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National Bank Holdings Corporation Announces Second Quarter 2020 Financial Results

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DENVER, July 21, 2020 (GLOBE NEWSWIRE) -- National Bank Holdings Corporation (NYSE:NBHC) reported:

                                     
    For the quarter   For the quarter - adjusted(1)
    2Q20   1Q20   2Q19   2Q20   1Q20     2Q19
Net income ($000's)   $  17,705     $  15,824     $  20,282     $  19,015     $  15,824     $  20,282  
Earnings per share - diluted   $  0.57     $  0.50     $  0.64     $  0.62     $  0.50     $  0.64  
Return on average tangible assets(2)     1.16 %     1.12 %     1.44 %     1.25 %     1.12 %     1.44 %
Return on average tangible common equity(2)     10.98 %     9.79 %     13.45 %     11.78 %     9.79 %     13.45 %

                                                      

(1) See non-GAAP reconciliation below.
(2) Quarterly ratios are annualized.

In announcing these results, Chief Executive Officer Tim Laney shared, "My teammates continue to tackle the challenges presented by the COVID-19 pandemic head on. We remain focused on our priorities to 1) protect the health of our associates and clients, 2) ensure the safety and soundness of our bank, and 3) act on every opportunity to prudently support our clients and the communities where we do business. While executing on these priorities during the second quarter, we delivered adjusted net income of $0.62 per diluted share, $0.12 per share higher than the first quarter. We maintained excellent credit quality with low annualized net charge-offs of just 0.05% during the second quarter, and our non-performing loan ratio decreased five basis points from the prior quarter to 0.42% of total loans." 

Mr. Laney added, "We continue to hold high levels of capital with a strong Common Equity Tier 1 capital ratio of 13.2% and grew our tangible book value per share by $0.40 during the quarter to $21.67. The pandemic has created operating stress for many businesses, and our teams are working with great intensity to monitor the financial health of our clients and manage the increased risk presented by the pandemic. Our strong capital and liquidity are allowing us to prudently navigate a challenging economy, and we are well positioned to support our clients and communities." 

Second Quarter 2020 Results
(All comparisons refer to the first quarter of 2020, except as noted)

Net income totaled $17.7 million during the second quarter of 2020, or $0.57 per diluted share, compared to $15.8 million during the first quarter, or $0.50 per diluted share. Adjusting for banking center consolidation-related expenses incurred during the second quarter, net income totaled $19.0 million, or $0.62 per diluted share, an increase of $0.12 per diluted share over the first quarter. The return on average tangible assets was 1.16%, compared to 1.12% in the prior quarter, and the return on average tangible common equity was 10.98%, compared to 9.79%, in the prior quarter. The adjusted return on average tangible assets was 1.25%, and the adjusted return on average tangible common equity was 11.78% during the second quarter.

Net Interest Income
Fully taxable equivalent net interest income totaled $48.6 million, decreasing $3.0 million from the prior quarter, driven by lower earning asset yields due to the decline in short-term interest rates as a result of monetary policy actions by the Federal Reserve in March 2020. Partially offsetting this decrease was strong earning asset growth of $408.3 million, or 30.6% annualized, which included average Paycheck Protection Program ("PPP") loans totaling $282.5 million. The fully taxable equivalent net interest margin narrowed 48 basis points from the prior quarter to 3.39% and included a six basis point decrease due to the lower yielding PPP loans originated during the second quarter and a nine basis point decrease due to the accelerated accretion benefits recognized in the prior quarter. The yield on earning assets decreased 66 basis points due to the decline in short-term interest rates, and the cost of funds decreased 23 basis points to 0.65%.

Loans
Total loans ended the quarter at $4.8 billion, increasing $276.6 million, or 24.7% annualized, due to $348.7 million of PPP loans. Total second quarter loan originations were $461.6 million, led by PPP loan originations of $358.8 million and commercial loan originations of $52.6 million. We maintain a granular and well diversified loan portfolio with self-imposed concentration limits. In light of the strain placed on industries by the COVID-19 pandemic, we have carefully evaluated and continue to closely monitor our entire loan portfolio. We have highlighted our current higher impacted industries and COVID-19 related loan modifications within the accompanying Supplemental Disclosure.

Asset Quality and Provision for Loan Losses
Provision for loan losses of $10.3 million was recorded during the quarter under the CECL model and included a $0.1 million provision for unfunded loan commitment reserves. The quarter's provision expense was primarily driven by further declines in the macro-economic forecast within the CECL model as a result of COVID-19. Annualized net charge-offs on loans totaled 0.05% of total loans, compared to 0.03% in the prior quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDRs) improved to 0.42% of total loans, decreasing 0.05% from 0.47% at March 31, 2020. The allowance for credit losses as a percentage of total loans increased 13 basis points to 1.26% at June 30, 2020. Excluding PPP loans, non-performing loans improved to 0.45% of total loans and the allowance for credit losses as a percentage of totals loans increased 23 basis points to 1.36% at June 30, 2020.

Deposits
Average transaction deposits (defined as total deposits less time deposits) increased $521.7 million, or 57.7% annualized, and average total deposits increased $513.8 million, or 44.0% annualized, to $5.2 billion as of June 30, 2020. Average non-interest bearing demand deposits increased $299.4 million and average interest-bearing demand, savings and money market deposits increased $222.3 million. The mix of transaction deposits to total deposits improved 280 basis points to 80.6% at June 30, 2020, compared to 77.8% at March 31, 2020. The loan to deposit ratio totaled 88.3% at June 30, 2020, compared to 95.0% at March 31, 2020.

The cost of transaction deposits decreased 13 basis points from the prior quarter to 0.19%. The cost of total deposits decreased 16 basis point from the prior quarter to 0.47%.

Non-Interest Income
Non-interest income totaled $38.8 million during the second quarter, representing an increase of $15.3 million, or 65.0%. Mortgage banking income reached a quarterly record of $30.6 million, an increase of $17.0 million from the prior quarter. Service charges and bank card fees decreased a combined $0.9 million and were impacted by changes in consumer behavior due to COVID-19. Other non-interest income decreased $0.7 million from the prior quarter, primarily due to decreased swap-fee income.

Non-Interest Expense
Non-interest expense totaled $53.8 million during the second quarter, representing an increase of $5.1 million, largely due to higher mortgage banking commissions of $3.3 million. A fair value impairment charge of $1.7 million was recorded during the second quarter related to the consolidation of 12 banking center locations throughout the Community Banks of Colorado, Bank Midwest and Hillcrest Bank markets. The fully taxable equivalent efficiency ratio improved to 61.1% at June 30, 2020, compared to 64.4% at March 31, 2020. Adjusting for banking center consolidation-related expense, the fully taxable equivalent efficiency ratio improved to 59.2% at June 30, 2020.

Income tax expense totaled $4.4 million during the second quarter, compared to $3.2 million during the prior quarter. The effective tax rate was 20.0% and 16.9% for the second and first quarter, respectively. 

Capital
Capital ratios continue to be strong and in excess of federal bank regulatory agency "well capitalized" thresholds. The Tier 1 leverage ratio at June 30, 2020 for the consolidated company and NBH Bank was 10.53% and 9.14%, respectively. Shareholders' equity totaled $777.0 million at June 30, 2020 and increased $13.5 million from the prior quarter due to higher retained earnings.

Common book value per share increased $0.38 to $25.42 at June 30, 2020. The tangible common book value per share increased $0.40 to $21.67 at June 30, 2020 as the quarter's earnings outpaced the quarterly dividend. Excluding accumulated other comprehensive income, the tangible book value per share increased $0.40 to $21.27 at June 30, 2020.

Recent Events
The COVID-19 pandemic has caused substantial disruption to the communities we serve and has changed the way we live and work.  We continue to remain committed to ensuring our associates, clients, and communities are receiving the support they need during these challenging times. All of our banking centers remain operational through our drive-thru services and on an appointment-only basis in the lobbies. We have leveraged our digital banking platform with our clients, and we have implemented a four-phase return to office plan for our associates. Our teams have been working diligently to support our clients who are experiencing financial hardship due to COVID-19 through participation in the SBA's Paycheck Protection Program and loan modifications, as needed. The length of the pandemic and the efficacy of the extraordinary government-mandated measures that have been put into place to address it are unknown, but have already had, and are likely to continue to have, a significantly negative impact to the U.S. labor market, consumer spending and business operations.

Year-Over-Year Review
(All comparisons refer to the first six month of 2019, except as noted)

Fully taxable equivalent net interest income totaled $100.2 million, decreasing $5.9 million, or 5.6%. Average earning assets increased $244.9 million, or 4.6%, primarily driven by average loan growth of $356.6 million, including average PPP loans of $141.2 million, partially offset by a decrease in average investment securities of $179.2 million. The fully taxable equivalent net interest margin narrowed 41 basis points to 3.62% due to lower earning asset yields. The yield on earning assets decreased 55 basis points, led by a 74 basis point decrease in the originated loan portfolio yields due to fed funds rate cuts. The cost of funds decreased 18 basis points to 0.76%.

Loans outstanding totaled $4.8 billion and increased $452.1 million, or 10.4%, led by PPP loans of $348.7 million and commercial loan growth of $160.6 million, or 5.6%. New loan originations over the trailing 12 months totaled $1.3 billion, led by commercial loan originations of $585.9 million and PPP loan originations of $358.8 million.

Average non-interest bearing demand deposits increased $154.9 million, or 13.7%. Average transaction deposits increased $343.3 million, or 9.7%, and average total deposits increased $314.7 million, or 6.8%, to $4.9 billion as of June 30, 2020. Spot transaction deposits increased $756.0 million to $4.4 billion at June 30, 2020, improving the mix of transaction deposits to total deposits by 370 basis points to 80.6% at June 30, 2020. The mix of non-interest bearing demand deposits to total deposits improved 290 basis points to 27.8% at June 30, 2020.

A CECL model driven provision for loan losses of $16.4 million was recorded during the first six months of 2020, net of a $0.1 million reduction in unfunded loan commitment reserves to provide coverage for the impact of deteriorating economic conditions as a result of COVID-19. Annualized net charge-offs on loans totaled 0.04% of total loans, compared to 0.02% last year. Non-performing loans to total loans decreased 36 basis points to 0.42%, compared to 0.78% at June 30, 2019. The allowance for credit losses totaled 1.26% of total loans, compared to 0.93% at June 30, 2019 and included a CECL adoption day 1 increase of $5.8 million. Excluding PPP loans, the allowance for credit losses as a percentage of total loans increased 43 basis points to 1.36% at June 30, 2020, compared to the same period last year.

Non-interest income totaled $62.4 million, representing an increase of $24.7 million, or 65.4%, from the prior year, primarily driven by an increase of $27.0 million, or 155.6%, in mortgage banking income. Service charges and bank card fees decreased a combined $1.7 million and other non-interest income decreased $0.5 million from the prior year.

Non-interest expense totaled $102.4 million, representing an increase of $11.6 million, or 12.8%, from the prior year. Mortgage banking commissions increased by $11.1 million and banking center consolidation-related expense totaled $1.7 million during 2020. Other non-interest expense decreased by $1.3 million largely due to a decrease in FDIC deposit insurance fees and marketing and development expense.

Income tax expense totaled $7.7 million, compared to $6.5 million during the first six months of 2019, an increase of $1.2 million. Included in income tax expense was $0.1 million of expense and $2.1 million of benefit from stock compensation activity during the first six months of 2020 and 2019, respectively. Adjusting for stock compensation activity, the effective tax rate for the first six months of 2020 was 18.3%, compared to 19.0% in the prior period. The lower rate compared to the statutory rate reflects the continued success of our tax strategies and tax exempt income.

Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Wednesday, July 22, 2020. Interested parties may listen to this call by dialing (877) 272-6762 / (615) 800-6832 (International) using the Conference ID of 8919639 and asking for the NBHC Second Quarter Earnings conference call. A telephonic replay of the call will be available beginning approximately four hours after the call's completion through August 5, 2020, by dialing (855) 859-2056 (United States) / (404) 537-3406 (International) using the Conference ID of 8919639. 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," "return on average tangible assets," "tangible common equity," "return on average tangible common equity," "tangible common book value per share," "tangible common book value, excluding accumulated other comprehensive loss, net of tax," "tangible common book value per share, excluding accumulated other comprehensive loss, net of tax," "tangible common equity to tangible assets," "adjusted efficiency ratio," "adjusted non-interest expense," "adjusted non-interest expense to average assets," "adjusted net income," "adjusted earnings per share - diluted," "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 101 banking centers, serving individual consumers, small, medium and large businesses, and government and non-profit entities. The bank's core geographic footprint consists of Colorado, the greater Kansas City region, New Mexico, Texas and Utah. NBH Bank operates under the following brand names: Community Banks of Colorado in Colorado, Bank Midwest in Kansas and Missouri and Hillcrest Bank in New Mexico, Texas and Utah. It also operates as Community Banks Mortgage, a division of NBH Bank, in Colorado. Additional information about National Bank Holdings Corporation can be found at www.nationalbankholdings.com.

For more information visit: cobnks.com, bankmw.com, hillcrestbank.com or nbhbank.com. Or, follow us on any of our social media sites:
Community Banks of Colorado: facebook.com/cobnks, twitter.com/cobnks, instagram.com/cobnks;
Bank Midwest: facebook.com/bankmw, twitter.com/bank_mw, instagram.com/bankmw;
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; effects of a prolonged government shutdown; 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; with respect to our mortgage business, the inability to negotiate fees with investors for the purchase or our loans or our obligation to indemnify purchasers or repurchase related loans; the Company's ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions, consolidations and other expansion opportunities; 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, hire 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, pandemics such as the outbreak of the novel Coronavirus Disease 2019 (COVID-19), dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; adverse effects due to COVID-19 on the Company and its clients, counterparties, employees, and third-party service providers, and the adverse impacts on our business, financial position, results of operations, and prospects; 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.

Contact:
Analysts/Institutional Investors: Aldis Birkans, Chief Financial Officer, (720) 554-6640, ir@nationalbankholdings.com
Media: Whitney Bartelli, Chief Marketing Officer, (816) 298-2203, media@nbhbank.com


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, 
  2020   2020   2019   2020   2019
Total interest and dividend income $  53,744   $  58,668   $  62,193     $  112,412   $  121,613  
Total interest expense    6,416      8,321      9,702        14,737      17,956  
Net interest income    47,328      50,347      52,491        97,675      103,657  
Taxable equivalent adjustment    1,301      1,268      1,285        2,568      2,512  
Net interest income FTE(1)    48,629      51,615      53,776        100,243      106,169  
Provision for loan losses    10,271      6,159      3,239        16,430      4,773  
Net interest income after provision for loan losses FTE(1)    38,358      45,456      50,537        83,813      101,396  
Non-interest income:                            
Service charges    3,094      4,126      4,541        7,220      8,862  
Bank card fees    3,654      3,513      3,766        7,167      7,194  
Mortgage banking income    30,630      13,673      10,398        44,303      17,335  
Other non-interest income    1,459      2,192      1,896        3,651      4,200  
OREO-related income    —      28      59        28      120  
Total non-interest income    38,837      23,532      20,660        62,369      37,711  
Non-interest expense:                            
Salaries and benefits    36,457      33,180      30,667        69,637      58,557  
Occupancy and equipment    7,078      6,898      6,721        13,976      13,603  
Professional fees    759      609      1,041        1,368      1,855  
Other non-interest expense    6,778      7,001      7,319        13,779      15,076  
Problem asset workout    629      648      725        1,277      1,848  
Loss (gain) on sale of OREO, net    55      39      (318 )      94      (686 )
Core deposit intangible asset amortization    296      296      296        592      592  
Banking center consolidation-related expense    1,708      —      —        1,708      —  
Total non-interest expense    53,760      48,671      46,451        102,431      90,845  
                             
Income before income taxes FTE(1)    23,435      20,317      24,746        43,751      48,262  
Taxable equivalent adjustment    1,301      1,268      1,285        2,568      2,512  
Income before income taxes    22,134      19,049      23,461        41,183      45,750  
Income tax expense    4,429      3,225      3,179        7,654      6,546  
Net income $  17,705   $  15,824   $  20,282     $  33,529   $  39,204  
Earnings per share - basic $  0.57   $  0.51   $  0.65     $  1.08   $  1.26  
Earnings per share - diluted    0.57      0.50      0.64        1.08      1.24  

                                                      

(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% for each period presented.


NATIONAL BANK HOLDINGS CORPORATION
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands, except share and per share data)

                       
  June 30, 2020   March 31, 2020   December 31, 2019   June 30, 2019
ASSETS                      
Cash and cash equivalents $  142,385     $  133,926     $  110,190     $  91,159  
Investment securities available-for-sale    610,735        629,396        638,249        710,206  
Investment securities held-to-maturity    215,183        192,902        182,884        206,361  
Non-marketable securities    30,188        29,948        29,751        30,726  
Loans    4,782,383        4,505,735        4,415,406        4,330,263  
Allowance for credit losses    (60,465 )      (50,956 )      (39,064 )      (40,082 )
Loans, net    4,721,918        4,454,779        4,376,342        4,290,181  
Loans held for sale    204,856        127,439        117,444        105,866  
Other real estate owned    6,491        7,051        7,300        7,054  
Premises and equipment, net    110,019        112,393        112,151        111,171  
Goodwill    115,027        115,027        115,027        115,027  
Intangible assets, net    12,175        10,489        11,361        12,267  
Other assets    216,454        214,980        194,813        177,984  
Total assets $  6,385,431     $  6,028,330     $  5,895,512     $  5,858,002  
LIABILITIES AND SHAREHOLDERS' EQUITY                      
Liabilities:                      
Non-interest bearing demand deposits $  1,502,948     $  1,150,437     $  1,184,945     $  1,167,399  
Interest bearing demand deposits    955,951        846,824        738,496        691,527  
Savings and money market    1,903,427        1,693,614        1,755,538        1,747,434  
Total transaction deposits    4,362,326        3,690,875        3,678,979        3,606,360  
Time deposits    1,051,563        1,050,981        1,058,153        1,081,637  
Total deposits    5,413,889        4,741,856        4,737,132        4,687,997  
Securities sold under agreements to repurchase    24,504        23,703        56,935        60,430  
Federal Home Loan Bank advances    15,000        341,506        207,675        272,414  
Other liabilities    155,071        157,811        126,850        103,244  
Total liabilities    5,608,464        5,264,876        5,128,592        5,124,085  
Shareholders' equity:                      
Common stock    515        515        515        515  
Additional paid in capital    1,008,773        1,009,478        1,009,223        1,006,008  
Retained earnings    180,537        168,984        164,082        135,210  
Treasury stock    (425,053 )      (427,890 )      (408,962 )      (409,322 )
Accumulated other comprehensive income, net of tax    12,195        12,367        2,062        1,506  
Total shareholders' equity    776,967        763,454        766,920        733,917  
Total liabilities and shareholders' equity $  6,385,431     $  6,028,330     $  5,895,512     $  5,858,002  
SHARE DATA                      
Average basic shares outstanding    30,731,758        31,157,476        31,299,989        31,155,264  
Average diluted shares outstanding    30,857,606        31,361,296        31,525,911        31,604,658  
Ending shares outstanding    30,569,011        30,483,361        31,176,627        31,139,044  
Common book value per share $  25.42     $  25.04     $  24.60     $  23.57  
Tangible common book value per share(1) (non-GAAP)    21.67        21.27        20.89        19.83  
Tangible common book value per share, excluding accumulated other comprehensive income(1) (non-GAAP)    21.27        20.87        20.83        19.78  
CAPITAL RATIOS                      
Average equity to average assets   12.21 %     13.21 %     12.91 %     12.46 %
Tangible common equity to tangible assets(1)   10.56 %     10.97 %     11.27 %     10.75 %
Tier 1 leverage ratio   10.53 %     11.05 %     11.04 %     10.60 %
Common equity tier 1 risk-based capital ratio   13.21 %     12.87 %     13.21 %     12.87 %
Total risk-based capital ratio   14.26 %     13.82 %     14.08 %     13.78 %

                                                      

(1) Represents a non-GAAP financial measure.


NATIONAL BANK HOLDINGS CORPORATION
Loan Portfolio
(Dollars in thousands)

Period End Loan Balances by Type

          June 30, 2020       June 30, 2020
          vs. March 31, 2020        vs. June 30, 2019
  June 30, 2020   March 31, 2020   % Change   June 30, 2019   % Change
Originated:                        
Commercial:                        
Commercial and industrial $  1,360,679   $  1,409,040   (3.4 )%   $  1,315,420   3.4 %
Municipal and non-profit    912,287      876,178   4.1 %      807,634   13.0 %
Owner-occupied commercial real estate    455,846      446,145   2.2 %      379,462   20.1 %
Food and agribusiness    213,789      235,389   (9.2 )%      236,865   (9.7 )%
Total commercial    2,942,601      2,966,752   (0.8 )%      2,739,381   7.4 %
Commercial real estate non-owner occupied    540,412      536,637   0.7 %      459,242   17.7 %
Residential real estate    631,032      656,924   (3.9 )%      660,657   (4.5 )%
Consumer    20,370      20,960   (2.8 )%      21,731   (6.3 )%
PPP loans(1)    348,689      —   100.0 %      —   100.0 %
Total originated    4,483,104      4,181,273   7.2 %      3,881,011   15.5 %
                         
Acquired:                        
Commercial:                        
Commercial and industrial    27,461      29,510   (6.9 )%      41,386   (33.6 )%
Municipal and non-profit    593      906   (34.5 )%      3,969   (85.1 )%
Owner-occupied commercial real estate    65,052      69,769   (6.8 )%      87,567   (25.7 )%
Food and agribusiness    6,237      7,159   (12.9 )%      9,060   (31.2 )%
Total commercial    99,343      107,344   (7.5 )%      141,982   (30.0 )%
Commercial real estate non-owner occupied    101,412      107,090   (5.3 )%      160,606   (36.9 )%
Residential real estate    97,982      109,400   (10.4 )%      145,670   (32.7 )%
Consumer    542      628   (13.7 )%      994   (45.5 )%
Total acquired    299,279      324,462   (7.8 )%      449,252   (33.4 )%
   Total loans $  4,782,383   $  4,505,735   6.1 %   $  4,330,263   10.4 %

                                                      

(1) PPP loan balances are net of fees and costs and include principal totaling $358,798.

Originations(1)

                             
  Second quarter   First quarter   Fourth quarter   Third quarter   Second quarter
  2020   2020   2019   2019   2019
Commercial:                            
Commercial and industrial $  (8,726 )   $  118,999     $  69,048   $  144,554     $  125,527
Municipal and non-profit    49,679        13,968        46,114      31,482        25,513
Owner occupied commercial real estate    22,078        37,372        46,965      16,149        41,380
Food and agribusiness    (10,480 )      (6,787 )      20,348      (4,894 )      18,217
Total commercial    52,551        163,552        182,475      187,291        210,637
Commercial real estate non-owner occupied    18,992        80,792        41,256      79,929        36,632
Residential real estate    29,024        46,273        43,493      49,022        40,012
Consumer    2,206        2,320        2,315      2,986        3,264
PPP loans    358,798        —        —      —        —
Total $  461,571     $  292,937     $  269,539   $  319,228     $  290,545

                                                      

(1) Originations are defined as closed end funded loans and net fundings under revolving lines of credit. Net funding under revolving lines of credit were ($55,826), $48,789, $1,756, $37,062 and $48,955 as of the second quarter 2020, first quarter 2020, fourth quarter 2019, third quarter 2019 and second quarter 2019, 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, 2020   March 31, 2020   June 30, 2019
  Average         Average   Average         Average   Average         Average
  balance   Interest   rate   balance   Interest   rate   balance   Interest   rate
Interest earning assets:                                                    
Originated loans FTE(1)(2) $  4,432,725     $  42,440     3.85 %   $  4,043,168     $  44,980     4.47 %   $  3,821,981     $  46,728     4.90 %
Acquired loans    312,723        6,722     8.65 %      343,608        8,879     10.39 %      467,982        9,619     8.24 %
Loans held for sale    157,887        1,310     3.34 %      102,935        936     3.66 %      87,222        934     4.30 %
Investment securities available-for-sale    607,132        3,050     2.01 %      626,921        3,395     2.17 %      738,970        4,002     2.17 %
Investment securities held-to-maturity    189,360        1,201     2.54 %      189,062        1,235     2.61 %      215,497        1,533     2.85 %
Other securities    30,087        310     4.12 %      29,753        414     5.57 %      28,425        458     6.45 %
Interest earning deposits and securities purchased under agreements to resell    36,758        12     0.13 %      22,957        97     1.70 %      27,079        204     3.02 %
Total interest earning assets FTE(2) $  5,766,672     $  55,045     3.84 %   $  5,358,404     $  59,936     4.50 %   $  5,387,156     $  63,478     4.73 %
Cash and due from banks $  76,041                 $  74,784                 $  75,780              
Other assets    532,867                    474,470                    419,368              
Allowance for credit losses    (56,984 )                  (44,807 )                  (37,743 )            
Total assets $  6,318,596                 $  5,862,851                 $  5,844,561              
Interest bearing liabilities:                                                    
Interest bearing demand, savings and money market deposits $  2,719,433     $  1,951     0.29 %   $  2,497,129     $  2,888     0.47 %   $  2,429,686     $  3,559     0.59 %
Time deposits    1,048,772        4,136     1.59 %      1,056,692        4,438     1.69 %      1,084,011        4,090     1.51 %
Securities sold under agreements to repurchase    23,485        18     0.31 %      44,898        97     0.87 %      57,571        162     1.13 %
Federal Home Loan Bank advances    163,263        311     0.77 %      219,353        898     1.65 %      294,524        1,891     2.58 %
Total interest bearing liabilities $  3,954,953     $  6,416     0.65 %   $  3,818,072     $  8,321     0.88 %   $  3,865,792     $  9,702     1.01 %
Demand deposits $  1,436,671                 $  1,137,273                 $  1,155,710              
Other liabilities    155,379                    133,126                    94,968              
Total liabilities    5,547,003                    5,088,471                    5,116,470              
Shareholders' equity    771,593                    774,380                    728,091              
   Total liabilities and shareholders' equity $  6,318,596                 $  5,862,851                 $  5,844,561              
Net interest income FTE(2)       $  48,629               $  51,615               $  53,776      
Interest rate spread FTE(2)               3.19 %                 3.62 %                 3.72 %
Net interest earning assets $  1,811,719                 $  1,540,332                 $  1,521,364              
Net interest margin FTE(2)               3.39 %                 3.87 %                 4.00 %
Average transaction deposits $  4,156,104                 $  3,634,402                 $  3,585,396              
Average total deposits    5,204,876                    4,691,094                    4,669,407              
Ratio of average interest earning assets to average interest bearing liabilities   145.81 %                 140.34 %                 139.35 %            

                                                      

(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%. The tax equivalent adjustments included above are $1,301, $1,268 and $1,285 for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019, respectively.


NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
(Dollars in thousands)

                               
  For the six months ended June 30, 2020   For the six months ended June 30, 2019
  Average         Average   Average         Average
  balance   Interest   rate   balance   Interest   rate
Interest earning assets:                              
Originated loans FTE(1)(2) $  4,237,946     $  87,419   4.15 %   $  3,723,932     $  90,301   4.89 %
Acquired loans    328,165        15,601   9.56 %      485,540        19,560   8.12 %
Loans held for sale    130,411        2,246   3.46 %      65,167        1,422   4.40 %
Investment securities available-for-sale    617,027        6,445   2.09 %      763,034        8,363   2.19 %
Investment securities held-to-maturity    189,211        2,436   2.57 %      222,411        3,184   2.86 %
Other securities    29,920        724   4.84 %      27,659        881   6.37 %
Interest earning deposits and securities purchased under agreements to resell    29,858        109   0.73 %      29,853        414   2.80 %
Total interest earning assets FTE(2) $  5,562,538     $  114,980   4.16 %   $  5,317,596     $  124,125   4.71 %
Cash and due from banks $  75,412               $  76,861            
Other assets    503,669                  420,486            
Allowance for credit losses    (50,895 )                (36,784 )          
Total assets $  6,090,724               $  5,778,159            
Interest bearing liabilities:                              
Interest bearing demand, savings and money market deposits $  2,608,281     $  4,839   0.37 %   $  2,419,902     $  6,567   0.55 %
Time deposits    1,052,732        8,574   1.64 %      1,081,297        7,697   1.44 %
Securities sold under agreements to repurchase    34,192        115   0.68 %      59,072        315   1.08 %
Federal Home Loan Bank advances    191,308        1,209   1.27 %      271,778        3,377   2.51 %
Total interest bearing liabilities $  3,886,513     $  14,737   0.76 %   $  3,832,049     $  17,956   0.94 %
Demand deposits $  1,286,972               $  1,132,062            
Other liabilities    144,253                  96,031            
Total liabilities    5,317,738                  5,060,142            
Shareholders' equity    772,986                  718,017            
Total liabilities and shareholders' equity $  6,090,724               $  5,778,159            
Net interest income FTE(2)       $  100,243             $  106,169    
Interest rate spread FTE(2)             3.40 %               3.77 %
Net interest earning assets $  1,676,025               $  1,485,547            
Net interest margin FTE(2)             3.62 %               4.03 %
Average transaction deposits $  3,895,253               $  3,551,964            
Average total deposits    4,947,985                  4,633,261            
Ratio of average interest earning assets to average interest bearing liabilities   143.12 %               138.77 %          

                                                      

(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%. The tax equivalent adjustments included above are $2,568 and $2,512 for the six months ended June 30, 2020 and June 30, 2019, respectively.


NATIONAL BANK HOLDINGS CORPORATION
Allowance for Credit Losses and Asset Quality
(Dollars in thousands)

Allowance for Credit Losses Analysis

                 
  As of and for the three months ended
  June 30, 2020 March 31, 2020   June 30, 2019
Beginning allowance for credit losses $  50,956     $  39,064     $  37,055  
Cumulative effect adjustment(1)    —        5,836        —  
Charge-offs    (852 )      (497 )      (294 )
Recoveries    236        144        82  
Provision    10,125        6,409        3,239  
Ending allowance for credit losses ("ACL") $  60,465     $  50,956     $  40,082  
Ratio of annualized net charge-offs to average total loans during the period   0.05 %     0.03 %     0.02 %
Ratio of annualized net charge-offs to average total loans excluding PPP loans during the period   0.05 %     0.03 %     0.02 %
Ratio of ACL to total loans outstanding at period end   1.26 %     1.13 %     0.93 %
Ratio of ACL to total loans outstanding excluding PPP loans at period end   1.36 %     1.13 %     0.93 %
Ratio of ACL to total non-performing loans at period end   302.34 %     238.93 %     118.93 %
Total loans $  4,782,383     $  4,505,735     $  4,330,263  
Average total loans during the period    4,794,466        4,412,320        4,289,963  
Average total loans excluding PPP loans during the period    4,512,010        4,412,320        4,289,963  
Total non-performing loans    19,999        21,327        33,703  

                                                      

(1) Related to the adoption of Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Instruments.

Past Due and Non-accrual Loans

                 
  June 30, 2020   March 31, 2020   June 30, 2019
Loans 30-89 days past due and still accruing interest $  3,932     $  10,693     $  11,514  
Loans 90 days past due and still accruing interest    2,444        1,364        200  
Non-accrual loans    19,999        21,327        33,703  
Total past due and non-accrual loans $  26,375     $  33,384     $  45,417  
Total 90 days past due and still accruing interest and non-accrual loans to total loans   0.47 %     0.50 %     0.78 %
Total non-accrual loans to total loans   0.42 %     0.47 %     0.78 %
Total non-accrual loans to total loans excluding PPP loans   0.45 %     0.47 %     0.78 %

Asset Quality Data

                 
  June 30, 2020   March 31, 2020   June 30, 2019
Non-performing loans $  19,999     $  21,327     $  33,703  
OREO    6,491        7,051        7,054  
Total non-performing assets $  26,490     $  28,378     $  40,757  
Accruing restructured loans $  20,284     $  10,285     $  2,633  
Total non-performing loans to total loans   0.42 %     0.47 %     0.78 %
Total non-performing loans to total loans excluding PPP loans   0.45 %     0.47 %     0.78 %
Total non-performing assets to total loans and OREO   0.55 %     0.63 %     0.94 %
Total non-performing assets to total loans and OREO excluding PPP loans   0.60 %     0.63 %     0.94 %


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, 
  2020   2020   2019   2020   2019
Key Ratios(1)                  
Return on average assets 1.13 %   1.09 %   1.39 %   1.11 %   1.37 %
Return on average tangible assets(2) 1.16 %   1.12 %   1.44 %   1.14 %   1.41 %
Return on average tangible assets, adjusted(2) 1.25 %   1.12 %   1.44 %   1.19 %   1.41 %
Return on average equity 9.23 %   8.22 %   11.17 %   8.72 %   11.01 %
Return on average tangible common equity(2) 10.98 %   9.79 %   13.45 %   10.38 %   13.30 %
Return on average tangible common equity, adjusted(2) 11.78 %   9.79 %   13.45 %   10.78 %   13.30 %
Loan to deposit ratio (end of period) 88.34 %   95.02 %   92.37 %   88.34 %   92.37 %
Non-interest bearing deposits to total deposits (end of period) 27.76 %   24.26 %   24.90 %   27.76 %   24.90 %
Net interest margin(4) 3.30 %   3.78 %   3.91 %   3.53 %   3.93 %
Net interest margin FTE(2)(4) 3.39 %   3.87 %   4.00 %   3.62 %   4.03 %
Interest rate spread FTE(2)(5) 3.19 %   3.62 %   3.72 %   3.40 %   3.77 %
Yield on earning assets(3) 3.75 %   4.40 %   4.63 %   4.06 %   4.61 %
Yield on earning assets FTE(2)(3) 3.84 %   4.50 %   4.73 %   4.16 %   4.71 %
Cost of interest bearing liabilities(3) 0.65 %   0.88 %   1.01 %   0.76 %   0.94 %
Cost of deposits 0.47 %   0.63 %   0.66 %   0.55 %   0.62 %
Non-interest income to total revenue FTE(2) 44.40 %   31.31 %   27.76 %   38.35 %   26.21 %
Non-interest expense to average assets 3.42 %   3.34 %   3.19 %   3.38 %   3.17 %
Non-interest expense to average assets, adjusted(2) 3.31 %   3.34 %   3.19 %   3.33 %   3.17 %
Efficiency ratio 62.05 %   65.48 %   63.10 %   63.63 %   63.84 %
Efficiency ratio FTE(2) 61.13 %   64.37 %   62.01 %   62.63 %   62.73 %
Efficiency ratio FTE, adjusted(2) 59.17 %   64.37 %   62.01 %   61.58 %   62.73 %
                   
Total Loans Asset Quality Data(6)(7)(8)                  
Non-performing loans to total loans 0.42 %   0.47 %   0.78 %   0.42 %   0.78 %
Non-performing loans to total loans excluding PPP loans 0.45 %   0.47 %   0.78 %   0.45 %   0.78 %
Non-performing assets to total loans and OREO 0.55 %   0.63 %   0.94 %   0.55 %   0.94 %
Non-performing assets to total loans and OREO excluding PPP loans 0.60 %   0.63 %   0.94 %   0.60 %   0.94 %
Allowance for credit losses to total loans 1.26 %   1.13 %   0.93 %   1.26 %   0.93 %
Allowance for credit losses to total loans excluding PPP loans 1.36 %   1.13 %   0.93 %   1.36 %   0.93 %
Allowance for credit losses to non-performing loans 302.34 %   238.93 %   118.93 %   302.34 %   118.93 %
Net charge-offs to average loans(1) 0.05 %   0.03 %   0.02 %   0.04 %   0.02 %
Net charge-offs to average loans excluding PPP loans(1) 0.05 %   0.03 %   0.02 %   0.04 %   0.02 %

                                                      

   
(1) Quarter-to-date 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 or loans are excluded from interest earning assets.
(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) Non-performing loans consist of non-accruing loans and restructured loans on non-accrual.
(7) Non-performing assets include non-performing loans and other real estate owned.
(8) 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, 2020   March 31, 2020   December 31, 2019   June 30, 2019
Total shareholders' equity $  776,967     $  763,454     $  766,920     $  733,917  
Less: goodwill and core deposit intangible assets, net    (123,166 )      (123,462 )      (123,758 )      (124,350 )
Add: deferred tax liability related to goodwill    8,698        8,469        8,241        7,784  
Tangible common equity (non-GAAP) $  662,499     $  648,461     $  651,403     $  617,351  
                       
Total assets $  6,385,431     $  6,028,330     $  5,895,512     $  5,858,002  
Less: goodwill and core deposit intangible assets, net    (123,166 )      (123,462 )      (123,758 )      (124,350 )
Add: deferred tax liability related to goodwill    8,698        8,469        8,241        7,784  
Tangible assets (non-GAAP) $  6,270,963     $  5,913,337     $  5,779,995     $  5,741,436  
                       
Tangible common equity to tangible assets calculations:                      
Total shareholders' equity to total assets   12.17 %     12.66 %     13.01 %     12.53 %
Less: impact of goodwill and core deposit intangible assets, net   (1.61 )%     (1.69 )%     (1.74 )%     (1.78 )%
Tangible common equity to tangible assets (non-GAAP)   10.56 %     10.97 %     11.27 %     10.75 %
                       
Tangible common book value per share calculations:                      
Tangible common equity (non-GAAP) $  662,499     $  648,461     $  651,403     $  617,351  
Divided by: ending shares outstanding    30,569,011        30,483,361        31,176,627        31,139,044  
Tangible common book value per share (non-GAAP) $  21.67     $  21.27     $  20.89     $  19.83  
                       
Tangible common book value per share, excluding accumulated other comprehensive income calculations:                      
Tangible common equity (non-GAAP) $  662,499     $  648,461     $  651,403     $  617,351  
Accumulated other comprehensive income, net of tax    (12,195 )      (12,367 )      (2,062 )      (1,506 )
Tangible common book value, excluding accumulated other comprehensive income, net of tax (non-GAAP)    650,304        636,094        649,341        615,845  
Divided by: ending shares outstanding    30,569,011        30,483,361        31,176,627        31,139,044  
Tangible common book value per share, excluding accumulated other comprehensive income, net of tax (non-GAAP) $  21.27     $  20.87     $  20.83     $  19.78  


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,    March 31,    June 30,    June 30,    June 30, 
  2020   2020   2019   2020   2019 
Net income $  17,705     $  15,824     $  20,282     $  33,529     $  39,204  
Add: impact of core deposit intangible amortization expense, after tax    227        225        225        454        450  
Net income adjusted for impact of core deposit intangible amortization expense, after tax $  17,932     $  16,049     $  20,507     $  33,983     $  39,654  
                             
Average assets $  6,318,596     $  5,862,851     $  5,844,561     $  6,090,724     $  5,778,159  
Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill    (114,631 )      (115,156 )      (116,712 )      (114,779 )      (116,858 )
Average tangible assets (non-GAAP) $  6,203,965     $  5,747,695     $  5,727,849     $  5,975,945     $  5,661,301  
                             
Average shareholders' equity $  771,593     $  774,380     $  728,091     $  772,986     $  718,017  
Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill    (114,631 )      (115,156 )      (116,712 )      (114,779 )      (116,858 )
Average tangible common equity (non-GAAP) $  656,962     $  659,224     $  611,379     $  658,207     $  601,159  
                             
Return on average assets   1.13 %     1.09 %     1.39 %     1.11 %     1.37 %
Return on average tangible assets (non-GAAP)   1.16 %     1.12 %     1.44 %     1.14 %     1.41 %
Return on average equity   9.23 %     8.22 %     11.17 %     8.72 %     11.01 %
Return on average tangible common equity (non-GAAP)   10.98 %     9.79 %     13.45 %     10.38 %     13.30 %

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,    March 31,    June 30,    June 30,    June 30, 
  2020   2020   2019   2020   2019
Interest income $  53,744     $  58,668     $  62,193     $  112,412     $  121,613  
Add: impact of taxable equivalent adjustment    1,301        1,268        1,285        2,568        2,512  
Interest income FTE (non-GAAP) $  55,045     $  59,936     $  63,478     $  114,980     $  124,125  
                             
Net interest income $  47,328     $  50,347     $  52,491     $  97,675     $  103,657  
Add: impact of taxable equivalent adjustment    1,301        1,268        1,285        2,568        2,512  
Net interest income FTE (non-GAAP) $  48,629     $  51,615     $  53,776     $  100,243     $  106,169  
                             
Average earning assets $  5,766,672     $  5,358,404     $  5,387,156     $  5,562,538     $  5,317,596  
Yield on earning assets   3.75 %     4.40 %     4.63 %     4.06 %     4.61 %
Yield on earning assets FTE (non-GAAP)   3.84 %     4.50 %     4.73 %     4.16 %     4.71 %
Net interest margin   3.30 %     3.78 %     3.91 %     3.53 %     3.93 %
Net interest margin FTE (non-GAAP)   3.39 %     3.87 %     4.00 %     3.62 %     4.03 %

Efficiency Ratio

                             
  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, 
  2020   2020   2019   2020   2019
Net interest income $  47,328     $  50,347     $  52,491     $  97,675     $  103,657  
Add: impact of taxable equivalent adjustment    1,301        1,268        1,285        2,568        2,512  
Net interest income, FTE (non-GAAP) $  48,629     $  51,615     $  53,776     $  100,243     $  106,169  
                             
Non-interest income $  38,837     $  23,532     $  20,660     $  62,369     $  37,711  
                             
Non-interest expense $  53,760     $  48,671     $  46,451     $  102,431     $  90,845  
Less: core deposit intangible asset amortization    (296 )      (296 )      (296 )      (592 )      (592 )
Non-interest expense, adjusted for core deposit intangible asset amortization $  53,464     $  48,375     $  46,155     $  101,839     $  90,253  
                             
Non-interest expense, adjusted for core deposit intangible asset amortization $  53,464     $  48,375     $  46,155     $  101,839     $  90,253  
Banking center consolidation-related expense    (1,708 )      —        —        (1,708 )      —  
Adjusted non-interest expense (non-GAAP) $  51,756     $  48,375     $  46,155     $  100,131     $  90,253  
                             
Efficiency ratio   62.05 %     65.48 %     63.10 %     63.63 %     63.84 %
Efficiency ratio FTE (non-GAAP)   61.13 %     64.37 %     62.01 %     62.63 %     62.73 %
Adjusted efficiency ratio FTE (non-GAAP)   59.17 %     64.37 %     62.01 %     61.58 %     62.73 %

Adjusted Financial Results

                               
    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, 
    2020   2020   2019   2020   2019
Adjustments to net income:                              
Net income   $  17,705     $  15,824     $  20,282     $  33,529     $  39,204  
Adjustments(1)      1,310        —        —        1,310        —  
Adjusted net income (non-GAAP)   $  19,015     $  15,824     $  20,282     $  34,839     $  39,204  
                               
Adjustments to earnings per share:                              
Earnings per share - diluted   $  0.57     $  0.50     $  0.64     $  1.08     $  1.24  
Adjustments(1)      0.05        —        —        0.04        —  
Adjusted earnings per share - diluted (non-GAAP)   $  0.62     $  0.50     $  0.64     $  1.12     $  1.24  
                               
Adjustments to return on average tangible assets:                              
Adjusted net income (non-GAAP)   $  19,015     $  15,824     $  20,282     $  34,839     $  39,204  
Add: impact of core deposit intangible amortization expense, after tax      227        225        225        454        450  
Net income adjusted for impact of core deposit intangible amortization expense, after tax      19,242        16,049        20,507        35,293        39,654  
Average tangible assets (non-GAAP)      6,203,965        5,747,695        5,727,849        5,975,945        5,661,301  
Adjusted return on average tangible assets (non-GAAP)     1.25 %     1.12 %     1.44 %     1.19 %     1.41 %
                               
Adjustments to return on average tangible common equity:                              
Net income adjusted for impact of core deposit intangible amortization expense, after tax   $  19,242     $  16,049     $  20,507     $  35,293     $  39,654  
Average tangible common equity (non-GAAP)      656,962        659,224        611,379        658,207        601,159  
Adjusted return on average tangible common equity (non-GAAP)     11.78 %     9.79 %     13.45 %     10.78 %     13.30 %
                               
Adjustments to non-interest expense:                              
Non-interest expense   $  53,760     $  48,671     $  46,451     $  102,431     $  90,845  
Adjustments(1)      1,708        —        —        1,708        —  
Adjusted non-interest expense (non-GAAP)      52,052        48,671        46,451        100,723        90,845  
Non-interest expense to average assets, adjusted (non-GAAP)     3.31 %     3.34 %     3.19 %     3.33 %     3.17 %
                               
(1) Adjustments:                              
Non-interest expense adjustments:                              
Banking center consolidation-related expense   $  1,708     $  —     $  —     $  1,708     $  —  
Tax expense impact      (398 )      —        —        (398 )      —  
Adjustments (non-GAAP)   $  1,310     $  —     $  —     $  1,310     $  —  


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