Veritex Holdings, Inc. Reports Fourth Quarter and Full Year 2022 Results

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 2022				Third Quarter 2022				Fourth Quarter 2021					Full Year 2022				Full 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, 2022				Sep 30, 2022				Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Dec 31, 2022				Dec 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 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
	(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  Balance				Interest  Earned/  Interest  Paid			Average  Yield/  Rate			Average  Outstanding  Balance				Interest  Earned/  Interest  Paid			Average  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,  2022			Sep 30,  2022			Jun 30,  2022			Mar 31,  2022			Dec 31,  2021
Average 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, 2022			Sep 30, 2022			Jun 30, 2022			Mar 31, 2022			Dec 31, 2021
Average 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,  2022				Sep 30,  2022				Jun 30,  2022				Mar 31,  2022				Dec 31,  2021				Dec 31,  2022				Dec 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,  2022				Sep 30,  2022				Jun 30,  2022				Mar 31,  2022				Dec 31,  2021				Dec 31,  2022				Dec 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,  2022			Sep 30,  2022			Jun 30,  2022			Mar 31,  2022			Dec 31,  2021				Dec 31,  2022			Dec 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, 2022				Sep 30, 2022				Jun 30, 2022				Mar 31, 2022				Dec 31, 2021				Dec 31, 2022				Dec 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.

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