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National Bank Holdings Corporation Announces Record First Quarter 2023 Financial Results
ソース: Nasdaq GlobeNewswire / 19 4 2023 15:20:22 America/Chicago
DENVER, April 19, 2023 (GLOBE NEWSWIRE) -- National Bank Holdings Corporation (NYSE: NBHC) reported:
For the quarter For the quarter - adjusted(1) 1Q23 4Q22 1Q22 1Q23 4Q22 1Q22 Net income ($000's) $ 40,283 $ 16,721 $ 18,352 $ 40,283 $ 34,546 $ 18,352 Earnings per share - diluted $ 1.06 $ 0.44 $ 0.60 $ 1.06 $ 0.91 $ 0.60 Return on average tangible assets(2) 1.80% 0.77% 1.07% 1.80% 1.55% 1.07% Return on average tangible common equity(2) 20.86% 9.17% 10.31% 20.86% 18.37% 10.31% (1 ) See non-GAAP reconciliations below. (2 ) Ratios are annualized. In announcing these results, Chief Executive Officer Tim Laney shared, “We are pleased to deliver record quarterly earnings of $1.06 per diluted share and a record return on average tangible common equity of 20.86%. Our teams maintained excellent credit quality with annualized net charge-offs of just one basis point, and a record low non-performing loans ratio of 0.13%. Our granular and relationship-focused deposit base continues to generate high-quality lower-cost funding. We believe our strong capital, ample liquidity, and relationship-based banking model positions us to continue to serve our clients and communities in any economic environment.”
Addressing recent banking industry liquidity stress, Mr. Laney added, “We have built a granular and relationship-focused deposit base and our investment securities portfolio has a short average duration and is primarily comprised of government guaranteed mortgage-back securities. As previously reported, approximately 70% of our deposits are FDIC insured.”
Mr. Laney added, “Our recently announced acquisition of Cambr provides us with a truly unique source of liquidity and further diversifies our funding and fee income capabilities. To that end, NBH has already added $500 million of deposits to its balance sheet since the deal closing on April 3rd. The remaining program balances continue to be swept to Cambr bank partners. We are pleased to have the ability to significantly grow FDIC insured deposits with little incremental overhead.”
First Quarter 2023 Results
(All comparisons refer to the fourth quarter of 2022, except as noted)Net income increased $23.6 million to a record $40.3 million, or $1.06 per diluted share, compared to net income of $16.7 million, or $0.44 per diluted share, during the fourth quarter of 2022. Fully taxable equivalent pre-provision net revenue increased $9.7 million to $52.7 million during the first quarter, compared to pre-provision net revenue of $43.0 million. The return on average tangible assets totaled a record 1.80%, compared to a return of 0.77% during the fourth quarter, and the return on average tangible common equity totaled a record 20.86%, compared to a fourth quarter return of 9.17%.
The fourth quarter included $23.2 million of non-recurring acquisition-related expenses, including $16.3 million of CECL Day 1 provision expense. Adjusting for these expenses, net income increased $5.7 million during the first quarter, or 67% annualized, and fully taxable equivalent pre-provision net revenue increased $2.9 million, or 23.4% annualized. The adjusted return on average tangible assets increased 25 basis points, and the adjusted return on average tangible common equity increased 249 basis points.
Net Interest Income
Fully taxable equivalent net interest income totaled $96.3 million, compared to $96.5 million in the prior quarter, as an increase in daily interest income was slightly offset by two fewer days. The fully taxable equivalent net interest margin remained consistent at 4.39% as an increase in cost of funds was offset by an increase in earning asset yields. Average earning assets increased $173.3 million, primarily driven by average originated loan growth. The cost of funds totaled 0.90%, compared to 0.43% during the fourth quarter.Loans
Total loans increased $124.8 million or 7.0% annualized to a record $7.3 billion at March 31, 2023. We generated quarterly loan fundings totaling $393.9 million with a weighted average new loan origination rate of 7.5%.Asset Quality and Provision for Credit Losses
The Company recorded $0.9 million of provision expense during the quarter to support the quarter’s loan growth. Annualized net charge-offs decreased three basis points to 0.01% of average total loans during the first quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDMs) decreased 10 basis points to 0.13% of total loans, and non-performing assets decreased 10 basis points to 0.18% of total loans and OREO. The allowance for credit losses as a percentage of loans totaled 1.23%, compared to 1.24% at December 31, 2022.Deposits
We maintain a granular and well diversified deposit base with no exposure to venture capital or crypto deposits. Average total deposits were $7.7 billion during the first quarter 2023, compared to $8.0 billion during the fourth quarter 2022. The loan to deposit ratio was 96.9% at March 31, 2023. Average transaction deposits (defined as total deposits less time deposits) totaled $6.8 billion, compared to $7.1 billion, and average non-interest bearing demand deposits totaled $3.0 billion, compared to $3.1 billion for the fourth quarter. The mix of transaction deposits to total deposits was 87.1% compared to 88.9% at December 31, 2022.Non-Interest Income
Non-interest income increased $0.5 million during the first quarter to $14.7 million. Mortgage banking income increased $0.5 million compared to the prior quarter, and other non-interest income increased $0.6 million. These increases were partially offset by a $0.6 million decrease in service charges and bank card fees due to seasonality.Non-Interest Expense
Non-interest expense totaled $58.3 million, a decrease of $9.4 million from the prior quarter. Excluding the impact of $6.8 million of non-recurring acquisition-related expenses in the fourth quarter, non-interest expense decreased $2.6 million. Salaries and benefits decreased $2.5 million due to payroll tax credits realized in the first quarter 2023, and professional fees decreased $1.2 million. Partially offsetting these decreases was a $1.1 million increase in other non-interest expense largely due to higher FDIC deposit insurance expense as a result of an increase in the FDIC assessment rate effective January 2023.The efficiency ratio improved 875 basis points to 53.2% at March 31, 2023, compared to 62.0% at December 31, 2022. The fully taxable equivalent efficiency ratio improved 246 basis points to 51.3% at March 31, 2023, adjusting for intangible asset amortization and non-recurring acquisition-related expenses in the prior quarter.
Income tax expense totaled $10.1 million during the first quarter, compared to $3.0 million in the prior quarter. The increase in income tax expense was due to an increase in pre-tax income. The effective tax rate was 20.0% and 15.0% for the first and fourth 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 totaled 9.46% at March 31, 2023, and the common equity tier 1 capital ratio totaled 11.32% at March 31, 2023. Shareholders’ equity totaled $1.1 billion at March 31, 2023 increasing $41.5 million largely due to higher retained earnings and a decrease in accumulated other comprehensive loss.Common book value per share increased $1.08 to $30.12 at March 31, 2023. Tangible common book value per share increased $1.13 to $21.76 at March 31, 2023 as this quarter’s earnings outpaced the quarterly dividend and benefitted from a $0.25 per share decrease in accumulated other comprehensive loss.
Year-Over-Year Review
(All comparisons refer to the first quarter 2022, except as noted)Net income totaled $40.3 million or $1.06 per diluted share, compared to $18.4 million or $0.60 per diluted share for the first quarter of 2022. The quarter’s increase over the same period prior year was driven by strong net interest income due to increases in the Federal Reserve’s interest rates and strong organic and acquired loan growth. Fully taxable equivalent pre-provision net revenue increased $29.7 million, or 129.6%, to $52.7 million. The return on average tangible assets was 1.80%, compared to 1.07% in the same period prior year, and the return on average tangible common equity was 20.86%, compared to 10.31%.
Fully taxable equivalent net interest income totaled $96.3 million, an increase of $48.3 million or 100.7%. Average earning assets increased $2.2 billion, or 32.8%, including average originated loan growth of $1.2 billion and average acquired loan growth of $1.6 billion. The fully taxable equivalent net interest margin widened 149 basis points to 4.39%, benefitting from a 216 basis point increase in earning asset yields to 5.24%. Total interest bearing liabilities increased $1.5 billion to $5.4 billion at March 31, 2023, and the cost of funds totaled 0.90%, compared to 0.19% in the same period prior year.
Loans outstanding totaled $7.3 billion, increasing $2.7 billion or 57.1%, and included $1.7 billion of loans acquired through the Rock Canyon Bank and Bank of Jackson Hole acquisitions in 2022. New loan fundings over the trailing 12 months totaled $2.0 billion, led by commercial loan fundings of $1.1 billion.
The Company recorded $0.9 million of provision expense for credit loss during the first quarter 2023, compared to a provision release of $0.3 million in the same period prior year. The current quarter’s provision expense was driven by loan growth. Annualized net charge-offs decreased four basis points to 0.01% of average total loans during the first quarter 2023. Non-performing loans to total loans improved 11 basis points to 0.13%, and non-performing assets to total loans and OREO improved 17 basis points to 0.18% at March 31, 2023. The allowance for credit losses totaled 1.23% of total loans, compared to 1.04% at March 31, 2022.
Average total deposits increased $1.5 billion or 24.2% to $7.7 billion, primarily due to the 2022 acquisitions. Average transaction deposits increased $1.4 billion or 26.1%, and average non-interest bearing demand deposits increased $570.4 million or 23.4%. The mix of transaction deposits to total deposits totaled 87.1%, compared to 87.4% at March 31, 2022, and the mix of non-interest bearing demand deposits to total deposits totaled 38.5%, compared to 40.1% at March 31, 2022.
Non-interest income totaled $14.7 million, a decrease of $4.4 million or 23.0%, largely driven by $6.5 million of lower mortgage banking income due to lower refinance activity, as well as competition driving tighter gain on sale margins. Service charges and bank card fees increased a combined $0.9 million compared to the same period prior year. Other non-interest income increased $1.9 million and included $0.5 million of trust income.
Non-interest expense totaled $58.3 million, an increase of $14.2 million, or 32.2%, largely driven by an increase in core operating expenses driven by our 2022 acquisitions. Included in other non-interest expense is $1.7 million higher FDIC deposit insurance expense as a result of our recent acquisitions and an increase in the FDIC assessment rate effective January 2023.
Income tax expense totaled $10.1 million, an increase of $6.5 million from the first quarter last year, driven by higher pre-tax income.
Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Thursday, April 20, 2023. Interested parties may listen to this call by dialing (888) 256-1007 using the participant passcode of 7825479 and asking for the NBHC Q1 2023 Earnings Call. The earnings release and a link to the replay of the call will be available on the Company’s website at www.nationalbankholdings.com by visiting the investor relations area.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 subsidiaries, NBH Bank and Bank of Jackson Hole Trust, National Bank Holdings Corporation operates a network of over 95 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, Utah, Wyoming, Texas, New Mexico and Idaho. Its comprehensive residential mortgage banking group primarily serves the bank’s core footprint. Its trust business is operated in its core footprint under the Bank of Jackson Hole Trust charter. NBH Bank operates under a single state charter through the following brand names as divisions of NBH Bank: in Colorado, Community Banks of Colorado and Community Banks Mortgage; in Kansas and Missouri, Bank Midwest and Bank Midwest Mortgage; in Texas, Utah, New Mexico and Idaho, Hillcrest Bank and Hillcrest Bank Mortgage; and in Wyoming, Bank of Jackson Hole and Bank of Jackson Hole Mortgage. Additional information about National Bank Holdings Corporation can be found at www.nationalbankholdings.com.For more information visit: cobnks.com, bankmw.com, hillcrestbank.com, bankofjacksonhole.com, or nbhbank.com. Or connect with any of our brands on LinkedIn.
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,” “non-interest expense adjusted for CDI and WMI asset amortization and acquisition-related expenses,” “non-interest expense adjusted for acquisition-related expenses,” “efficiency ratio adjusted for CDI and WMI amortization and acquisition-related expenses,” “adjusted net income,” “adjusted earnings per share – diluted,” “net income adjusted for the impact of CDI and WMI amortization expense and acquisition-related expenses, after tax,” “net income excluding the impact of CDI and WMI amortization expense, after tax,” “adjusted return on average tangible assets,” “adjusted return on average tangible common equity,” “pre-provision net revenue,” “pre-provision net revenue adjusted for acquisition-related expenses,” 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.
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: difficulties in integrating the NBHC, Community Bancorporation, Bancshares of Jackson Hole Incorporated, or Cambr Solutions, LLC businesses or fully realizing cost savings and other benefits; business disruption following the mergers; ability to execute our business strategy (including our digital 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 of 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; the effects of tax legislation, including the potential of future increases to prevailing tax rules, or challenges to our positions; 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, including in the digital technology space our digital solution 2UniFi; 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 our bank subsidiaries; 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; a cybersecurity incident, data breach or a failure of a key information technology system; 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
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 March 31, December 31, March 31, 2023 2022 2022 Total interest and dividend income $ 113,533 $ 103,958 $ 49,525 Total interest expense 18,644 8,892 2,864 Net interest income 94,889 95,066 46,661 Taxable equivalent adjustment 1,414 1,454 1,313 Net interest income FTE(1) 96,303 96,520 47,974 Provision expense (release) for credit losses 900 21,869 (322 ) Net interest income after provision for credit losses FTE(1) 95,403 74,651 48,296 Non-interest income: Service charges 4,101 4,365 3,710 Bank card fees 4,637 4,954 4,123 Mortgage banking income 3,216 2,686 9,666 Other non-interest income 2,711 2,133 847 Banking center consolidation-related income — — 708 Total non-interest income 14,665 14,138 19,054 Non-interest expense: Salaries and benefits 32,989 36,319 29,336 Occupancy and equipment 9,073 10,409 6,396 Professional fees 2,590 6,308 814 Data processing 3,752 4,924 2,381 Other non-interest expense 8,525 8,339 4,859 Core deposit and wealth management intangible assets amortization 1,363 1,363 296 Total non-interest expense 58,292 67,662 44,082 Income before income taxes FTE(1) 51,776 21,127 23,268 Taxable equivalent adjustment 1,414 1,454 1,313 Income before income taxes 50,362 19,673 21,955 Income tax expense 10,079 2,952 3,603 Net income $ 40,283 $ 16,721 $ 18,352 Earnings per share - basic $ 1.06 $ 0.44 $ 0.61 Earnings per share - diluted 1.06 0.44 0.60 (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)March 31, 2023 December 31, 2022 March 31, 2022 ASSETS Cash and cash equivalents $ 369,705 $ 195,505 $ 786,385 Investment securities available-for-sale 695,485 706,289 790,384 Investment securities held-to-maturity 637,921 651,527 567,055 Non-marketable securities 120,733 89,049 54,568 Loans 7,345,298 7,220,469 4,674,238 Allowance for credit losses (90,343 ) (89,553 ) (48,810 ) Loans, net 7,254,955 7,130,916 4,625,428 Loans held for sale 24,594 22,767 90,152 Other real estate owned 3,458 3,731 5,063 Premises and equipment, net 140,417 136,111 95,133 Goodwill 279,132 279,132 115,027 Intangible assets, net 58,619 59,887 13,505 Other assets 332,204 298,329 198,812 Total assets $ 9,917,223 $ 9,573,243 $ 7,341,512 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Non-interest bearing demand deposits $ 2,920,891 $ 3,134,716 $ 2,554,820 Interest bearing demand deposits 1,098,172 913,852 595,137 Savings and money market 2,584,128 2,950,658 2,412,081 Total transaction deposits 6,603,191 6,999,226 5,562,038 Time deposits 978,489 873,400 802,772 Total deposits 7,581,680 7,872,626 6,364,810 Securities sold under agreements to repurchase 21,492 20,214 24,744 Long-term debt 53,968 53,890 39,505 Federal Home Loan Bank advances 1,000,000 385,000 — Other liabilities 126,356 149,311 92,238 Total liabilities 8,783,496 8,481,041 6,521,297 Shareholders' equity: Common stock 515 515 515 Additional paid in capital 1,160,436 1,159,508 1,014,332 Retained earnings 361,440 330,721 301,220 Treasury stock (310,037 ) (310,338 ) (457,219 ) Accumulated other comprehensive loss, net of tax (78,627 ) (88,204 ) (38,633 ) Total shareholders' equity 1,133,727 1,092,202 820,215 Total liabilities and shareholders' equity $ 9,917,223 $ 9,573,243 $ 7,341,512 SHARE DATA Average basic shares outstanding 37,785,488 37,762,853 30,120,195 Average diluted shares outstanding 38,074,973 38,100,155 30,479,261 Ending shares outstanding 37,641,381 37,608,519 30,008,781 Common book value per share $ 30.12 $ 29.04 $ 27.33 Tangible common book value per share(1)(non-GAAP) 21.76 20.63 23.64 Tangible common book value per share, excluding accumulated other comprehensive loss(1)(non-GAAP) 23.85 22.98 24.93 CAPITAL RATIOS Average equity to average assets 11.63% 11.47% 11.74% Tangible common equity to tangible assets(1) 8.53% 8.38% 9.81% Tier 1 leverage ratio 9.46% 9.29% 10.48% Common equity tier 1 risk-based capital ratio 11.32% 10.54% 13.94% Tier 1 risk-based capital ratio 11.32% 10.54% 13.94% Total risk-based capital ratio 13.17% 12.29% 15.56% (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
March 31, 2023 March 31, 2023 vs. December 31, 2022 vs. March 31, 2022 March 31, 2023 December 31, 2022 % Change March 31, 2022 % Change Originated: Commercial: Commercial and industrial $ 1,818,415 $ 1,841,313 (1.2 )% $ 1,551,447 17.2 % Municipal and non-profit 979,801 959,305 2.1 % 949,125 3.2 % Owner-occupied commercial real estate 674,231 656,361 2.7 % 554,345 21.6 % Food and agribusiness 270,197 284,714 (5.1 )% 205,899 31.2 % Total commercial 3,742,644 3,741,693 0.0 % 3,260,816 14.8 % Commercial real estate non-owner occupied 979,150 841,657 16.3 % 634,928 54.2 % Residential real estate 864,544 827,030 4.5 % 626,763 37.9 % Consumer 16,766 16,986 (1.3 )% 17,321 (3.2 )% Total originated 5,603,104 5,427,366 3.2 % 4,539,828 23.4 % Acquired: Commercial: Commercial and industrial 172,368 183,522 (6.1 )% 15,800 >100% Municipal and non-profit 316 321 (1.6 )% 335 (5.7 )% Owner-occupied commercial real estate 248,883 256,979 (3.2 )% 21,329 >100% Food and agribusiness 64,739 69,265 (6.5 )% 2,976 >100% Total commercial 486,306 510,087 (4.7 )% 40,440 >100% Commercial real estate non-owner occupied 845,374 854,393 (1.1 )% 46,431 >100% Residential real estate 407,254 424,251 (4.0 )% 47,314 >100% Consumer 3,260 4,372 (25.4 )% 225 >100% Total acquired 1,742,194 1,793,103 (2.8 )% 134,410 >100% Total loans $ 7,345,298 $ 7,220,469 1.7 % $ 4,674,238 57.1 % Loan Fundings(1)
First quarter Fourth quarter Third quarter Second quarter First quarter 2023 2022 2022 2022 2022 Commercial: Commercial and industrial $ 107,013 $ 177,693 $ 201,106 $ 152,550 $ 169,168 Municipal and non-profit 22,526 20,393 20,845 81,428 49,906 Owner occupied commercial real estate 33,912 40,912 65,125 78,905 67,597 Food and agribusiness (6,564 ) 28,518 76,293 (4,186 ) 18,620 Total commercial 156,887 267,516 363,369 308,697 305,291 Commercial real estate non-owner occupied 185,875 133,271 166,739 88,612 63,416 Residential real estate 49,406 95,067 99,951 93,220 49,040 Consumer 1,717 1,396 1,505 1,989 1,904 Total $ 393,885 $ 497,250 $ 631,564 $ 492,518 $ 419,651 (1 ) Loan fundings are defined as closed end funded loans and net fundings under revolving lines of credit. Net fundings under revolving lines of credit were ($7,096), $96,903, $124,834, $21,762 and $66,430 for the periods noted in the table above, 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 March 31, 2023 December 31, 2022 March 31, 2022 Average Average Average Average Average Average balance Interest rate balance Interest rate balance Interest rate Interest earning assets: Originated loans FTE(1)(2) $ 5,514,704 $ 79,167 5.82 % $ 5,269,227 $ 70,536 5.31 % $ 4,361,919 $ 42,085 3.91 % Acquired loans 1,771,224 27,023 6.19 % 1,790,476 26,508 5.87 % 147,638 2,568 7.05 % Loans held for sale 21,753 346 6.45 % 24,381 375 6.10 % 93,639 756 3.27 % Investment securities available-for-sale 810,257 3,989 1.97 % 841,762 4,187 1.99 % 751,646 2,849 1.52 % Investment securities held-to-maturity 646,646 2,871 1.78 % 661,992 2,818 1.70 % 589,830 2,012 1.36 % Other securities 51,366 898 6.99 % 26,203 402 6.14 % 14,590 209 5.73 % Interest earning deposits 86,790 653 3.05 % 115,441 586 2.01 % 743,239 359 0.20 % Total interest earning assets FTE(2) $ 8,902,740 $ 114,947 5.24 % $ 8,729,482 $ 105,412 4.79 % $ 6,702,501 $ 50,838 3.08 % Cash and due from banks $ 118,607 $ 126,107 $ 79,383 Other assets 687,940 673,679 442,098 Allowance for credit losses (89,831 ) (85,638 ) (49,584 ) Total assets $ 9,619,456 $ 9,443,630 $ 7,174,398 Interest bearing liabilities: Interest bearing demand, savings and money market deposits $ 3,766,203 $ 7,759 0.84 % $ 3,946,573 $ 4,587 0.46 % $ 2,936,158 $ 1,437 0.20 % Time deposits 922,521 3,290 1.45 % 892,122 2,048 0.91 % 821,814 1,094 0.54 % Securities sold under agreements to repurchase 20,045 6 0.12 % 18,515 23 0.49 % 22,770 7 0.12 % Long-term debt 53,918 518 3.90 % 53,530 539 3.99 % 39,489 326 3.35 % Federal Home Loan Bank advances 597,833 7,071 4.80 % 162,146 1,695 4.15 % — — 0.00 % Total interest bearing liabilities $ 5,360,520 $ 18,644 1.41 % $ 5,072,886 $ 8,892 0.70 % $ 3,820,231 $ 2,864 0.30 % Demand deposits $ 3,004,643 $ 3,142,296 $ 2,434,198 Other liabilities 135,175 145,608 78,027 Total liabilities 8,500,338 8,360,790 6,332,456 Shareholders' equity 1,119,118 1,082,840 841,942 Total liabilities and shareholders' equity $ 9,619,456 $ 9,443,630 $ 7,174,398 Net interest income FTE(2) $ 96,303 $ 96,520 $ 47,974 Interest rate spread FTE(2) 3.83 % 4.09 % 2.78 % Net interest earning assets $ 3,542,220 $ 3,656,596 $ 2,882,270 Net interest margin FTE(2) 4.39 % 4.39 % 2.90 % Average transaction deposits $ 6,770,846 $ 7,088,869 $ 5,370,356 Average total deposits 7,693,367 7,980,991 6,192,170 Ratio of average interest earning assets to average interest bearing liabilities 166.08 % 172.08 % 175.45 % (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 $1,414, $1,454 and $1,313 for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, 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 March 31, 2023 December 31, 2022 March 31, 2022 Beginning allowance for credit losses $ 89,553 $ 65,623 $ 49,694 Acquisition Day 1 CECL provision expense — 16,027 — PCD allowance for credit loss at acquisition — 3,764 — Charge-offs (325 ) (849 ) (634 ) Recoveries 65 129 75 Provision expense (release) for credit losses 1,050 4,859 (325 ) Ending allowance for credit losses ("ACL") $ 90,343 $ 89,553 $ 48,810 Ratio of annualized net charge-offs to average total loans during the period 0.01% 0.04% 0.05% Ratio of ACL to total loans outstanding at period end 1.23% 1.24% 1.04% Ratio of ACL to total non-performing loans at period end 946.40% 542.35% 440.01% Total loans $ 7,345,298 $ 7,220,469 $ 4,674,238 Average total loans during the period 7,257,639 7,029,021 4,520,205 Total non-performing loans 9,546 16,512 11,093 Past Due and Non-accrual Loans
March 31, 2023 December 31, 2022 March 31, 2022 Loans 30-89 days past due and still accruing interest $ 2,308 $ 2,986 $ 3,034 Loans 90 days past due and still accruing interest 185 95 389 Non-accrual loans 9,546 16,512 11,093 Total past due and non-accrual loans $ 12,039 $ 19,593 $ 14,516 Total 90 days past due and still accruing interest and non-accrual loans to total loans 0.13% 0.23% 0.25% Asset Quality Data
March 31, 2023 December 31, 2022 March 31, 2022 Non-performing loans $ 9,546 $ 16,512 $ 11,093 OREO 3,458 3,731 5,063 Total non-performing assets $ 13,004 $ 20,243 $ 16,156 Accruing modified loans $ 4,154 $ 4,654 $ 4,979 Total non-performing loans to total loans 0.13% 0.23% 0.24% Total non-performing assets to total loans and OREO 0.18% 0.28% 0.35% NATIONAL BANK HOLDINGS CORPORATION
Key Metrics(1)As of and for the three months ended March 31, December 31, March 31, 2023 2022 2022 Return on average assets 1.70% 0.70% 1.04% Return on average tangible assets(2) 1.80% 0.77% 1.07% Return on average tangible assets, adjusted(2) 1.80% 1.55% 1.07% Return on average equity 14.60% 6.13% 8.84% Return on average tangible common equity(2) 20.86% 9.17% 10.31% Return on average tangible common equity, adjusted(2) 20.86% 18.37% 10.31% Loan to deposit ratio (end of period) 96.88% 91.72% 73.44% Non-interest bearing deposits to total deposits (end of period) 38.53% 39.82% 40.14% Net interest margin(3) 4.32% 4.32% 2.82% Net interest margin FTE(2)(3) 4.39% 4.39% 2.90% Interest rate spread FTE(2)(4) 3.83% 4.09% 2.78% Yield on earning assets(5) 5.17% 4.72% 3.00% Yield on earning assets FTE(2)(5) 5.24% 4.79% 3.08% Cost of interest bearing liabilities 1.41% 0.70% 0.30% Cost of deposits 0.58% 0.33% 0.17% Non-interest income to total revenue FTE(2) 13.22% 12.78% 28.43% Non-interest expense to average assets 2.46% 2.84% 2.49% Efficiency ratio 53.21% 61.96% 67.08% Efficiency ratio excluding CDI and WMI amortization FTE(2) 51.30% 53.76% 65.32% Pre-provision net revenue $ 51,262 $ 41,542 $ 21,633 Pre-provision net revenue FTE(2) 52,676 42,996 22,946 Pre-provision net revenue FTE, adjusted(2) 52,676 49,807 22,946 Total Loans Asset Quality Data(6)(7)(8) Non-performing loans to total loans 0.13% 0.23% 0.24% Non-performing assets to total loans and OREO 0.18% 0.28% 0.35% Allowance for credit losses to total loans 1.23% 1.24% 1.04% Allowance for credit losses to non-performing loans 946.40% 542.35% 440.01% Net charge-offs to average loans 0.01% 0.04% 0.05% (1 ) Quarterly ratios are annualized. (2 ) Ratio represents non-GAAP financial measure. See non-GAAP reconciliations below. (3 ) Net interest margin represents net interest income, including accretion income on interest earning assets, as a percentage of average interest earning assets. (4 ) Interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average cost of interest bearing liabilities. (5 ) 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. (6 ) Non-performing loans consist of non-accruing loans and modified 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
March 31, 2023 December 31, 2022 March 31, 2022 Total shareholders' equity $ 1,133,727 $ 1,092,202 $ 820,215 Less: goodwill, core deposit (“CDI”) and wealth management (“WMI”) intangible assets, net (325,828 ) (327,191 ) (121,096 ) Add: deferred tax liability related to goodwill 11,212 10,984 10,298 Tangible common equity (non-GAAP) $ 819,111 $ 775,995 $ 709,417 Total assets $ 9,917,223 $ 9,573,243 $ 7,341,512 Less: goodwill, CDI and WMI assets, net (325,828 ) (327,191 ) (121,096 ) Add: deferred tax liability related to goodwill 11,212 10,984 10,298 Tangible assets (non-GAAP) $ 9,602,607 $ 9,257,036 $ 7,230,714 Tangible common equity to tangible assets calculations: Total shareholders' equity to total assets 11.43% 11.41% 11.17% Less: impact of goodwill, CDI and WMI assets, net (2.90)% (3.03)% (1.36)% Tangible common equity to tangible assets (non-GAAP) 8.53% 8.38% 9.81% Tangible common book value per share calculations: Tangible common equity (non-GAAP) $ 819,111 $ 775,995 $ 709,417 Divided by: ending shares outstanding 37,641,381 37,608,519 30,008,781 Tangible common book value per share (non-GAAP) $ 21.76 $ 20.63 $ 23.64 Tangible common book value per share, excluding accumulated other comprehensive loss calculations: Tangible common equity (non-GAAP) $ 819,111 $ 775,995 $ 709,417 Accumulated other comprehensive loss, net of tax 78,627 88,204 38,633 Tangible common book value, excluding accumulated other comprehensive loss, net of tax (non-GAAP) 897,738 864,199 748,050 Divided by: ending shares outstanding 37,641,381 37,608,519 30,008,781 Tangible common book value per share, excluding accumulated other comprehensive loss, net of tax (non-GAAP) $ 23.85 $ 22.98 $ 24.93 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 March 31, December31, March31, 2023 2022 2022 Net income $ 40,283 $ 16,721 $ 18,352 Add: impact of CDI and WMI amortization expense, after tax 1,049 1,049 227 Net income excluding the impact of CDI and WMI amortization expense, after tax (non-GAAP) $ 41,332 $ 17,770 $ 18,579 Net income excluding the impact of CDI and WMI amortization expense, after tax $ 41,332 $ 17,770 $ 18,579 Add: acquisition-related adjustments, after tax (non-GAAP)(1) — 17,825 — Net income adjusted for the impact of CDI and WMI amortization expense and acquisition-related expenses, after tax (non-GAAP)(1) $ 41,332 $ 35,595 $ 18,579 Average assets $ 9,619,456 $ 9,443,630 $ 7,174,398 Less: average goodwill, CDI and WMI assets, net of deferred tax liability related to goodwill (315,493 ) (314,017 ) (110,973 ) Average tangible assets (non-GAAP) $ 9,303,963 $ 9,129,613 $ 7,063,425 Average shareholders' equity $ 1,119,118 $ 1,082,840 $ 841,942 Less: average goodwill, CDI and WMI assets, net of deferred tax liability related to goodwill (315,493 ) (314,017 ) (110,973 ) Average tangible common equity (non-GAAP) $ 803,625 $ 768,823 $ 730,969 Return on average assets 1.70% 0.70% 1.04% Return on average tangible assets (non-GAAP) 1.80% 0.77% 1.07% Adjusted return on average tangible assets (non-GAAP) 1.80% 1.55% 1.07% Return on average equity 14.60% 6.13% 8.84% Return on average tangible common equity (non-GAAP) 20.86% 9.17% 10.31% Adjusted return on average tangible common equity (non-GAAP) 20.86% 18.37% 10.31% (1) Acquisition-related adjustments: Provision expense adjustments: CECL day 1 provision expense (non-GAAP) $ — $ 16,348 $ — Non-interest expense adjustments: Acquisition-related expenses (non-GAAP) — 6,811 — Acquisition-related adjustments before tax (non-GAAP) — 23,159 — Tax expense impact — (5,334 ) — Acquisition-related adjustments, after tax (non-GAAP) $ — $ 17,825 $ — Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin
As of and for the three months ended March 31, December31, March31, 2023 2022 2022 Interest income $ 113,533 $ 103,958 $ 49,525 Add: impact of taxable equivalent adjustment 1,414 1,454 1,313 Interest income FTE (non-GAAP) $ 114,947 $ 105,412 $ 50,838 Net interest income $ 94,889 $ 95,066 $ 46,661 Add: impact of taxable equivalent adjustment 1,414 1,454 1,313 Net interest income FTE (non-GAAP) $ 96,303 $ 96,520 $ 47,974 Average earning assets $ 8,902,740 $ 8,729,482 $ 6,702,501 Yield on earning assets 5.17% 4.72% 3.00% Yield on earning assets FTE (non-GAAP) 5.24% 4.79% 3.08% Net interest margin 4.32% 4.32% 2.82% Net interest margin FTE (non-GAAP) 4.39% 4.39% 2.90% Efficiency Ratio and Pre-Provision Net Revenue
As of and for the three months ended March 31, December31, March31, 2023 2022 2022 Net interest income $ 94,889 $ 95,066 $ 46,661 Add: impact of taxable equivalent adjustment 1,414 1,454 1,313 Net interest income FTE (non-GAAP) $ 96,303 $ 96,520 $ 47,974 Non-interest income $ 14,665 $ 14,138 $ 19,054 Non-interest expense $ 58,292 $ 67,662 $ 44,082 Less: CDI and WMI asset amortization (1,363 ) (1,363 ) (296 ) Less: acquisition-related expenses (non-GAAP) — (6,811 ) — Non-interest expense excluding CDI and WMI asset amortization and acquisition-related expenses (non-GAAP) $ 56,929 $ 59,488 $ 43,786 Non-interest expense $ 58,292 $ 67,662 $ 44,082 Less: acquisition-related expenses (non-GAAP) — (6,811 ) — Non-interest expense adjusted for acquisition-related expenses (non-GAAP) $ 58,292 $ 60,851 $ 44,082 Efficiency ratio 53.21% 61.96% 67.08% Efficiency ratio excluding CDI and WMI amortization and acquisition-related expenses FTE (non-GAAP) 51.30% 53.76% 65.32% Pre-provision net revenue (non-GAAP) $ 51,262 $ 41,542 $ 21,633 Pre-provision net revenue, FTE (non-GAAP) 52,676 42,996 22,946 Pre-provision net revenue FTE, adjusted for acquisition-related expenses (non-GAAP) 52,676 49,807 22,946 Adjusted Net Income and Earnings Per Share
As of and for the three months ended March 31, December31, March31, 2023 2022 2022 Adjustments to net income: Net income $ 40,283 $ 16,721 $ 18,352 Add: Acquisition-related adjustments, after tax (non-GAAP) — 17,825 — Adjusted net income (non-GAAP) $ 40,283 $ 34,546 $ 18,352 Adjustments to earnings per share: Earnings per share diluted $ 1.06 $ 0.44 $ 0.60 Add: Acquisition-related adjustments, after tax (non-GAAP) — 0.47 — Adjusted earnings per share - diluted (non-GAAP)(1) $ 1.06 $ 0.91 $ 0.60 
