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National Bank Holdings Corporation Announces Record Third Quarter 2020 Financial Results

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DENVER, Oct. 20, 2020 (GLOBE NEWSWIRE) -- National Bank Holdings Corporation (NYSE:NBHC) reported:

                                     
    For the quarter   For the quarter - adjusted(1)
    3Q20   2Q20   3Q19   3Q20   2Q20     3Q19
Net income ($000's)   $  27,893     $ 17,705     $ 21,642     $  28,224     $ 19,015     $ 22,331  
Earnings per share - diluted   $  0.90     $ 0.57     $ 0.69     $  0.91     $ 0.62     $ 0.71  
Return on average tangible assets(2)     1.76 %     1.16 %     1.51 %     1.78 %     1.25 %     1.56 %
Return on average tangible common equity(2)     16.49 %     10.98 %     13.68 %     16.69 %     11.78 %     14.11 %

                                                      

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

In announcing these results, Chief Executive Officer Tim Laney shared, "Despite the challenges presented in 2020, we delivered record quarterly earnings of $0.90 per diluted share and record-breaking fee income. We are prudently supporting our clients and ensuring the safety and soundness of our bank all while maintaining excellent credit quality with annualized net charge-offs of just four basis points." 

Mr. Laney added, "I am proud of our teammates tireless efforts to support our clients and communities, and we are honored to be recognized as the Small Business Association's Colorado 2020 Job Creation Lender of the Year. We feel confident that our strong Common Equity Tier 1 ratio of 14.25%, coupled with a diverse and granular credit portfolio and a sizable liquidity position, continues to enable us to navigate this challenging economy from a position of strength." 

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

Net income totaled $27.9 million during the third quarter of 2020, or $0.90 per diluted share, an increase of $10.2 million, or 57.5%. Adjusting for banking center consolidation-related expenses, net income totaled $28.2 million, or $0.91 per diluted share, an increase of $9.2 million, or 48.4%. The return on average tangible assets was 1.76%, compared to 1.16% in the prior quarter, and the return on average tangible common equity was 16.49%, compared to 10.98%, in the prior quarter. The adjusted return on average tangible assets was 1.78%, compared to 1.25% in the prior quarter, and the adjusted return on average tangible common equity was 16.69%, compared to 11.78% during the second quarter.

Net Interest Income
Fully taxable equivalent net interest income totaled $48.0 million, decreasing $0.6 million, driven by lower earning asset yields due to changes in the mix of earning assets. The fully taxable equivalent net interest margin narrowed 18 basis points from the prior quarter to 3.21%, 13 basis points of which was driven by elevated cash balances. The yield on earning assets decreased 25 basis points due to the excess cash liquidity and the continued impact of the decline in short-term interest rates. Our cost of funds decreased by 10 basis points to 0.55%.

Loans
Total loans ended the quarter at $4.6 billion, decreasing $226.3 million, or 18.8% annualized. During the quarter, we took a very careful approach to extending new credit as well as continuing an intense focus on managing credit risk and yield. This led to third quarter loan originations of $132.9 million, which were more than offset by higher levels of paydowns and payoffs. We continue to 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 highly 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 $1.2 million was recorded during the quarter under the CECL model and included a $0.2 million provision for unfunded loan commitment reserves. Annualized net charge-offs improved to 0.04% of total loans, compared to 0.05% in the prior quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDRs) decreased during the quarter, and the ratio of non-performing loans to total loans improved one basis point to 0.41%. The allowance for credit losses as a percentage of total loans increased eight basis points to 1.34% at September 30, 2020. Excluding PPP loans, non-performing loans remained at 0.45% of total loans, and the allowance for credit losses as a percentage of totals loans increased nine basis points to 1.45% at September 30, 2020.

Deposits
Average transaction deposits (defined as total deposits less time deposits) increased $316.6 million, or 30.3% annualized, and average total deposits increased $306.8 million, or 23.4% annualized, to $5.5 billion as of September 30, 2020. Average non-interest bearing demand deposits increased $78.4 million, and average interest-bearing demand, savings and money market deposits increased $238.2 million. The mix of transaction deposits to total deposits improved 114 basis points to 81.7% at September 30, 2020. The loan to deposit ratio totaled 81.1% at September 30, 2020, compared to 88.3% at June 30, 2020.

The cost of transaction deposits decreased one basis point from the prior quarter to 0.18%. The cost of total deposits decreased seven basis points from the prior quarter to 0.40%, and the total cost of funds decreased 10 basis points.

Non-Interest Income
Non-interest income totaled $44.5 million during the third quarter, representing an increase of $5.7 million, or 14.7%. Mortgage banking income reached a quarterly record of $34.9 million, an increase of $4.3 million. Service charges and bank card fees increased a combined $1.0 million, and other non-interest income increased $0.3 million.

Non-Interest Expense
Non-interest expense totaled $55.3 million during the third quarter, representing an increase of $1.6 million, due to higher mortgage banking performance-related compensation. Banking center consolidation-related expenses of $0.4 million were recorded during the third quarter as compared to $1.7 million during the prior quarter. The consolidations of 12 banking centers were announced in the second quarter of 2020 and are expected to be substantially completed by year end. The fully taxable equivalent efficiency ratio improved to 59.5% at September 30, 2020, compared to 61.1% at June 30, 2020. Adjusting for banking center consolidation-related expense, the fully taxable equivalent efficiency ratio improved 16 basis points to 59.0% at September 30, 2020.

Income tax expense totaled $6.8 million during the third quarter, compared to $4.4 million during the prior quarter. The effective tax rate was 19.7% and 20.0% for the third and second quarters, 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 September 30, 2020 for the consolidated company and NBH Bank was 10.60% and 9.23%, respectively. Shareholders' equity totaled $799.4 million at September 30, 2020 and increased $22.4 million from the prior quarter due to higher retained earnings.

Common book value per share increased $0.71 to $26.13 at September 30, 2020. The quarter's earnings, net of dividends paid, increased the tangible common book value per share by $0.73 to $22.40 at September 30, 2020. Excluding accumulated other comprehensive income, the tangible book value per share increased $0.77 to $22.04 at September 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 continued to leverage our digital banking platform with our clients. 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, including assistance with PPP loan forgiveness applications, 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 nine months of 2019, except as noted)

Net income totaled a record $61.4 million during the first nine months of 2020, or $1.97 per diluted share, an increase of $0.6 million. Adjusting for banking center consolidation-related expenses, net income totaled $63.1 million, or $2.03 per diluted share, an increase of $1.5 million. The return on average tangible assets was 1.36%, compared to 1.45% in the prior period, and the return on average tangible common equity was 12.47%, compared to 13.43%, in the prior period. The adjusted return on average tangible assets was 1.39%, compared to 1.46% in the prior period, and the adjusted return on average tangible common equity was 12.80%, compared to 13.58% during the prior period.

Fully taxable equivalent net interest income totaled $148.2 million, decreasing $11.0 million, or 6.9%. Average earning assets increased $346.4 million, or 6.5%, primarily driven by average loan growth of $339.0 million, including average PPP loan growth of $210.7 million, partially offset by a decrease in average investment securities of $147.7 million. The fully taxable equivalent net interest margin narrowed 50 basis points to 3.48% due to lower earning asset yields. The yield on earning assets decreased 71 basis points, led by an 83 basis point decrease in the originated loan portfolio yields that resulted from a decline in short-term interest rates as a result of monetary policy actions by the Federal Reserve. The cost of funds decreased 27 basis points to 0.69%.

Loans outstanding totaled $4.6 billion and increased $154.2 million, or 3.5%, led by PPP loans of $348.3 million that were partially offset by lower commercial and industrial loans of $151.5 million, or 10.8%. New loan originations over the trailing 12 months totaled $1.2 billion, led by commercial loan originations of $812.6 million, which included PPP loan originations of $358.9 million.

Average non-interest bearing demand deposits increased $210.8 million, or 18.3%. Average transaction deposits increased $510.3 million, or 14.3%, and average total deposits increased $479.8 million, or 10.3%, to $5.1 billion as of September 30, 2020. Spot transaction deposits increased $922.8 million to $4.6 billion at September 30, 2020, improving the mix of transaction deposits to total deposits by 420 basis points to 81.7% at September 30, 2020. The mix of non-interest bearing demand deposits to total deposits improved 117 basis points to 27.3% at September 30, 2020.

A CECL model driven provision for loan losses of $17.6 million was recorded during the first nine months of 2020, including a $0.1 million provision for 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 0.23% in the prior period. Non-performing loans to total loans decreased 17 basis points to 0.41%, compared to 0.58% at September 30, 2019. The allowance for credit losses totaled 1.34% of total loans, compared to 0.88% at September 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 57 basis points to 1.45% at September 30, 2020.

Non-interest income totaled $106.9 million, representing an increase of $44.4 million, or 71.1%, driven by an increase in mortgage banking income. Service charges and bank card fees decreased a combined $2.3 million and other non-interest income decreased $0.5 million.

Non-interest expense totaled $157.8 million, representing an increase of $23.1 million, or 17.2%. Mortgage banking commissions increased by $12.9 million, and banking center consolidation-related expense totaled $2.1 million compared to $0.9 million during the prior period. Other non-interest expense decreased by $1.3 million largely due to a decrease in FDIC deposit insurance fees and marketing and development expense. Additionally, included in the prior period were net gains on the sale of OREO of $7.2 million, compared to minimal net gains on the sale of OREO recorded in 2020.

Income tax expense totaled $14.5 million, compared to $12.0 million during the first nine months of 2019. Included in income tax expense was $0.1 million of expense during the first nine months of 2020 and $2.2 million of benefit during the first nine months of 2019 from stock compensation activity. Adjusting for stock compensation activity, the effective tax rate for the first nine months of 2020 was 18.9%, compared to 19.4% 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, October 21, 2020. Interested parties may listen to this call by dialing (877) 272-6762 / (615) 800-6832 (International) using the Conference ID of 2471788 and asking for the NBHC Third Quarter Earnings conference call. A telephonic replay of the call will be available beginning approximately four hours after the call's completion through November 4, 2020, by dialing (855) 859-2056 (United States) / (404) 537-3406 (International) using the Conference ID of 2471788. 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 97 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, Texas, Utah and New Mexico. NBH Bank operates under the following brand names: Community Banks of Colorado and Community Banks Mortgage, a division of NBH Bank, in Colorado, Bank Midwest and Bank Midwest Mortgage in Kansas and Missouri, and Hillcrest Bank and Hillcrest Bank Mortgage in Texas, Utah and New Mexico.  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, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; adverse effects due to the novel Coronavirus Disease 2019 (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: Angela Petrucci, Chief Administrative Officer, (720) 529-3349, 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 nine months ended
  September 30,       June 30,       September 30,       September 30,       September 30, 
  2020    2020   2019    2020    2019 
Total interest and dividend income $  52,302     $  53,744   $  61,372     $  164,714     $  182,985  
Total interest expense    5,587        6,416      9,587        20,324        27,543  
Net interest income    46,715        47,328      51,785        144,390        155,442  
Taxable equivalent adjustment    1,275        1,301      1,264        3,843        3,775  
Net interest income FTE(1)    47,990        48,629      53,049        148,233        159,217  
Provision for loan losses    1,200        10,271      5,690        17,630        10,463  
Net interest income after provision for loan losses FTE(1)    46,790        38,358      47,359        130,603        148,754  
Non-interest income:                            
Service charges    3,742        3,094      4,617        10,962        13,479  
Bank card fees    4,039        3,654      3,752        11,206        10,946  
Mortgage banking income    34,943        30,630      14,702        79,246        32,037  
Other non-interest income    1,733        1,459      1,661        5,384        5,861  
OREO-related income    75        —      27        103        147  
Total non-interest income    44,532        38,837      24,759        106,901        62,470  
Non-interest expense:                            
Salaries and benefits    38,614        36,457      33,522        108,251        92,079  
Occupancy and equipment    6,878        7,078      6,825        20,854        20,428  
Professional fees    714        759      743        2,082        2,598  
Other non-interest expense    7,443        6,778      7,422        21,222        22,498  
Problem asset workout    1,064        629      602        2,341        2,450  
(Gain) loss on sale of OREO, net    (119 )      55      (6,514 )      (25 )      (7,200 )
Core deposit intangible asset amortization    295        296      295        887        887  
Banking center consolidation-related expense    432        1,708      898        2,140        898  
Total non-interest expense    55,321        53,760      43,793        157,752        134,638  
                             
Income before income taxes FTE(1)    36,001        23,435      28,325        79,752        76,586  
Taxable equivalent adjustment    1,275        1,301      1,264        3,843        3,775  
Income before income taxes    34,726        22,134      27,061        75,909        72,811  
Income tax expense    6,833        4,429      5,419        14,487        11,965  
Net income $  27,893     $  17,705   $  21,642     $  61,422     $  60,846  
Earnings per share - basic $  0.91     $  0.57   $  0.69     $  1.99     $  1.95  
Earnings per share - diluted    0.90        0.57      0.69        1.97        1.93  

                                                      

(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)
                       
  September 30, 2020   June 30, 2020   December 31, 2019   September 30, 2019
ASSETS                      
Cash and cash equivalents $  445,103     $ 142,385     $ 110,190     $ 116,919  
Investment securities available-for-sale    572,523       610,735       638,249       661,129  
Investment securities held-to-maturity    320,001       215,183       182,884       189,982  
Non-marketable securities    29,598       30,188       29,751       27,277  
Loans    4,556,121       4,782,383       4,415,406       4,401,917  
Allowance for credit losses    (60,979 )     (60,465 )     (39,064 )     (38,710 )
Loans, net    4,495,142       4,721,918       4,376,342       4,363,207  
Loans held for sale    273,003       204,856       117,444       204,602  
Other real estate owned    4,590       6,491       7,300       7,904  
Premises and equipment, net    108,860       110,019       112,151       110,692  
Goodwill    115,027       115,027       115,027       115,027  
Intangible assets, net    15,017       12,175       11,361       11,578  
Other assets    221,812       216,454       194,813       181,733  
Total assets $  6,600,676     $ 6,385,431     $ 5,895,512     $ 5,990,050  
LIABILITIES AND SHAREHOLDERS' EQUITY                      
Liabilities:                      
Non-interest bearing demand deposits $  1,533,676     $ 1,502,948     $ 1,184,945     $ 1,237,189  
Interest bearing demand deposits    976,133       955,951       738,496       681,113  
Savings and money market    2,079,585       1,903,427       1,755,538       1,748,257  
Total transaction deposits    4,589,394       4,362,326       3,678,979       3,666,559  
Time deposits    1,027,066       1,051,563       1,058,153       1,067,301  
Total deposits    5,616,460       5,413,889       4,737,132       4,733,860  
Securities sold under agreements to repurchase    23,904       24,504       56,935       62,735  
Federal Home Loan Bank advances    —       15,000       207,675       303,897  
Other liabilities    160,955       155,071       126,850       136,232  
Total liabilities    5,801,319       5,608,464       5,128,592       5,236,724  
Shareholders' equity:                      
Common stock    515       515       515       515  
Additional paid in capital    1,010,145       1,008,773       1,009,223       1,007,628  
Retained earnings    202,238       180,537       164,082       150,866  
Treasury stock    (424,621 )     (425,053 )     (408,962 )     (408,770 )
Accumulated other comprehensive income, net of tax    11,080       12,195       2,062       3,087  
Total shareholders' equity    799,357       776,967       766,920       753,326  
Total liabilities and shareholders' equity $  6,600,676     $ 6,385,431     $ 5,895,512     $ 5,990,050  
SHARE DATA                      
Average basic shares outstanding    30,756,116       30,731,758       31,299,989       31,281,970  
Average diluted shares outstanding    30,924,223       30,857,606       31,525,911       31,508,999  
Ending shares outstanding    30,594,412       30,569,011       31,176,627       31,169,086  
Common book value per share $  26.13     $ 25.42     $ 24.60     $ 24.17  
Tangible common book value per share(1) (non-GAAP)    22.40       21.67       20.89       20.45  
Tangible common book value per share, excluding accumulated other comprehensive income(1) (non-GAAP)    22.04       21.27       20.83       20.35  
CAPITAL RATIOS                      
Average equity to average assets   12.22 %     12.21 %     12.91 %     12.79 %
Tangible common equity to tangible assets(1)   10.57 %     10.56 %     11.27 %     10.85 %
Tier 1 leverage ratio   10.60 %     10.53 %     11.04 %     10.89 %
Common equity tier 1 risk-based capital ratio   14.25 %     13.21 %     13.21 %     12.93 %
Total risk-based capital ratio   15.40 %     14.26 %     14.08 %     13.79 %

                                                      

(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            
          September 30, 2020
vs. June 30, 2020
      September 30, 2020
vs. September 30, 2019
  September 30, 2020   June 30, 2020   % Change   September 30, 2019   % Change
Originated:                        
Commercial:                        
Commercial and industrial $  1,228,550   $ 1,360,679   (9.7 )%   $ 1,369,615   (10.3 )%
Municipal and non-profit    883,065     912,287   (3.2 )%     843,763   4.7 %
Owner-occupied commercial real estate    460,487     455,846   1.0 %     378,956   21.5 %
Food and agribusiness    210,818     213,789   (1.4 )%     230,869   (8.7 )%
PPP loans(1)    348,257     348,689   (0.1 )%       100.0 %
Total commercial    3,131,177     3,291,290   (4.9 )%     2,823,203   10.9 %
Commercial real estate non-owner occupied    515,415     540,412   (4.6 )%     501,771   2.7 %
Residential real estate    614,449     631,032   (2.6 )%     659,246   (6.8 )%
Consumer    20,196     20,370   (0.9 )%     21,378   (5.5 )%
Total originated    4,281,237     4,483,104   (4.5 )%     4,005,598   6.9 %
                         
Acquired:                        
Commercial:                        
Commercial and industrial    23,984     27,461   (12.7 )%     34,409   (30.3 )%
Municipal and non-profit    576     593   (2.9 )%     3,939   (85.4 )%
Owner-occupied commercial real estate    55,929     65,052   (14.0 )%     78,297   (28.6 )%
Food and agribusiness    5,740     6,237   (8.0 )%     8,618   (33.4 )%
Total commercial    86,229     99,343   (13.2 )%     125,263   (31.2 )%
Commercial real estate non-owner occupied    101,672     101,412   0.3 %     139,410   (27.1 )%
Residential real estate    86,478     97,982   (11.7 )%     130,831   (33.9 )%
Consumer    505     542   (6.8 )%     815   (38.0 )%
Total acquired    274,884     299,279   (8.2 )%     396,319   (30.6 )%
Total loans $  4,556,121   $ 4,782,383   (4.7 )%   $ 4,401,917   3.5 %

                                                      

(1 )      PPP loan balances are net of fees and costs and include principal totaling $356,913.


                             
Originations(1)                            
                             
  Third quarter   Second quarter   First quarter   Fourth quarter   Third quarter
  2020   2020   2020   2019   2019
Commercial:                            
Commercial and industrial $  11,354   $ (8,726 )   $ 118,999     $ 69,048   $ 144,554  
Municipal and non-profit    6,083     49,679       13,968       46,114     31,482  
Owner occupied commercial real estate    23,758     22,078       37,372       46,965     16,149  
Food and agribusiness    13,876     (10,480 )     (6,787 )     20,348     (4,894 )
PPP loans    122     358,798                  
Total commercial    55,193     411,349       163,552       182,475     187,291  
Commercial real estate non-owner occupied    24,937     18,992       80,792       41,256     79,929  
Residential real estate    49,786     29,024       46,273       43,493     49,022  
Consumer    2,980     2,206       2,320       2,315     2,986  
Total $  132,896   $ 461,571     $ 292,937     $ 269,539   $ 319,228  

                                                      

(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 ($27,899), ($55,826), $48,789, $1,756 and $37,062 as of the third quarter 2020, second quarter 2020, first quarter 2020, fourth quarter 2019, and third 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
    September 30, 2020   June 30, 2020   September 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)   $  4,343,335     $  40,973     3.75 %   $ 4,432,725     $ 42,440     3.85 %   $ 3,886,503     $ 46,736     4.77 %
Acquired loans      284,653        6,593     9.21 %     312,723       6,722     8.65 %     425,079       8,907     8.31 %
Loans held for sale      230,390        1,683     2.91 %     157,887       1,310     3.34 %     139,281       1,328     3.78 %
Investment securities available-for-sale      559,330        2,784     1.99 %     607,132       3,050     2.01 %     687,989       3,696     2.15 %
Investment securities held-to-maturity      242,511        1,253     2.07 %     189,360       1,201     2.54 %     199,519       1,384     2.77 %
Other securities      29,640        221     2.98 %     30,087       310     4.12 %     27,227       418     6.14 %
Interest earning deposits and securities purchased under agreements to resell      254,931        70     0.11 %     36,758       12     0.13 %     19,809       167     3.34 %
Total interest earning assets FTE(2)   $  5,944,790     $  53,577     3.59 %   $ 5,766,672     $ 55,045     3.84 %   $ 5,385,407     $ 62,636     4.61 %
Cash and due from banks   $  73,274                 $ 76,041                 $ 76,866              
Other assets      525,324                   532,867                   443,724              
Allowance for credit losses      (60,372 )                 (56,984 )                 (40,212 )            
Total assets   $  6,483,016                 $ 6,318,596                 $ 5,865,785              
Interest bearing liabilities:                                                      
Interest bearing demand, savings and money market deposits   $  2,957,604     $  1,990     0.27 %   $ 2,719,433     $ 1,951     0.29 %   $ 2,438,399     $ 3,609     0.59 %
Time deposits      1,038,983        3,501     1.34 %     1,048,772       4,136     1.59 %     1,073,140       4,365     1.61 %
Securities sold under agreements to repurchase      22,667        10     0.18 %     23,485       18     0.31 %     65,722       204     1.23 %
Federal Home Loan Bank advances      1,141        86     29.99 %     163,263       311     0.77 %     231,926       1,409     2.41 %
Total interest bearing liabilities   $  4,020,395     $  5,587     0.55 %   $ 3,954,953     $ 6,416     0.65 %   $ 3,809,187     $ 9,587     1.00 %
Demand deposits   $  1,515,058                 $ 1,436,671                 $ 1,193,357              
Other liabilities      155,205                   155,379                   112,927              
Total liabilities      5,690,658                   5,547,003                   5,115,471              
Shareholders' equity      792,358                   771,593                   750,314              
Total liabilities and shareholders' equity   $  6,483,016                 $ 6,318,596                 $ 5,865,785              
Net interest income FTE(2)         $  47,990               $ 48,629               $ 53,049      
Interest rate spread FTE(2)                 3.04 %                 3.19 %                 3.61 %
Net interest earning assets   $  1,924,395                 $ 1,811,719                 $ 1,576,220              
Net interest margin FTE(2)                 3.21 %                 3.39 %                 3.91 %
Average transaction deposits   $  4,472,662                 $ 4,156,104                 $ 3,631,756              
Average total deposits      5,511,645                   5,204,876                   4,704,896              
Ratio of average interest earning assets to average interest bearing liabilities     147.87 %                 145.81 %                 141.38 %            

                                                      

(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 $1,275, $1,301 and $1,264 for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.


 
NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
(Dollars in thousands)
 
                               
  For the nine months ended September 30, 2020   For the nine months ended September 30, 2019
  Average              Average   Average              Average
  balance   Interest   rate   balance   Interest   rate
Interest earning assets:                              
Originated loans FTE(1)(2) $  4,273,332     $  128,392   4.01 %   $  3,782,765     $  137,036   4.84 %
Acquired loans    313,555        22,194   9.45 %      465,165        28,467   8.18 %
Loans held for sale    163,980        3,929   3.20 %      90,143        2,750   4.08 %
Investment securities available-for-sale    597,654        9,229   2.06 %      737,744        12,059   2.18 %
Investment securities held-to-maturity    207,107        3,689   2.37 %      214,696        4,568   2.84 %
Other securities    29,826        945   4.22 %      27,513        1,299   6.30 %
Interest earning deposits and securities purchased under agreements to resell    105,430        179   0.23 %      26,468        581   2.93 %
Total interest earning assets FTE(2) $  5,690,884     $  168,557   3.96 %   $  5,344,494     $  186,760   4.67 %
Cash and due from banks $  74,694               $  76,863            
Other assets    510,941                  424,271            
Allowance for credit losses    (54,077 )                (37,939 )          
Total assets $  6,222,442               $  5,807,689            
Interest bearing liabilities:                              
Interest bearing demand, savings and money market deposits $  2,725,572     $  6,829   0.33 %   $  2,426,136     $  10,176   0.56 %
Time deposits    1,048,116        12,075   1.54 %      1,078,549        12,062   1.50 %
Securities sold under agreements to repurchase    30,322        125   0.55 %      61,313        519   1.13 %
Federal Home Loan Bank advances    127,456        1,295   1.36 %      258,348        4,786   2.48 %
Total interest bearing liabilities $  3,931,466     $  20,324   0.69 %   $  3,824,346     $  27,543   0.96 %
Demand deposits $  1,363,556               $  1,152,718            
Other liabilities    147,929                  101,724            
Total liabilities    5,442,951                  5,078,788            
Shareholders' equity    779,491                  728,901            
Total liabilities and shareholders' equity $  6,222,442               $  5,807,689            
Net interest income FTE(2)       $  148,233             $  159,217    
Interest rate spread FTE(2)             3.27 %               3.71 %
Net interest earning assets $  1,759,418               $  1,520,148            
Net interest margin FTE(2)             3.48 %               3.98 %
Average transaction deposits $  4,089,128               $  3,578,854            
Average total deposits    5,137,244                  4,657,403            
Ratio of average interest earning assets to average interest bearing liabilities   144.75 %               139.75 %          

                                                      

(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 $3,843 and $3,775 for the nine months ended September 30, 2020 and September 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
  September 30, 2020   June 30, 2020   September 30, 2019
Beginning allowance for credit losses $  60,465     $ 50,956     $ 40,082  
Charge-offs    (619 )     (852 )     (7,101 )
Recoveries    133       236       39  
Provision    1,000       10,125       5,690  
Ending allowance for credit losses ("ACL") $  60,979     $ 60,465     $ 38,710  
Ratio of annualized net charge-offs to average total loans during the period   0.04 %     0.05 %     0.65 %
Ratio of annualized net charge-offs to average total loans excluding PPP loans during the period   0.04 %     0.05 %     0.65 %
Ratio of ACL to total loans outstanding at period end   1.34 %     1.26 %     0.88 %
Ratio of ACL to total loans outstanding excluding PPP loans at period end   1.45 %     1.36 %     0.88 %
Ratio of ACL to total non-performing loans at period end   322.95 %     302.34 %     152.41 %
Total loans $  4,556,121     $ 4,782,383     $ 4,401,917  
Average total loans during the period    4,677,630       4,794,466       4,329,590  
Average total loans excluding PPP loans during the period    4,329,458       4,512,010       4,329,590  
Total non-performing loans    18,882       19,999       25,398  


Past Due and Non-accrual Loans                 
                 
  September 30, 2020   June 30, 2020   September 30, 2019
Loans 30-89 days past due and still accruing interest $  6,587     $ 3,932     $ 6,723  
Loans 90 days past due and still accruing interest    161       2,444       1,968  
Non-accrual loans    18,882       19,999       25,398  
Total past due and non-accrual loans $  25,630     $ 26,375     $ 34,089  
Total 90 days past due and still accruing interest and non-accrual loans to total loans   0.42 %     0.47 %     0.62 %


Asset Quality Data                
                 
  September 30, 2020   June 30, 2020   September 30, 2019
Non-performing loans $  18,882     $  19,999     $  25,398  
OREO    4,590        6,491        7,904  
Total non-performing assets $  23,472     $  26,490     $  33,302  
Accruing restructured loans $  21,786     $  20,284     $  7,384  
Total non-performing loans to total loans   0.41 %     0.42 %     0.58 %
Total non-performing loans to total loans excluding PPP loans   0.45 %     0.45 %     0.58 %
Total non-performing assets to total loans and OREO   0.51 %     0.55 %     0.76 %
Total non-performing assets to total loans and OREO excluding PPP loans   0.56 %     0.60 %     0.76 %


                   
NATIONAL BANK HOLDINGS CORPORATION
Key Ratios
                   
  As of and for the three months ended   As of and for the nine months ended
  September 30,       June 30,       September 30,       September 30,    September 30, 
  2020       2020       2019       2020    2019 
Key Ratios(1)                  
Return on average assets 1.71 %   1.13 %   1.46 %   1.32 %   1.40 %
Return on average tangible assets(2) 1.76 %   1.16 %   1.51 %   1.36 %   1.45 %
Return on average tangible assets, adjusted(2) 1.78 %   1.25 %   1.56 %   1.39 %   1.46 %
Return on average equity 14.00 %   9.23 %   11.44 %   10.53 %   11.16 %
Return on average tangible common equity(2) 16.49 %   10.98 %   13.68 %   12.47 %   13.43 %
Return on average tangible common equity, adjusted(2) 16.69 %   11.78 %   14.11 %   12.80 %   13.58 %
Loan to deposit ratio (end of period) 81.12 %   88.34 %   92.99 %   81.12 %   92.99 %
Non-interest bearing deposits to total deposits (end of period) 27.31 %   27.76 %   26.13 %   27.31 %   26.13 %
Net interest margin(4) 3.13 %   3.30 %   3.81 %   3.39 %   3.89 %
Net interest margin FTE(2)(4) 3.21 %   3.39 %   3.91 %   3.48 %   3.98 %
Interest rate spread FTE(2)(5) 3.04 %   3.19 %   3.61 %   3.27 %   3.71 %
Yield on earning assets(3) 3.50 %   3.75 %   4.52 %   3.87 %   4.58 %
Yield on earning assets FTE(2)(3) 3.59 %   3.84 %   4.61 %   3.96 %   4.67 %
Cost of interest bearing liabilities(3) 0.55 %   0.65 %   1.00 %   0.69 %   0.96 %
Cost of deposits 0.40 %   0.47 %   0.67 %   0.49 %   0.64 %
Non-interest income to total revenue FTE(2) 48.13 %   44.40 %   31.82 %   41.90 %   28.18 %
Non-interest expense to average assets 3.39 %   3.42 %   2.96 %   3.39 %   3.10 %
Non-interest expense to average assets, adjusted(2) 3.37 %   3.31 %   2.90 %   3.34 %   3.08 %
Efficiency ratio 60.30 %   62.05 %   56.83 %   62.42 %   61.38 %
Efficiency ratio FTE(2) 59.47 %   61.13 %   55.90 %   61.48 %   60.33 %
Efficiency ratio FTE, adjusted(2) 59.01 %   59.17 %   54.75 %   60.64 %   59.93 %
                   
Total Loans Asset Quality Data(6)(7)(8)                  
Non-performing loans to total loans 0.41 %   0.42 %   0.58 %   0.41 %   0.58 %
Non-performing loans to total loans excluding PPP loans 0.45 %   0.45 %   0.58 %   0.45 %   0.58 %
Non-performing assets to total loans and OREO 0.51 %   0.55 %   0.76 %   0.51 %   0.76 %
Non-performing assets to total loans and OREO excluding PPP loans 0.56 %   0.60 %   0.76 %   0.56 %   0.76 %
Allowance for credit losses to total loans 1.34 %   1.26 %   0.88 %   1.34 %   0.88 %
Allowance for credit losses to total loans excluding PPP loans 1.45 %   1.36 %   0.88 %   1.45 %   0.88 %
Allowance for credit losses to non-performing loans 322.95 %   302.34 %   152.41 %   322.95 %   152.41 %
Net charge-offs to average loans(1) 0.04 %   0.05 %   0.65 %   0.04 %   0.23 %

                                                      

(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                      
  September 30, 2020   June 30, 2020   December 31, 2019   September 30, 2019
Total shareholders' equity $  799,357     $ 776,967     $ 766,920     $ 753,326  
Less: goodwill and core deposit intangible assets, net    (122,871 )     (123,166 )     (123,758 )     (124,054 )
Add: deferred tax liability related to goodwill    8,927       8,698       8,241       8,012  
Tangible common equity (non-GAAP) $  685,413     $ 662,499     $ 651,403     $ 637,284  
                       
Total assets $  6,600,676     $ 6,385,431     $ 5,895,512     $ 5,990,050  
Less: goodwill and core deposit intangible assets, net    (122,871 )     (123,166 )     (123,758 )     (124,054 )
Add: deferred tax liability related to goodwill    8,927       8,698       8,241       8,012  
Tangible assets (non-GAAP) $  6,486,732     $ 6,270,963     $ 5,779,995     $ 5,874,008  
                       
Tangible common equity to tangible assets calculations:                      
Total shareholders' equity to total assets   12.11 %     12.17 %     13.01 %     12.58 %
Less: impact of goodwill and core deposit intangible assets, net   (1.54 )%     (1.61 )%     (1.74 )%     (1.73 )%
Tangible common equity to tangible assets (non-GAAP)   10.57 %     10.56 %     11.27 %     10.85 %
                       
Tangible common book value per share calculations:                      
Tangible common equity (non-GAAP) $  685,413     $ 662,499     $ 651,403     $ 637,284  
Divided by: ending shares outstanding    30,594,412       30,569,011       31,176,627       31,169,086  
Tangible common book value per share (non-GAAP) $  22.40     $ 21.67     $ 20.89     $ 20.45  
                       
Tangible common book value per share, excluding accumulated other comprehensive income calculations:                      
Tangible common equity (non-GAAP) $  685,413     $ 662,499     $ 651,403     $ 637,284  
Accumulated other comprehensive income, net of tax    (11,080 )     (12,195 )     (2,062 )     (3,087 )
Tangible common book value, excluding accumulated other comprehensive income, net of tax (non-GAAP)    674,333       650,304       649,341       634,197  
Divided by: ending shares outstanding    30,594,412       30,569,011       31,176,627       31,169,086  
Tangible common book value per share, excluding accumulated other comprehensive income, net of tax (non-GAAP) $  22.04     $ 21.27     $ 20.83     $ 20.35  


 
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 nine months ended
  September 30,    June 30,   September 30,   September 30,    September 30,
  2020
  2020
  2019
  2020
  2019
Net income $  27,893     $ 17,705     $ 21,642     $  61,422     $ 60,846  
Add: impact of core deposit intangible amortization expense, after tax    226       227       224        680       674  
Net income adjusted for impact of core deposit intangible amortization expense, after tax $  28,119     $ 17,932     $ 21,866     $  62,102     $ 61,520  
                             
Average assets $  6,483,016     $ 6,318,596     $ 5,865,785     $  6,222,442     $ 5,807,689  
Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill    (114,122 )     (114,631 )     (116,188 )      (114,406 )     (116,481 )
Average tangible assets (non-GAAP) $  6,368,894     $ 6,203,965     $ 5,749,597     $  6,108,036     $ 5,691,208  
                             
Average shareholders' equity $  792,358     $ 771,593     $ 750,314     $  779,491     $ 728,901  
Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill    (114,122 )     (114,631 )     (116,188 )      (114,406 )     (116,481 )
Average tangible common equity (non-GAAP) $  678,236     $ 656,962     $ 634,126     $  665,085     $ 612,420  
                             
Return on average assets   1.71 %     1.13 %     1.46 %     1.32 %     1.40 %
Return on average tangible assets (non-GAAP)   1.76 %     1.16 %     1.51 %     1.36 %     1.45 %
Return on average equity   14.00 %     9.23 %     11.44 %     10.53 %     11.16 %
Return on average tangible common equity (non-GAAP)   16.49 %     10.98 %     13.68 %     12.47 %     13.43 %


Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin
                             
  As of and for the three months ended   As of and for the nine months ended
  September 30,    June 30,   September 30,   September 30,    September 30,
  2020
  2020
  2019
  2020
  2019
Interest income $  52,302     $ 53,744     $ 61,372        $  164,714     $ 182,985  
Add: impact of taxable equivalent adjustment    1,275       1,301       1,264        3,843       3,775  
Interest income FTE (non-GAAP) $  53,577     $ 55,045     $ 62,636     $  168,557     $ 186,760  
                             
Net interest income $  46,715     $ 47,328     $ 51,785     $  144,390     $ 155,442  
Add: impact of taxable equivalent adjustment    1,275       1,301       1,264        3,843       3,775  
Net interest income FTE (non-GAAP) $  47,990     $ 48,629     $ 53,049     $  148,233     $ 159,217  
                             
Average earning assets $  5,944,790     $ 5,766,672     $ 5,385,407     $  5,690,884     $ 5,344,494  
Yield on earning assets   3.50 %     3.75 %     4.52 %     3.87 %     4.58 %
Yield on earning assets FTE (non-GAAP)   3.59 %     3.84 %     4.61 %     3.96 %     4.67 %
Net interest margin   3.13 %     3.30 %     3.81 %     3.39 %     3.89 %
Net interest margin FTE (non-GAAP)   3.21 %     3.39 %     3.91 %     3.48 %     3.98 %


Efficiency Ratio                            
                             
  As of and for the three months ended   As of and for the nine months ended
  September 30,       June 30,       September 30,       September 30,       September 30, 
  2020       2020       2019       2020       2019 
Net interest income $  46,715     $  47,328     $  51,785     $  144,390     $  155,442  
Add: impact of taxable equivalent adjustment    1,275        1,301        1,264        3,843        3,775  
Net interest income, FTE (non-GAAP) $  47,990     $  48,629     $  53,049     $  148,233     $  159,217  
                             
Non-interest income $  44,532     $  38,837     $  24,759     $  106,901     $  62,470  
                             
Non-interest expense $  55,321     $  53,760     $  43,793     $  157,752     $  134,638  
Less: core deposit intangible asset amortization    (295 )      (296 )      (295 )      (887 )      (887 )
Non-interest expense, adjusted for core deposit intangible asset amortization $  55,026     $  53,464     $  43,498     $  156,865     $  133,751  
                             
Non-interest expense, adjusted for core deposit intangible asset amortization $  55,026     $  53,464     $  43,498     $  156,865     $  133,751  
Banking center consolidation-related expense    (432 )      (1,708 )      (898 )      (2,140 )      (898 )
Adjusted non-interest expense (non-GAAP) $  54,594     $  51,756     $  42,600     $  154,725     $  132,853  
                             
Efficiency ratio   60.30 %     62.05 %     56.83 %     62.42 %     61.38 %
Efficiency ratio FTE (non-GAAP)   59.47 %     61.13 %     55.90 %     61.48 %     60.33 %
Adjusted efficiency ratio FTE (non-GAAP)   59.01 %     59.17 %     54.75 %     60.64 %     59.93 %


Adjusted Financial Results                              
                               
    As of and for the three months ended   As of and for the nine months ended
    September 30,    June 30,   September 30,   September 30,    September 30,
    2020
  2020
  2019
  2020
  2019
Adjustments to net income:                              
Net income   $  27,893     $ 17,705     $ 21,642     $  61,422     $ 60,846  
Adjustments(1)      331       1,310       689        1,641       689  
Adjusted net income (non-GAAP)   $  28,224     $ 19,015     $ 22,331     $  63,063     $ 61,535  
                               
Adjustments to earnings per share:                              
Earnings per share - diluted   $  0.90     $ 0.57     $ 0.69     $  1.97     $ 1.93  
Adjustments(1)      0.01       0.05       0.02        0.06       0.02  
Adjusted earnings per share - diluted (non-GAAP)   $  0.91     $ 0.62     $ 0.71     $  2.03     $ 1.95  
                               
Adjustments to return on average tangible assets:                              
Adjusted net income (non-GAAP)   $  28,224     $ 19,015     $ 22,331     $  63,063     $ 61,535  
Add: impact of core deposit intangible amortization expense, after tax      226       227       224        680       674  
Net income adjusted for impact of core deposit intangible amortization expense, after tax      28,450       19,242       22,555        63,743       62,209  
Average tangible assets (non-GAAP)      6,368,894       6,203,965       5,749,597        6,108,036       5,691,208  
Adjusted return on average tangible assets (non-GAAP)     1.78 %     1.25 %     1.56 %     1.39 %     1.46 %
                               
Adjustments to return on average tangible common equity:                              
Net income adjusted for impact of core deposit intangible amortization expense, after tax   $  28,450     $ 19,242     $ 22,555     $  63,743     $ 62,209  
Average tangible common equity (non-GAAP)      678,236       656,962       634,126        665,085       612,420  
Adjusted return on average tangible common equity (non-GAAP)     16.69 %     11.78 %     14.11 %     12.80 %     13.58 %
                               
Adjustments to non-interest expense:                              
Non-interest expense   $  55,321     $ 53,760     $ 43,793     $  157,752     $ 134,638  
Adjustments(1)      432       1,708       898        2,140       898  
Adjusted non-interest expense (non-GAAP)      54,889       52,052       42,895        155,612       133,740  
Non-interest expense to average assets, adjusted (non-GAAP)     3.37 %     3.31 %     2.90 %     3.34 %     3.08 %
                               
(1) Adjustments:                              
Non-interest expense adjustments:                              
Banking center consolidation-related expense   $  432     $ 1,708     $ 898     $  2,140     $ 898  
Tax expense impact      (101 )     (398 )     (209 )      (499 )     (209 )
Adjustments (non-GAAP)   $  331     $ 1,310     $ 689     $  1,641     $ 689  
                                         

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