National Bank Holdings Corporation Announces First Quarter 2021 Financial Results

DENVER, April 22, 2021 (GLOBE NEWSWIRE) -- National Bank Holdings Corporation NBHC reported:

In announcing these results, Chief Executive Officer Tim Laney shared, "We are off to a solid start in 2021 with quarterly earnings of $0.86 per diluted share, and we delivered an impressive return on average tangible equity of 15.20% on a strong capital base. We continue to generate positive returns through our diverse revenue streams, excellent credit quality and prudent expense management.  Net charge-offs were a record low one basis point annualized of total loans. We continue to build upon our relationship-based banking model with low cost transaction deposit growth of 14.5% annualized, compared to the prior quarter."

Mr. Laney added, "We are optimistic about our growth potential as we continue to see signs of strong economic recovery in our markets. Our pipeline for new business generation during the second quarter is very encouraging. We tackled the challenges faced during 2020 head-on from a position of strength and continue to be well positioned for growth with a strong common equity tier 1 ratio of 15.23% and sizable liquidity. We are fueled by our clients' determination to succeed and our associates' resolve to provide fair and simple solutions that enable them to realize their dreams."

First Quarter 2021 Results
(All comparisons refer to the fourth quarter of 2020, except as noted)

Net income totaled $26.8 million, or $0.86 per diluted share, compared to $27.2 million, or $0.87 per diluted share. The return on average tangible assets was 1.65%, compared to 1.67%, and the return on average tangible common equity was 15.20%, compared to 15.55% last quarter.

Net Interest Income
Fully taxable equivalent net interest income totaled $46.5 million, a decrease of $3.3 million, largely driven by $2.6 million lower PPP loan fee income from PPP loan forgiveness and two fewer calendar days. As of March 31, 2021, the remaining unamortized PPP loan fees totaled $6.2 million. The fully taxable equivalent net interest margin narrowed 22 basis points to 3.02%. Excess liquidity drove a 32 basis point dilutive impact to this quarter's margin. The yield on earning assets decreased 27 basis points largely due to the remix of assets into lower-yielding cash balances and lower PPP loan forgiveness activity during the first quarter. Our cost of funds decreased five basis points to 0.28%.

Loans
During the quarter, we continued our careful approach to extending new credit as well as continuing an intense focus on managing credit risk and yield. Total loans ended the quarter at $4.3 billion, decreasing $50.5 million, or 4.7% annualized. Excluding PPP loans, total loans decreased by $92.1 million. First quarter loan originations totaled $294.2 million and included $121.1 million of PPP loan originations. We continue to maintain a granular and well-diversified loan portfolio with self-imposed concentration limits.

Asset Quality and Provision for Loan Losses
The Company released $3.6 million of net provision during the quarter driven by improved outlook in the CECL model's underlying economic forecast as well as strong asset quality. Included in the quarter was a $1.0 million provision expense for unfunded loan commitment reserves. Annualized net charge-offs totaled only 0.01% of total loans, compared to 0.11% in the prior quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDRs) improved nine basis points to 0.38% of total loans and non-performing assets improved seven basis points to 0.51% of total loans and OREO. The allowance for credit losses as a percentage of total loans decreased nine basis points to 1.28% at March 31, 2021. Excluding PPP loans, non-performing loans totaled 0.40% of total loans, non-performing assets totaled 0.54% of total loans and OREO, and the allowance for credit losses as a percentage of total loans totaled 1.35% at March 31, 2021.

Deposits
Average transaction deposits (defined as total deposits less time deposits) increased $166.6 million, or 14.5% annualized, and average total deposits increased $125.7 million, or 9.0% annualized, to $5.8 billion for the first quarter 2021. The mix of transaction deposits to total deposits improved 160 basis points to 84.2% at March 31, 2021. The loan to deposit ratio totaled 71.7% at March 31, 2021, compared to 76.7% at December 31, 2020. The cost of transaction deposits decreased one basis point from the prior quarter to 0.14%, and the cost of deposits decreased five basis points from the prior quarter to 0.28%.

Non-Interest Income
Non-interest income totaled $33.4 million during the first quarter of 2021, consistent with the fourth quarter of 2020. Included in other non-interest income for the first quarter were $1.6 million of gains on fixed assets sales from the banking center consolidations. Mortgage banking income decreased $0.8 million during the quarter, and service charges and bank card fees decreased $0.7 million during the quarter due to seasonality and the continued impact of the economic stimulus funds.

Non-Interest Expense
Non-interest expense totaled $49.7 million during the first quarter, representing an increase of $1.2 million. Included in the quarter was $1.3 million of banking center consolidation expense related to the consolidation of seven banking center locations announced in January 2021. The fully taxable equivalent efficiency ratio totaled 61.8% at March 31, 2021, compared to 57.9% at December 31, 2020.

Income tax expense totaled $5.7 million during the first quarter, compared to $6.3 million during the prior quarter. Included in income tax expense was $0.2 million of benefit during the first quarter of 2021 from stock compensation activity. The effective tax rate for the first quarter 2021 was 18.0%, adjusted for stock compensation activity, compared to 19.0% for the full year 2020. The lower rate compared to the statutory rate reflects the continued success of our tax strategies and tax-exempt income.

Capital
Capital ratios continue to be strong and in excess of federal bank regulatory agency "well capitalized" thresholds. The Tier 1 leverage ratio at March 31, 2021 for the consolidated company and NBH Bank was 10.80% and 9.26%, respectively. Shareholders' equity totaled $832.0 million at March 31, 2021 and increased $11.3 million from the prior quarter due to higher retained earnings, partially offset by lower accumulated other comprehensive income.

Common book value per share increased $0.30 to $27.09 at March 31, 2021. The quarter's earnings, net of dividends paid and lower accumulated other comprehensive income, increased the tangible common book value per share by $0.32 to $23.41 at March 31, 2021. Excluding accumulated other comprehensive income, the tangible book value per share increased $0.63 to $23.40 at March 31, 2021.

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. 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. While vaccination rates are improving, the length of time that the government-mandated measures must remain in place to address COVID-19 is unknown. The pandemic has had a significantly negative impact to the U.S. labor market, consumer spending and business operations, and it is not clear when government-mandated measures will be removed.

Year-Over-Year Review
(All comparisons refer to the first quarter 2020, except as noted)

Net income totaled $26.8 million, or $0.86 per diluted share, an increase of $11.0 million, or 69.4%. The return on average tangible assets was 1.65%, compared to 1.12%, and the return on average tangible common equity was 15.20%, compared to 9.79%.

Fully taxable equivalent net interest income totaled $46.5 million, decreasing $5.1 million, or 9.9%, as a result of monetary policy actions by the Federal Reserve during 2020. Average earning assets increased $879.5 million, or 16.4%, primarily driven by increases in average interest bearing cash balances of $616.3 million and increases in investments of $291.9 million. The fully taxable equivalent net interest margin narrowed 85 basis points to 3.02% due to lower earning asset yields. The yield on earning assets decreased 122 basis points, led by a 46 basis point decrease in the originated loan portfolio yields and the remix of assets into lower-yielding cash balances. The cost of deposits decreased 35 basis points to 0.28%.

Loans outstanding totaled $4.3 billion, decreasing $202.5 million, or 4.5%, due to payoffs that were partially offset by PPP loans of $217.7 million. New loan originations over the trailing 12 months totaled $1.2 billion, led by commercial loan originations of $813.3 million including PPP loan originations of $480.1 million.

Average non-interest bearing demand deposits increased $1.0 billion, or 90.4%. Average transaction deposits increased $1.2 billion, or 32.4%, and average total deposits increased $1.1 billion, or 23.2%, to $5.8 billion for the first quarter of 2021. Spot transaction deposits increased $1.4 billion to $5.1 billion at March 31, 2021, improving the mix of transaction deposits to total deposits by 640 basis points to 84.2% at March 31, 2021. The mix of non-interest bearing demand deposits to total deposits improved to 38.3% from 24.3% at March 31, 2020.

The Company recorded $3.6 million of net provision release during the first quarter of 2021, compared to $6.2 million of provision expense during the same period in 2020. First quarter 2021's provision release was driven by strong asset quality and an improved outlook in the CECL model's underlying economic forecast. Included in the first quarter of 2021 was $1.0 million of provision expense for unfunded loan commitment reserves. Net charge-offs on loans totaled 0.01% of total loans, compared to 0.03% during the first quarter of 2020. Non-performing loans to total loans improved nine basis points to 0.38%, compared to 0.47% at March 31, 2020. The allowance for credit losses totaled 1.28% of total loans, compared to 1.13% at March 31, 2020.

Non-interest income totaled $33.4 million, representing an increase of $9.9 million, or 41.8%, driven by an increase in mortgage banking income and gains on fixed assets sales. Service charges and bank card fees decreased a combined $0.1 million and continue to be impacted by economic stimulus funds and changes in consumer behavior due to COVID-19.

Non-interest expense totaled $49.7 million, representing an increase of $1.0 million, or 2.0%, due to $1.3 million of banking center consolidation-related expense. Salaries and benefits increased $0.3 million due to higher mortgage banking performance-related compensation. Occupancy and equipment decreased $0.3 million largely due to efficiencies gained from the completion of the previously announced banking center consolidations, and problem asset workout expense decreased $0.2 million.

Income tax expense totaled $5.7 million, an increase of $2.5 million from the first quarter last year, driven by the increase in pre-tax income.

Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Friday, April 23, 2021. Interested parties may listen to this call by dialing (877) 272-6762 / (615) 800-6832 (International) using the Conference ID of 9588935 and asking for the NBHC First Quarter Earnings conference call. A telephonic replay of the call will be available beginning approximately four hours after the call's completion through May 6, 2021, by dialing (855) 859-2056 (United States) / (404) 537-3406 (International) using the Conference ID of 9588935. 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," 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 stakeholder results. Through its bank subsidiary, NBH Bank, National Bank Holdings Corporation operates a network of 89 banking centers, serving individual consumers, small, medium and large businesses, and government and non-profit entities. Its banking centers are located in its core footprint of Colorado, the greater Kansas City region, Texas, Utah and New Mexico. Its comprehensive residential mortgage banking group primarily serves the bank's core footprint. 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 any potential government shutdowns; 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 credit 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: Jody Soper, Chief Marketing Officer, (303) 784-5925, Jody.Soper@nbhbank.com