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National Bank Holdings Corporation Announces Record Second Quarter 2018 Financial Results

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National Bank Holdings Corporation Announces Record Second Quarter 2018 Financial Results

PR Newswire

GREENWOOD VILLAGE, Colo., July 24, 2018 /PRNewswire/ -- National Bank Holdings Corporation (NYSE:NBHC) reported: 






















For the quarter


For the quarter - Adjusted(1)



2Q18


1Q18


2Q17


2Q18


1Q18



2Q17

Net income ($000's)


$

17,512


$

8,464


$

9,209


$

17,787


$

14,510


$

9,209

Earnings per share - diluted


$

0.56


$

0.27


$

0.33


$

0.57


$

0.47


$

0.33

Return on average tangible assets



1.31%



0.66%



0.87%



1.33%



1.11%



0.87%

Return on average tangible common equity



13.52%



6.95%



8.21%



13.72%



11.63%



8.21%




















(1)

Adjusted for Peoples, Inc. ("Peoples") acquisition-related costs. See non-GAAP reconciliations below.

NBHC Logo (PRNewsfoto/National Bank Holdings Corporat)

In announcing these results, Chief Executive Officer Tim Laney shared, "Our momentum continued into the second quarter, and we delivered record quarterly adjusted earnings of $0.57 per share.  Each day our teammates strive to build strong client relationships, and this client-centric focus resulted in record loan originations of $351 million for the second quarter.  Our ability to grow loans and maintain a low cost of funds demonstrates our ability to execute on our strategies and generate positive returns for our shareholders.  Average transaction deposits grew 4.7% on an annualized basis from the prior quarter, while the cost of these deposits remained flat at 0.22%.  As we grow our business, we remain focused on strong credit quality and expense management.  Net charge-offs remained low at 0.03% for the quarter, and we drove expense reductions from the prior quarter through efficiencies gained in the integration of Peoples. 

Mr. Laney added, "We believe our positive momentum will continue as we move through the second half of the year.  Our associates are committed to delivering exceptional client service, and through these efforts, our business, shareholders, and the communities we serve will continue to be positively impacted."

Second Quarter 2018 Results
(All comparisons refer to the first quarter of 2018, except as noted)

Net Interest Income
Fully taxable equivalent net interest income totaled $50.5 million and increased $1.8 million, or 3.64% over the prior quarter, and 14.6% annualized.  Fully taxable equivalent net interest margin was 3.95%, widening 0.11% from the prior quarter, driven by 0.13% higher earning asset yields, partially offset by a 0.03% increase in the cost of interest-bearing liabilities.  Originated loan yields increased 0.13%, driven by recent increases in short-term interest rates and higher yields on new loan originations.  In addition, net interest income also included $0.6 million in accelerated accretion benefit from early payoffs of acquired and 310-30 loans, a benefit of 0.05% to the fully taxable equivalent net interest margin this quarter. 

Loans
Originated loans and acquired loans not accounted for under 310-30 ("acquired loans") ended the quarter at $3.7 billion, increasing $152.6 million, or 17.0% annualized, driven by a record volume of loan originations totaling $351.1 million. Commercial loan originations totaled a record $288.9 million for the quarter, increasing 77.6% over the prior quarter and 50.4% over the second quarter last year.  The increase in commercial loan originations drove a 41.2% annualized increase in commercial loans, compared to the prior quarter.

Asset Quality and Provision for Loan Losses
Provision for loan losses of $1.9 million was recorded during the second quarter, driven by the quarter's increase in originated loans. Annualized net charge-offs on originated and acquired loans totaled 0.03%, compared to 0.07% in the prior quarter.  Non-performing originated and acquired loans (comprised of non-accrual loans and non-accrual TDRs) were 0.68% of total originated and acquired loans, compared to 0.66% at March 31, 2018. The originated and acquired allowance for loan losses was 0.86% compared to 0.85% at the prior quarter end.

Acquired problem loans accounted for under 310-30 totaled $83.0 million at June 30, 2018 and decreased $29.4 million during the second quarter primarily as a result of one large acquired 310-30 problem loan transferred out of 310-30 loans to OREO as part of the asset resolution process. The life-to-date economic benefit of the accretable yield transfers, net of impairments, on 310-30 loans totals $290.1 million.

Deposits
Average total deposits increased $12.2 million to $4.6 billion, a 1.1% annualized increase. Average transaction deposits (defined as total deposits less time deposits) increased $40.5 million, a 4.7% annualized increase.  The cost of deposits was 0.42%, increasing 0.01% from the prior quarter, and the cost of transaction deposits remained flat at 0.22%.

Non-Interest Income
Non-interest income totaled $19.6 million, an increase of $1.7 million, primarily due to increases in mortgage banking income, bankcard fees, and other non-interest income. Mortgage banking income increased $0.9 million, or 11.8%, due to higher levels of 1-4 family mortgage loans sold in the secondary market.  Bankcard fees increased $0.3 million and other non-interest income increased $0.6 million

Non-Interest Expense
Non-interest expense totaled $46.8 million and decreased $8.5 million from the prior quarter, driven by lower acquisition expenses and efficiencies realized from the Peoples acquisition, resulting in decreases in salaries and benefits, occupancy and equipment, professional fees and other non-interest expense.  The second quarter included $0.4 million of acquisition costs, included in other non-interest expense, compared to $7.6 million in the first quarter. 

Income tax expense totaled $2.8 million, representing an effective tax rate of 13.8%, compared to an effective tax rate of 16.7% in the prior quarter. Both quarters included tax benefits related to stock-based compensation activity totaling $0.8 million in the second quarter, compared to $0.4 million in the first quarter. The lower tax rate compared to the statutory rate reflects the continued success of our tax strategies and tax exempt income in relation to the pre-tax income.

Capital
Capital ratios continue to be strong and in excess of federal bank regulatory agency "well capitalized" thresholds. Shareholders' equity totaled $660.2 million at June 30, 2018 and increased $14.3 million from the prior quarter end. The increase in shareholders' equity was due to higher retained earnings, which was partially offset by an increase in accumulated other comprehensive loss (AOCI), driven by the fair market value fluctuations of the available-for-sale investment securities portfolio.

Common book value per share increased $0.30 to $21.49 at June 30, 2018. The tangible common book value per share was $17.61 at June 30, 2018 and increased $0.34 primarily due to the increase in retained earnings. Excluding AOCI, the tangible book value increased $0.42 to $18.18. The leverage ratio at June 30, 2018 for the consolidated company and NBH Bank was 9.92% and 8.97%, respectively.

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 June 30, 2018 accretable yield balance on the 310-30 loans of $42.7 million would add $1.06 after-tax to the tangible book value per share. A more conservative methodology that management uses values the excess yield above 5.0% and then considers the timing of the excess accreted interest income recognition discounted at 5.0%. This would add $0.80 after-tax to our tangible book value per share as of June 30, 2018, resulting in a tangible common book value per share of $18.41

Year-Over-Year Review
(All comparisons refer to the first six months of 2017, except as noted)

Fully taxable equivalent net interest income totaled $99.2 million and increased $24.9 million, or 33.6%. Average earning assets increased $849.4 million, or 19.8%, driven by originated loan growth and the Peoples acquisition. The fully taxable equivalent net interest margin widened 0.41% to 3.90% as the yield on earning assets increased 0.42%, led by a 0.43% increase in the originated loan portfolio yields due to short-term rate increases, partially offset by an increase in the cost of deposits of 0.01% from 0.40% to 0.41%.

Loan balances at June 30, 2018 totaled $3.8 billion and increased $737.6 million, or 23.9%, while originated and acquired loans outstanding totaled $3.7 billion and increased $789.1 million, or 26.7%, driven by Peoples acquired loans and an increase in originated loans of $357.8 million, or 12.7%. New loan originations between the two periods totaled $972.4 million, led by commercial loan originations of $737.2 million. The 310-30 loan portfolio declined $51.5 million, or 38.3%.

Total deposits averaged $4.6 billion, increasing $750.3 million, or 19.3%.  The Peoples acquisition added $730 million in total deposits on January 1, 2018, coupled with transaction deposit growth, partially offset by the sale of four banking centers in the second quarter 2017. The mix of transaction deposits to total deposits improved to 75.6% from 70.8% in the prior year.

Provision for loan loss expense on originated and acquired loans was $1.7 million, compared to $5.9 million last year. Annualized net charge-offs on originated and acquired loans totaled 0.05%, compared to 0.00% last year. Non-performing originated and acquired loans decreased to 0.68% of total originated and acquired loans, compared to 1.10% at June 30, 2017, primarily due to the resolution of non-accrual energy loans. The originated and acquired allowance for loan losses totaled 0.86% of total originated and acquired loans compared to 1.18% at June 30, 2017, and decreased as the acquired loans from the Peoples acquisition were recorded at fair value.

Non-interest income for the first six months of 2018 was $37.4 million, representing an increase of $16.7 million, primarily due to the Peoples acquisition. Service charges and bank card interchange fees grew $3.1 million due to organic growth and the addition of Peoples' client base. Mortgage banking income increased $15.8 million, primarily due to increased volume from the acquisition of Peoples. OREO related income increased $0.5 million compared to the prior year. Other non-interest income decreased $2.7 million, primarily driven by a gain on the sale of banking centers during 2017.

Non-interest expense totaled $102.0 million the first six months of 2018, representing an increase of $34.0 million, driven by the Peoples acquisition. The first six months of 2018 included $8.0 million of acquisition costs.

Income tax expense totaled $4.5 million and increased $3.6 million. Income tax expense included a $1.2 million tax benefit from stock compensation activity in the first six months of 2018, compared to $3.4 million in the first six months of 2017. Adjusting for the stock compensation activity, the effective tax rate for the first six months of 2018 would be 17.7%, compared to an adjusted 2017 rate of 23.5%.

Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Wednesday, July 25, 2018. Interested parties may listen to this call by dialing (877) 272-6762 (United States) / (615) 800-6832 (International) using the Conference ID of 7153207 and asking for the National Bank Holdings Corporation Second Quarter Earnings conference call. A telephonic replay of the call will be available beginning approximately two hours after the call's completion through August 2, 2018, by dialing (855) 859-2056 (United States) / (404) 537-3406 (International) using the Conference ID of 7153207. The earnings release 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," "return on average tangible assets," "return on average tangible assets before provision for loan losses and taxes," "return on average tangible common equity," "tangible common book value," "tangible common book value per share," "tangible common equity," "tangible common equity to tangible assets," "adjusted non-interest expense to average assets," "adjusted net income," "adjusted income per share," "adjusted return on average tangible assets," "adjusted return on average tangible common equity," and "fully taxable equivalent" metrics, are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as "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 or by presenting certain metrics on a fully taxable equivalent basis. 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.

These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. 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 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 client service and committed to shareholder results. Through its bank subsidiary, NBH Bank, National Bank Holdings Corporation operates a network of 104 banking centers, serving individual consumers, small, medium and large businesses, and government and non-profit entities. Its banking centers are located in its core footprint of Colorado, the greater Kansas City region, Texas and New Mexico. Its comprehensive residential banking group primarily serves the bank's core footprint with additional offices in Arizona, Nevada and Utah. NBH Bank operates under the following brand names: Bank Midwest in Kansas and Missouri, Community Banks of Colorado in Colorado and Hillcrest Bank in Texas and New Mexico. It also operates as Community Banks Mortgage, a division of NBH Bank, in Arizona, Colorado, Nevada and Utah. Additional information about National Bank Holdings Corporation can be found at www.nationalbankholdings.com.

For more information visit: bankmw.com, cobnks.com, hillcrestbank.com or nbhbank.com. Or, follow us on any of our social media sites:
Bank Midwest: facebook.com/bankmw, twitter.com/bank_mw, instagram.com/bankmw;
Community Banks of Colorado: facebook.com/cobnks, twitter.com/cobnks, instagram.com/cobnks;
Hillcrest Bank: facebook.com/hillcrestbank, twitter.com/hillcrest_bank;
NBH Bank: twitter.com/nbhbank;
or connect with any of our brands on LinkedIn.

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 "anticipate," "believe," "can," "would," "should," "could," "may," "predict," "seek," "potential," "will," "estimate," "target," "plan," "project," "continuing," "ongoing," "expect," "intend" or similar expressions that relate to the Company's strategy, plans or intentions. Forward-looking statements involve certain important risks, uncertainties and other factors, any of which could cause actual results to differ materially from those in such statements. Such factors include, without limitation, the "Risk Factors" referenced in our most recent Form 10-K filed with the Securities and Exchange Commission (SEC), other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, and the following factors: ability to execute our business strategy; business and economic conditions; economic, market, operational, liquidity, credit and interest rate risks associated with the Company's business; effects of any changes in trade, monetary and fiscal policies and laws; changes imposed by regulatory agencies to increase capital standards; effects of inflation, as well as, interest rate, securities market and monetary supply fluctuations; changes in the economy or supply-demand imbalances affecting local real estate values; changes in consumer spending, borrowings and savings habits; the Company's ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions or consolidations; the Company's ability to realize anticipated benefits from enhancements or updates to its core operating systems from time to time without significant change in client service or risk to the Company's control environment; the Company's dependence on information technology and telecommunications systems of third party service providers and the risk of systems failures, interruptions or breaches of security; the Company's ability to achieve organic loan and deposit growth and the composition of such growth; changes in sources and uses of funds; increased competition in the financial services industry; the effect of changes in accounting policies and practices; the share price of the Company's stock; the Company's ability to realize deferred tax assets or the need for a valuation allowance; continued consolidation in the financial services industry; ability to maintain or increase market share and control expenses; costs and effects of changes in laws and regulations and of other legal and regulatory developments; technological changes; the timely development and acceptance of new products and services; the Company's continued ability to attract and maintain qualified personnel; ability to implement and/or improve operational management and other internal risk controls and processes and reporting system and procedures; regulatory limitations on dividends from the Company's bank subsidiary; changes in estimates of future loan reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; widespread natural and other disasters, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; impact of reputational risk; and success at managing the risks involved in the foregoing items. The Company can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of this press release, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.

 

NATIONAL BANK HOLDINGS CORPORATION






FINANCIAL SUMMARY






Consolidated Statements of Operations (Unaudited)





(Dollars in thousands, except share and per share data)





















For the three months ended


For the six months ended


June 30, 


March 31, 


June 30, 


June 30, 


June 30, 


2018


2018


2017


2018


2017

Total interest and dividend income

$

54,911


$

52,791


$

41,332


$

107,702


$

80,072

Total interest expense


5,525



5,144



4,440



10,669



8,458

Net interest income


49,386



47,647



36,892



97,033



71,614

Taxable equivalent adjustment


1,099



1,063



1,389



2,162



2,658

Net interest income FTE(1)


50,485



48,710



38,281



99,195



74,272

Provision for loan losses


1,873



41



4,025



1,914



5,820

Net interest income after provision for loan losses FTE(1)


48,612



48,669



34,256



97,281



68,452

Non-interest income:















Service charges


4,371



4,510



3,546



8,881



6,872

Bank card fees


3,672



3,362



3,134



7,034



5,938

Mortgage banking income


8,911



7,971



594



16,882



1,048

Other non-interest income


2,157



1,602



4,596



3,760



6,480

OREO related income


451



390



86



841



314

Total non-interest income


19,562



17,835



11,956



37,398



20,652

Non-interest expense:















Salaries and benefits


29,123



30,672



19,909



59,795



40,299

Occupancy and equipment


7,190



7,955



5,242



15,145



10,679

Professional fees


738



2,819



1,270



3,557



1,686

Other non-interest expense


8,298



12,324



6,412



20,622



12,644

Problem asset workout


775



781



880



1,556



1,752

Gain on sale of OREO, net


(14)



78



(1,644)



64



(1,756)

Core deposit intangible asset amortization


653



653



1,370



1,306



2,740

Total non-interest expense


46,763



55,282



33,439



102,045



68,044
















Income before income taxes FTE(1)


21,411



11,222



12,773



32,634



21,060

Taxable equivalent adjustment


1,099



1,063



1,389



2,162



2,658

Income before income taxes


20,312



10,159



11,384



30,472



18,402

Income tax expense


2,800



1,695



2,175



4,495



935

Net income

$

17,512


$

8,464


$

9,209


$

25,977


$

17,467

Earnings per share - basic

$

0.57


$

0.28


$

0.34


$

0.85


$

0.65

Earnings per share - diluted

$

0.56


$

0.27


$

0.33


$

0.83


$

0.63




















(1)

Net interest income is presented on a GAAP basis and fully taxable equivalent (FTE) basis, as the Company believes this non-GAAP measure is the preferred industry measurement for this item. The FTE adjustment is for the tax benefit on certain tax exempt loans using the federal tax rate of 21%, 21% and 35% for the three months ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively, and federal tax rate of 21% and 35% for the six months ended June 30, 2018 and June 30, 2017, respectively. See non-GAAP reconciliations below.

 

NATIONAL BANK HOLDINGS CORPORATION







Consolidated Statements of Financial Condition (Unaudited)







(Dollars in thousands, except share and per share data)




















June 30, 2018


March 31, 2018


June 30, 2017


December 31, 2017

ASSETS












Cash and cash equivalents

$

137,917


$

286,870


$

129,827


$

257,364

Investment securities available-for-sale


856,751



917,865



866,714



855,345

Investment securities held-to-maturity


266,197



283,369



294,891



258,730

Non-marketable securities


20,070



14,088



18,468



15,030

Loans


3,825,555



3,702,334



3,087,945



3,178,947

Allowance for loan losses


(32,230)



(30,686)



(34,959)



(31,264)

Loans, net


3,793,325



3,671,648



3,052,986



3,147,683

Loans held for sale


113,057



51,050



7,067



4,629

Other real estate owned


35,469



11,875



14,297



10,491

Premises and equipment, net


111,415



112,038



92,321



93,708

Goodwill


115,027



114,909



59,630



59,630

Intangible assets, net


14,693



15,561



4,210



1,607

Other assets


183,335



178,310



152,358



139,248

Total assets

$

5,647,256


$

5,657,583


$

4,692,769


$

4,843,465

LIABILITIES AND SHAREHOLDERS' EQUITY












Liabilities:












Non-interest bearing demand deposits

$

1,099,601


$

1,083,245


$

870,875


$

902,439

Interest bearing demand deposits


682,998



698,796



418,729



474,607

Savings and money market


1,716,534



1,779,817



1,441,372



1,484,463

Total transaction deposits


3,499,133



3,561,858



2,730,976



2,861,509

Time deposits


1,132,331



1,147,452



1,126,481



1,118,050

Total deposits


4,631,464



4,709,310



3,857,457



3,979,559

Securities sold under agreements to repurchase


73,441



141,187



119,213



130,463

Federal Home Loan Bank advances


188,334



77,335



129,115



129,115

Other liabilities


93,832



83,888



42,497



71,921

Total liabilities


4,987,071



5,011,720



4,148,282



4,311,058

Shareholders' equity:












Common stock


515



515



515



515

Additional paid in capital


1,012,175



1,012,268



971,145



970,668

Retained earnings


81,182



68,008



68,570



60,795

Treasury stock


(416,281)



(420,040)



(494,547)



(493,329)

Accumulated other comprehensive loss, net of tax


(17,406)



(14,888)



(1,196)



(6,242)

Total shareholders' equity


660,185



645,863



544,487



532,407

Total liabilities and shareholders' equity

$

5,647,256


$

5,657,583


$

4,692,769


$

4,843,465

SHARE DATA












Average basic shares outstanding


30,735,427



30,493,689



26,955,187



27,007,799

Average diluted shares outstanding


31,387,175



31,143,528



27,597,443



27,007,799

Ending shares outstanding


30,726,789



30,479,969



26,788,833



26,875,585

Common book value per share

$

21.49


$

21.19


$

20.33


$

19.81

Tangible common book value per share(1)

$

17.61


$

17.27


$

18.32


$

17.94

Tangible common book value per share, excluding accumulated other comprehensive income(1)

$

18.18


$

17.76


$

18.36


$

18.17

CAPITAL RATIOS












Average equity to average assets


11.63%



11.44%



11.66%



11.41%

Tangible common equity to tangible assets(1)


9.79%



9.51%



10.58%



10.06%

Leverage ratio


9.92%



9.59%



10.25%



9.83%

Tier 1 risk-based capital ratio


12.62%



12.43%



13.29%



12.94%

Total risk-based capital ratio


13.47%



13.17%



14.28%



13.82%
















(1)

Represents a non-GAAP financial measure. See non-GAAP reconciliations below.

 

NATIONAL BANK HOLDINGS CORPORATION






Loan Portfolio




(Dollars in thousands)















Period End Loan Balances by Type





























June 30, 2018





June 30, 2018






vs. March 31, 2018




 vs. June 30, 2017


June 30, 2018


March 31, 2018


% Change


June 30, 2017


% Change

Originated:













Commercial:













Commercial and industrial

$

1,611,864


$

1,422,517


13.3%


$

1,273,778


26.5%

Owner-occupied commercial real estate


286,298



274,182


4.4%



221,356


29.3%

Agriculture


188,185



154,922


21.5%



127,361


47.8%

Energy


37,221



40,213


(7.4)%



98,293


(62.1)%

Total commercial


2,123,568



1,891,834


12.2%



1,720,788


23.4%

Commercial real estate non-owner occupied


411,953



424,125


(2.9)%



448,146


(8.1)%

Residential real estate


625,940



630,576


(0.7)%



633,167


(1.1)%

Consumer


23,235



23,082


0.7%



24,797


(6.3)%

  Total originated


3,184,696



2,969,617


7.2%



2,826,898


12.7%














Acquired:













Commercial:













Commercial and industrial


68,509



72,571


(5.6)%



2,077


3,198.5%

Owner-occupied commercial real estate


96,353



110,065


(12.5)%



12,574


666.3%

Agriculture


6,611



6,727


(1.7)%



4,037


63.8%

Total commercial


171,473



189,363


(9.4)%



18,688


817.6%

Commercial real estate non-owner occupied


182,787



211,313


(13.5)%



25,089


628.6%

Residential real estate


200,730



216,579


(7.3)%



81,332


146.8%

Consumer


2,915



3,153


(7.5)%



1,511


92.9%

  Total acquired


557,905



620,408


(10.1)%



126,620


340.6%














ASC 310-30 loans


82,954



112,309


(26.1)%



134,427


(38.3)%

Total loans

$

3,825,555


$

3,702,334


3.3%


$

3,087,945


23.9%











Originated and Acquired Loan Balances by Loan Segment



























June 30, 2018





June 30, 2018






vs. March 31, 2018





 vs. June 30, 2017


June 30, 2018


March 31, 2018


% Change


June 30, 2017


% Change

Commercial

$

2,295,041


$

2,081,197


10.3%


$

1,739,476


31.9%

Commercial real estate non-owner occupied


594,740



635,438


(6.4)%



473,235


25.7%

Residential real estate


826,670



847,155


(2.4)%



714,499


15.7%

Consumer


26,150



26,235


(0.3)%



26,308


(0.6)%

Total originated and acquired loans

$

3,742,601


$

3,590,025


4.2%


$

2,953,518


26.7%














Originations(1)



























Second quarter


First quarter


Fourth quarter


Third quarter


Second quarter


2018


2018


2017


2017


2017

Commercial:














Commercial and industrial

$

232,643


$

123,984


$

167,699


$

73,917


$

159,340

Owner occupied commercial real estate


19,009



23,576



8,937



32,787



6,899

Agriculture


38,220



25,873



14,050



3,335



16,696

Energy


(929)



(10,778)



(8,121)



(6,993)



9,120

  Total commercial


288,943



162,655



182,565



103,046



192,055

Commercial real estate non-owner occupied


28,316



20,694



21,323



46,654



47,312

Residential real estate


30,259



21,698



25,995



28,471



26,979

Consumer


3,588



3,238



1,815



3,122



3,233

Total

$

351,106


$

208,285


$

231,698


$

181,293


$

269,579



















(1)

Originations are defined as closed end funded loans and net fundings under revolving lines of credit. Net fundings under revolving lines of credit were $151,888, $59,236, $65,686, $(12,804) and $68,305 as of the second quarter 2018, first quarter 2018, fourth quarter 2017, third quarter 2017 and second quarter 2017, respectively.

 

NATIONAL BANK HOLDINGS CORPORATION






















Summary of Net Interest Margin





















(Dollars in thousands)


















































For the three months ended


For the three months ended


For the three months ended


June 30, 2018


March 31, 2018


June 30, 2017


Average





Average


Average





Average


Average





Average


balance


Interest


rate


balance


Interest


rate


balance


Interest


rate

Interest earning assets:



























Originated loans FTE(1)(2)

$

3,079,727


$

34,165



4.45%


$

2,954,865


$

31,454



4.32%


$

2,732,733


$

27,481



4.03%

Acquired loans


596,229



8,687



5.84%



639,552



8,930



5.66%



132,596



2,005



6.07%

ASC 310-30 loans


95,033



4,831



20.33%



115,432



5,393



18.69%



136,662



6,180



18.09%

Loans held for sale


83,258



950



4.58%



54,358



566



4.22%



6,691



134



8.03%

Investment securities available-for-sale


916,133



4,840



2.11%



935,359



4,775



2.04%



906,738



4,358



1.92%

Investment securities held-to-maturity


276,141



1,970



2.85%



256,646



1,751



2.73%



305,722



2,131



2.79%

Other securities


16,735



248



5.93%



16,072



244



6.07%



15,657



218



5.57%

Interest earning deposits and securities purchased under agreements to resell


66,019



319



1.94%



168,318



741



1.79%



85,350



214



1.01%

Total interest earning assets FTE(2)

$

5,129,275


$

56,010



4.38%


$

5,140,602


$

53,854



4.25%


$

4,322,149


$

42,721



3.96%

Cash and due from banks

$

95,823








$

99,798








$

66,651







Other assets


424,288









406,903









318,429







Allowance for loan losses


(31,421)









(31,619)









(31,615)







Total assets

$

5,617,965








$

5,615,684








$

4,675,614







Interest bearing liabilities:



























Interest bearing demand, savings and money market deposits

$

2,437,404


$

1,929



0.32%


$

2,408,387


$

1,844



0.31%


$

1,871,814


$

1,424



0.31%

Time deposits


1,138,924



2,935



1.03%



1,167,302



2,790



0.97%



1,147,037



2,479



0.87%

Securities sold under agreements to repurchase


93,625



36



0.15%



132,339



50



0.15%



85,022



40



0.19%

Federal Home Loan Bank advances


132,297



625



1.89%



115,683



460



1.61%



130,795



497



1.52%

Total interest bearing liabilities

$

3,802,250


$

5,525



0.58%


$

3,823,711


$

5,144



0.55%


$

3,234,668


$

4,440



0.55%

Demand deposits

$

1,069,146








$

1,057,622








$

858,299







Other liabilities


92,939









92,076









37,480







Total liabilities


4,964,335









4,973,409









4,130,447







Shareholders' equity


653,630









642,275









545,167







Total liabilities and shareholders' equity

$

5,617,965








$

5,615,684








$

4,675,614







Net interest income FTE(2)




$

50,485








$

48,710








$

38,281




Interest rate spread FTE(2)








3.80%









3.70%









3.41%

Net interest earning assets

$

1,327,025








$

1,316,891








$

1,087,481







Net interest margin FTE(2)








3.95%









3.84%









3.55%

Average transaction deposits


3,506,550









3,466,009









2,730,113







Average total deposits


4,645,474









4,633,311









3,877,150







Ratio of average interest earning assets to average interest bearing liabilities


134.90%









134.44%









133.62%


































(1)

Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.

(2)

Presented on a fully taxable equivalent basis using the statutory tax rate of 21%, 21% and 35% for the three month ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively. The tax equivalent adjustments included above are $1,099, $1,063 and $1,389 for the three months ended June 30, 2018, March 31, 2018and June 30, 2017, respectively.

 

NATIONAL BANK HOLDINGS CORPORATION










Summary of Net Interest Margin










(Dollars in thousands)

























For the six months ended June 30, 2018


For the six months ended June 30, 2017


Average





Average


Average





Average


balance


Interest


rate


balance


Interest


rate

Interest earning assets:
















Originated loans FTE(1)(2)

$

3,017,641


$

65,619


4.39%


$

2,663,528


$

52,323


3.96%

Acquired loans


617,771



17,617


5.75%



137,939



4,179


6.11%

ASC 310-30 loans


105,176



10,224


19.44%



139,416



12,051


17.29%

Loans held for sale


68,888



1,516


4.44%



8,377



279


6.72%

Investment securities available-for-sale


925,693



9,615


2.08%



918,628



8,719


1.90%

Investment securities held-to-maturity


266,447



3,721


2.79%



315,015



4,383


2.78%

Other securities


16,405



492


6.00%



14,527



385


5.30%

Interest earning deposits and securities purchased under agreements to resell


116,886



1,060


1.83%



88,092



411


0.94%

Total interest earning assets FTE(2)

$

5,134,907


$

109,864


4.31%


$

4,285,522


$

82,730


3.89%

Cash and due from banks

$

97,799







$

66,875






Other assets


415,644








319,771






Allowance for loan losses


(31,519)








(30,736)






Total assets

$

5,616,831







$

4,641,432






Interest bearing liabilities:
















Interest bearing demand, savings and money market deposits

$

2,422,976


$

3,773


0.31%


$

1,883,969


$

2,791


0.30%

Time deposits


1,153,034



5,725


1.00%



1,163,338



4,900


0.85%

Securities sold under agreements to repurchase


112,875



86


0.15%



81,693



73


0.18%

Federal Home Loan Bank advances


124,036



1,085


1.76%



89,856



694


1.56%

Total interest bearing liabilities

$

3,812,921


$

10,669


0.56%


$

3,218,856


$

8,458


0.53%

Demand deposits

$

1,063,416







$

841,814






Other liabilities


92,510








39,199






Total liabilities


4,968,847








4,099,869






Shareholders' equity


647,984








541,563






Total liabilities and shareholders' equity

$

5,616,831







$

4,641,432






Net interest income FTE(2)




$

99,195







$

74,272



Interest rate spread FTE(2)







3.75%








3.36%

Net interest earning assets

$

1,321,986







$

1,066,666






Net interest margin FTE(2)







3.90%








3.49%

Average transaction deposits


3,486,392








2,725,783






Average total deposits


4,639,426








3,889,121






Ratio of average interest earning assets to average interest bearing liabilities


134.67%








133.14%

























(1)

Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.

(2)

Presented on a fully taxable equivalent basis using the statutory tax rate of 21% and 35% for the six months ended June 30, 2018 and June 30, 2017, respectively. The tax equivalent adjustments included above are $2,162 and $2,658 for the six months ended June 30, 2018and June 30, 2017, respectively.

 

NATIONAL BANK HOLDINGS CORPORATION



















Allowance for Loan Losses and Asset Quality



















(Dollars in thousands)














































Allowance for Loan Losses Analysis


















































As of and for the three months ended


June 30, 2018


March 31, 2018


June 30, 2017


ASC


Originated





ASC


Originated





ASC


Originated





310-30


and acquired





310-30


and acquired





310-30


and acquired





loans


loans


Total


loans


loans


Total


loans


loans


Total

Beginning allowance for loan losses

$

112


$

30,574


$

30,686


$

71


$

31,193


$

31,264


$

220


$

30,630


$

30,850

Charge-offs


(61)



(335)



(396)





(716)



(716)





(121)



(121)

Recoveries




67



67





97



97





205



205

Provision (recoupment)


150



1,723



1,873



41





41



(78)



4,103



4,025

Ending ALL

$

201


$

32,029


$

32,230


$

112


$

30,574


$

30,686


$

142


$

34,817


$

34,959

Ratio of annualized net charge-offs to average total loans during the period, respectively


0.26%



0.03%



0.03%



0.00%



0.07%



0.07%



0.00%



(0.01)%



(0.01)%

Ratio of ALL to total loans outstanding at period end, respectively


0.24%



0.86%



0.84%



0.10%



0.85%



0.83%



0.11%



1.18%



1.13%

Ratio of ALL to total non-performing loans at period end, respectively(1)


0.00%



124.94%



125.73%



0.00%



129.17%



129.65%



0.00%



107.28%



107.72%

Total loans

$

82,954


$

3,742,601


$

3,825,555


$

112,309


$

3,590,025


$

3,702,334


$

134,427


$

2,953,518


$

3,087,945

Average total loans during the period

$

95,033


$

3,675,956


$

3,770,989


$

115,432


$

3,594,417


$

3,709,849


$

136,662


$

2,865,329


$

3,001,991

Total non-performing loans(1)

$


$

25,635


$

25,635


$


$

23,669


$

23,669


$


$

32,455


$

32,455





























(1)

Loans accounted for under ASC 310-30 may be considered performing, regardless of past due status, if the timing and expected cash flows on these loans can be reasonably estimated and if collection of the new carrying value is expected.



 

Originated and Acquired Loans


















June 30, 2018


March 31, 2018


June 30, 2017

Loans 30-89 days past due and still accruing interest

$

9,587


$

6,029


$

4,415

Loans 90 days past due and still accruing interest


1,104



1,767



215

Non-accrual loans


25,635



23,669



32,455

Total past due and non-accrual loans

$

36,326


$

31,465


$

37,085

Total 90 days past due and still accruing interest and non-accrual loans to total originated and acquired loans


0.71%



0.71%



1.11%

Total non-accrual loans to total originated and acquired loans


0.68%



0.66%



1.10%

 

NATIONAL BANK HOLDINGS CORPORATION





Asset Quality







(Dollars in thousands)
















Asset Quality Data



















June 30, 2018


March 31, 2018


June 30, 2017

Non-performing loans

$

25,635


$

23,669


$

32,455

OREO:









Originated and acquired


5,905



5,774



8,392

Transferred from 310-30 loans


29,564



6,101



5,905

 Total OREO


35,469



11,875



14,297

Total non-performing assets

$

61,104


$

35,544


$

46,752

Accruing restructured loans

$

6,939


$

8,678


$

5,177

Total non-performing loans to total loans


0.67%



0.64%



1.05%

Total non-performing assets to total loans and OREO


1.58%



0.96%



1.51%

Total non-performing assets (excluding OREO transferred from 310-30 loans) to total loans and OREO (excluding OREO transferred from 310-30)


0.82%



0.79%



1.32%

 

Changes in Accretable Yield























For the three months ended


Life-to-date


June 30, 2018


March 31, 2018


June 30, 2017


June 30, 2018

Accretable yield at beginning of period

$

45,193


$

46,568


$

59,591


$

Additions through acquisitions








214,996

Reclassification from non-accretable difference to accretable yield


2,644



5,409



2,347



290,098

Reclassification to non-accretable difference from accretable yield


(304)



(1,391)



(95)



(37,263)

Accretion


(4,831)



(5,393)



(6,180)



(425,129)

Accretable yield at end of period

$

42,702


$

45,193


$

55,663


$

42,702

 

NATIONAL BANK HOLDINGS CORPORATION






Key Ratios





















As of and for the three months ended


As of and for the six months ended


June 30, 


March 31, 


June 30, 


June 30, 


June 30, 


2018


2018


2017


2018


2017

Key Ratios(1)










Return on average assets

1.25%


0.61%


0.79%


0.93%


0.76%

Return on average tangible assets(2)

1.31%


0.66%


0.87%


0.99%


0.84%

Return on average tangible assets, adjusted(2)

1.33%


1.11%


0.87%


1.22%


0.84%

Return on average equity

10.75%


5.34%


6.78%


8.08%


6.50%

Return on average tangible common equity(2)

13.52%


6.95%


8.21%


10.29%


7.93%

Return on average tangible common equity, adjusted(2)

13.72%


11.63%


8.21%


12.71%


7.93%

Loans to deposits ratio (end of period)

82.60%


78.62%


80.05%


82.60%


80.05%

Non-interest bearing deposits to total deposits (end of period)

23.74%


23.00%


22.58%


23.74%


22.58%

Net interest margin(4)

3.86%


3.76%


3.42%


3.81%


3.37%

Net interest margin FTE(2)(4)

3.95%


3.84%


3.55%


3.90%


3.49%

Interest rate spread FTE(5)

3.80%


3.70%


3.41%


3.75%


3.36%

Yield on earning assets(3)

4.29%


4.16%


3.84%


4.23%


3.77%

Yield on earning assets FTE(2)(3)

4.38%


4.25%


3.96%


4.31%


3.89%

Cost of interest bearing liabilities(3)

0.58%


0.55%


0.55%


0.56%


0.53%

Cost of deposits

0.42%


0.41%


0.40%


0.41%


0.40%

Non-interest income to total revenue FTE

27.93%


26.80%


23.80%


27.38%


21.76%

Non-interest expense to average assets

3.34%


3.99%


2.87%


3.66%


2.96%

Non-interest expense to average assets, adjusted(2)

3.31%


3.44%


2.87%


3.95%


2.96%

Efficiency ratio FTE(2)(6)

65.83%


82.09%


63.83%


73.75%


68.80%

Efficiency ratio FTE, adjusted for acquisition-related costs(2)(6)

65.31%


70.68%


63.83%


67.93%


68.80%











Originated and Acquired Loans Asset Quality Data(7)(8)(9)










Non-performing loans to total loans

0.68%


0.66%


1.10%


0.68%


1.10%

Allowance for loan losses to total loans

0.86%


0.85%


1.18%


0.86%


1.18%

Allowance for loan losses to non-performing loans

124.94%


129.17%


107.28%


124.94%


107.28%

Net charge-offs (recoveries) to average loans(1)

0.03%


0.07%


(0.01)%


0.05%


0.00%











Total Loans Asset Quality Data(7)(8)(9)










Non-performing loans to total loans

0.67%


0.64%


1.05%


0.67%


1.05%

Non-performing assets to total loans and OREO

1.58%


0.96%


1.51%


1.58%


1.51%

Allowance for loan losses to total loans

0.84%


0.83%


1.13%


0.84%


1.13%

Allowance for loan losses to non-performing loans

125.73%


129.65%


107.72%


125.73%


107.72%

Net charge-offs (recoveries) to average loans(1)

0.03%


0.07%


(0.01)%


0.05%


0.00%













(1)

Ratios are annualized.

(2)

Ratio represents non-GAAP financial measure. See non-GAAP reconciliations below.

(3)

Interest earning assets include assets that earn interest/accretion or dividends. Any market value adjustments on investment securities are excluded from interest earning assets. Interest bearing liabilities include liabilities that must be paid interest.

(4)

Net interest margin represents net interest income, including accretion income on interest earning assets, as a percentage of average interest earning assets.

(5)

Interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average cost of interest bearing liabilities.

(6)

The efficiency ratio represents non-interest expense, less intangible asset amortization, as a percentage of net interest income on a FTE basis plus non-interest income.

(7)

Non-performing loans consist of non-accruing loans and restructured loans on non-accrual, 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.

(8)

Non-performing assets include non-performing loans, other real estate owned and other repossessed assets.

(9)

Total loans are net of unearned discounts and fees.

 

NATIONAL BANK HOLDINGS CORPORATION






NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS






(Dollars in thousands, except share and per share data)


















Tangible Common Book Value Ratios























June 30, 2018


March 31, 2018


June 30, 2017


December 31, 2017

Total shareholders' equity

$

660,185


$

645,863


$

544,487


$

532,407

Less: goodwill and core deposit intangible assets, net


(125,805)



(126,340)



(63,840)



(61,237)

Add: deferred tax liability related to goodwill


6,869



6,878



10,098



10,873

Tangible common equity (non-GAAP)

$

541,249


$

526,401


$

490,745


$

482,043













Total assets

$

5,647,256


$

5,657,583


$

4,692,769


$

4,843,465

Less: goodwill and core deposit intangible assets, net


(125,805)



(126,340)



(63,840)



(61,237)

Add: deferred tax liability related to goodwill


6,869



6,878



10,098



10,873

Tangible assets (non-GAAP)

$

5,528,320


$

5,538,121


$

4,639,027


$

4,793,101













Tangible common equity to tangible assets calculations:












Total shareholders' equity to total assets


11.69%



11.42%



11.60%



10.99%

Less: impact of goodwill and core deposit intangible assets, net


(1.90)%



(1.91)%



(1.02)%



(0.93)%

Tangible common equity to tangible assets (non-GAAP)


9.79%



9.51%



10.58%



10.06%













Tangible common book value per share calculations:












Tangible common equity (non-GAAP)

$

541,249


$

526,401


$

490,745


$

482,043

Divided by: ending shares outstanding


30,726,789



30,479,969



26,788,833



26,875,585

Tangible common book value per share (non-GAAP)

$

17.61


$

17.27


$

18.32


$

17.94













Tangible common book value per share, excluding accumulated other comprehensive loss calculations:












Tangible common equity (non-GAAP)

$

541,249


$

526,401


$

490,745


$

482,043

Accumulated other comprehensive loss, net of tax


17,406



14,888



1,196



6,242

Tangible common book value, excluding accumulated other comprehensive loss, net of tax (non-GAAP)


558,655



541,289



491,941



488,285

Divided by: ending shares outstanding


30,726,789



30,479,969



26,788,833



26,875,585

Tangible common book value per share, excluding accumulated other comprehensive loss, net of tax (non-GAAP)

$

18.18


$

17.76


$

18.36


$

18.17

 

NATIONAL BANK HOLDINGS CORPORATION





(Dollars in thousands, except share and per share data)






















Return on Average Tangible Assets and Return on Average Tangible Equity

















As of and for the three months ended


As of and for the six months ended


June 30, 2018


March 31, 2018


June 30, 2017


June 30, 2018


June 30, 2017

Net income

$

17,512


$

8,464


$

9,209


$

25,977


$

17,467

Add: impact of core deposit intangible amortization expense, after tax


496



496



836



993



1,671

Net income adjusted for impact of core deposit intangible amortization expense, after tax

$

18,008


$

8,960


$

10,045


$

26,970


$

19,138
















Average assets

$

5,617,965


$

5,615,684


$

4,675,614


$

5,616,831


$

4,641,432

Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill


(119,257)



(119,158)



(54,420)



(119,600)



(55,102)

Average tangible assets (non-GAAP)

$

5,498,708


$

5,496,526


$

4,621,194


$

5,497,231


$

4,586,330
















Average shareholders' equity

$

653,630


$

642,275


$

545,167


$

647,984


$

541,563

Less: average goodwill and core deposit intangible assets, net of deferred tax liability related to goodwill


(119,257)



(119,158)



(54,420)



(119,600)



(55,102)

Average tangible common equity (non-GAAP)

$

534,373


$

523,117


$

490,747


$

528,384


$

486,461
















Return on average assets


1.25%



0.61%



0.79%



0.93%



0.76%

Return on average tangible assets (non-GAAP)


1.31%



0.66%



0.87%



0.99%



0.84%

Return on average equity


10.75%



5.34%



6.78%



8.08%



6.50%

Return on average tangible common equity (non-GAAP)


13.52%



6.95%



8.21%



10.29%



7.93%
















Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin

















As of and for the three months ended


As of and for the six months ended


June 30, 2018


March 31, 2018


June 30, 2017


June 30, 2018


June 30, 2017

Interest income

$

54,911


$

52,791


$

41,332


$

107,702


$

80,072

Add: impact of taxable equivalent adjustment


1,099



1,063



1,389



2,162



2,658

Interest income FTE (non-GAAP)

$

56,010


$

53,854


$

42,721


$

109,864


$

82,730
















Net interest income

$

49,386


$

47,647


$

36,892


$

97,033


$

71,614

Add: impact of taxable equivalent adjustment


1,099



1,063



1,389



2,162



2,658

Net interest income FTE (non-GAAP)

$

50,485


$

48,710


$

38,281


$

99,195


$

74,272
















Average earning assets

$

5,129,275


$

5,140,602


$

4,322,149


$

5,134,907


$

4,285,522

Yield on earning assets


4.29%



4.16%



3.84%



4.23%



3.77%

Yield on earning assets FTE (non-GAAP)


4.38%



4.25%



3.96%



4.31%



3.89%

Net interest margin


3.86%



3.76%



3.42%



3.81%



3.37%

Net interest margin FTE (non-GAAP)


3.95%



3.84%



3.55%



3.90%



3.49%

 

Adjusted Financial Results
















As of and for the


As of and for the



three months ended


three months ended



June 30, 2018


March 31, 2018

Adjustments to net  income:







Net income


$

17,512


$

8,464

Adjustments (non-GAAP)(1)



275



6,046

Adjusted net income (non-GAAP)


$