Veritex Holdings, Inc. Reports Third Quarter Operating Results

DALLAS, Oct. 24, 2023 (GLOBE NEWSWIRE) -- Veritex Holdings, Inc. (“Veritex”, the “Company”, “we” or “our”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the quarter ended September 30, 2023.

“Despite the challenging markets, Veritex continues to focus on strengthening our balance sheet and adding to capital”, said C. Malcolm Holland, III. “Our year long deposit centric strategy is gaining momentum shown by the positive trends in our balance sheet ratios.”

  Quarter to Date Year to Date
  Q3 2023 Q2 2023 Q3 2023 Q3 2022
   
  (Dollars in thousands, except per share data)
(unaudited)
Financial Results        
Net income $32,621  $33,730  $104,762  $106,418 
Diluted EPS  0.60   0.62   1.92   1.98 
Book value per common share  27.46   27.48   27.46   26.15 
Return on average assets2  1.06%  1.10%  1.14%  1.33%
Return on average equity2  8.58   8.96   9.35   10.02 
Efficiency ratio  54.49   49.94   50.88   49.05 
Financial Operating Results1        
Operating earnings $32,621  $34,673  $110,489  $107,494 
Diluted operating EPS  0.60   0.64   2.02   2.00 
Tangible book value per common share  19.44   19.41   19.44   17.91 
Pre-tax, pre-provision operating earnings  49,621   58,520   174,523   152,719 
Pre-tax, pre-provision operating return on average assets2  1.61%  1.90%  1.90%  1.90%
Pre-tax, pre-provision operating return on average loans2  2.05   2.43   2.43   2.54 
Operating return on average assets2  1.06   1.13   1.20   1.34 
Return on average tangible common equity2  12.80   13.35   13.95   15.40 
Operating return on average tangible common equity2  12.80   13.70   14.68   15.55 
Operating efficiency ratio  54.49   48.90   49.53   48.59 

1 Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of these non-generally accepted accounting principles (“GAAP”) financial measures to their most directly comparable GAAP measures.
2 Annualized ratio.

Other Third Quarter Metrics and Company Highlights

  • Total deposits increased by $962.6 million, or 41.68% annualized, to $10.2 billion as of September 30, 2023 compared to $9.2 billion as of June 30, 2023;
  • Loan to deposit ratio decreased to 94.5% as of September 30, 2023 compared to 105.1% as of June 30, 2023;
  • Allowance for credit losses (“ACL”) to total loans increased to 1.14% as of September 30, 2023, or an increase of 9 bps and 20 bps from June 30, 2023 and September 30, 2022, respectively;
  • Annualized net charge-offs to average loans outstanding were 8 bps for the three months ended September 30, 2023 compared to 48 bps and 12 bps for the three months ended June 30, 2023 and September 30, 2022, respectively;
  • Total Commercial Real Estate (“CRE”) / Risk Based Capital (“RBC”) decreased to 317.2% as of September 30, 2023 compared to 327.2% as of June 30, 2023;
  • Total unfunded Acquisition, Development, and Construction (“ADC”) decreased to $1.15 billion, or approximately 16.3%, as of September 30, 2023 compared to $1.37 billion as of June 30, 2023;
  • Common equity tier 1 capital increased 35 bps to 10.11% as of September 30, 2023 compared to 9.76% as of June 30, 2023 driven by earnings and a decrease in risk-weighted assets;
  • Named one of the “Best Companies to Work For” by the 2023 Inaugural U.S. News & World Report which evaluates companies based on quality of pay, work/life balance, and opportunities for professional development and advancement; and
  • Declared quarterly cash dividend of $0.20 per share of outstanding common stock payable on November 24, 2023.

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

Net Interest Income

For the three months ended September 30, 2023, net interest income before provision for credit losses was $99.3 million and net interest margin was 3.46% compared to $100.8 million and 3.51%, respectively, for the three months ended June 30, 2023. The $1.5 million decrease, or 1.5%, in net interest income before provision for credit losses was primarily due to a $8.1 million increase in interest expense on certificates and other time deposits and a $7.0 million increase in interest expense on transaction and savings deposits driven by an increase in funding costs on deposits. The decrease in net interest income was partially offset by a $9.0 million decrease in interest expense on advances from the Federal Home Loan Bank (“FHLB”), a $3.6 million increase in interest income on loans driven by an increase in loan yields and average balances, a $762 thousand increase in interest income on debt securities and a $573 thousand increase in equity securities and other investments during the three months ended September 30, 2023. Net interest margin decreased 5 bps compared to the three months ended June 30, 2023, primarily due to the increase in funding costs on deposits during three months ended September 30, 2023, partially offset by an increase in loan yields and debt securities.

Compared to the three months ended September 30, 2022, net interest income before provision for credit losses for the three months ended September 30, 2023 decreased by $1.7 million, or 1.7%. The decrease was primarily due to a $32.3 million increase in certificates and other time deposits, a $27.0 million increase in transaction and savings deposits and a $6.0 million increase in advances from the FHLB driven by an increase in funding costs. The decrease was partially offset by a $58.2 million increase in interest income on loans driven by an increase in loan yields and average balances and a $5.2 million increase in deposits in financial institutions and fed funds sold. Net interest margin decreased 31 bps from 3.77% for the three months ended September 30, 2022. The decrease was primarily due to the increase in funding costs on deposits during the three months ended September 30, 2023, partially offset by an increase in loan yields and debt securities.

Noninterest Income

Noninterest income for the three months ended September 30, 2023 was $9.7 million, a decrease of $4.0 million, or 29.3%, compared to the three months ended June 30, 2023. The decrease was primarily due to a $2.4 million decrease in government guaranteed loan income primarily driven by a decrease in U.S. Department of Agriculture (“USDA”) loans sold. In addition, the decrease was due to a $759 thousand decrease in customer swap income and a $621 thousand decrease in equity method investment income. This decrease was partially offset by a $178 thousand increase in other income.

Compared to the three months ended September 30, 2022, noninterest income for the three months ended September 30, 2023 decreased by $3.3 million, or 25.7%. The decrease was primarily due to a $3.2 million decrease in customer swap income, a $1.2 million decrease in loan fees driven by a $1.2 million decrease in syndication fees and a $1.0 million decrease in other noninterest income. The decrease was partially offset by a $1.2 million increase in government guaranteed loan income, primarily driven by an increase in USDA loans sold through our wholly owned subsidiary North Avenue Capital, LLC, and a $922 thousand increase in equity method investment income.

Noninterest Expense

Noninterest expense was $59.4 million for the three months ended September 30, 2023, compared to $57.2 million for the three months ended June 30, 2023, an increase of $2.2 million, or 3.9%. The increase was primarily due to a $2.3 million increase in salaries and employee benefits and a $415 thousand increase in professional and regulatory fees driven by FDIC assessment fees. The increase is partially offset by a decrease of $274 thousand in marketing expense and a $168 thousand decrease in data processing and software expense.

Compared to the three months ended September 30, 2022, noninterest expense for the three months ended September 30, 2023 increased by $8.4 million, or 16.5%. The increase was primarily driven by a $3.6 million increase in professional and regulatory fees driven by FDIC assessment fees that increased when the Company crossed $10 billion in total assets, a $2.3 million increase in other noninterest expenses, a $1.2 million increase in salaries and employee benefits, a $1.0 million increase in data processing and software expenses and a $508 thousand increase in marketing expenses.

Financial Condition

Total loans held for investment (“LHI”) was $9.64 billion at September 30, 2023, a decrease of $67.8 million, or 2.8% annualized, compared to June 30, 2023. The decrease was the result of the state of the economy and banking environment as a result of higher interest rates.

Total deposits were $10.20 billion at September 30, 2023, an increase of $962.6 million, or 41.7% annualized, compared to June 30, 2023. The increase was primarily the result of an increase of $474.5 million in certificates and other time deposits, an increase of $345.8 million in interest-bearing deposits, an increase of $129.2 million in non-interest bearing deposits and an increase of $13.1 million in correspondent money market account balances.

Credit Quality

Nonperforming assets (“NPAs”) totaled $79.9 million, or 0.65% of total assets, at September 30, 2023, compared to $68.3 million, or 0.55% of total assets, at June 30, 2023. The Company had net charge-offs of $1.8 million for the three months ended September 30, 2023. Annualized net charge-offs were down to 8 bps for the three months ended September 30, 2023, compared to 48 bps and 12 bps for the three months ended June 30, 2023 and September 30, 2022, respectively.

ACL as a percentage of LHI was 1.14%, 1.05% and 0.94% at September 30, 2023, June 30, 2023 and September 30, 2022, respectively. The Company recorded a provision for credit losses of $8.6 million for the three months ended September 30, 2023, a $15.0 million provision for credit losses for the three months ended June 30, 2023 and a $6.7 million provision for credit losses for the three months ended September 30, 2022. The recorded provision for credit losses for the three months ended September 30, 2023, compared to the three months ended June 30, 2023, was primarily attributable to an increase in general reserves as a result of changes in economic factors and individually analyzed loans receiving specific reserves. The Company recorded a benefit for unfunded commitments of $909 thousand for the three months ended September 30, 2023, a $1.1 million benefit for unfunded commitments for the three months ended June 30, 2023, and a $850 thousand provision for unfunded commitments for the three months ended September 30, 2022. The recorded benefit for unfunded commitments for the three months ended September 30, 2023, compared to the three months ended June 30, 2023, was attributable to a decrease in unfunded commitment balances partially offset by changes in economic factors.

Dividend Information

After the close of the market on Tuesday, October 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 or after November 24, 2023 to stockholders of record as of the close of business on November 10, 2023.

Non-GAAP Financial Measures

Veritex’s management uses certain non-GAAP (U.S. generally accepted accounting principles) financial measures to evaluate its operating performance and provide information that is important to investors. However, non-GAAP financial measures are supplemental and should be viewed in addition to, and not as an alternative for, Veritex’s reported results prepared in accordance with GAAP. Specifically, Veritex reviews and reports tangible book value per common share, operating earnings, tangible common equity to tangible assets, return on average tangible common equity, pre-tax, pre-provision operating earnings, pre-tax, pre-provision operating return on average assets, pre-tax, pre-provision operating return on average loans, pre-tax, pre-provision operating return on average loans, diluted operating earnings per share, operating return on average assets, operating return on average tangible common equity and operating efficiency ratio. Veritex has included in this earnings release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to “Reconciliation of Non-GAAP Financial Measures” after the financial highlights at the end of this earnings release for a reconciliation of these non-GAAP financial measures.

Conference Call

The Company will host an investor conference call and webcast to review the results on Wednesday, October 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/nzdfo4ub/ 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/BI9b72154b2c424063aae6950d635afeec. 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.

 

Media and Investor Relations:
investorrelations@veritexbank.com

Forward-Looking Statements

This earnings release includes “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on various facts and derived utilizing assumptions, current expectations, estimates and projections and are subject to known and unknown risks, uncertainties and other factors, which change over time and are beyond our control, that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, statements relating to the expected payment of Veritex Holdings, Inc.’s (“Veritex”) quarterly cash dividend; the impact of certain changes in Veritex’s accounting policies, standards and interpretations; a continuation of recent turmoil in the banking industry, responsive measures to mitigate and manage it and related supervisory and regulatory actions and costs and Veritex’s future financial performance, business and growth strategy, projected plans and objectives, as well as other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact broader economic and industry trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “seeks,” “targets,” “outlooks,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing words. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Veritex’s Annual Report on Form 10-K for the year ended December 31, 2022 and any updates to those risk factors set forth in Veritex’s Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov. If one or more events related to these or other risks or uncertainties materialize, or if Veritex’s underlying assumptions prove to be incorrect, actual results may differ materially from what Veritex anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. Veritex does not undertake any obligation, and specifically declines any obligation, to supplement, update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law. All forward-looking statements, expressed or implied, included in this earnings release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Veritex or persons acting on Veritex’s behalf may issue.


VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
 
  For the Quarter Ended For the Nine Months Ended
  Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Sep 30, 2023 Sep 30, 2022
   
  (Dollars and shares in thousands, except per share data)
Per Share Data (Common Stock):              
Basic EPS $0.60  $0.62  $0.71  $0.74  $0.80  $1.93  $2.01 
Diluted EPS  0.60   0.62   0.70   0.73   0.79   1.92   1.98 
Book value per common share  27.46   27.48   27.54   26.83   26.15   27.46   26.15 
Tangible book value per common share1  19.44   19.41   19.43   18.64   17.91   19.44   17.91 
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  54,305   54,261   54,229   54,030   53,988   54,305   53,988 
Weighted average basic shares outstanding for the period  54,300   54,247   54,149   54,011   53,979   54,233   52,886 
Weighted average diluted shares outstanding for the period  54,597   54,486   54,606   54,780   54,633   54,563   53,655 
               
Summary of Credit Ratios:              
ACL to total LHI  1.14%  1.05%  1.02%  0.96%  0.94%  1.14%  0.94%
NPAs to total assets  0.65   0.55   0.35   0.36   0.26   0.65   0.26 
NPAs, excluding nonaccrual purchase credit deteriorated (“PCD”) loans, to total assets3  0.54   0.44   0.25   0.25   0.26   0.54   0.26 
Net charge-offs to average loans outstanding4  0.08   0.48   0.04   0.24   0.12   0.20   0.13 
               
Summary Performance Ratios:              
Return on average assets4  1.06%  1.10%  1.28%  1.35%  1.50%  1.14%  1.33%
Return on average equity4  8.58   8.96   10.55   11.03   11.82   9.35   10.02 
Return on average tangible common equity1, 4  12.80   13.35   15.81   16.75   17.82   13.95   15.40 
Efficiency ratio  54.49   49.94   48.42   47.63   44.71   50.88   49.05 
Net interest margin  3.46   3.51   3.69   3.87   3.77   3.55   3.48 
               
Selected Performance Metrics - Operating:              
Diluted operating EPS1 $0.60  $0.64  $0.79  $0.74  $0.80  $2.02  $2.00 
Pre-tax, pre-provision operating return on average assets1, 4  1.61%  1.90%  2.20%  2.15%  2.20%  1.90%  1.90%
Pre-tax, pre-provision operating return on average loans1, 4  2.05   2.43   2.83   2.78   2.88   2.43   2.54 
Operating return on average assets1,4  1.06   1.13   1.43   1.36   1.51   1.20   1.34 
Operating return on average tangible common equity1,4  12.80   13.70   17.68   16.95   17.94   14.68   15.55 
Operating efficiency ratio1  54.49   48.90   45.70   47.11   44.37   49.53   48.59 
               
Veritex Holdings, Inc. Capital Ratios:              
Average stockholders' equity to average total assets  12.30%  12.23%  12.09%  12.20%  12.69%  12.21%  13.23%
Tangible common equity to tangible assets1  8.86   8.76   8.66   8.60   8.58   8.86   8.58 
Tier 1 capital to average assets (leverage)  10.10   9.80   9.67   9.82   9.79   10.10   9.79 
Common equity tier 1 capital  10.11   9.76   9.32   9.09   9.09   10.11   9.09 
Tier 1 capital to risk-weighted assets  10.37   10.01   9.56   9.34   9.35   10.37   9.35 
Total capital to risk-weighted assets  12.95   12.51   11.99   11.63   11.68   12.95   11.68 

1Refer to the section titled “Reconciliation of Non-GAAP Financial Measures” after the financial highlights for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.
2Dividend amount represents dividend paid per common share subsequent to each respective quarter end.
3Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 Financial Instruments - Credit Losses and were accounted for on a pooled basis that have subsequently been placed on nonaccrual status.
4Annualized ratio for quarterly metrics.


VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands)
           
  Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022
  (unaudited) (unaudited) (unaudited)   (unaudited)
ASSETS          
Cash and cash equivalents $713,408  $663,921  $808,395  $436,077  $433,897 
Debt securities, net  1,060,629   1,144,020   1,150,959   1,282,460   1,303,004 
Other investments  80,869   138,894   137,621   122,450   115,551 
           
Loans held for sale (“LHFS”)  41,313   29,876   42,816   20,641   17,644 
LHI, mortgage warehouse (“MW”)  390,767   436,255   437,501   446,227   523,805 
LHI, excluding MW  9,237,447   9,257,183   9,237,159   9,036,424   8,513,254 
Total loans  9,669,527   9,723,314   9,717,476   9,503,292   9,054,703 
ACL  (109,831)  (102,150)  (98,694)  (91,052)  (85,037)
Bank-owned life insurance  84,867   84,375   84,962   84,496   84,030 
Bank premises, furniture and equipment, net  106,118   105,986   107,540   108,824   108,720 
Intangible assets, net of accumulated amortization  44,294   48,293   51,086   53,213   56,238 
Goodwill  404,452   404,452   404,452   404,452   404,452 
Other assets  291,998   259,263   245,690   250,149   238,896 
Total assets $12,346,331  $12,470,368  $12,609,487  $12,154,361  $11,714,454 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Deposits:          
Noninterest-bearing deposits $2,363,340  $2,234,109  $2,212,389  $2,640,617  $2,811,412 
Interest-bearing transaction and savings deposits  3,936,070   3,590,253   3,492,011   3,514,729   3,437,898 
Certificates and other time deposits  3,403,427   2,928,949   2,896,870   2,086,642   1,667,364 
Correspondent money market deposits  493,681   480,598   433,468   881,246   831,770 
Total deposits  10,196,518   9,233,909   9,034,738   9,123,234   8,748,444 
Accounts payable and other liabilities  229,116   190,900   171,985   177,579   173,198 
Advances from FHLB  200,000   1,325,000   1,680,000   1,175,000   1,150,000 
Subordinated debentures and subordinated notes  229,531   229,279   229,027   228,775   228,524 
Securities sold under agreements to repurchase              2,389 
Total liabilities  10,855,165   10,979,088   11,115,750   10,704,588   10,302,555 
Commitments and contingencies          
Stockholders’ equity:          
Common stock  609   609   609   607   606 
Additional paid-in capital  1,314,459   1,311,687   1,308,345   1,306,852   1,303,171 
Retained earnings  451,513   429,753   406,873   379,299   350,195 
Accumulated other comprehensive loss  (107,833)  (83,187)  (54,508)  (69,403)  (74,491)
Treasury stock  (167,582)  (167,582)  (167,582)  (167,582)  (167,582)
Total stockholders’ equity  1,491,166   1,491,280   1,493,737   1,449,773   1,411,899 
Total liabilities and stockholders’ equity $12,346,331  $12,470,368  $12,609,487  $12,154,361  $11,714,454 


VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands, except per share data)
 
  For the Quarter Ended For the Nine Months Ended
  Sep 30,
2023
 Jun 30,
2023
 Mar 31,
2023
 Dec 31,
2022
 Sep 30,
2022
 Sep 30,
2023
 Sep 30,
2022
  (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Interest income:              
Loans, including fees $167,368  $163,727  $151,707  $136,846  $109,199  $482,802  $262,833
Debt securities  10,928   10,166   10,988   10,880   10,462   32,082   27,856
Deposits in financial institutions and Fed Funds sold  7,128   7,507   5,534   3,401   1,898   20,169   2,874
Equity securities and other investments  1,691   1,118   1,408   1,087   1,666   4,217   3,633
Total interest income  187,115   182,518   169,637   152,214   123,225   539,270   297,196
Interest expense:              
Transaction and savings deposits  39,936   32,957   29,857   24,043   12,897   102,750   18,742
Certificates and other time deposits  36,177   28,100   20,967   8,543   3,919   85,244   6,764
Advances from FHLB  8,523   17,562   12,358   10,577   2,543   38,443   4,924
Subordinated debentures and subordinated notes  3,118   3,068   3,066   2,954   2,826   9,252   8,206
Total interest expense  87,754   81,687   66,248   46,117   22,185   235,689   38,636
Net interest income  99,361   100,831   103,389 �� 106,097   101,040   303,581   258,560
Provision for credit losses1  8,627   15,000   9,385   11,800   6,650   33,012   15,150
(Benefit) provision for unfunded commitments  (909)  (1,129)  1,497   (523)  850   (541)  1,343
Net interest income after provisions  91,643   86,960   92,507   94,820   93,540   271,110   242,067
Noninterest income:              
Service charges and fees on deposit accounts  5,159   5,272   5,017   5,173   5,217   15,448   14,966
Loan fees  1,564   1,520   2,064   2,477   2,786   5,148   7,965
Loss on sales of debt securities        (5,321)        (5,321)  
Gain on sales of mortgage LHFS  21   40   6   4   16   67   546
Government guaranteed loan income, net  1,772   4,144   9,688   7,808   572   15,604   6,252
Equity method investment (loss) income  (136)  485   (1,521)  (5,416)  (1,058)  (1,172)  275
Customer swap income  202   961   217   2,273   3,358   1,380   5,625
Other income  1,092   1,270   3,381   2,007   2,130   5,743   2,867
Total noninterest income  9,674   13,692   13,531   14,326   13,021   36,897   38,496
Noninterest expense:              
Salaries and employee benefits  30,949   28,650   31,865   33,690   29,714   91,464   84,151
Occupancy and equipment  4,881   4,827   4,973   5,116   4,615   14,681   13,628
Professional and regulatory fees  7,283   6,868   4,389   4,401   3,718   18,540   9,741
Data processing and software expense  4,541   4,709   4,720   4,197   3,509   13,970   9,816
Marketing  2,353   2,627   1,779   1,841   1,845   6,759   5,338
Amortization of intangibles  2,437   2,468   2,495   2,495   2,494   7,400   7,484
Telephone and communications  362   355   478   358   389   1,195   1,126
Merger and acquisition (“M&A”) expense              384      1,379
Other  6,608   6,693   5,916   5,261   4,323   19,217   13,053
Total noninterest expense  59,414   57,197   56,615   57,359   50,991   173,226   145,716
Income before income tax expense  41,903   43,455   49,423   51,787   55,570   134,781   134,847
Income tax expense  9,282   9,725   11,012   11,890   12,248   30,019   28,429
Net income $32,621  $33,730  $38,411  $39,897  $43,322  $104,762  $106,418
Net income available to common stockholders $32,621  $33,730  $38,411  $39,897  $43,322  $104,762  $106,418
               
Basic EPS $0.60  $0.62  $0.71  $0.74  $0.80  $1.93  $2.01
Diluted EPS $0.60  $0.62  $0.70  $0.73  $0.79  $1.92  $1.98
Weighted average basic shares outstanding  54,300   54,247   54,149   54,011   53,979   54,233   52,886
Weighted average diluted shares outstanding  54,597   54,486   54,606   54,780   54,633   54,563   53,655

1 Includes provision for credit losses on available for sale (“AFS”) securities of $885 thousand for the three months ended March 31, 2023 and June 30, 2023.

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

  For the Quarter Ended
  September 30, 2023 June 30, 2023 September 30, 2022
  Average
Outstanding
Balance
 Interest
Earned/
Interest
Paid
 Average
Yield/
Rate
 Average
Outstanding
Balance
 Interest
Earned/
Interest
Paid
 Average
Yield/
Rate
 Average
Outstanding
Balance
 Interest
Earned/
Interest
Paid
 Average
Yield/
Rate
   
  (In thousands, except percentages)
Assets                  
Interest-earning assets:                  
Loans1 $9,267,366  $161,615 6.92% $9,285,550  $158,685 6.85% $8,280,537  $104,550 5.01%
LHI, MW  357,639   5,753 6.38   371,763   5,042 5.44   448,556   4,649 4.11 
Debt securities  1,121,716   10,928 3.87   1,133,845   10,166 3.60   1,362,365   10,462 3.05 
Interest-bearing deposits in other banks  520,785   7,128 5.43   583,818   7,507 5.16   346,296   1,898 2.17 
Equity securities and other investments  135,714   1,691 4.94   137,868   1,118 3.25   203,528   1,666 3.25 
Total interest-earning assets  11,403,220   187,115 6.51   11,512,844   182,518 6.36   10,641,282   123,225 4.59 
ACL  (105,320)      (102,559)      (81,888)    
Noninterest-earning assets  961,162       939,938       901,463     
Total assets $12,259,062      $12,350,223      $11,460,857     
                   
Liabilities and Stockholders’ Equity                  
Interest-bearing liabilities:                  
Interest-bearing demand and savings deposits $4,168,876  $39,936 3.80% $3,919,745  $32,957 3.37% $4,164,164  $12,897 1.23%
Certificates and other time deposits  3,151,704   36,177 4.55   2,873,548   28,100 3.92   1,656,347   3,919 0.94 
Advances from FHLB and Other  725,543   8,523 4.66   1,472,912   17,562 4.78   904,065   2,543 1.12 
Subordinated debentures and subordinated notes  229,389   3,118 5.39   229,151   3,068 5.37   231,012   2,826 4.85 
Total interest-bearing liabilities  8,275,512   87,754 4.21   8,495,356   81,687 3.86   6,955,588   22,185 1.27 
                   
Noninterest-bearing liabilities:                  
Noninterest-bearing deposits  2,272,207       2,175,002       2,925,462     
Other liabilities  203,173       169,240       125,991     
Total liabilities  10,750,892       10,839,598       10,007,041     
Stockholders’ equity  1,508,170       1,510,625       1,453,816     
Total liabilities and stockholders’ equity $12,259,062      $12,350,223      $11,460,857     
                   
Net interest rate spread2     2.30%     2.50%     3.32%
Net interest income and margin3   $99,361 3.46%   $100,831 3.51%   $101,040 3.77%

1 Includes average outstanding balances of LHFS of $28,284, $23,374 and $14,023 for the quarters ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively, and average balances of LHI, excluding MW.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.

VERITEX HOLDINGS, INC. AND SUBSIDIARY
Financial Highlights
(In thousands except percentages)
 
  Nine Months Ended
  September 30, 2023 September 30, 2022
  Average
Outstanding
Balance
 Interest
Earned/
Interest Paid
 Average
Yield/ Rate
 Average
Outstanding
Balance
 Interest
Earned/
Interest Paid
 Average
Yield/ Rate
Assets            
Interest-earning assets:            
Loans1 $9,231,814  $467,101 6.76% $7,586,302  $251,186 4.43%
LHI, MW  363,182   15,701 5.78   449,906   11,647 3.46 
Debt securities  1,168,860   32,082 3.67   1,274,712   27,856 2.92 
Interest-bearing deposits in other banks  527,805   20,169 5.11   422,905   2,874 0.91 
Equity securities and other investments  132,895   4,217 4.24   187,002   3,633 2.60 
Total interest-earning assets  11,424,556   539,270 6.31   9,920,827   297,196 4.01 
ACL  (100,228)      (78,015)    
Noninterest-earning assets  950,369       886,357     
Total assets $12,274,697      $10,729,169     
             
Liabilities and Stockholders’ Equity            
Interest-bearing liabilities:            
Interest-bearing demand and savings deposits $4,079,436  $102,750 3.37% $3,804,506  $18,742 0.66%
Certificates and other time deposits  2,873,388   85,244 3.97   1,539,861   6,764 0.59 
Advances from FHLB and Other  1,105,592   38,443 4.65   837,254   4,924 0.79 
Subordinated debentures and subordinated notes  229,923   9,252 5.38   231,640   8,206 4.74 
Total interest-bearing liabilities  8,288,339   235,689 3.80   6,413,261   38,636 0.81 
             
Noninterest-bearing liabilities:            
Noninterest-bearing deposits  2,305,745       2,797,110     
Other liabilities  182,040       98,898     
Total liabilities  10,776,124       9,309,269     
Stockholders’ equity  1,498,573       1,419,900     
Total liabilities and stockholders’ equity $12,274,697      $10,729,169     
             
Net interest rate spread2     2.51%     3.20%
Net interest income and margin3   $303,581 3.55%   $258,560 3.48%

1 Includes average outstanding balances of loans held for sale of $23,810 and $12,973 for the nine months ended September 30, 2023 and 2022, respectively, and average balances of LHI, excluding MW.
2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
Yield Trend 
  For the Quarter Ended For the Year Ended
  Sep 30,
2023
 Jun 30,
2023
 Mar 31,
2023
 Dec 31,
2022
 Sep 30,
2022
 Sep 30,
2023
 Sep 30,
2022
Average yield on interest-earning assets:              
Loans1 6.92% 6.85% 6.51% 5.98% 5.01% 6.76% 4.43%
LHI, MW 6.38  5.44  5.52  5.20  4.11  5.78  3.46 
Debt securities 3.87  3.60  3.56  3.36  3.05  3.67  2.92 
Interest-bearing deposits in other banks 5.43  5.16  4.69  3.81  2.17  5.11  0.91 
Equity securities and other investments 4.94  3.25  4.57  3.62  3.25  4.24  2.60 
Total interest-earning assets 6.51% 6.36% 6.06% 5.55% 4.59% 6.31% 4.01%
               
Average rate on interest-bearing liabilities:              
Interest-bearing demand and savings deposits 3.80% 3.37% 2.92% 2.21% 1.23% 3.37% 0.66%
Certificates and other time deposits 4.55  3.92  3.28  1.90  0.94  3.97  0.59 
Advances from FHLB 4.66  4.78  4.46  3.91  1.12  4.65  0.79 
Subordinated debentures and subordinated notes 5.39  5.37  5.38  5.12  4.85  5.38  4.74 
Total interest-bearing liabilities 4.21% 3.86% 3.32% 2.47% 1.27% 3.80% 0.81%
               
Net interest rate spread2 2.30% 2.50% 2.74% 3.08% 3.32% 2.51% 3.20%
Net interest margin3 3.46% 3.51% 3.69% 3.87% 3.77% 3.55% 3.48%

1Includes average outstanding balances of loans held for sale of $28,284, $23,374, $19,679, $15,296 and $14,023 for the three months ended September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, respectively, and average balances of LHI, excluding MW.

2 Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
3 Net interest margin is equal to net interest income divided by average interest-earning assets.

Supplemental Yield Trend

  For the Quarter Ended For the Year Ended
  Sep 30,
2023
 Jun 30,
2023
 Mar 31,
2023
 Dec 31,
2022
 Sep 30,
2022
 Sep 30,
2023
 Sep 30,
2022
Average cost of interest-bearing deposits 4.12% 3.61% 3.06% 2.12% 1.15% 3.62% 0.64%
Average costs of total deposits, including noninterest-bearing 3.15  2.73  2.24  1.46  0.76  2.03  0.31 


VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
LHI and Deposit Portfolio Composition
  Sep 30,
2023
 Jun 30,
2023
 Mar 31,
2023
 Dec 31,
2022
 Sep 30,
2022
   
  (In thousands, except percentages)
LHI1                    
Commercial and Industrial (“C&I”) $2,841,024  30.7% $2,850,084  30.7% $2,895,957  31.3% $2,942,348  32.4% $2,743,769  32.2%
Real Estate:                    
Owner occupied commercial (“OOCRE”)  697,299  7.5   671,602  7.2   631,563  6.8   715,829  7.9   677,705  7.9 
Non-owner occupied commercial (“NOOCRE”)  2,398,060  25.9   2,509,731  27.1   2,505,344  27.1   2,341,379  25.9   2,273,305  26.6 
Construction and land  1,705,053  18.4   1,659,700  17.9   1,831,349  19.8   1,787,400  19.7   1,673,997  19.6 
Farmland  59,684  0.6   51,663  0.6   51,680  0.6   43,500  0.5   43,569  0.5 
1-4 family residential  933,225  10.1   923,442  10.0   896,252  9.7   894,456  9.9   858,693  10.1 
Multi-family residential  603,395  6.7   592,473  6.4   432,209  4.6   322,679  3.6   252,244  3.0 
Consumer  9,845  0.1   11,189  0.1   8,316  0.1   7,806  0.1   7,465  0.1 
Total LHI $9,247,585  100% $9,269,884  100% $9,252,670  100% $9,055,397  100% $8,530,747  100%
                     
MW  390,767     436,255     437,501     446,227     523,805   
                     
Total LHI1 $9,638,352    $9,706,139    $9,690,171    $9,501,624    $9,054,552   
                     
Deposits                    
Noninterest-bearing $2,363,340  23.2% $2,234,109  24.2% $2,212,389  24.5% $2,640,617  28.9% $2,811,412  32.1%
Interest-bearing transaction  739,098  7.2   676,653  7.3   866,609  9.6   622,814  6.8   603,729  6.9 
Money market  3,096,498  30.4   2,816,769  30.5   2,518,922  27.9   2,773,622  30.4   2,701,762  30.9 
Savings  100,474  1.0   96,831  1.0   106,480  1.2   118,293  1.3   132,407  1.5 
Certificates and other time deposits  3,403,427  33.4   2,928,949  31.7   2,896,870  32.0   2,086,642  22.9   1,667,364  19.1 
Correspondent money market accounts  493,681  4.8   480,598  5.2   433,468  4.8   881,246  9.7   831,770  9.5 
Total deposits $10,196,518  100% $9,233,909  100% $9,034,738  100% $9,123,234  100% $8,748,444  100%
                     
Loan to Deposit Ratio  94.5%    105.1%    107.3%    104.1%    103.5%  
                     
Loan to Deposit Ratio, excluding MW  90.7%    100.4%    102.4%    99.3%    97.5%  

1 Total LHI does not include deferred fees of $10.1 million, $12.7 million, $15.5 million, $19.0 million and $17.5 million at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, respectively.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Financial Highlights
(Unaudited)
Asset Quality
 For the Quarter Ended For the Nine Months Ended
 Sep 30,
2023
 Jun 30,
2023
 Mar 31,
2023
 Dec 31,
2022
 Sep 30,
2022
 Sep 30,
2023
 Sep 30,
2022
      
 (In thousands, except percentages)    
NPAs:             
Nonaccrual loans$65,676  $54,055  $31,452  $30,364  $30,592  $65,676  $30,592 
Nonaccrual PCD loans1 13,718   13,721   12,784   13,178      13,718    
Accruing loans 90 or more days past due2 474   528   296   125      474    
Total nonperforming loans held for investment (“NPLs”) 79,868   68,304   44,532   43,667   30,592   79,868   30,592 
Other real estate owned                    
Total NPAs$79,868  $68,304  $44,532  $43,667  $30,592  $79,868  $30,592 
              
Charge-offs:             
OOCRE$(375) $  $(116) $  $(1,061) $(491) $(2,646)
NOOCRE    (8,215)     (1,019)  (838)  (8,215)  (1,391)
C&I (1,929)  (3,540)  (1,051)  (5,449)  (460)  (6,520)  (4,282)
Consumer (49)  (92)  (62)  (41)  (19)  (203)  (1,244)
Total charge-offs (2,353)  (11,847)  (1,229)  (6,509)  (2,378)  (15,429)  (9,563)
              
Recoveries:             
1-4 family residential    1   1   24   4   2   7 
OOCRE          26         245 
NOOCRE 200   150      229   3   350   496 
C&I 308   106   364   415   177   778   893 
Consumer 14   46   6   30   5   66   55 
Total recoveries 522   303   371   724   189   1,196   1,696 
              
Net charge-offs$(1,831) $(11,544) $(858) $(5,785) $(2,189) $(14,233) $(7,867)
              
              
ACL$109,831  $102,150  $98,694  $91,052  $85,037  $109,831  $85,037 
              
Asset Quality Ratios:             
NPAs to total assets 0.65%  0.55%  0.35%  0.36%  0.26%  0.65%  0.26%
NPAs, excluding nonaccrual PCD loans, to total assets 0.54   0.44   0.25   0.25   0.26   0.54   0.26 
NPLs to total LHI 0.83   0.71   0.47   0.48   0.35   0.83   0.38 
NPLs, excluding nonaccrual PCD loans, to total LHI 0.69   0.56   0.33   0.32   0.34   0.69   0.34 
ACL to total LHI 1.14   1.05   1.02   0.96   0.94   1.14   0.94 
Net charge-offs to average loans outstanding3 0.08   0.48   0.04   0.24   0.12   0.20   0.13 

1 Nonaccrual PCD loans consist of PCD loans that transitioned upon adoption of ASC 326 Financial Instruments - Credit Losses and were accounted for on a pooled basis that have subsequently been placed on nonaccrual status.
2 Accruing loans greater than 90 days past due exclude purchase credit deteriorated loans greater than 90 days past due that are accounted for on a pooled basis.
3Annualized ratio for quarterly metrics.

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

We identify certain financial measures discussed in this earnings release as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles as in effect from time to time in the United States (“GAAP”), in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios calculated using exclusively either one or both of (i) financial measures calculated in accordance with GAAP and (ii) operating measures or other measures that are not non-GAAP financial measures.

The non-GAAP financial measures that we present in this earnings release should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we present in this earnings release may differ from that of other companies reporting measures with similar names. You should understand how such other financial institutions calculate their financial measures that appear to be similar or have similar names to the non-GAAP financial measures we have discussed in this earnings release when comparing such non-GAAP financial measures.

Tangible Book Value Per Common Share. Tangible book value is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total stockholders’ equity less goodwill and core deposit intangibles, net of accumulated amortization; and (b) tangible book value per common share as tangible common equity (as described in clause (a)) divided by number of common shares outstanding. For tangible book value per common share, the most directly comparable financial measure calculated in accordance with GAAP is book value per common share.

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

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

  As of
  Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022
   
  (Dollars in thousands, except per share data)
Tangible Common Equity          
Total stockholders' equity $1,491,166  $1,491,280  $1,493,737  $1,449,773  $1,411,899 
Adjustments:          
Goodwill  (404,452)  (404,452)  (404,452)  (404,452)  (404,452)
Core deposit intangibles  (30,933)  (33,371)  (35,808)  (38,247)  (40,684)
Tangible common equity $1,055,781  $1,053,457  $1,053,477  $1,007,074  $966,763 
Common shares outstanding  54,305   54,261   54,229   54,030   53,988 
           
Book value per common share $27.46  $27.48  $27.54  $26.83  $26.15 
Tangible book value per common share $19.44  $19.41  $19.43  $18.64  $17.91 

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

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

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

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

  As of
  Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022
   
  (Dollars in thousands)
Tangible Common Equity          
Total stockholders' equity $1,491,166  $1,491,280  $1,493,737  $1,449,773  $1,411,899 
Adjustments:          
Goodwill  (404,452)  (404,452)  (404,452)  (404,452)  (404,452)
Core deposit intangibles  (30,933)  (33,371)  (35,808)  (38,247)  (40,684)
Tangible common equity $1,055,781  $1,053,457  $1,053,477  $1,007,074  $966,763 
Tangible Assets          
Total assets $12,346,331  $12,470,368  $12,609,487  $12,154,361  $11,714,454 
Adjustments:          
Goodwill  (404,452)  (404,452)  (404,452)  (404,452)  (404,452)
Core deposit intangibles  (30,933)  (33,371)  (35,808)  (38,247)  (40,684)
Tangible Assets $11,910,946  $12,032,545  $12,169,227  $11,711,662  $11,269,318 
Tangible Common Equity to Tangible Assets  8.86%  8.76%  8.66%  8.60%  8.58%

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

Return on Average Tangible Common Equity. Return on average tangible common equity is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) net income available for common stockholders adjusted for amortization of core deposit intangibles (which we refer to as “return”) as net income, plus amortization of core deposit intangibles, less tax benefit at the statutory rate; (b) average tangible common equity as total average stockholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization; and (c) return (as described in clause (a)) divided by average tangible common equity (as described in clause (b)). For return on average tangible common equity, the most directly comparable financial measure calculated in accordance with GAAP is return on average equity.

We believe that this measure is important to many investors in the marketplace who are interested in the return on common equity, exclusive of the impact of core deposit intangibles. Goodwill and core deposit intangibles have the effect of increasing total stockholders’ equity while not increasing our tangible common equity. This measure is particularly relevant to acquisitive institutions that may have higher balances in goodwill and core deposit intangibles than non-acquisitive institutions.

The following table reconciles, as of the dates set forth below, average tangible common equity to average common equity and net income available for common stockholders adjusted for amortization of core deposit intangibles, net of taxes to net income and presents our return on average tangible common equity:

  For the Quarter Ended For the Nine Months Ended
  Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Sep 30, 2023 Sep 30, 2022
   
  (Dollars in thousands)
Net income available for common stockholders adjusted for amortization of core deposit intangibles              
Net income $32,621  $33,730  $38,411  $39,897  $43,322  $104,762  $106,418 
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 $34,547  $35,656  $40,337  $41,823  $45,248  $110,540  $112,196 
               
Average Tangible Common Equity              
Total average stockholders' equity $1,508,170  $1,510,625  $1,476,576  $1,434,818  $1,453,816  $1,498,573  $1,419,900 
Adjustments:              
Average goodwill  (404,452)  (404,452)  (404,452)  (404,452)  (404,452)  (404,452)  (404,308)
Average core deposit intangibles  (32,540)  (34,969)  (37,361)  (39,792)  (42,230)  (34,939)  (41,470)
Average tangible common equity $1,071,178  $1,071,204  $1,034,763  $990,574  $1,007,134  $1,059,182  $974,122 
Return on Average Tangible Common Equity (Annualized)  12.80%  13.35%  15.81%  16.75%  17.82%  13.95%  15.40%

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

Operating Earnings, Pre-tax, Pre-provision Operating Earnings and performance metrics calculated using Operating Earnings and Pre-tax, Pre-provision Operating Earnings, including Diluted Operating Earnings per Share, Operating Return on Average Assets, Pre-tax, Pre-Provision Operating Return on Average Assets, Pre-tax, Pre-Provision Operating Return on Average Loans, Operating Return on Average Tangible Common Equity and Operating Efficiency Ratio. Operating earnings, pre-tax, pre-provision operating earnings and the performance metrics calculated using these metrics, listed below, are non-GAAP measures used by management to evaluate the Company’s financial performance. We calculate (a) operating earnings as net income plus severance payments, plus loss on sale of debt securities AFS, net, 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,
2023
 Jun 30,
2023
 Mar 31,
2023
 Dec 31,
2022
 Sep 30,
2022
 Sep 30,
2023
 Sep 30,
2022
   
  (Dollars in thousands, except per share data)
Operating Earnings              
Net income $32,621 $33,730 $38,411 $39,897 $43,322 $104,762 $106,418
               
Plus: Severance payments1    1,194  756  630    1,950  
Plus: Loss on sale of debt securities AFS, net      5,321      5,321  
Plus: M&A expenses          384    1,379
Operating pre-tax income  32,621  34,924  44,488  40,527  43,706  112,033  107,797
Less: Tax impact of adjustments    251  1,293  132  81  1,544  303
Operating earnings $32,621 $34,673 $43,195 $40,395 $43,625 $110,489 $107,494
               
Weighted average diluted shares outstanding  54,597  54,486  54,606  54,780  54,633  54,563  53,655
Diluted EPS $0.60 $0.62 $0.70 $0.73 $0.79 $1.92 $1.98
Diluted operating EPS $0.60 $0.64 $0.79 $0.74 $0.80 $2.02 $2.00

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

  For the Quarter Ended For the Nine Months Ended
  Sep 30,
2023
 Jun 30,
2023
 Mar 31,
2023
 Dec 31,
2022
 Sep 30,
2022
 Sep 30,
2023
 Sep 30,
2022
   
  (Dollars in thousands)
Pre-Tax, Pre-Provision Operating Earnings              
Net income $32,621  $33,730  $38,411  $39,897  $43,322  $104,762  $106,418 
Plus: Provision for income taxes  9,282   9,725   11,012   11,890   12,248   30,019   28,429 
Plus: Provision for credit losses and unfunded commitments  7,718   13,871   10,882   11,277   7,500   32,471   16,493 
Plus: Severance payments     1,194   756   630      1,950    
Plus: Loss on sale of debt securities AFS, net        5,321         5,321    
Plus: M&A expenses              384      1,379 
Pre-tax, pre-provision operating earnings $49,621  $58,520  $66,382  $63,694  $63,454  $174,523  $152,719 
               
Average total assets $12,259,062  $12,350,223  $12,214,313  $11,761,044  $11,460,857  $12,274,697  $10,729,169 
Pre-tax, pre-provision operating return on average assets1  1.61%  1.90%  2.20%  2.15%  2.20%  1.90%  1.90%
               
Average loans $9,625,005  $9,657,313  $9,501,309  $9,103,552  $8,729,093  $9,594,996  $8,036,208 
Pre-tax, pre-provision operating return on average loans1  2.05%  2.43%  2.83%  2.78%  2.88%  2.43%  2.54%
               
Average total assets $12,259,062  $12,350,223  $12,214,313  $11,761,044  $11,460,857  $12,274,697  $10,729,169 
Return on average assets1  1.06%  1.10%  1.28%  1.35%  1.50%  1.14%  1.33%
Operating return on average assets1  1.06   1.13   1.43   1.36   1.51   1.20   1.34 
               
Operating earnings adjusted for amortization of core deposit intangibles              
Operating earnings $32,621  $34,673  $43,195  $40,395  $43,625  $110,489  $107,494 
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 $34,547  $36,599  $45,121  $42,321  $45,551  $116,267  $113,272 
               
Average Tangible Common Equity              
Total average stockholders' equity $1,508,170  $1,510,625  $1,476,576  $1,434,818  $1,453,816  $1,498,573  $1,419,900 
Adjustments:              
Less: Average goodwill  (404,452)  (404,452)  (404,452)  (404,452)  (404,452)  (404,452)  (404,308)
Less: Average core deposit intangibles  (32,540)  (34,969)  (37,361)  (39,792)  (42,230)  (34,939)  (41,470)
Average tangible common equity $1,071,178  $1,071,204  $1,034,763  $990,574  $1,007,134  $1,059,182  $974,122 
Operating return on average tangible common equity1  12.80%  13.70%  17.68%  16.95%  17.94%  14.68%  15.55%
               
Efficiency ratio  54.49%  49.94%  48.42%  47.63%  44.71%  50.88%  49.05%
Net interest income $99,361  $100,831  $103,389  $106,097  $101,040  $303,581  $258,560 
Noninterest income  9,674   13,692   13,531   14,326   13,021   36,897   38,496 
Plus: Loss on sale of AFS securities, net        5,321         5,321    
Operating noninterest income  9,674   13,692   18,852   14,326   13,021   42,218   38,496 
Noninterest expense  59,414   57,197   56,615   57,359   50,991   173,226   145,716 
Less: Severance payments     1,194   756   630      1,950    
Less: M&A expenses              384      1,379 
Operating noninterest expense $59,414  $56,003  $55,859  $56,729  $50,607  $171,276  $144,337 
Operating efficiency ratio  54.49%  48.90%  45.70%  47.11%  44.37%  49.53%  48.59%

1 Annualized ratio for quarterly metrics.


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