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National Bank Holdings Corporation Announces Second Quarter 2021 Financial Results
ソース: Nasdaq GlobeNewswire / 26 7 2021 16:10:01 America/New_York
DENVER, July 26, 2021 (GLOBE NEWSWIRE) -- National Bank Holdings Corporation (NYSE: NBHC) reported:
For the quarter 2Q21 1Q21 2Q20 Net income ($000's) $ 24,200 $ 26,812 $ 17,705 Earnings per share - diluted $ 0.77 $ 0.86 $ 0.57 Return on average tangible assets(1) 1.41 % 1.65 % 1.16 % Return on average tangible common equity(1) 13.41 % 15.20 % 10.98 % (1 ) Ratios are annualized. See non-GAAP reconciliations below. In announcing these results, Chief Executive Officer Tim Laney shared, “We built strong momentum during the second quarter, delivering solid loan growth and earnings of $0.77 per diluted share. Our resumed focus on new business development drove annualized loan growth of 8.4%, net of PPP loans, during the second quarter. We maintained our proven track record of exceptional credit quality with year-to-date annualized net charge-offs of just four basis points. We realized meaningful new relationship growth during the quarter and brought our cost of deposits down another four basis points.”
Mr. Laney added, “We are pleased with the economic recovery in our markets and are committed to delivering additional growth as we look to the second half of 2021. We are inspired by our clients’ fortitude during this economic recovery period, and we are well-positioned with a strong Common Equity Tier 1 ratio of 15.31% to provide our clients the tools they need to succeed.”
Second Quarter 2021 Results
(All comparisons refer to the first quarter of 2021, except as noted)Net income totaled $24.2 million, or $0.77 per diluted share, during the second quarter of 2021, compared to $26.8 million, or $0.86 per diluted share during the first quarter. The return on average tangible assets was 1.41%, compared to 1.65%, and the return on average tangible common equity was 13.41%, compared to 15.20% last quarter.
Net Interest Income
Fully taxable equivalent net interest income totaled $46.1 million during the second quarter of 2021, a decrease of $0.3 million compared to the first quarter. Excluding PPP loan fee income of $2.0 million, which was $0.6 million lower than last quarter, net interest income increased $0.2 million. As of June 30, 2021, the remaining unamortized PPP loan fees totaled $5.0 million. The fully taxable equivalent net interest margin narrowed 20 basis points to 2.82% driven by higher levels of excess cash liquidity and lower PPP loan forgiveness income during the second quarter. The yield on earning assets decreased 24 basis points, and our cost of deposits decreased four basis points to 0.24%.Loans
Total loans ended the quarter at $4.3 billion consistent with the prior quarter as the second quarter’s strong loan origination activity was offset by PPP loan balance declines. Excluding PPP loans, total loans increased $85.6 million or 8.4% annualized, led by commercial loan growth of $93.3 million, or 13.6% annualized. Second quarter loan originations totaled $362.1 million, led by commercial loan originations of $247.3 million. Excluding PPP loans, the second quarter’s loan originations more than doubled the first quarter’s loan origination level increasing $189.0 million over the first quarter or 109.2%.Asset Quality and Provision for Loan Losses
The Company released $5.9 million of provision during the quarter, including a release of $0.6 of unfunded loan commitment reserves, driven by strong asset quality and an improved outlook in the CECL model’s underlying economic forecast. Annualized net charge-offs totaled 0.07% of total loans, compared to 0.01% in the prior quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDRs) improved six basis points to 0.32% of total loans, and non-performing assets improved seven basis points to 0.44% of total loans and OREO. The allowance for credit losses as a percentage of total loans totaled 1.14% at June 30, 2021. Excluding PPP loans, non-performing loans totaled 0.33% of total loans, non-performing assets totaled 0.46% of total loans and OREO, and the allowance for credit losses as a percentage of total loans totaled 1.18% at June 30, 2021.Deposits
Average total deposits increased $317.3 million or 22.0% annualized, to $6.1 billion for the second quarter 2021. Average transaction deposits (defined as total deposits less time deposits) increased $347.1 million or 28.9% annualized. The mix of transaction deposits to total deposits improved 79 basis points to 85.0% at June 30, 2021. The loan to deposit ratio totaled 69.8% at June 30, 2021, compared to 71.7% at March 31, 2021. The cost of deposits decreased four basis points from the prior quarter to 0.24%.Non-Interest Income
Non-interest income totaled $25.3 million, a decrease of $8.1 million, driven by lower mortgage banking income. Service charges and bank card fees increased a combined $0.6 million during the quarter. Included in other non-interest income were $0.8 million and $1.6 million of gains on fixed assets sales from banking center consolidations during the second and first quarters, respectively.Non-Interest Expense
Non-interest expense totaled $46.3 million, a decrease of $3.3 million primarily due to lower mortgage banking related compensation and lower banking center consolidation-related expense. Occupancy and equipment decreased $0.4 million largely due to efficiencies gained from the completion of the previously announced banking center consolidations. Banking center consolidation-related expense totaled $0.3 million and $1.3 million during the second and first quarters, respectively. The fully taxable equivalent efficiency ratio totaled 64.5% at June 30, 2021, compared to 61.8% at March 31, 2021.Income tax expense totaled $5.4 million during the second quarter, compared to $5.7 million. Included in income tax expense was $0.2 million of tax benefit from stock compensation activity during the second and first quarters 2021. Adjusting for stock compensation activity, the effective tax rate for the second quarter 2021 was 19.1%, compared to 18.0% during the prior quarter. 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 ratios at June 30, 2021 for the consolidated company and NBH Bank was 10.57% and 9.00%, respectively. Shareholders’ equity totaled $851.9 million at June 30, 2021 and increased $19.9 million from the prior quarter due to higher retained earnings and accumulated other comprehensive income.Common book value per share increased $0.57 to $27.66 at June 30, 2021. The quarter’s earnings and higher accumulated other comprehensive income, net of dividends paid, increased the tangible common book value per share by $0.60 to $24.01 at June 30, 2021. Excluding accumulated other comprehensive income, the tangible book value per share increased $0.55 to $23.95 at June 30, 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 remain committed to ensuring our associates, clients and communities continue to receive the support they need. Our banking centers are fully operational, and we continue 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 full extent to which COVID-19 impacts our business and financial results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact, the impacts of new variants of the virus, and the timing, distribution, efficacy and public acceptance of vaccines and other treatment for COVID-19.Year-Over-Year Review
(All comparisons refer to the first six months of 2020, except as noted)Net income totaled $51.0 million, or $1.63 per diluted share, an increase of $17.5 million, or 52.1% over the first six months of 2020. The return on average tangible assets increased 39 basis points to 1.53%, and the return on average tangible common equity increased 391 basis points to 14.29%.
Fully taxable equivalent net interest income totaled $92.6 million, decreasing $7.6 million or 7.6%, as a result of interest rate actions taken by the Federal Reserve during 2020 and lower non-PPP loan balances. Average earning assets increased $838.1 million, or 15.1%, primarily driven by increases in average interest bearing cash balances of $734.8 million and average investment securities of $353.3 million. The fully taxable equivalent net interest margin narrowed 70 basis points to 2.92% due to lower earning asset yields. The yield on earning assets decreased 100 basis points, driven by the remix of assets into lower-yielding cash balances and an 18 basis point decrease in the originated loan portfolio yields. The cost of deposits decreased 29 basis points to 0.26%.
Loans outstanding totaled $4.3 billion, decreasing $481.6 million or 10.1%, due to loan payoffs including lower PPP loan balances of $219.0 million as a result of PPP loan forgiveness. New loan originations over the trailing 12 months totaled $1.1 billion, led by commercial loan originations of $649.3 million including PPP loan originations of $121.3 million.
Average total deposits increased $990.3 million, or 20.0%, to $5.9 billion for the first six months of 2021. Average non-interest bearing demand deposits increased $980.9 million or 76.2%, and average transaction deposits increased $1.1 billion, or 28.0%. The mix of transaction deposits to total deposits increased by 441 basis points to 85.0% at June 30, 2021. The mix of non-interest bearing demand deposits to total deposits improved to 39.6% from 27.8% at June 30, 2020.
The Company recorded $9.4 million of net provision release during the first six months of 2021, compared to $16.4 million of net provision expense during the same period in 2020. The provision release was driven by strong asset quality and an improved outlook in the CECL model’s underlying economic forecast. Net charge-offs totaled 0.04% of total loans during the first six months of 2021 and 2020. Non-performing loans to total loans improved 10 basis points to 0.32%, compared to 0.42% at June 30, 2020. The allowance for credit losses totaled 1.14% of total loans, compared to 1.26% at June 30, 2020.
Non-interest income totaled $58.6 million, representing a decrease of $3.7 million or 6.0%. Mortgage banking income decreased $7.9 million due to lower refinance activity during 2021. Service charges and bank card fees increased a combined $1.3 million. Other non-interest income increased $2.9 million due to $2.4 million of gains on fixed assets sales from the banking center consolidations during the first six months of 2021.
Non-interest expense totaled $96.0 million, a decrease of $6.4 million or 6.3% driven by lower mortgage-related compensation as well as the Company’s strategic efforts to improve operating efficiency. Salaries and benefits decreased $4.7 million largely due to lower mortgage banking related compensation. Occupancy and equipment decreased $1.3 million largely due to efficiencies gained from the completion of the previously announced banking center consolidations. Problem asset workout expenses decreased $0.5 million.
Income tax expense totaled $11.1 million, an increase of $3.5 million, driven by 2021’s higher pre-tax income. Included in income tax expense was $0.4 million of tax benefit and $0.1 million of tax expense from stock compensation activity during the first six months of 2021 and 2020, respectively. Adjusting for stock compensation activity, the effective tax rate for the first six months of 2021 was 18.5%, compared to 18.3% in the prior period.
Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Tuesday, July 27, 2021. Interested parties may listen to this call by dialing (888) 394-8218 (United States) / 0800 358 6377 (United Kingdom) using the confirmation code of 8424776 and asking for the NBHC Q2 2021 Earnings Call. A telephonic replay of the call will be available beginning approximately four hours after the call’s completion through August 1, 2021, by dialing (888) 203-1112 using the confirmation code of 8424776. 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 82 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
NATIONAL BANK HOLDINGS CORPORATION
FINANCIAL SUMMARY
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except share and per share data)For the three months ended For the six months ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Total interest and dividend income $ 48,450 $ 49,213 $ 53,744 $ 97,663 $ 112,412 Total interest expense 3,582 3,992 6,416 7,574 14,737 Net interest income 44,868 45,221 47,328 90,089 97,675 Taxable equivalent adjustment 1,279 1,268 1,301 2,547 2,568 Net interest income FTE(1) 46,147 46,489 48,629 92,636 100,243 Provision (release) expense for loan losses (5,850 ) (3,575 ) 10,271 (9,425 ) 16,430 Net interest income after provision for loan losses FTE(1) 51,997 50,064 38,358 102,061 83,813 Non-interest income: Service charges 3,568 3,474 3,094 7,042 7,220 Bank card fees 4,614 4,073 3,654 8,687 7,167 Mortgage banking income 13,979 22,379 30,630 36,358 44,303 Other non-interest income 3,105 3,400 1,459 6,505 3,651 OREO-related income — 35 — 35 28 Total non-interest income 25,266 33,361 38,837 58,627 62,369 Non-interest expense: Salaries and benefits 31,439 33,523 36,457 64,962 69,637 Occupancy and equipment 6,131 6,550 7,078 12,681 13,976 Professional fees 649 742 759 1,391 1,368 Other non-interest expense 7,019 6,853 6,778 13,872 13,779 Problem asset workout 294 438 629 732 1,277 Loss (gain) on sale of OREO, net 221 (29 ) 55 192 94 Core deposit intangible asset amortization 296 296 296 592 592 Banking center consolidation-related expense 294 1,295 1,708 1,589 1,708 Total non-interest expense 46,343 49,668 53,760 96,011 102,431 Income before income taxes FTE(1) 30,920 33,757 23,435 64,677 43,751 Taxable equivalent adjustment 1,279 1,268 1,301 2,547 2,568 Income before income taxes 29,641 32,489 22,134 62,130 41,183 Income tax expense 5,441 5,677 4,429 11,118 7,654 Net income $ 24,200 $ 26,812 $ 17,705 $ 51,012 $ 33,529 Earnings per share - basic $ 0.78 $ 0.87 $ 0.57 $ 1.65 $ 1.08 Earnings per share - diluted 0.77 0.86 0.57 1.63 1.08 (1 ) Net interest income is presented on a GAAP basis and fully taxable equivalent (FTE) basis, as the Company believes this non-GAAP measure is the preferred industry measurement for this item. The FTE adjustment is for the tax benefit on certain tax exempt loans using the federal tax rate of 21% for each period presented. NATIONAL BANK HOLDINGS CORPORATION
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands, except share and per share data)June 30, 2021 March 31, 2021 December 31, 2020 June 30, 2020 ASSETS Cash and cash equivalents $ 1,004,493 $ 822,518 $ 605,565 $ 142,385 Investment securities available-for-sale 605,798 666,915 661,955 610,735 Investment securities held-to-maturity 687,635 520,823 376,615 215,183 Non-marketable securities 14,741 15,493 16,493 30,188 Loans 4,300,757 4,303,246 4,353,726 4,782,383 Allowance for credit losses (49,030 ) (55,057 ) (59,777 ) (60,465 ) Loans, net 4,251,727 4,248,189 4,293,949 4,721,918 Loans held for sale 134,805 228,888 247,813 204,856 Other real estate owned 5,124 5,669 4,730 6,491 Premises and equipment, net 95,019 101,830 106,982 110,019 Goodwill 115,027 115,027 115,027 115,027 Intangible assets, net 22,360 20,205 17,928 12,175 Other assets 199,399 203,944 212,893 216,454 Total assets $ 7,136,128 $ 6,949,501 $ 6,659,950 $ 6,385,431 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Non-interest bearing demand deposits $ 2,437,328 $ 2,295,704 $ 2,111,045 $ 1,502,948 Interest bearing demand deposits 555,865 557,850 514,286 955,951 Savings and money market 2,240,359 2,199,420 2,064,769 1,903,427 Total transaction deposits 5,233,552 5,052,974 4,690,100 4,362,326 Time deposits 924,501 948,676 986,132 1,051,563 Total deposits 6,158,053 6,001,650 5,676,232 5,413,889 Securities sold under agreements to repurchase 22,957 19,405 22,897 24,504 Federal Home Loan Bank advances — — — 15,000 Other liabilities 103,252 96,456 140,130 155,071 Total liabilities 6,284,262 6,117,511 5,839,259 5,608,464 Shareholders' equity: Common stock 515 515 515 515 Additional paid in capital 1,011,200 1,010,798 1,011,362 1,008,773 Retained earnings 260,821 243,446 223,175 180,537 Treasury stock (422,365 ) (423,254 ) (424,127 ) (425,053 ) Accumulated other comprehensive income, net of tax 1,695 485 9,766 12,195 Total shareholders' equity 851,866 831,990 820,691 776,967 Total liabilities and shareholders' equity $ 7,136,128 $ 6,949,501 $ 6,659,950 $ 6,385,431 SHARE DATA Average basic shares outstanding 30,947,206 30,828,262 30,784,896 30,731,758 Average diluted shares outstanding 31,226,351 31,143,322 31,032,648 30,857,606 Ending shares outstanding 30,800,985 30,715,790 30,634,291 30,569,011 Common book value per share $ 27.66 $ 27.09 $ 26.79 $ 25.42 Tangible common book value per share(1) (non-GAAP) 24.01 23.41 23.09 21.67 Tangible common book value per share, excluding accumulated other comprehensive income(1) (non-GAAP) 23.95 23.40 22.77 21.27 CAPITAL RATIOS Average equity to average assets 11.95 % 12.36 % 12.27 % 12.21 % Tangible common equity to tangible assets(1) 10.53 % 10.52 % 10.80 % 10.56 % Tier 1 leverage ratio 10.57 % 10.80 % 10.70 % 10.53 % Common equity tier 1 risk-based capital ratio 15.31 % 15.23 % 14.70 % 13.21 % Tier 1 risk-based capital ratio 15.31 % 15.23 % 14.70 % 13.21 % Total risk-based capital ratio 16.27 % 16.30 % 15.83 % 14.26 % (1 ) Represents a non-GAAP financial measure. See non-GAAP reconciliations below. NATIONAL BANK HOLDINGS CORPORATION
Loan Portfolio
(Dollars in thousands)Period End Loan Balances by Type
June 30, 2021 June 30, 2021 vs. March 31, 2021 vs. June 30, 2020 June 30, 2021 March 31, 2021 % Change June 30, 2020 % Change Originated: Commercial: Commercial and industrial $ 1,253,745 $ 1,177,764 6.5 % $ 1,360,679 (7.9 )% Municipal and non-profit 860,740 850,663 1.2 % 912,287 (5.7 )% Owner-occupied commercial real estate 479,286 476,625 0.6 % 455,846 5.1 % Food and agribusiness 195,095 178,419 9.3 % 213,789 (8.7 )% PPP loans(1) 129,643 217,697 (40.4 )% 348,689 (62.8 )% Total commercial 2,918,509 2,901,168 0.6 % 3,291,290 (11.3 )% Commercial real estate non-owner occupied 570,252 553,184 3.1 % 540,412 5.5 % Residential real estate 600,124 604,001 (0.6 )% 631,032 (4.9 )% Consumer 17,942 17,671 1.5 % 20,370 (11.9 )% Total originated 4,106,827 4,076,024 0.8 % 4,483,104 (8.4 )% Acquired: Commercial: Commercial and industrial 18,710 20,405 (8.3 )% 27,461 (31.9 )% Municipal and non-profit 359 370 (3.0 )% 593 (39.5 )% Owner-occupied commercial real estate 40,435 50,607 (20.1 )% 65,052 (37.8 )% Food and agribusiness 3,913 4,129 (5.2 )% 6,237 (37.3 )% Total commercial 63,417 75,511 (16.0 )% 99,343 (36.2 )% Commercial real estate non-owner occupied 67,368 81,176 (17.0 )% 101,412 (33.6 )% Residential real estate 62,805 70,141 (10.5 )% 97,982 (35.9 )% Consumer 340 394 (13.7 )% 542 (37.3 )% Total acquired 193,930 227,222 (14.7 )% 299,279 (35.2 )% Total loans $ 4,300,757 $ 4,303,246 (0.1 )% $ 4,782,383 (10.1 )% (1 ) PPP loan balances are net of fees and costs and include principal totaling $134,632, $223,867 and $358,798 as of June 30, 2021, March 31, 2021 and June 30, 2020, respectively. Originations(1)
Second quarter First quarter Fourth quarter Third quarter Second quarter 2021 2021 2020 2020 2020 Commercial: Commercial and industrial $ 147,030 $ 23,390 $ 96,625 $ 11,354 $ (8,726 ) Municipal and non-profit 25,131 7,999 25,348 6,083 49,679 Owner occupied commercial real estate 48,225 27,093 36,085 23,758 22,078 Food and agribusiness 26,956 (10,104 ) 19,191 13,876 (10,480 ) PPP loans — 121,141 — 122 358,798 Total commercial 247,342 169,519 177,249 55,193 411,349 Commercial real estate non-owner occupied 58,532 49,195 52,018 24,937 18,992 Residential real estate 53,962 74,145 41,355 49,786 29,024 Consumer 2,267 1,353 1,858 2,980 2,206 Total $ 362,103 $ 294,212 $ 272,480 $ 132,896 $ 461,571 (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 $59,520, ($26,395), $50,982, ($27,899) and ($55,826) as of the second and first quarters of 2021 and the fourth, third and second quarters of 2020, respectively. NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
(Dollars in thousands)For the three months ended For the three months ended For the three months ended June 30, 2021 March 31, 2021 June 30, 2020 Average Average Average Average Average Average balance Interest rate balance Interest rate balance Interest rate Interest earning assets: Originated loans FTE(1)(2) $ 4,077,142 $ 40,036 3.94 % $ 4,004,994 $ 39,560 4.01 % $ 4,432,725 $ 42,440 3.85 % Acquired loans 211,126 3,923 7.45 % 238,468 5,128 8.72 % 312,723 6,722 8.65 % Loans held for sale 159,068 1,213 3.06 % 231,521 1,517 2.66 % 157,887 1,310 3.34 % Investment securities available-for-sale 638,039 2,397 1.50 % 686,731 2,485 1.45 % 607,132 3,050 2.01 % Investment securities held-to-maturity 572,534 1,723 1.20 % 421,119 1,416 1.34 % 189,360 1,201 2.54 % Other securities 15,079 209 5.54 % 15,818 210 5.31 % 30,087 310 4.12 % Interest earning deposits and securities purchased under agreements to resell 888,600 228 0.10 % 639,273 165 0.10 % 36,758 12 0.13 % Total interest earning assets FTE(2) $ 6,561,588 $ 49,729 3.04 % $ 6,237,924 $ 50,481 3.28 % $ 5,766,672 $ 55,045 3.84 % Cash and due from banks $ 78,148 $ 81,253 $ 76,041 Other assets 472,142 495,222 532,867 Allowance for credit losses (54,984 ) (58,915 ) (56,984 ) Total assets $ 7,056,894 $ 6,755,484 $ 6,318,596 Interest bearing liabilities: Interest bearing demand, savings and money market deposits $ 2,789,681 $ 1,572 0.23 % $ 2,645,487 $ 1,652 0.25 % $ 2,719,433 $ 1,951 0.29 % Time deposits 937,579 2,004 0.86 % 967,447 2,335 0.98 % 1,048,772 4,136 1.59 % Securities sold under agreements to repurchase 19,891 6 0.12 % 21,377 5 0.09 % 23,485 18 0.31 % Federal Home Loan Bank advances — — 0.00 % — — 0.00 % 163,263 311 0.77 % Total interest bearing liabilities $ 3,747,151 $ 3,582 0.38 % $ 3,634,311 $ 3,992 0.45 % $ 3,954,953 $ 6,416 0.65 % Demand deposits $ 2,368,810 $ 2,165,868 $ 1,436,671 Other liabilities 97,817 120,607 155,379 Total liabilities 6,213,778 5,920,786 5,547,003 Shareholders' equity 843,116 834,698 771,593 Total liabilities and shareholders' equity $ 7,056,894 $ 6,755,484 $ 6,318,596 Net interest income FTE(2) $ 46,147 $ 46,489 $ 48,629 Interest rate spread FTE(2) 2.66 % 2.83 % 3.19 % Net interest earning assets $ 2,814,437 $ 2,603,613 $ 1,811,719 Net interest margin FTE(2) 2.82 % 3.02 % 3.39 % Average transaction deposits $ 5,158,491 $ 4,811,355 $ 4,156,104 Average total deposits 6,096,070 5,778,802 5,204,876 Ratio of average interest earning assets to average interest bearing liabilities 175.11 % 171.64 % 145.81 % (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 $1,279, $1,268 and $1,301 for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively. NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
(Dollars in thousands)For the six months ended June 30, 2021 For the six months ended June 30, 2020 Average Average Average Average balance Interest rate balance Interest rate Interest earning assets: Originated loans FTE(1)(2) $ 4,041,268 $ 79,596 3.97 % $ 4,237,946 $ 87,419 4.15 % Acquired loans 224,722 9,051 8.12 % 328,165 15,601 9.56 % Loans held for sale 195,094 2,730 2.82 % 130,411 2,246 3.46 % Investment securities available-for-sale 662,250 4,882 1.47 % 617,027 6,445 2.09 % Investment securities held-to-maturity 497,245 3,139 1.26 % 189,211 2,436 2.57 % Other securities 15,446 419 5.43 % 29,920 724 4.84 % Interest earning deposits and securities purchased under agreements to resell 764,626 393 0.10 % 29,858 109 0.73 % Total interest earning assets FTE(2) $ 6,400,651 $ 100,210 3.16 % $ 5,562,538 $ 114,980 4.16 % Cash and due from banks $ 79,692 $ 75,412 Other assets 483,617 503,669 Allowance for credit losses (56,938 ) (50,895 ) Total assets $ 6,907,022 $ 6,090,724 Interest bearing liabilities: Interest bearing demand, savings and money market deposits $ 2,717,983 $ 3,224 0.24 % $ 2,608,281 $ 4,839 0.37 % Time deposits 952,431 4,339 0.92 % 1,052,732 8,574 1.64 % Securities sold under agreements to repurchase 20,630 11 0.11 % 34,192 115 0.68 % Federal Home Loan Bank advances — — 0.00 % 191,308 1,209 1.27 % Total interest bearing liabilities $ 3,691,044 $ 7,574 0.41 % $ 3,886,513 $ 14,737 0.76 % Demand deposits $ 2,267,900 $ 1,286,972 Other liabilities 109,148 144,253 Total liabilities 6,068,092 5,317,738 Shareholders' equity 838,930 772,986 Total liabilities and shareholders' equity $ 6,907,022 $ 6,090,724 Net interest income FTE(2) $ 92,636 $ 100,243 Interest rate spread FTE(2) 2.75 % 3.40 % Net interest earning assets $ 2,709,607 $ 1,676,025 Net interest margin FTE(2) 2.92 % 3.62 % Average transaction deposits $ 4,985,883 $ 3,895,253 Average total deposits 5,938,314 4,947,985 Ratio of average interest earning assets to average interest bearing liabilities 173.41 % 143.12 % (1 ) Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan. (2 ) Presented on a fully taxable equivalent basis using the statutory tax rate of 21%. The tax equivalent adjustments included above are $2,547 and $2,568 for the six months ended June 30, 2021 and June 30, 2020, respectively. NATIONAL BANK HOLDINGS CORPORATION
Allowance for Credit Losses and Asset Quality
(Dollars in thousands)Allowance for Credit Losses Analysis
As of and for the three months ended June 30, 2021 March 31, 2021 June 30, 2020 Beginning allowance for credit losses $ 55,057 $ 59,777 $ 50,956 Charge-offs (925 ) (302 ) (852 ) Recoveries 198 182 236 Provision (release) expense (5,300 ) (4,600 ) 10,125 Ending allowance for credit losses ("ACL") $ 49,030 $ 55,057 $ 60,465 Ratio of annualized net charge-offs to average total loans during the period 0.07 % 0.01 % 0.05 % Ratio of annualized net charge-offs to average total loans excluding PPP loans during the period 0.07 % 0.01 % 0.05 % Ratio of ACL to total loans outstanding at period end 1.14 % 1.28 % 1.26 % Ratio of ACL to total loans outstanding excluding PPP loans at period end 1.18 % 1.35 % 1.36 % Ratio of ACL to total non-performing loans at period end 353.22 % 336.25 % 302.34 % Total loans $ 4,300,757 $ 4,303,246 $ 4,782,383 Average total loans during the period 4,312,128 4,277,481 4,794,466 Average total loans excluding PPP loans during the period 4,112,172 4,098,898 4,512,010 Total non-performing loans 13,881 16,374 19,999 Past Due and Non-accrual Loans
June 30, 2021 March 31, 2021 June 30, 2020 Loans 30-89 days past due and still accruing interest $ 2,098 $ 1,867 $ 3,932 Loans 90 days past due and still accruing interest 767 1,021 2,444 Non-accrual loans 13,881 16,374 19,999 Total past due and non-accrual loans $ 16,746 $ 19,262 $ 26,375 Total 90 days past due and still accruing interest and non-accrual loans to total loans 0.34 % 0.40 % 0.47 % Asset Quality Data
June 30, 2021 March 31, 2021 June 30, 2020 Non-performing loans $ 13,881 $ 16,374 $ 19,999 OREO 5,124 5,669 6,491 Other repossessed assets — 17 — Total non-performing assets $ 19,005 $ 22,060 $ 26,490 Accruing restructured loans $ 11,844 $ 13,822 $ 20,284 Total non-performing loans to total loans 0.32 % 0.38 % 0.42 % Total non-performing loans to total loans excluding PPP loans 0.33 % 0.40 % 0.45 % Total non-performing assets to total loans and OREO 0.44 % 0.51 % 0.55 % Total non-performing assets to total loans and OREO excluding PPP loans 0.46 % 0.54 % 0.60 % NATIONAL BANK HOLDINGS CORPORATION
Key Ratios(1)As of and for the three months ended As of and for the six months ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Return on average assets 1.38 % 1.61 % 1.13 % 1.49 % 1.11 % Return on average tangible assets(2) 1.41 % 1.65 % 1.16 % 1.53 % 1.14 % Return on average equity 11.51 % 13.03 % 9.23 % 12.26 % 8.72 % Return on average tangible common equity(2) 13.41 % 15.20 % 10.98 % 14.29 % 10.38 % Loan to deposit ratio (end of period) 69.84 % 71.70 % 88.34 % 69.84 % 88.34 % Non-interest bearing deposits to total deposits (end of period) 39.58 % 38.25 % 27.76 % 39.58 % 27.76 % Net interest margin(4) 2.74 % 2.94 % 3.30 % 2.84 % 3.53 % Net interest margin FTE(2)(4) 2.82 % 3.02 % 3.39 % 2.92 % 3.62 % Interest rate spread FTE(2)(5) 2.66 % 2.83 % 3.19 % 2.75 % 3.40 % Yield on earning assets(3) 2.96 % 3.20 % 3.75 % 3.08 % 4.06 % Yield on earning assets FTE(2)(3) 3.04 % 3.28 % 3.84 % 3.16 % 4.16 % Cost of interest bearing liabilities(3) 0.38 % 0.45 % 0.65 % 0.41 % 0.76 % Cost of deposits 0.24 % 0.28 % 0.47 % 0.26 % 0.55 % Non-interest income to total revenue FTE(2) 35.38 % 41.78 % 44.40 % 38.76 % 38.35 % Non-interest expense to average assets 2.63 % 2.98 % 3.42 % 2.80 % 3.38 % Efficiency ratio 65.66 % 62.83 % 62.05 % 64.16 % 63.63 % Efficiency ratio FTE(2) 64.48 % 61.83 % 61.13 % 63.08 % 62.63 % Total Loans Asset Quality Data(6)(7)(8) Non-performing loans to total loans 0.32 % 0.38 % 0.42 % 0.32 % 0.42 % Non-performing loans to total loans excluding PPP loans 0.33 % 0.40 % 0.45 % 0.33 % 0.45 % Non-performing assets to total loans and OREO 0.44 % 0.51 % 0.55 % 0.44 % 0.55 % Non-performing assets to total loans and OREO excluding PPP loans 0.46 % 0.54 % 0.60 % 0.46 % 0.60 % Allowance for credit losses to total loans 1.14 % 1.28 % 1.26 % 1.14 % 1.26 % Allowance for credit losses to total loans excluding PPP loans 1.18 % 1.35 % 1.36 % 1.18 % 1.36 % Allowance for credit losses to non-performing loans 353.22 % 336.25 % 302.34 % 353.22 % 302.34 % Net charge-offs to average loans(1) 0.07 % 0.01 % 0.05 % 0.04 % 0.04 % (1 ) Ratios are annualized. (2 ) Ratio represents non-GAAP financial measure. See non-GAAP reconciliations below. (3 ) Interest earning assets include assets that earn interest/accretion or dividends. Any market value adjustments on investment securities or loans are excluded from interest earning assets. (4 ) Net interest margin represents net interest income, including accretion income on interest earning assets, as a percentage of average interest earning assets. (5 ) Interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average cost of interest bearing liabilities. (6 ) Non-performing loans consist of non-accruing loans and restructured loans on non-accrual. (7 ) Non-performing assets include non-performing loans and other real estate owned. (8 ) Total loans are net of unearned discounts and fees. NATIONAL BANK HOLDINGS CORPORATION
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
(Dollars in thousands, except share and per share data)Tangible Common Book Value Ratios
June 30, 2021 March 31, 2021 December 31, 2020 June 30, 2020 Total shareholders' equity $ 851,866 $ 831,990 $ 820,691 $ 776,967 Less: goodwill and core deposit intangible assets, net (121,983 ) (122,280 ) (122,575 ) (123,166 ) Add: deferred tax liability related to goodwill 9,612 9,384 9,155 8,698 Tangible common equity (non-GAAP) $ 739,495 $ 719,094 $ 707,271 $ 662,499 Total assets $ 7,136,128 $ 6,949,501 $ 6,659,950 $ 6,385,431 Less: goodwill and core deposit intangible assets, net (121,983 ) (122,280 ) (122,575 ) (123,166 ) Add: deferred tax liability related to goodwill 9,612 9,384 9,155 8,698 Tangible assets (non-GAAP) $ 7,023,757 $ 6,836,605 $ 6,546,530 $ 6,270,963 Tangible common equity to tangible assets calculations: Total shareholders' equity to total assets 11.94 % 11.97 % 12.32 % 12.17 % Less: impact of goodwill and core deposit intangible assets, net (1.41 )% (1.45 )% (1.52 )% (1.61 )% Tangible common equity to tangible assets (non-GAAP) 10.53 % 10.52 % 10.80 % 10.56 % Tangible common book value per share calculations: Tangible common equity (non-GAAP) $ 739,495 $ 719,094 $ 707,271 $ 662,499 Divided by: ending shares outstanding 30,800,985 30,715,790 30,634,291 30,569,011 Tangible common book value per share (non-GAAP) $ 24.01 $ 23.41 $ 23.09 $ 21.67 Tangible common book value per share, excluding accumulated other comprehensive income calculations: Tangible common equity (non-GAAP) $ 739,495 $ 719,094 $ 707,271 $ 662,499 Accumulated other comprehensive income, net of tax (1,695 ) (485 ) (9,766 ) (12,195 ) Tangible common book value, excluding accumulated other comprehensive income, net of tax (non-GAAP) 737,800 718,609 697,505 650,304 Divided by: ending shares outstanding 30,800,985 30,715,790 30,634,291 30,569,011 Tangible common book value per share, excluding accumulated other comprehensive income, net of tax (non-GAAP) $ 23.95 $ 23.40 $ 22.77 $ 21.27 NATIONAL BANK HOLDINGS CORPORATION
(Dollars in thousands, except share and per share data)Return on Average Tangible Assets and Return on Average Tangible Equity
As of and for the three months ended As of and for the six months ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Net income $ 24,200 $ 26,812 $ 17,705 $ 51,012 $ 33,529 Add: impact of core deposit intangible amortization expense, after tax 228 228 227 455 454 Net income adjusted for impact of core deposit intangible amortization expense, after tax $ 24,428 $ 27,040 $ 17,932 $ 51,467 $ 33,983 Average assets $ 7,056,894 $ 6,755,484 $ 6,318,596 $ 6,907,022 $ 6,090,724 Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill (112,552 ) (113,074 ) (114,631 ) (112,698 ) (114,779 ) Average tangible assets (non-GAAP) $ 6,944,342 $ 6,642,410 $ 6,203,965 $ 6,794,324 $ 5,975,945 Average shareholders' equity $ 843,116 $ 834,698 $ 771,593 $ 838,930 $ 772,986 Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill (112,552 ) (113,074 ) (114,631 ) (112,698 ) (114,779 ) Average tangible common equity (non-GAAP) $ 730,564 $ 721,624 $ 656,962 $ 726,232 $ 658,207 Return on average assets 1.38 % 1.61 % 1.13 % 1.49 % 1.11 % Return on average tangible assets (non-GAAP) 1.41 % 1.65 % 1.16 % 1.53 % 1.14 % Return on average equity 11.51 % 13.03 % 9.23 % 12.26 % 8.72 % Return on average tangible common equity (non-GAAP) 13.41 % 15.20 % 10.98 % 14.29 % 10.38 % Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin
As of and for the three months ended As of and for the six months ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Interest income $ 48,450 $ 49,213 $ 53,744 $ 97,663 $ 112,412 Add: impact of taxable equivalent adjustment 1,279 1,268 1,301 2,547 2,568 Interest income FTE (non-GAAP) $ 49,729 $ 50,481 $ 55,045 $ 100,210 $ 114,980 Net interest income $ 44,868 $ 45,221 $ 47,328 $ 90,089 $ 97,675 Add: impact of taxable equivalent adjustment 1,279 1,268 1,301 2,547 2,568 Net interest income FTE (non-GAAP) $ 46,147 $ 46,489 $ 48,629 $ 92,636 $ 100,243 Average earning assets $ 6,561,588 $ 6,237,924 $ 5,766,672 $ 6,400,651 $ 5,562,538 Yield on earning assets 2.96 % 3.20 % 3.75 % 3.08 % 4.06 % Yield on earning assets FTE (non-GAAP) 3.04 % 3.28 % 3.84 % 3.16 % 4.16 % Net interest margin 2.74 % 2.94 % 3.30 % 2.84 % 3.53 % Net interest margin FTE (non-GAAP) 2.82 % 3.02 % 3.39 % 2.92 % 3.62 % Efficiency Ratio
As of and for the three months ended As of and for the six months ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Net interest income $ 44,868 $ 45,221 $ 47,328 $ 90,089 $ 97,675 Add: impact of taxable equivalent adjustment 1,279 1,268 1,301 2,547 2,568 Net interest income, FTE (non-GAAP) $ 46,147 $ 46,489 $ 48,629 $ 92,636 $ 100,243 Non-interest income $ 25,266 $ 33,361 $ 38,837 $ 58,627 $ 62,369 Non-interest expense $ 46,343 $ 49,668 $ 53,760 $ 96,011 $ 102,431 Less: core deposit intangible asset amortization (296 ) (296 ) (296 ) (592 ) (592 ) Non-interest expense, adjusted for core deposit intangible asset amortization $ 46,047 $ 49,372 $ 53,464 $ 95,419 $ 101,839 Efficiency ratio 65.66 % 62.83 % 62.05 % 64.16 % 63.63 % Efficiency ratio FTE (non-GAAP) 64.48 % 61.83 % 61.13 % 63.08 % 62.63 % 