Veritex Holdings, Inc. Reports Second Quarter Operating Results

July 25, 2023

DALLAS, July 25, 2023 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. (“Veritex”, the “Company”, “we” or “our”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the quarter ended June 30, 2023.

“I am incredibly pleased with our second quarter and year to date results,” said C. Malcolm Holland, III. “We increased our deposits by $200 million with only 1% in brokered, grew capital by $32 million, expanded our CET1 ratio by 44 basis points and decreased our commercial real estate exposure. We continue to see positive results in all these areas as we progress through the start of the third quarter.”       

    Quarter to Date   Year to Date
Financial Highlights   Q2 2023   Q1 2023   Q2 2023   Q2 2022
     
    (Dollars in thousands, except per share data)
(unaudited)
GAAP                
Net income   $ 33,730     $ 38,411     $ 72,141     $ 63,096  
Diluted EPS     0.62       0.70       1.32       1.19  
Book value per common share     27.48       27.54       27.48       26.50  
Return on average assets2     1.10 %     1.28 %     1.18 %     1.23 %
Efficiency ratio     49.94       48.42       49.17       51.76  
Return on average equity2     8.96       10.55       9.74       9.07  
Non-GAAP1                
Operating earnings   $ 34,673     $ 43,274     $ 77,947     $ 63,869  
Diluted operating EPS     0.64       0.79       1.43       1.20  
Tangible book value per common share     19.41       19.43       19.41       18.20  
Pre-tax, pre-provision operating earnings     58,520       66,461       124,981       89,265  
Pre-tax, pre-provision operating return on average assets2     1.90 %     2.21 %     2.05 %     1.74 %
Pre-tax, pre-provision operating return on average loans2     2.43       2.84       2.63       2.34  
Operating return on average assets2     1.13       1.44       1.28       1.24  
Operating efficiency ratio     48.90       45.63       47.21       51.22  
Return on average tangible common equity2     13.35       15.81       14.55       14.17  
Operating return on average tangible common equity2     13.70       17.72       15.66       14.34  

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.
2 Annualized ratio.

Other Second Quarter Results

  • Total deposits increased by $199.2 million, or 8.8% annualized;
  • Loan to deposit ratio has decreased 3% from March 31, 2023;
  • Uninsured and uncollateralized deposits decreased to 33.3% as of June 30, 2023 compared to 36.5% as of March 31, 2023;
  • Common Equity Tier 1 increased 44 basis points to 9.76% driven by a decrease in risk-weighted assets;
  • Acquisition, development, and construction (“ADC”) loans decreased 9.3% from March 31, 2023 and as a percentage of risk-based capital (“RBC”) decreased from 129.2% to 115.1%;
  • Total ADC/CRE loans decreased 0.2% from March 31, 2023 and as a percentage of RBC decreased from 333.7% to 327.2%;
  • ACL to total loans increased to 1.05%;
  • Non-performing assets (“NPAs”) to total assets increased to 0.55%, or 20 bps, from March 31, 2023;
  • Annualized net charge-offs to average loans outstanding were 48 bps for the second quarter of 2023 compared to 4 bps for the three months ended March 31, 2023; and
  • Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on August 25, 2023.

Results of Operations for the Three Months Ended June 30, 2023

Net Interest Income

For the three months ended June 30, 2023, net interest income before provision for credit losses was $100.8 million and net interest margin was 3.51% compared to $103.4 million and 3.69%, respectively, for the three months ended March 31, 2023. The $2.6 million decrease in net interest income before provision for credit losses was primarily due to a $7.1 million increase in interest expense on certificates and other time deposits, a $5.2 million increase in advances from the Federal Home Loan Bank (“FHLB”), a $3.1 million increase in transaction and savings deposits driven by an increase in funding costs on deposits, and an $822 thousand decrease in interest income on debt securities. The decrease was partially offset by a $12.0 million increase in interest income on loans driven by an increase in loan yields and average balances and a $2.0 million increase in interest income on deposits in financial institutions and fed funds sold during the three months ended June 30, 2023. Net interest margin decreased 18 basis points compared to the three months ended March 31, 2023, primarily due to the increase in funding costs on deposits and FHLB borrowing costs during three months ended June 30, 2023, partially offset by an increase in loan yields and average balances.

Compared to the three months ended June 30, 2022, net interest income before provision for credit losses for the three months ended June 30, 2023 increased by $16.4 million, or 19.4%. The increase was primarily due to a $81.5 million increase in interest income on loans driven by an increase in average balances and loan yields and a $6.8 million increase in deposits in financial institutions and fed funds sold, partially offset by a $28.9 million increase in transaction and savings deposits, a $26.6 million increase in certificates and other time deposits and a $16.4 million increase in advances from FHLB driven by an increase in funding costs. Net interest margin increased 9 basis points to 3.51% for the three months ended June 30, 2023 from 3.42% for the three months ended June 30, 2022. The increase was primarily due to the increase in average balances and loan yields during the three months ended June 30, 2023, partially offset by an increase in funding costs.

Noninterest Income

Noninterest income for the three months ended June 30, 2023 was $13.7 million, an increase of $161 thousand, or 1.2%, compared to the three months ended March 31, 2023. The increase was primarily due to a $2.0 million increase in equity method investment income and a loss on sales of investment securities in the first quarter of 2023 of $5.3 million. The increase was partially offset by a $5.5 million decrease in government guaranteed loan income primarily driven by a decrease in USDA loans sold.

Compared to the three months ended June 30, 2022, noninterest income for the three months ended June 30, 2023 increased by $3.3 million, or 31.9%. The increase was primarily due to a $3.4 million increase in government guaranteed loan income, primarily driven by an increase in USDA loans sold through NAC and a $1.6 million increase in other noninterest income. The increase was partially offset by a $865 thousand decrease in loan fees driven by a $562 thousand decrease in syndication fees, a $481 thousand decrease in equity method investment income, and a decrease of $360 thousand in customer swap income.

Noninterest Expense

Noninterest expense was $57.2 million for the three months ended June 30, 2023, compared to $56.6 million for the three months ended March 31, 2023, an increase of $582 thousand, or 1.0%. The increase was primarily due to a $2.5 million increase in professional and regulatory fees driven by FDIC assessment fees that increased when the Company crossed $10 billion in total assets, an increase of $848 thousand in marketing expense, and a $777 thousand increase in other noninterest expense. The increase is partially offset by a $3.2 million decrease in salaries and employee benefits.

Compared to the three months ended June 30, 2022, noninterest expense for the three months ended June 30, 2023 increased by $9.0 million, or 18.8%. The increase was primarily driven by a $4.0 million increase in professional and regulatory fees driven by FDIC assessment fees that increased when the Company crossed $10 billion in total assets, a $1.7 million increase in salaries and employee benefits, a $1.7 million increase in other noninterest expenses, a $1.3 million increase in data processing and software expenses and a $331 thousand increase in occupancy and equipment expenses.

Financial Condition

Total LHI was $9.71 billion at June 30, 2023, an increase of $16.0 million, or 0.7% annualized, compared to March 31, 2023. The increase was the result of the continued execution, and success of our loan growth strategy, including our continued investment in talent.

Total deposits were $9.23 billion at June 30, 2023, an increase of $199.2 million, or 8.8% annualized, compared to March 31, 2023. The increase was primarily the result of an increase of $98.2 million in interest-bearing deposits, an increase of $32.1 million in certificates and other time deposits, an increase of $21.7 million in non-interest bearing deposits, and an increase of $47.1 million in correspondent money market account balances. As of June 30, 2023, uninsured deposits were 33.26% of total deposits compared to 38.92% as of March 31, 2023.

Credit Quality

Nonperforming assets totaled $68.3 million, or 0.55% of total assets, at June 30, 2023, compared to $44.5 million, or 0.35% of total assets, at March 31, 2023. The Company had net charge-offs of $11.5 million for the quarter.

The Company recorded a provision for credit losses of $15.0 million for the three months ended June 30, 2023, a $9.4 million provision for credit losses for the three months ended March 31, 2023 and a $9.0 million provision for credit losses for the three months ended June 30, 2022. The recorded provision for credit losses for the three months ended June 30, 2023, compared to the three months ended March 31, 2023, was primarily attributable to an increase in general reserves as a result of changes in economic factors and loan growth. The Company recorded a benefit for unfunded commitments of $1.1 million for the three months ended June 30, 2023, a $1.5 million provision for unfunded commitments for the three months ended March 31, 2023, and no provision for unfunded commitments for the three months ended June 30, 2022. The recorded benefit for unfunded commitments for the three months ended June 30, 2023, compared to the three months ended March 31, 2023, was attributable to a decrease in unfunded commitment balances partially offset by changes in economic factors. Allowance for credit loss (“ACL”) as a percentage of LHI was 1.05%, 1.02% and 0.94% at June 30, 2023, March 31, 2023 and June 30, 2022, respectively.

Dividend Information

After the close of the market on Tuesday, July 25, 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 or after August 25, 2023 to stockholders of record as of the close of business on August 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, pre-tax, pre-provision operating return on average loans, pre-tax, pre-provision operating return on average loans, 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 and webcast to review the results on Wednesday, July 26, 2023, at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/xu9w726g 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/BI4c4f56cfcc834a4f9ccbaba9c815983a. 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 thereafter. 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; a continuation of recent turmoil in the banking industry, responsive measures to mitigate and manage it and related supervisory and regulatory actions and costs 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, 2022 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 Six Months
Ended
    Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
  Jun 30,
2023
  Jun 30,
2022
     
    (Dollars and shares in thousands, except per share data)
Per Share Data (Common Stock):                            
Basic EPS   $ 0.62     $ 0.71     $ 0.74     $ 0.80     $ 0.55     $ 1.33     $ 1.21  
Diluted EPS     0.62       0.70       0.73       0.79       0.54       1.32       1.19  
Book value per common share     27.48       27.54       26.83       26.15       26.50       27.48       26.50  
Tangible book value per common share1     19.41       19.43       18.64       17.91       18.20       19.41       18.20  
Dividends paid per common share outstanding2     0.20       0.20       0.20       0.20       0.20       0.40       0.40  
                             
Common Stock Data:                            
Shares outstanding at period end     54,261       54,229       54,030       53,988       53,951       54,261       53,951  
Weighted average basic shares outstanding for the period     54,247       54,149       54,011       53,979       53,949       54,199       52,331  
Weighted average diluted shares outstanding for the period     54,486       54,606       54,780       54,633       54,646       54,546       53,121  
                             
Summary of Credit Ratios:                            
ACL to total LHI     1.05 %     1.02 %     0.96 %     0.94 %     0.94 %     1.05 %     0.94 %
NPAs to total assets     0.55       0.35       0.36       0.26       0.40       0.55       0.40  
NPAs, excluding nonaccrual purchase credit deteriorated (“PCD”) loans, to total assets3     0.44       0.25       0.25       0.26       0.40       0.44       0.40  
Net charge-offs to average loans outstanding4     0.48       0.04       0.24       0.12       0.04       0.26       0.14  
                             
Summary Performance Ratios:                            
Return on average assets4     1.10 %     1.28 %     1.35 %     1.50 %     1.11 %     1.18 %     1.23 %
Return on average equity4     8.96       10.55       11.03       11.82       8.21       9.74       9.07  
Return on average tangible common equity1, 4     13.35       15.81       16.75       17.82       12.68       14.55       14.17  
Efficiency ratio     49.94       48.42       47.63       44.71       50.76       49.17       51.76  
Net interest margin     3.51       3.69       3.87       3.77       3.42       3.60       3.32  
                             
Selected Performance Metrics - Operating:                            
Diluted operating EPS1   $ 0.64     $ 0.79     $ 0.74     $ 0.80     $ 0.55     $ 1.43     $ 1.20  
Pre-tax, pre-provision operating return on average assets1, 4     1.90 %     2.21 %     2.15 %     2.20 %     1.76 %     2.05 %     1.74 %
Pre-tax, pre-provision operating return on average loans1, 4     2.43       2.84       2.78       2.88       2.35       2.63       2.34  
Operating return on average assets1,4     1.13       1.44       1.36       1.51       1.12       1.28       1.24  
Operating return on average tangible common equity1,4     13.70       17.72       16.95       17.94       12.77       15.66       14.34  
Operating efficiency ratio1     48.90       45.63       47.11       44.37       50.45       47.21       51.22  
                             
Veritex Holdings, Inc. Capital Ratios:                            
Average stockholders' equity to average total assets     12.23 %     12.09 %     12.20 %     12.69 %     13.51 %     12.16 %     13.54 %
Tangible common equity to tangible assets1     8.76       8.66       8.60       8.58       9.04       8.76       9.04  
Tier 1 capital to average assets (leverage)     9.80       9.67       9.82       9.79       10.14       9.80       10.14  
Common equity tier 1 capital     9.76       9.32       9.09       9.09       9.25       9.76       9.25  
Tier 1 capital to risk-weighted assets     10.01       9.56       9.34       9.35       9.52       10.01       9.52  
Total capital to risk-weighted assets     12.51       11.99       11.63       11.68       11.95       12.51       11.95  

1Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” after the financial highlights for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.
2Dividend amount represents dividend paid per common share subsequent to each respective quarter end.
3Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 Financial Instruments - Credit Losses 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)
                     
    Jun 30, 2023   Mar 31, 2023   Dec 31, 2022   Sep 30, 2022   Jun 30, 2022
    (unaudited)   (unaudited)       (unaudited)   (unaudited)
ASSETS                    
Cash and cash equivalents   $ 663,921     $ 808,395     $ 436,077     $ 433,897     $ 410,716  
Debt securities, net     1,144,020       1,150,959       1,282,460       1,303,004       1,354,403  
Other investments     138,894       137,621       122,450       115,551       202,685  
                     
Loans held for sale     29,876       42,816       20,641       17,644       14,210  
LHI, MW     436,255       437,501       446,227       523,805       629,291  
LHI, excluding MW     9,257,183       9,237,159       9,036,424       8,513,254       7,923,131  
Total loans     9,723,314       9,717,476       9,503,292       9,054,703       8,566,632  
ACL, loans     (102,150 )     (98,694 )     (91,052 )     (85,037 )     (80,576 )
Bank-owned life insurance     84,375       84,962       84,496       84,030       84,097  
Bank premises, furniture and equipment, net     105,986       107,540       108,824       108,720       108,769  
Other real estate owned (“OREO”)                             1,032  
Intangible assets, net of accumulated amortization     48,293       51,086       53,213       56,238       59,011  
Goodwill     404,452       404,452       404,452       404,452       404,452  
Other assets     259,263       245,690       250,149       238,896       193,590  
Total assets   $ 12,470,368     $ 12,609,487     $ 12,154,361     $ 11,714,454     $ 11,304,811  
LIABILITIES AND STOCKHOLDERS’ EQUITY                    
Deposits:                    
Noninterest-bearing deposits   $ 2,234,109     $ 2,212,389     $ 2,640,617     $ 2,811,412     $ 2,947,830  
Interest-bearing transaction and savings deposits     3,590,253       3,492,011       3,514,729       3,437,898       3,233,803  
Certificates and other time deposits     2,928,949       2,896,870       2,086,642       1,667,364       1,562,626  
Correspondent money market deposits     480,598       433,468       881,246       831,770       773,447  
Total deposits     9,233,909       9,034,738       9,123,234       8,748,444       8,517,706  
Accounts payable and other liabilities     190,900       171,985       177,579       173,198       126,116  
Advances from FHLB     1,325,000       1,680,000       1,175,000       1,150,000       1,000,000  
Subordinated debentures and subordinated notes     229,279       229,027       228,775       228,524       228,272  
Securities sold under agreements to repurchase                       2,389       3,275  
Total liabilities     10,979,088       11,115,750       10,704,588       10,302,555       9,875,369  
Commitments and contingencies                    
Stockholders’ equity:                    
Common stock     609       609       607       606       606  
Additional paid-in capital     1,311,687       1,308,345       1,306,852       1,303,171       1,300,170  
Retained earnings     429,753       406,873       379,299       350,195       317,664  
Accumulated other comprehensive loss     (83,187 )     (54,508 )     (69,403 )     (74,491 )     (21,416 )
Treasury stock     (167,582 )     (167,582 )     (167,582 )     (167,582 )     (167,582 )
Total stockholders’ equity     1,491,280       1,493,737       1,449,773       1,411,899       1,429,442  
Total liabilities and stockholders’ equity   $ 12,470,368     $ 12,609,487     $ 12,154,361     $ 11,714,454     $ 11,304,811  


VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands, except per share data)
 
    For the Quarter Ended   For the Six Months Ended
    Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
  Jun 30,
2023
  Jun 30,
2022
    (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)
Interest income:                            
Loans, including fees   $ 163,727     $ 151,707     $ 136,846     $ 109,199     $ 82,191     $ 315,434     $ 153,634
Debt securities     10,166       10,988       10,880       10,462       9,632       21,154       17,394
Deposits in financial institutions and Fed Funds sold     7,507       5,534       3,401       1,898       714       13,041       976
Equity securities and other investments     1,118       1,408       1,087       1,666       1,057       2,526       1,967
Total interest income     182,518       169,637       152,214       123,225       93,594       352,155       173,971
Interest expense:                            
Transaction and savings deposits     32,957       29,857       24,043       12,897       4,094       62,814       5,845
Certificates and other time deposits     28,100       20,967       8,543       3,919       1,465       49,067       2,845
Advances from FHLB     17,562       12,358       10,577       2,543       834       29,920       2,381
Subordinated debentures and subordinated notes     3,068       3,066       2,954       2,826       2,721       6,134       5,380
Total interest expense     81,687       66,248       46,117       22,185       9,114       147,935       16,451
Net interest income     100,831       103,389       106,097       101,040       84,480       204,220       157,520
Provision for credit losses1     15,000       9,385       11,800       6,650       9,000       24,385       8,500
(Benefit) provision for unfunded commitments     (1,129 )     1,497       (523 )     850             368       493
Net interest income after provisions     86,960       92,507       94,820       93,540       75,480       179,467       148,527
Noninterest income:                            
Service charges and fees on deposit accounts     5,272       5,017       5,173       5,217       5,039       10,289       9,749
Loan fees     1,520       2,064       2,477       2,786       2,385       3,584       5,179
Loss on sales of investment securities           (5,321 )                       (5,321 )    
Gain on sales of mortgage loans held for sale     40       6       4       16       223       46       530
Government guaranteed loan income, net     4,144       9,688       7,808       572       789       13,832       5,680
Equity method investment income (loss)     485       (1,521 )     (5,416 )     (1,058 )     966       (1,036 )     1,333
Customer swap income     961       217       2,273       3,358       1,321       1,178       2,267
Other income (loss)     1,270       3,381       2,007       2,130       (345 )     4,651       737
Total noninterest income     13,692       13,531       14,326       13,021       10,378       27,223       25,475
Noninterest expense:                            
Salaries and employee benefits     28,650       31,865       33,690       29,714       26,924       60,515       54,437
Occupancy and equipment     4,827       4,973       5,116       4,615       4,496       9,800       9,013
Professional and regulatory fees     6,868       4,389       4,401       3,718       2,865       11,257       6,023
Data processing and software expense     4,709       4,720       4,197       3,509       3,386       9,429       6,307
Marketing     2,627       1,779       1,841       1,845       2,306       4,406       3,493
Amortization of intangibles     2,468       2,495       2,495       2,494       2,495       4,963       4,990
Telephone and communications     355       478       358       389       352       833       737
Merger and acquisition (“M&A”) expense                       384       295             995
Other     6,693       5,916       5,261       4,323       5,034       12,609       8,730
Total noninterest expense     57,197       56,615       57,359       50,991       48,153       113,812       94,725
Income before income tax expense     43,455       49,423       51,787       55,570       37,705       92,878       79,277
Income tax expense     9,725       11,012       11,890       12,248       8,079       20,737       16,181
Net income   $ 33,730     $ 38,411     $ 39,897     $ 43,322     $ 29,626     $ 72,141     $ 63,096
Net income available to common stockholders   $ 33,730     $ 38,411     $ 39,897     $ 43,322     $ 29,626     $ 72,141     $ 63,096
                             
Basic EPS   $ 0.62     $ 0.71     $ 0.74     $ 0.80     $ 0.55     $ 1.33     $ 1.21
Diluted EPS   $ 0.62     $ 0.70     $ 0.73     $ 0.79     $ 0.54     $ 1.32     $ 1.19
Weighted average basic shares outstanding     54,247       54,149       54,011       53,979       53,949       54,199       52,331
Weighted average diluted shares outstanding     54,486       54,606       54,780       54,633       54,646       54,546       53,121

1 Includes provision for credit losses on loans of $23.5 million and available for sale (“AFS”) securities of $885 thousand for the six months ended June 30, 2023.


VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
 
    For the Quarter Ended
    June 30, 2023   March 31, 2023   June 30, 2022
    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
     
    (In thousands, except percentages)
Assets                                    
Interest-earning assets:                                    
Loans1   $ 9,285,550     $ 158,685   6.85 %   $ 9,141,137     $ 146,801   6.51 %   $ 7,558,966     $ 78,262   4.15 %
LHI, MW     371,763       5,042   5.44       360,172       4,906   5.52       479,187       3,929   3.29  
Debt securities     1,133,845       10,166   3.60       1,252,457       10,988   3.56       1,318,502       9,632   2.93  
Interest-bearing deposits in other banks     583,818       7,507   5.16       478,345       5,534   4.69       369,847       714   0.77  
Equity securities and other investments     137,868       1,118   3.25       124,985       1,408   4.57       167,327       1,057   2.53  
Total interest-earning assets     11,512,844       182,518   6.36       11,357,096       169,637   6.06       9,893,829       93,594   3.79  
ACL, loans     (102,559 )             (92,664 )             (74,268 )        
Noninterest-earning assets     939,938               949,881               892,102          
Total assets   $ 12,350,223             $ 12,214,313             $ 10,711,663          
                                     
Liabilities and Stockholders’ Equity                                    
Interest-bearing liabilities:                                    
Interest-bearing demand and savings deposits   $ 3,919,745     $ 32,957   3.37 %   $ 4,150,995     $ 29,857   2.92 %   $ 3,770,098     $ 4,094   0.44 %
Certificates and other time deposits     2,873,548       28,100   3.92       2,588,728       20,967   3.28       1,459,690       1,465   0.40  
Advances from FHLB and Other     1,472,912       17,562   4.78       1,122,683       12,358   4.46       828,769       834   0.40  
Subordinated debentures and subordinated notes     229,151       3,068   5.37       231,251       3,066   5.38       232,043       2,721   4.70  
Total interest-bearing liabilities     8,495,356       81,687   3.86       8,093,657       66,248   3.32       6,290,600       9,114   0.58  
                                     
Noninterest-bearing liabilities:                                    
Noninterest-bearing deposits     2,175,002               2,470,700               2,870,692          
Other liabilities     169,240               173,380               102,994          
Total liabilities     10,839,598               10,737,737               9,264,286          
Stockholders’ equity     1,510,625               1,476,576               1,447,377          
Total liabilities and stockholders’ equity   $ 12,350,223             $ 12,214,313             $ 10,711,663          
                                     
Net interest rate spread2           2.50 %           2.74 %           3.21 %
Net interest income and margin3       $ 100,831   3.51 %       $ 103,389   3.69 %       $ 84,480   3.42 %

1 Includes average outstanding balances of loans held for sale of $23,374, $19,679 and $12,112 for the quarters ended June 30, 2023, March 31, 2023, and June 30, 2022, respectively, and average balances of LHI, excluding MW.
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 SUBSIDIARY
Financial Highlights
(In thousands except percentages)
 
    Six Months Ended
    June 30, 2023   June 30, 2022
    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   $ 9,213,742     $ 305,486   6.69 %   $ 7,233,431     $ 146,636   4.09 %
LHI, WH     366,000       9,948   5.48       450,592       6,998   3.13  
Debt securities     1,192,823       21,154   3.58       1,230,159       17,394   2.85  
Interest-bearing deposits in other banks     531,373       13,041   4.95       461,844       976   0.43  
Equity securities and other investments     131,462       2,526   3.87       178,602       1,967   2.22  
Total interest-earning assets     11,435,400       352,155   6.21       9,554,628       173,971   3.67  
ACL     (97,639 )             (76,046 )        
Noninterest-earning assets     944,883               878,679          
Total assets   $ 12,282,644             $ 10,357,261          
                         
Liabilities and Stockholders’ Equity                        
Interest-bearing liabilities:                        
Interest-bearing demand and savings deposits   $ 4,033,975     $ 62,814   3.14 %   $ 3,621,697     $ 5,845   0.33 %
Certificates and other time deposits     2,731,925       49,067   3.62       1,480,654       2,845   0.39  
Advances from FHLB and Other     1,298,765       29,920   4.65       803,295       2,381   0.60  
Subordinated debentures and subordinated notes     230,195       6,134   5.37       231,959       5,380   4.68  
Total interest-bearing liabilities     8,294,860       147,935   3.60       6,137,605       16,451   0.54  
                         
Noninterest-bearing liabilities:                        
Noninterest-bearing deposits     2,322,790               2,731,869          
Other liabilities     171,299               85,126          
Total liabilities     10,788,949               8,954,600          
Stockholders’ equity     1,493,695               1,402,661          
Total liabilities and stockholders’ equity   $ 12,282,644             $ 10,357,261          
                         
Net interest rate spread2           2.61 %           3.13 %
Net interest income and margin3       $ 204,220   3.60 %       $ 157,520   3.32 %

1 Includes average outstanding balances of loans held for sale of $21,537 and $12,440 for the six months ended June 30, 2023 and 2022, respectively, and average balances of LHI, excluding MW.
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
    Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
Average yield on interest-earning assets:                    
Loans1   6.85 %   6.51 %   5.98 %   5.01 %   4.15 %
LHI, MW   5.44     5.52     5.20     4.11     3.29  
Debt securities   3.60     3.56     3.36     3.05     2.93  
Interest-bearing deposits in other banks   5.16     4.69     3.81     2.17     0.77  
Equity securities and other investments   3.25     4.57     3.62     3.25     2.53  
Total interest-earning assets   6.36 %   6.06 %   5.55 %   4.59 %   3.79 %
                     
Average rate on interest-bearing liabilities:                    
Interest-bearing demand and savings deposits   3.37 %   2.92 %   2.21 %   1.23 %   0.44 %
Certificates and other time deposits   3.92     3.28     1.90     0.94     0.40  
Advances from FHLB   4.78     4.46     3.91     1.12     0.40  
Subordinated debentures and subordinated notes   5.37     5.38     5.12     4.85     4.70  
Total interest-bearing liabilities   3.86 %   3.32 %   2.47 %   1.27 %   0.58 %
                     
Net interest rate spread2   2.50 %   2.74 %   3.08 %   3.32 %   3.21 %
Net interest margin3   3.51 %   3.69 %   3.87 %   3.77 %   3.42 %

  
1Includes average outstanding balances of loans held for sale of $23,374, $19,679, $15,296, $14,023 and $12,112 for the three months ended June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022 and June 30, 2022, respectively, and average balances of LHI, excluding MW. 
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
    Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
Average cost of interest-bearing deposits   3.61 %   3.06 %   2.12 %   1.15 %   0.43 %
Average costs of total deposits, including noninterest-bearing   2.73     2.24     1.46     0.76     0.28  

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

LHI and Deposit Portfolio Composition

    Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
     
    (In thousands, except percentages)
LHI1                                        
Commercial and Industrial (“C&I”)   $ 2,850,084     30.7 %   $ 2,895,957     31.3 %   $ 2,942,348     32.4 %   $ 2,743,769     32.2 %   $ 2,457,742     31.0 %
Real Estate:                                        
Owner occupied commercial (“OOCRE”)     671,602     7.2       631,563     6.8       715,829     7.9       677,705     7.9       646,723     8.1  
Non-owner occupied commercial (“NOOCRE”)     2,509,731     27.1       2,505,344     27.1       2,341,379     25.9       2,273,305     26.6       2,203,970     27.8  
Construction and land     1,659,700     17.9       1,831,349     19.8       1,787,400     19.7       1,673,997     19.6       1,532,997     19.3  
Farmland     51,663     0.6       51,680     0.6       43,500     0.5       43,569     0.5       47,319     0.6  
1-4 family residential     923,442     10.0       896,252     9.7       894,456     9.9       858,693     10.1       765,260     9.6  
Multi-family residential     592,473     6.4       432,209     4.6       322,679     3.6       252,244     3.0       276,632     3.5  
Consumer     11,189     0.1       8,316     0.1       7,806     0.1       7,465     0.1       7,520     0.1  
Total LHI   $ 9,269,884     100 %   $ 9,252,670     100 %   $ 9,055,397     100 %   $ 8,530,747     100 %   $ 7,938,163     100 %
                                         
MW     436,255           437,501           446,227           523,805           629,291      
                                         
Total LHI1   $ 9,706,139         $ 9,690,171         $ 9,501,624         $ 9,054,552         $ 8,567,454      
                                         
Deposits                                        
Noninterest-bearing   $ 2,234,109     24.2 %   $ 2,212,389     24.5 %   $ 2,640,617     28.9 %   $ 2,811,412     32.1 %   $ 2,947,830     34.6 %
Interest-bearing transaction     676,653     7.3       866,609     9.6       622,814     6.8       603,729     6.9       660,557     7.8  
Money market     2,816,769     30.5       2,518,922     27.9       2,773,622     30.4       2,701,762     30.9       2,443,748     28.7  
Savings     96,831     1.0       106,480     1.2       118,293     1.3       132,407     1.5       129,498     1.5  
Certificates and other time deposits     2,928,949     31.7       2,896,870     32.0       2,086,642     22.9       1,667,364     19.1       1,562,626     18.3  
Correspondent money market accounts     480,598     5.2       433,468     4.8       881,246     9.7       831,770     9.5       773,447     9.1  
Total deposits   $ 9,233,909     100 %   $ 9,034,738     100 %   $ 9,123,234     100 %   $ 8,748,444     100 %   $ 8,517,706     100 %
                                         
Loan to Deposit Ratio     105.1 %         107.3 %         104.1 %         103.5 %         100.6 %    
                                         
Loan to Deposit Ratio, excluding MW     100.4 %         102.4 %         99.3 %         97.5 %         93.2 %    

1 Total LHI does not include deferred fees of $12.7 million, $15.5 million, $19.0 million, $17.5 million and $15.0 million at June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022 and June 30, 2022, respectively.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
Asset Quality
 
  For the Quarter Ended   Six Months Ended
  Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
  June 30,
2023
  Jun 30,
2022
           
  (In thousands, except percentages)        
NPAs:                          
Nonaccrual loans $         54,055     $         31,452     $         30,364     $         30,592     $         42,242     $         54,055     $         42,242  
Nonaccrual PCD loans1           13,721               12,784               13,178               —               —               13,721               —  
Accruing loans 90 or more days past due2           528               296               125               —               1,753               528               1,753  
Total nonperforming loans held for investment (“NPLs”)           68,304               44,532               43,667               30,592               43,995               68,304               43,995  
OREO           —               —               —               —               1,032               —               1,032  
Total NPAs $         68,304     $         44,532     $         43,667     $         30,592     $         45,027     $         68,304     $         45,027  
                           
Charge-offs:                          
OOCRE $         —     $         (116 )   $         —     $         (1,061 )   $         (244 )   $         (116 )   $         (1,585 )
NOOCRE           (8,215 )             —               (1,019 )             (838 )             —               (8,215 )             (553 )
C&I           (3,540 )             (1,051 )             (5,449 )             (460 )             (528 )             (4,591 )             (3,822 )
Consumer           (92 )             (62 )             (41 )             (19 )             (1,091 )             (154 )             (1,225 )
Total charge-offs           (11,847 )             (1,229 )             (6,509 )             (2,378 )             (1,863 )             (13,076 )             (7,185 )
                           
Recoveries:                          
1-4 family residential           1               1               24               4               3               2               3  
OOCRE           —               —               26               —               245               —               245  
NOOCRE           150               —               229               3               93               150               493  
C&I           106               364               415               177               572               470               716  
Consumer           46               6               30               5               41               52               50  
Total recoveries           303               371               724               189               954               674               1,507  
                           
Net charge-offs $         (11,544 )   $         (858 )   $         (5,785 )   $         (2,189 )   $         (909 )   $         (12,402 )   $         (5,678 )
                           
                           
ACL $         102,150     $         98,694     $         91,052     $         85,037     $         80,576     $         102,150     $         80,576  
                           
Asset Quality Ratios:                          
NPAs to total assets   0.55 %     0.35 %     0.36 %     0.26 %     0.40 %     0.55 %     0.40 %
NPAs, excluding nonaccrual PCD loans, to total assets   0.44       0.25       0.25       0.26       0.40       0.44       0.40  
NPLs to total LHI   0.71       0.47       0.48       0.35       0.55       0.71       0.55  
NPLs, excluding nonaccrual PCD loans, to total LHI   0.56       0.33       0.32       0.34       0.51       0.56       0.51  
ACL to total LHI   1.05       1.02       0.96       0.94       0.94       1.05       0.94  
Net charge-offs to average loans outstanding3   0.48       0.04       0.24       0.12       0.04       0.26       0.14  

1 Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 Financial Instruments - Credit Losses 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 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.

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
    Jun 30, 2023   Mar 31, 2023   Dec 31, 2022   Sep 30, 2022   Jun 30, 2022
     
    (Dollars in thousands, except per share data)
Tangible Common Equity                    
Total stockholders' equity   $ 1,491,280     $ 1,493,737     $ 1,449,773     $ 1,411,899     $ 1,429,442  
Adjustments:                    
Goodwill     (404,452 )     (404,452 )     (404,452 )     (404,452 )     (404,452 )
Core deposit intangibles     (33,371 )     (35,808 )     (38,247 )     (40,684 )     (43,122 )
Tangible common equity   $ 1,053,457     $ 1,053,477     $ 1,007,074     $ 966,763     $ 981,868  
Common shares outstanding     54,261       54,229       54,030       53,988       53,951  
                     
Book value per common share   $ 27.48     $ 27.54     $ 26.83     $ 26.15     $ 26.50  
Tangible book value per common share   $ 19.41     $ 19.43     $ 18.64     $ 17.91     $ 18.20  

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
    Jun 30, 2023   Mar 31, 2023   Dec 31, 2022   Sep 30, 2022   Jun 30, 2022
     
    (Dollars in thousands)
Tangible Common Equity                    
Total stockholders' equity   $ 1,491,280     $ 1,493,737     $ 1,449,773     $ 1,411,899     $ 1,429,442  
Adjustments:                    
Goodwill     (404,452 )     (404,452 )     (404,452 )     (404,452 )     (404,452 )
Core deposit intangibles     (33,371 )     (35,808 )     (38,247 )     (40,684 )     (43,122 )
Tangible common equity   $ 1,053,457     $ 1,053,477     $ 1,007,074     $ 966,763     $ 981,868  
Tangible Assets                    
Total assets   $ 12,470,368     $ 12,609,487     $ 12,154,361     $ 11,714,454     $ 11,304,811  
Adjustments:                    
Goodwill     (404,452 )     (404,452 )     (404,452 )     (404,452 )     (404,452 )
Core deposit intangibles     (33,371 )     (35,808 )     (38,247 )     (40,684 )     (43,122 )
Tangible Assets   $ 12,032,545     $ 12,169,227     $ 11,711,662     $ 11,269,318     $ 10,857,237  
Tangible Common Equity to Tangible Assets     8.76 %     8.66 %     8.60 %     8.58 %     9.04 %

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   Six Months Ended
    Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
  June 30,
2023
  Jun 30,
2022
             
    (Dollars in thousands)        
Net income available for common stockholders adjusted for amortization of core deposit intangibles                            
Net income   $ 33,730     $ 38,411     $ 39,897     $ 43,322     $ 29,626     $ 72,141     $ 63,096  
Adjustments:                            
Plus: Amortization of core deposit intangibles     2,438       2,438       2,438       2,438       2,438       4,876       4,876  
Less: Tax benefit at the statutory rate     512       512       512       512       512       1,024       1,024  
Net income available for common stockholders adjusted for amortization of core deposit intangibles   $ 35,656     $ 40,337     $ 41,823     $ 45,248     $ 31,552     $ 75,993     $ 66,948  
                             
Average Tangible Common Equity                            
Total average stockholders' equity   $ 1,510,625     $ 1,476,576     $ 1,434,818     $ 1,453,816     $ 1,447,377     $ 1,493,695     $ 1,402,661  
Adjustments:                            
Average goodwill     (404,452 )     (404,452 )     (404,452 )     (404,452 )     (404,452 )     (404,452 )     (404,234 )
Average core deposit intangibles     (34,969 )     (37,361 )     (39,792 )     (42,230 )     (44,720 )     (36,159 )     (45,932 )
Average tangible common equity   $ 1,071,204     $ 1,034,763     $ 990,574     $ 1,007,134     $ 998,205     $ 1,053,084     $ 952,495  
Return on Average Tangible Common Equity (Annualized)     13.35 %     15.81 %     16.75 %     17.82 %     12.68 %     14.55 %     14.17 %

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, Pre-tax, Pre-Provision Operating Return on Average Loans, 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 on sale of debt securities AFS, net, 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 (benefit) 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 noninterest expense plus adjustments to operating noninterest expense divided by noninterest income plus adjustments to operating noninterest 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   Six Months Ended
    Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
  June 30,
2023
  Jun 30,
2022
     
    (Dollars in thousands, except per share data)
Operating Earnings                            
Net income   $ 33,730   $ 38,411   $ 39,897   $ 43,322   $ 29,626   $ 72,141   $ 63,096
                             
Plus: Severance payments1     1,194     835     630             2,029    
Plus: Loss on sale of debt securities AFS, net         5,321                 5,321    
Plus: M&A expenses                 384     295         995
Operating pre-tax income     34,924     44,567     40,527     43,706     29,921     79,491     64,091
Less: Tax impact of adjustments     251     1,293     132     81     66     1,544     222
Operating earnings   $ 34,673   $ 43,274   $ 40,395   $ 43,625   $ 29,855   $ 77,947   $ 63,869
                             
Weighted average diluted shares outstanding     54,486     54,606     54,780     54,633     54,646     54,546     53,121
Diluted EPS   $ 0.62   $ 0.70   $ 0.73   $ 0.79   $ 0.54   $ 1.32   $ 1.19
Diluted operating EPS   $ 0.64   $ 0.79   $ 0.74   $ 0.80   $ 0.55   $ 1.43   $ 1.20

1 Severance payments relate to certain restructurings made during the periods disclosed.

    For the Quarter Ended   Six Months Ended
    Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
  June 30,
2023
  Jun 30,
2022
     
    (Dollars in thousands)
Pre-Tax, Pre-Provision Operating Earnings                            
Net income   $ 33,730     $ 38,411     $ 39,897     $ 43,322     $ 29,626     $ 72,141     $ 63,096  
Plus: Provision for income taxes     9,725       11,012       11,890       12,248       8,079       20,737       16,181  
Plus: Provision for credit losses and unfunded commitments     13,871       10,882       11,277       7,500       9,000       24,753       8,993  
Plus: Severance payments     1,194       835       630                   2,029        
Plus: Loss on sale of debt securities AFS, net           5,321                         5,321        
Plus: M&A expenses                       384       295             995  
Pre-tax, pre-provision operating earnings   $ 58,520     $ 66,461     $ 63,694     $ 63,454     $ 47,000     $ 124,981     $ 89,265  
                             
Average total assets   $ 12,350,223     $ 12,214,313     $ 11,761,044     $ 11,460,857     $ 10,711,663     $ 12,282,644     $ 10,357,261  
Pre-tax, pre-provision operating return on average assets1     1.90 %     2.21 %     2.15 %     2.20 %     1.76 %     2.05 %     1.74 %
                             
Average loans   $ 9,657,313     $ 9,501,309     $ 9,103,552     $ 8,729,093     $ 8,038,153     $ 9,579,742     $ 7,684,023  
Pre-tax, pre-provision operating return on average loans1     2.43 %     2.84 %     2.78 %     2.88 %     2.35 %     2.63 %     2.34 %
                             
Average total assets   $ 12,350,223     $ 12,214,313     $ 11,761,044     $ 11,460,857     $ 10,711,663     $ 12,282,644     $ 10,357,261  
Return on average assets1     1.10 %     1.28 %     1.35 %     1.50 %     1.11 %     1.18 %     1.23 %
Operating return on average assets1     1.13       1.44       1.36       1.51       1.12       1.28       1.24  
                             
Operating earnings adjusted for amortization of core deposit intangibles                            
Operating earnings   $ 34,673     $ 43,274     $ 40,395     $ 43,625     $ 29,855     $ 77,947     $ 63,869  
Adjustments:                            
Plus: Amortization of core deposit intangibles     2,438       2,438       2,438       2,438       2,438       4,876       4,876  
Less: Tax benefit at the statutory rate     512       512       512       512       512       1,024       1,024  
Operating earnings adjusted for amortization of core deposit intangibles   $ 36,599     $ 45,200     $ 42,321     $ 45,551     $ 31,781     $ 81,799     $ 67,721  
                             
Average Tangible Common Equity                            
Total average stockholders' equity   $ 1,510,625     $ 1,476,576     $ 1,434,818     $ 1,453,816     $ 1,447,377     $ 1,493,695     $ 1,402,661  
Adjustments:                            
Less: Average goodwill     (404,452 )     (404,452 )     (404,452 )     (404,452 )     (404,452 )     (404,452 )     (404,234 )
Less: Average core deposit intangibles     (34,969 )     (37,361 )     (39,792 )     (42,230 )     (44,720 )     (36,159 )     (45,932 )
Average tangible common equity   $ 1,071,204     $ 1,034,763     $ 990,574     $ 1,007,134     $ 998,205     $ 1,053,084     $ 952,495  
Operating return on average tangible common equity1     13.70 %     17.72 %     16.95 %     17.94 %     12.77 %     15.66 %     14.34 %
                             
Efficiency ratio     49.94 %     48.42 %     47.63 %     44.71 %     50.76 %     49.17 %     51.76 %
Net interest income   $ 100,831     $ 103,389     $ 106,097     $ 101,040     $ 84,480     $ 204,220     $ 157,520  
Noninterest income     13,692       13,531       14,326       13,021       10,378       27,223       25,475  
Plus: Loss on sale of AFS securities, net           5,321