-
National Bank Holdings Corporation Announces Third Quarter 2023 Financial Results
ソース: Nasdaq GlobeNewswire / 24 10 2023 15:10:56 America/Chicago
DENVER, Oct. 24, 2023 (GLOBE NEWSWIRE) -- National Bank Holdings Corporation (NYSE: NBHC) reported:
For the quarter For the year Adjusted(1) 3Q23 2Q23 3Q22 2023 2022 3Q22 - QTD 3Q22 -YTD Net income ($000's) $ 36,087 $ 32,557 $ 15,839 $ 108,927 $ 54,553 $ 25,349 $ 65,033 Earnings per share - diluted $ 0.94 $ 0.85 $ 0.50 $ 2.85 $ 1.77 $ 0.80 $ 2.11 Return on average tangible assets(2) 1.58% 1.45% 0.87% 1.61% 1.03% 1.39% 1.23% Return on average tangible common equity(2) 18.38% 17.24% 8.66% 18.81% 10.17% 13.76% 12.10% (1) See non-GAAP reconciliations below. (2) Ratios are annualized. In announcing these results, Chief Executive Officer Tim Laney shared, “We delivered a 10.8% increase in our quarterly earnings to $0.94 per diluted share and a solid return on average tangible common equity of 18.38%. After adjusting for acquisition expenses, year over year pre-provision net revenues grew 54.6%. Year-to-date net income increased $54.4 million or 100% over the prior period to $108.9 million, or $2.85 per diluted share. Our disciplined approach to extending credit and diligence in monitoring our loan book resulted in excellent credit quality with just one basis point of annualized quarterly net charge-offs. We maintain a granular average deposit base and grew our diversified core deposits 5.9% annualized. Our total deposit beta through this interest rate cycle has been 28%.”
Mr. Laney added, “We enter the fourth quarter from a position of strength. We operate in high-performing markets where our relationship-based banking model continues to generate a positive impact in our communities and attractive shareholder returns. Our strong balance sheet, solid capital position and diversified funding sources provide optionality to be leveraged for future growth.”
Third Quarter 2023 Results
(All comparisons refer to the second quarter of 2023, except as noted)Net income totaled $36.1 million or $0.94 per diluted share, an increase of 10.8% over the second quarter. Fully taxable equivalent pre-provision net revenue totaled $48.1 million, an increase of 9.2% over the second quarter. The return on average tangible assets increased 13 basis points to 1.58%, and the return on average tangible common equity increased 114 basis points to 18.38%.
Net Interest Income
Fully taxable equivalent net interest income totaled $89.4 million, compared to $91.2 million in the prior quarter, as an increase in loan interest income was offset by an increase in the cost of funds. The fully taxable equivalent net interest margin totaled 3.92%, narrowing 15 basis points as the 14 basis point increase in earning asset yields was offset by a 32 basis point increase in the cost of funds. Average earning assets increased $40.9 million, primarily driven by loan growth. The cost of funds totaled 1.80%, compared to 1.48% during the second quarter.Loans
Total loans increased $64.1 million or 3.4% annualized to $7.5 billion at September 30, 2023. We generated quarterly loan fundings totaling $324.1 million, led by commercial loan fundings of $191.5 million. The average interest rate on the third quarter’s loan originations was 8.6% compared to 8.2%.Asset Quality and Provision for Credit Losses
The Company recorded $1.1 million of provision expense for credit losses, compared to $1.7 million in the prior quarter. The current quarter’s provision expense was primarily driven by loan growth. Annualized net charge-offs improved to 0.01% of average total loans during the third quarter, compared to 0.02% in the prior quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDMs) improved one basis point to 0.44% of total loans, and non-performing assets improved one basis point to 0.49% of total loans and OREO. The allowance for credit losses as a percentage of loans remained a consistent 1.25% at September 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 $116.1 million, or 5.8% annualized, to $8.1 billion during the third quarter 2023, compared to $8.0 billion during the second quarter 2023. The loan to deposit ratio totaled 91.8% at September 30, 2023. Average transaction deposits (defined as total deposits less time deposits) increased $104.5 million to $7.1 billion.We improved our balance sheet funding mix during the third quarter and utilized the funding provided by the quarter’s deposit growth to pay down $68.2 million of Federal Home Loan Bank advances. The mix of transaction deposits remained a consistent 87.8% of total deposits at September 30, 2023.
Non-Interest Income
Non-interest income increased $5.5 million to $19.4 million during the third quarter. Excluding $4.1 million of impairments related to venture capital investments classified as non-marketable securities included in the prior quarter, non-interest income increased $1.4 million and included a $1.1 million gain from the sale of mortgage servicing rights. Service charges and bank card fees increased $0.3 million.Non-Interest Expense
Non-interest expense decreased $0.4 million to $60.6 million largely due to Cambr related acquisition expenses incurred in the second quarter. The efficiency ratio improved 230 basis points to 56.6% for the third quarter, compared to 58.9%. The fully taxable equivalent efficiency ratio improved 224 basis points to 53.9% for the third quarter, excluding other intangible assets amortization.Income tax expense totaled $9.3 million during the third quarter, compared to $8.4 million in the prior quarter. The increase in income tax expense was due to an increase in pre-tax income. The effective tax rate remained consistent at 20.5% for the third quarter.
Capital
Capital ratios continue to be strong and in excess of federal bank regulatory agency “well capitalized” thresholds. The Tier 1 leverage ratio totaled 9.56% at September 30, 2023, and the common equity tier 1 capital ratio totaled 11.61% at September 30, 2023. Shareholders’ equity totaled $1.2 billion at September 30, 2023 increasing $16.3 million, largely due to higher retained earnings partially offset by an increase in accumulated other comprehensive loss.Common book value per share increased $0.41 to $30.83 at September 30, 2023. Tangible common book value per share increased $0.48 to $21.43 as this quarter’s earnings outpaced the quarterly dividend and a $0.32 per share increase in accumulated other comprehensive loss.
Year-Over-Year Review
(All comparisons refer to the first nine months of 2022, except as noted)Net income increased $54.4 million or 99.7% to $108.9 million, or $2.85 per diluted share, compared to net income of $54.6 million, or $1.77 per diluted share, for the first nine months of 2022. The increase over the same period prior year was driven by higher net interest income from our organic balance sheet growth, revenues from strategic acquisition growth, and a benefit to our net interest income from increases in the Federal Reserve Bank’s interest rates. Fully taxable equivalent pre-provision net revenue increased $59.4 million, or 69.6%, to $144.9 million. The return on average tangible assets increased 58 basis points to 1.61%, and the return on average tangible common equity increased 864 basis points to 18.81%.
The first nine months of 2022 included $13.6 million of non-recurring acquisition-related expenses from our 2022 acquisitions. Adjusting for these expenses in the prior period, net income for the first nine months of 2023 increased $43.9 million or 67.5%, and fully taxable equivalent pre-provision net revenue increased $51.2 million, or 54.6%. The adjusted return on average tangible assets increased 38 basis points to 1.61%, and the adjusted return on average tangible common equity increased 671 basis points to 18.81% for the first nine months of 2023.
Fully taxable equivalent net interest income totaled $276.9 million, an increase of $101.1 million or 57.5%. Average earning assets increased $2.2 billion, or 31.5%, including average originated loan growth of $1.1 billion and average acquired loan growth of $1.5 billion. The fully taxable equivalent net interest margin widened 68 basis points to 4.12%, benefitting from a 182 basis point increase in earning asset yields to 5.44%. Average interest bearing liabilities increased $1.8 billion to $5.7 billion at September 30, 2023, and the cost of funds totaled 1.40%, compared to 0.19% in the same period prior year.
Loans outstanding totaled $7.5 billion increasing $1.8 billion, or 30.7%, from organic loan growth and 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 $1.6 billion, led by commercial loan fundings of $0.8 billion.
The Company recorded $3.7 million of provision expense for credit losses for the first nine months of 2023, compared to provision expense of $14.9 million in the same period prior year. The current period’s provision expense was driven by loan growth and higher reserve requirements. Provision expense for the first nine months of 2022 included $5.4 million of Day 1 reserve requirements for a 2022 acquisition. Annualized net charge-offs decreased one basis points to 0.02% of average total loans during the first nine months of 2023. Non-performing loans to total loans was 0.44%, compared to 0.26% in the same period prior year, and non-performing assets to total loans and OREO was 0.49% at September 30, 2023, compared to 0.32%. The allowance for credit losses totaled 1.25% of total loans, compared to 1.15% at September 30, 2022.
Average total deposits increased $1.6 billion or 25.9% to $7.9 billion, primarily due to higher deposit balances driven by the strategic growth from our recent acquisitions. Average transaction deposits increased $1.5 billion or 26.7%, and average non-interest bearing demand deposits increased $264.0 million or 10.6%. The mix of transaction deposits to total deposits remained consistent at 87.8%, and the mix of non-interest bearing demand deposits to total deposits was 30.5%, compared to 40.2% at September 30, 2022.
Non-interest income totaled $47.9 million, a decrease of $5.3 million or 10.0%, largely driven by $9.5 million of lower mortgage banking income due to lower purchase and refinance activity, as well as competition driving tighter gains on sale margins. This decrease was partially offset by $1.5 million of trust income, $1.3 million of gains on SBA loan sales, as well as 2023’s Cambr income, all of which are new and diversified sources of fee revenue. Service charges and bank card fees increased a combined $2.8 million compared to the same period prior year. Included in non-interest income during 2023 was $4.4 million in impairments related to venture capital investments classified as non-marketable securities and a $1.1 million gain from the sale of mortgage servicing rights.
Non-interest expense totaled $179.9 million, an increase of $36.3 million, or 25.3%, primarily due to an increase in core operating expenses driven by our 2022 acquisitions. Included in other non-interest expense is $4.0 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 nine months of 2022 were non-recurring acquisition-related expenses of $8.3 million related to our 2022 acquisitions.
Income tax expense totaled $27.8 million, an increase of $15.8 million from the same period last year, driven by higher pre-tax income. The effective tax rate was 20.3% for the first nine months of 2023, compared to 18.0% in the prior year.
Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Wednesday, October 25, 2023. Interested parties may listen to this call by dialing (877) 400-0505 using the participant passcode of 9162801 and asking for the NBHC Q3 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 nine months ended September 30, June 30, September 30, September 30, September 30, 2023 2023 2022 2023 2022 Total interest and dividend income $ 126,110 $ 121,069 $ 72,369 $ 360,712 $ 180,730 Total interest expense 38,333 31,285 3,278 88,262 8,961 Net interest income 87,777 89,784 69,091 272,450 171,769 Taxable equivalent adjustment 1,575 1,442 1,409 4,432 4,058 Net interest income FTE(1) 89,352 91,226 70,500 276,882 175,827 Provision expense for credit losses 1,125 1,700 12,678 3,725 14,860 Net interest income after provision for credit losses FTE(1) 88,227 89,526 57,822 273,157 160,967 Non-interest income: Service charges 4,849 4,444 4,326 13,394 11,992 Bank card fees 4,993 5,091 4,681 14,721 13,345 Mortgage banking income 4,688 3,710 4,474 11,614 21,088 Other non-interest income 4,835 578 3,877 8,124 6,749 Total non-interest income 19,365 13,823 17,358 47,853 53,174 Non-interest expense: Salaries and benefits 35,027 35,215 30,540 103,231 88,652 Occupancy and equipment 9,167 9,126 8,026 27,366 21,087 Professional fees 2,215 3,146 5,810 7,951 8,110 Data processing 3,546 2,959 2,899 10,257 7,733 Other non-interest expense 8,640 8,528 6,280 25,693 17,015 Other intangible assets amortization 2,008 2,007 383 5,378 975 Total non-interest expense 60,603 60,981 53,938 179,876 143,572 Income before income taxes FTE(1) 46,989 42,368 21,242 141,134 70,569 Taxable equivalent adjustment 1,575 1,442 1,409 4,432 4,058 Income before income taxes 45,414 40,926 19,833 136,702 66,511 Income tax expense 9,327 8,369 3,994 27,775 11,958 Net income $ 36,087 $ 32,557 $ 15,839 $ 108,927 $ 54,553 Earnings per share - basic $ 0.95 $ 0.86 $ 0.51 $ 2.87 $ 1.78 Earnings per share - diluted 0.94 0.85 0.50 2.85 1.77 (1) Net interest income is presented on a GAAP basis and fully taxable equivalent (FTE) basis, as the Company believes this non-GAAP measure is the preferred industry measurement for this item. The FTE adjustment is for the tax benefit on certain tax exempt loans using the federal tax rate of 21% for each period presented. NATIONAL BANK HOLDINGS CORPORATION
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands, except share and per share data)September 30, 2023 June 30, 2023 December 31, 2022 September 30, 2022 ASSETS Cash and cash equivalents $ 291,291 $ 323,832 $ 195,505 $ 256,207 Investment securities available-for-sale 620,445 659,347 706,289 730,791 Investment securities held-to-maturity 600,501 619,400 651,527 606,245 Non-marketable securities 87,817 88,849 89,049 64,004 Loans 7,478,438 7,414,357 7,220,469 5,721,985 Allowance for credit losses (93,446 ) (92,581 ) (89,553 ) (65,623 ) Loans, net 7,384,992 7,321,776 7,130,916 5,656,362 Loans held for sale 19,048 25,172 22,767 33,043 Other real estate owned 3,416 3,458 3,731 3,695 Premises and equipment, net 153,553 147,853 136,111 105,801 Goodwill 306,043 306,043 279,132 167,882 Intangible assets, net 68,283 74,914 59,887 30,843 Other assets 330,894 301,313 298,329 268,048 Total assets $ 9,866,283 $ 9,871,957 $ 9,573,243 $ 7,922,921 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Non-interest bearing demand deposits $ 2,483,174 $ 2,628,942 $ 3,134,716 $ 2,735,832 Interest bearing demand deposits 1,358,445 1,324,292 913,852 597,035 Savings and money market 3,314,895 3,183,355 2,950,658 2,631,855 Total transaction deposits 7,156,514 7,136,589 6,999,226 5,964,722 Time deposits 992,494 984,269 873,400 838,830 Total deposits 8,149,008 8,120,858 7,872,626 6,803,552 Securities sold under agreements to repurchase 20,273 21,422 20,214 20,044 Long-term debt 54,123 54,045 53,890 39,559 Federal Home Loan Bank advances 316,770 385,000 385,000 — Other liabilities 162,524 143,298 149,311 140,340 Total liabilities 8,702,698 8,724,623 8,481,041 7,003,495 Shareholders' equity: Common stock 515 515 515 515 Additional paid in capital 1,160,706 1,158,727 1,159,508 1,079,560 Retained earnings 410,243 384,094 330,721 323,448 Treasury stock (307,026 ) (307,388 ) (310,338 ) (394,758 ) Accumulated other comprehensive loss, net of tax (100,853 ) (88,614 ) (88,204 ) (89,339 ) Total shareholders' equity 1,163,585 1,147,334 1,092,202 919,426 Total liabilities and shareholders' equity $ 9,866,283 $ 9,871,957 $ 9,573,243 $ 7,922,921 SHARE DATA Average basic shares outstanding 37,990,659 37,957,287 37,762,853 31,259,188 Average diluted shares outstanding 38,134,338 38,107,326 38,100,155 31,531,075 Ending shares outstanding 37,739,776 37,719,026 37,608,519 33,189,253 Common book value per share $ 30.83 $ 30.42 $ 29.04 $ 27.70 Tangible common book value per share(1)(non-GAAP) 21.43 20.95 20.63 22.40 Tangible common book value per share, excluding accumulated other comprehensive income(1)(non-GAAP) 24.10 23.30 22.98 25.10 CAPITAL RATIOS Average equity to average assets 11.93% 11.78% 11.47% 11.69% Tangible common equity to tangible assets(1) 8.50% 8.30% 8.38% 9.60% Tier 1 leverage ratio 9.56% 9.15% 9.29% 10.45% Common equity tier 1 risk-based capital ratio 11.61% 11.08% 10.54% 12.75% Tier 1 risk-based capital ratio 11.61% 11.08% 10.54% 12.75% Total risk-based capital ratio 13.49% 12.95% 12.29% 14.34% (1) Represents a non-GAAP financial measure. See non-GAAP reconciliations below. NATIONAL BANK HOLDINGS CORPORATION
Loan Portfolio
(Dollars in thousands)Period End Loan Balances by Type
September 30, 2023 September 30, 2023 vs. June 30, 2023 vs. September 30, 2022 September 30, 2023 June 30, 2023 % Change September 30, 2022 % Change Originated: Commercial: Commercial and industrial $ 1,784,188 $ 1,788,714 (0.3)% $ 1,724,469 3.5% Municipal and non-profit 1,012,967 1,022,414 (0.9)% 968,539 4.6% Owner-occupied commercial real estate 827,679 710,508 16.5% 631,783 31.0% Food and agribusiness 258,609 263,086 (1.7)% 265,835 (2.7)% Total commercial 3,883,443 3,784,722 2.6% 3,590,626 8.2% Commercial real estate non-owner occupied 1,026,133 1,043,999 (1.7)% 731,293 40.3% Residential real estate 897,804 877,907 2.3% 750,669 19.6% Consumer 16,700 16,979 (1.6)% 17,027 (1.9)% Total originated 5,824,080 5,723,607 1.8% 5,089,615 14.4% Acquired: Commercial: Commercial and industrial 156,012 163,139 (4.4)% 82,324 89.5% Municipal and non-profit 305 310 (1.6)% 326 (6.4)% Owner-occupied commercial real estate 247,701 245,605 0.9% 176,385 40.4% Food and agribusiness 61,551 62,918 (2.2)% 73,822 (16.6)% Total commercial 465,569 471,972 (1.4)% 332,857 39.9% Commercial real estate non-owner occupied 787,926 847,946 (7.1)% 219,109 >100% Residential real estate 398,187 367,998 8.2% 79,477 >100% Consumer 2,676 2,834 (5.6)% 927 >100% Total acquired 1,654,358 1,690,750 (2.2)% 632,370 >100% Total loans $ 7,478,438 $ 7,414,357 0.9% $ 5,721,985 30.7%
Loan Fundings(1)Third quarter Second quarter First quarter Fourth quarter Third quarter 2023 2023 2023 2022 2022 Commercial: Commercial and industrial $ 89,297 $ 111,717 $ 107,013 $ 177,693 $ 201,106 Municipal and non-profit 18,657 39,331 22,526 20,393 20,845 Owner occupied commercial real estate 67,322 62,649 33,912 40,912 65,125 Food and agribusiness 16,191 6,017 (6,564 ) 28,518 76,293 Total commercial 191,467 219,714 156,887 267,516 363,369 Commercial real estate non-owner occupied 88,434 99,984 185,875 133,271 166,739 Residential real estate 42,514 40,814 49,406 95,067 99,951 Consumer 1,689 1,777 1,717 1,396 1,505 Total $ 324,104 $ 362,289 $ 393,885 $ 497,250 $ 631,564 (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 ($12,877), $13,766, ($7,096), $96,903 and $124,834 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 September 30, 2023 June 30, 2023 September 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) $ 5,803,157 $ 92,813 6.35 % $ 5,649,623 $ 86,547 6.14 % $ 4,834,206 $ 58,153 4.77 % Acquired loans 1,671,595 26,115 6.20 % 1,712,118 26,388 6.18 % 295,893 6,581 8.82 % Loans held for sale 22,154 383 6.86 % 26,572 460 6.94 % 39,532 551 5.53 % Investment securities available-for-sale 761,892 3,783 1.99 % 786,643 3,883 1.97 % 865,875 4,247 1.96 % Investment securities held-to-maturity 611,712 2,685 1.76 % 630,547 2,808 1.78 % 605,356 2,212 1.46 % Other securities 39,115 701 7.17 % 49,093 914 7.45 % 14,909 212 5.69 % Interest earning deposits 130,239 1,205 3.67 % 144,391 1,511 4.20 % 326,277 1,822 2.22 % Total interest earning assets FTE(2) $ 9,039,864 $ 127,685 5.60 % $ 8,998,987 $ 122,511 5.46 % $ 6,982,048 $ 73,778 4.19 % Cash and due from banks $ 104,308 $ 109,948 $ 81,112 Other assets 737,568 746,864 440,516 Allowance for credit losses (92,831 ) (90,636 ) (54,610 ) Total assets $ 9,788,909 $ 9,765,163 $ 7,449,066 Interest bearing liabilities: Interest bearing demand, savings and money market deposits $ 4,535,183 $ 27,211 2.38 % $ 4,282,972 $ 20,100 1.88 % $ 3,058,463 $ 1,829 0.24 % Time deposits 992,755 6,212 2.48 % 981,201 5,043 2.06 % 799,759 1,116 0.55 % Securities sold under agreements to repurchase 19,288 6 0.12 % 20,264 5 0.10 % 22,183 7 0.13 % Long-term debt 54,074 519 3.81 % 53,997 518 3.85 % 39,543 326 3.27 % Federal Home Loan Bank advances 316,723 4,385 5.49 % 435,713 5,619 5.17 % — — 0.00 % Total interest bearing liabilities $ 5,918,023 $ 38,333 2.57 % $ 5,774,147 $ 31,285 2.17 % $ 3,919,948 $ 3,278 0.33 % Demand deposits $ 2,553,619 $ 2,701,306 $ 2,557,286 Other liabilities 149,068 138,936 100,983 Total liabilities 8,620,710 8,614,389 6,578,217 Shareholders' equity 1,168,199 1,150,774 870,849 Total liabilities and shareholders' equity $ 9,788,909 $ 9,765,163 $ 7,449,066 Net interest income FTE(2) $ 89,352 $ 91,226 $ 70,500 Interest rate spread FTE(2) 3.03 % 3.29 % 3.86 % Net interest earning assets $ 3,121,841 $ 3,224,840 $ 3,062,100 Net interest margin FTE(2) 3.92 % 4.07 % 4.01 % Average transaction deposits $ 7,088,802 $ 6,984,278 $ 5,615,749 Average total deposits 8,081,557 7,965,479 6,415,508 Ratio of average interest earning assets to average interest bearing liabilities 152.75 % 155.85 % 178.12 % (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 $1,575, $1,442 and $1,409 for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively. NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
(Dollars in thousands)For the nine months ended September 30, 2023 For the nine months ended September 30, 2022 Average Average Average Average balance Interest rate balance Interest rate Interest earning assets: Originated loans FTE(1)(2) $ 5,656,309 $ 258,528 6.11 % $ 4,598,705 $ 148,025 4.30 % Acquired loans 1,718,523 79,526 6.19 % 191,089 13,552 9.48 % Loans held for sale 23,494 1,189 6.77 % 70,384 2,188 4.16 % Investment securities available-for-sale 786,087 11,655 1.98 % 839,235 10,904 1.73 % Investment securities held-to-maturity 629,507 8,364 1.77 % 585,023 6,291 1.43 % Other securities 46,480 2,513 7.21 % 14,698 632 5.73 % Interest earning deposits 120,633 3,369 3.73 % 530,841 3,196 0.80 % Total interest earning assets FTE(2) $ 8,981,033 $ 365,144 5.44 % $ 6,829,975 $ 184,788 3.62 % Cash and due from banks $ 110,902 $ 78,710 Other assets 724,305 428,374 Allowance for credit losses (91,110 ) (51,125 ) Total assets $ 9,725,130 $ 7,285,934 Interest bearing liabilities: Interest bearing demand, savings and money market deposits $ 4,197,603 $ 55,070 1.75 % $ 2,996,317 $ 4,760 0.21 % Time deposits 965,750 14,545 2.01 % 804,110 3,201 0.53 % Securities sold under agreements to repurchase 19,863 17 0.11 % 22,236 20 0.12 % Long-term debt 53,997 1,555 3.85 % 39,516 980 3.32 % Federal Home Loan Bank advances 449,060 17,075 5.08 % — — 0.00 % Total interest bearing liabilities $ 5,686,273 $ 88,262 2.08 % $ 3,862,179 $ 8,961 0.31 % Demand deposits $ 2,751,537 $ 2,487,522 Other liabilities 141,110 91,992 Total liabilities 8,578,920 6,441,693 Shareholders' equity 1,146,210 844,241 Total liabilities and shareholders' equity $ 9,725,130 $ 7,285,934 Net interest income FTE(2) $ 276,882 $ 175,827 Interest rate spread FTE(2) 3.36 % 3.31 % Net interest earning assets $ 3,294,760 $ 2,967,796 Net interest margin FTE(2) 4.12 % 3.44 % Average transaction deposits $ 6,949,140 $ 5,483,839 Average total deposits 7,914,890 6,287,949 Ratio of average interest earning assets to average interest bearing liabilities 157.94 % 176.84 % (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 $4,432 and $4,058 for the nine months ended September 30, 2023 and September 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 September 30, 2023 June 30, 2023 September 30, 2022 Beginning allowance for credit losses $ 92,581 $ 90,343 $ 50,860 Day 1 CECL provision expense — — 5,201 PCD allowance for credit loss at acquisition — — 2,474 Charge-offs (540 ) (354 ) (253 ) Recoveries 280 42 66 Provision expense for credit losses 1,125 2,550 7,275 Ending allowance for credit losses ("ACL") $ 93,446 $ 92,581 $ 65,623 Ratio of annualized net charge-offs to average total loans during the period 0.01% 0.02% 0.01% Ratio of ACL to total loans outstanding at period end 1.25% 1.25% 1.15% Ratio of ACL to total non-performing loans at period end 281.36% 276.25% 447.72% Total loans $ 7,478,438 $ 7,414,357 $ 5,721,985 Average total loans during the period 7,443,869 7,338,585 5,114,044 Total non-performing loans 33,212 33,514 14,657 Past Due and Non-accrual Loans
September 30, 2023 June 30, 2023 September 30, 2022 Loans 30-89 days past due and still accruing interest $ 8,144 $ 7,261 $ 1,548 Loans 90 days past due and still accruing interest 154 246 332 Non-accrual loans 33,212 33,514 14,657 Total past due and non-accrual loans $ 41,510 $ 41,021 $ 16,537 Total 90 days past due and still accruing interest and non-accrual loans to total loans 0.45% 0.46% 0.26% Asset Quality Data
September 30, 2023 June 30, 2023 September 30, 2022 Non-performing loans $ 33,212 $ 33,514 $ 14,657 OREO 3,416 3,458 3,695 Total non-performing assets $ 36,628 $ 36,972 $ 18,352 Accruing modified loans $ 6,059 $ 18,906 $ 4,610 Total non-performing loans to total loans 0.44% 0.45% 0.26% Total non-performing assets to total loans and OREO 0.49% 0.50% 0.32% NATIONAL BANK HOLDINGS CORPORATION
Key Metrics(1)As of and for the three months ended As of and for the nine months ended September 30, June 30, September 30, September 30, September 30, 2023 2023 2022 2023 2022 Return on average assets 1.46% 1.34% 0.84% 1.50% 1.00% Return on average tangible assets(2) 1.58% 1.45% 0.87% 1.61% 1.03% Return on average tangible assets, adjusted(2) 1.58% 1.45% 1.39% 1.61% 1.23% Return on average equity 12.26% 11.35% 7.22% 12.71% 8.64% Return on average tangible common equity(2) 18.38% 17.24% 8.66% 18.81% 10.17% Return on average tangible common equity, adjusted(2) 18.38% 17.24% 13.76% 18.81% 12.10% Loan to deposit ratio (end of period) 91.77% 91.30% 84.10% 91.77% 84.10% Non-interest bearing deposits to total deposits (end of period) 30.47% 32.37% 40.21% 30.47% 40.21% Net interest margin(3) 3.85% 4.00% 3.93% 4.06% 3.36% Net interest margin FTE(2)(3) 3.92% 4.07% 4.01% 4.12% 3.44% Interest rate spread FTE(2)(4) 3.03% 3.29% 3.86% 3.36% 3.31% Yield on earning assets(5) 5.53% 5.40% 4.11% 5.37% 3.54% Yield on earning assets FTE(2)(5) 5.60% 5.46% 4.19% 5.44% 3.62% Cost of interest bearing liabilities 2.57% 2.17% 0.33% 2.08% 0.31% Cost of deposits 1.64% 1.27% 0.18% 1.18% 0.17% Non-interest income to total revenue FTE(2) 17.81% 13.16% 19.76% 14.74% 23.22% Non-interest expense to average assets 2.46% 2.50% 2.87% 2.47% 2.63% Efficiency ratio 56.56% 58.86% 62.39% 56.16% 63.83% Efficiency ratio excluding other intangible assets amortization FTE(2) 53.90% 56.14% 52.99% 53.74% 58.66% Pre-provision net revenue $ 46,539 $ 42,626 $ 32,511 $ 140,427 $ 81,371 Pre-provision net revenue FTE(2) 48,114 44,068 33,920 144,859 85,429 Pre-provision net revenue FTE, adjusted(2) 48,114 44,068 40,916 144,859 93,685 Total Loans Asset Quality Data(6)(7)(8) Non-performing loans to total loans 0.44% 0.45% 0.26% 0.44% 0.26% Non-performing assets to total loans and OREO 0.49% 0.50% 0.32% 0.49% 0.32% Allowance for credit losses to total loans 1.25% 1.25% 1.15% 1.25% 1.15% Allowance for credit losses to non-performing loans 281.36% 276.25% 447.72% 281.36% 447.72% Net charge-offs to average loans 0.01% 0.02% 0.01% 0.02% 0.03% (1) 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
September 30, 2023 June 30, 2023 December 31, 2022 September 30, 2022 Total shareholders' equity $ 1,163,585 $ 1,147,334 $ 1,092,202 $ 919,426 Less: goodwill and other intangible assets, net (366,724 ) (368,732 ) (327,191 ) (186,608 ) Add: deferred tax liability related to goodwill 11,876 11,544 10,984 10,755 Tangible common equity (non-GAAP) $ 808,737 $ 790,146 $ 775,995 $ 743,573 Total assets $ 9,866,283 $ 9,871,957 $ 9,573,243 $ 7,922,921 Less: goodwill and other intangible assets, net (366,724 ) (368,732 ) (327,191 ) (186,608 ) Add: deferred tax liability related to goodwill 11,876 11,544 10,984 10,755 Tangible assets (non-GAAP) $ 9,511,435 $ 9,514,769 $ 9,257,036 $ 7,747,068 Tangible common equity to tangible assets calculations: Total shareholders' equity to total assets 11.79% 11.62% 11.41% 11.60% Less: impact of goodwill and other intangible assets, net (3.29)% (3.32)% (3.03)% (2.00)% Tangible common equity to tangible assets (non-GAAP) 8.50% 8.30% 8.38% 9.60% Tangible common book value per share calculations: Tangible common equity (non-GAAP) $ 808,737 $ 790,146 $ 775,995 $ 743,573 Divided by: ending shares outstanding 37,739,776 37,719,026 37,608,519 33,189,253 Tangible common book value per share (non-GAAP) $ 21.43 $ 20.95 $ 20.63 $ 22.40 Tangible common book value per share, excluding accumulated other comprehensive loss calculations: Tangible common equity (non-GAAP) $ 808,737 $ 790,146 $ 775,995 $ 743,573 Accumulated other comprehensive loss, net of tax 100,853 88,614 88,204 89,339 Tangible common book value, excluding accumulated other comprehensive loss, net of tax (non-GAAP) 909,590 878,760 864,199 832,912 Divided by: ending shares outstanding 37,739,776 37,719,026 37,608,519 33,189,253 Tangible common book value per share, excluding accumulated other comprehensive loss, net of tax (non-GAAP) $ 24.10 $ 23.30 $ 22.98 $ 25.10 NATIONAL BANK HOLDINGS CORPORATION
(Dollars in thousands, except share and per share data)Return on Average Tangible Assets and Return on Average Tangible Equity
As of and for the three months ended As of and for the nine months ended September 30, June 30, September 30, September 30, September 30, 2023 2023 2022 2023 2022 Net income $ 36,087 $ 32,557 $ 15,839 $ 108,927 $ 54,553 Add: impact of other intangible assets amortization expense, after tax 1,541 1,546 295 4,128 751 Net income excluding the impact of other intangible assets amortization expense, after tax (non-GAAP) $ 37,628 $ 34,103 $ 16,134 $ 113,055 $ 55,304 Net income excluding the impact of other intangible assets amortization expense, after tax $ 37,628 $ 34,103 $ 16,134 $ 113,055 $ 55,304 Add: acquisition-related adjustments, after tax (non-GAAP)(1) — — 9,510 — 10,480 Net income adjusted for the impact of other intangible assets amortization expense and acquisition-related expenses, after tax (non-GAAP)(1) $ 37,628 $ 34,103 $ 25,644 $ 113,055 $ 65,784 Average assets $ 9,788,909 $ 9,765,163 $ 7,449,066 $ 9,725,130 $ 7,285,934 Less: average goodwill and other intangible assets, net of deferred tax liability related to goodwill (356,083 ) (357,446 ) (131,490 ) (342,826 ) (117,485 ) Average tangible assets (non-GAAP) $ 9,432,826 $ 9,407,717 $ 7,317,576 $ 9,382,304 $ 7,168,449 Average shareholders' equity $ 1,168,199 $ 1,150,774 $ 870,849 $ 1,146,210 $ 844,241 Less: average goodwill and other intangible assets, net of deferred tax liability related to goodwill (356,083 ) (357,446 ) (131,490 ) (342,826 ) (117,485 ) Average tangible common equity (non-GAAP) $ 812,116 $ 793,328 $ 739,359 $ 803,384 $ 726,756 Return on average assets 1.46% 1.34% 0.84% 1.50% 1.00% Return on average tangible assets (non-GAAP) 1.58% 1.45% 0.87% 1.61% 1.03% Adjusted return on average tangible assets (non-GAAP) 1.58% 1.45% 1.39% 1.61% 1.23% Return on average equity 12.26% 11.35% 7.22% 12.71% 8.64% Return on average tangible common equity (non-GAAP) 18.38% 17.24% 8.66% 18.81% 10.17% Adjusted return on average tangible common equity (non-GAAP) 18.38% 17.24% 13.76% 18.81% 12.10% (1) Acquisition-related adjustments: Provision expense adjustments: CECL day 1 provision expense (non-GAAP) $ — $ — $ 5,358 $ — $ 5,358 Non-interest expense adjustments: Acquisition-related expenses (non-GAAP) — — 6,996 — 8,256 Acquisition-related adjustments before tax (non-GAAP) — — 12,354 — 13,614 Tax expense impact — — (2,844 ) — (3,134 ) Acquisition-related adjustments, after tax (non-GAAP) $ — $ — $ 9,510 $ — $ 10,480 Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin
As of and for the three months ended As of and for the nine months ended September 30, June 30, September 30, September 30, September 30, 2023 2023 2022 2023 2022 Interest income $ 126,110 $ 121,069 $ 72,369 $ 360,712 $ 180,730 Add: impact of taxable equivalent adjustment 1,575 1,442 1,409 4,432 4,058 Interest income FTE (non-GAAP) $ 127,685 $ 122,511 $ 73,778 $ 365,144 $ 184,788 Net interest income $ 87,777 $ 89,784 $ 69,091 $ 272,450 $ 171,769 Add: impact of taxable equivalent adjustment 1,575 1,442 1,409 4,432 4,058 Net interest income FTE (non-GAAP) $ 89,352 $ 91,226 $ 70,500 $ 276,882 $ 175,827 Average earning assets $ 9,039,864 $ 8,998,987 $ 6,982,048 $ 8,981,033 $ 6,829,975 Yield on earning assets 5.53% 5.40% 4.11% 5.37% 3.54% Yield on earning assets FTE (non-GAAP) 5.60% 5.46% 4.19% 5.44% 3.62% Net interest margin 3.85% 4.00% 3.93% 4.06% 3.36% Net interest margin FTE (non-GAAP) 3.92% 4.07% 4.01% 4.12% 3.44% Efficiency Ratio and Pre-Provision Net Revenue
As of and for the three months ended As of and for the nine months ended September 30, June 30, September 30, September 30, September 30, 2023 2023 2022 2023 2022 Net interest income $ 87,777 $ 89,784 $ 69,091 $ 272,450 $ 171,769 Add: impact of taxable equivalent adjustment 1,575 1,442 1,409 4,432 4,058 Net interest income FTE (non-GAAP) $ 89,352 $ 91,226 $ 70,500 $ 276,882 $ 175,827 Non-interest income $ 19,365 $ 13,823 $ 17,358 $ 47,853 $ 53,174 Non-interest expense $ 60,603 $ 60,981 $ 53,938 $ 179,876 $ 143,572 Less: other intangible assets amortization (2,008 ) (2,007 ) (383 ) (5,378 ) (975 ) Less: acquisition-related expenses (non-GAAP) — — (6,996 ) — (8,256 ) Non-interest expense adjusted for other intangible assets amortization and acquisition-related expenses (non-GAAP) $ 58,595 $ 58,974 $ 46,559 $ 174,498 $ 134,341 Non-interest expense $ 60,603 $ 60,981 $ 53,938 $ 179,876 $ 143,572 Less: acquisition-related expenses (non-GAAP) — — (6,996 ) — (8,256 ) Non-interest expense, adjusted for acquisition-related expenses (non-GAAP) $ 60,603 $ 60,981 $ 46,942 $ 179,876 $ 135,316 Efficiency ratio 56.56% 58.86% 62.39% 56.16% 63.83% Efficiency ratio excluding other intangible assets amortization and acquisition-related expenses FTE (non-GAAP) 53.90% 56.14% 52.99% 53.74% 58.66% Pre-provision net revenue (non-GAAP) $ 46,539 $ 42,626 $ 32,511 $ 140,427 $ 81,371 Pre-provision net revenue, FTE (non-GAAP) 48,114 44,068 33,920 144,859 85,429 Pre-provision net revenue FTE, adjusted for acquisition-related expenses (non-GAAP) 48,114 44,068 40,916 144,859 93,685 Adjusted Net Income and Earnings Per Share
As of and for the three months ended As of and for the nine months ended September 30, June 30, September 30, September 30, September 30, 2023 2023 2022 2023 2022 Adjustments to net income: Net income $ 36,087 $ 32,557 $ 15,839 $ 108,927 $ 54,553 Add: Acquisition-related adjustments, after tax (non-GAAP) — — 9,510 — 10,480 Adjusted net income (non-GAAP) $ 36,087 $ 32,557 $ 25,349 $ 108,927 $ 65,033 Adjustments to earnings per share: Earnings per share diluted $ 0.94 $ 0.85 $ 0.50 $ 2.85 $ 1.77 Add: Acquisition-related adjustments, after tax (non-GAAP) — — 0.30 — 0.34 Adjusted earnings per share - diluted (non-GAAP)(1) $ 0.94 $ 0.85 $ 0.80 $ 2.85 $ 2.11 
