	$	6,904,570		100	%	$	6,512,846		100	%	$	6,222,556		100	%	$	6,125,547		100	%

Loan to Deposit Ratio	102.2		%			101.0		%			104.2		%			108.3		%			107.2		%

Loan to Deposit Ratio, excluding MW and PPP loans	90.0		%			86.4		%			89.8		%			93.0		%			93.5		%

Asset Quality


	For the Three Months Ended															For the Six Months Ended
	Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020			Jun 30, 2020			Jun 30, 2021			Jun 30, 2020
	(Dollars in thousands)
NPAs:
Nonaccrual loans	$	76,994		$	73,594		$	81,096		$	88,877		$	43,594		$	76,994		$	43,594
Accruing loans 90 or more days past due1	462			9,093			4,204			1,689			2,021			462			2,021
Total nonperforming loans held for investment (“NPLs”)	77,456			82,687			85,300			90,566			45,615			77,456			45,615
OREO	2,467			2,337			2,337			5,796			7,716			2,467			7,716
Total NPAs	$	79,923		$	85,024		$	87,637		$	96,362		$	53,331		$	79,923		$	53,331

Charge-offs:
Residential	$	(300)		$	(15)		$	(18)		$	—		$	—		$	(303)		$	—
OOCRE	(689)			—			—			(2,421)			—			(689)			—
NOOCRE	—			—			(2,865)			—			—
Commercial	(5,608)			(346)			(13,699)			(68)			(1,740)			(5,966)			(1,740)
Consumer	(20)			(18)			(26)			(11)			(57)			(38)			(125)
Total charge-offs	(6,617)			(379)			(16,608)			(2,500)			(1,797)			(6,996)			(1,865)

Recoveries:
Residential	29			3			49			7			—			26			1
OOCRE	500			—			—			—			—			500			—
Commercial	659			226			52			14			7			885			36
Consumer	36			2			—			13			—			44			274
Total recoveries	1,224			231			101			34			7			1,455			311

Net charge-offs	$	(5,393)		$	(148)		$	(16,507)		$	(2,466)		$	(1,790)		$	(5,541)		$	(1,554)

CECL transition adjustment	$	—		$	—		$	—		$	—		$	—		$	—		$	39,137

ACL at end of period	$	99,543		$	104,936		$	105,084		$	121,591		$	115,365		$	99,543		$	115,365



Asset Quality Ratios:
NPAs to total assets	0.85		%	0.92		%	0.99		%	1.11		%	0.62		%	0.85		%	0.62		%
NPLs to total LHI, excluding MW and PPP loans	1.23			1.39			1.46			1.56			0.80			1.23			0.80
ACL to total LHI, excluding MW and PPP loans	1.59			1.76			1.80			2.10			2.01			1.59			2.01

Net charge-offs to average loans outstanding	0.09			—			0.28			0.04			0.03			0.09			0.03

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

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

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


	As of
	Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		Jun 30, 2020
	(Dollars in thousands, except per share data)
Tangible Common Equity
Total stockholders' equity	$	1,272,907	$	1,233,808	$	1,203,376	$	1,185,337	$	1,163,749
Adjustments:
Goodwill	(370,840)		(370,840)		(370,840)		(370,840)		(370,840)
Core deposit intangibles	(52,873)		(55,311)		(57,758)		(60,209)		(62,661)
Tangible common equity	$	849,194	$	807,657	$	774,778	$	754,288	$	730,248
Common shares outstanding	49,498		49,433		49,340		49,650		49,633

Book value per common share	$	25.72	$	24.96	$	24.39	$	23.87	$	23.45
Tangible book value per common share	$	17.16	$	16.34	$	15.70	$	15.19	$	14.71

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

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


	As of
	Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020			Jun 30, 2020
	(Dollars in thousands)
Tangible Common Equity
Total stockholders' equity	$	1,272,907		$	1,233,808		$	1,203,376		$	1,185,337		$	1,163,749
Adjustments:
Goodwill	(370,840)			(370,840)			(370,840)			(370,840)			(370,840)
Core deposit intangibles	(52,873)			(55,311)			(57,758)			(60,209)			(62,661)
Tangible common equity	$	849,194		$	807,657		$	774,778		$	754,288		$	730,248
Tangible Assets
Total assets	$	9,349,525		$	9,237,510		$	8,820,871		$	8,702,375		$	8,587,858
Adjustments:
Goodwill	(370,840)			(370,840)			(370,840)			(370,840)			(370,840)
Core deposit intangibles	(52,873)			(55,311)			(57,758)			(60,209)			(62,661)
Tangible Assets	$	8,925,812		$	8,811,359		$	8,392,273		$	8,271,326		$	8,154,357
Tangible Common Equity to Tangible Assets	9.51		%	9.17		%	9.23		%	9.12		%	8.96		%

Return on Average Tangible Common Equity. Return on average tangible common equity is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) net income available for common stockholders adjusted for amortization of core deposit intangibles (which we refer to as “return”) as net income, plus amortization of core deposit intangibles, less tax benefit at the statutory rate; (b) average tangible common equity as total average stockholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization; and (c) return on average tangible common equity as 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.


	For the Three Months Ended															For the Six Months Ended
	Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020			Jun 30, 2020			Jun 30, 2021			Jun 30, 2020
	(Dollars in thousands)
Net income available for common stockholders adjusted for amortization of core deposit intangibles
Net income	$	29,456		$	31,787		$	22,801		$	22,920		$	24,028		$	61,243		$	28,162
Adjustments:
Plus: Amortization of core deposit intangibles	2,438			2,447			2,451			2,451			2,451			4,885			4,902
Less: Tax benefit at the statutory rate	512			514			515			515			515			1,026			1,030
Net income available for common stockholders adjusted for amortization of core deposit intangibles	$	31,382		$	33,720		$	24,737		$	24,856		$	25,964		$	65,102		$	32,034

Average Tangible Common Equity
Total average stockholders' equity	$	1,254,371		$	1,224,294		$	1,196,274		$	1,177,882		$	1,155,798		$	1,239,415		$	1,142,626
Adjustments:
Average goodwill	(370,840)			(370,840)			(370,840)			(370,840)			(370,840)			(370,840)			(370,840)
Average core deposit intangibles	(54,471)			(56,913)			(59,010)			(61,666)			(64,151)			(55,685)			(65,296)
Average tangible common equity	$	829,060		$	796,541		$	766,424		$	745,376		$	720,807		$	812,890		$	706,490
Return on Average Tangible Common Equity (Annualized)	15.18		%	17.17		%	12.84		%	13.27		%	14.49		%	16.15		%	9.12		%

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, Pre-tax, Pre-Provision Operating Return on Average Assets, Operating Return on Average Tangible Common Equity and Operating Efficiency Ratio. Operating earnings, pre-tax, pre-provision operating earnings and the performance metrics calculated using these metrics, listed below, are non-GAAP measures used by management to evaluate the Company’s financial performance. We calculate (a) operating earnings as net income plus severance payments, plus loss (gain) on sale of securities, net, plus debt extinguishment costs, less tax impact of adjustments, plus nonrecurring tax adjustments. We calculate (b) diluted operating earnings per share as operating earnings as described in clause (a) divided by weighted average diluted shares outstanding. We calculate (c) 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 (d) pre-tax, pre-provision operating return on average assets as pre-tax, pre-provision operating earnings as described in clause (a) divided by average total assets. We calculate (e) operating return on average assets as operating earnings as described in clause (a) divided by average total assets. We calculate (f) operating return on average tangible common equity as operating earnings as described in clause (a), adjusted for the amortization of intangibles and tax benefit at the statutory rate, divided by total average tangible common equity (average stockholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization). We calculate (g) operating efficiency ratio as noninterest expense plus adjustments to operating noninterest expense divided by (i) noninterest income plus adjustments to operating noninterest income plus (ii) net interest income.


	For the Three Months Ended										For the Six Months Ended
	Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Jun 30, 2021		Jun 30, 2020
	(Dollars in thousands)
Operating Earnings
Net income	$	29,456	$	31,787	$	22,801	$	22,920	$	24,028	$	61,243	$	28,162
Plus: Severance payments1	627		—		—		—		—		627		—
Plus: Loss (gain) on sale of securities available for sale, net	—		—		256		8		(2,879)		—		(2,879)

Plus: Debt extinguishment costs2	—		—		9,746		—		1,561		—		1,561


Operating pre-tax income	30,083		31,787		32,803		22,928		22,710		61,870		26,844
Less: Tax impact of adjustments	131		—		2,100		—		(277)		131		(277)


Plus: Nonrecurring tax adjustments3	—		426		(973)		—		(1,799)		426		(1,799)
Operating earnings	$	29,952	$	32,213	$	29,730	$	22,928	$	21,188	$	62,165	$	25,322

Weighted average diluted shares outstanding	50,331		49,998		49,837		49,775		49,727		50,187		50,383
Diluted EPS	$	0.59	$	0.64	$	0.46	$	0.46	$	0.48	$	1.22	$	0.56
Diluted operating EPS	0.60		0.64		0.60		0.46		0.43		1.24		0.50

3 A nonrecurring tax adjustment of $426 thousand recorded in the first quarter of 2021 was due to a true-up of a deferred tax liability. A nonrecurring tax adjustment of $973 thousand recorded in the fourth quarter of 2020 was primarily due the reversal of acquired deferred tax liabilities resulting in a tax benefit of $1.2 million offset by tax expense of $281 thousand for the setup of an uncertain tax position liability relating to state tax exposure for tax years prior to the year ending December 31, 2020. A nonrecurring tax adjustment of $1,799 was recorded in the second quarter of 2020 as a result of the Company amending a prior year Green Bancorp, Inc. tax return to carry back a net operating loss ("NOL") incurred by Green Bancorp, Inc. on January 1, 2019. The Company was allowed to carry back this NOL as result of a provision in the CARES Act, which permits NOLs generated in tax years 2018, 2019 or 2020 to be carried back five years.


	For the Three Months Ended															For the Six Months Ended
	Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020			Jun 30, 2020			Jun 30, 2021			Jun 30, 2020
	(Dollars in thousands)
Pre-Tax, Pre-Provision Operating Earnings
Net income	$	29,456		$	31,787		$	22,801		$	22,920		$	24,028		$	61,243		$	28,162
Plus: Provision (benefit) for income taxes	7,837			8,993			4,702			6,198			3,987			16,830			3,303
Plus: Provision (benefit) for credit losses and unfunded commitments	577			(570)			902			10,139			18,971			7			54,628
Plus: Severance payments	627			—			—			—			—			627			—
Plus: Loss (gain) on sale of securities, net	—			—			256			8			(2,879)			—			(2,879)

Plus: Debt extinguishment costs	—			—			9,746			—			1,561			—			1,561


Pre-tax, pre-provision operating earnings	$	38,497		$	40,210		$	38,407		$	39,265		$	45,668		$	78,707		$	84,775

Average total assets	$	9,321,279		$	8,941,271		$	8,750,141		$	8,585,926		$	8,689,774		$	9,132,347		$	8,380,947
Pre-tax, pre-provision operating return on average assets1	1.66		%	1.82		%	1.75		%	1.82		%	2.11		%	1.74		%	2.03		%

Average total assets	$	9,321,279		$	8,941,271		$	8,750,141		$	8,585,926		$	8,689,774		$	9,132,347		$	8,380,947
Return on average assets1	1.27		%	1.44		%	1.04		%	1.06		%	1.11		%	1.35		%	0.68		%
Operating return on average assets1	1.29			1.46			1.35			1.06			0.98			1.37			0.61

Operating earnings adjusted for amortization of core deposit intangibles
Operating earnings	$	29,952		$	32,213		$	29,730		$	22,928		$	21,188		$	62,165		$	25,322
Adjustments:
Plus: Amortization of core deposit intangibles	2,438			2,447			2,451			2,451			2,451			4,885			4,902
Less: Tax benefit at the statutory rate	512			514			515			515			515			1,026			1,030
Operating earnings adjusted for amortization of core deposit intangibles	$	31,878		$	34,146		$	31,666		$	24,864		$	23,124		$	66,024		$	29,194

Average Tangible Common Equity
Total average stockholders' equity	$	1,254,371		$	1,224,294		$	1,196,274		$	1,177,882		$	1,155,798		$	1,239,415		$	1,142,626
Adjustments:
Less: Average goodwill	(370,840)			(370,840)			(370,840)			(370,840)			(370,840)			(370,840)			(370,840)
Less: Average core deposit intangibles	(54,471)			(56,913)			(59,010)			(61,666)			(64,151)			(55,685)			(65,296)
Average tangible common equity	$	829,060		$	796,541		$	766,424		$	745,376		$	720,807		$	812,890		$	706,490
Operating return on average tangible common equity1	15.42		%	17.39		%	16.44		%	13.27		%	12.90		%	16.38		%	8.31		%





Efficiency ratio	52.42		%	49.62		%	62.52		%	48.12		%	46.02		%	51.01		%	46.76		%






Operating efficiency ratio
Net interest income	$	67,131		$	65,635		$	66,766		$	65,870		$	65,757		$	132,766		$	133,162
Noninterest income	12,456			14,172			9,012			9,795			21,290			26,628			28,537
Plus: Loss (gain) on sale of securities available for sale, net	—			—			256			8			(2,879)			—			(2,879)
Operating noninterest income	12,456			14,172			9,268			9,803			18,411			26,628			25,658
Noninterest expense	41,717			39,597			47,373			36,408			40,061			81,314			75,606
Less: Severance payments	627			—			—			—			—			627			—
Less: Debt extinguishment costs	—			—			9,746			—			1,561			—			1,561
Operating noninterest expense	$	41,090		$	39,597		$	37,627		$	36,408		$	38,500		$	80,687		$	74,045
Operating efficiency ratio	51.63		%	49.62		%	49.49		%	48.11		%	45.74		%	50.62		%	46.62		%

1 Annualized ratio.