Market Overview

National Bank Holdings Corporation Announces Third Quarter 2012 Financial Results

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GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)--

National Bank Holdings Corporation (NYSE: NBHC) reported a net loss of $7.9 million, or $0.15 per diluted share for the third quarter of 2012. Excluding $10.8 million of after tax costs related to the successful initial public offering (IPO), net income for the third quarter of 2012 was $2.9 million, or $0.06 per diluted share, compared to second quarter 2012 net income of $2.7 million, or $0.05 per share. Tangible book value per share grew in the third quarter of 2012 to $19.30 as compared to $19.29 at June 30, 2012.

“During the third quarter we were pleased to have achieved a key corporate milestone with the successful completion of our IPO by listing on the New York Stock Exchange,” said President and Chief Executive Officer Tim Laney. “I am pleased to report that we increased our loan production for the seventh consecutive quarter, grew our strategic loan balances, grew our non-interest bearing demand deposit balances and banking fee revenues while maintaining our focus on maximizing the returns on the acquired problem loans portfolio and managing expenses.”

Third Quarter 2012 Highlights

  • Grew organic loan production for the seventh consecutive quarter, resulting in growth in our strategic loan portfolio.
  • Grew average non-interest bearing demand deposit balances 8.5% annualized, leading to growth in average transaction balances.
  • Lowered the cost of deposits by 10 basis points.
  • Added $14.8 million to accretable yield for the acquired loans accounted for under ASC 310-30 and took $3.7 million in impairments.
  • Tangible book value per share of $19.30 before consideration of the excess accretable yield value of $0.56 per share.
  • Non-performing loans improved to 1.94% of total loans at September 30, 2012 from 2.49% at June 30, 2012.
  • Approximately $375 million in excess strategic capital (above 10% Tier 1 Leverage), which positions us for future growth opportunities.
  • Completed the integration of our acquisitions to a single operating platform.

Third Quarter 2012 Results

(All comparisons refer to the second quarter of 2012, except as noted)

Net Interest Income

Net interest income for the third quarter of 2012 totaled $49.5 million, decreasing $2.4 million or 4.7% from the prior quarter. The decrease was primarily driven by a 3.8% reduction in average earning assets as we successfully exited non-strategic loans and slightly reduced the investment portfolio. In addition, the third quarter net interest margin equaled 3.92% representing a narrowing of 8 basis points from the prior quarter as the continued low interest rate environment provided lower reinvestment yields for the investment portfolio coupled with lower prepayments on acquired non 310-30 loans, thereby decreasing the accelerated recognition of acquisition discounts. The cost of interest bearing liabilities continued its downward trend, declining 10 basis points from the second quarter of 2012.

Loans

Strategic loans grew $39.5 million or 15.0% annualized over the prior quarter to $1.1 billion at September 30, 2012. We increased production across all loan categories and continue to realize success in our residential mortgage promotions as well as the generation of new commercial client relationships. The credit quality of the strategic portfolio continues to be strong with only 0.4% in non-performing loans. Strategic loans include all originated loans in addition to those acquired loans inside our operating markets that meet our credit risk profile. Criteria utilized in the designation of an acquired loan as “strategic” include (a) geography, (b) total relationship with borrower and (c) credit metrics commensurate with our current underwriting standards.

“We continue to build on our focus of strategic loan growth and we now have seven consecutive quarters of increasing loan originations. Our bankers are expanding on existing relationships and cultivating new banking relationships,” said Mr. Laney. “During the third quarter, we increased our originations to $128 million and made progress towards achieving the loan generation potential of our franchise.”

Total loans ended the third quarter, 2012 at $1.9 billion representing a decrease from the prior quarter of $46.3 million or 9.3% annualized. The decrease reflects our strategy of exiting the non-strategic loan portfolio as adversely rated and other non-strategic relationships paid off or paid down. The non-strategic loans totaled $851.5 million at September 30, 2012 and decreased $85.8 million or 36.3% annualized from June 30, 2012.

Deposits

Average transaction deposits (defined as total deposits less time deposits) totaled $2.3 billion and grew 0.7% annualized over the prior quarter. We executed our strategy of building client relationships resulting in average non-interest bearing demand deposits growing 8.5% annualized. Average time deposits totaled $2.1 billion in the third quarter and decreased $235 million as we continued our strategy of only retaining those acquired high rate time deposit clients that were interested in market rate time deposits and developing a banking relationship. At September 30, 2012 the mix of transaction deposits to total deposits improved to 55% from 52% at the end of the prior quarter. We decreased our cost of deposits to 0.59% in the third quarter representing an improvement of 10 basis points from the prior quarter. At September 30, 2012, client deposits and treasury management products (repurchase agreements) comprised 97.8% of total liabilities.

Non-Interest Income

Banking related non-interest income (excludes FDIC related income) totaled $9.4 million for the third quarter, 2012 and increased $0.8 million over the prior quarter. The increase was driven by higher service charges and bank card fees and higher recoveries on loans fully charged off prior to acquisition. Other FDIC loss sharing income totaled $1.5 million in the third quarter and declined $2.6 million versus the prior quarter due to an increase in amounts owed to the FDIC related to gains on the sale of other real estate covered under loss sharing agreements and higher FDIC clawback liability given the favorable actual and anticipated loss experience with the covered assets.

Asset Quality and Provision for Loan Losses

“Our balance sheet continues to have one of the lowest risk profiles in the industry,” stated Chief Financial Officer Brian Lilly. “Our risk weighted assets to total assets ratio of 34% is among the lowest in the industry, and our loan portfolio has several risk mitigants including: 80% of our loan portfolio carries acquisition discounts, 37% have the added protection of FDIC loss share and 50% are accounted for in acquired loan pools which requires a quarterly valuation update.”

Loans accounted for under ASC 310-30 (acquired loan pools) totaled $971.0 million at September 30, 2012. We completed our quarterly fair value re-measurement on the acquired loan pools and transferred $14.8 million from non-accretable to accretable yield while recording $3.7 million of impairment through the provision for credit losses thereby increasing the economic value of the acquired loan pools by an additional $11.1 million for the third quarter and $61.7 million on a life-to-date basis at September 30, 2012. The increase in accretable yield will be recognized over the remaining life of these loan pools with the quarter recognizing just $0.8 million of the third quarter increase in accretable yield.

The non 310-30 loans totaled $967 million at September 30, 2012. These loans are primarily comprised of acquired loans not accounted for under the ASC 310-30 acquired loan pool accounting in addition to originated loans. Non-performing loans to non 310-30 loans was 3.9% at quarter end representing an improvement from 5.4% at the end of the prior quarter. Non-accrual loans were relatively stable at 2.3% of non 310-30 loans at September 30, 2012 versus 2.2% at the end of the prior quarter. Accruing troubled debt restructurings improved to 1.6% of ending third quarter non 310-30 loans versus 3.2% as of June 30, 2012. The improvement in the accruing troubled debt restructurings is primarily attributed to payoffs of two large commercial real estate loans. Net annualized charge-offs for the non 310-30 loans were 51 basis points for the third quarter 2012. The allowance for loan losses attributed to the non 310-30 loans was 1.07% as of September 30, 2012 as the provision for loan losses of $1.6 million covered net charge-offs and provided for new loan growth.

Non-Interest Expense

Non-interest expense totaled $60.0 million during the third quarter of 2012, an increase of $14.7 million from the previous quarter. The increase in non-interest expense during the quarter was due to $12.5 million related to the September IPO and $3.4 million higher OREO costs. IPO-related expenses included $7.6 million related to underwriting fees, legal, printing and accounting costs plus $4.9 million in stock-based compensation expense related to the IPO. The Company recorded the $4.9 million of stock-based compensation expense related to grants that had vesting requirements tied to the IPO which is reflected in the salaries and employee benefits expense line item. Under applicable accounting guidance, we previously deferred this expense recognition until the vesting criteria was met. The linked quarter increase in OREO costs was primarily driven by a large recovery received in the second quarter of 2012 of a previously charged off commercial real estate credit. The OREO and problem loan expense will fluctuate quarterly as we work to resolve the acquired problem asset portfolio.

Capital

Total shareholders' equity increased slightly during the quarter to $1.1 billion at September 30, 2012. The Company's capital ratios continue to be well in excess of federal bank regulatory agency “well capitalized” thresholds. Tangible book value per share increased to $19.30 at September 30, 2012 from $19.29 at June 30, 2012. The tangible common equity to tangible assets ratio ended September 30, 2012 at 18.54% representing an increase of 87 basis points from the prior quarter. This increase was driven by lower total assets at September 30, 2012.

A common convention in the industry is to add the value of the accretable yield to the tangible book value per share. The value of the September 30, 2012 accretable yield balance on the ASC 310-30 loans of $148.9 million would add $1.73 after-tax to the tangible book value per share. A more conservative methodology that management uses values the excess yield, and then considers the timing of the accreted interest income recognition over time. Under this more conservative methodology, the accretable yield on ASC 310-30 loans plus the accretable yield on the FDIC indemnification asset, net, in excess of a 4.5% yield (an approximate yield on new loan originations), and discounted at 5%, would add $0.56 after-tax to our tangible book value per share as of September 30, 2012.

Conference Call

Management will host a conference call to review the results at 8:00 a.m. Eastern Time on Friday, November 2, 2012. Interested parties may listen to this call by dialing (877) 272-6762 (United States)/ (615) 800-6832 (International) using the Conference ID of 58781861 and ask for the National Bank Holding Corporation Third Quarter Earnings conference call. A telephonic replay of the call will be available beginning approximately two hours after the call's completion through November 16, 2012, by dialing (855) 859-2056 (United States)/ (404) 537-3406 (International) using the Conference ID of 58781861. The earnings release and an on-line replay of the call will also be available on the Company's website at www.nationalbankholdings.com by visiting the investor relations area.

About Non-GAAP Financial Measures

Certain of the financial measures and ratios we present, including “tangible assets,” “tangible book value,” “tangible book value per share,” “pre-tax pre-provision net revenue to risk weighted assets,” “adjusted net revenue,” “adjusted non-interest expense,” and “tangible common equity,” are supplemental measures that are not required by, or are not presented in accordance with, accounting principles generally accepted in the United States, or “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.

We believe that these measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however we acknowledge that our non-GAAP financial measures have a number of limitations relative to GAAP financial measures. First, certain non-GAAP financial measures exclude provisions for loan losses and income taxes, and both of these expenses significantly impact our financial statements. Additionally, the items that we exclude in our adjustments are not necessarily consistent with the items that our peers may exclude from their results of operations and key financial measures and therefore may limit the comparability of similarly named financial measures and ratios. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.

A reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.

About National Bank Holdings Corporation

National Bank Holdings Corporation is a bank holding company created to build a leading community bank franchise delivering high quality customer service and committed to shareholder results. National Bank Holdings Corporation currently operates a network of 101 full-service banking centers, with the majority of those banking centers located in Colorado and the greater Kansas City region. Through the Company's subsidiary, NBH Bank, N.A. it operates under the following brand names: Bank Midwest in Kansas and Missouri, Community Banks of Colorado in Colorado and California and Hillcrest Bank in Texas.

Forward Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contain words such as “believes,” “expects,” “may,” “should,” “will,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “targets” or “anticipates” or similar expressions that relate to the Company's strategy, plans or intentions. Forward-looking statements are statements about future, not past, events and involve certain important risks and uncertainties, any of which could cause the Company's actual results to differ materially from those expressed in forward-looking statements, including, without limitation, the factors more fully described under the caption “Risk Factors” in the prospectus filed by us with the Securities and Exchange Commission and: (1) changes in business and economic conditions generally and in the financial services industry; (2) changes in the laws, regulations and the regulatory environment; (3) the Company's ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions of banking franchises on attractive terms, or at all; (4) the Company's ability to achieve organic loan and deposit growth and the composition of such growth; (5) a weakening of the economy which could materially impact credit quality trends and local real estate values; and (6) increased competition in the financial services industry, nationally, regionally or locally. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management's estimates, expectations or beliefs as of such time. For a discussion of additional risks and uncertainties that may affect the future results of the Company, please see the Company's filings with the Securities and Exchange Commission.

 
NATIONAL BANK HOLDINGS CORPORATION
FINANCIAL SUMMARY
(in thousands, except share and per share data)   For the three months ended   For the nine months ended
September 30,   June 30,   September 30, September 30,   September 30,
2012 2012 2011 2012 2011
 
Total interest and dividend income 56,042 59,845 50,567 178,777 136,220
Total interest expense   6,546     7,932     9,814     24,110     30,748  
Net interest income before provision for loan losses   49,496     51,913     40,753     154,667     105,472  
Provision for loan losses on 310-30 loans 3,663 10,456 - 17,398 3,238
Provision for loan losses on non-310-30 loans   1,600     1,770     3,760     7,927     13,208  
Net interest income after provision for loan losses   44,233     39,687     36,993     129,342     89,026  
 
Non-interest income:
FDIC indemnification asset accretion (2,832 ) (2,646 ) (5,976 ) (9,165 ) (2,237 )
Other FDIC loss sharing income 1,503 4,076 (250 ) 9,278 2,410
Service charges 4,466 4,328 4,717 13,170 12,180
Bank card fees 2,484 2,383 1,856 7,168 5,396
Bargain purchase gain - - 60,520 - 60,520
Gain on sales of mortgages, net 283 294 356 886 817
Gain (loss) on sale of securities, net - - (813 ) 674 (621 )
Gain on recoveries of previously charged-off acquired loans 837 257 3,423 2,627 3,470
Other non-interest income   1,322     1,357     233     3,744     2,224  
Total non-interest income   8,063     10,049     64,066     28,382     84,159  
 
Non-interest expense:
Salaries and employee benefits 27,182 22,631 22,098 72,226 52,115
Occupancy and equipment 5,570 4,738 4,392 14,845 9,652
Professional fees 2,669 3,272 3,101 8,612 7,372
Other real estate owned expenses 3,468 63 1,013 12,152 5,466
Problem loan expenses 2,267 2,726 341 6,704 2,366
Intangible asset amortization 1,353 1,331 1,122 4,020 3,079
Initial public offering related expenses 7,566 87 600 7,974 600
Acquisition related costs - 15 3,819 870 4,293
Other non-interest expense   9,882     10,438     10,173     30,828     24,864  
Total non-interest expense   59,957     45,301     46,659     158,231     109,807  
 
Income (loss) before income taxes (7,661 ) 4,435 54,400 (507 ) 63,378
Income tax expense   230     1,733     20,648     3,039     23,868  
Net income $ (7,891 ) $ 2,702   $ 33,752   $ (3,546 ) $ 39,510  
 
(Loss) income per share - basic $ (0.15 ) $ 0.05 $ 0.65 $ (0.07 ) $ 0.76
(Loss) income per share - diluted $ (0.15 ) $ 0.05 $ 0.65 $ (0.07 ) $ 0.76
 
 
NATIONAL BANK HOLDINGS CORPORATION
Consolidated Statements of Condition
(Dollars in thousands)
       
September 30, 2012 June 30, 2012 September 30, 2011 December 31, 2011
 
ASSETS
Cash and due from banks $ 65,452 $ 74,671 $ 62,018 $ 93,862
Due from Federal Reserve Bank of Kansas City 496,893 519,625 1,056,623 1,421,734
Federal funds sold and interest bearing bank deposits   102,354     110,290     288,026     112,541  
Cash and cash equivalents 664,699 704,586 1,406,667 1,628,137
 
Investment securities available-for-sale 1,739,632 1,803,843 2,011,539 1,862,699
Investment securities held-to-maturity 643,661 707,110 - 6,801
Non-marketable securities 33,046 33,076 20,267 29,117
 
Loans receivable, net - covered 711,029 767,683 538,144 952,715
Loans receivable, net - non-covered   1,226,770     1,216,391     1,057,001     1,321,336  
Total loans, net 1,937,799 1,984,074 1,595,145 2,274,051
Allowance for loan losses   (17,496 )   (17,294 )   (7,703 )   (11,527 )
Loans, net 1,920,303 1,966,780 1,587,442 2,262,524
 
Federal Deposit Insurance Corporation ("FDIC") indemnification asset, net 113,195 148,527 73,381 223,402
Other real estate owned 129,345 137,712 94,904 120,636
Premises and equipment, net 118,385 116,908 53,426 87,315
Goodwill 59,630 59,630 52,442 59,630
Intangible assets, net 28,901 30,255 29,385 32,923
Other assets   72,029     80,648     25,400     38,842  
Total assets $ 5,522,826   $ 5,789,075   $ 5,354,853   $ 6,352,026  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing demand deposits $ 648,808 $ 633,936 $ 459,994 $ 678,735
Interest bearing demand deposits 484,760 527,363 450,239 537,160
Savings and money market   1,202,938     1,181,749     865,448     1,062,562  
Total transaction deposits 2,336,506 2,343,048 1,775,681 2,278,457
Time deposits   1,945,218     2,186,501     2,345,332     2,784,596  
Total deposits 4,281,724 4,529,549 4,121,013 5,063,053
 
Securities sold under agreements to repurchase 46,192 57,508 43,197 47,597
Other liabilities   99,075     105,277     96,085     152,647  
Total liabilities 4,426,991 4,692,334 4,260,295 5,263,297
 
Stockholders' equity:
Common Stock, par value $0.01 per share:

400,000,000 shares authorized and 52,191,239 and 52,157,697 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively

522

522 520 522
Additional paid in capital 1,005,627 998,963 997,109 994,705
Retained earnings 42,934 50,825 44,027 46,480
Accumulated other comprehensive income, net of tax   46,752     46,431     52,902     47,022  
Total stockholders' equity   1,095,835     1,096,741     1,094,558     1,088,729  
Total liabilities and stockholders' equity $ 5,522,826   $ 5,789,075   $ 5,354,853   $ 6,352,026  
 
 
COMMON STOCK DATA
Average basic shares outstanding 52,191,239 52,191,239 51,936,280 51,978,744
Average diluted shares outstanding 52,191,239 52,319,170 52,242,834 52,104,021
Ending shares outstanding 52,191,239 52,191,239 51,936,280 52,157,697
Common book value per share $ 21.00 $ 21.01 $ 21.08 $ 20.87
Tangible common book value per share $ 19.30 $ 19.29 $ 19.50 $ 19.10
 
CAPITAL RATIOS
Book equity to assets 19.84 % 18.95 % 20.44 % 17.14 %
Tangible common equity to tangible assets 18.54 % 17.67 % 19.21 % 15.91 %
Leverage ratio 17.71 % 17.02 % 18.30 % 15.10 %
 
       
NATIONAL BANK HOLDINGS CORPORATION
Loan Portfolio Update
   
Strategic/Non-Strategic Period-End Loan Balances:
 
September 30, 2012 June 30, 2012
Strategic Non-strategic Total Strategic Non-strategic Total
Commercial $ 143,255 $ 122,972 $ 266,227 $ 146,082 $ 137,682 $ 283,764
Commercial real estate 287,583 625,041 912,624 289,227 676,689 965,916
Agriculture 145,295 15,961 161,256 129,827 17,216 147,043
Residential real estate 463,034 77,953 540,987 433,670 91,869 525,539
Consumer   47,114   9,591   56,705   47,939   13,873   61,812
Total $ 1,086,281 $ 851,518 $ 1,937,799 $ 1,046,745 $ 937,329 $ 1,984,074
 
Originations:
 
Commercial

Commercial
real estate

Agriculture

Residential real
estate

Consumer Total
First quarter 2011 $ 1,128 $ 5,194 $ 3,101 $ 14,170 $ 1,223 $ 24,816
Second quarter 2011 1,390 2,081 2,476 16,707 2,207 24,861
Third quarter 2011 14,226 818 651 16,908 2,772 35,375
Fourth quarter 2011 9,955 4,062 1,575 35,745 3,083 54,420
First quarter 2012 20,102 18,546 7,570 33,016 3,155 82,389
Second quarter 2012 10,799 6,816 22,444 40,123 4,057 84,239
Third quarter 2012 25,640 11,135 24,328 60,320 6,505 127,928
 
 
Loss-Share Coverage and Accounting Treatment Period End Loan Balances:
 
September 30, 2012
Total covered loans Total non-covered loans
310-30 Non-310-30

Total
covered

310-30 Non-310-30

Total non-
covered

Commercial $ 83,469 $ 57,416 $ 140,885 $ 14,195 $ 111,147 $ 125,342
Commercial real estate 477,427 11,081 488,508 187,344 236,772 424,116
Agriculture 44,738 14,939 59,677 11,206 90,373 101,579
Residential real estate 19,584 2,371 21,955 106,710 412,322 519,032
Consumer   4   -   4   26,359   30,342   56,701
Total $ 625,222 $ 85,807 $ 711,029 $ 345,814 $ 880,956 $ 1,226,770
 
June 30, 2012
Total covered loans Total non-covered loans
310-30 Non-310-30

Total
covered

310-30 Non-310-30

Total non-
covered

Commercial $ 100,037 $ 68,386 168,423 $ 17,675 $ 97,666 115,341
Commercial real estate 504,929 8,905 513,834 201,742 250,340 452,082
Agriculture 46,567 16,759 63,326 12,572 71,145 83,717
Residential real estate 20,046 2,049 22,095 123,386 380,058 503,444
Consumer   5   -   5   33,473   28,334   61,807
Total $ 671,584 $ 96,099 $ 767,683 $ 388,848 $ 827,543 $ 1,216,391
 
           
NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
 
Three months ended September 30, 2012 Three months ended June 30, 2012
Average Average Average Average
Balance Interest Rate Balance Interest Rate
(Dollars in thousands) (Dollars in thousands)
Interest earning assets:
310-30 loans $ 990,661 $ 24,008 9.64 % $ 1,108,322 $ 25,694 9.32 %
Non 310-30 loans 968,652 16,097 6.61 % 927,688 16,900 7.33 %
Investment securities available-for-sale 1,747,254 9,302 2.12 % 1,759,623 10,124 2.31 %
Investment securities held-to-maturity 683,700 5,888 3.43 % 738,196 6,330 3.45 %
Other securities 33,067 377 4.54 % 31,943 384 4.84 %
Interest-bearing deposits   595,383     370   0.25 %   650,759     413   0.26 %
Total interest earning assets $ 5,018,717   $ 56,042   4.44 % $ 5,216,531   $ 59,845   4.61 %
Cash and due from banks 66,467 70,805
Other assets 585,735 623,648
Allowance for loan losses   (15,817 )   (11,375 )
Total assets $ 5,655,102   $ 5,899,609  
 
Interest bearing liabilities:

Savings deposits and interest bearing checking

$ 1,696,972 $ 1,341 0.31 % $ 1,705,916 $ 1,364 0.32 %
Time Deposits 2,063,622 5,178 1.00 % 2,298,782 6,536 1.14 %
Securities sold under agreements to repurchase   53,073     27   0.20 %   62,124     32   0.21 %
Total interest bearing liabilities $ 3,813,667   $ 6,546   0.68 % $ 4,066,822   $ 7,932   0.78 %
Non-interest bearing demand deposits 636,277 622,936
Other liabilities   107,415     115,032  
Total liabilities   4,557,359     4,804,790  
Stockholders' equity   1,097,743     1,094,819  
Total liabilities and stockholders' equity $ 5,655,102   $ 5,899,609  
 
Net interest income $ 49,496   $ 51,913  
Interest rate spread 3.76 % 3.83 %
Net interest earning assets $ 1,205,050   $ 1,149,709  
Net interest margin 3.92 % 4.00 %

Ratio of average interest earning assets to average interest bearing liabilities

131.60 % 128.27 %
 
(1) Originated loans are net of deferred loan fees, less costs.
(2) Loan fees, less costs on originated loans, are included in interest income.
 
 
NATIONAL BANK HOLDINGS CORPORATION
           
Allowance For Loan Losses Analysis:
As of and for the three months ended:
September 30, 2012 June 30, 2012
310-30 Non-310-30 Total 310-30 Non-310-30 Total
Beginning allowance for loan losses $ 7,259 $ 10,035 $ 17,294 $ 3,327 $ 9,081 $ 12,408
Net chargeoffs (3,812 ) (1,249 ) (5,061 ) (6,524 ) (816 ) (7,340 )
Provision 3,663 1,600 5,263 10,456 1,770 12,226
Ending allowance for loan losses $ 7,110 $ 10,386 $ 17,496 $ 7,259 $ 10,035 $ 17,294
 

Annualized net charge-offs to average loans, respectively

1.53 % 0.51 % 1.03 % 2.37 % 0.35 % 1.45 %

% of net charge-offs covered, respectively

69.02 % 21.10 % 57.19 % 97.23 % 0.00 % 86.42 %

Ratio of allowance for loan losses to total loans outstanding at period end, respectively

0.72 % 1.07 % 0.89 % 0.65 % 1.08 % 0.85 %

Ratio of non-performing loans to loans

3.89 % 1.94 % 5.40 % 2.51 %

Ratio of allowance for loan losses to non-performing loans

27.62 % 46.52 % 20.13 % 34.69 %

Ratio of allowance for loan losses to non-covered loans outstanding at period end, respectively

2.06 % 1.18 % 1.43 % 1.87 % 1.21 % 1.42 %

Ratio of allowance for loan losses to non-performing, non-covered loans

34.52 % 58.14 % 23.85 % 41.10 %
 
Total loans $ 990,661 $ 968,652 $ 1,959,313 $ 1,108,322 $ 927,688 $ 2,036,010
Non-covered loans $ 345,814 $ 880,956 $ 1,226,770 $ 388,848 $ 827,543 $ 1,216,391
Total non-performing loans $ - $ 37,606 $ 37,606 $ - $ 49,846 $ 49,846
Non-performing, non-covered loans $ - $ 30,092 $ 30,092 $ - $ 42,077 $ 42,077
 
 
Past Due Loans:
September 30, 2012 June 30, 2012
310-30 Non-310-30 Total 310-30 Non-310-30 Total
Non-accrual loans $ - $ 21,976 $ 21,976 $ - $ 19,959 $ 19,959

Loans 30-89 days past due and still accruing interest

47,772 14,018 61,790 48,860 10,926 59,786

Loans 90 days past due and still accruing interest

  143,953     50     144,003     149,986     345     150,331  
Total past due and non-accrual loans $ 191,725   $ 36,044   $ 227,769   $ 198,846   $ 31,230   $ 230,076  
 

Total past due and non-accrual loans to total loans, respectively

19.74 % 3.73 % 11.75 % 41.00 % 3.38 % 11.60 %

% of total past due and non-accrual loans that carry fair value marks

100.00 % 55.32 % 92.93 % 100.00 % 49.71 % 93.17 %

% of total past due and non-accrual loans that are covered by FDIC loss sharing agreement

56.21 % 5.24 % 61.45 % 52.14 % 4.62 % 56.77 %
 
 
Asset Quality Data (Covered/Non-covered):
September 30, 2012 June 30, 2012
Non-covered

 

Covered Total Non-covered Covered Total
Total non-accrual loans $ 16,597 $ 5,379 $ 21,976 $ 15,891 $ 4,068 $ 19,959
Total accruing loans 90 days past due and still accruing interest 50 - 50 345 - 345
Accruing restructured loans (1)   13,445     2,135     15,580     25,841     3,701     29,542  
Total non-performing loans 30,092 7,514 37,606 42,077 7,769 49,846
OREO 48,008 81,337 129,345 60,219 77,493 137,712
Other repossessed assets   801     530     1,331     821     514     1,335  
Total non-performing assets $ 78,901   $ 89,381   $ 168,282   $ 103,117   $ 85,776   $ 188,893  
 
Allowance for loan losses $ 17,496 $ 17,294
 

Total non-performing loans to loans, respectively

1.55 % 0.39 % 1.94 % 2.12 % 0.39 % 2.51 %

Total non-performing assets to total assets

3.05 % 3.26 %
 
(1) Includes restructured loans less than 90 days past due and still accruing.
 
 
Changes in Accretable Yield
For the three months ended For the nine months ended Life-to-date
Sept 30, 2012 June 30, 2012 Sept 30, 2011 Sept 30, 2012 Sept 30, 2011 Sept 30, 2012
Accretable yield at beginning of period $ 158,082 $ 166,468 $ 75,635 $ 186,494 $ 74,329 $ -
Additions through acquisitions - - 33,696 - 33,696 214,994

Reclassification from non-accretable difference to accretable yield

17,491 18,830 - 46,974 25,098 92,845

Reclassification to non-accretable difference from accretable yield

(2,697 ) (1,521 ) - (8,348 ) (314 ) (8,757 )
Accretion   (24,008 )   (25,695 )   (16,215 )   (76,252 )   (39,693 )   (141,557 )
Accretable yield at end of period $ 148,868   $ 158,082   $ 93,116   $ 148,868   $ 93,116   $ 148,868  
 
       
NATIONAL BANK HOLDINGS CORPORATION
Key Ratios
 
For the three For the three For the three For the nine For the nine
months ended months ended months ended months ended months ended
September 30, June 30, September 30, September 30, September 30,

Key Ratios (1)

2012 2012 2011 2012 2011
Return on average assets -0.56 % 0.18 % 2.49 % -0.08 % 1.08 %
Return on average tangible assets -0.51 % 0.25 % 2.58 % -0.03 % 1.15 %
Adjusted return on average assets (2) (3) 0.28 % 0.28 % 0.30 % 0.26 % 0.42 %
Adjusted return on average tangible assets (2) (3) 0.34 % 0.34 % 0.37 % 0.32 % 0.48 %
Return on average equity -2.86 % 0.99 % 12.28 % -0.43 % 5.12 %
Return on average tangible common equity -2.79 % 1.42 % 13.52 % -0.15 % 5.81 %
Adjusted return on average equity (2) (3) 1.45 % 1.48 % 1.49 % 1.40 % 1.98 %
Adjusted return on average tangible equity (2) (3) 1.91 % 1.96 % 1.88 % 1.86 % 2.40 %
Return on risk weighted assets -1.65 % 0.55 % 8.35 % -0.25 % 3.29 %
Pre-tax, pre-provision net revenue to risk weighted assets (2) -0.50 % 3.37 % 14.39 % 1.74 % 6.65 %
Adjusted pre-tax, pre-provision net revenue to risk weighted assets (2) (3) 2.48 % 3.81 % 2.17 % 3.08 % 3.28 %
Interest-earning assets to interest-bearing liabilities (end of period) (4) 133.44 % 130.30 % 132.45 % 133.44 % 132.45 %
Loans to deposits ratio (end of period) 45.26 % 43.80 % 38.71 % 45.26 % 38.71 %
Non-interest bearing deposits to total deposits (end of period) 15.15 % 14.00 % 11.16 % 15.15 % 11.16 %
Yield on earning assets (4) 4.44 % 4.61 % 4.15 % 4.56 % 4.16 %
Cost of interest bearing liabilities (4) 0.68 % 0.78 % 1.04 % 0.79 % 1.21 %
Interest rate spread (5) 3.76 % 3.83 % 3.11 % 3.77 % 2.95 %
Net interest margin (6) 3.92 % 4.00 % 3.35 % 3.95 % 3.22 %
Non-interest expense to average assets 4.22 % 3.09 % 3.45 % 3.58 % 3.00 %
Adjusted non-interest expense to average assets (2) (3) 3.22 % 2.94 % 2.69 % 3.13 % 2.46 %
Efficiency ratio (7) 101.82 % 70.96 % 43.44 % 84.25 % 56.28 %
Adjusted efficiency ratio (2) (3) 77.09 % 67.45 % 78.18 % 73.72 % 67.34 %
 

Asset Quality Data (8) (9) (10)

Non-performing loans to total loans 1.94 % 2.51 % 2.49 % 1.94 % 2.49 %
Covered non-performing loans to total non-performing loans 19.98 % 15.59 % 35.89 % 19.98 % 35.89 %
Non-performing assets to total assets 3.05 % 3.26 % 2.53 % 3.05 % 2.53 %
Covered non-performing assets to total non-performing assets 53.11 % 45.41 % 52.88 % 53.11 % 52.88 %
Allowance for loan losses to total loans 0.90 % 0.87 % 0.48 % 0.90 % 0.48 %
Allowance for loan losses to total non-covered loans 1.43 % 1.42 % 0.73 % 1.43 % 0.73 %
Allowance for loan losses to non-performing loans 46.52 % 34.69 % 19.40 % 46.52 % 19.40 %
Net charge-offs to average loans 1.03 % 1.45 % 0.24 % 1.25 % 0.77 %
 
 
(1) Ratio is annualized.
(2) Ratio represents non-GAAP financial measure.
(3) "Adjusted" calculations exclude bargain purchase gains, initial public offering related expenses, stock based compensation expense (related to the initial public offering and those not related to the initial public offering), acquisition costs, and loss (gain) on sale of investment securities.
(4) Interest earning assets include assets that earn interest/accretion or dividends, except for the FDIC indemnification asset that earns accretion but is not part of interest earning assets. Any market value adjustments on investment securities are excluded from interest-earning assets. Interest bearing liabilities include liabilities that much be paid interest.
(5) Interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average costs of interest bearing liabilities.
(6) Net interest margin represents net interest income, including accretion income, as a percentage of average interest-earning assets.
(7) The efficiency ratio represents non-interest expense, less intangible asset amortization, as a percentage of net interest income plus non-interest income.
(8) Non-performing loans consists of non-accruing loans, loans 90 days or more past due and still accruing interest and restructured loans, but exclude any loans accounted for under ASC 310-30 in which the pool is still performing. These ratios may therefore not be comparable to similar ratios of our peers.
(9) Non-performing assets include non-performing loans, OREO and other repossessed assets.
(10) Total loans are net of unearned discounts and fees.
 
       
NATIONAL BANK HOLDINGS CORPORATION
Non-GAAP Financial Measures
 
September 30, 2012 June 30, 2012 September 30, 2011 December 31, 2011
 
Total stockholders' equity $ 1,095,835 $ 1,096,741 $ 1,094,558 $ 1,088,729
Less: goodwill (59,630 ) (59,630 ) (52,442 ) (59,630 )
Less: intangibles   (28,901 )   (30,255 )   (29,385 )   (32,923 )
Tangible common equity $ 1,007,304   $ 1,006,856   $ 1,012,731   $ 996,176  
 
Total assets $ 5,522,826 $ 5,789,075 $ 5,354,853 $ 6,352,026
Less: goodwill (59,630 ) (59,630 ) (52,442 ) (59,630 )
Less: intangibles   (28,901 )   (30,255 )   (29,385 )   (32,923 )
Tangible assets $ 5,434,295   $ 5,699,190   $ 5,273,026   $ 6,259,473  
 
Total stockholders' equity to total assets 19.84 % 18.95 % 20.44 % 17.14 %
Less: impact of goodwill -0.88 % -0.85 % -0.79 % -0.79 %
Less: impact of intangibles   -0.42 %   -0.43 %   -0.44 %   -0.44 %
Tangible common equity to tangible assets   18.54 %   17.67 %   19.21 %   15.91 %
 
 
For the
three months ended
September 30, 2012
 
Net loss $ (7,891 )
Add: impact of initial public offering related expenses 7,566
Add: impact of initial public offering related stock-based compensation,

after tax

  3,267  
Total impact of initial public offering related expenses   10,833  
Net income adjusted for initial public offering related items $ 2,942  
 
Loss per share - diluted $ (0.15 )
 
Add: impact of initial public offering related expenses 0.15
Add: impact of initial public offering related stock-based compensation,

after tax

  0.06  
Adjusted income per share - diluted $ 0.06  
 
         
NATIONAL BANK HOLDINGS CORPORATION
Non-GAAP Financial Measures
 
For the three For the three For the three For the nine For the nine
months ended months ended months ended months ended months ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
 
Net income (loss) $ (7,891 ) $ 2,702 $ 33,752 $ (3,546 ) $ 39,510
Less: bargain purchase gain, after tax - - (36,589 ) - (36,589 )
Add: impact of initial public offering related expenses 7,566 87 600 7,974 600
Add: impact of non initial public offering related stock-based compensation, after tax 1,068 1,261 3,536 3,699 8,749
Add: impact of initial public offering related stock-based compensation, after tax 3,267 - - 3,267 -
Add: impact of acquisition costs, after tax - 9 2,309 537 2,595
Less:Gain (loss) on sale of investment securities, after tax   -     -     492     (416 )   375  
Adjusted net revenue, after tax $ 4,010   $ 4,059   $ 4,100   $ 11,515   $ 15,240  
 
Net income (loss) $ (7,891 ) $ 2,702 $ 33,752 $ (3,546 ) $ 39,510
Add: impact of income taxes 230 1,733 20,648 3,039 23,868
Add: impact of provision   5,263     12,226     3,760     25,325     16,446  
Pre-tax, pre-provision net income (2,398 ) 16,661 58,160 24,818 79,824
Less: bargain purchase gain - - (60,520 ) - (60,520 )
Add: impact of initial public offering related expenses 7,566 87 600 7,974 600
Add: impact of non initial public offering related stock-based compensation 1,730 2,076 5,848 5,988 14,471
Add: impact of initial public offering related stock-based compensation 4,934 - - 4,934 -
Add: impact of acquisition costs - 15 3,819 870 4,293
Less: gain (loss) on sale of investment securities   -     -     813     (674 )   621  
Adjusted pre-tax, pre-provision net revenue $ 11,832   $ 18,839   $ 8,720   $ 43,910   $ 39,289  
 
Non-interest expense $ 59,957 $ 45,301 $ 46,659 $ 158,231 $ 109,807
Less: impact of initial public offering related expenses (7,566 ) (87 ) (600 ) (7,974 ) (600 )
Less: impact of non initial public offering related stock-based compensation (1,730 ) (2,076 ) (5,848 ) (5,989 ) (14,471 )
Less: impact of initial public offering related stock-based compensation (4,934 ) - - (4,934 ) -
Less: impact of acquisition costs   -     (15 )   (3,819 )   (870 )   (4,293 )
Adjusted non-interest expense $ 45,727   $ 43,123   $ 36,392   $ 138,464   $ 90,443  
 
         
NATIONAL BANK HOLDINGS CORPORATION
Non-GAAP Financial Measures
 
For the three For the three For the three For the nine For the nine
months ended months ended months ended months ended months ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
 
Return on average assets -0.56 % 0.18 % 2.49 % -0.08 % 1.08 %
Less: bargain purchase gain, after tax 0.00 % 0.00 % -2.70 % 0.00 % -1.00 %
Add: impact of initial public offering related expenses, after tax 0.53 % 0.01 % 0.04 % 0.18 % 0.02 %
Add: impact of non initial public offering related stock-based compensation, after tax 0.08 % 0.09 % 0.26 % 0.08 % 0.24 %
Add: impact of initial public offering related stock-based compensation, after tax 0.23 % 0.00 % 0.00 % 0.07 % 0.00 %
Add: impact of acquisition costs, after tax 0.00 % 0.00 % 0.17 % 0.01 % 0.07 %
Less: gain (loss) on sale of investment securities, after tax 0.00 % 0.00 % 0.04 % -0.01 % 0.01 %
Adjusted return on average assets 0.28 % 0.28 % 0.30 % 0.26 % 0.42 %
 
Return on average tangible assets -0.51 % 0.25 % 2.58 % -0.03 % 1.15 %
Less: bargain purchase gain, after tax 0.00 % 0.00 % -2.74 % 0.00 % -1.02 %
Add: impact of initial public offering related expenses, after tax 0.54 % 0.01 % 0.04 % 0.18 % 0.02 %
Add: impact of non initial public offering related stock-based compensation, after tax 0.08 % 0.09 % 0.27 % 0.08 % 0.24 %
Add: impact of initial public offering related stock-based compensation, after tax 0.23 % 0.00 % 0.00 % 0.07 % 0.00 %
Add: impact of acquisition costs, after tax 0.00 % 0.00 % 0.17 % 0.01 % 0.07 %
Less: gain (loss) on sale of investment securities, after tax 0.00 % 0.00 % 0.04 % -0.01 % 0.01 %
Adjusted return on average tangible assets 0.34 % 0.34 % 0.37 % 0.32 % 0.48 %
 
Return on average equity -2.86 % 0.99 % 12.28 % -0.43 % 5.12 %
Less: bargain purchase gain, after tax 0.00 % 0.00 % -13.32 % 0.00 % -4.74 %
Add: impact of initial public offering related expenses, after tax 2.74 % 0.03 % 0.22 % 0.97 % 0.08 %
Add: impact of non initial public offering related stock-based compensation, after tax 0.39 % 0.46 % 1.29 % 0.45 % 1.13 %
Add: impact of initial public offering related stock-based compensation, after tax 1.18 % 0.00 % 0.00 % 0.40 % 0.00 %
Add: impact of acquisition costs, after tax 0.00 % 0.00 % 0.84 % 0.07 % 0.34 %
Less: gain (loss) on sale of investment securities, after tax 0.00 % 0.00 % 0.18 % -0.05 % 0.05 %
Adjusted return on average equity 1.45 % 1.48 % 1.49 % 1.40 % 1.98 %
 
Return on average tangible equity -2.79 % 1.42 % 13.52 % -0.15 % 5.81 %
Less: bargain purchase gain, after tax 0.00 % 0.00 % -14.37 % 0.00 % -5.14 %
Add: impact of initial public offering related expenses, after tax 2.98 % 0.04 % 0.24 % 1.06 % 0.08 %
Add: impact of non initial public offering related stock-based compensation, after tax 0.42 % 0.51 % 1.39 % 0.49 % 1.23 %
Add: impact of initial public offering related stock-based compensation, after tax 1.29 % 0.00 % 0.00 % 0.43 % 0.00 %
Add: impact of acquisition costs, after tax 0.00 % 0.00 % 0.91 % 0.07 % 0.36 %
Less: gain (loss) on sale of investment securities, after tax 0.00 % 0.00 % 0.19 % -0.06 % 0.05 %
Adjusted return on average tangible equity 1.91 % 1.96 % 1.88 % 1.86 % 2.40 %
 
Net income to risk weighted assets -1.65 % 0.55 % 8.35 % -0.25 % 3.29 %
Add: impact of income taxes 0.05 % 0.35 % 5.11 % 0.21 % 1.99 %
Add: impact of provision 1.10 % 2.47 % 0.93 % 1.78 % 1.37 %
Pre-tax, pre-provision net revenue to risk weighted assets -0.50 % 3.37 % 14.39 % 1.74 % 6.65 %
Less: bargain purchase gain 0.00 % 0.00 % -14.96 % 0.00 % -5.04 %
Add: impact of initial public offering related expenses 1.58 % 0.02 % 0.15 % 0.56 % 0.05 %
Add: impact of non initial public offering related stock-based compensation 0.36 % 0.42 % 1.45 % 0.42 % 1.21 %
Add: impact of initial public offering related stock-based compensation 1.03 % 0.00 % 0.00 % 0.35 % 0.00 %
Add: impact of acquisition costs 0.00 % 0.00 % 0.94 % 0.06 % 0.36 %
Less: gain (loss) on sale of investment securities 0.00 % 0.00 % 0.20 % -0.05 % 0.05 %
Adjusted pre-tax, pre-provision net revenue to risk weighted assets 2.48 % 3.81 % 2.17 % 3.08 % 3.28 %
 
Non-interest expense to average assets 4.22 % 3.09 % 3.45 % 3.58 % 3.00 %
Add: impact of initial public offering related expenses -0.53 % -0.01 % -0.04 % -0.18 % -0.02 %
Add: impact of non initial public offering related stock-based compensation -0.12 % -0.14 % -0.44 % -0.14 % -0.40 %
Add: impact of initial public offering related stock-based compensation -0.35 % 0.00 % 0.00 % -0.11 % 0.00 %
Less: impact of acquisition costs 0.00 % 0.00 % -0.28 % -0.02 % -0.12 %
Adjusted non-interest expense to average assets 3.22 % 2.94 % 2.69 % 3.13 % 2.46 %
 
Efficiency ratio 101.82 % 70.96 % 43.44 % 84.25 % 56.28 %
Less: bargain purchase gain 0.00 % 0.00 % 57.83 % 0.00 % 26.16 %
Add: impact of initial public offering related expenses -13.14 % -0.14 % -1.33 % -4.37 % -0.46 %
Add: impact of non initial public offering related stock-based compensation -3.00 % -3.35 % -12.96 % -3.28 % -11.15 %
Add: impact of initial public offering related stock-based compensation -8.57 % 0.00 % 0.00 % -2.71 % 0.00 %
Add: impact of acquisition costs 0.00 % -0.02 % -8.47 % -0.48 % -3.31 %
Less: gain (loss) on sale of investment securities 0.00 % 0.00 % -0.33 % 0.31 % -0.18 %
Adjusted efficiency ratio 77.09 % 67.45 % 78.18 % 73.72 % 67.34 %
 

National Bank Holdings Corporation
Analysts/Investors:
Brian Lilly, 720-529-3315
Chief Financial Officer
blilly@nationalbankholdings.com
or
Media:
Kris Mapes, 720-529-3372
Executive Assistant
kmapes@nationalbankholdings.com








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