10-Q 1 a2023q2-10q.htm 10-Q Document






UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             .
Commission File Number: 001-36682
VERITEX HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Texas 27-0973566
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
   
8214 Westchester Drive, Suite 800  
Dallas,Texas 75225
(Address of principal executive offices) (Zip code)
(972)349-6200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01VBTXNasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer☒ Accelerated filer ☐
   
Non-accelerated filer☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 7, 2023, there were 54,305,922 outstanding shares of the registrant’s common stock, par value $0.01 per share.





2



PART I. FINANCIAL INFORMATION 

Item 1. Financial Statements
3

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
as of June 30, 2023 and December 31, 2022
(Dollars in thousands, except par value and share information) 
June 30,December 31,
20232022
(Unaudited)
ASSETS
Cash and due from banks$53,166 $60,551 
Interest bearing deposits in other banks610,755 375,526 
Total cash and cash equivalents663,921 436,077 
Debt securities available-for-sale (“AFS”), at fair value961,045 1,096,292 
Debt securities held-to-maturity (“HTM”) (fair value of $158,767 and $158,781, at June 30, 2023 and December 31, 2022, respectively)
182,975 186,168 
Equity securities20,859 19,864 
Investment in unconsolidated subsidiaries1,018 1,018 
Federal Home Loan Bank of Dallas (“FHLB”) Stock and Federal Reserve Bank (“FRB”) Stock117,017 101,568 
Total investments1,282,914 1,404,910 
Loans held for sale (“LHFS”)29,876 20,641 
Loans held for investment (“LHI”), mortgage warehouse (“MW”)436,255 446,227 
LHI, excluding MW 9,257,183 9,036,424 
Less: Allowance for credit losses (“ACL”)(102,150)(91,052)
Total LHI, net9,591,288 9,391,599 
Bank-owned life insurance (“BOLI”)84,375 84,496 
Premises and equipment, net105,986 108,824 
Intangible assets, net of accumulated amortization48,293 53,213 
Goodwill404,452 404,452 
Other assets259,263 250,149 
Total assets$12,470,368 $12,154,361 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Deposits:  
Noninterest-bearing deposits$2,234,109 $2,640,617 
Interest-bearing transaction and savings deposits3,590,253 3,514,729 
Certificates and other time deposits2,928,949 2,086,642 
Correspondent money market deposits480,598 881,246 
Total deposits9,233,909 9,123,234 
Accounts payable and other liabilities190,900 177,579 
Advances from FHLB1,325,000 1,175,000 
Subordinated debentures and subordinated notes229,279 228,775 
Total liabilities10,979,088 10,704,588 
Stockholders’ equity:  
Common stock, $0.01 par value:
Authorized shares - 75,000,000
Issued shares - 60,898,886 and 60,668,049 at June 30, 2023 and December 31, 2022, respectively
609 607 
Additional paid-in capital (“APIC”)1,311,687 1,306,852 
Retained earnings429,753 379,299 
 Accumulated other comprehensive (loss) income (“AOCI”)(83,187)(69,403)
Treasury stock, 6,638,094 and 6,638,094 shares at cost at June 30, 2023 and December 31, 2022, respectively
(167,582)(167,582)
Total stockholders’ equity1,491,280 1,449,773 
Total liabilities and stockholders’ equity$12,470,368 $12,154,361 


See accompanying Notes to Consolidated Financial Statements.
4

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
For the Three and Six Months Ended June 30, 2023 and 2022
(Dollars in thousands, except per share amounts)
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
INTEREST AND DIVIDEND INCOME
Interest and fees on loans$163,727 $82,191 $315,434 $153,634 
Debt securities10,166 9,632 21,154 17,394 
Deposits in financial institutions and Fed Funds sold7,507 714 13,041 976 
Equity securities and other investments1,118 1,057 2,526 1,967 
Total interest and dividend income182,518 93,594 352,155 173,971 
INTEREST EXPENSE
Transaction and savings deposits32,957 4,094 62,814 5,845 
Certificates and other time deposits28,100 1,465 49,067 2,845 
Advances from FHLB17,562 834 29,920 2,381 
Subordinated debentures and subordinated notes3,068 2,721 6,134 5,380 
Total interest expense81,687 9,114 147,935 16,451 
NET INTEREST INCOME100,831 84,480 204,220 157,520 
Provision for credit losses15,000 9,000 24,385 8,500 
(Benefit) provision for credit losses on unfunded commitments(1,129)— 368 493 
Net interest income after provision (benefit) for credit losses86,960 75,480 179,467 148,527 
NONINTEREST INCOME
Service charges and fees on deposit accounts5,272 5,039 10,289 9,749 
Loan fees1,520 2,385 3,584 5,179 
Loss on sales of debt securities— — (5,321)— 
Gain on sale of mortgage LHFS40 223 46 530 
Government guaranteed loan income, net4,144 789 13,832 5,680 
Equity method investment income (loss)485 966 (1,036)1,333 
Customer swap income961 1,321 1,178 2,267 
Other1,270 (345)4,651 737 
Total noninterest income13,692 10,378 27,223 25,475 
NONINTEREST EXPENSE
Salaries and employee benefits28,650 26,924 60,515 54,437 
Occupancy and equipment4,827 4,496 9,800 9,013 
Professional and regulatory fees6,868 2,865 11,257 6,023 
Data processing and software expense4,709 3,386 9,429 6,307 
Marketing2,627 2,306 4,406 3,493 
Amortization of intangibles2,468 2,495 4,963 4,990 
Telephone and communications355 352 833 737 
Merger and acquisition (“M&A”) expense— 295 — 995 
Other6,693 5,034 12,609 8,730 
Total noninterest expense57,197 48,153 113,812 94,725 
Income before income tax expense43,455 37,705 92,878 79,277 
Income tax expense9,725 8,079 20,737 16,181 
NET INCOME$33,730 $29,626 $72,141 $63,096 
Basic earnings per share (“EPS”)$0.62 $0.55 $1.33 $1.21 
Diluted EPS$0.62 $0.54 $1.32 $1.19 
See accompanying Notes to Consolidated Financial Statements.
5

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Unaudited)
For the Three and Six Months Ended June 30, 2023 and 2022
(Dollars in thousands)
Three Months Ended June 30,Six Months Ended
June 30,
2023202220232022
NET INCOME$33,730 $29,626 $72,141 $63,096 
OTHER COMPREHENSIVE INCOME
Net unrealized gains (losses) on debt securities AFS:
Change in net unrealized loss on debt securities AFS during the period, net(21,975)(39,374)(19,428)(88,450)
Amortization (accretion) from transfer of debt securities from AFS to HTM(165)(151)3,457 4,104 
Reclassification adjustment for net losses included in net income— — 5,321 — 
Net unrealized loss on debt securities AFS(22,140)(39,525)(10,650)(84,346)
Net unrealized loss on derivative instruments designated as cash flow hedges(15,033)(11,572)(7,955)(24,953)
Other comprehensive loss, before tax(37,173)(51,097)(18,605)(109,299)
Income tax expense(8,494)(10,699)(4,821)(23,813)
Other comprehensive loss, net of tax(28,679)(40,398)(13,784)(85,486)
COMPREHENSIVE INCOME (LOSS)$5,051 $(10,772)$58,357 $(22,390)

See accompanying Notes to Consolidated Financial Statements.


6


VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) 
For the Three and Six Months Ended June 30, 2023 and 2022
(Dollars in thousands, except share data)
Three Months Ended June 30, 2023
 Common StockTreasury StockAPICRetained
Earnings		AOCITotal 
 SharesAmountSharesAmount
Balance at March 31, 202354,229,033 $609 6,638,094 $(167,582)$1,308,345 $406,873 $(54,508)$1,493,737 
Restricted stock units (“RSU”) vested, net of 2,960 shares withheld to cover taxes
18,425 — — — (56)— — (56)
Exercise of employee stock options, net of 2,343 shares withheld to cover exercise
13,334 — — — 231 — — 231 
Stock based compensation— — — — 3,167 — 3,167 
Net income— — — — — 33,730 — 33,730 
Dividends paid— — — — — (10,850)— (10,850)
Other comprehensive loss— — — — — — (28,679)(28,679)
Balance at June 30, 202354,260,792 $609 6,638,094 $(167,582)$1,311,687 $429,753 $(83,187)$1,491,280 


Three Months Ended June 30, 2022
 Common StockTreasury StockAPICRetained
Earnings		AOCI 
 SharesAmountSharesAmountTotal
Balance at March 31, 202253,908,924 $605 6,638,094 $(167,582)$1,297,161 $298,830 $18,982 $1,447,996 
RSUs vested, net of 3,669 shares withheld to cover taxes
12,885 — — — (155)— — (155)
Exercise of employee stock options29,228 1 — — 520 — — 521 
Stock based compensation— — — — 2,644 — — 2,644 
Net income— — — — — 29,626 — 29,626 
Dividends paid— — — — — (10,792)— (10,792)
Other comprehensive loss— — — — — — (40,398)(40,398)
Balance at June 30, 202253,951,037 $606 6,638,094 $(167,582)$1,300,170 $317,664 $(21,416)$1,429,442 

See accompanying Notes to Consolidated Financial Statements.


7


VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) 
For the Three and Six Months Ended June 30, 2023 and 2022
(Dollars in thousands, except share data)

Six Months Ended June 30, 2023
 Common StockTreasury StockAPICRetained
Earnings		AOCI 
 SharesAmountSharesAmountTotal
Balance at December 31, 202254,029,955 $607 6,638,094 $(167,582)$1,306,852 $379,299 $(69,403)$1,449,773 
RSUs vested, net of 74,425 shares withheld to cover taxes
179,506 2 — — (1,984)— — (1,982)
Exercise of employee stock options, net of 121 and 9,729 shares withheld to cover taxes and exercise, respectively
51,331 — — — 765 — — 765 
Stock based compensation— — — — 6,054 — — 6,054 
Net income— — — — — 72,141 — 72,141 
Dividends paid— — — — — (21,687)— (21,687)
Other comprehensive loss— — — — — — (13,784)(13,784)
Balance at June 30, 202354,260,792 $609 6,638,094 $(167,582)$1,311,687 $429,753 $(83,187)$1,491,280 


Six Months Ended June 30, 2022
 Common StockTreasury StockAPICRetained
Earnings		AOCI 
 SharesAmountSharesAmountTotal
Balance at December 31, 202149,372,329 $560 6,638,094 $(167,582)$1,142,758 $275,273 $64,070 $1,315,079 
RSUs vested, net of 71,634 shares withheld to cover taxes
200,686 2 — — (2,994)— — (2,992)
Exercise of employee stock options, net of 6,905 and 28,064 shares withheld to cover taxes and exercise, respectively
63,548 1 — — 618 — — 619 
Common stock follow-on offering4,314,474 43 153,826 153,869 
Stock based compensation— — — — 5,962 — — 5,962 
Net income— — — — — 63,096 — 63,096 
Dividends paid— — — — — (20,705)— (20,705)
Other comprehensive income— — — — — — (85,486)(85,486)
Balance at June 30, 202253,951,037 $606 6,638,094 $(167,582)$1,300,170 $317,664 $(21,416)$1,429,442 

See accompanying Notes to Consolidated Financial Statements.
8

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2023 and 2022
(Dollars in thousands)

 For the Six Months Ended June 30,
 20232022
Cash flows from operating activities:
Net income$72,141 $63,096 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of fixed assets and intangibles10,041 9,381 
Net amortization of time deposit premium, debt discount and debt issuance costs478 492 
Provision for credit losses and unfunded commitments24,753 8,993 
Accretion of loan discount(1,897)(2,811)
Stock-based compensation expense6,054 5,962 
Excess tax expense (benefit) from stock compensation153 (1,075)
Net amortization of premiums on debt securities1,718 2,016 
Unrealized loss on equity securities recognized in earnings31 869 
Change in cash surrender value and mortality rates of BOLI121 (903)
Loss on sales of debt securities5,321 — 
Change in fair value of government guaranteed loans using fair value option(616)209 
Gain on sales of mortgage LHFS(46)(530)
Gain on sales of government guaranteed loans(15,598)(5,427)
Servicing asset (recoveries), net impairment(862)1,883 
Originations of LHFS(39,877)(30,047)
Proceeds from sales of LHFS34,273 44,115 
Equity method investment loss (income) 1,036 (1,333)
Increase in other assets(6,527)(16,806)
Increase in accounts payable and other liabilities7,620 21,157 
Net cash provided by operating activities98,317 99,241 
Cash flows from investing activities:  
Purchases of AFS debt securities(189,668)(432,678)
Proceeds from sales of AFS debt securities109,793 — 
Proceeds from maturities, calls and pay downs of AFS debt securities197,634 54,530 
Purchases of HTM debt securities— (11,642)
Maturity, calls and paydowns of HTM debt securities2,107 1,518 
Purchases of other investments(16,475)(16,290)
Proceeds from sales of equity securities— 3,327 
Net loans originated(291,810)(1,202,273)
Proceeds from sale of government guaranteed loans79,812 32,041 
Net additions (disposals) to premises and equipment337 (2,026)
Net cash used in investing activities(108,270)(1,573,493)
Cash flows from financing activities:  
Net increase in deposits110,701 1,154,107 
Net increase in advances from FHLB150,000 221,080 
Net change in securities sold under agreement to repurchase— (794)
Net proceeds on sale of common stock in public offering— 153,869 
Payments to tax authorities for stock-based compensation(1,982)(2,992)
Proceeds from exercise of employee stock options765 619 
Dividends paid(21,687)(20,705)
Net cash provided by financing activities237,797 1,505,184 
Net increase in cash and cash equivalents227,844 30,932 
Cash and cash equivalents at beginning of period436,077 379,784 
Cash and cash equivalents at end of period$663,921 $410,716 
See accompanying Notes to Consolidated Financial Statements.
9

VERITEX HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except for per share amounts) 

1. Summary of Significant Accounting Policies
Nature of Organization
In this report, the words “Veritex,” “the Company,” “we,” “us,” and “our” refer to the combined entities of Veritex Holdings, Inc. and its subsidiaries, including Veritex Community Bank. The word “Holdco” refers to Veritex Holdings, Inc. The word “the Bank” refers to Veritex Community Bank.
Veritex is a Texas state banking organization, with corporate offices in Dallas, Texas, and currently operates 18 branches located in the Dallas-Fort Worth metroplex and 11 branches in the Houston metropolitan area. The Bank provides a full range of banking services, including commercial and retail lending and the acceptance of checking and savings deposits, to individual and corporate customers. The Texas Department of Banking and the Board of Governors of the Federal Reserve System (the “Federal Reserve”) are the primary regulators of the Company and the Bank, and both regulatory agencies perform periodic examinations to ensure regulatory compliance.
Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of Veritex Holdings, Inc. and its subsidiaries, including Veritex Community Bank.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), but do not include all of the information and footnotes required for complete financial statements. Intercompany transactions and balances are eliminated in consolidation. In management’s opinion, these unaudited consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair statement of the Company’s consolidated balance sheets at June 30, 2023 and December 31, 2022, consolidated statements of income, consolidated changes in stockholders’ equity and consolidated statements of comprehensive income for the three and six months ended June 30, 2023 and 2022 and consolidated statements of cash flows for the six months ended June 30, 2023 and 2022.

Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end and the results for the interim periods shown herein are not necessarily indicative of results to be expected for the full year due in part to global economic and financial market conditions, interest rates, access to sources of liquidity, market competition and interruptions of business processes. These unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Quarterly Reports on Form 10-Q adopted by the Securities and Exchange Commission (“SEC”). These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 28, 2023.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

10


Reclassifications
Certain items in the Company’s prior year financial statements were reclassified to conform to the current presentation.
EPS
EPS is based upon the weighted average shares outstanding. The table below sets forth the reconciliation between weighted average shares used for calculating basic and diluted EPS for the three and six months ended June 30, 2023 and 2022:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Numerator:
Net income$33,730 $29,626 $72,141 $63,096 
Denominator:
Weighted average shares outstanding for basic EPS54,247 53,949 54,199 52,331 
Dilutive effect of employee stock-based awards239 697 347 790 
Adjusted weighted average shares outstanding54,486 54,646 54,546 53,121 
EPS:
Basic$0.62 $0.55 $1.33 $1.21 
Diluted$0.62 $0.54 $1.32 $1.19 
For the three months ended June 30, 2023, there were 31 antidilutive shares excluded from the diluted EPS weighted average shares outstanding, 18 relating to RSUs and 13 relating to stock options. For the six months ended June 30, 2023, there were 231 antidilutive shares excluded from the diluted EPS weighed average shares outstanding, 180 related to RSUs and 51 relating to stock options.


For the three months ended June 30, 2022, there were 290 antidilutive shares excluded from the diluted EPS weighted average shares outstanding 280 related to RSUs and ten related to stock options. For the six months ended June 30, 2022, there were 205 antidilutive shares excluded from the diluted EPS weighed average shares outstanding, 204 related to RSUs and 1 relating to stock options.

Recent Accounting Pronouncements

There were no accounting standards or updates issued during the second quarter of 2023.

Goodwill

Goodwill resulting from a business combination represents the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill is not amortized but is reviewed for potential impairment annually on October 31 of each fiscal year or when a triggering event occurs. The Company may first assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount, including goodwill. The Company has an unconditional option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test, and the Company may resume performing the qualitative assessment in any subsequent period. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company proceeds to perform the quantitative goodwill impairment test. The quantitative goodwill impairment test, used to identify both the existence of potential impairment and the amount of impairment loss, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Any such adjustments to goodwill are reflected in the results of operations in the periods in which they become known.

11

During the second quarter of 2023, the Company observed a sustained decline in the market valuation of the Company’s common stock as a result of significant volatility in the banking industry with multiple high-profile bank failures and industry wide concerns related to liquidity, deposit outflows, unrealized securities losses and eroding consumer confidence in the banking system. As a result, the Company performed an interim quantitative impairment test with a trigger date of May 31, 2023. The Company determined the fair value of its reporting unit using a combination of a market and an income approach. Upon completion of the quantitative evaluation, the Company determined that the fair value of the Company's reporting unit exceeded its related carrying value by approximately 26%, and therefore goodwill was not impaired. However, changing economic conditions that may adversely affect the Company's performance, the fair value of its assets and liabilities, or its stock price could result in future impairment, which could adversely affect earnings in future periods. Management will continue to monitor events that could impact this conclusion in the future.

2. Supplemental Statement of Cash Flows
Other supplemental cash flow information is presented below:

 Six Months Ended June 30,
 20232022
(in thousands)
Supplemental Disclosures of Cash Flow Information:  
Cash paid for interest$127,174 $16,572 
Cash paid for income taxes23,500 10,000 
Supplemental Disclosures of Non-Cash Flow Information:
Transfer of AFS debt securities to HTM debt securities— 117,001 
Net foreclosure of OREO and repossessed assets— 1,032 
Noncash assets acquired in business combination1
LHI— (681)
Goodwill— 681 
1 Represents adjustments to provisional estimates recorded during the six months ended June 30, 2022 for the acquisition of North Avenue Capital, LLC (“NAC”).

3. Securities
Equity Securities With a Readily Determinable Fair Value
The Company held equity securities with a fair value of $9,761 and $9,792 at June 30, 2023 and December 31, 2022, respectively. The Company did not realize a loss on equity securities with a readily determinable fair value during the six months ended June 30, 2023 or 2022, respectively. The gross unrealized loss recognized on equity securities with readily determinable fair values recorded in other noninterest income in the Company’s consolidated statements of income were as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Unrealized loss recognized on equity securities with a readily determinable fair value$(157)$(356)$(31)$(869)
Equity Securities Without a Readily Determinable Fair Value
The Company held equity securities without a readily determinable fair values and measured at cost of $11,098 and $10,072 as of June 30, 2023 and December 31, 2022, respectively.
Securities Purchased Under Agreements to Resell
12

As of June 30, 2023, we held no securities purchased under agreements to resell and we recognized no interest income during the six months ended June 30, 2023 on securities purchased under agreements to resell. As of June 30, 2022, we held securities purchased under agreements to resell of $99.0 million and we recognized interest income of $585 thousand during the six months ended June 30, 2022 on securities purchased under agreements to resell. Securities purchased under agreements to resell typically mature 30 days from the settlement date, qualify as a secured borrowing and are measured at amortized cost.
Debt Securities
Debt securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost, related gross unrealized gains and losses, ACL and the fair value of AFS and HTM debt securities are as follows:
 June 30, 2023
 Amortized CostGross Unrealized GainsGross Unrealized LossesACLFair Value
AFS
U.S. government agencies$39,708 $4 $— $— $39,712 
Corporate bonds244,322 1,102 36,552 885 207,987 
Municipal securities46,818 — 3,653 — 43,165 
Mortgage-backed securities126,547 15 16,021 — 110,541 
Collateralized mortgage obligations507,796 — 51,972 — 455,824 
Asset-backed securities36,708 454 909 — 36,253 
Collateralized loan obligations69,750 — 2,187 — 67,563 
 $1,071,649 $1,575 $111,294 $885 $961,045 
Amortized CostGross Unrealized GainsGross Unrealized LossesACLFair Value
HTM
Mortgage-backed securities$35,198 $— $6,495 $— $28,703 
Collateralized mortgage obligations35,014 — 5,230 — 29,784 
Municipal securities112,763 — 12,483 — 100,280 
$182,975 $— $24,208 $— $158,767 

13

 December 31, 2022
 Amortized CostGross Unrealized GainsGross Unrealized LossesACLFair Value
AFS
Corporate bonds$268,179 $1,445 $17,379 $— $252,245 
Municipal securities49,886 3 4,198 — 45,691 
Mortgage-backed securities156,408 23 17,420 — 139,011 
Collateralized mortgage obligations609,456 — 55,850 — 553,606 
Asset-backed securities42,015 289 2,613 — 39,691 
Collateralized loan obligations69,750 — 3,702 — 66,048 
 $1,195,694 $1,760 $101,162 $— $1,096,292 
Amortized CostGross Unrealized GainsGross Unrealized LossesACLFair Value
HTM
Mortgage-backed securities$36,342 $— $6,753 $— $29,589 
Collateralized mortgage obligations36,169 — 5,884 — 30,285 
Municipal securities113,657 6 14,756 — 98,907 
$186,168 $6 $27,393 $— $158,781 
Mortgage-backed securities (“MBS”) are commercial MBS, secured by commercial properties, and residential MBS, generally secured by single-family residential properties. All mortgage-backed securities included in the table above were issued by U.S. government agencies or corporations.
The Company elected to transfer 25 AFS debt securities with an aggregate fair value of $117,001 to a classification of HTM debt securities on January 1, 2022. In accordance with FASB ASC 320-10-35-10, the transfer from AFS to HTM must be recorded at the fair value of the AFS debt securities at the time of transfer. The net unrealized holding gain retained in AOCI for securities transferred from AFS to HTM was $3,457 and $3,790 at June 30, 2023 and December 31, 2022, respectively.
The following tables disclose the Company’s AFS debt securities in an unrealized loss position, aggregated by investment category and length of time that individual debt securities have been in a continuous loss position:
14

 June 30, 2023
 Less Than 12 Months12 Months or MoreTotals
 Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss
AFS
Corporate bonds$88,314 $14,686 $97,892 $21,866 $186,206 $36,552 
Municipal securities24,483 351 18,682 3,302 43,165 3,653 
Mortgage-backed securities935 19 108,865 16,002 109,800 16,021 
Collateralized mortgage obligations52,483 2,853 403,341 49,119 455,824 51,972 
Asset-backed securities3,232 147 7,864 762 11,096 909 
Collateralized loan obligations— — 67,563 2,187 67,563 2,187 
 $169,447 $18,056 $704,207 $93,238 $873,654 $111,294 
HTM
Mortgage-backed securities$— $— $28,703 $6,495 $28,703 $6,495 
Collateralized mortgage obligations3,752 280 26,032 4,950 29,784 5,230 
Municipal securities21,077 225 79,203 12,258 100,280 12,483 
 $24,829 $505 $133,938 $23,703 $158,767 $24,208 
 December 31, 2022
 Less Than 12 Months12 Months or MoreTotals
 Fair
Value		Unrealized LossFair
Value		Unrealized LossFair
Value		Unrealized Loss
AFS
Corporate bonds$197,946 $15,697 $15,568 $1,682 $213,514 $17,379 
Municipal securities33,919 848 8,813 3,350 42,732 4,198 
Mortgage-backed securities115,467 11,104 22,780 6,317 138,247 17,421 
Collateralized mortgage obligations482,358 42,553 71,198 13,296 553,556 55,849 
Asset-backed securities15,195 991 11,207 1,621 26,402 2,612 
Collateralized loan obligations23,673 1,328 42,375 2,375 66,048 3,703 
 $868,558 $72,521 $171,941 $28,641 $1,040,499 $101,162 
HTM
Mortgage-backed securities$804 $85 $28,784 $6,668 $29,588 $6,753 
Collateralized mortgage obligations25,285 4,676 4,999 1,208 30,284 5,884 
Municipal securities85,671 11,411 9,161 3,345 94,832 14,756 
$111,760 $16,172 $42,944 $11,221 $154,704 $27,393 

Management evaluates AFS debt securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.
The number of AFS debt securities in an unrealized loss position totaled 148 and 175 at June 30, 2023 and December 31, 2022, respectively. Management does not have the intent to sell any of these debt securities and believes that it is more likely than not that the Company will not have to sell any such debt securities before a recovery of cost. The fair value is expected to recover as the debt securities approach their maturity date or repricing date or if market yields for such investments decline. Accordingly, as of June 30, 2023, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore no losses have been recognized in the Company’s consolidated statements of income.
15

The following table presents the activity in the allowance for credit losses for AFS debt securities:
Six Months Ended June 30,
20232022
Allowance for credit losses:
   Beginning Balance$— $— 
   Credit Loss Expense885 — 
Allowance for credit losses ending balance$885 $— 

    The amortized costs and estimated fair values of AFS and HTM debt securities, by contractual maturity, as of the dates indicated, are shown in the table below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities, collateralized mortgage obligations, asset-backed securities, and collateralized loan obligations typically are issued with stated principal amounts, and the securities are backed by pools of mortgage loans and other loans that have varying maturities. The terms of mortgage-backed securities, collateralized mortgage obligations, asset-backed securities, and collateralized loan obligations thus approximates the terms of the underlying mortgages and loans and can vary significantly due to prepayments. Therefore, these securities are not included in the maturity categories below.
June 30, 2023
AFSHTM
Amortized CostFair ValueAmortized CostFair Value
Due in one year or less$39,708 $39,712 $— $— 
Due from one year to five years43,578 44,452 454 440 
Due from five years to ten years191,277 157,406 13,168 12,744 
Due after ten years56,285 49,294 99,141 87,096 
330,848 290,864 112,763 100,280 
Mortgage-backed securities and collateralized mortgage obligations634,343 566,365 70,212 58,487 
Asset-backed securities36,708 36,253 — — 
Collateralized loan obligations69,750 67,563 — — 
$1,071,649 $961,045 $182,975 $158,767 
December 31, 2022
AFSHTM
Amortized CostFair ValueAmortized CostFair Value
Due in one year or less$— $— $— $— 
Due from one year to five years53,692 54,179 — — 
Due from five years to ten years205,911 190,406 8,275 8,129 
Due after ten years58,462 53,351 105,382 90,778 
318,065 297,936 113,657 98,907 
Mortgage-backed securities and collateralized mortgage obligations765,864 692,617 72,511 59,874 
Asset-backed securities42,015 39,691 — — 
Collateralized loan obligations69,750 66,048 — — 
$1,195,694 $1,096,292 $186,168 $158,781 
16

Proceeds from sales of debt securities AFS and gross gains and losses for the six months ended June 30, 2023 and 2022 were as follows:
Six Months Ended June 30,
20232022
Proceeds from sales (1)
$109,793 $— 
Gross realized losses (1)
5,321 — 
(1) There were no proceeds from sales or gross realized losses for the three months ended June 30, 2023.
As of June 30, 2023 and December 31, 2022, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders' equity. There was a blanket floating lien on all debt securities held by the Company to secure FHLB advances as of June 30, 2023 and December 31, 2022.
17

4. LHI and ACL
LHI in the accompanying consolidated balance sheets are summarized as follows:
 June 30, 2023December 31, 2022
LHI, carried at amortized cost:
Real estate:        
Construction and land$1,659,700 $1,787,400 
Farmland51,663 43,500 
1 - 4 family residential923,442 894,456 
Multi-family residential592,473 322,679 
Owner occupied commercial real estate (“OOCRE”)671,602 715,829 
Non-owner occupied commercial real estate (“NOOCRE”)2,509,731 2,341,379 
Commercial
2,850,084 2,942,348 
MW436,255 446,227 
Consumer11,189 7,806 
9,706,139 9,501,624 
Deferred loan fees, net(12,701)(18,973)
ACL(102,150)(91,052)
Total LHI, net9,591,288 9,391,599 
Included in the total LHI, net, as of June 30, 2023 and December 31, 2022 was an accretable discount related to purchased performing and purchased credit deteriorated (“PCD”) loans acquired in the approximate amounts of $6,798 and $8,260, respectively. The discount is being accreted into income on a level-yield basis over the life of the loans. In addition, included in the net loan portfolio as of June 30, 2023 and December 31, 2022 is a discount on retained loans from sale of originated U.S. Small Business Administration (“SBA”) and U.S. Department of Agriculture (“USDA”) loans of $7,602 and $5,238, respectively. During the year ended December 31, 2022, the Company purchased $223,924 in pooled residential real estate loans at a net discount, with a remaining balance of $167,847 as of June 30, 2023. The remaining net purchase discount of $3,683 and $4,135 is included in the total LHI, net, as of June 30, 2023 and December 31, 2022, respectively. No additional pooled residential real estate loans were purchased during the six months ended June 30, 2023.
ACL
The Company’s estimate of the ACL reflects losses expected over the remaining contractual life of the assets. The activity in the ACL related to LHI is as follows:
 Three Months Ended June 30, 2023
 Construction and LandFarmlandResidentialMultifamilyOOCRENOOCRECommercialConsumerTotal
Balance at beginning of the period$17,314 $168 $9,541 $3,484 $8,813 $26,238 $32,717 $419 $98,694 
Credit loss (benefit) expense non-PCD loans831 2 (331)1,223 (1,286)9,914 5,642 (45)15,950 
Credit (benefit) loss expense PCD loans— — (2)— (8)(212)(728)— (950)
Charge-offs— — — — — (8,215)(3,540)(92)(11,847)
Recoveries— — 1 — — 150 106 46 303 
Ending Balance$18,145 $170 $9,209 $4,707 $7,519 $27,875 $34,197 $328 $102,150 
18

 Three Months Ended June 30, 2022
 Construction and LandFarmlandResidentialMultifamilyOOCRENOOCRECommercialConsumerTotal
Balance at beginning of the period$8,883 $158 $6,134 $2,127 $7,423 $26,954 $20,084 $722 $72,485 
Credit (benefit) loss expense non-PCD loans1,428 (13)1,919 59 185 725 3,068 1,718 9,089 
Credit (benefit) loss expense PCD loans(11)— — — — — 1,178 (1,256)(89)
Charge-offs— — — — (244)— (528)(1,091)(1,863)
Recoveries— — 3 — 245 93 572 41 954 
Ending Balance$10,300 $145 $8,056 $2,186 $7,609 $27,772 $24,374 $134 $80,576 
 Six Months Ended June 30, 2023
 Construction and LandFarmlandResidentialMultifamilyOOCRENOOCRECommercialConsumerTotal
Balance at beginning of the period$13,120 $127 $9,533 $2,607 $8,707 $26,704 $30,142 $112 $91,052 
Credit loss (benefit) expense non-PCD loans5,071 43 (319)2,100 (1,048)9,415 8,638 318 24,218 
Credit (benefit) expense PCD loans(46)— (7)— (24)(179)(462)— (718)
Charge-offs— — — — (116)(8,215)(4,591)(154)(13,076)
Recoveries— — 2 — — 150 470 52 674 
Ending Balance$18,145 $170 $9,209 $4,707 $7,519 $27,875 $34,197 $328 $102,150 
 Six Months Ended June 30, 2022
 Construction and LandFarmlandResidentialMultifamilyOOCRENOOCRECommercialConsumerTotal
Balance at beginning of the period$7,293 $187 $5,982 $2,664 $9,215 $30,548 $21,632 $233 $77,754 
Credit (benefit) loss expense non-PCD loans3,022 (42)2,143 (478)997 (3,389)7,112 2,340 11,705 
Credit (benefit) loss expense PCD loans(15)— (72)— (1,263)673 (1,264)(1,264)(3,205)
Charge-offs— — — — (1,585)(553)(3,822)(1,225)(7,185)
Recoveries— — 3 — 245 493 716 50 1,507 
Ending Balance$10,300 $145 $8,056 $2,186 $7,609 $27,772 $24,374 $134 $80,576 
The majority of the Company's loan portfolio consists of loans to businesses and individuals in the Dallas-Fort Worth metroplex and the Houston metropolitan area. This geographic concentration subjects the loan portfolio to the general economic conditions within these areas. The risks created by this concentration have been considered by management in the determination of the adequacy of the ACL.
A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:
19

June 30, 2023December 31, 2022
 
Real Property(1)
ACL Allocation
Real Property(1)
ACL Allocation
OOCRE$1,157 $— $1,193 $129 
NOOCRE32,897 1,939 20,896 2,138 
Commercial2,317 589 1,240 396 
Mortgage warehouse208 208 — — 
Consumer— — 15 — 
Total$36,579 $2,736 $23,344 $2,663 
(1) Loans reported exclude PCD loans that transitioned upon adoption of ASC 326 and accounted for on a pooled basis.

Nonaccrual and Past Due Loans
Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due in accordance with the terms of the loan agreement. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Nonaccrual loans aggregated by class of loans, as of June 30, 2023 and December 31, 2022, were as follows:
 June 30, 2023December 31, 2022
NonaccrualNonaccrual With No ACLNonaccrualNonaccrual With No ACL
Real estate:        
1 - 4 family residential$1,231 $1,231 $862 $862 
OOCRE10,287 10,287 9,737 8,545 
NOOCRE32,981 25,049 21,377 13,178 
Commercial23,007 1,953 11,397 2,521 
MW208 — — — 
Consumer62 62 169 169 
Total$67,776 $38,582 $43,542 $25,275 
    There were $7,736 and $8,545 of PCD loans that are not accounted for on a pooled basis included in nonaccrual loans at June 30, 2023 and December 31, 2022, respectively.
    During the three and six months ended June 30, 2023, interest income not recognized on nonaccrual loans was $1,996 and $2,768, respectively. During the three and six months ended June 30, 2022, interest income not recognized on non accrual loans was $589 and $1,478, respectively.
An age analysis of past due loans, aggregated by class of loans and including past due nonaccrual loans, as of June 30, 2023 and December 31, 2022, is as follows:
20

 June 30, 2023
 30 to 59 Days60 to 89 Days90 Days or Greater
Total Past Due (1)
Total CurrentPCDTotal
Loans
Total 90 Days Past Due and Still Accruing(2)
Real estate:                            
Construction and land$— $— $— $— $1,659,700 $— $1,659,700 $— 
Farmland— — — — 51,663 — 51,663 — 
1 - 4 family residential2,867 306 996 4,169 918,174 1,099 923,442 197 
Multi-family residential— — — — 592,473 — 592,473 — 
OOCRE4,225 33 1,157 5,415 647,637 18,550 671,602 — 
NOOCRE11,970 — 21,569 33,539 2,462,065 14,127 2,509,731 — 
Commercial1,908 18,441 16,462 36,811 2,809,846 3,427 2,850,084