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National Bank Holdings Corporation Announces Second Quarter 2023 Financial Results
ソース: Nasdaq GlobeNewswire / 19 7 2023 16:10:28 America/New_York
DENVER, July 19, 2023 (GLOBE NEWSWIRE) -- National Bank Holdings Corporation (NYSE: NBHC) reported:
For the quarter For the year For the year - adjusted (1) 2Q23 1Q23 2Q22 2023 2022 2023 2022 Net income ($000's) $ 32,557 $ 40,283 $ 20,362 $ 72,840 $ 38,714 $ 72,840 $ 39,682 Earnings per share - diluted $ 0.85 $ 1.06 $ 0.67 $ 1.91 $ 1.27 $ 1.91 $ 1.30 Return on average tangible assets(2) 1.45 % 1.80 % 1.16 % 1.63 % 1.11 % 1.63 % 1.14 % Return on average tangible common equity(2) 17.24 % 20.86 % 11.64 % 19.05 % 10.97 % 19.05 % 11.24 % (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 quarterly earnings of $0.85 per diluted share and a solid return on average tangible common equity of 17.24%. Year-to-date net income increased $34.1 million or 88% over the prior year period to $72.8 million, or $1.91 per diluted share. We continue to adhere to solid, disciplined approaches that limit concentrations in our loan book and our depositor base. Our credit quality remains strong with just two basis points of annualized net charge-offs. We maintain diversified funding sources and grew our core deposits by 29% annualized during the second quarter.”
Mr. Laney added, “During the quarter, we seamlessly integrated our Cambr acquisition into the NBH family. This strategic acquisition has provided us with a unique funding source of core deposits and further diversified our fee income capabilities. We believe our strong Common Equity Tier 1 capital ratio of 11.08% and our ample liquidity position serve as a source of strength in any economic environment.”
Second Quarter 2023 Results
(All comparisons refer to the first quarter of 2023, except as noted)Net income totaled $32.6 million or $0.85 per diluted share, compared to net income of $40.3 million or $1.06 per diluted share during the first quarter of 2023. Fully taxable equivalent pre-provision net revenue totaled $44.1 million during the second quarter, compared to $52.7 million. The return on average tangible assets totaled 1.45%, compared to a return of 1.80% during the first quarter, and the return on average tangible common equity totaled 17.24%, compared to the first quarter return of 20.86%.
Net Interest Income
Fully taxable equivalent net interest income totaled $91.2 million, compared to $96.3 million in the prior quarter, as an increase in loan interest income was more than offset by an increase in the cost of funds. The fully taxable equivalent net interest margin narrowed 32 basis points to 4.07% as the 22 basis point increase in earning asset yields was more than offset by a 58 basis point increase in the cost of funds. Average earning assets increased $96.2 million, primarily driven by loan growth. The cost of funds totaled 1.48%, compared to 0.90% during the first quarter.Loans
Total loans increased $69.1 million or 3.8% annualized to $7.4 billion at June 30, 2023. We generated quarterly loan fundings totaling $362.3 million with a weighted average new loan origination rate of 8.2%.Asset Quality and Provision for Credit Losses
The Company recorded $1.7 million of provision expense for credit losses, compared to $0.9 million in the prior quarter. The current quarter’s provision expense was driven by loan growth and higher reserve requirements. Annualized net charge-offs totaled 0.02% of average total loans during the second quarter, compared to 0.01% in the prior quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDMs) was 0.45% of total loans, compared to 0.13% in the prior quarter, and non-performing assets was 0.50% of total loans and OREO, compared to 0.18%. The allowance for credit losses as a percentage of loans increased two basis points to 1.25% at June 30, 2023.Deposits
We maintain a granular and well diversified deposit base with no exposure to venture capital or crypto deposits. Average total deposits increased $272.1 million, or 14.2% annualized, to $8.0 billion during the second quarter 2023, compared to $7.7 billion during the first quarter 2023. The loan to deposit ratio totaled 91.3% at June 30, 2023. Average transaction deposits (defined as total deposits less time deposits) increased $213.4 million to $7.0 billion.We improved our balance sheet funding mix during the second quarter and utilized the funding provided by the quarter’s deposit growth to pay down $615.0 million of Federal Home Loan Bank advances. The mix of transaction deposits to total deposits increased eight basis points to 87.9% at June 30, 2023.
Non-Interest Income
Non-interest income totaled $13.8 million during the second quarter, compared to $14.7 million. Included in other non-interest income during the quarter was $4.1 million of impairments related to venture capital investments classified as non-marketable securities. Excluding these impairments, non-interest income increased $3.3 million largely due to the addition of $1.2 million of Cambr fee income, $0.8 million higher service charges and bank card fees and $0.5 million higher mortgage banking income.Non-Interest Expense
Non-interest expense totaled $61.0 million, compared to $58.3 million in the prior quarter. Salaries and benefits increased $2.2 million due to payroll tax credits realized in the first quarter 2023. Included in the second quarter were Cambr related acquisition expenses including $0.5 million higher transaction expenses and Cambr intangible amortization of $0.6 million. Partially offsetting these increases was a $0.8 million decrease in data processing expense.The efficiency ratio totaled 58.9% for the second quarter, compared to 53.2%. The fully taxable equivalent efficiency ratio totaled 56.1% for the second quarter compared to 51.3%, adjusting for other intangible assets amortization.
Income tax expense totaled $8.4 million during the second quarter, compared to $10.1 million in the prior quarter. The decrease in income tax expense was due to a decrease in pre-tax income. The effective tax rate was 20.4% and 20.0% for the second and first 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 9.15% at June 30, 2023, and the common equity tier 1 capital ratio totaled 11.08% at June 30, 2023. Shareholders’ equity totaled $1.1 billion at June 30, 2023 increasing $13.6 million, largely due to higher retained earnings partially offset by an increase in accumulated other comprehensive loss.Common book value per share increased $0.30 to $30.42 at June 30, 2023. Tangible common book value per share decreased $0.81 to $20.95 due to the impact of the Cambr acquisition and a $0.26 per share increase in accumulated other comprehensive loss.
Year-Over-Year Review
(All comparisons refer to the first six months of 2022, except as noted)Net income increased $34.1 million or 88.1% to $72.8 million, or $1.91 per diluted share, compared to net income of $38.7 million, or $1.27 per diluted share, for the first six months of 2022. The increase over the same period prior year was driven by our organic balance sheet growth, strategic acquisition growth and increases in the Federal Reserve’s interest rates. Fully taxable equivalent pre-provision net revenue increased $45.2 million, or 87.8%, to $96.7 million. The return on average tangible assets was 1.63%, compared to 1.11% in the same period prior year, and the return on average tangible common equity was 19.05%, compared to 10.97%.
The first six months of 2022 included $1.0 million of non-recurring acquisition-related expenses related to our 2022 acquisitions. Adjusting for these expenses in the prior period, net income for the first six months of 2023 increased $33.2 million or 83.6%, and fully taxable equivalent pre-provision net revenue increased $44.0 million, or 83.3%. The adjusted return on average tangible assets was 1.14%, and the adjusted return on average tangible common equity was 11.24% for the first six months of 2022.
Fully taxable equivalent net interest income totaled $187.5 million, an increase of $82.2 million or 78.0%. Average earning assets increased $2.2 billion, or 32.6%, including average originated loan growth of $1.1 billion and average acquired loan growth of $1.6 billion. The fully taxable equivalent net interest margin widened 107 basis points to 4.22%, benefitting from a 203 basis point increase in earning asset yields to 5.35%. Average interest bearing liabilities increased $1.7 billion to $5.6 billion at June 30, 2023, and the cost of funds totaled 1.20%, compared to 0.18% in the same period prior year.
Loans outstanding totaled $7.4 billion, increasing $2.6 billion or 53.9%, and included $1.7 billion of loans acquired through the Rock Canyon Bank and Bank of Jackson Hole acquisitions in the second half of 2022. New loan fundings over the trailing 12 months totaled $1.9 billion, led by commercial loan fundings of $1.0 billion.
The Company recorded $2.6 million of provision expense for credit losses for the first six months of 2023, compared to provision expense of $2.2 million in the same period prior year. The current period’s provision expense was driven by loan growth and higher reserve requirements. Annualized net charge-offs decreased two basis points to 0.02% of average total loans during the first six months of 2023. Non-performing loans to total loans was 0.45%, compared to 0.20% in the same period prior year, and non-performing assets to total loans and OREO was 0.50% at June 30, 2023, compared to 0.31%. The allowance for credit losses totaled 1.25% of total loans, compared to 1.06% at June 30, 2022.
Average total deposits increased $1.6 billion or 25.8% to $7.8 billion, primarily due to higher deposit balances driven by the strategic growth from our recent acquisitions. Average transaction deposits increased $1.5 billion or 27.0%, and average non-interest bearing demand deposits increased $400.1 million or 16.3%. The mix of transaction deposits to total deposits was 87.9%, compared to 87.4% at June 30, 2022, and the mix of non-interest bearing demand deposits to total deposits was 32.4%, compared to 39.6% at June 30, 2022.
Non-interest income totaled $28.5 million, a decrease of $7.3 million or 20.5%, largely driven by $9.7 million of lower mortgage banking income due to lower purchase and refinance activity, as well as competition driving tighter gain on sale margins. Service charges and bank card fees increased a combined $1.9 million compared to the same period prior year. Other non-interest income included $1.2 million of Cambr income, $1.0 million of trust income and $0.7 million from gains on SBA loan sales, all of which are new and diversified sources of fee revenue. Included in other non-interest income during 2023 was $4.4 million in impairments related to venture capital investments classified as non-marketable securities.
Non-interest expense totaled $119.3 million, an increase of $29.6 million, or 33.1%, largely driven by an increase in core operating expenses driven by our 2022 acquisitions. Included in other non-interest expense is $2.8 million higher FDIC deposit insurance expense as a result of our recent acquisitions and an increase in the FDIC assessment rate effective January 2023. Included in the first six months of 2022 were non-recurring acquisition-related expenses of $1.0 million related to our 2022 acquisitions.
Income tax expense totaled $18.4 million, an increase of $10.5 million from the same period last year, driven by higher pre-tax income. The effective tax rate was 20.2% for the first six months of 2023, compared to 17.1%.
Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Thursday, July 20, 2023. Interested parties may listen to this call by dialing (888) 204-4368 using the participant passcode of 6310514 and asking for the NBHC Q2 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 and wealth management 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 other intangible assets amortization and acquisition-related expenses,” “non-interest expense adjusted for acquisition-related expenses,” “efficiency ratio adjusted for other intangible assets amortization and acquisition-related expenses,” “adjusted net income,” “adjusted earnings per share – diluted,” “net income adjusted for the impact of other intangible assets amortization expense and acquisition-related expenses, after tax,” “net income excluding the impact of other intangible assets 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 For the six months ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Total interest and dividend income $ 121,069 $ 113,533 $ 58,836 $ 234,602 $ 108,361 Total interest expense 31,285 18,644 2,819 49,929 5,683 Net interest income 89,784 94,889 56,017 184,673 102,678 Taxable equivalent adjustment 1,442 1,414 1,336 2,857 2,649 Net interest income FTE(1) 91,226 96,303 57,353 187,530 105,327 Provision expense for credit losses 1,700 900 2,504 2,600 2,182 Net interest income after provision for credit losses FTE(1) 89,526 95,403 54,849 184,930 103,145 Non-interest income: Service charges 4,444 4,101 3,956 8,545 7,666 Bank card fees 5,091 4,637 4,541 9,728 8,664 Mortgage banking income 3,710 3,216 6,948 6,926 16,614 Other non-interest income 578 2,711 1,317 3,289 2,872 Total non-interest income 13,823 14,665 16,762 28,488 35,816 Non-interest expense: Salaries and benefits 35,215 32,989 28,776 68,204 58,112 Occupancy and equipment 9,126 9,073 6,665 18,199 13,061 Professional fees 3,146 2,590 1,486 5,736 2,300 Data processing 2,959 3,752 2,453 6,711 4,834 Other non-interest expense 8,528 8,525 5,876 17,053 10,735 Other intangible assets amortization 2,007 1,363 296 3,370 592 Total non-interest expense 60,981 58,292 45,552 119,273 89,634 Income before income taxes FTE(1) 42,368 51,776 26,059 94,145 49,327 Taxable equivalent adjustment 1,442 1,414 1,336 2,857 2,649 Income before income taxes 40,926 50,362 24,723 91,288 46,678 Income tax expense 8,369 10,079 4,361 18,448 7,964 Net income $ 32,557 $ 40,283 $ 20,362 $ 72,840 $ 38,714 Earnings per share - basic $ 0.86 $ 1.06 $ 0.67 $ 1.92 $ 1.28 Earnings per share - diluted 0.85 1.06 0.67 1.91 1.27 (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, 2023 March 31, 2023 December 31, 2022 June 30, 2022 ASSETS Cash and cash equivalents $ 323,832 $ 369,705 $ 195,505 $ 448,375 Investment securities available-for-sale 659,347 695,485 706,289 805,858 Investment securities held-to-maturity 619,400 637,921 651,527 582,650 Non-marketable securities 88,849 120,733 89,049 59,754 Loans 7,414,357 7,345,298 7,220,469 4,817,070 Allowance for credit losses (92,581 ) (90,343 ) (89,553 ) (50,860 ) Loans, net 7,321,776 7,254,955 7,130,916 4,766,210 Loans held for sale 25,172 24,594 22,767 48,816 Other real estate owned 3,458 3,458 3,731 4,992 Premises and equipment, net 147,853 140,417 136,111 103,690 Goodwill 306,043 279,132 279,132 115,027 Intangible assets, net 74,914 58,619 59,887 14,568 Other assets 301,313 332,204 298,329 218,059 Total assets $ 9,871,957 $ 9,917,223 $ 9,573,243 $ 7,167,999 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Non-interest bearing demand deposits $ 2,628,942 $ 2,920,891 $ 3,134,716 $ 2,454,740 Interest bearing demand deposits 1,324,292 1,098,172 913,852 597,000 Savings and money market 3,183,355 2,584,128 2,950,658 2,364,681 Total transaction deposits 7,136,589 6,603,191 6,999,226 5,416,421 Time deposits 984,269 978,489 873,400 777,977 Total deposits 8,120,858 7,581,680 7,872,626 6,194,398 Securities sold under agreements to repurchase 21,422 21,492 20,214 24,396 Long-term debt 54,045 53,968 53,890 39,532 Federal Home Loan Bank advances 385,000 1,000,000 385,000 — Other liabilities 143,298 126,356 149,311 94,122 Total liabilities 8,724,623 8,783,496 8,481,041 6,352,448 Shareholders' equity: Common stock 515 515 515 515 Additional paid in capital 1,158,727 1,160,436 1,159,508 1,014,330 Retained earnings 384,094 361,440 330,721 314,616 Treasury stock (307,388 ) (310,037 ) (310,338 ) (455,909 ) Accumulated other comprehensive loss, net of tax (88,614 ) (78,627 ) (88,204 ) (58,001 ) Total shareholders' equity 1,147,334 1,133,727 1,092,202 815,551 Total liabilities and shareholders' equity $ 9,871,957 $ 9,917,223 $ 9,573,243 $ 7,167,999 SHARE DATA Average basic shares outstanding 37,957,287 37,785,488 37,762,853 30,225,898 Average diluted shares outstanding 38,107,326 38,074,973 38,100,155 30,493,265 Ending shares outstanding 37,719,026 37,641,381 37,608,519 30,075,175 Common book value per share $ 30.42 $ 30.12 $ 29.04 $ 27.12 Tangible common book value per share(1)(non-GAAP) 20.95 21.76 20.63 23.45 Tangible common book value per share, excluding accumulated other comprehensive income(1)(non-GAAP) 23.30 23.85 22.98 25.38 CAPITAL RATIOS Average equity to average assets 11.78 % 11.63 % 11.47 % 11.32 % Tangible common equity to tangible assets(1) 8.30 % 8.53 % 8.38 % 9.99 % Tier 1 leverage ratio 9.15 % 9.46 % 9.29 % 10.54 % Common equity tier 1 risk-based capital ratio 11.08 % 11.32 % 10.54 % 13.75 % Tier 1 risk-based capital ratio 11.08 % 11.32 % 10.54 % 13.75 % Total risk-based capital ratio 12.95 % 13.17 % 12.29 % 15.35 % (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, 2023 June 30, 2023 vs. March 31, 2023 vs. June 30, 2022 June 30, 2023 March 31, 2023 % Change June 30, 2022 % Change Originated: Commercial: Commercial and industrial $ 1,788,714 $ 1,818,415 (1.6 )% $ 1,588,241 12.6 % Municipal and non-profit 1,022,414 979,801 4.3 % 996,223 2.6 % Owner-occupied commercial real estate 710,508 674,231 5.4 % 592,334 20.0 % Food and agribusiness 263,086 270,197 (2.6 )% 196,829 33.7 % Total commercial 3,784,722 3,742,644 1.1 % 3,373,627 12.2 % Commercial real estate non-owner occupied 1,043,999 979,150 6.6 % 620,133 68.4 % Residential real estate 877,907 864,544 1.5 % 682,272 28.7 % Consumer 16,979 16,766 1.3 % 17,486 (2.9 )% Total originated 5,723,607 5,603,104 2.2 % 4,693,518 21.9 % Acquired: Commercial: Commercial and industrial 163,139 172,368 (5.4 )% 15,056 >100 % Municipal and non-profit 310 316 (1.9 )% 330 (6.1 )% Owner-occupied commercial real estate 245,605 248,883 (1.3 )% 18,849 >100 % Food and agribusiness 62,918 64,739 (2.8 )% 2,849 >100 % Total commercial 471,972 486,306 (2.9 )% 37,084 >100 % Commercial real estate non-owner occupied 847,946 845,374 0.3 % 42,771 >100 % Residential real estate 367,998 407,254 (9.6 )% 43,486 >100 % Consumer 2,834 3,260 (13.1 )% 211 >100 % Total acquired 1,690,750 1,742,194 (3.0 )% 123,552 >100 % Total loans $ 7,414,357 $ 7,345,298 0.9 % $ 4,817,070 53.9 % Loan Fundings(1)
Second quarter First quarter Fourth quarter Third quarter Second quarter 2023 2023 2022 2022 2022 Commercial: Commercial and industrial $ 111,717 $ 107,013 $ 177,693 $ 201,106 $ 152,550 Municipal and non-profit 39,331 22,526 20,393 20,845 81,428 Owner occupied commercial real estate 62,649 33,912 40,912 65,125 78,905 Food and agribusiness 6,017 (6,564 ) 28,518 76,293 (4,186 ) Total commercial 219,714 156,887 267,516 363,369 308,697 Commercial real estate non-owner occupied 99,984 185,875 133,271 166,739 88,612 Residential real estate 40,814 49,406 95,067 99,951 93,220 Consumer 1,777 1,717 1,396 1,505 1,989 Total $ 362,289 $ 393,885 $ 497,250 $ 631,564 $ 492,518 (1) Loan fundings are defined as closed end funded loans and net fundings under revolving lines of credit. Net fundings (paydowns) under revolving lines of credit were $13,766, ($7,096), $96,903, $124,834 and $21,762 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 June 30, 2023 March 31, 2023 June 30, 2022 Average Average Average Average Average Average balance Interest rate balance Interest rate balance Interest rate Interest earning assets: Originated loans FTE(1)(2) $ 5,649,623 $ 86,547 6.14 % $ 5,514,704 $ 79,167 5.82 % $ 4,594,799 $ 47,787 4.17 % Acquired loans 1,712,118 26,388 6.18 % 1,771,224 27,023 6.19 % 128,107 4,403 13.79 % Loans held for sale 26,572 460 6.94 % 21,753 346 6.45 % 78,574 881 4.50 % Investment securities available-for-sale 786,643 3,883 1.97 % 810,257 3,989 1.97 % 898,928 3,808 1.69 % Investment securities held-to-maturity 630,547 2,808 1.78 % 646,646 2,871 1.78 % 559,712 2,067 1.48 % Other securities 49,093 914 7.45 % 51,366 898 6.99 % 14,591 211 5.78 % Interest earning deposits 144,391 1,511 4.20 % 86,790 653 3.05 % 527,589 1,015 0.77 % Total interest earning assets FTE(2) $ 8,998,987 $ 122,511 5.46 % $ 8,902,740 $ 114,947 5.24 % $ 6,802,300 $ 60,172 3.55 % Cash and due from banks $ 109,948 $ 118,607 $ 75,616 Other assets 746,864 687,940 402,529 Allowance for credit losses (90,636 ) (89,831 ) (49,126 ) Total assets $ 9,765,163 $ 9,619,456 $ 7,231,319 Interest bearing liabilities: Interest bearing demand, savings and money market deposits $ 4,282,972 $ 20,100 1.88 % $ 3,766,203 $ 7,759 0.84 % $ 2,992,986 $ 1,494 0.20 % Time deposits 981,201 5,043 2.06 % 922,521 3,290 1.45 % 790,998 991 0.50 % Securities sold under agreements to repurchase 20,264 5 0.10 % 20,045 6 0.12 % 21,761 6 0.11 % Long-term debt 53,997 518 3.85 % 53,918 518 3.90 % 39,516 328 3.33 % Federal Home Loan Bank advances 435,713 5,619 5.17 % 597,833 7,071 4.80 % — — 0.00 % Total interest bearing liabilities $ 5,774,147 $ 31,285 2.17 % $ 5,360,520 $ 18,644 1.41 % $ 3,845,261 $ 2,819 0.29 % Demand deposits $ 2,701,306 $ 3,004,643 $ 2,469,729 Other liabilities 138,936 135,175 96,715 Total liabilities 8,614,389 8,500,338 6,411,705 Shareholders' equity 1,150,774 1,119,118 819,614 Total liabilities and shareholders' equity $ 9,765,163 $ 9,619,456 $ 7,231,319 Net interest income FTE(2) $ 91,226 $ 96,303 $ 57,353 Interest rate spread FTE(2) 3.29 % 3.83 % 3.26 % Net interest earning assets $ 3,224,840 $ 3,542,220 $ 2,957,039 Net interest margin FTE(2) 4.07 % 4.39 % 3.38 % Average transaction deposits $ 6,984,278 $ 6,770,846 $ 5,462,715 Average total deposits 7,965,479 7,693,367 6,253,713 Ratio of average interest earning assets to average interest bearing liabilities 155.85 % 166.08 % 176.90 % (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 $1,442, $1,414 and $1,336 for the three months ended June 30, 2023, March 31, 2023 and June 30, 2022, respectively. NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
(Dollars in thousands)For the six months ended June 30, 2023 For the six months ended June 30, 2022 Average Average Average Average balance Interest rate balance Interest rate Interest earning assets: Originated loans FTE(1)(2) $ 5,582,536 $ 165,715 5.99 % $ 4,479,002 $ 89,872 4.05 % Acquired loans 1,741,508 53,411 6.18 % 137,819 6,971 10.20 % Loans held for sale 24,176 806 6.72 % 86,065 1,637 3.84 % Investment securities available-for-sale 798,385 7,872 1.97 % 825,694 6,657 1.61 % Investment securities held-to-maturity 638,552 5,679 1.78 % 574,688 4,079 1.42 % Other securities 50,223 1,812 7.22 % 14,590 420 5.76 % Interest earning deposits 115,750 2,164 3.77 % 634,818 1,374 0.44 % Total interest earning assets FTE(2) $ 8,951,130 $ 237,459 5.35 % $ 6,752,676 $ 111,010 3.32 % Cash and due from banks $ 114,254 $ 77,489 Other assets 717,563 422,205 Allowance for credit losses (90,235 ) (49,354 ) Total assets $ 9,692,712 $ 7,203,016 Interest bearing liabilities: Interest bearing demand, savings and money market deposits $ 4,026,015 $ 27,859 1.40 % $ 2,964,729 $ 2,931 0.20 % Time deposits 952,023 8,333 1.77 % 806,321 2,085 0.52 % Securities sold under agreements to repurchase 20,155 11 0.11 % 22,263 13 0.12 % Long-term debt 53,958 1,036 3.87 % 39,503 654 3.34 % Federal Home Loan Bank advances 516,326 12,690 4.96 % — — 0.00 % Total interest bearing liabilities $ 5,568,477 $ 49,929 1.81 % $ 3,832,816 $ 5,683 0.30 % Demand deposits $ 2,852,137 $ 2,452,062 Other liabilities 137,065 87,422 Total liabilities 8,557,679 6,372,300 Shareholders' equity 1,135,033 830,716 Total liabilities and shareholders' equity $ 9,692,712 $ 7,203,016 Net interest income FTE(2) $ 187,530 $ 105,327 Interest rate spread FTE(2) 3.54 % 3.02 % Net interest earning assets $ 3,382,653 $ 2,919,860 Net interest margin FTE(2) 4.22 % 3.15 % Average transaction deposits $ 6,878,152 $ 5,416,791 Average total deposits 7,830,175 6,223,112 Ratio of average interest earning assets to average interest bearing liabilities 160.75 % 176.18 % (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 $2,857 and $2,649 for the six months ended June 30, 2023 and June 30, 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 June 30, 2023 March 31, 2023 June 30, 2022 Beginning allowance for credit losses $ 90,343 $ 89,553 $ 48,810 Charge-offs (354 ) (325 ) (451 ) Recoveries 42 65 115 Provision expense for credit losses 2,550 1,050 2,386 Ending allowance for credit losses ("ACL") $ 92,581 $ 90,343 $ 50,860 Ratio of annualized net charge-offs to average total loans during the period 0.02 % 0.01 % 0.03 % Ratio of ACL to total loans outstanding at period end 1.25 % 1.23 % 1.06 % Ratio of ACL to total non-performing loans at period end 276.25 % 946.40 % 515.72 % Total loans $ 7,414,357 $ 7,345,298 $ 4,817,070 Average total loans during the period 7,338,585 7,257,639 4,711,416 Total non-performing loans 33,514 9,546 9,862 Past Due and Non-accrual Loans
June 30, 2023 March 31, 2023 June 30, 2022 Loans 30-89 days past due and still accruing interest $ 7,261 $ 2,308 $ 1,781 Loans 90 days past due and still accruing interest 246 185 194 Non-accrual loans 33,514 9,546 9,862 Total past due and non-accrual loans $ 41,021 $ 12,039 $ 11,837 Total 90 days past due and still accruing interest and non-accrual loans to total loans 0.46 % 0.13 % 0.21 % Asset Quality Data
June 30, 2023 March 31, 2023 June 30, 2022 Non-performing loans $ 33,514 $ 9,546 $ 9,862 OREO 3,458 3,458 4,992 Total non-performing assets $ 36,972 $ 13,004 $ 14,854 Accruing modified loans $ 18,906 $ 4,154 $ 7,208 Total non-performing loans to total loans 0.45 % 0.13 % 0.20 % Total non-performing assets to total loans and OREO 0.50 % 0.18 % 0.31 % NATIONAL BANK HOLDINGS CORPORATION
Key Metrics(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, 2023 2023 2022 2023 2022 Return on average assets 1.34 % 1.70 % 1.13 % 1.52 % 1.08 % Return on average tangible assets(2) 1.45 % 1.80 % 1.16 % 1.63 % 1.11 % Return on average tangible assets, adjusted(2) 1.45 % 1.80 % 1.20 % 1.63 % 1.14 % Return on average equity 11.35 % 14.60 % 9.96 % 12.94 % 9.40 % Return on average tangible common equity(2) 17.24 % 20.86 % 11.64 % 19.05 % 10.97 % Return on average tangible common equity, adjusted(2) 17.24 % 20.86 % 12.08 % 19.05 % 11.24 % Loan to deposit ratio (end of period) 91.30 % 96.88 % 77.76 % 91.30 % 77.76 % Non-interest bearing deposits to total deposits (end of period) 32.37 % 38.53 % 39.63 % 32.37 % 39.63 % Net interest margin(3) 4.00 % 4.32 % 3.30 % 4.16 % 3.07 % Net interest margin FTE(2)(3) 4.07 % 4.39 % 3.38 % 4.22 % 3.15 % Interest rate spread FTE(2)(4) 3.29 % 3.83 % 3.26 % 3.54 % 3.02 % Yield on earning assets(5) 5.40 % 5.17 % 3.47 % 5.29 % 3.24 % Yield on earning assets FTE(2)(5) 5.46 % 5.24 % 3.55 % 5.35 % 3.32 % Cost of interest bearing liabilities 2.17 % 1.41 % 0.29 % 1.81 % 0.30 % Cost of deposits 1.27 % 0.58 % 0.16 % 0.93 % 0.16 % Non-interest income to total revenue FTE(2) 13.16 % 13.22 % 22.62 % 13.19 % 25.38 % Non-interest expense to average assets 2.50 % 2.46 % 2.53 % 2.48 % 2.51 % Efficiency ratio 58.86 % 53.21 % 62.59 % 55.95 % 64.72 % Efficiency ratio excluding other intangible assets amortization FTE(2) 56.14 % 51.30 % 59.70 % 53.65 % 62.19 % Pre-provision net revenue $ 42,626 $ 51,262 $ 27,227 $ 93,888 $ 48,860 Pre-provision net revenue FTE(2) 44,068 52,676 28,563 96,745 51,509 Pre-provision net revenue FTE, adjusted(2) 44,068 52,676 29,569 96,745 52,769 Total Loans Asset Quality Data(6)(7)(8) Non-performing loans to total loans 0.45 % 0.13 % 0.20 % 0.45 % 0.20 % Non-performing assets to total loans and OREO 0.50 % 0.18 % 0.31 % 0.50 % 0.31 % Allowance for credit losses to total loans 1.25 % 1.23 % 1.06 % 1.25 % 1.06 % Allowance for credit losses to non-performing loans 276.25 % 946.40 % 515.72 % 276.25 % 515.72 % Net charge-offs to average loans 0.02 % 0.01 % 0.03 % 0.02 % 0.04 % (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
June 30, 2023 March 31, 2023 December 31, 2022 June 30, 2022 Total shareholders' equity $ 1,147,334 $ 1,133,727 $ 1,092,202 $ 815,551 Less: goodwill and other intangible assets, net (368,732 ) (325,828 ) (327,191 ) (120,800 ) Add: deferred tax liability related to goodwill 11,544 11,212 10,984 10,527 Tangible common equity (non-GAAP) $ 790,146 $ 819,111 $ 775,995 $ 705,278 Total assets $ 9,871,957 $ 9,917,223 $ 9,573,243 $ 7,167,999 Less: goodwill and other intangible assets, net (368,732 ) (325,828 ) (327,191 ) (120,800 ) Add: deferred tax liability related to goodwill 11,544 11,212 10,984 10,527 Tangible assets (non-GAAP) $ 9,514,769 $ 9,602,607 $ 9,257,036 $ 7,057,726 Tangible common equity to tangible assets calculations: Total shareholders' equity to total assets 11.62 % 11.43 % 11.41 % 11.38 % Less: impact of goodwill and other intangible assets, net (3.32 )% (2.90 )% (3.03 )% (1.39 )% Tangible common equity to tangible assets (non-GAAP) 8.30 % 8.53 % 8.38 % 9.99 % Tangible common book value per share calculations: Tangible common equity (non-GAAP) $ 790,146 $ 819,111 $ 775,995 $ 705,278 Divided by: ending shares outstanding 37,719,026 37,641,381 37,608,519 30,075,175 Tangible common book value per share (non-GAAP) $ 20.95 $ 21.76 $ 20.63 $ 23.45 Tangible common book value per share, excluding accumulated other comprehensive loss calculations: Tangible common equity (non-GAAP) $ 790,146 $ 819,111 $ 775,995 $ 705,278 Accumulated other comprehensive loss, net of tax 88,614 78,627 88,204 58,001 Tangible common book value, excluding accumulated other comprehensive loss, net of tax (non-GAAP) 878,760 897,738 864,199 763,279 Divided by: ending shares outstanding 37,719,026 37,641,381 37,608,519 30,075,175 Tangible common book value per share, excluding accumulated other comprehensive loss, net of tax (non-GAAP) $ 23.30 $ 23.85 $ 22.98 $ 25.38 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, 2023 2023 2022 2023 Net income $ 32,557 $ 40,283 $ 20,362 $ 72,840 $ 38,714 Add: impact of other intangible assets amortization expense, after tax 1,546 1,049 227 2,596 455 Net income excluding the impact of other intangible assets amortization expense, after tax (non-GAAP) $ 34,103 $ 41,332 $ 20,589 $ 75,436 $ 39,169 Net income excluding the impact of other intangible assets amortization expense, after tax $ 34,103 $ 41,332 $ 20,589 $ 75,436 $ 39,169 Add: acquisition-related adjustments, after tax (non-GAAP)(1) — — 773 — 968 Net income adjusted for the impact of other intangible assets amortization expense and acquisition-related expenses, after tax (non-GAAP)(1) $ 34,103 $ 41,332 $ 21,362 $ 75,436 $ 40,137 Average assets $ 9,765,163 $ 9,619,456 $ 7,231,319 $ 9,692,712 $ 7,203,016 Less: average goodwill and other intangible assets, net of deferred tax liability related to goodwill (357,446 ) (315,493 ) (110,446 ) (336,420 ) (110,594 ) Average tangible assets (non-GAAP) $ 9,407,717 $ 9,303,963 $ 7,120,873 $ 9,356,292 $ 7,092,422 Average shareholders' equity $ 1,150,774 $ 1,119,118 $ 819,614 $ 1,135,033 $ 830,716 Less: average goodwill and other intangible assets, net of deferred tax liability related to goodwill (357,446 ) (315,493 ) (110,446 ) (336,420 ) (110,594 ) Average tangible common equity (non-GAAP) $ 793,328 $ 803,625 $ 709,168 $ 798,613 $ 720,122 Return on average assets 1.34 % 1.70 % 1.13 % 1.52 % 1.08 % Return on average tangible assets (non-GAAP) 1.45 % 1.80 % 1.16 % 1.63 % 1.11 % Adjusted return on average tangible assets (non-GAAP) 1.45 % 1.80 % 1.20 % 1.63 % 1.14 % Return on average equity 11.35 % 14.60 % 9.96 % 12.94 % 9.40 % Return on average tangible common equity (non-GAAP) 17.24 % 20.86 % 11.64 % 19.05 % 10.97 % Adjusted return on average tangible common equity (non-GAAP) 17.24 % 20.86 % 12.08 % 19.05 % 11.24 % (1) Acquisition-related adjustments: Non-interest expense adjustments: Acquisition-related expenses (non-GAAP) $ — $ — $ 1,006 $ — $ 1,260 Tax expense impact — — (233 ) — (292 ) Acquisition-related adjustments, after tax (non-GAAP) $ — $ — $ 773 $ — $ 968 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, 2023 2023 2022 2023 2022 Interest income $ 121,069 $ 113,533 $ 58,836 $ 234,602 $ 108,361 Add: impact of taxable equivalent adjustment 1,442 1,414 1,336 2,857 2,649 Interest income FTE (non-GAAP) $ 122,511 $ 114,947 $ 60,172 $ 237,459 $ 111,010 Net interest income $ 89,784 $ 94,889 $ 56,017 $ 184,673 $ 102,678 Add: impact of taxable equivalent adjustment 1,442 1,414 1,336 2,857 2,649 Net interest income FTE (non-GAAP) $ 91,226 $ 96,303 $ 57,353 $ 187,530 $ 105,327 Average earning assets $ 8,998,987 $ 8,902,740 $ 6,802,300 $ 8,951,130 $ 6,752,676 Yield on earning assets 5.40 % 5.17 % 3.47 % 5.29 % 3.24 % Yield on earning assets FTE (non-GAAP) 5.46 % 5.24 % 3.55 % 5.35 % 3.32 % Net interest margin 4.00 % 4.32 % 3.30 % 4.16 % 3.07 % Net interest margin FTE (non-GAAP) 4.07 % 4.39 % 3.38 % 4.22 % 3.15 % Efficiency Ratio and Pre-Provision Net Revenue
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, 2023 2023 2022 2023 2022 Net interest income $ 89,784 $ 94,889 $ 56,017 $ 184,673 $ 102,678 Add: impact of taxable equivalent adjustment 1,442 1,414 1,336 2,857 2,649 Net interest income FTE (non-GAAP) $ 91,226 $ 96,303 $ 57,353 $ 187,530 $ 105,327 Non-interest income $ 13,823 $ 14,665 $ 16,762 $ 28,488 $ 35,816 Non-interest expense $ 60,981 $ 58,292 $ 45,552 $ 119,273 $ 89,634 Less: other intangible assets amortization (2,007 ) (1,363 ) (296 ) (3,370 ) (592 ) Less: acquisition-related expenses (non-GAAP) — — (1,006 ) — (1,260 ) Non-interest expense adjusted for other intangible assets amortization and acquisition-related expenses (non-GAAP) $ 58,974 $ 56,929 $ 44,250 $ 115,903 $ 87,782 Non-interest expense $ 60,981 $ 58,292 $ 45,552 $ 119,273 $ 89,634 Less: acquisition-related expenses (non-GAAP) — — (1,006 ) — (1,260 ) Non-interest expense, adjusted for acquisition-related expenses (non-GAAP) $ 60,981 $ 58,292 $ 44,546 $ 119,273 $ 88,374 Efficiency ratio 58.86 % 53.21 % 62.59 % 55.95 % 64.72 % Efficiency ratio excluding other intangible assets amortization and acquisition-related expenses FTE (non-GAAP) 56.14 % 51.30 % 59.70 % 53.65 % 62.19 % Pre-provision net revenue (non-GAAP) $ 42,626 $ 51,262 $ 27,227 $ 93,888 $ 48,860 Pre-provision net revenue, FTE (non-GAAP) 44,068 52,676 28,563 96,745 51,509 Pre-provision net revenue FTE, adjusted for acquisition-related expenses (non-GAAP) 44,068 52,676 29,569 96,745 52,769 Adjusted Net Income and Earnings Per Share
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, 2023 2023 2022 2023 2022 Adjustments to net income: Net income $ 32,557 $ 40,283 $ 20,362 $ 72,840 $ 38,714 Add: Acquisition-related adjustments, after tax (non-GAAP) — — 773 — 968 Adjusted net income (non-GAAP) $ 32,557 $ 40,283 $ 21,135 $ 72,840 $ 39,682 Adjustments to earnings per share: Earnings per share diluted $ 0.85 $ 1.06 $ 0.67 $ 1.91 $ 1.27 Add: Acquisition-related adjustments, after tax (non-GAAP) — — 0.02 — 0.03 Adjusted earnings per share - diluted (non-GAAP)(1) $ 0.85 $ 1.06 $ 0.69 $ 1.91 $ 1.30 
