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Veritex Holdings, Inc. Reports Third Quarter 2024 Operating Results
Source: Nasdaq GlobeNewswire / 22 Oct 2024 16:45:01 America/New_York
DALLAS, Oct. 22, 2024 (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, 2024.
“We are pleased to announce both our third quarter results and updates on our balance sheet transformation over the past 2 years,” said C. Malcolm Holland, III, the Company’s Chairman and Chief Executive Officer. “My team has remained focused on growing granular, attractively priced deposits, increasing capital, managing concentrations and reducing credit risk exposure all while continuing to grow a fortress balance sheet through full relationship banking. I could not be more proud of our team of nearly 900 employees who embraced the challenges we set forth back in 2022 and each day going forward.”
Quarter to Date Year to Date Financial Highlights Q3 2024 Q2 2024 Q3 2024 Q3 2023 (Dollars in thousands, except per share data)
(unaudited)GAAP Net income $ 31,001 $ 27,202 $ 82,359 $ 104,762 Diluted EPS 0.56 0.50 1.50 1.92 Book value per common share 29.53 28.49 29.53 27.46 Return on average assets1 0.96 % 0.87 % 0.87 % 1.14 % Return on average equity1 7.79 7.10 7.08 9.35 Net interest margin 3.30 3.29 3.28 3.55 Efficiency ratio 61.94 59.11 61.15 50.88 Non-GAAP2 Operating earnings $ 32,181 $ 28,310 $ 89,628 $ 110,489 Diluted operating EPS 0.59 0.52 1.63 2.02 Tangible book value per common share 21.72 20.62 21.72 19.44 Pre-tax, pre-provision operating earnings 44,555 44,420 132,631 174,523 Pre-tax, pre-provision operating return on average assets1 1.38 % 1.42 % 1.41 % 1.90 % Pre-tax, pre-provision operating return on average loans1 1.83 1.83 1.83 2.43 Operating return on average assets1 1.00 0.91 0.95 1.20 Return on average tangible common equity1 11.33 10.54 10.48 13.95 Operating return on average tangible common equity1 11.74 10.94 11.34 14.68 Operating efficiency ratio 60.63 58.41 59.28 49.53 1 Annualized ratio.
2 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.Other Third Quarter Financial, Credit and Company Highlights
- Return on average assets (“ROAA”) increased 9 bps compared to June 30, 2024;
- 7.2% linked quarter revenue growth;
- Nonperforming assets (“NPAs”) decreased 13 bps from the prior quarter to 0.52% of total assets;
- Total deposits grew $311.2 million, or 11.60% annualized, compared to June 30, 2024;
- Common equity tier 1 capital grew 37 bps from the prior quarter to 10.86%;
- Net interest margin (“NIM”) expanded to 3.30%;
- Loan to deposit ratio, excluding mortgage warehouse loans, decreased to 81.9% as of September 30, 2024, compared to 85.9% as of June 30, 2024 and 90.7% as of September 30, 2023;
- Tangible book value per common share increased to $21.72;
- Allowance for credit losses (“ACL”) to total loans held for investment (“LHI”) increased to 1.21%, compared to 1.16% as of June 30, 2024 and 1.14% as of September 30, 2023; and
- Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on November 22, 2024.
Results of Operations for the Three Months Ended September 30, 2024
Net Interest Income
For the three months ended September 30, 2024, net interest income before provision for credit losses was $100.1 million and NIM was 3.30% compared to $96.2 million and 3.29%, respectively, for the three months ended June 30, 2024. The approximately $3.8 million increase, or 4.0%, in net interest income before provision for credit losses was primarily due to a $4.8 million increase in interest income on deposits in financial institutions and fed funds sold, a $1.4 million decrease in interest expense on advances from the Federal Home Loan Bank (“FHLB”), a $422 thousand increase in interest income on debt securities and a $282 thousand increase in interest income on loans. The increase was partially offset by a $1.6 million increase in interest expense on transactions and savings deposits and a $1.4 million increase in interest expense on certificates and other time deposits, during the three months ended September 30, 2024. NIM increased 1 basis point compared to the three months ended June 30, 2024, primarily due to a decrease in funding costs on deposits during the three months ended September 30, 2024, partially offset by a decrease in loan yields and average balances.
Compared to the three months ended September 30, 2023, net interest income before provision for credit losses for the three months ended September 30, 2024 increased by $701 thousand, or 0.7%. The increase was primarily due to a $8.5 million decrease in interest expense on advances from the FHLB, a $5.4 million increase in interest income on deposits in financial institutions and fed funds sold and a $4.9 million increase in interest income on debt securities. The increase was partially offset by a $10.1 million increase in interest expense on certificates and other time deposits, a $7.3 million increase in interest expense on transaction and savings deposits and a $690 thousand decrease in interest income on equity securities and other investments. Compared to the three months ended September 30, 2023, NIM decreased 16 bps from 3.46% for the three months ended September 30, 2024. The decrease was primarily due to the increase in funding costs on deposits during the three months ended September 30, 2024, partially offset by an increase in loan yields and an increase in average balances and yields on debt securities.
Noninterest Income
Noninterest income for the three months ended September 30, 2024 was $13.1 million, an increase of $2.5 million, or 23.9%, compared to the three months ended June 30, 2024. The increase was primarily due to a $1.6 million increase in other income, driven by a $1.2 million increase in other real estate owned (“OREO”) income, a $1.1 million increase in loan fees and a $468 thousand increase in service charges and fees on deposits for the three months ended September 30, 2024. The increase was partially offset by a $540 thousand decrease in government guaranteed loan income.
Compared to the three months ended September 30, 2023, noninterest income for the three months ended September 30, 2024 increased by $3.4 million, or 35.5%. The increase was primarily due to a $2.2 million increase in other income, driven by a $1.2 million increase in OREO income, a $1.7 million increase in loan fees and a $283 thousand increase in service charges and fees on deposit accounts. The increase was partially offset by a $1.0 million decrease in government guaranteed loan income, primarily driven by a decrease in the Company’s USDA sales.
Noninterest Expense
Noninterest expense was $70.1 million for the three months ended September 30, 2024, compared to $63.1 million for the three months ended June 30, 2024, an increase of $7.0 million, or 11.0%. The increase was primarily due to a $4.6 million increase in salaries and employee benefits primarily due to an increase in incentive accruals to 80% of target payout, a $1.9 million increase in other noninterest expense primarily driven by OREO expenses, a $805 thousand increase in marketing expenses and a $204 thousand increase in occupancy and equipment expense. The increase is partially offset by a decrease of $714 thousand in professional and regulatory fees compared to the three months ended June 30, 2024.
Compared to the three months ended September 30, 2023, noninterest expense for the three months ended September 30, 2024 increased by $10.7 million, or 18.0%. The increase was primarily due to a $6.4 million increase in salaries and employee benefits primarily due to the increase in incentive accruals aforementioned, a $5.6 million increase in other noninterest expense, a $727 thousand increase data processing and software expense, and a $428 thousand increase in marketing expenses. The increase was partially offset by a $2.4 million decrease in professional and regulatory fees compared to the three months ended September 30, 2023.
Financial Condition
Total LHI was $9.03 billion at September 30, 2024, a decrease of $180.5 million compared to June 30, 2024.
Total deposits were $11.04 billion at September 30, 2024, an increase of $311.2 million, or 11.6% linked quarter annualized. The increase was primarily the result of an increase of $227.2 million in noninterest bearing deposits and an increase of $225.3 million in interest-bearing transaction and savings deposits. The increase was partially offset by a decrease of $118.7 million in certificates and other time deposits and a decrease of $22.6 million in correspondent money market accounts.
Credit Quality
NPAs totaled $67.3 million, or 0.52% of total assets, of which $58.3 million represents LHI and $9.0 million represents OREO at September 30, 2024, compared to $83.0 million, or 0.65% of total assets, at June 30, 2024. The Company had net charge-offs of $269 thousand for the three months ended September 30, 2024. Annualized net charge-offs to average loans outstanding were 1bp, for the three months ended September 30, 2024, compared to 28 bps and 8 bps for the three months ended June 30, 2024 and September 30, 2023, respectively.
ACL as a percentage of LHI was 1.21%, 1.16% and 1.14% at September 30, 2024, June 30, 2024 and September 30, 2023, respectively. The Company recorded a provision for credit losses of $4.0 million, $8.3 million and $8.6 million for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively. The recorded provision for credit losses for the three months ended September 30, 2024, compared to the three months ended June 30, 2024, was primarily attributable to an increase in general reserves as a result of changes in economic factors which now represents 97% of the total ACL as a percentage of LHI. The balance for unfunded commitments for the three months ended September 30, 2024 remained relatively stable compared to the three months ended June 30, 2024 and recorded no benefit or provision for unfunded commitments for the three months ended September 30, 2024. The Company recorded no benefit or provision for unfunded commitments for the three months ended June 30, 2024 and a $909 thousand benefit for unfunded commitments for the three months ended September 30, 2023.
Income Tax
Income tax expense for the three months ended September 30, 2024 totaled $8.1 million, a decrease of $154 thousand, or 1.9%, compared to the three months ended June 30, 2024. The Company’s effective tax rate was approximately 20.6% for the three months ended September 30, 2024. The decrease was primarily due a $941 thousand change in the Company’s valuation allowance slightly offset by a return to provision of $224 thousand and a net discrete tax expense of $501 thousand associated with the recognition of an excess tax expense realized on share-based payment awards.
Dividend Information
After the close of the market on Tuesday, October 22, 2024, 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 22, 2024 to stockholders of record as of the close of business on November 8, 2024.
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 of the Company; 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; 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 23, 2024, at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting http://edge.media-server.com/mmc/p/99msavdf and will receive a unique PIN, which can be used when dialing in for the call.
Participants may also register via teleconference: https://register.vevent.com/register/BI8a41df4f3f824d2888f9cf9a3e02c9b8. 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; turmoil in the banking industry, responsive measures to mitigate and manage such turmoil 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, 2023 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, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Sep 30, 2024 Sep 30, 2023 (Dollars and shares in thousands, except per share data) Per Share Data (Common Stock): Basic EPS $ 0.57 $ 0.50 $ 0.44 $ 0.06 $ 0.60 $ 1.51 $ 1.93 Diluted EPS 0.56 0.50 0.44 0.06 0.60 1.50 1.92 Book value per common share 29.53 28.49 28.23 28.18 27.46 29.53 27.46 Tangible book value per common share1 21.72 20.62 20.33 20.21 19.44 21.72 19.44 Dividends paid per common share outstanding2 0.20 0.20 0.20 0.20 0.20 0.60 0.60 Common Stock Data: Shares outstanding at period end 54,446 54,350 54,496 54,338 54,305 54,446 54,305 Weighted average basic shares outstanding for the period 54,409 54,457 54,444 54,327 54,300 54,437 54,233 Weighted average diluted shares outstanding for the period 54,932 54,823 54,842 54,691 54,597 54,866 54,563 Summary of Credit Ratios: ACL to total LHI 1.21 % 1.16 % 1.15 % 1.14 % 1.14 % 1.21 % 1.14 % NPAs to total assets 0.52 0.65 0.82 0.77 0.65 0.52 0.65 NPAs to total loans and OREO 0.70 0.85 1.06 0.99 0.83 0.70 0.83 Net charge-offs to average loans outstanding3 0.01 0.28 0.22 0.39 0.08 0.17 0.20 Summary Performance Ratios: Return on average assets3 0.96 % 0.87 % 0.79 % 0.11 % 1.06 % 0.87 % 1.14 % Return on average equity3 7.79 7.10 6.33 0.92 8.58 7.08 9.35 Return on average tangible common equity1,3 11.33 10.54 9.52 2.00 12.80 10.48 13.95 Efficiency ratio 61.94 59.11 62.45 77.49 54.49 61.15 50.88 Net interest margin 3.30 3.29 3.24 3.31 3.46 3.28 3.55 Selected Performance Metrics - Operating: Diluted operating EPS1 $ 0.59 $ 0.52 $ 0.53 $ 0.58 $ 0.60 $ 1.63 $ 2.02 Pre-tax, pre-provision operating return on average assets1,3 1.38 % 1.42 % 1.42 % 1.54 % 1.61 % 1.41 % 1.90 % Pre-tax, pre-provision operating return on average loans1,3 1.83 1.83 1.84 1.97 2.05 1.83 2.43 Operating return on average assets1,3 1.00 0.91 0.95 1.02 1.06 0.95 1.20 Operating return on average tangible common equity1,3 11.74 10.94 11.34 12.37 12.80 11.34 14.68 Operating efficiency ratio1 60.63 58.41 58.73 55.50 54.49 59.28 49.53 Veritex Holdings, Inc. Capital Ratios: Average stockholders' equity to average total assets 12.31 % 12.26 % 12.43 % 12.27 % 12.30 % 12.33 % 12.21 % Tangible common equity to tangible assets1 9.37 9.14 9.02 9.18 8.86 9.37 8.86 Tier 1 capital to average assets (leverage) 10.06 10.06 10.12 10.03 10.10 10.06 10.10 Common equity tier 1 capital 10.86 10.49 10.37 10.29 10.11 10.86 10.11 Tier 1 capital to risk-weighted assets 11.13 10.75 10.63 10.56 10.37 11.13 10.37 Total capital to risk-weighted assets 13.91 13.45 13.33 13.18 12.95 13.91 12.95 Risk weighted assets $ 11,290,800 $ 11,450,997 $ 11,407,446 $ 11,387,825 $ 11,617,229 $ 11,290,800 $ 11,617,229 1 Refer 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.
2 Dividend amount represents dividend paid per common share subsequent to each respective quarter end.
3 Annualized ratio for quarterly metrics.VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands)Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 (unaudited) (unaudited) (unaudited) (unaudited) ASSETS Cash and cash equivalents $ 1,100,790 $ 651,837 $ 740,769 $ 629,063 $ 713,408 Debt securities, net 1,423,610 1,349,354 1,344,930 1,257,042 1,060,629 Other investments 71,257 75,885 76,788 76,238 80,869 Loans held for sale (“LHFS”) 48,496 57,046 64,762 79,072 41,313 LHI, mortgage warehouse (“MW”) 630,650 568,047 449,531 377,796 390,767 LHI, excluding MW 9,028,575 9,209,094 9,249,551 9,206,544 9,237,447 Total loans 9,707,721 9,834,187 9,763,844 9,663,412 9,669,527 ACL (117,162 ) (113,431 ) (112,032 ) (109,816 ) (109,831 ) Bank-owned life insurance 84,776 84,233 85,359 84,833 84,867 Bank premises, furniture and equipment, net 114,202 105,222 105,299 105,727 106,118 Other real estate owned (“OREO”) 9,034 24,256 18,445 — — Intangible assets, net of accumulated amortization 32,825 35,817 38,679 41,753 44,294 Goodwill 404,452 404,452 404,452 404,452 404,452 Other assets 211,471 232,518 241,863 241,633 291,998 Total assets $ 13,042,976 $ 12,684,330 $ 12,708,396 $ 12,394,337 $ 12,346,331 LIABILITIES AND STOCKHOLDERS’ EQUITY Deposits: Noninterest-bearing deposits $ 2,643,894 $ 2,416,727 $ 2,349,211 $ 2,218,036 $ 2,363,340 Interest-bearing transaction and savings deposits 4,204,708 3,979,454 4,220,114 4,348,385 3,936,070 Certificates and other time deposits 3,625,920 3,744,596 3,486,805 3,191,737 3,403,427 Correspondent money market deposits 561,489 584,067 597,690 580,037 493,681 Total deposits 11,036,011 10,724,844 10,653,820 10,338,195 10,196,518 Accounts payable and other liabilities 168,415 180,585 186,027 195,036 229,116 Advances from FHLB — — 100,000 100,000 200,000 Subordinated debentures and subordinated notes 230,536 230,285 230,034 229,783 229,531 Total liabilities 11,434,962 11,135,714 11,169,881 10,863,014 10,855,165 Commitments and contingencies Stockholders’ equity: Common stock 613 612 611 610 609 Additional paid-in capital 1,324,929 1,321,995 1,319,144 1,317,516 1,314,459 Retained earnings 493,921 473,801 457,499 444,242 451,513 Accumulated other comprehensive loss (40,330 ) (76,713 ) (71,157 ) (63,463 ) (107,833 ) Treasury stock (171,119 ) (171,079 ) (167,582 ) (167,582 ) (167,582 ) Total stockholders’ equity 1,608,014 1,548,616 1,538,515 1,531,323 1,491,166 Total liabilities and stockholders’ equity $ 13,042,976 $ 12,684,330 $ 12,708,396 $ 12,394,337 $ 12,346,331 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands, except per share data)For the Quarter Ended For the Nine Months Ended Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Sep 30, 2024 Sep 30, 2023 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Interest income: Loans, including fees $ 167,261 $ 166,979 $ 161,942 $ 165,443 $ 167,368 $ 496,182 $ 482,802 Debt securities 15,830 15,408 13,695 12,282 10,928 44,933 32,082 Deposits in financial institutions and Fed Funds sold 12,571 7,722 8,050 8,162 7,128 28,343 20,169 Equity securities and other investments 1,001 1,138 900 1,717 1,691 3,039 4,217 Total interest income 196,663 191,247 184,587 187,604 187,115 572,497 539,270 Interest expense: Transaction and savings deposits 47,208 45,619 46,784 46,225 39,936 139,611 102,750 Certificates and other time deposits 46,230 44,811 40,492 40,165 36,177 131,533 85,244 Advances from FHLB 47 1,468 1,391 2,581 8,523 2,906 38,443 Subordinated debentures and subordinated notes 3,116 3,113 3,114 3,100 3,118 9,343 9,252 Total interest expense 96,601 95,011 91,781 92,071 87,754 283,393 235,689 Net interest income 100,062 96,236 92,806 95,533 99,361 289,104 303,581 Provision for credit losses 4,000 8,250 7,500 9,500 8,627 19,750 33,012 (Benefit) provision for unfunded commitments — — (1,541 ) (1,500 ) (909 ) (1,541 ) (541 ) Net interest income after provisions 96,062 87,986 86,847 87,533 91,643 270,895 271,110 Noninterest income: Service charges and fees on deposit accounts 5,442 4,974 4,896 4,800 5,159 15,312 15,448 Loan fees 3,278 2,207 2,510 1,200 1,564 7,995 5,148 Loss on sales of debt securities — — (6,304 ) — — (6,304 ) (5,321 ) Government guaranteed loan income, net 780 1,320 2,614 4,378 1,772 4,714 15,604 Equity method investment (loss) income — — — (29,417 ) (136 ) — (1,172 ) Customer swap income 271 326 449 258 202 1,046 1,380 Other income 3,335 1,751 2,497 989 1,113 7,583 5,810 Total noninterest income (loss) 13,106 10,578 6,662 (17,792 ) 9,674 30,346 36,897 Noninterest expense: Salaries and employee benefits 37,370 32,790 33,365 30,606 30,949 103,525 91,464 Occupancy and equipment 4,789 4,585 4,677 4,670 4,881 14,051 14,681 Professional and regulatory fees 4,903 5,617 6,053 7,626 7,283 16,573 18,540 Data processing and software expense 5,268 5,097 4,856 4,569 4,541 15,221 13,970 Marketing 2,781 1,976 1,546 1,945 2,353 6,303 6,759 Amortization of intangibles 2,438 2,438 2,438 2,438 2,438 7,314 7,401 Telephone and communications 335 365 261 356 362 961 1,195 Other 12,216 10,273 8,920 8,028 6,607 31,409 19,216 Total noninterest expense 70,100 63,141 62,116 60,238 59,414 195,357 173,226 Income before income tax expense 39,068 35,423 31,393 9,503 41,903 105,884 134,781 Income tax expense 8,067 8,221 7,237 6,004 9,282 23,525 30,019 Net income $ 31,001 $ 27,202 $ 24,156 $ 3,499 $ 32,621 $ 82,359 $ 104,762 Basic EPS $ 0.57 $ 0.50 $ 0.44 $ 0.06 $ 0.60 $ 1.51 $ 1.93 Diluted EPS $ 0.56 $ 0.50 $ 0.44 $ 0.06 $ 0.60 $ 1.50 $ 1.92 Weighted average basic shares outstanding 54,409 54,457 54,444 54,327 54,300 54,437 54,233 Weighted average diluted shares outstanding 54,932 54,823 54,842 54,691 54,597 54,866 54,563 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)For the Quarter Ended September 30, 2024 June 30, 2024 September 30, 2023 Average
Outstanding
BalanceInterest
Earned/
Interest
PaidAverage
Yield/
RateAverage
Outstanding
BalanceInterest
Earned/
Interest
PaidAverage
Yield/
RateAverage
Outstanding
BalanceInterest
Earned/
Interest
PaidAverage
Yield/
Rate(Dollars in thousands) Assets Interest-earning assets: Loans1 $ 9,184,182 $ 159,163 6.89 % $ 9,344,482 $ 160,323 6.90 % $ 9,267,366 $ 161,615 6.92 % LHI, MW 477,592 8,098 6.75 420,946 6,656 6.36 357,639 5,753 6.38 Debt securities 1,384,835 15,830 4.55 1,352,293 15,408 4.58 1,121,716 10,928 3.87 Interest-bearing deposits in other banks 924,685 12,571 5.41 560,586 7,722 5.54 520,785 7,128 5.43 Equity securities and other investments 75,884 1,001 5.25 78,964 1,138 5.80 135,714 1,691 4.94 Total interest-earning assets 12,047,178 196,663 6.49 11,757,271 191,247 6.54 11,403,220 187,115 6.51 ACL (115,510 ) (115,978 ) (105,320 ) Noninterest-earning assets 930,250 937,413 961,162 Total assets $ 12,861,918 $ 12,578,706 $ 12,259,062 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Interest-bearing demand and savings deposits $ 4,700,196 $ 47,208 4.00 % $ 4,570,329 $ 45,619 4.01 % $ 4,168,876 $ 39,936 3.80 % Certificates and other time deposits 3,678,718 46,230 5.00 3,591,035 44,811 5.02 3,151,704 36,177 4.55 Advances from FHLB and Other 3,261 47 5.73 106,648 1,468 5.54 725,543 8,523 4.66 Subordinated debentures and subordinated notes 230,393 3,116 5.38 230,141 3,113 5.44 229,389 3,118 5.39 Total interest-bearing liabilities 8,612,568 96,601 4.46 8,498,153 95,011 4.50 8,275,512 87,754 4.21 Noninterest-bearing liabilities: Noninterest-bearing deposits 2,486,676 2,346,908 2,272,207 Other liabilities 179,273 192,036 203,173 Total liabilities 11,278,517 11,037,097 10,750,892 Stockholders’ equity 1,583,401 1,541,609 1,508,170 Total liabilities and stockholders’ equity $ 12,861,918 $ 12,578,706 $ 12,259,062 Net interest rate spread2 2.03 % 2.04 % 2.30 % Net interest income and margin3 $ 100,062 3.30 % $ 96,236 3.29 % $ 99,361 3.46 % 1 Includes average outstanding balances of LHFS of $54.3 million, $58.5 million and $28.3 million for the quarters ended September 30, 2024, June 30, 2024, and September 30, 2023, 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
(In thousands, except percentages)For the Nine Months Ended September 30, 2024 September 30, 2023 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 $ 9,270,510 $ 477,071 6.87 % $ 9,231,814 $ 467,101 6.76 % LHI, MW 393,008 19,111 6.50 363,182 15,701 5.78 Debt securities 1,344,190 44,933 4.47 1,168,860 32,082 3.67 Interest-bearing deposits in other banks 692,434 28,343 5.47 527,805 20,169 5.11 Equity securities and other investments 77,035 3,039 5.27 132,895 4,217 4.24 Total interest-earning assets 11,777,177 572,497 6.49 11,424,556 539,270 6.31 ACL (114,576 ) (100,228 ) Noninterest-earning assets 930,605 950,369 Total assets $ 12,593,206 $ 12,274,697 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Interest-bearing demand and savings deposits $ 4,636,889 $ 139,611 4.02 % $ 4,079,436 $ 102,750 3.37 % Certificates and other time deposits 3,518,417 131,533 4.99 2,873,388 85,244 3.97 Advances from FHLB and Other 70,055 2,906 5.54 1,105,592 38,443 4.65 Subordinated debentures and subordinated notes 230,139 9,343 5.42 229,923 9,252 5.38 Total interest-bearing liabilities 8,455,500 283,393 4.48 8,288,339 235,689 3.80 Noninterest-bearing liabilities: Noninterest-bearing deposits 2,396,629 2,305,745 Other liabilities 188,007 182,040 Total liabilities 11,040,136 10,776,124 Stockholders’ equity 1,553,070 1,498,573 Total liabilities and stockholders’ equity $ 12,593,206 $ 12,274,697 Net interest rate spread2 2.01 % 2.51 % Net interest income and margin3 $ 289,104 3.28 % $ 303,581 3.55 % 1 Includes average outstanding balances of LHFS of $55.5 million and $23.8 million for the nine months ended September 30, 2024 and 2023, 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 Sep 30,
2024Jun 30,
2024Mar 31,
2024Dec 31,
2023Sep 30,
2023Average yield on interest-earning assets: Loans1 6.89 % 6.90 % 6.83 % 6.88 % 6.92 % LHI, MW 6.75 6.36 6.27 5.82 6.38 Total Loans 6.89 6.88 6.81 6.85 6.90 Debt securities 4.55 4.58 4.25 4.10 3.87 Interest-bearing deposits in other banks 5.41 5.54 5.54 5.51 5.43 Equity securities and other investments 5.25 5.80 4.75 8.28 4.94 Total interest-earning assets 6.49 % 6.54 % 6.44 % 6.51 % 6.51 % Average rate on interest-bearing liabilities: Interest-bearing demand and savings deposits 4.00 % 4.01 % 4.06 % 4.03 % 3.80 % Certificates and other time deposits 5.00 5.02 4.96 4.85 4.55 Advances from FHLB 5.73 5.54 5.54 5.60 4.66 Subordinated debentures and subordinated notes 5.38 5.44 5.45 5.36 5.39 Total interest-bearing liabilities 4.46 % 4.50 % 4.47 % 4.43 % 4.21 % Net interest rate spread2 2.03 % 2.04 % 1.97 % 2.08 % 2.30 % Net interest margin3 3.30 % 3.29 % 3.24 % 3.31 % 3.46 % 1Includes average outstanding balances of LHFS of $54.3 million, $58.5 million, $53.9 million, $31.2 million and $28.3 million for the three months ended September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023, and September 30, 2023, 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 For the Nine Months Ended Sep 30,
2024Jun 30,
2024Mar 31,
2024Dec 31,
2023Sep 30,
2023Sep 30,
2024Sep 30,
2023Average cost of interest-bearing deposits 4.44 % 4.46 % 4.43 % 4.38 % 4.12 % 4.44 % 3.62 % Average costs of total deposits, including noninterest-bearing 3.42 3.46 3.42 3.37 3.15 3.43 2.03 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)LHI and Deposit Portfolio Composition Sep 30,
2024Jun 30,
2024Mar 31,
2024Dec 31,
2023Sep 30,
2023(Dollars in thousands) LHI1 Commercial and Industrial (“C&I”) $ 2,728,544 30.2 % $ 2,798,260 30.4 % $ 2,785,987 30.1 % $ 2,752,063 29.9 % $ 2,841,024 30.7 % Real Estate: Owner occupied commercial (“OOCRE”) 807,223 8.9 806,285 8.7 788,376 8.5 794,088 8.6 697,299 7.5 Non-owner occupied commercial (“NOOCRE”) 2,338,094 25.9 2,369,848 25.7 2,352,993 25.5 2,350,725 25.5 2,398,060 26.1 Construction and land 1,436,540 15.8 1,536,580 16.7 1,568,257 16.9 1,734,254 18.8 1,705,053 18.4 Farmland 32,254 0.4 30,512 0.3 30,979 0.3 31,114 0.3 59,684 0.6 1-4 family residential 944,755 10.5 917,402 10.0 969,401 10.5 937,119 10.2 933,225 10.1 Multi-family residential 738,090 8.2 748,740 8.1 751,607 8.1 605,817 6.6 603,395 6.5 Consumer 11,292 0.1 9,245 0.1 8,882 0.1 10,149 0.1 9,845 0.1 Total LHI $ 9,036,792 100 % $ 9,216,872 100 % $ 9,256,482 100 % $ 9,215,329 100 % $ 9,247,585 100 % MW 630,650 568,047 449,531 377,796 390,767 Total LHI1 $ 9,667,442 $ 9,784,919 $ 9,706,013 $ 9,593,125 $ 9,638,352 Total LHFS 48,496 57,046 64,762 79,072 41,313 Total Loans $ 9,715,938 $ 9,841,965 $ 9,770,775 $ 9,672,197 $ 9,679,665 Deposits Noninterest-bearing $ 2,643,894 24.0 % $ 2,416,727 22.5 % $ 2,349,211 22.1 % $ 2,218,036 21.5 % $ 2,363,340 23.2 % Interest-bearing transaction 421,059 3.8 523,272 4.9 724,171 6.8 927,193 8.9 739,098 7.2 Money market 3,462,709 31.4 3,268,286 30.5 3,326,742 31.2 3,284,324 31.8 3,096,498 30.4 Savings 320,940 2.9 187,896 1.8 169,201 1.6 136,868 1.3 100,474 1.0 Certificates and other time deposits 3,625,920 32.8 3,744,596 34.9 3,486,805 32.7 3,191,737 30.9 3,403,427 33.4 Correspondent money market accounts 561,489 5.1 584,067 5.4 597,690 5.6 580,037 5.6 493,681 4.8 Total deposits $ 11,036,011 100 % $ 10,724,844 100 % $ 10,653,820 100 % $ 10,338,195 100 % $ 10,196,518 100 % Total Loans to Deposits Ratio 88.0 % 91.8 % 91.7 % 93.6 % 94.9 % Total Loans to Deposit Ratio, excluding MW loans and LHFS 81.9 % 85.9 % 86.9 % 89.1 % 90.7 % 1 Total LHI does not include deferred fees of $8.2 million, $7.8 million, $6.9 million, $8.8 million and $10.1 million at September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023 and September 30, 2023, respectively.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)Asset Quality For the Quarter Ended For the Nine Months Ended Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Sep 30, 2024 Sep 30, 2023 (Dollars in thousands) NPAs: Nonaccrual loans $ 55,335 $ 58,537 $ 75,721 $ 79,133 $ 65,676 $ 55,335 $ 65,676 Nonaccrual PCD loans1 70 73 9,419 13,715 13,718 70 13,718 Accruing loans 90 or more days past due2 2,860 143 220 2,975 474 2,860 474 Total nonperforming loans held for investment (“NPLs”) 58,265 58,753 85,360 95,823 79,868 58,265 79,868 Other real estate owned 9,034 24,256 18,445 — — 9,034 — Total NPAs $ 67,299 $ 83,009 $ 103,805 $ 95,823 $ 79,868 $ 67,299 $ 79,868 Charge-offs: 1-4 family residential $ — $ (31 ) $ — $ (21 ) $ — $ (31 ) $ — Multifamily — (198 ) — (192 ) — (198 ) — OOCRE — — (120 ) (364 ) (375 ) (120 ) (491 ) NOOCRE — (1,969 ) (4,293 ) (5,434 ) — (6,262 ) (8,215 ) C&I (2,259 ) (5,601 ) (946 ) (3,893 ) (1,929 ) (8,806 ) (6,520 ) Consumer (54 ) (30 ) (71 ) (33 ) (49 ) (155 ) (203 ) Total charge-offs $ (2,313 ) $ (7,829 ) $ (5,430 ) $ (9,937 ) $ (2,353 ) $ (15,572 ) $ (15,429 ) Recoveries: 1-4 family residential $ 3 $ — $ 1 $ 1 $ — $ 4 $ 2 OOCRE — 120 — — — 120 — NOOCRE — — — — 200 — 350 C&I 1,962 361 96 387 308 2,419 778 Mortgage Warehouse 46 — — — — 46 — Consumer 33 497 49 34 14 579 66 Total recoveries $ 2,044 $ 978 $ 146 $ 422 $ 522 $ 3,168 $ 1,196 Net charge-offs $ (269 ) $ (6,851 ) $ (5,284 ) $ (9,515 ) $ (1,831 ) $ (12,404 ) $ (14,233 ) Provision for credit losses $ 4,000 $ 8,250 $ 7,500 $ 9,500 $ 8,627 $ 19,750 $ 33,012 ACL $ 117,162 $ 113,431 $ 112,032 $ 109,816 $ 109,831 $ 117,162 $ 109,831 Asset Quality Ratios: NPAs to total assets 0.52 % 0.65 % 0.82 % 0.77 % 0.65 % 0.52 % 0.65 % NPAs, excluding nonaccrual PCD loans, to total assets 0.52 0.65 0.74 0.66 0.44 0.52 0.54 NPAs to total loans and OREO 0.70 0.85 1.06 0.99 0.83 0.70 0.83 NPLs to total LHI 0.60 0.60 0.88 1.00 0.83 0.60 0.83 NPLs, excluding nonaccrual PCD loans, to total LHI 0.60 0.60 0.78 0.86 0.69 0.60 0.69 ACL to total LHI 1.21 1.16 1.15 1.14 1.14 1.21 1.14 ACL to total loans, excluding MW and LHFS 1.30 1.23 1.21 1.19 1.19 1.30 1.19 Net charge-offs to average loans outstanding3 0.01 0.28 0.22 0.39 0.08 0.17 0.20 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.
3 Annualized ratio for quarterly metrics.VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)We identify certain financial measures discussed in this earnings release as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP, in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios calculated using exclusively either one or both of (i) financial measures calculated in accordance with GAAP and (ii) operating measures or other measures that are not non-GAAP financial measures.
The non-GAAP financial measures that we present in this earnings release should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we present in this earnings release may differ from that of other companies reporting measures with similar names. You should understand how such other financial institutions calculate their financial measures that appear to be similar or have similar names to the non-GAAP financial measures we have discussed in this earnings release when comparing such non-GAAP financial measures.
Tangible Book Value Per Common Share. Tangible book value 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, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 (Dollars in thousands, except per share data) Tangible Common Equity Total stockholders' equity $ 1,608,014 $ 1,548,616 $ 1,538,515 $ 1,531,323 $ 1,491,166 Adjustments: Goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) Core deposit intangibles (21,182 ) (23,619 ) (26,057 ) (28,495 ) (30,933 ) Tangible common equity $ 1,182,380 $ 1,120,545 $ 1,108,006 $ 1,098,376 $ 1,055,781 Common shares outstanding 54,446 54,350 54,496 54,338 54,305 Book value per common share $ 29.53 $ 28.49 $ 28.23 $ 28.18 $ 27.46 Tangible book value per common share $ 21.72 $ 20.62 $ 20.33 $ 20.21 $ 19.44 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, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 (Dollars in thousands) Tangible Common Equity Total stockholders' equity $ 1,608,014 $ 1,548,616 $ 1,538,515 $ 1,531,323 $ 1,491,166 Adjustments: Goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) Core deposit intangibles (21,182 ) (23,619 ) (26,057 ) (28,495 ) (30,933 ) Tangible common equity $ 1,182,380 $ 1,120,545 $ 1,108,006 $ 1,098,376 $ 1,055,781 Tangible Assets Total assets $ 13,042,976 $ 12,684,330 $ 12,708,396 $ 12,394,337 $ 12,346,331 Adjustments: Goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) Core deposit intangibles (21,182 ) (23,619 ) (26,057 ) (28,495 ) (30,933 ) Tangible Assets $ 12,617,342 $ 12,256,259 $ 12,277,887 $ 11,961,390 $ 11,910,946 Tangible Common Equity to Tangible Assets 9.37 % 9.14 % 9.02 % 9.18 % 8.86 % 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, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Sep 30, 2024 Sep 30, 2023 (Dollars in thousands) Net income available for common stockholders adjusted for amortization of core deposit intangibles Net income $ 31,001 $ 27,202 $ 24,156 $ 3,499 $ 32,621 $ 82,359 $ 104,762 Adjustments: Plus: Amortization of core deposit intangibles 2,438 2,438 2,438 2,438 2,438 7,314 7,314 Less: Tax benefit at the statutory rate 512 512 512 512 512 1,536 1,536 Net income available for common stockholders adjusted for amortization of core deposit intangibles $ 32,927 $ 29,128 $ 26,082 $ 5,425 $ 34,547 $ 88,137 $ 110,540 Average Tangible Common Equity Total average stockholders' equity $ 1,583,401 $ 1,541,609 $ 1,533,868 $ 1,510,286 $ 1,508,170 $ 1,553,070 $ 1,498,573 Adjustments: Average goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) Average core deposit intangibles (22,789 ) (25,218 ) (27,656 ) (30,093 ) (32,540 ) (25,212 ) (34,939 ) Average tangible common equity $ 1,156,160 $ 1,111,939 $ 1,101,760 $ 1,075,741 $ 1,071,178 $ 1,123,406 $ 1,059,182 Return on Average Tangible Common Equity (Annualized) 11.33 % 10.54 % 9.52 % 2.00 % 12.80 % 10.48 % 13.95 % 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, 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, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Sep 30, 2024 Sep 30, 2023 (Dollars in thousands, except per share data) Operating Earnings Net income $ 31,001 $ 27,202 $ 24,156 $ 3,499 $ 32,621 $ 82,359 $ 104,762 Plus: Severance payments1 1,487 613 — — — 2,100 1,950 Plus: Loss on sale of AFS securities, net — — 6,304 — — 6,304 5,321 Plus: Equity method investment write-down — — — 29,417 — — — Plus: FDIC special assessment — 134 — 768 — 134 — Operating pre-tax income 32,488 27,949 30,460 33,684 32,621 90,897 112,033 Less: Tax impact of adjustments 307 166 1,323 2,059 — 1,796 1,544 Plus: Nonrecurring tax adjustments — 527 — — — 527 — Operating earnings $ 32,181 $ 28,310 $ 29,137 $ 31,625 $ 32,621 $ 89,628 $ 110,489 Weighted average diluted shares outstanding 54,932 54,823 54,842 54,691 54,597 54,866 54,563 Diluted EPS $ 0.56 $ 0.50 $ 0.44 $ 0.06 $ 0.60 $ 1.50 $ 1.92 Diluted operating EPS $ 0.59 $ 0.52 $ 0.53 $ 0.58 $ 0.60 $ 1.63 $ 2.02 1 Severance payments relate to certain restructurings made during the periods disclosed.
For the Quarter Ended For the Nine Months Ended Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Sep 30, 2024 Sep 30, 2023 (Dollars in thousands) Pre-Tax, Pre-Provision Operating Earnings Net income $ 31,001 $ 27,202 $ 24,156 $ 3,499 $ 32,621 $ 82,359 $ 104,762 Plus: Provision for income taxes 8,067 8,221 7,237 6,004 9,282 23,525 30,019 Plus: Provision for credit losses and unfunded commitments 4,000 8,250 5,959 8,000 7,718 18,209 32,471 Plus: Severance payments 1,487 613 — — — 2,100 1,950 Plus: Loss on sale of AFS securities, net — — 6,304 — — 6,304 5,321 Plus: Equity method investment write-down — — — 29,417 — — — Plus: FDIC special assessment — 134 — 768 — 134 — Pre-tax, pre-provision operating earnings $ 44,555 $ 44,420 $ 43,656 $ 47,688 $ 49,621 $ 132,631 $ 174,523 Average total assets $ 12,861,918 $ 12,578,706 $ 12,336,042 $ 12,306,634 $ 12,259,062 $ 12,593,206 $ 12,274,697 Pre-tax, pre-provision operating return on average assets1 1.38 % 1.42 % 1.42 % 1.54 % 1.61 % 1.41 % 1.90 % Average loans $ 9,661,774 $ 9,765,428 $ 9,563,372 $ 9,581,784 $ 9,625,005 $ 9,663,518 $ 9,594,996 Pre-tax, pre-provision operating return on average loans1 1.83 % 1.83 % 1.84 % 1.97 % 2.05 % 1.83 % 2.43 % Average total assets $ 12,861,918 $ 12,578,706 $ 12,336,042 $ 12,306,634 $ 12,259,062 $ 12,593,206 $ 12,274,697 Return on average assets1 0.96 % 0.87 % 0.79 % 0.11 % 1.06 % 0.87 % 1.14 % Operating return on average assets1 1.00 0.91 0.95 1.02 1.06 0.95 1.20 Operating earnings adjusted for amortization of core deposit intangibles Operating earnings $ 32,181 $ 28,310 $ 29,137 $ 31,625 $ 32,621 $ 89,628 $ 110,489 Adjustments: Plus: Amortization of core deposit intangibles 2,438 2,438 2,438 2,438 2,438 7,314 7,314 Less: Tax benefit at the statutory rate 512 512 512 512 512 1,536 1,536 Operating earnings adjusted for amortization of core deposit intangibles $ 34,107 $ 30,236 $ 31,063 $ 33,551 $ 34,547 $ 95,406 $ 116,267 Average Tangible Common Equity Total average stockholders' equity $ 1,583,401 $ 1,541,609 $ 1,533,868 $ 1,510,286 $ 1,508,170 $ 1,553,070 $ 1,498,573 Adjustments: Less: Average goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) (404,452 ) Less: Average core deposit intangibles (22,789 ) (25,218 ) (27,656 ) (30,093 ) (32,540 ) (25,212 ) (34,939 ) Average tangible common equity $ 1,156,160 $ 1,111,939 $ 1,101,760 $ 1,075,741 $ 1,071,178 $ 1,123,406 $ 1,059,182 Operating return on average tangible common equity1 11.74 % 10.94 % 11.34 % 12.37 % 12.80 % 11.34 % 14.68 % Efficiency ratio 61.94 % 59.11 % 62.45 % 77.49 % 54.49 % 61.15 % 50.88 % Operating efficiency ratio Net interest income $ 100,062 $ 96,236 $ 92,806 $ 95,533 $ 99,361 $ 289,104 $ 303,581 Noninterest income 13,106 10,578 6,662 (17,792 ) 9,674 30,346 36,897 Plus: Loss on sale of AFS securities, net — — 6,304 — — 6,304 5,321 Plus: Equity method investment write-down — — — 29,417 — — — Operating noninterest income 13,106 10,578 12,966 11,625 9,674 36,650 42,218 Noninterest expense 70,100 63,141 62,116 60,238 59,414 195,357 173,226 Less: FDIC special assessment — 134 — 768 — 134 — Less: Severance payments 1,487 613 — — — 2,100 1,950 Operating noninterest expense $ 68,613 $ 62,394 $ 62,116 $ 59,470 $ 59,414 $ 193,123 $ 171,276 Operating efficiency ratio 60.63 % 58.41 % 58.73 % 55.50 % 54.49 % 59.28 % 49.53 % 1 Annualized ratio for quarterly metrics.
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