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Veritex Holdings, Inc. Reports Fourth Quarter and Full Year 2022 Results
Source: Nasdaq GlobeNewswire / 24 Jan 2023 16:05:02 America/New_York
DALLAS, Jan. 24, 2023 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. (“Veritex” or the “Company”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the fourth quarter and full year of 2022.
"Today we reported strong 2022 performance metrics with $216 million in pre-tax pre-provision earnings, or 1.97% on average assets, 1.35% operating return on average assets, 16% return on average tangible common equity and an efficiency ratio below 50% for the 5th consecutive year," said C. Malcolm Holland, III, Veritex President and Chief Executive Officer. "We generated 34% growth in loans, 24% growth in deposits, completed an oversubscribed common stock offering and expanded relationships and new customers. Looking towards 2023, we remain focused on credit discipline, lending in portfolios that align with our core deposit priorities and delivering strong financial results."
Financial Highlights Fourth Quarter
2022Third Quarter
2022Fourth Quarter
2021Full Year
2022Full Year
2021(Dollars in thousands, except per share data)
(unaudited)GAAP Net income $ 39,897 $ 43,322 $ 41,506 $ 146,315 $ 139,584 Diluted EPS 0.73 0.79 0.82 2.71 2.77 Book value per common share 26.83 26.15 26.64 26.83 26.64 Return on average assets2 1.35 % 1.50 % 1.68 % 1.33 % 1.49 % Efficiency ratio 47.63 44.71 48.53 48.64 49.45 Return on average equity2 11.03 11.82 12.65 10.28 11.01 Non-GAAP1 Operating earnings $ 40,395 $ 43,625 $ 42,410 $ 147,889 $ 139,647 Diluted operating EPS 0.74 0.80 0.84 2.74 2.77 Tangible book value per common share 18.64 17.91 17.49 18.64 17.49 Pre-tax, pre-provision operating earnings 63,694 63,454 48,640 216,413 171,205 Pre-tax, pre-provision operating return on average assets2 2.15 % 2.20 % 1.97 % 1.97 % 1.83 % Operating return on average assets2 1.36 1.51 1.72 1.35 1.49 Operating efficiency ratio 47.11 44.37 47.64 48.21 49.27 Return on average tangible common equity2 16.75 17.82 20.06 15.78 17.57 Operating return on average tangible common equity2 16.95 17.94 20.48 15.94 17.58 1 Refer to the section titled "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.
2 Annualized ratio.Other Fourth Quarter and 2022 Highlights:
- Pre-tax, pre-provision operating return on average assets decreased 5 basis points ("bps") from the third quarter of 2022 to 2.15%, and grew 14 bps year-over-year;
- Net interest margin increased to 3.87%, up 10 bps from the third quarter of 2022, and grew by 50 bps year-over-year;
- Tangible book value per common share increased to $18.64 during the three months ended December 31, 2022 compared to $17.91 for the three months ended September 30, 2022 and 17.49 for the three months ended December 31, 2021;
- Total loans held for investment ("LHI"), excluding Paycheck Protection Program ("PPP") and mortgage warehouse ("MW") loans, grew $524.0 million, from the third quarter of 2022, or 24.4% annualized, and grew $2.3 billion, or 33.5%, year-over-year;
- Total deposits grew $374.8 million for the fourth quarter of 2022, or 17.0% annualized, with the average cost of total deposits increasing to 1.46% for the three months ended December 31, 2022 from 0.76% for the three months ended September 30, 2022. Total deposits grew $1.8 billion, or 23.9%, year-over-year;
- Non-performing assets ("NPAs"), excluding nonaccrual purchased credit deteriorated ("PCD") loans, to total assets decreased to 0.25% , or 1 basis point from September 30, 2022, and decreased 26 bps from December 31, 2021;
- Net charge-offs to average loans outstanding, excluding MW and PPP loans decreased 21 bps for the year ended December 31, 2022, compared to December 31, 2021;
- Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on February 24, 2023.
Results of Operations for the Three Months Ended December 31, 2022
Net Interest Income
For the three months ended December 31, 2022, net interest income before provision for credit losses was $106.1 million and net interest margin was 3.87%, compared to $101.0 million and 3.77%, respectively, for the three months ended September 30, 2022. The $5.1 million increase in net interest income before provision for credit losses was primarily due to a $27.6 million increase in interest income on loans driven by an increase in average balances and loan yields, offset by a $23.9 million increase in total interest expense on interest bearing liabilities driven by an increase in average balances and rates during three months ended December 31, 2022. Net interest margin increased 10 bps from the three months ended September 30, 2022, primarily due to the increase in yields earned on loans during the three months ended December 31, 2022, partially offset by an increase in funding costs.
Compared to the three months ended December 31, 2021, net interest income before provision for credit losses for the three months ended December 31, 2022 increased by $29.4 million, or 38.3%. The increase was primarily due to a $62.7 million increase in interest income on loans driven by an increase in average balances and loan yields, offset by a $22.4 million increase in interest expenses on interest-bearing demand and savings deposits and $6.9 million increase in certificates and other time deposits. Net interest margin increased 50 bps to 3.87% for the three months ended December 31, 2022 from 3.37% for the three months ended December 31, 2021. The increase was primarily due to an increase in average balances and loan yields during the three months ended December 31, 2022, partially offset by an increase in funding costs.
Noninterest Income
Noninterest income for the three months ended December 31, 2022 was $14.3 million, an increase of $1.3 million, or 10.0%, compared to the three months ended September 30, 2022. The increase in noninterest income was primarily due to a $7.0 million increase in gain on sale of USDA loans through our wholly owned subsidiary, North Avenue Capital, LLC ("NAC"). This increase was partially offset by an increase of $4.4 million in equity method investment losses and a $1.1 million decrease in customer swap income.
Compared to the three months ended December 31, 2021, noninterest income for the three months ended December 31, 2022 decreased $1.8 million, or 11.3%. The decrease was primarily due to a $6.7 million decrease in equity method investment income and $1.7 million decrease in gain on sale of SBA loans. The decrease was partially offset by a $5.7 million increase in gain on sale of USDA loans through NAC and a $1.5 million increase in customer swap income.
Noninterest Expense
Noninterest expense was $57.4 million for the three months ended December 31, 2022, compared to $51.0 million for the three months ended September 30, 2022, an increase of $6.4 million, or 12.5%. The increase was primarily driven by a $4.0 million increase in salaries and employee benefits from continued investment in talent, a $688 thousand increase in data processing and software expenses, a $683 thousand increase in professional and regulatory fees and a $501 thousand increase in occupancy and equipment.
Noninterest expense was $57.4 million for the three months ended December 31, 2022, compared to $45.1 million for the three months ended December 31, 2021, an increase of $12.3 million, or 27.2%. The increase was primarily driven by a $8.3 million increase in salary and employee benefits, from continued investment in talent. Additionally, the increase was driven by data processing and software expense of $1.6 million, professional and regulatory fees of $1.4 million, and occupancy and equipment of $718 thousand.
Financial Condition
Total LHI, excluding MW and PPP, were $9.0 billion at December 31, 2022, an increase of $524.0 million, or 24.4% annualized, compared to September 30, 2022, and an increase of $2.3 billion, or 33.5%, compared to December 31, 2021. These increases were the result of the continued execution and success of our loan growth strategy, including our investment in talent during 2022.
Total deposits were $9.1 billion at December 31, 2022, an increase of $374.8 million, or 17.0% annualized, compared to September 30, 2022, and an increase of $1.8 billion, or 23.9%, compared to December 31, 2021. The increase from September 30, 2022 was primarily the result of increase of $419.3 million in certificates and other time deposits and an increase of $126.3 million in interest-bearing transaction, money market and savings deposits accounts. The increase was partially offset by a decrease of $170.8 million of noninterest bearing deposits. The increase from December 31, 2021 was primarily the result of increases of $1.1 billion and $510.1 million in interest-bearing transaction, money market, and savings and certificates and other time deposits, respectively.
Asset Quality
NPAs increased to $43.7 million, or 0.36% of total assets, at December 31, 2022, compared to $30.6 million, or 0.26% of total assets, at September 30, 2022. The increase is primarily the result of a $13.2 million pool of PCD loans placed on non-accrual status during the three months ended December 31, 2022. Excluding the nonaccrual PCD loans, NPAs decreased to $30.5 million, or 0.25% of total assets. The Company had net charge-offs of $5.8 million for the fourth quarter of 2022. Net charge-offs compared to average loans outstanding were 17 bps for the year ended December 31, 2022, compared to 38 bps for year ended December 31, 2021.
The Company recorded a provision for credit losses of $11.8 million for the three months ended December 31, 2022, compared to a provision for credit losses of $6.7 million and a benefit for credit losses of $3.3 million for the three months ended September 30, 2022 and December 31, 2021, respectively. The provision for credit losses reported for the three months ended December 31, 2022, compared to the three months ended September 30, 2022 and December 31, 2021, respectively, was primarily attributable to an increase in general reserves as a result of changes in economic factors and loan growth. During the three months ended December 31, 2022, the Company recorded a $523 thousand benefit for unfunded commitments, which was primarily driven by decreases in unfunded balances.
Allowance for credit losses ("ACL") as a percentage of LHI, excluding MW and PPP loans, was 1.01%, 1.00% and 1.15% at December 31, 2022, September 30, 2022 and December 31, 2021, respectively.
Dividend Information
On January 24, 2023, Veritex's Board of Directors declared a quarterly cash dividend of $0.20 per share on its outstanding shares of common stock. The dividend will be paid on February 24, 2023 to stockholders of record as of the close of business on February 10, 2023.
Non-GAAP Financial Measures
Veritex’s management uses certain non-GAAP (U.S. generally accepted accounting principles) financial measures to evaluate its operating performance and provide information that is important to investors. However, non-GAAP financial measures are supplemental and should be viewed in addition to, and not as an alternative for, Veritex’s reported results prepared in accordance with GAAP. Specifically, Veritex reviews and reports tangible book value per common share, operating earnings, tangible common equity to tangible assets, return on average tangible common equity, pre-tax, pre-provision operating earnings, pre-tax, pre-provision operating return on average assets, diluted operating earnings per share, operating return on average assets, operating return on average tangible common equity and operating efficiency ratio. Veritex has included in this earnings release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to “Reconciliation of Non-GAAP Financial Measures” after the financial highlights at the end of this earnings release for a reconciliation of these non-GAAP financial measures.
Conference Call
The Company will host an investor conference call to review the results on Wednesday, January 25, 2023 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/mmc/p/767zfwtq and will receive a unique PIN, which can be used when dialing in for the call.
Participants may also register via teleconference at: https://register.vevent.com/register/BI7ccf0c5ef7d84e35916df74d12b9e4ad. Once registration is completed, participants will be provided with a dial-in number containing a personalized conference code to access the call. All participants are instructed to dial-in 15 minutes prior to the start time.
A replay will be available within approximately two hours after the completion of the call, and made accessible for one week. You may access the replay via webcast through the investor relations section of Veritex’s website.
About Veritex Holdings, Inc.
Headquartered in Dallas, Texas, Veritex is a bank holding company that conducts banking activities through its wholly-owned subsidiary, Veritex Community Bank, with locations throughout the Dallas-Fort Worth metroplex and in the Houston metropolitan area. Veritex Community Bank is a Texas state chartered bank regulated by the Texas Department of Banking and the Board of Governors of the Federal Reserve System. For more information, visit www.veritexbank.com.
Forward-Looking Statements
This earnings release includes “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors, which change over time and are beyond our control, that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, statements relating to the expected payment of Veritex Holdings, Inc.’s (“Veritex”) quarterly cash dividend; the impact of certain changes in Veritex’s accounting policies, standards and interpretations; the effects of the COVID-19 pandemic and actions taken in response thereto; and Veritex’s future financial performance, business and growth strategy, projected plans and objectives, as well as other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact broader economic and industry trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “seeks,” “targets,” “outlooks,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Veritex’s Annual Report on Form 10-K for the year ended December 31, 2021 and any updates to those risk factors set forth in Veritex’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov. If one or more events related to these or other risks or uncertainties materialize, or if Veritex’s underlying assumptions prove to be incorrect, actual results may differ materially from what Veritex anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. Veritex does not undertake any obligation, and specifically declines any obligation, to supplement, update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law. All forward-looking statements, expressed or implied, included in this earnings release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Veritex or persons acting on Veritex’s behalf may issue.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)For the Quarter Ended For the Year Ended Dec 31,
2022Sep 30,
2022Jun 30,
2022Mar 31,
2022Dec 31,
2021Dec 31,
2022Dec 31,
2021(Dollars and shares in thousands, except per-share data) Per Share Data (Common Stock): Basic EPS $ 0.74 $ 0.80 $ 0.55 $ 0.66 $ 0.84 $ 2.75 $ 2.83 Diluted EPS 0.73 0.79 0.54 0.65 0.82 2.71 2.77 Book value per common share 26.83 26.15 26.50 26.86 26.64 26.83 26.64 Tangible book value per common share1 18.64 17.91 18.20 18.51 17.49 18.64 17.49 Dividends paid per common share outstanding2 0.20 0.20 0.20 0.20 0.20 0.80 0.77 Common Stock Data: Shares outstanding at period end 54,030 53,988 53,951 53,907 49,372 54,030 49,372 Weighted average basic shares outstanding for the period 54,011 53,979 53,949 50,695 49,329 53,170 49,405 Weighted average diluted shares outstanding for the period 54,780 54,633 54,646 51,571 50,441 53,952 50,352 Summary of Credit Ratios: ACL to total LHI, excluding MW and PPP loans 1.01 % 1.00 % 1.02 % 1.02 % 1.15 % 1.01 % 1.15 % NPAs to total assets 0.36 0.26 0.40 0.46 0.51 0.36 0.51 NPAs, excluding nonaccrual PCD loans, to total assets3 0.25 0.26 0.40 0.46 0.51 0.25 0.51 Net charge-offs to average loans outstanding, excluding MW and PPP loans4 0.28 0.12 0.04 0.28 0.75 0.17 0.38 Summary Performance Ratios: Return on average assets4 1.35 % 1.50 % 1.11 % 1.36 % 1.68 % 1.33 % 1.49 % Return on average equity4 11.03 11.82 8.21 10.00 12.65 10.28 11.01 Return on average tangible common equity1, 4 16.75 17.82 12.68 15.84 20.06 15.78 17.57 Efficiency ratio 47.63 44.71 50.76 52.84 48.53 48.64 49.45 Net interest margin 3.87 3.77 3.42 3.22 3.37 3.59 3.24 Selected Performance Metrics - Operating: Diluted operating EPS1 $ 0.74 $ 0.80 $ 0.55 $ 0.66 $ 0.84 $ 2.74 $ 2.77 Pre-tax, pre-provision operating return on average assets1, 2 2.15 % 2.20 % 1.76 % 1.71 % 1.97 % 1.97 % 1.83 % Operating return on average assets1,4 1.36 1.51 1.12 1.38 1.72 1.35 1.49 Operating return on average tangible common equity1,3 16.95 17.94 12.77 16.08 20.48 15.94 17.58 Operating efficiency ratio1 47.11 44.37 50.45 52.05 47.64 48.21 49.27 Veritex Holdings, Inc. Capital Ratios: Average stockholders' equity to average total assets 12.20 % 12.69 % 13.51 % 13.58 % 13.30 % 12.96 % 13.54 % Tangible common equity to tangible assets1 8.60 8.58 9.04 9.98 9.28 8.60 9.28 Tier 1 capital to average assets (leverage) 9.82 9.79 10.14 10.66 9.05 9.82 9.05 Common equity tier 1 capital 9.09 9.09 9.25 9.84 8.58 9.09 8.58 Tier 1 capital to risk-weighted assets 9.34 9.35 9.52 10.14 8.89 9.34 8.89 Total capital to risk-weighted assets 11.63 11.68 11.95 12.73 11.60 11.63 11.60 1Refer to "Reconciliation of Non-GAAP Financial Measures" after the financial highlights for a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP measure.
2 Dividend amount represents dividend paid per common share subsequent to each respective quarter end.
3 Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 and were accounted for on a pooled basis that have subsequently been placed on nonaccrual status.
4Annualized ratio for quarterly metrics.VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(in thousands)Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 (unaudited) (unaudited) (unaudited) (unaudited) ASSETS Cash and cash equivalents $ 436,077 $ 433,897 $ 410,716 $ 551,573 $ 379,784 Debt securities 1,282,460 1,303,004 1,354,403 1,244,514 1,052,494 Other investments 122,450 115,551 202,685 188,699 190,591 Loans held for sale 20,641 17,644 14,210 18,721 26,007 LHI PPP loans, carried at fair value 1,995 2,821 7,339 18,512 53,369 LHI, MW 446,227 523,805 629,291 542,877 565,645 LHI, excluding MW and PPP 9,034,429 8,510,433 7,915,792 7,125,429 6,766,009 Total loans 9,503,292 9,054,703 8,566,632 7,705,539 7,411,030 ACL (91,052 ) (85,037 ) (80,576 ) (72,485 ) (77,754 ) Bank-owned life insurance 84,496 84,030 84,097 83,641 83,194 Bank premises, furniture and equipment, net 108,824 108,720 108,769 109,138 109,271 Other real estate owned ("OREO") — — 1,032 1,062 — Intangible assets, net of accumulated amortization 53,213 56,238 59,011 63,986 66,017 Goodwill 404,452 404,452 404,452 404,452 403,771 Other assets 250,149 238,896 193,590 173,561 138,851 Total assets $ 12,154,361 $ 11,714,454 $ 11,304,811 $ 10,453,680 $ 9,757,249 LIABILITIES AND STOCKHOLDERS’ EQUITY Deposits: Noninterest-bearing deposits $ 2,640,617 $ 2,811,412 $ 2,947,830 $ 2,765,895 $ 2,510,723 Interest-bearing transaction and savings deposits 4,395,975 4,269,668 4,007,250 3,688,292 3,276,312 Certificates and other time deposits 2,086,642 1,667,364 1,562,626 1,435,409 1,576,580 Total deposits 9,123,234 8,748,444 8,517,706 7,889,596 7,363,615 Accounts payable and other liabilities 177,579 173,198 126,116 105,552 69,160 Advances from Federal Home Loan Bank ("FHLB") 1,175,000 1,150,000 1,000,000 777,522 777,562 Subordinated debentures and subordinated notes 228,775 228,524 228,272 228,018 227,764 Securities sold under agreements to repurchase — 2,389 3,275 4,996 4,069 Total liabilities 10,704,588 10,302,555 9,875,369 9,005,684 8,442,170 Commitments and contingencies Stockholders’ equity: Common stock 607 606 606 605 560 Additional paid-in capital 1,306,852 1,303,171 1,300,170 1,297,161 1,142,758 Retained earnings 379,299 350,195 317,664 298,830 275,273 Accumulated other comprehensive (loss) income (69,403 ) (74,491 ) (21,416 ) 18,982 64,070 Treasury stock (167,582 ) (167,582 ) (167,582 ) (167,582 ) (167,582 ) Total stockholders’ equity 1,449,773 1,411,899 1,429,442 1,447,996 1,315,079 Total liabilities and stockholders’ equity $ 12,154,361 $ 11,714,454 $ 11,304,811 $ 10,453,680 $ 9,757,249 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(in thousands, except per share data)For the Quarter Ended For the Year Ended Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Dec 31, 2022 Dec 31, 2021 Interest income: Loans, including fees $ 136,846 $ 109,199 $ 82,191 $ 71,443 $ 74,174 $ 399,679 $ 280,526 Debt securities 10,880 10,462 9,632 7,762 9,553 38,736 32,132 Deposits in financial institutions and Fed Funds sold 3,401 1,898 714 262 165 6,275 589 Equity securities and other investments 1,087 1,666 1,057 910 1,004 4,720 3,237 Total interest income 152,214 123,225 93,594 80,377 84,896 449,410 316,484 Interest expense: Transaction and savings deposits 24,043 12,897 4,094 1,751 1,629 42,785 6,858 Certificates and other time deposits 8,543 3,919 1,465 1,380 1,661 15,307 9,079 Advances from FHLB 10,577 2,543 834 1,547 1,847 15,501 7,336 Subordinated debentures and subordinated notes 2,954 2,826 2,721 2,659 3,018 11,160 12,428 Total interest expense 46,117 22,185 9,114 7,337 8,155 84,753 35,701 Net interest income 106,097 101,040 84,480 73,040 76,741 364,657 280,783 Provision (benefit) for credit losses 11,800 6,650 9,000 (500 ) (3,349 ) 26,950 (3,349 ) (Benefit) provision for unfunded commitments (523 ) 850 — 493 (1,040 ) 820 (1,481 ) Net interest income after provisions 94,820 93,540 75,480 73,047 81,130 336,887 285,613 Noninterest income: Service charges and fees on deposit accounts 5,173 5,217 5,039 4,710 4,782 20,139 16,742 Loan fees 2,477 2,786 2,385 2,794 2,697 10,442 7,607 Loss on sales of investment securities — — — — — — (188 ) Gain on sales of mortgage loans held for sale 4 16 223 307 293 550 1,592 Government guaranteed loan income, net 7,808 572 789 4,891 3,423 14,060 15,760 Equity method investment (loss) income (5,416 ) (1,058 ) 966 367 1,238 (5,141 ) 5,760 Customer swap income 2,273 3,358 1,321 946 796 7,898 2,491 Other income (loss) 2,007 2,130 (345 ) 1,082 2,921 4,874 8,641 Total noninterest income 14,326 13,021 10,378 15,097 16,150 52,822 58,405 Noninterest expense: Salaries and employee benefits 33,690 29,714 26,924 27,513 25,401 117,841 94,748 Occupancy and equipment 5,116 4,615 4,496 4,517 4,398 18,744 17,263 Professional and regulatory fees 4,401 3,718 2,865 3,158 3,017 14,142 12,945 Data processing and software expense 4,197 3,509 3,386 2,921 2,597 14,013 9,946 Marketing 1,841 1,845 2,306 1,187 1,443 7,179 5,344 Amortization of intangibles 2,495 2,494 2,495 2,495 2,494 9,979 10,057 Telephone and communications 358 389 352 385 380 1,484 1,434 Merger and acquisition ("M&A") expense — 384 295 700 826 1,379 826 Other 5,261 4,323 5,034 3,696 4,521 18,314 15,149 Total noninterest expense 57,359 50,991 48,153 46,572 45,077 203,075 167,712 Income before income tax expense 51,787 55,570 37,705 41,572 52,203 186,634 176,306 Income tax expense 11,890 12,248 8,079 8,102 10,697 40,319 36,722 Net income $ 39,897 $ 43,322 $ 29,626 $ 33,470 $ 41,506 $ 146,315 $ 139,584 Basic EPS $ 0.74 $ 0.80 $ 0.55 $ 0.66 $ 0.84 $ 2.75 $ 2.83 Diluted EPS $ 0.73 $ 0.79 $ 0.54 $ 0.65 $ 0.82 $ 2.71 $ 2.77 Weighted average basic shares outstanding 54,011 53,979 53,949 50,695 49,329 53,170 49,405 Weighted average diluted shares outstanding 54,780 54,633 54,646 51,571 50,441 53,952 50,352 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)For the Quarter Ended December 31, 2022 September 30, 2022 December 31, 2021 Average
Outstanding
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 $ 8,741,023 $ 131,817 5.98 % $ 8,277,762 $ 104,543 5.01 % $ 6,777,397 $ 70,334 4.12 % LHI, MW 383,080 5,024 5.20 448,556 4,649 4.11 483,850 3,629 2.98 PPP loans 2,357 6 1.00 2,775 7 1.00 83,553 211 1.00 Debt securities 1,286,342 10,880 3.36 1,362,365 10,462 3.05 1,092,089 9,553 3.47 Interest-earning deposits in other banks 353,737 3,401 3.81 346,296 1,898 2.17 417,266 165 0.16 Equity securities and other investments 119,054 1,087 3.62 203,528 1,666 3.25 191,031 1,004 2.09 Total interest-earning assets 10,885,593 152,215 5.55 10,641,282 123,225 4.59 9,045,186 84,896 3.72 ACL (85,275 ) (81,888 ) (95,218 ) Noninterest-earning assets 960,726 901,463 838,703 Total assets $ 11,761,044 $ 11,460,857 $ 9,788,671 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Interest-bearing demand and savings deposits $ 4,321,936 24,043 2.21 % $ 4,164,164 $ 12,897 1.23 % $ 3,357,958 1,629 0.19 % Certificates and other time deposits 1,785,152 8,543 1.90 1,656,347 3,919 0.94 1,615,066 1,661 0.41 Advances from FHLB 1,073,049 10,577 3.91 904,065 2,543 1.12 777,577 1,847 0.94 Subordinated debentures and subordinated notes 229,037 2,954 5.12 231,012 2,826 4.85 259,191 3,018 4.62 Total interest-bearing liabilities 7,409,174 46,117 2.47 6,955,588 22,185 1.27 6,009,792 8,155 0.54 Noninterest-bearing liabilities: Noninterest-bearing deposits 2,737,468 2,925,462 2,413,443 Other liabilities 179,584 125,991 63,760 Total liabilities 10,326,226 10,007,041 8,486,995 Stockholders’ equity 1,434,818 1,453,816 1,301,676 Total liabilities and stockholders’ equity $ 11,761,044 $ 11,460,857 $ 9,788,671 Net interest rate spread2 3.08 % 3.32 % 3.18 % Net interest income and margin3 $ 106,098 3.87 % $ 101,040 3.77 % $ 76,741 3.37 % 1 Includes average outstanding balances of loans held for sale of $15,296, $14,023 and $8,987 for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively, and average balances of LHI, excluding MW and PPP loans.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)For the Year Ended December 31, 2022 2021 Average
Outstanding
BalanceInterest
Earned/
Interest
PaidAverage
Yield/
RateAverage
Outstanding
BalanceInterest
Earned/
Interest
PaidAverage
Yield/
Rate(Dollars in thousands) Assets Interest-earning assets: Loans1 $ 7,865,432 $ 382,883 4.87 % $ 6,285,510 $ 263,583 4.19 % LHI, MW 433,062 16,671 3.85 468,001 14,219 3.04 PPP loans 12,517 125 1.00 272,770 2,724 1.00 Debt securities 1,277,643 38,736 3.03 1,092,967 32,132 2.94 Interest-earning deposits in other banks 405,471 6,275 1.55 410,785 589 0.14 Equity securities and other investments 169,875 4,720 2.78 133,594 3,237 2.42 Total interest-earning assets 10,164,000 449,410 4.42 8,663,627 316,484 3.65 ACL (79,845 ) (101,383 ) Noninterest-earning assets 905,103 799,334 Total assets $ 10,989,258 $ 9,361,578 Liabilities and Stockholders’ Equity Interest-bearing liabilities: Interest-bearing demand and savings deposits $ 3,934,926 42,785 1.09 $ 3,198,225 6,858 0.21 Certificates and other time deposits 1,601,687 15,307 0.96 1,540,188 9,079 0.59 Advances from FHLB 896,687 15,501 1.73 777,635 7,336 0.94 Subordinated debentures and subordinated notes 230,984 11,160 4.83 263,535 12,428 4.72 Total interest-bearing liabilities 6,664,284 84,753 1.27 5,779,583 35,701 0.62 Noninterest-bearing liabilities: Noninterest-bearing deposits 2,782,077 2,256,546 Other liabilities 119,237 57,457 Total liabilities 9,565,598 8,093,586 Stockholders’ equity 1,423,660 1,267,992 Total liabilities and stockholders’ equity $ 10,989,258 $ 9,361,578 Net interest rate spread2 3.15 % 3.03 % Net interest income and margin3 $ 364,657 3.59 % $ 280,783 3.24 % 1Includes average outstanding balances of loans held for sale of $13,558 and $12,093 for the twelve months ended December 31, 2022 and 2021, respectively, and average balances of LHI, excluding MW and PPP loans.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)Yield Trend
For the Quarter Ended Dec 31,
2022Sep 30,
2022Jun 30,
2022Mar 31,
2022Dec 31,
2021Average yield on interest-earning assets: Loans1 5.98 % 5.01 % 4.16 % 4.03 % 4.12 % LHI, MW 5.20 4.11 3.29 2.95 2.98 PPP loans 1.00 1.00 1.00 1.00 1.00 Debt securities 3.36 3.05 2.93 2.76 3.47 Interest-bearing deposits in other banks 3.81 2.17 0.77 0.19 0.16 Equity securities and other investments 3.62 3.25 2.53 1.94 2.09 Total interest-earning assets 5.55 % 4.59 % 3.79 % 3.54 % 3.72 % Average rate on interest-bearing liabilities: Interest-bearing demand and savings deposits 2.21 % 1.23 % 0.44 % 0.20 % 0.19 % Certificates and other time deposits 1.90 0.94 0.40 0.37 0.41 Advances from FHLB 3.91 1.12 0.40 0.81 0.94 Subordinated debentures and subordinated notes 5.12 4.85 4.70 4.65 4.62 Total interest-bearing liabilities 2.47 % 1.27 % 0.58 % 0.50 % 0.54 % Net interest rate spread2 3.08 % 3.32 % 3.21 % 3.04 % 3.18 % Net interest margin3 3.87 % 3.77 % 3.42 % 3.22 % 3.37 % 1 Includes average outstanding balances of loans held for sale of $15,296, $14,023, $12,112, $12,769 and $8,987 for the three months ended December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively, and average balances of LHI, excluding MW and PPP loans.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.Supplemental Yield Trend
For the Quarter Ended Dec 31,
2022Sep 30,
2022Jun 30,
2022Mar 31,
2022Dec 31,
2021Average cost of interest-bearing deposits 2.12 % 1.15 % 0.43 % 0.26 % 0.26 % Average costs of total deposits, including noninterest-bearing 1.46 0.76 0.28 0.17 0.18 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)LHI and Deposit Portfolio Composition
Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 (In thousands, except percentages) LHI1 Commercial $ 2,940,353 32.4 % $ 2,740,948 32.1 % $ 2,450,403 30.9 % $ 2,125,900 29.8 % $ 2,006,876 29.6 % Real Estate: Owner occupied commercial ("OOCRE") 715,829 7.9 677,705 7.9 646,723 8.2 633,615 8.9 665,537 9.8 Non-owner occupied commercial ("NOOCRE") 2,341,379 25.9 2,273,305 26.7 2,203,970 27.8 2,145,826 30.0 2,120,309 31.3 Construction and land 1,787,400 19.7 1,673,997 19.6 1,532,997 19.3 1,297,338 18.2 1,062,144 15.7 Farmland 43,500 0.5 43,569 0.5 47,319 0.6 48,095 0.7 55,827 0.8 1-4 family residential 894,456 9.9 858,693 10.1 765,260 9.6 604,408 8.5 542,566 8.0 Multi-family residential 322,679 3.6 252,244 3.0 276,632 3.5 272,250 3.8 310,241 4.6 Consumer 7,806 0.1 7,465 0.1 7,520 0.1 9,533 0.1 11,998 0.2 Total LHI $ 9,053,402 100 % $ 8,527,926 100 % $ 7,930,824 100 % $ 7,136,965 100 % $ 6,775,498 100 % MW 446,227 523,805 629,291 542,877 565,645 PPP loans 1,995 2,821 7,339 18,512 53,369 Total LHI1 $ 9,501,624 $ 9,054,552 $ 8,567,454 $ 7,698,354 $ 7,394,512 Deposits Noninterest-bearing $ 2,640,617 28.9 % $ 2,811,412 32.1 % $ 2,947,830 34.6 % $ 2,765,895 35.1 % $ 2,510,723 34.1 % Interest-bearing transaction 622,814 6.8 603,729 6.9 660,557 7.8 599,580 7.6 579,408 7.9 Money market 3,654,868 40.1 3,533,532 40.4 3,217,195 37.8 2,958,790 37.5 2,568,843 34.9 Savings 118,293 1.3 132,407 1.5 129,498 1.5 129,922 1.6 128,061 1.7 Certificates and other time deposits 2,086,642 22.9 1,667,364 19.1 1,562,626 18.3 1,435,409 18.2 1,576,580 21.4 Total deposits $ 9,123,234 100 % $ 8,748,444 100 % $ 8,517,706 100 % $ 7,889,596 100 % $ 7,363,615 100 % Loan to Deposit Ratio 104.1 % 103.5 % 100.6 % 97.6 % 100.4 % Loan to Deposit Ratio, excluding MW and PPP loans 99.2 % 97.5 % 93.1 % 90.5 % 92.0 % 1 Total LHI does not include deferred costs of $19.0 million, $17.5 million, $15.0 million, $11.5 million and $9.5 million at December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively.
VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)Asset Quality
For the Quarter Ended For the Year Ended Dec 31,
2022Sep 30,
2022Jun 30,
2022Mar 31,
2022Dec 31,
2021Dec 31,
2022Dec 31,
2021(In thousands, except percentages) NPAs: Nonaccrual loans $ 30,364 $ 30,592 $ 42,242 $ 46,680 $ 49,687 $ 30,364 $ 49,687 Nonaccrual PCD loans1 13,178 — — — — 13,178 — Accruing loans 90 or more days past due2 125 — 1,753 264 441 125 441 Total nonperforming loans held for investment ("NPLs") 43,667 30,592 43,995 46,944 50,128 43,667 50,128 OREO — — 1,032 1,062 — — — Total NPAs $ 43,667 $ 30,592 $ 45,027 $ 48,006 $ 50,128 $ 43,667 $ 50,128 Charge-offs: 1-4 family residential $ — $ — $ — $ — $ — $ — $ (379 ) OOCRE — (1,061 ) (244 ) (1,341 ) (898 ) (2,646 ) (2,400 ) NOOCRE (1,019 ) (838 ) — (553 ) (7,936 ) (2,410 ) (7,936 ) Commercial (5,449 ) (460 ) (528 ) (3,294 ) (4,114 ) (9,731 ) (15,576 ) Consumer (41 ) (19 ) (1,091 ) (134 ) (44 ) (1,285 ) (99 ) Total charge-offs (6,509 ) (2,378 ) (1,863 ) (5,322 ) (12,992 ) (16,072 ) (26,390 ) Recoveries: 1-4 family residential 24 4 3 — 6 31 64 OOCRE 26 — 245 — — 271 500 NOOCRE 229 3 93 400 — 725 — Commercial 415 177 572 144 61 1,308 1,542 Consumer 30 5 41 9 257 85 303 Total recoveries 724 189 954 553 324 2,420 2,409 Net charge-offs $ (5,785 ) $ (2,189 ) $ (909 ) $ (4,769 ) $ (12,668 ) $ (13,652 ) $ (23,981 ) ACL $ 91,052 $ 85,037 $ 80,576 $ 72,485 $ 77,754 $ 91,052 $ 77,754 Asset Quality Ratios: NPAs to total assets 0.36 % 0.26 % 0.40 % 0.46 % 0.51 % 0.36 % 0.51 % NPAs, excluding nonaccrual PCD loans, to total assets 0.25 0.26 0.40 0.46 0.51 0.25 0.51 NPLs to total LHI, excluding MW and PPP loans 0.48 0.36 0.55 0.66 0.74 0.48 0.74 NPLs, excluding nonaccrual PCD loans, to total LHI, excluding MW and PPP loans 0.34 0.36 0.55 0.66 0.74 0.34 0.74 ACL to total LHI, excluding MW and PPP loans 1.01 1.00 1.02 1.02 1.15 1.01 1.15 Net charge-offs to average loans outstanding3 0.28 0.12 0.04 0.28 0.75 0.17 0.38 1 Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 and were accounted for on a pooled basis that have subsequently been placed on nonaccrual status.
2 Accruing loans greater than 90 days past due exclude purchase credit deteriorated loans greater than 90 days past due that are accounted for on a pooled basis.
3Annualized ratio for quarterly metrics.VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)We identify certain financial measures discussed in this earnings release as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP, in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios calculated using exclusively either one or both of (i) financial measures calculated in accordance with GAAP and (ii) operating measures or other measures that are not non-GAAP financial measures.
The non-GAAP financial measures that we present in this earnings release should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we present in this earnings release may differ from that of other companies reporting measures with similar names. You should understand how such other financial institutions calculate their financial measures that appear to be similar or have similar names to the non-GAAP financial measures we have discussed in this earnings release when comparing such non-GAAP financial measures.
Tangible Book Value Per Common Share. Tangible book value per common share is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total stockholders’ equity less goodwill and core deposit intangibles, net of accumulated amortization; and (b) tangible book value per common share as tangible common equity (as described in clause (a)) divided by number of common shares outstanding. For tangible book value per common share, the most directly comparable financial measure calculated in accordance with GAAP is book value per common share.
We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in core deposit intangibles. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.
The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and presents our tangible book value per common share compared with our book value per common share:
As of Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 (Dollars in thousands, except per share data) Tangible Common Equity Total stockholders' equity $ 1,449,773 $ 1,411,899 $ 1,429,442 $ 1,447,996 $ 1,315,079 Adjustments: Goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (403,771 ) Core deposit intangibles (38,247 ) (40,684 ) (43,122 ) (45,560 ) (47,998 ) Tangible common equity $ 1,007,074 $ 966,763 $ 981,868 $ 997,984 $ 863,310 Common shares outstanding 54,030 53,988 53,951 53,907 49,372 Book value per common share $ 26.83 $ 26.15 $ 26.50 $ 26.86 $ 26.64 Tangible book value per common share $ 18.64 $ 17.91 $ 18.20 $ 18.51 $ 17.49 VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)Tangible Common Equity to Tangible Assets. Tangible common equity to tangible assets is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total stockholders’ equity, less goodwill and core deposit intangibles, net of accumulated amortization; (b) tangible assets as total assets less goodwill and core deposit intangibles, net of accumulated amortization; and (c) tangible common equity to tangible assets as tangible common equity (as described in clause (a)) divided by tangible assets (as described in clause (b)). For tangible common equity to tangible assets, the most directly comparable financial measure calculated in accordance with GAAP is total stockholders’ equity to total assets.
We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, in each case, exclusive of changes in core deposit intangibles. Goodwill and other intangible assets have the effect of increasing both total stockholders’ equity and assets while not increasing our tangible common equity or tangible assets.
The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and total assets to tangible assets and presents our tangible common equity to tangible assets:
As of Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 (Dollars in thousands, except percentages) Tangible Common Equity Total stockholders' equity $ 1,449,773 $ 1,411,899 $ 1,429,442 $ 1,447,996 $ 1,315,079 Adjustments: Goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (403,771 ) Core deposit intangibles (38,247 ) (40,684 ) (43,122 ) (45,560 ) (47,998 ) Tangible common equity $ 1,007,074 $ 966,763 $ 981,868 $ 997,984 $ 863,310 Tangible Assets Total assets $ 12,154,361 $ 11,714,454 $ 11,304,811 $ 10,453,680 $ 9,757,249 Adjustments: Goodwill (404,452 ) (404,452 ) (404,452 ) (404,452 ) (403,771 ) Core deposit intangibles (38,247 ) (40,684 ) (43,122 ) (45,560 ) (47,998 ) Tangible Assets $ 11,711,662 $ 11,269,318 $ 10,857,237 $ 10,003,668 $ 9,305,480 Tangible Common Equity to Tangible Assets 8.60 % 8.58 % 9.04 % 9.98 % 9.28 % VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)Return on Average Tangible Common Equity. Return on average tangible common equity is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) net income available for common stockholders adjusted for amortization of core deposit intangibles (which we refer to as “return”) as net income, plus amortization of core deposit intangibles, less tax benefit at the statutory rate; (b) average tangible common equity as total average stockholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization; and (c) return (as described in clause (a)) divided by average tangible common equity (as described in clause (b)). For return on average tangible common equity, the most directly comparable financial measure calculated in accordance with GAAP is return on average equity.
We believe that this measure is important to many investors in the marketplace who are interested in the return on common equity, exclusive of the impact of core deposit intangibles. Goodwill and core deposit intangibles have the effect of increasing total stockholders’ equity while not increasing our tangible common equity. This measure is particularly relevant to acquisitive institutions that may have higher balances in goodwill and core deposit intangibles than non-acquisitive institutions.
The following table reconciles, as of the dates set forth below, average tangible common equity to average common equity and net income available for common stockholders adjusted for amortization of core deposit intangibles, net of taxes to net income and presents our return on average tangible common equity:
For the Quarter Ended For the Year Ended Dec 31,
2022Sep 30,
2022Jun 30,
2022Mar 31,
2022Dec 31,
2021Dec 31,
2022Dec 31,
2021(Dollars in thousands, except for percentages) Net income available for common stockholders adjusted for amortization of core deposit intangibles Net income $ 39,897 $ 43,322 $ 29,626 $ 33,470 $ 41,506 $ 146,315 $ 139,584 Adjustments: Plus: Amortization of core deposit intangibles 2,438 2,438 2,438 2,438 2,438 9,752 9,761 Less: Tax benefit at the statutory rate 512 512 512 512 512 2,048 2,050 Net income available for common stockholders adjusted for amortization of core deposit intangibles $ 41,823 $ 45,248 $ 31,552 $ 35,396 $ 43,432 $ 154,019 $ 147,295 Average Tangible Common Equity Total average stockholders' equity $ 1,434,818 $ 1,453,816 $ 1,447,377 $ 1,357,448 $ 1,301,676 $ 1,423,660 $ 1,267,992 Adjustments: Average goodwill (404,452 ) (404,452 ) (404,452 ) (404,014 ) (393,220 ) (404,344 ) (376,480 ) Average core deposit intangibles (39,792 ) (42,230 ) (44,720 ) (47,158 ) (49,596 ) (43,451 ) (53,233 ) Average tangible common equity $ 990,574 $ 1,007,134 $ 998,205 $ 906,276 $ 858,860 $ 975,865 $ 838,279 Return on Average Tangible Common Equity (Annualized) 16.75 % 17.82 % 12.68 % 15.84 % 20.06 % 15.78 % 17.57 % VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)Operating Earnings, Pre-tax, Pre-provision Operating Earnings and performance metrics calculated using Operating Earnings and Pre-tax, Pre-provision Operating Earnings, including Diluted Operating Earnings per Share, Operating Return on Average Assets, Pre-tax, Pre-Provision Operating Return on Average Assets, Operating Return on Average Tangible Common Equity and Operating Efficiency Ratio. Operating earnings, pre-tax, pre-provision operating earnings and the performance metrics calculated using these metrics, listed below, are non-GAAP measures used by management to evaluate the Company’s financial performance. We calculate (a) operating earnings as net income plus severance payments, plus loss (gain) on sale of securities, net, plus debt extinguishment costs, less Thrive Mortgage, LLC's ("Thrive") PPP loan forgiveness income, plus merger and acquisition expenses, less tax impact of adjustments, plus nonrecurring tax adjustments. We calculate (b) diluted operating earnings per share as operating earnings as described in clause (a) divided by weighted average diluted shares outstanding. We calculate (c) pre-tax, pre-provision operating earnings as operating earnings as described in clause (a) plus provision for income taxes, plus benefit (provision) for credit losses and unfunded commitments. We calculate (d) pre-tax, pre-provision operating return on average assets as pre-tax, pre-provision operating earnings as described in clause (a) divided by total average assets. We calculate (e) operating return on average assets as operating earnings as described in clause (a) divided by total average assets. We calculate (f) operating return on average tangible common equity as operating earnings as described in clause (a), adjusted for the amortization of intangibles and tax benefit at the statutory rate, divided by total average tangible common equity (average stockholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization). We calculate (g) operating efficiency ratio as non interest expense plus adjustments to operating non interest expense divided by non interest income plus adjustments to operating non interest income, plus net interest income.
We believe that these measures and the operating metrics calculated utilizing these measures are important to management and many investors in the marketplace who are interested in understanding the ongoing operating performance of the Company and provide meaningful comparisons to its peers.
The following tables reconcile, as of the dates set forth below, operating net income and pre-tax, pre-provision operating earnings and related metrics:
For the Quarter Ended For the Year Ended Dec 31,
2022Sep 30,
2022Jun 30,
2022Mar 31,
2022Dec 31,
2021Dec 31,
2022Dec 31,
2021(Dollars in thousands, except per share data) Operating Earnings Net income $ 39,897 $ 43,322 $ 29,626 $ 33,470 $ 41,506 $ 146,315 $ 139,584 Plus: Severance payments1 630 — — — — 630 627 Plus: Loss on sale of debt securities AFS, net — — — — — — 188 Less: Thrive PPP loan forgiveness income2 — — — — — — 1,912 Plus: M&A expenses — 384 295 700 826 1,379 826 Operating pre-tax income 40,527 43,706 29,921 34,170 42,332 148,324 139,313 Less: Tax impact of adjustments 132 81 66 156 (78 ) 435 92 Plus: Nonrecurring tax adjustments3 — — — — — — 426 Operating earnings $ 40,395 $ 43,625 $ 29,855 $ 34,014 $ 42,410 $ 147,889 $ 139,647 Weighted average diluted shares outstanding 54,780 54,633 54,646 51,571 50,441 53,952 50,352 Diluted EPS $ 0.73 $ 0.79 $ 0.54 $ 0.65 $ 0.82 $ 2.71 $ 2.77 Diluted operating EPS $ 0.74 $ 0.80 $ 0.55 $ 0.66 $ 0.84 $ 2.74 $ 2.77 1 Severance payments relate to restructurings made for the years ended December 31, 2022 and 2021.
2 During the year ended December 31, 2021, Thrive’s PPP loan with another bank was 100% forgiven by the Small Business Administration. As a result of our 49% investment in Thrive, the $1.9 million represents our portion of the PPP loan forgiveness. PPP fee income is not taxable and as such has no tax impact.
3 A nonrecurring tax adjustment of $426 thousand recorded for the year ended December 31, 2021 was due to a true-up of a deferred tax liability.For the Quarter Ended For the Year Ended Dec 31,
2022Sep 30,
2022Jun 30,
2022Mar 31,
2022Dec 31,
2021Dec 31,
2022Dec 31,
2021(Dollars in thousands, except percentages) Pre-Tax, Pre-Provision Operating Earnings Net Income $ 39,897 $ 43,322 $ 29,626 $ 33,470 $ 41,506 $ 146,315 $ 139,584 Plus: Provision for income taxes 11,890 12,248 8,079 8,102 10,697 40,319 36,722 Plus: Provision (benefit) for credit losses and unfunded commitments 11,277 7,500 9,000 (7 ) (4,389 ) 27,770 (4,830 ) Plus: Severance payments 630 — — — — 630 627 Plus: Loss on sale of debt securities AFS, net — — — — — — 188 Less: Thrive PPP loan forgiveness income — — — — — — 1,912 Plus: M&A expenses — 384 295 700 826 1,379 826 Net pre-tax, pre-provision operating earnings $ 63,694 $ 63,454 $ 47,000 $ 42,265 $ 48,640 $ 216,413 $ 171,205 Total average assets $ 11,761,044 $ 11,460,857 $ 10,711,663 $ 9,998,922 $ 9,788,671 $ 10,989,258 $ 9,361,578 Pre-tax, pre-provision operating return on average assets1 2.15 % 2.20 % 1.76 % 1.71 % 1.97 % 1.97 % 1.83 % Average Total Assets $ 11,761,044 $ 11,460,857 $ 10,711,663 $ 9,998,922 $ 9,788,671 $ 10,989,258 $ 9,361,578 Return on average assets1 1.35 % 1.50 % 1.11 % 1.36 % 1.68 % 1.33 % 1.49 % Operating return on average assets1 1.36 1.51 1.12 1.38 1.72 1.35 1.49 Operating earnings adjusted for amortization of core deposit intangibles Operating earnings $ 40,395 $ 43,625 $ 29,855 $ 34,014 $ 42,410 $ 147,889 $ 139,647 Adjustments: Plus: Amortization of core deposit intangibles 2,438 2,438 2,438 2,438 2,438 9,752 9,761 Less: Tax benefit at the statutory rate 512 512 512 512 512 2,048 2,050 Operating earnings adjusted for amortization of core deposit intangibles $ 42,321 $ 45,551 $ 31,781 $ 35,940 $ 44,336 $ 155,593 $ 147,358 Average Tangible Common Equity Total average stockholders' equity $ 1,434,818 $ 1,453,816 $ 1,447,377 $ 1,357,448 $ 1,301,676 $ 1,423,660 $ 1,267,992 Adjustments: Less: Average goodwill (404,452 ) (404,452 ) (404,452 ) (404,014 ) (393,220 ) (404,344 ) (376,480 ) Less: Average core deposit intangibles (39,792 ) (42,230 ) (44,720 ) (47,158 ) (49,596 ) (43,451 ) (53,233 ) Average tangible common equity $ 990,574 $ 1,007,134 $ 998,205 $ 906,276 $ 858,860 $ 975,865 $ 838,279 Operating return on average tangible common equity1 16.95 % 17.94 % 12.77 % 16.08 % 20.48 % 15.94 % 17.58 % Efficiency ratio 47.63 % 44.71 % 50.76 % 52.84 % 48.53 % 48.64 % 49.45 % Net interest income $ 106,097 $ 101,040 $ 84,480 $ 73,040 $ 76,741 $ 364,657 $ 280,783 Noninterest income 14,326 13,021 10,378 15,097 16,150 52,822 58,405 Plus: Loss on sale of debt securities AFS, net — — — — — — 188 Less: Thrive's PPP loan forgiveness income — — — — — — 1,912 Operating noninterest income 14,326 13,021 10,378 15,097 16,150 52,822 56,681 Noninterest expense 57,359 50,991 48,153 46,572 45,077 203,075 167,712 Less: Severance payments 630 — — — — 630 627 Less: M&A expenses — 384 295 700 826 1,379 826 Operating noninterest expense $ 56,729 $ 50,607 $ 47,858 $ 45,872 $ 44,251 $ 201,066 $ 166,259 Operating efficiency ratio 47.11 % 44.37 % 50.45 % 52.05 % 47.64 % 48.21 % 49.27 % 1 Annualized ratio for quarterly metrics.
Media and Investor Relations: investorrelations@veritexbank.com
