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Veritex Holdings, Inc. Reports Third Quarter Operating Results

DALLAS, Oct. 25, 2022 (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 September 30, 2022.

“The third quarter of 2022 resulted in record dollar earnings for our Company in a resilient Texas market” said President and CEO, C. Malcolm C. Holland, III. “We reported historical financial metrics with 2.2% in pre-tax, pre-provision operating return, 1.5% in return on average assets, return on average tangible common equity of 18% and an efficiency ratio of 44% coupled with continuing improved credit metrics noted by a 14 bp decrease in nonperforming assets. We remain focused on this positive momentum and deposit growth but more importantly our customers, the strong markets we serve and our shareholders”

    Quarter to Date   Year to Date
Financial Highlights   Q3 2022   Q2 2022   Q3 2022   Q3 2021
     
    (Dollars in thousands, except per share data)
(unaudited)
GAAP                
Net income   $ 43,322     $ 29,626     $ 106,418     $ 98,078  
Diluted EPS     0.79       0.54       1.98       1.95  
Book value per common share     26.15       26.50       26.15       26.09  
Return on average assets2     1.50 %     1.11 %     1.33 %     1.42 %
Efficiency ratio     44.71       50.76       49.05       49.79  
Return on average equity2     11.82       8.21       10.02       10.43  
Non-GAAP1                
Operating earnings   $ 43,625     $ 29,855     $ 107,494     $ 97,237  
Diluted operating EPS     0.80       0.55       2.00       1.94  
Tangible book value per common share     17.91       18.20       17.91       17.53  
Pre-tax, pre-provision operating earnings     63,454       47,000       152,719       122,565  
Pre-tax, pre-provision operating return on average assets2     2.20 %     1.76 %     1.90 %     1.78 %
Operating return on average assets2     1.51       1.12       1.34       1.41  
Operating efficiency ratio     44.37       50.45       48.59       49.89  
Return on average tangible common equity2     17.82       12.68       15.40       16.70  
Operating return on average tangible common equity2     17.94       12.77       15.55       16.57  

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 Third Quarter Highlights

  • Pre-tax, pre-provision operating return on average assets increased 44 bps from the second quarter of 2022 to 2.20%;
  • Net interest margin increased to 3.77%, up 35 basis points from the second quarter of 2022;
  • Non-performing assets (“NPAs”) to total assets decreased to 0.26%, or 14 bps from June 30, 2022 and 51 bps from September 30, 2021, respectively;
  • Net charge-offs to average loans outstanding was 3 basis points for the third quarter of 2022;
  • Total loans held for investment (“LHI”), excluding mortgage warehouse (“MW”) and paycheck protection program (“PPP”) loans, grew $594.6 million, or 30.0% annualized, during the three months ended September 30, 2022 from $8.5 billion at the end of the second quarter of 2022;
  • Total deposits grew $230.7 million, or 10.8% annualized, during the three months ended September 30, 2022 from $8.5 billion at the end of the second quarter of 2022; and
  • Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on November 25, 2022.

Results of Operations for the Three Months Ended September 30, 2022

Net Interest Income

For the three months ended September 30, 2022, net interest income before provision for credit losses was $101.0 million and net interest margin was 3.77% compared to $84.5 million and 3.42%, respectively, for the three months ended June 30, 2022. The $16.6 million increase in net interest income before provision for credit losses was primarily due to a $27.0 million increase in interest income on loans driven by an increase in average balances and loan yields during the three months ended September 30, 2022. Net interest margin increased 35 basis points compared to the three months ended June 30, 2022, primarily due to the increase in yields earned on loans during three months ended September 30, 2022, partially offset by an increase in funding costs.

Compared to the three months ended September 30, 2021, net interest income before provision for credit losses for the three months ended September 30, 2022 increased by $29.8 million, or 41.8%. The increase was primarily due to a $38.1 million increase in interest income on loans driven by an increase in average balances and loan yields. Net interest margin increased 51 basis points to 3.77% for the three months ended September 30, 2022 from 3.26% for the three months ended September 30, 2021. The increase was primarily due to the increase in average balances and loan yields during the three months ended September 30, 2022, partially offset by an increase in funding costs.

Noninterest Income

Noninterest income for the three months ended September 30, 2022 was $13.0 million, an increase of $2.6 million, or 25.5%, compared to the three months ended June 30, 2022. The increase was primarily due to a $2.0 million increase in customer swap income and a $2.2 million increase in the fair value of the servicing asset, partially offset by a $2.0 million decrease in equity method investment income.

Compared to the three months ended September 30, 2021, noninterest income for the three months ended September 30, 2022 decreased by $2.6 million, or 16.7%. The decrease was primarily due to a $5.6 million decrease in equity method investment income, partially offset by a $2.3 million increase in customer swap income and a $1.0 million increase in loan fees.

Noninterest Expense

Noninterest expense was $51.0 million for the three months ended September 30, 2022, compared to $48.2 million for the three months ended June 30, 2022, an increase of $2.8 million, or 5.9%. This increase was primarily due to a $2.7 million increase in salaries and employee benefits from continued investment in talent.

Compared to the three months ended September 30, 2021, noninterest expense for the three months ended September 30, 2022 increased by $9.7 million, or 23.4%. The increase was primarily driven by a $6.8 million increase in salaries and employee benefits as a result of a $4.1 million increase in salaries and employee benefits from continued investment in talent.

Financial Condition

Total LHI, excluding MW and PPP loans, were $8.5 billion at September 30, 2022, an increase of $594.6 million, or 30.0% annualized, compared to June 30, 2022. 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 $8.7 billion at September 30, 2022, an increase of $230.7 million, or 10.8% annualized, compared to June 30, 2022. The increase was primarily the result of an increase of $262.4 million in interest-bearing transaction and savings deposits and an increase of $104.7 million in certificates and other time deposits, partially offset by a $136.4 million decrease in non-interest bearing deposits.

Credit Quality

Nonperforming assets totaled $30.6 million, or 0.26% of total assets at September 30, 2022, compared to $45.0 million, or 0.40% of total assets, at June 30, 2022. The Company had net charge-offs of $2.2 million for the quarter, which were fully reserved against in prior quarters under our allowance for credit loss (“ACL”) model.

The Company recorded a provision for credit losses of $6.7 million for the three months ended September 30, 2022, a $9.0 million provision for credit losses for the three months ended June 30, 2022 and no provision for credit losses for the three months ended September 30, 2021. The recorded provision for credit losses for the three months ended September 30, 2022, compared to the three months ended June 30, 2022, was primarily attributable to an increase in general reserves as a result of changes in economic factors and loan growth. For the three months ended September 30, 2022, we recorded an $850 thousand provision for unfunded commitments, which was attributable to changes in economic factors and an increase of unfunded balances. ACL as a percentage of LHI, excluding MW and PPP loans, was 1.00%, 1.02% and 1.42% at September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

Dividend Information

After the close of the market on Tuesday, October 25, 2022, 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 November 25, 2022 to stockholders of record as of the close of business on November 11, 2022.

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 and webcast to review the results on Wednesday, October 26, 2022, at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/w5hrkf8v 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/BIcf08415eefb54948a6cdbc60349b8e55. 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 Nine Months Ended
    Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021   Sep 30, 2021   Sep 30, 2022   Sep 30, 2021
     
    (Dollars and shares in thousands)
Per Share Data (Common Stock):                            
Basic EPS   $ 0.80     $ 0.55     $ 0.66     $ 0.84     $ 0.75     $ 2.01     $ 1.98  
Diluted EPS     0.79       0.54       0.65       0.82       0.73       1.98       1.95  
Book value per common share     26.15       26.50       26.86       26.64       26.09       26.15       26.09  
Tangible book value per common share1     17.91       18.20       18.51       17.49       17.53       17.91       17.53  
Dividends paid per common share outstanding2     0.20       0.20       0.20       0.20       0.20       0.60       0.57  
                             
Common Stock Data:                            
Shares outstanding at period end     53,988       53,951       53,907       49,372       49,229       53,988       49,229  
Weighted average basic shares outstanding for the period     53,979       53,949       50,695       49,329       49,423       52,886       49,431  
Weighted average diluted shares outstanding for the period     54,633       54,646       51,571       50,441       50,306       53,655       50,230  
                             
Summary of Credit Ratios:                            
ACL to total LHI, excluding MW and PPP loans     1.00 %     1.02 %     1.02 %     1.15 %     1.42 %     1.00 %     1.42 %
NPAs to total assets     0.26       0.40       0.46       0.51       0.77       0.26       0.77  
Net charge-offs to average loans outstanding     0.03       0.01       0.07       0.19       0.09       0.10       0.18  
                             
Summary Performance Ratios:                            
Return on average assets3     1.50       1.11       1.36       1.68       1.56       1.33       1.42  
Return on average equity3     11.82       8.21       10.00       12.65       11.32       10.02       10.43  
Return on average tangible common equity1, 3     17.82       12.68       15.84       20.06       17.72       15.40       16.70  
Efficiency ratio     44.71       50.76       52.84       48.53       47.55       49.05       49.79  
Net interest margin     3.77       3.42       3.22       3.37       3.26       3.48       3.20  
                             
Selected Performance Metrics - Operating:                            
Diluted operating EPS1   $ 0.80     $ 0.55     $ 0.66     $ 0.84     $ 0.70     $ 2.00     $ 1.94  
Pre-tax, pre-provision operating return on average assets1, 2     2.20 %     1.76 %     1.71 %     1.97 %     1.85 %     1.90 %     1.78 %
Operating return on average assets1, 3     1.51       1.12       1.38       1.72       1.48       1.34       1.41  
Operating return on average tangible common equity1, 3     17.94       12.77       16.08       20.48       16.92       15.55       16.57  
Operating efficiency ratio1     44.37       50.45       52.05       47.64       48.51       48.59       49.89  
                             
Veritex Holdings, Inc. Capital Ratios:                            
Average stockholders' equity to average total assets     12.69 %     13.51 %     13.58 %     13.30 %     13.75 %     13.23 %     13.63 %
Tangible common equity to tangible assets1     8.58       9.04       9.98       9.28       9.43       8.58       9.43  
Tier 1 capital to average assets (leverage)     9.79       10.14       10.66       9.05       9.54       9.79       9.54  
Common equity tier 1 capital     9.09       9.25       9.84       8.58       8.75       9.09       8.75  
Tier 1 capital to risk-weighted assets     9.35       9.52       10.14       8.89       9.06       9.35       9.06  
Total capital to risk-weighted assets     11.68       11.95       12.73       11.60       12.31       11.68       12.31  

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.
3Annualized ratio for quarterly metrics.

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

    Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021   Sep 30, 2021
    (unaudited)   (unaudited)   (unaudited)       (unaudited)
ASSETS                    
Cash and cash equivalents   $ 433,897     $ 410,716     $ 551,573     $ 379,784     $ 229,712  
Debt securities     1,303,004       1,354,403       1,244,514       1,052,494       1,103,745  
Other investments     115,551       202,685       188,699       190,591       191,786  
                     
Loans held for sale     17,644       14,210       18,721       26,007       18,896  
LHI, PPP loans, carried at fair value     2,821       7,339       18,512       53,369       135,842  
LHI, MW     523,805       629,291       542,877       565,645       615,045  
LHI, excluding MW and PPP     8,510,433       7,915,792       7,125,429       6,766,009       6,615,905  
Total loans     9,054,703       8,566,632       7,705,539       7,411,030       7,385,688  
ACL     (85,037 )     (80,576 )     (72,485 )     (77,754 )     (93,771 )
Bank-owned life insurance     84,030       84,097       83,641       83,194       83,781  
Bank premises, furniture and equipment, net     108,720       108,769       109,138       109,271       116,063  
Other real estate owned (“OREO”)           1,032       1,062              
Intangible assets, net of accumulated amortization     56,238       59,011       63,986       66,017       54,682  
Goodwill     404,452       404,452       404,452       403,771       370,840  
Other assets     238,896       193,590       173,561       138,851       129,774  
Total assets   $ 11,714,454     $ 11,304,811     $ 10,453,680     $ 9,757,249     $ 9,572,300  
LIABILITIES AND STOCKHOLDERS’ EQUITY                    
Deposits:                    
Noninterest-bearing deposits   $ 2,811,412     $ 2,947,830     $ 2,765,895     $ 2,510,723     $ 2,302,925  
Interest-bearing transaction and savings deposits     4,269,668       4,007,250       3,688,292       3,276,312       3,228,306  
Certificates and other time deposits     1,667,364       1,562,626       1,435,409       1,576,580       1,647,521  
Total deposits     8,748,444       8,517,706       7,889,596       7,363,615       7,178,752  
Accounts payable and other liabilities     173,198       126,116       105,552       69,160       66,571  
Advances from Federal Home Loan Bank (“FHLB”)     1,150,000       1,000,000       777,522       777,562       777,601  
Subordinated debentures and subordinated notes     228,524       228,272       228,018       227,764       262,761  
Securities sold under agreements to repurchase     2,389       3,275       4,996       4,069       2,455  
Total liabilities     10,302,555       9,875,369       9,005,684       8,442,170       8,288,140  
Commitments and contingencies                    
Stockholders’ equity:                    
Common stock     606       606       605       560       559  
Additional paid-in capital     1,303,171       1,300,170       1,297,161       1,142,758       1,137,889  
Retained earnings     350,195       317,664       298,830       275,273       243,633  
Accumulated other comprehensive (loss) income     (74,491 )     (21,416 )     18,982       64,070       69,661  
Treasury stock     (167,582 )     (167,582 )     (167,582 )     (167,582 )     (167,582 )
Total stockholders’ equity     1,411,899       1,429,442       1,447,996       1,315,079       1,284,160  
Total liabilities and stockholders’ equity   $ 11,714,454     $ 11,304,811     $ 10,453,680     $ 9,757,249     $ 9,572,300  
                                         

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

    For the Quarter Ended   For the Nine Months Ended
    Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021   Sep 30, 2021   Sep 30, 2022   Sep 30, 2021
Interest income:                            
Loans, including fees   $ 109,199     $ 82,191     $ 71,443     $ 74,174     $ 71,139     $ 262,833   $ 206,352  
Debt securities     10,462       9,632       7,762       9,553       7,613       27,856     22,579  
Deposits in financial institutions and Fed Funds sold     1,898       714       262       165       130       2,874     424  
Equity securities and other investments     1,666       1,057       910       1,004       898       3,633     2,233  
Total interest income     123,225       93,594       80,377       84,896       79,780       297,196     231,588  
Interest expense:                            
Transaction and savings deposits     12,897       4,094       1,751       1,629       1,588       18,742     5,229  
Certificates and other time deposits     3,919       1,465       1,380       1,661       1,934       6,764     7,418  
Advances from FHLB     2,543       834       1,547       1,847       1,848       4,924     5,489  
Subordinated debentures and subordinated notes     2,826       2,721       2,659       3,018       3,134       8,206     9,410  
Total interest expense     22,185       9,114       7,337       8,155       8,504       38,636     27,546  
Net interest income     101,040       84,480       73,040       76,741       71,276       258,560     204,042  
Provision (benefit) for credit losses     6,650       9,000       (500 )     (3,349 )           15,150      
Provision (benefit) for unfunded commitments     850             493       (1,040 )     (448 )     1,343     (441 )
Net interest income after provisions     93,540       75,480       73,047       81,130       71,724       242,067     204,483  
Noninterest income:                            
Service charges and fees on deposit accounts     5,217       5,039       4,710       4,782       4,484       14,966     11,960  
Loan fees     2,786       2,385       2,794       2,697       1,746       7,965     4,910  
Loss on sales of investment securities                             (188 )         (188 )
Gain on sales of mortgage loans held for sale     16       223       307       293       407       546     1,299  
Government guaranteed loan income, net     572       789       4,891       3,423       2,341       6,252     12,337  
Equity method investment (loss) income     (1,058 )     966       367       1,238       4,522       275     4,522  
Customer swap income     3,358       1,321       946       796       1,093       5,625     1,694  
Other income (loss)     2,130       (345 )     1,082       2,921       1,222       2,867     5,721  
Total noninterest income     13,021       10,378       15,097       16,150       15,627       38,496     42,255  
Noninterest expense:                            
Salaries and employee benefits     29,714       26,924       27,513       25,401       22,964       84,151     69,347  
Occupancy and equipment     4,615       4,496       4,517       4,398       4,536       13,628     12,865  
Professional and regulatory fees     3,718       2,865       3,158       3,017       3,401       9,741     9,928  
Data processing and software expense     3,509       3,386       2,921       2,597       2,494       9,816     7,349  
Marketing     1,845       2,306       1,187       1,443       1,151       5,338     3,901  
Amortization of intangibles     2,494       2,495       2,495       2,494       2,509       7,484     7,563  
Telephone and communications     389       352       385       380       380       1,126     1,054  
Merger and acquisition (“M&A”) expense     384       295       700       826             1,379      
Other     4,323       5,034       3,696       4,521       3,886       13,053     10,628  
Total noninterest expense     50,991       48,153       46,572       45,077       41,321       145,716     122,635  
Income before income tax expense     55,570       37,705       41,572       52,203       46,030       134,847     124,103  
Income tax expense     12,248       8,079       8,102       10,697       9,195       28,429     26,025  
Net income   $ 43,322     $ 29,626     $ 33,470     $ 41,506     $ 36,835     $ 106,418   $ 98,078  
Net income available to common stockholders   $ 43,322     $ 29,626     $ 33,470     $ 41,506     $ 36,835     $ 106,418   $ 98,078  
                             
Basic EPS   $ 0.80     $ 0.55     $ 0.66     $ 0.84     $ 0.75     $ 2.01   $ 1.98  
Diluted EPS   $ 0.79     $ 0.54     $ 0.65     $ 0.82     $ 0.73     $ 1.98   $ 1.95  
Weighted average basic shares outstanding     53,979       53,949       50,695       49,329       49,423       52,886     49,431  
Weighted average diluted shares outstanding     54,633       54,646       51,571       50,441       50,306       53,655     50,230  
                                                       

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

    For the Quarter Ended
    September 30, 2022   June 30, 2022   September 30, 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
     
    (In thousands, except percentages)
Assets                                    
Interest-earning assets:                                    
Loans1   $ 8,277,762     $ 104,543   5.01 %   $ 7,547,564     $ 78,234   4.16 %   $ 6,384,856     $ 66,911   4.16 %
LHI, MW     448,556       4,649   4.11       479,187       3,929   3.29       465,945       3,697   3.15  
PPP loans     2,775       7   1.00       11,402       28   1.00       210,092       531   1.00  
Debt securities     1,362,365       10,462   3.05       1,318,502       9,632   2.93       1,119,952       7,613   2.70  
Interest-bearing deposits in other banks     346,296       1,898   2.17       369,847       714   0.77       336,289       130   0.15  
Equity securities and other investments     203,528       1,666   3.25       167,327       1,057   2.53       167,242       898   2.13  
Total interest-earning assets     10,641,282       123,225   4.59       9,893,829       93,594   3.79       8,684,376       79,780   3.64  
ACL     (81,888 )             (74,268 )             (99,482 )        
Noninterest-earning assets     901,463               892,102               800,576          
Total assets   $ 11,460,857             $ 10,711,663             $ 9,385,470          
                                     
Liabilities and Stockholders’ Equity                                    
Interest-bearing liabilities:                                    
Interest-bearing demand and savings deposits   $ 4,164,164     $ 12,897   1.23 %   $ 3,770,098     $ 4,094   0.44 %   $ 3,201,409     $ 1,588   0.20 %
Certificates and other time deposits     1,656,347       3,919   0.94       1,459,690       1,465   0.40       1,519,824       1,934   0.50  
Advances from FHLB     904,065       2,543   1.12       828,769       834   0.40       777,617       1,848   0.94  
Subordinated debentures and subordinated notes     231,012       2,826   4.85       232,043       2,721   4.70       264,714       3,134   4.70  
Total interest-bearing liabilities     6,955,588       22,185   1.27       6,290,600       9,114   0.58       5,763,564       8,504   0.59  
                                     
Noninterest-bearing liabilities:                                    
Noninterest-bearing deposits     2,925,462               2,870,692               2,271,197          
Other liabilities     125,991               102,994               60,181          
Total liabilities     10,007,041               9,264,286               8,094,942          
Stockholders’ equity     1,453,816               1,447,377               1,290,528          
Total liabilities and stockholders’ equity   $ 11,460,857             $ 10,711,663             $ 9,385,470          
                                     
Net interest rate spread2           3.32 %           3.21 %           3.05 %
Net interest income and margin3         101,040   3.77 %         84,480   3.42 %         71,276   3.26 %
                                                 

1 Includes average outstanding balances of loans held for sale of $14,023, $12,112 and $8,542 for the three months ended September 30, 2022, June 30, 2022, and September 30, 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 SUBSIDIARY
Financial Highlights
(In thousands except percentages)

    Nine Months Ended
    September 30, 2022   September 30, 2021
    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   $ 7,558,825     $ 255,630   4.52 %   $ 6,118,880     $ 193,040   4.22 %
LHI, WH     449,906       6,998   2.08       477,319       10,988   3.08  
PPP loans     27,477       205   1.00       309,620       2,324   1.00  
Debt securities     1,274,712       27,856   2.92       1,093,263       22,579   2.76  
Interest-bearing deposits in other banks     422,905       2,874   0.91       408,601       424   0.14  
Equity securities and other investments     187,002       3,633   2.60       114,237       2,233   2.61  
Total interest-earning assets     9,920,827       297,196   4.01       8,521,920       231,588   3.63  
ACL     (78,015 )             (103,478 )        
Noninterest-earning assets     886,357               799,207          
Total assets   $ 10,729,169             $ 9,217,649          
                         
Liabilities and Stockholders’ Equity                        
Interest-bearing liabilities:                        
Interest-bearing demand and savings deposits   $ 3,804,506     $ 18,742   0.66 %   $ 3,144,395     $ 5,229   0.22 %
Certificates and other time deposits     1,539,861       6,764   0.59       1,514,954       7,418   0.65  
Advances from FHLB     837,254       4,924   0.79       777,655       5,489   0.94  
Subordinated debentures and subordinated notes     231,640       8,206   4.74       264,998       9,410   4.75  
Total interest-bearing liabilities     6,413,261       38,636   0.81       5,702,002       27,546   0.65  
                         
Noninterest-bearing liabilities:                        
Noninterest-bearing deposits     2,797,110               2,198,551          
Other liabilities     98,898               60,456          
Total liabilities     9,309,269               7,961,009          
Stockholders’ equity     1,419,900               1,256,640          
Total liabilities and stockholders’ equity   $ 10,729,169             $ 9,217,649          
                         
Net interest rate spread2           3.20 %           2.98 %
Net interest income and margin3       $ 258,560   3.48 %       $ 204,042   3.20 %
                                 

1 Includes average outstanding balances of loans held for sale of $12,973 and $13,140 for the nine months ended September 30, 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

Yield Trend

    For the Quarter Ended
    Sep 30,
2022
  Jun 30,
2022
  Mar 31,
2022
  Dec 31,
2021
  Sep 30,
2021
Average yield on interest-earning assets:                    
Loans1   5.01 %   4.16 %   4.03 %   4.12 %   4.16 %
LHI, MW   4.11     3.29     2.95     2.98     3.15  
PPP loans   1.00     1.00     1.00     1.00     1.00  
Debt securities   3.05     2.93     2.76     3.47     2.70  
Interest-bearing deposits in other banks   2.17     0.77     0.19     0.16     0.15  
Equity securities and other investments   3.25     2.53     1.94     2.09     2.13  
Total interest-earning assets   4.59 %   3.79 %   3.54 %   3.72 %   3.64 %
                     
Average rate on interest-bearing liabilities:                    
Interest-bearing demand and savings deposits   1.23 %   0.44 %   0.20 %   0.19 %   0.20 %
Certificates and other time deposits   0.94     0.40     0.37     0.41     0.50  
Advances from FHLB   1.12     0.40     0.81     0.94     0.94  
Subordinated debentures and subordinated notes   4.85     4.70     4.65     4.62     4.70  
Total interest-bearing liabilities   1.27 %   0.58 %   0.50 %   0.54 %   0.59 %
                     
Net interest rate spread2   3.32 %   3.21 %   3.04 %   3.18 %   3.05 %
Net interest margin3   3.77 %   3.42 %   3.22 %   3.37 %   3.26 %

  
1Includes average outstanding balances of loans held for sale of $14,023, $12,112, $12,769, $8,987 and $8,542 for the three months ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 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
    Sep 30,
2022
  Jun 30,
2022
  Mar 31,
2022
  Dec 31,
2021
  Sep 30,
2021
Average cost of interest-bearing deposits   1.15 %   0.43 %   0.26 %   0.26 %   0.30 %
Average costs of total deposits, including noninterest-bearing   0.76     0.28     0.17     0.18     0.20  

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

LHI and Deposit Portfolio Composition

    Sep 30,
2022
  Jun 30,
2022
  Mar 31,
2022
  Dec 31,
2021
  Sep 30,
2021
     
    (In thousands, except percentages)
LHI1                                        
Commercial   $ 2,740,948     32.1 %   $ 2,450,403     30.9 %   $ 2,125,900     29.8 %   $ 2,006,876     29.6 %   $ 1,793,740     27.1 %
Real Estate:                                        
Owner occupied commercial (“OOCRE”)     677,705     7.9       646,723     8.2       633,615     8.9       665,537     9.8       711,476     10.7  
Non-owner occupied commercial (“NOOCRE”)     2,273,305     26.7       2,203,970     27.8       2,145,826     30.0       2,120,309     31.3       2,194,438     33.1  
Construction and land     1,673,997     19.6       1,532,997     19.3       1,297,338     18.2       1,062,144     15.7       936,174     14.1  
Farmland     43,569     0.5       47,319     0.6       48,095     0.7       55,827     0.8       73,550     1.1  
1-4 family residential     858,693     10.1       765,260     9.6       604,408     8.5       542,566     8.0       543,518     8.2  
Multi-family residential     252,244     3.0       276,632     3.5       272,250     3.8       310,241     4.6       356,885     5.4  
Consumer     7,465     0.1       7,520     0.1       9,533     0.1       11,998     0.2       14,266     0.3  
Total LHI   $ 8,527,926     100 %   $ 7,930,824     100 %   $ 7,136,965     100 %   $ 6,775,498     100 %   $ 6,624,047     100 %
                                         
MW     523,805           629,291           542,877           565,645           615,045      
PPP loans     2,821           7,339           18,512           53,369           135,842      
                                         
Total LHI1   $ 9,054,552         $ 8,567,454         $ 7,698,354         $ 7,394,512         $ 7,374,934      
                                         
Deposits                                        
Noninterest-bearing   $ 2,811,412     32.1 %   $ 2,947,830     34.6 %   $ 2,765,895     35.1 %   $ 2,510,723     34.1 %   $ 2,302,925     32.1 %
Interest-bearing transaction     603,729     6.9       660,557     7.8       599,580     7.6       579,408     7.9       514,537     7.2  
Money market     3,533,532     40.4       3,217,195     37.8       2,958,790     37.5       2,568,843     34.9       2,585,926     36.0  
Savings     132,407     1.5       129,498     1.5       129,922     1.6       128,061     1.7       127,843     1.8  
Certificates and other time deposits     1,667,364     19.1       1,562,626     18.3       1,435,409     18.2       1,576,580     21.4       1,647,521     22.9  
Total deposits   $ 8,748,444     100 %   $ 8,517,706     100 %   $ 7,889,596     100 %   $ 7,363,615     100 %   $ 7,178,752     100 %
                                         
Loan to Deposit Ratio     103.5 %         100.6 %         97.6 %         100.4 %         102.7 %    
                                         
Loan to Deposit Ratio, excluding MW and PPP loans     97.5 %         93.1 %         90.5 %         92.0 %         92.3 %    

1 Total LHI does not include deferred fees of $17.5 million, $15.0 million, $11.5 million, $9.5 million and $8.1 million at September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021, respectively.

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

  For the Quarter Ended   For the Nine Months Ended
  Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021   Sep 30, 2021   Sep 30, 2022   Sep 30, 2021
           
  (In thousands, except percentages)        
NPAs:                          
Nonaccrual loans $ 30,592     $ 42,242     $ 46,680     $ 49,687     $ 72,317     $ 30,592     $ 72,317  
Accruing loans 90 or more days past due1         1,753       264       441       1,711             1,711  
Total nonperforming loans held for investment (“NPLs”)   30,592       43,995       46,944       50,128       74,028       30,592       74,028  
OREO         1,032       1,062                          
Total NPAs $ 30,592     $ 45,027     $ 48,006     $ 50,128     $ 74,028     $ 30,592     $ 74,028  
                           
Charge-offs:                          
1-4 family residential $     $     $     $     $ (64 )   $     $ (379 )
OOCRE   (1,061 )     (244 )     (1,341 )     (898 )     (813 )     (2,646 )     (1,502 )
NOOCRE   (838 )           (553 )     (7,936 )           (1,391 )      
Commercial   (460 )     (528 )     (3,294 )     (4,114 )     (5,508 )     (4,282 )     (11,462 )
Consumer   (19 )     (1,091 )     (134 )     (44 )     (17 )     (1,244 )     (55 )
Total charge-offs   (2,378 )     (1,863 )     (5,322 )     (12,992 )     (6,402 )     (9,563 )     (13,398 )
                           
Recoveries:                          
1-4 family residential   4       3             6       26       7       58  
OOCRE         245                         245       500  
NOOCRE   3       93       400                   496        
Commercial   177       572       144       61       596       893       1,481  
Consumer   5       41       9       257       8       55       46  
Total recoveries   189       954       553       324       630       1,696       2,085  
                           
Net charge-offs $ (2,189 )   $ (909 )   $ (4,769 )   $ (12,668 )   $ (5,772 )   $ (7,867 )   $ (11,313 )
                           
                           
ACL $ 85,037     $ 80,576     $ 72,485     $ 77,754     $ 93,771     $ 85,037     $ 93,771  
                           
Asset Quality Ratios:                          
NPAs to total assets   0.26 %     0.40 %     0.46 %     0.51 %     0.77 %     0.26 %     0.77 %
NPLs to total LHI, excluding MW and PPP loans   0.36       0.55       0.66       0.74       1.12       0.36       1.12  
ACL to total LHI, excluding MW and PPP loans   1.00       1.02       1.02       1.15       1.42       1.00       1.42  
Net charge-offs to average loans outstanding   0.03       0.01       0.07       0.19       0.09       0.10       0.18  

1 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.

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
    Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021   Sep 30, 2021
     
    (Dollars in thousands, except per share data)
Tangible Common Equity                    
Total stockholders' equity   $ 1,411,899     $ 1,429,442     $ 1,447,996     $ 1,315,079     $ 1,284,160  
Adjustments:                    
Goodwill     (404,452 )     (404,452 )     (404,452 )     (403,771 )     (370,840 )
Core deposit intangibles     (40,684 )     (43,122 )     (45,560 )     (47,998 )     (50,436 )
Tangible common equity   $ 966,763     $ 981,868     $ 997,984     $ 863,310     $ 862,884  
Common shares outstanding     53,988       53,951       53,907       49,372       49,229  
                     
Book value per common share   $ 26.15     $ 26.50     $ 26.86     $ 26.64     $ 26.09  
Tangible book value per common share   $ 17.91     $ 18.20     $ 18.51     $ 17.49     $ 17.53  

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
    Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021   Sep 30, 2021
     
    (Dollars in thousands)
Tangible Common Equity                    
Total stockholders' equity   $ 1,411,899     $ 1,429,442     $ 1,447,996     $ 1,315,079     $ 1,284,160  
Adjustments:                    
Goodwill     (404,452 )     (404,452 )     (404,452 )     (403,771 )     (370,840 )
Core deposit intangibles     (40,684 )     (43,122 )     (45,560 )     (47,998 )     (50,436 )
Tangible common equity   $ 966,763     $ 981,868     $ 997,984     $ 863,310     $ 862,884  
Tangible Assets                    
Total assets   $ 11,714,454     $ 11,304,811     $ 10,453,680     $ 9,757,249     $ 9,572,300  
Adjustments:                    
Goodwill     (404,452 )     (404,452 )     (404,452 )     (403,771 )     (370,840 )
Core deposit intangibles     (40,684 )     (43,122 )     (45,560 )     (47,998 )     (50,436 )
Tangible Assets   $ 11,269,318     $ 10,857,237     $ 10,003,668     $ 9,305,480     $ 9,151,024  
Tangible Common Equity to Tangible Assets     8.58 %     9.04 %     9.98 %     9.28 %     9.43 %

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 Nine Months Ended
    Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021   Sep 30, 2021   Sep 30, 2022   Sep 30, 2021
             
    (Dollars in thousands)        
Net income available for common stockholders adjusted for amortization of core deposit intangibles                            
Net income   $ 43,322     $ 29,626     $ 33,470     $ 41,506     $ 36,835     $ 106,418     $ 98,078  
Adjustments:                            
Plus: Amortization of core deposit intangibles     2,438       2,438       2,438       2,438       2,438       7,314       7,323  
Less: Tax benefit at the statutory rate     512       512       512       512       512       1,536       1,538  
Net income available for common stockholders adjusted for amortization of core deposit intangibles   $ 45,248     $ 31,552     $ 35,396     $ 43,432     $ 38,761     $ 112,196     $ 103,863  
                             
Average Tangible Common Equity                            
Total average stockholders' equity   $ 1,453,816     $ 1,447,377     $ 1,357,448     $ 1,301,676     $ 1,290,528     $ 1,419,900     $ 1,256,640  
Adjustments:                            
Average goodwill     (404,452 )     (404,452 )     (404,014 )     (393,220 )     (370,840 )     (404,308 )     (370,840 )
Average core deposit intangibles     (42,230 )     (44,720 )     (47,158 )     (49,596 )     (52,043 )     (41,470 )     (54,458 )
Average tangible common equity   $ 1,007,134     $ 998,205     $ 906,276     $ 858,860     $ 867,645     $ 974,122     $ 831,342  
Return on Average Tangible Common Equity (Annualized)     17.82 %     12.68 %     15.84 %     20.06 %     17.72 %     15.40 %     16.70 %

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 on sale of debt securities AFS, net, less Thrive PPP loan forgiveness income, plus M&A 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 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   For the Nine Months Ended
    Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021   Sep 30, 2021   Sep 30, 2022   Sep 30, 2021
     
    (Dollars in thousands, except per share data)
Operating Earnings                            
Net income   $ 43,322   $ 29,626   $ 33,470   $ 41,506     $ 36,835   $ 106,418   $ 98,078
                             
Plus: Severance payments1                               627
Plus: Loss on sale of debt securities AFS, net                       188         188
Less: Thrive PPP loan forgiveness income2                       1,912         1,912
Plus: M&A expenses     384     295     700     826           1,379    
Operating pre-tax income     43,706     29,921     34,170     42,332       35,111     107,797     96,981
Less: Tax impact of adjustments     81     66     156     (78 )     39     303     170
Plus: Nonrecurring tax adjustments3                               426
Operating earnings   $ 43,625   $ 29,855   $ 34,014   $ 42,410     $ 35,072   $ 107,494   $ 97,237
                             
Weighted average diluted shares outstanding     54,633     54,646     51,571     50,441       50,306     53,655     50,230
Diluted EPS   $ 0.79   $ 0.54   $ 0.65   $ 0.82     $ 0.73   $ 1.98   $ 1.95
Diluted operating EPS   $ 0.80   $ 0.55   $ 0.66   $ 0.84     $ 0.70   $ 2.00   $ 1.94

1 Severance payments relate to branch restructurings made during the three months ended June 30, 2021.
2 During the third quarter of 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 in the first quarter of 2021 was due to a true-up of a deferred tax liability.

    For the Quarter Ended   For the Nine Months Ended
    Sep 30, 2022   Jun 30, 2022   Mar 31, 2022   Dec 31, 2021   Sep 30, 2021   Sep 30, 2022   Sep 30, 2021
     
    (Dollars in thousands)
Pre-Tax, Pre-Provision Operating Earnings                            
Net income   $ 43,322     $ 29,626     $ 33,470     $ 41,506     $ 36,835     $ 106,418     $ 98,078  
Plus: Provision for income taxes     12,248       8,079       8,102       10,697       9,195       28,429       26,025  
Plus: Provision (benefit) for credit losses and unfunded commitments     7,500       9,000       (7 )     (4,389 )     (448 )     16,493       (441 )
Plus: Severance payments                                         627  
Plus: Loss on sale of debt securities AFS, net                             188             188  
Less: Thrive PPP loan forgiveness income                             1,912           1,912  
Plus: M&A expenses     384       295       700       826             1,379        
Pre-tax, pre-provision operating earnings   $ 63,454     $ 47,000     $ 42,265     $ 48,640     $ 43,858     $ 152,719     $ 122,565  
                             
Average total assets   $ 11,460,857     $ 10,711,663     $ 9,998,922     $ 9,788,671     $ 9,385,470     $ 10,729,169     $ 9,217,649  
Pre-tax, pre-provision operating return on average assets1     2.20 %     1.76 %     1.71 %     1.97 %     1.85 %     1.90 %     1.78 %
                             
Average total assets   $ 11,460,857     $ 10,711,663     $ 9,998,922     $ 9,788,671     $ 9,385,470     $ 10,729,169     $ 9,217,649  
Return on average assets1     1.50 %     1.11 %     1.36 %     1.68 %     1.56 %     1.33 %     1.42 %
Operating return on average assets1     1.51       1.12       1.38       1.72       1.48       1.34       1.41  
                             
Operating earnings adjusted for amortization of core deposit intangibles                            
Operating earnings   $ 43,625     $ 29,855     $ 34,014     $ 42,410     $ 35,072     $ 107,494     $ 97,237  
Adjustments:                            
Plus: Amortization of core deposit intangibles     2,438       2,438       2,438       2,438       2,438       7,314       7,323  
Less: Tax benefit at the statutory rate     512       512       512       512       512       1,536       1,538  
Operating earnings adjusted for amortization of core deposit intangibles   $ 45,551     $ 31,781     $ 35,940     $ 44,336     $ 36,998     $ 113,272     $ 103,022  
                             
Average Tangible Common Equity                            
Total average stockholders' equity   $ 1,453,816     $ 1,447,377     $ 1,357,448     $ 1,301,676     $ 1,290,528     $ 1,419,900     $ 1,256,640  
Adjustments:                            
Less: Average goodwill     (404,452 )     (404,452 )     (404,014 )     (393,220 )     (370,840 )     (404,308 )     (370,840 )
Less: Average core deposit intangibles     (42,230 )     (44,720 )     (47,158 )     (49,596 )     (52,043 )     (41,470 )     (54,458 )
Average tangible common equity   $ 1,007,134     $ 998,205     $ 906,276     $ 858,860     $ 867,645     $ 974,122     $ 831,342  
Operating return on average tangible common equity1     17.94 %     12.77 %     16.08 %     20.48 %     16.92 %     15.55 %     16.57 %
                             
Efficiency ratio     44.71 %     50.76 %     52.84 %     48.53 %     47.55 %     49.05 %     49.79 %
Net interest income   $ 101,040     $ 84,480     $ 73,040     $ 76,741     $ 71,276     $ 258,560     $ 204,042  
Noninterest income     13,021       10,378       15,097       16,150       15,627       38,496       42,255  
Plus: Loss on sale of AFS securities, net                             188             188  
Less: Thrive PPP loan forgiveness income                             1,912             1,912  
Operating noninterest income     13,021       10,378       15,097       16,150       13,903       38,496       40,531  
Noninterest expense     50,991       48,153       46,572       45,077       41,321       145,716       122,635  
Less: Severance payments                                         627  
Less: M&A expenses     384       295       700       826             1,379        
Operating noninterest expense   $ 50,607     $ 47,858     $ 45,872     $ 44,251     $ 41,321     $ 144,337     $ 122,008  
Operating efficiency ratio     44.37 %     50.45 %     52.05 %     47.64 %     48.51 %     48.59 %     49.89 %

1 Annualized ratio for quarterly metrics.


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