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Veritex Holdings, Inc. Reports Fourth Quarter and Full Year 2022 Results

DALLAS, Jan. 24, 2023 (GLOBE NEWSWIRE) — Veritex Holdings, Inc. (“Veritex” or the “Company”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the fourth quarter and full year of 2022.

“Today we reported strong 2022 performance metrics with $216 million in pre-tax pre-provision earnings, or 1.97% on average assets, 1.35% operating return on average assets, 16% return on average tangible common equity and an efficiency ratio below 50% for the 5th consecutive year,” said C. Malcolm Holland, III, Veritex President and Chief Executive Officer. “We generated 34% growth in loans, 24% growth in deposits, completed an oversubscribed common stock offering and expanded relationships and new customers. Looking towards 2023, we remain focused on credit discipline, lending in portfolios that align with our core deposit priorities and delivering strong financial results.”

Financial Highlights Fourth Quarter

2022
  Third Quarter

2022
  Fourth Quarter

2021
    Full Year

2022
  Full Year

2021
  (Dollars in thousands, except per share data)

(unaudited)
GAAP                    
Net income $ 39,897     $ 43,322     $ 41,506       $ 146,315     $ 139,584  
Diluted EPS   0.73       0.79       0.82         2.71       2.77  
Book value per common share   26.83       26.15       26.64         26.83       26.64  
Return on average assets2   1.35 %     1.50 %     1.68 %       1.33 %     1.49 %
Efficiency ratio   47.63       44.71       48.53         48.64       49.45  
Return on average equity2   11.03       11.82       12.65         10.28       11.01  
Non-GAAP1                    
Operating earnings $ 40,395     $ 43,625     $ 42,410       $ 147,889     $ 139,647  
Diluted operating EPS   0.74       0.80       0.84         2.74       2.77  
Tangible book value per common share   18.64       17.91       17.49         18.64       17.49  
Pre-tax, pre-provision operating earnings   63,694       63,454       48,640         216,413       171,205  
Pre-tax, pre-provision operating return on average assets2   2.15 %     2.20 %     1.97 %       1.97 %     1.83 %
Operating return on average assets2   1.36       1.51       1.72         1.35       1.49  
Operating efficiency ratio   47.11       44.37       47.64         48.21       49.27  
Return on average tangible common equity2   16.75       17.82       20.06         15.78       17.57  
Operating return on average tangible common equity2   16.95       17.94       20.48         15.94       17.58  

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.

Other Fourth Quarter and 2022 Highlights:

  • Pre-tax, pre-provision operating return on average assets decreased 5 basis points (“bps”) from the third quarter of 2022 to 2.15%, and grew 14 bps year-over-year;
  • Net interest margin increased to 3.87%, up 10 bps from the third quarter of 2022, and grew by 50 bps year-over-year;
  • Tangible book value per common share increased to $18.64 during the three months ended December 31, 2022 compared to $17.91 for the three months ended September 30, 2022 and 17.49 for the three months ended December 31, 2021;
  • Total loans held for investment (“LHI”), excluding Paycheck Protection Program (“PPP”) and mortgage warehouse (“MW”) loans, grew $524.0 million, from the third quarter of 2022, or 24.4% annualized, and grew $2.3 billion, or 33.5%, year-over-year;
  • Total deposits grew $374.8 million for the fourth quarter of 2022, or 17.0% annualized, with the average cost of total deposits increasing to 1.46% for the three months ended December 31, 2022 from 0.76% for the three months ended September 30, 2022. Total deposits grew $1.8 billion, or 23.9%, year-over-year;
  • Non-performing assets (“NPAs”), excluding nonaccrual purchased credit deteriorated (“PCD”) loans, to total assets decreased to 0.25% , or 1 basis point from September 30, 2022, and decreased 26 bps from December 31, 2021;
  • Net charge-offs to average loans outstanding, excluding MW and PPP loans decreased 21 bps for the year ended December 31, 2022, compared to December 31, 2021;
  • Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on February 24, 2023.

Results of Operations for the Three Months Ended December 31, 2022

Net Interest Income

For the three months ended December 31, 2022, net interest income before provision for credit losses was $106.1 million and net interest margin was 3.87%, compared to $101.0 million and 3.77%, respectively, for the three months ended September 30, 2022. The $5.1 million increase in net interest income before provision for credit losses was primarily due to a $27.6 million increase in interest income on loans driven by an increase in average balances and loan yields, offset by a $23.9 million increase in total interest expense on interest bearing liabilities driven by an increase in average balances and rates during three months ended December 31, 2022. Net interest margin increased 10 bps from the three months ended September 30, 2022, primarily due to the increase in yields earned on loans during the three months ended December 31, 2022, partially offset by an increase in funding costs.

Compared to the three months ended December 31, 2021, net interest income before provision for credit losses for the three months ended December 31, 2022 increased by $29.4 million, or 38.3%. The increase was primarily due to a $62.7 million increase in interest income on loans driven by an increase in average balances and loan yields, offset by a $22.4 million increase in interest expenses on interest-bearing demand and savings deposits and $6.9 million increase in certificates and other time deposits. Net interest margin increased 50 bps to 3.87% for the three months ended December 31, 2022 from 3.37% for the three months ended December 31, 2021. The increase was primarily due to an increase in average balances and loan yields during the three months ended December 31, 2022, partially offset by an increase in funding costs.

Noninterest Income

Noninterest income for the three months ended December 31, 2022 was $14.3 million, an increase of $1.3 million, or 10.0%, compared to the three months ended September 30, 2022. The increase in noninterest income was primarily due to a $7.0 million increase in gain on sale of USDA loans through our wholly owned subsidiary, North Avenue Capital, LLC (“NAC”). This increase was partially offset by an increase of $4.4 million in equity method investment losses and a $1.1 million decrease in customer swap income.

Compared to the three months ended December 31, 2021, noninterest income for the three months ended December 31, 2022 decreased $1.8 million, or 11.3%. The decrease was primarily due to a $6.7 million decrease in equity method investment income and $1.7 million decrease in gain on sale of SBA loans. The decrease was partially offset by a $5.7 million increase in gain on sale of USDA loans through NAC and a $1.5 million increase in customer swap income.

Noninterest Expense

Noninterest expense was $57.4 million for the three months ended December 31, 2022, compared to $51.0 million for the three months ended September 30, 2022, an increase of $6.4 million, or 12.5%. The increase was primarily driven by a $4.0 million increase in salaries and employee benefits from continued investment in talent, a $688 thousand increase in data processing and software expenses, a $683 thousand increase in professional and regulatory fees and a $501 thousand increase in occupancy and equipment.

Noninterest expense was $57.4 million for the three months ended December 31, 2022, compared to $45.1 million for the three months ended December 31, 2021, an increase of $12.3 million, or 27.2%. The increase was primarily driven by a $8.3 million increase in salary and employee benefits, from continued investment in talent. Additionally, the increase was driven by data processing and software expense of $1.6 million, professional and regulatory fees of $1.4 million, and occupancy and equipment of $718 thousand.

Financial Condition

Total LHI, excluding MW and PPP, were $9.0 billion at December 31, 2022, an increase of $524.0 million, or 24.4% annualized, compared to September 30, 2022, and an increase of $2.3 billion, or 33.5%, compared to December 31, 2021. These increases were the result of the continued execution and success of our loan growth strategy, including our investment in talent during 2022.

Total deposits were $9.1 billion at December 31, 2022, an increase of $374.8 million, or 17.0% annualized, compared to September 30, 2022, and an increase of $1.8 billion, or 23.9%, compared to December 31, 2021. The increase from September 30, 2022 was primarily the result of increase of $419.3 million in certificates and other time deposits and an increase of $126.3 million in interest-bearing transaction, money market and savings deposits accounts. The increase was partially offset by a decrease of $170.8 million of noninterest bearing deposits. The increase from December 31, 2021 was primarily the result of increases of $1.1 billion and $510.1 million in interest-bearing transaction, money market, and savings and certificates and other time deposits, respectively.

Asset Quality

NPAs increased to $43.7 million, or 0.36% of total assets, at December 31, 2022, compared to $30.6 million, or 0.26% of total assets, at September 30, 2022. The increase is primarily the result of a $13.2 million pool of PCD loans placed on non-accrual status during the three months ended December 31, 2022. Excluding the nonaccrual PCD loans, NPAs decreased to $30.5 million, or 0.25% of total assets. The Company had net charge-offs of $5.8 million for the fourth quarter of 2022. Net charge-offs compared to average loans outstanding were 17 bps for the year ended December 31, 2022, compared to 38 bps for year ended December 31, 2021.

The Company recorded a provision for credit losses of $11.8 million for the three months ended December 31, 2022, compared to a provision for credit losses of $6.7 million and a benefit for credit losses of $3.3 million for the three months ended September 30, 2022 and December 31, 2021, respectively. The provision for credit losses reported for the three months ended December 31, 2022, compared to the three months ended September 30, 2022 and December 31, 2021, respectively, was primarily attributable to an increase in general reserves as a result of changes in economic factors and loan growth. During the three months ended December 31, 2022, the Company recorded a $523 thousand benefit for unfunded commitments, which was primarily driven by decreases in unfunded balances.

Allowance for credit losses (“ACL”) as a percentage of LHI, excluding MW and PPP loans, was 1.01%, 1.00% and 1.15% at December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

Dividend Information

On January 24, 2023, Veritex’s Board of Directors declared a quarterly cash dividend of $0.20 per share on its outstanding shares of common stock. The dividend will be paid on February 24, 2023 to stockholders of record as of the close of business on February 10, 2023.

Non-GAAP Financial Measures

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.

Conference Call

The Company will host an investor conference call to review the results on Wednesday, January 25, 2023 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/767zfwtq and will receive a unique PIN, which can be used when dialing in for the call.

Participants may also register via teleconference at: https://register.vevent.com/register/BI7ccf0c5ef7d84e35916df74d12b9e4ad. Once registration is completed, participants will be provided with a dial-in number containing a personalized conference code to access the call. All participants are instructed to dial-in 15 minutes prior to the start time.

A replay will be available within approximately two hours after the completion of the call, and made accessible for one week. You may access the replay via webcast through the investor relations section of Veritex’s website.

About Veritex Holdings, Inc.

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

Forward-Looking Statements

This earnings release includes “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, which change over time and are beyond our control, 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 of Veritex Holdings, Inc.’s (“Veritex”) quarterly cash dividend; the impact of certain changes in Veritex’s accounting policies, standards and interpretations; the effects of the COVID-19 pandemic and actions taken in response thereto; and 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,” “seeks,” “targets,” “outlooks,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Veritex’s Annual Report on Form 10-K for the year ended December 31, 2021 and any updates to those risk factors set forth in Veritex’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov. If one or more events related to these or other risks or uncertainties materialize, or if Veritex’s underlying assumptions prove to be incorrect, actual results may differ materially from what Veritex anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. Veritex does not undertake any obligation, and specifically declines any obligation, to supplement, 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 Veritex or persons acting on Veritex’s behalf may issue.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES

Financial Highlights

(Unaudited)

  For the Quarter Ended   For the Year Ended
  Dec 31,

2022
  Sep 30,

2022
  Jun 30,

2022
  Mar 31,

2022
  Dec 31,

2021
  Dec 31,

2022
  Dec 31,

2021
  (Dollars and shares in thousands, except per-share data)
Per Share Data (Common Stock):                          
Basic EPS $ 0.74     $ 0.80     $ 0.55     $ 0.66     $ 0.84     $ 2.75     $ 2.83  
Diluted EPS   0.73       0.79       0.54       0.65       0.82       2.71       2.77  
Book value per common share   26.83       26.15       26.50       26.86       26.64       26.83       26.64  
Tangible book value per common share1   18.64       17.91       18.20       18.51       17.49       18.64       17.49  
Dividends paid per common share outstanding2   0.20       0.20       0.20       0.20       0.20       0.80       0.77  
                           
Common Stock Data:                          
Shares outstanding at period end   54,030       53,988       53,951       53,907       49,372       54,030       49,372  
Weighted average basic shares outstanding for the period   54,011       53,979       53,949       50,695       49,329       53,170       49,405  
Weighted average diluted shares outstanding for the period   54,780       54,633       54,646       51,571       50,441       53,952       50,352  
                           
Summary of Credit Ratios:                          
ACL to total LHI, excluding MW and PPP loans   1.01 %     1.00 %     1.02 %     1.02 %     1.15 %     1.01 %     1.15 %
NPAs to total assets   0.36       0.26       0.40       0.46       0.51       0.36       0.51  
NPAs, excluding nonaccrual PCD loans, to total assets3   0.25       0.26       0.40       0.46       0.51       0.25       0.51  
Net charge-offs to average loans outstanding, excluding MW and PPP loans4   0.28       0.12       0.04       0.28       0.75       0.17       0.38  
                           
Summary Performance Ratios:                          
Return on average assets4   1.35 %     1.50 %     1.11 %     1.36 %     1.68 %     1.33 %     1.49 %
Return on average equity4   11.03       11.82       8.21       10.00       12.65       10.28       11.01  
Return on average tangible common equity1, 4   16.75       17.82       12.68       15.84       20.06       15.78       17.57  
Efficiency ratio   47.63       44.71       50.76       52.84       48.53       48.64       49.45  
Net interest margin   3.87       3.77       3.42       3.22       3.37       3.59       3.24  
                           
Selected Performance Metrics – Operating:                          
Diluted operating EPS1 $ 0.74     $ 0.80     $ 0.55     $ 0.66     $ 0.84     $ 2.74     $ 2.77  
Pre-tax, pre-provision operating return on average assets1, 2   2.15 %     2.20 %     1.76 %     1.71 %     1.97 %     1.97 %     1.83 %
Operating return on average assets1,4   1.36       1.51       1.12       1.38       1.72       1.35       1.49  
Operating return on average tangible common equity1,3   16.95       17.94       12.77       16.08       20.48       15.94       17.58  
Operating efficiency ratio1   47.11       44.37       50.45       52.05       47.64       48.21       49.27  
                           
Veritex Holdings, Inc. Capital Ratios:                          
Average stockholders’ equity to average total assets   12.20 %     12.69 %     13.51 %     13.58 %     13.30 %     12.96 %     13.54 %
Tangible common equity to tangible assets1   8.60       8.58       9.04       9.98       9.28       8.60       9.28  
Tier 1 capital to average assets (leverage)   9.82       9.79       10.14       10.66       9.05       9.82       9.05  
Common equity tier 1 capital   9.09       9.09       9.25       9.84       8.58       9.09       8.58  
Tier 1 capital to risk-weighted assets   9.34       9.35       9.52       10.14       8.89       9.34       8.89  
Total capital to risk-weighted assets   11.63       11.68       11.95       12.73       11.60       11.63       11.60  

1Refer to “Reconciliation of Non-GAAP Financial Measures” after the financial highlights for a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP measure.

2 Dividend amount represents dividend paid per common share subsequent to each respective quarter end.

3 Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 and were accounted for on a pooled basis that have subsequently been placed on nonaccrual status.

4Annualized ratio for quarterly metrics.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES

Financial Highlights

(in thousands)

  Dec 31, 2022   Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021
  (unaudited)   (unaudited)   (unaudited)   (unaudited)    
ASSETS                  
Cash and cash equivalents $ 436,077     $ 433,897     $ 410,716     $ 551,573     $ 379,784  
Debt securities   1,282,460       1,303,004       1,354,403       1,244,514       1,052,494  
Other investments   122,450       115,551       202,685       188,699       190,591  
                   
Loans held for sale   20,641       17,644       14,210       18,721       26,007  
LHI PPP loans, carried at fair value   1,995       2,821       7,339       18,512       53,369  
LHI, MW   446,227       523,805       629,291       542,877       565,645  
LHI, excluding MW and PPP   9,034,429       8,510,433       7,915,792       7,125,429       6,766,009  
Total loans   9,503,292       9,054,703       8,566,632       7,705,539       7,411,030  
ACL   (91,052 )     (85,037 )     (80,576 )     (72,485 )     (77,754 )
Bank-owned life insurance   84,496       84,030       84,097       83,641       83,194  
Bank premises, furniture and equipment, net   108,824       108,720       108,769       109,138       109,271  
Other real estate owned (“OREO”)               1,032       1,062        
Intangible assets, net of accumulated amortization   53,213       56,238       59,011       63,986       66,017  
Goodwill   404,452       404,452       404,452       404,452       403,771  
Other assets   250,149       238,896       193,590       173,561       138,851  
Total assets $ 12,154,361     $ 11,714,454     $ 11,304,811     $ 10,453,680     $ 9,757,249  
LIABILITIES AND STOCKHOLDERS’ EQUITY                  
Deposits:                  
Noninterest-bearing deposits $ 2,640,617     $ 2,811,412     $ 2,947,830     $ 2,765,895     $ 2,510,723  
Interest-bearing transaction and savings deposits   4,395,975       4,269,668       4,007,250       3,688,292       3,276,312  
Certificates and other time deposits   2,086,642       1,667,364       1,562,626       1,435,409       1,576,580  
Total deposits   9,123,234       8,748,444       8,517,706       7,889,596       7,363,615  
Accounts payable and other liabilities   177,579       173,198       126,116       105,552       69,160  
Advances from Federal Home Loan Bank (“FHLB”)   1,175,000       1,150,000       1,000,000       777,522       777,562  
Subordinated debentures and subordinated notes   228,775       228,524       228,272       228,018       227,764  
Securities sold under agreements to repurchase         2,389       3,275       4,996       4,069  
Total liabilities   10,704,588       10,302,555       9,875,369       9,005,684       8,442,170  
Commitments and contingencies                  
Stockholders’ equity:                  
Common stock   607       606       606       605       560  
Additional paid-in capital   1,306,852       1,303,171       1,300,170       1,297,161       1,142,758  
Retained earnings   379,299       350,195       317,664       298,830       275,273  
Accumulated other comprehensive (loss) income   (69,403 )     (74,491 )     (21,416 )     18,982       64,070  
Treasury stock   (167,582 )     (167,582 )     (167,582 )     (167,582 )     (167,582 )
Total stockholders’ equity   1,449,773       1,411,899       1,429,442       1,447,996       1,315,079  
Total liabilities and stockholders’ equity $ 12,154,361     $ 11,714,454     $ 11,304,811     $ 10,453,680     $ 9,757,249  

VERITEX HOLDINGS, INC. AND SUBSIDIARIES

Financial Highlights

(in thousands, except per share data)

  For the Quarter Ended   For the Year Ended
  Dec 31, 2022   Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021   Dec 31, 2022   Dec 31, 2021
Interest income:                          
Loans, including fees $ 136,846     $ 109,199     $ 82,191     $ 71,443     $ 74,174     $ 399,679     $ 280,526  
Debt securities   10,880       10,462       9,632       7,762       9,553       38,736       32,132  
Deposits in financial institutions and Fed Funds sold   3,401       1,898       714       262       165       6,275       589  
Equity securities and other investments   1,087       1,666       1,057       910       1,004       4,720       3,237  
Total interest income   152,214       123,225       93,594       80,377       84,896       449,410       316,484  
Interest expense:                          
Transaction and savings deposits   24,043       12,897       4,094       1,751       1,629       42,785       6,858  
Certificates and other time deposits   8,543       3,919       1,465       1,380       1,661       15,307       9,079  
Advances from FHLB   10,577       2,543       834       1,547       1,847       15,501       7,336  
Subordinated debentures and subordinated notes   2,954       2,826       2,721       2,659       3,018       11,160       12,428  
Total interest expense   46,117       22,185       9,114       7,337       8,155       84,753       35,701  
Net interest income   106,097       101,040       84,480       73,040       76,741       364,657       280,783  
Provision (benefit) for credit losses   11,800       6,650       9,000       (500 )     (3,349 )     26,950       (3,349 )
(Benefit) provision for unfunded commitments   (523 )     850             493       (1,040 )     820       (1,481 )
Net interest income after provisions   94,820       93,540       75,480       73,047       81,130       336,887       285,613  
Noninterest income:                          
Service charges and fees on deposit accounts   5,173       5,217       5,039       4,710       4,782       20,139       16,742  
Loan fees   2,477       2,786       2,385       2,794       2,697       10,442       7,607  
Loss on sales of investment securities                                       (188 )
Gain on sales of mortgage loans held for sale   4       16       223       307       293       550       1,592  
Government guaranteed loan income, net   7,808       572       789       4,891       3,423       14,060       15,760  
Equity method investment (loss) income   (5,416 )     (1,058 )     966       367       1,238       (5,141 )     5,760  
Customer swap income   2,273       3,358       1,321       946       796       7,898       2,491  
Other income (loss)   2,007       2,130       (345 )     1,082       2,921       4,874       8,641  
Total noninterest income   14,326       13,021       10,378       15,097       16,150       52,822       58,405  
Noninterest expense:                          
Salaries and employee benefits   33,690       29,714       26,924       27,513       25,401       117,841       94,748  
Occupancy and equipment   5,116       4,615       4,496       4,517       4,398       18,744       17,263  
Professional and regulatory fees   4,401       3,718       2,865       3,158       3,017       14,142       12,945  
Data processing and software expense   4,197       3,509       3,386       2,921       2,597       14,013       9,946  
Marketing   1,841       1,845       2,306       1,187       1,443       7,179       5,344  
Amortization of intangibles   2,495       2,494       2,495       2,495       2,494       9,979       10,057  
Telephone and communications   358       389       352       385       380       1,484       1,434  
Merger and acquisition (“M&A”) expense         384       295       700       826       1,379       826  
Other   5,261       4,323       5,034       3,696       4,521       18,314       15,149  
Total noninterest expense   57,359       50,991       48,153       46,572       45,077       203,075       167,712  
Income before income tax expense   51,787       55,570       37,705       41,572       52,203       186,634       176,306  
Income tax expense   11,890       12,248       8,079       8,102       10,697       40,319       36,722  
Net income $ 39,897     $ 43,322     $ 29,626     $ 33,470     $ 41,506     $ 146,315     $ 139,584  
                           
Basic EPS $ 0.74     $ 0.80     $ 0.55     $ 0.66     $ 0.84     $ 2.75     $ 2.83  
Diluted EPS $ 0.73     $ 0.79     $ 0.54     $ 0.65     $ 0.82     $ 2.71     $ 2.77  
Weighted average basic shares outstanding   54,011       53,979       53,949       50,695       49,329       53,170       49,405  
Weighted average diluted shares outstanding   54,780       54,633       54,646       51,571       50,441       53,952       50,352  

VERITEX HOLDINGS, INC. AND SUBSIDIARIES

Financial Highlights

(Unaudited)

  For the Quarter Ended
  December 31, 2022   September 30, 2022   December 31, 2021
  Average

Outstanding

Balance
  Interest

Earned/

Interest

Paid
  Average

Yield/

Rate
  Average

Outstanding

Balance
  Interest

Earned/

Interest

Paid
  Average

Yield/

Rate
  Average

Outstanding

Balance
  Interest

Earned/

Interest

Paid
  Average

Yield/

Rate
  (Dollars in thousands)
Assets                                  
Interest-earning assets:                                  
Loans1 $ 8,741,023     $ 131,817   5.98 %   $ 8,277,762     $ 104,543   5.01 %   $ 6,777,397     $ 70,334   4.12 %
LHI, MW   383,080       5,024   5.20       448,556       4,649   4.11       483,850       3,629   2.98  
PPP loans   2,357       6   1.00       2,775       7   1.00       83,553       211   1.00  
Debt securities   1,286,342       10,880   3.36       1,362,365       10,462   3.05       1,092,089       9,553   3.47  
Interest-earning deposits in other banks   353,737       3,401   3.81       346,296       1,898   2.17       417,266       165   0.16  
Equity securities and other investments   119,054       1,087   3.62       203,528       1,666   3.25       191,031       1,004   2.09  
Total interest-earning assets   10,885,593       152,215   5.55       10,641,282       123,225   4.59       9,045,186       84,896   3.72  
ACL   (85,275 )             (81,888 )             (95,218 )        
Noninterest-earning assets   960,726               901,463               838,703          
Total assets $ 11,761,044             $ 11,460,857             $ 9,788,671          
                                   
Liabilities and Stockholders’ Equity                                  
Interest-bearing liabilities:                                  
Interest-bearing demand and savings deposits $ 4,321,936       24,043   2.21 %   $ 4,164,164     $ 12,897   1.23 %   $ 3,357,958       1,629   0.19 %
Certificates and other time deposits   1,785,152       8,543   1.90       1,656,347       3,919   0.94       1,615,066       1,661   0.41  
Advances from FHLB   1,073,049       10,577   3.91       904,065       2,543   1.12       777,577       1,847   0.94  
Subordinated debentures and subordinated notes   229,037       2,954   5.12       231,012       2,826   4.85       259,191       3,018   4.62  
Total interest-bearing liabilities   7,409,174       46,117   2.47       6,955,588       22,185   1.27       6,009,792       8,155   0.54  
                                   
Noninterest-bearing liabilities:                                  
Noninterest-bearing deposits   2,737,468               2,925,462               2,413,443          
Other liabilities   179,584               125,991               63,760          
Total liabilities   10,326,226               10,007,041               8,486,995          
Stockholders’ equity   1,434,818               1,453,816               1,301,676          
Total liabilities and stockholders’ equity $ 11,761,044             $ 11,460,857             $ 9,788,671          
                                   
Net interest rate spread2         3.08 %           3.32 %           3.18 %
Net interest income and margin3     $ 106,098   3.87 %       $ 101,040   3.77 %       $ 76,741   3.37 %

1 Includes average outstanding balances of loans held for sale of $15,296, $14,023 and $8,987 for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively, and average balances of LHI, excluding MW and PPP loans.

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

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

VERITEX HOLDINGS, INC. AND SUBSIDIARIES

Financial Highlights

(Unaudited)

  For the Year Ended December 31,
  2022

  2021

  Average 

Outstanding 

Balance
  Interest 

Earned/ 

Interest 

Paid
  Average 

Yield/ 

Rate
  Average 

Outstanding 

Balance
  Interest 

Earned/ 

Interest 

Paid
  Average 

Yield/ 

Rate
  (Dollars in thousands)
Assets                      
Interest-earning assets:                      
Loans1 $ 7,865,432     $ 382,883   4.87 %   $ 6,285,510     $ 263,583   4.19 %
LHI, MW   433,062       16,671   3.85       468,001       14,219   3.04  
PPP loans   12,517       125   1.00       272,770       2,724   1.00  
Debt securities   1,277,643       38,736   3.03       1,092,967       32,132   2.94  
Interest-earning deposits in other banks   405,471       6,275   1.55       410,785       589   0.14  
Equity securities and other investments   169,875       4,720   2.78       133,594       3,237   2.42  
Total interest-earning assets   10,164,000       449,410   4.42       8,663,627       316,484   3.65  
ACL   (79,845 )             (101,383 )        
Noninterest-earning assets   905,103               799,334          
Total assets $ 10,989,258             $ 9,361,578          
                       
Liabilities and Stockholders’ Equity                      
Interest-bearing liabilities:                      
Interest-bearing demand and savings deposits $ 3,934,926       42,785   1.09     $ 3,198,225       6,858   0.21  
Certificates and other time deposits   1,601,687       15,307   0.96       1,540,188       9,079   0.59  
Advances from FHLB   896,687       15,501   1.73       777,635       7,336   0.94  
Subordinated debentures and subordinated notes   230,984       11,160   4.83       263,535       12,428   4.72  
Total interest-bearing liabilities   6,664,284       84,753   1.27       5,779,583       35,701   0.62  
                       
Noninterest-bearing liabilities:                      
Noninterest-bearing deposits   2,782,077               2,256,546          
Other liabilities   119,237               57,457          
Total liabilities   9,565,598               8,093,586          
Stockholders’ equity   1,423,660               1,267,992          
Total liabilities and stockholders’ equity $ 10,989,258             $ 9,361,578          
                       
Net interest rate spread2         3.15 %           3.03 %
Net interest income and margin3     $ 364,657   3.59 %       $ 280,783   3.24 %

1Includes average outstanding balances of loans held for sale of $13,558 and $12,093 for the twelve months ended December 31, 2022 and 2021, respectively, and average balances of LHI, excluding MW and PPP loans.

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

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

VERITEX HOLDINGS, INC. AND SUBSIDIARIES

Financial Highlights

(Unaudited)

Yield Trend

  For the Quarter Ended
  Dec 31, 

2022
  Sep 30, 

2022
  Jun 30, 

2022
  Mar 31, 

2022
  Dec 31, 

2021
Average yield on interest-earning assets:                  
Loans1 5.98 %   5.01 %   4.16 %   4.03 %   4.12 %
LHI, MW 5.20     4.11     3.29     2.95     2.98  
PPP loans 1.00     1.00     1.00     1.00     1.00  
Debt securities 3.36     3.05     2.93     2.76     3.47  
Interest-bearing deposits in other banks 3.81     2.17     0.77     0.19     0.16  
Equity securities and other investments 3.62     3.25     2.53     1.94     2.09  
Total interest-earning assets 5.55 %   4.59 %   3.79 %   3.54 %   3.72 %
                   
Average rate on interest-bearing liabilities:                  
Interest-bearing demand and savings deposits 2.21 %   1.23 %   0.44 %   0.20 %   0.19 %
Certificates and other time deposits 1.90     0.94     0.40     0.37     0.41  
Advances from FHLB 3.91     1.12     0.40     0.81     0.94  
Subordinated debentures and subordinated notes 5.12     4.85     4.70     4.65     4.62  
Total interest-bearing liabilities 2.47 %   1.27 %   0.58 %   0.50 %   0.54 %
                   
Net interest rate spread2 3.08 %   3.32 %   3.21 %   3.04 %   3.18 %
Net interest margin3 3.87 %   3.77 %   3.42 %   3.22 %   3.37 %

1 Includes average outstanding balances of loans held for sale of $15,296, $14,023, $12,112, $12,769 and $8,987 for the three months ended December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively, and average balances of LHI, excluding MW and PPP loans.

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

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

Supplemental Yield Trend

  For the Quarter Ended
  Dec 31,

2022
  Sep 30,

2022
  Jun 30,

2022
  Mar 31,

2022
  Dec 31,

2021
Average cost of interest-bearing deposits 2.12 %   1.15 %   0.43 %   0.26 %   0.26 %
Average costs of total deposits, including noninterest-bearing 1.46     0.76     0.28     0.17     0.18  

VERITEX HOLDINGS, INC. AND SUBSIDIARIES

Financial Highlights

(Unaudited)

LHI and Deposit Portfolio Composition

  Dec 31, 2022   Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021
  (In thousands, except percentages)
LHI1                                      
Commercial $ 2,940,353     32.4 %   $ 2,740,948     32.1 %   $ 2,450,403     30.9 %   $ 2,125,900     29.8 %   $ 2,006,876     29.6 %
Real Estate:                                      
Owner occupied commercial (“OOCRE”)   715,829     7.9       677,705     7.9       646,723     8.2       633,615     8.9       665,537     9.8  
Non-owner occupied commercial (“NOOCRE”)   2,341,379     25.9       2,273,305     26.7       2,203,970     27.8       2,145,826     30.0       2,120,309     31.3  
Construction and land   1,787,400     19.7       1,673,997     19.6       1,532,997     19.3       1,297,338     18.2       1,062,144     15.7  
Farmland   43,500     0.5       43,569     0.5       47,319     0.6       48,095     0.7       55,827     0.8  
1-4 family residential   894,456     9.9       858,693     10.1       765,260     9.6       604,408     8.5       542,566     8.0  
Multi-family residential   322,679     3.6       252,244     3.0       276,632     3.5       272,250     3.8       310,241     4.6  
Consumer   7,806     0.1       7,465     0.1       7,520     0.1       9,533     0.1       11,998     0.2  
Total LHI $ 9,053,402     100 %   $ 8,527,926     100 %   $ 7,930,824     100 %   $ 7,136,965     100 %   $ 6,775,498     100 %
                                       
MW   446,227           523,805           629,291           542,877           565,645      
PPP loans   1,995           2,821           7,339           18,512           53,369      
                                       
Total LHI1 $ 9,501,624         $ 9,054,552         $ 8,567,454         $ 7,698,354         $ 7,394,512      
                                       
Deposits                                      
Noninterest-bearing $ 2,640,617     28.9 %   $ 2,811,412     32.1 %   $ 2,947,830     34.6 %   $ 2,765,895     35.1 %   $ 2,510,723     34.1 %
Interest-bearing transaction   622,814     6.8       603,729     6.9       660,557     7.8       599,580     7.6       579,408     7.9  
Money market   3,654,868     40.1       3,533,532     40.4       3,217,195     37.8       2,958,790     37.5       2,568,843     34.9  
Savings   118,293     1.3       132,407     1.5       129,498     1.5       129,922     1.6       128,061     1.7  
Certificates and other time deposits   2,086,642     22.9       1,667,364     19.1       1,562,626     18.3       1,435,409     18.2       1,576,580     21.4  
Total deposits $ 9,123,234     100 %   $ 8,748,444     100 %   $ 8,517,706     100 %   $ 7,889,596     100 %   $ 7,363,615     100 %
                                       
Loan to Deposit Ratio   104.1 %         103.5 %         100.6 %         97.6 %         100.4 %    
Loan to Deposit Ratio, excluding MW and PPP loans   99.2 %         97.5 %         93.1 %         90.5 %         92.0 %    

1 Total LHI does not include deferred costs of $19.0 million, $17.5 million, $15.0 million, $11.5 million and $9.5 million at December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES

Financial Highlights

(Unaudited)

Asset Quality

  For the Quarter Ended   For the Year Ended
  Dec 31, 

2022
  Sep 30, 

2022
  Jun 30, 

2022
  Mar 31, 

2022
  Dec 31, 

2021
  Dec 31, 

2022
  Dec 31, 

2021
  (In thousands, except percentages)
NPAs:                          
Nonaccrual loans $ 30,364     $ 30,592     $ 42,242     $ 46,680     $ 49,687     $ 30,364     $ 49,687  
Nonaccrual PCD loans1   13,178                               13,178        
Accruing loans 90 or more days past due2   125             1,753       264       441       125       441  
Total nonperforming loans held for investment (“NPLs”)   43,667       30,592       43,995       46,944       50,128       43,667       50,128  
OREO               1,032       1,062                    
Total NPAs $ 43,667     $ 30,592     $ 45,027     $ 48,006     $ 50,128     $ 43,667     $ 50,128  
                           
Charge-offs:                          
1-4 family residential $     $     $     $     $     $     $ (379 )
OOCRE         (1,061 )     (244 )     (1,341 )     (898 )     (2,646 )     (2,400 )
NOOCRE   (1,019 )     (838 )           (553 )     (7,936 )     (2,410 )     (7,936 )
Commercial   (5,449 )     (460 )     (528 )     (3,294 )     (4,114 )     (9,731 )     (15,576 )
Consumer   (41 )     (19 )     (1,091 )     (134 )     (44 )     (1,285 )     (99 )
Total charge-offs   (6,509 )     (2,378 )     (1,863 )     (5,322 )     (12,992 )     (16,072 )     (26,390 )
                           
Recoveries:                          
1-4 family residential   24       4       3             6       31       64  
OOCRE   26             245                   271       500  
NOOCRE   229       3       93       400             725        
Commercial   415       177       572       144       61       1,308       1,542  
Consumer   30       5       41       9       257       85       303  
Total recoveries   724       189       954       553       324       2,420       2,409  
                           
Net charge-offs $ (5,785 )   $ (2,189 )   $ (909 )   $ (4,769 )   $ (12,668 )   $ (13,652 )   $ (23,981 )
                           
ACL $ 91,052     $ 85,037     $ 80,576     $ 72,485     $ 77,754     $ 91,052     $ 77,754  
                           
Asset Quality Ratios:                          
NPAs to total assets   0.36 %     0.26 %     0.40 %     0.46 %     0.51 %     0.36 %     0.51 %
NPAs, excluding nonaccrual PCD loans, to total assets   0.25       0.26       0.40       0.46       0.51       0.25       0.51  
NPLs to total LHI, excluding MW and PPP loans   0.48       0.36       0.55       0.66       0.74       0.48       0.74  
NPLs, excluding nonaccrual PCD loans, to total LHI, excluding MW and PPP loans   0.34       0.36       0.55       0.66       0.74       0.34       0.74  
ACL to total LHI, excluding MW and PPP loans   1.01       1.00       1.02       1.02       1.15       1.01       1.15  
Net charge-offs to average loans outstanding3   0.28       0.12       0.04       0.28       0.75       0.17       0.38  
                           

1 Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 and were accounted for on a pooled basis that have subsequently been placed on nonaccrual status.

2 Accruing loans greater than 90 days past due exclude purchase credit deteriorated loans greater than 90 days past due that are accounted for on a pooled basis.

3Annualized ratio for quarterly metrics.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES

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 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 per common share 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.

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

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

  As of
  Dec 31, 2022   Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021
  (Dollars in thousands, except per share data)
Tangible Common Equity                  
Total stockholders’ equity $ 1,449,773     $ 1,411,899     $ 1,429,442     $ 1,447,996     $ 1,315,079  
Adjustments:                  
Goodwill   (404,452 )     (404,452 )     (404,452 )     (404,452 )     (403,771 )
Core deposit intangibles   (38,247 )     (40,684 )     (43,122 )     (45,560 )     (47,998 )
Tangible common equity $ 1,007,074     $ 966,763     $ 981,868     $ 997,984     $ 863,310  
Common shares outstanding   54,030       53,988       53,951       53,907       49,372  
                   
Book value per common share $ 26.83     $ 26.15     $ 26.50     $ 26.86     $ 26.64  
Tangible book value per common share $ 18.64     $ 17.91     $ 18.20     $ 18.51     $ 17.49  

VERITEX HOLDINGS, INC. AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

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

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

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

  As of
  Dec 31, 2022   Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021
  (Dollars in thousands, except percentages)
Tangible Common Equity                  
Total stockholders’ equity $ 1,449,773     $ 1,411,899     $ 1,429,442     $ 1,447,996     $ 1,315,079  
Adjustments:                  
Goodwill   (404,452 )     (404,452 )     (404,452 )     (404,452 )     (403,771 )
Core deposit intangibles   (38,247 )     (40,684 )     (43,122 )     (45,560 )     (47,998 )
Tangible common equity $ 1,007,074     $ 966,763     $ 981,868     $ 997,984     $ 863,310  
Tangible Assets                  
Total assets $ 12,154,361     $ 11,714,454     $ 11,304,811     $ 10,453,680     $ 9,757,249  
Adjustments:                  
Goodwill   (404,452 )     (404,452 )     (404,452 )     (404,452 )     (403,771 )
Core deposit intangibles   (38,247 )     (40,684 )     (43,122 )     (45,560 )     (47,998 )
Tangible Assets $ 11,711,662     $ 11,269,318     $ 10,857,237     $ 10,003,668     $ 9,305,480  
Tangible Common Equity to Tangible Assets   8.60 %     8.58 %     9.04 %     9.98 %     9.28 %

VERITEX HOLDINGS, INC. AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

Return on Average Tangible Common Equity. Return on average tangible common equity is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) net income 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 (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 adjusted for amortization of core deposit intangibles, net of taxes to net income and presents our return on average tangible common equity:

  For the Quarter Ended   For the Year Ended
  Dec 31, 

2022
  Sep 30, 

2022
  Jun 30, 

2022
  Mar 31, 

2022
  Dec 31, 

2021
  Dec 31, 

2022
  Dec 31, 

2021
  (Dollars in thousands, except for percentages)
Net income available for common stockholders adjusted for amortization of core deposit intangibles                          
Net income $ 39,897     $ 43,322     $ 29,626     $ 33,470     $ 41,506     $ 146,315     $ 139,584  
Adjustments:                          
Plus: Amortization of core deposit intangibles   2,438       2,438       2,438       2,438       2,438       9,752       9,761  
Less: Tax benefit at the statutory rate   512       512       512       512       512       2,048       2,050  
Net income available for common stockholders adjusted for amortization of core deposit intangibles $ 41,823     $ 45,248     $ 31,552     $ 35,396     $ 43,432     $ 154,019     $ 147,295  
                           
Average Tangible Common Equity                          
Total average stockholders’ equity $ 1,434,818     $ 1,453,816     $ 1,447,377     $ 1,357,448     $ 1,301,676     $ 1,423,660     $ 1,267,992  
Adjustments:                          
Average goodwill   (404,452 )     (404,452 )     (404,452 )     (404,014 )     (393,220 )     (404,344 )     (376,480 )
Average core deposit intangibles   (39,792 )     (42,230 )     (44,720 )     (47,158 )     (49,596 )     (43,451 )     (53,233 )
Average tangible common equity $ 990,574     $ 1,007,134     $ 998,205     $ 906,276     $ 858,860     $ 975,865     $ 838,279  
Return on Average Tangible Common Equity (Annualized)   16.75 %     17.82 %     12.68 %     15.84 %     20.06 %     15.78 %     17.57 %

VERITEX HOLDINGS, INC. AND SUBSIDIARIES

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, 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 Thrive Mortgage, LLC’s (“Thrive”) PPP loan forgiveness income, plus merger and acquisition expenses, 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 benefit (provision) for credit losses and unfunded commitments. 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 total average assets. We calculate (e) operating return on average assets as operating earnings as described in clause (a) divided by total average 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 non interest expense plus adjustments to operating non interest expense divided by non interest income plus adjustments to operating non interest income, plus net interest income.

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

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

  For the Quarter Ended   For the Year Ended
  Dec 31, 

2022
  Sep 30, 

2022
  Jun 30, 

2022
  Mar 31, 

2022
  Dec 31, 

2021
  Dec 31, 

2022
  Dec 31, 

2021
  (Dollars in thousands, except per share data)
Operating Earnings                          
Net income $ 39,897   $ 43,322   $ 29,626   $ 33,470   $ 41,506     $ 146,315   $ 139,584
Plus: Severance payments1   630                       630     627
Plus: Loss on sale of debt securities AFS, net                             188
Less: Thrive PPP loan forgiveness income2                             1,912
Plus: M&A expenses       384     295     700     826       1,379     826
Operating pre-tax income   40,527     43,706     29,921     34,170     42,332       148,324     139,313
Less: Tax impact of adjustments   132     81     66     156     (78 )     435     92
Plus: Nonrecurring tax adjustments3                             426
Operating earnings $ 40,395   $ 43,625   $ 29,855   $ 34,014   $ 42,410     $ 147,889   $ 139,647
                           
Weighted average diluted shares outstanding   54,780     54,633     54,646     51,571     50,441       53,952     50,352
Diluted EPS $ 0.73   $ 0.79   $ 0.54   $ 0.65   $ 0.82     $ 2.71   $ 2.77
Diluted operating EPS $ 0.74   $ 0.80   $ 0.55   $ 0.66   $ 0.84     $ 2.74   $ 2.77

1 Severance payments relate to restructurings made for the years ended December 31, 2022 and 2021.

2 During the year ended December 31, 2021, Thrive’s PPP loan with another bank was 100% forgiven by the Small Business Administration. As a result of our 49% investment in Thrive, the $1.9 million represents our portion of the PPP loan forgiveness. PPP fee income is not taxable and as such has no tax impact.

3 A nonrecurring tax adjustment of $426 thousand recorded for the year ended December 31, 2021 was due to a true-up of a deferred tax liability.

  For the Quarter Ended   For the Year Ended
  Dec 31,

2022
  Sep 30,

2022
  Jun 30,

2022
  Mar 31,

2022
  Dec 31,

2021
  Dec 31,

2022
  Dec 31,

2021
  (Dollars in thousands, except percentages)
Pre-Tax, Pre-Provision Operating Earnings                          
Net Income $ 39,897     $ 43,322     $ 29,626     $ 33,470     $ 41,506     $ 146,315     $ 139,584  
Plus: Provision for income taxes   11,890       12,248       8,079       8,102       10,697       40,319       36,722  
Plus: Provision (benefit) for credit losses and unfunded commitments   11,277       7,500       9,000       (7 )     (4,389 )     27,770       (4,830 )
Plus: Severance payments   630                               630       627  
Plus: Loss on sale of debt securities AFS, net                                       188  
Less: Thrive PPP loan forgiveness income                                       1,912  
Plus: M&A expenses         384       295       700       826       1,379       826  
Net pre-tax, pre-provision operating earnings $ 63,694     $ 63,454     $ 47,000     $ 42,265     $ 48,640     $ 216,413     $ 171,205  
                           
Total average assets $ 11,761,044     $ 11,460,857     $ 10,711,663     $ 9,998,922     $ 9,788,671     $ 10,989,258     $ 9,361,578  
Pre-tax, pre-provision operating return on average assets1   2.15 %     2.20 %     1.76 %     1.71 %     1.97 %     1.97 %     1.83 %
                           
Average Total Assets $ 11,761,044     $ 11,460,857     $ 10,711,663     $ 9,998,922     $ 9,788,671     $ 10,989,258     $ 9,361,578  
Return on average assets1   1.35 %     1.50 %     1.11 %     1.36 %     1.68 %     1.33 %     1.49 %
Operating return on average assets1   1.36       1.51       1.12       1.38       1.72       1.35       1.49  
                           
Operating earnings adjusted for amortization of core deposit intangibles                          
Operating earnings $ 40,395     $ 43,625     $ 29,855     $ 34,014     $ 42,410     $ 147,889     $ 139,647  
Adjustments:                          
Plus: Amortization of core deposit intangibles   2,438       2,438       2,438       2,438       2,438       9,752       9,761  
Less: Tax benefit at the statutory rate   512       512       512       512       512       2,048       2,050  
Operating earnings adjusted for amortization of core deposit intangibles $ 42,321     $ 45,551     $ 31,781     $ 35,940     $ 44,336     $ 155,593     $ 147,358  
                           
Average Tangible Common Equity                          
Total average stockholders’ equity $ 1,434,818     $ 1,453,816     $ 1,447,377     $ 1,357,448     $ 1,301,676     $ 1,423,660     $ 1,267,992  
Adjustments:                          
Less: Average goodwill   (404,452 )     (404,452 )     (404,452 )     (404,014 )     (393,220 )     (404,344 )     (376,480 )
Less: Average core deposit intangibles   (39,792 )     (42,230 )     (44,720 )     (47,158 )     (49,596 )     (43,451 )     (53,233 )
Average tangible common equity $ 990,574     $ 1,007,134     $ 998,205     $ 906,276     $ 858,860     $ 975,865     $ 838,279  
Operating return on average tangible common equity1   16.95 %     17.94 %     12.77 %     16.08 %     20.48 %     15.94 %     17.58 %
                           
Efficiency ratio   47.63 %     44.71 %     50.76 %     52.84 %     48.53 %     48.64 %     49.45 %
Net interest income $ 106,097     $ 101,040     $ 84,480     $ 73,040     $ 76,741     $ 364,657     $ 280,783  
Noninterest income   14,326       13,021       10,378       15,097       16,150       52,822       58,405  
Plus: Loss on sale of debt securities AFS, net                                       188  
Less: Thrive’s PPP loan forgiveness income                                       1,912  
Operating noninterest income   14,326       13,021       10,378       15,097       16,150       52,822       56,681  
Noninterest expense   57,359       50,991       48,153       46,572       45,077       203,075       167,712  
Less: Severance payments   630                               630       627  
Less: M&A expenses         384       295       700       826       1,379       826  
Operating noninterest expense $ 56,729     $ 50,607     $ 47,858     $ 45,872     $ 44,251     $ 201,066     $ 166,259  
Operating efficiency ratio   47.11 %     44.37 %     50.45 %     52.05 %     47.64 %     48.21 %     49.27 %

1 Annualized ratio for quarterly metrics.


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