National Bank Holdings Corporation Announces Second Quarter 2024 Financial Results

DENVER, July 23, 2024 (GLOBE NEWSWIRE) — National Bank Holdings Corporation (NYSE: NBHC) reported:

                               
    For the quarter(1)   For the year(1)
    2Q24   1Q24   2Q23   2024     2023  
Net income ($000’s)   $ 26,135     $ 31,391     $ 32,557     $ 57,526     $ 72,840  
Earnings per share – diluted   $ 0.68     $ 0.82     $ 0.85     $ 1.50     $ 1.91  
Return on average assets     1.06%       1.28%       1.34%       1.17%       1.52%  
Return on average tangible assets(2)     1.17%       1.39%       1.45%       1.28%       1.63%  
Return on average equity     8.46%       10.30%       11.35%       9.37%       12.94%  
Return on average tangible common equity(2)     12.44%       15.14%       17.24%       13.77%       19.05%  

                                                      

(1 )   Ratios are annualized.
(2 )   See non-GAAP reconciliations below.
       

In announcing these results, Chief Executive Officer Tim Laney shared, “During the second quarter, we delivered quarterly earnings of $0.68 per diluted share and continued to strengthen our balance sheet. We maintained a strong net interest margin of 3.76% and are prepared to take action should the Federal Reserve Bank lower interest rates this year. We are leveraging diverse revenue streams across our franchise, resulting in an increase in year-to-date fee income of 11.4% over the prior period. Our teams generated strong balance sheet growth by delivering 8.1% annualized net loan growth and 7.9% annualized average deposit growth during the second quarter.”

Mr. Laney added, “We made meaningful progress resolving our non-performing loans. We continue to adhere to sound banking practices by maintaining a prudent approach to extending credit along with a granular and diversified loan portfolio. We believe our strong Common Equity Tier 1 capital ratio of 12.41%, ample liquidity position, and diversified funding sources provide strength in any economic environment and provide optionality that we will leverage for future growth.”

Second Quarter 2024 Results
(All comparisons refer to the first quarter of 2024, except as noted)

Net income totaled $26.1 million or $0.68 per diluted share, compared to $31.4 million or $0.82 per diluted share, a decrease from the prior quarter largely due to impairment of venture capital investments and increased provision expense driven by loan growth. Fully taxable equivalent pre-provision net revenue totaled $36.2 million, compared to $40.6 million. The return on average tangible assets totaled 1.17%, compared to 1.39%, and the return on average tangible common equity totaled 12.44%, compared to 15.14%.

Net Interest Income
Fully taxable equivalent net interest income totaled $85.3 million, compared to $85.7 million in the prior quarter. The fully taxable equivalent net interest margin was 3.76%, narrowing two basis points as a four basis point increase in earning asset yields was more than offset by a seven basis point increase in the cost of funds.

Loans
Total loans increased $153.1 million, or 8.1% annualized, to $7.7 billion at June 30, 2024. We generated quarterly loan fundings totaling $505.2 million, led by commercial loan fundings of $384.4 million. The average interest rate on the second quarter’s loan originations was 8.4%.

Asset Quality and Provision for Credit Losses
The Company recorded $2.8 million of provision expense for credit losses, compared to no provision expense in the prior quarter. The current quarter’s provision expense was driven by loan growth and higher reserve requirements from changes in the CECL model’s underlying economic forecast. Annualized net charge-offs were 0.22% of average total loans, compared to 0.00% in the prior quarter, driven by one previously reserved credit that was resolved during the quarter. Non-performing loans decreased 13 basis points to 0.34% of total loans at June 30, 2024, and non-performing assets decreased 17 basis points to 0.36% of total loans and OREO at June 30, 2024. The allowance for credit losses as a percentage of loans totaled 1.25% at June 30, 2024, compared to 1.29% in the prior quarter.

Deposits
Average total deposits increased $160.9 million, or 7.9% annualized, to $8.4 billion during the second quarter 2024. The loan to deposit ratio totaled 92.2% at June 30, 2024. Average transaction deposits (defined as total deposits less time deposits) increased $135.6 million to $7.4 billion. The mix of transaction deposits to total deposits was 87.8% and 88.3% at June 30, 2024 and March 31, 2024, respectively.

Non-Interest Income
Non-interest income totaled $14.0 million, compared to $17.7 million during the first quarter. Included in the second quarter was $3.9 million of impairment related to venture capital investments classified as non-marketable securities. Included in the prior quarter was a $0.6 million gain from the sale of a banking center building. Excluding these items, non-interest income increased $0.9 million driven by our diversified sources of fee revenue including increases in SBA loan income, trust income, Cambr income and mortgage banking income.

Non-Interest Expense
Non-interest expense increased $0.2 million to $63.1 million during the second quarter. Salaries and benefits increased $0.4 million and occupancy and equipment increased $0.2 million. Partially offsetting these increases was a decrease in other non-interest expense of $0.4 million. The efficiency ratio totaled 64.6% for the second quarter, compared to 61.8% for the first quarter. The fully taxable equivalent efficiency ratio, excluding other intangible assets amortization, totaled 61.5% for the second quarter, compared to 58.8%.

Income tax expense totaled $5.6 million, compared to $7.5 million in the prior quarter, due to lower pre-tax income. The effective tax rate was 17.7%, compared to 19.3% for the first 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 10.20%, and the common equity tier 1 capital ratio totaled 12.41% at June 30, 2024. Shareholders’ equity totaled $1.2 billion at June 30, 2024, increasing $15.8 million, largely due to $15.4 million of growth in retained earnings.

Common book value per share increased $0.34 to $32.92 at June 30, 2024. Tangible common book value per share increased $0.42 to $23.74 as this quarter’s earnings outpaced the quarterly dividend.

Year-Over-Year Review
(All comparisons refer to the first six months of 2023, except as noted)

Net income totaled $57.5 million, or $1.50 per diluted share, compared to net income of $72.8 million, or $1.91 per diluted share, for the first six months of 2023. The decrease over the same period prior year was largely driven by lower net interest income, due to an increase in cost of funds outpacing the increase in interest income. Partially offsetting this decrease was an increase in our non-interest income discussed below. Fully taxable equivalent pre-provision net revenue totaled $76.8 million, compared to $96.7 million. The return on average tangible assets totaled 1.28%, compared to 1.63%, and the return on average tangible common equity was 13.77%, compared to 19.05%.

Fully taxable equivalent net interest income totaled $171.0 million, compared to $187.5 million. Average earning assets increased $171.4 million, including average loan growth of $313.0 million, which was partially offset by a decrease in average investment securities of $87.9 million. The fully taxable equivalent net interest margin narrowed 45 basis points to 3.77%, as the increase in earning asset yields was more than offset by an increase in the cost of funds. Average interest bearing liabilities increased $654.4 million due to higher deposit balances, and the cost of funds totaled 2.29%, compared to 1.20% in the same period prior year.

Loans outstanding totaled $7.7 billion, increasing $307.8 million or 4.2%. New loan fundings over the trailing twelve months totaled $1.5 billion, led by commercial loan fundings of $1.0 billion.  

The Company recorded $2.8 million of provision expense for credit losses for the first six months of 2024, compared to provision expense of $2.6 million in the same period prior year. Annualized net charge-offs totaled 0.11% of average total loans during the first six months of 2024, compared to 0.02% of average total loans during the first six months of 2023. Non-performing loans decreased 11 basis points to 0.34% of total loans at June 30, 2024, and non-performing assets decreased 14 basis points to 0.36% of total loans and OREO at June 30, 2024. The allowance for credit losses as a percentage of loans totaled 1.25% at June 30, 2024 and 2023.

Average total deposits increased $469.1 million or 6.0% to $8.3 billion, and average transaction deposits increased $418.4 million or 6.1%. The mix of transaction deposits to total deposits was 87.8%, compared to 87.9% at June 30, 2023.

Non-interest income totaled $31.7 million, an increase of $3.2 million or 11.4%, driven by our diversified sources of fee revenue. Other non-interest income increased $4.3 million and included increases in SBA loan income, trust income, Cambr income and swap fee income. Mortgage banking income decreased $1.0 million as the sustained high-interest rate environment has lowered mortgage volume.

Non-interest expense totaled $125.9 million, an increase of $6.6 million or 5.6%, largely due to ongoing investments in technology. Salaries and benefits increased $5.2 million, occupancy and equipment increased $1.9 million and data processing increased $1.5 million. Other intangible assets amortization increased $0.6 million due to our Cambr acquisition in April of 2023. These increases were partially offset by a decrease of $2.4 million in professional fees.

Income tax expense totaled $13.1 million, a decrease of $5.3 million from the same period prior year, driven by lower pre-tax income. The effective tax rate was 18.6% for the first six months of 2024, compared to 20.2%.

Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Wednesday, July 24, 2024. Interested parties may listen to this call by dialing (877) 400-0505 using the participant passcode of 1616066 and asking for the NBHC Q2 2024 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 90 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 excluding other intangible assets amortization,” “efficiency ratio excluding other intangible assets amortization,” “net income excluding the impact of other intangible assets amortization expense, after tax,” “pre-provision net revenue,” 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: the impact of potential regulatory changes to capital requirements, treatment of investment securities and FDIC deposit insurance levels and costs; our ability to execute our business strategy, including our digital strategy, as well as changes in our business strategy or development plans; 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, including increased competition for deposits due to prevailing market interest rates and banking sector volatility; effects of any changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board; 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; changes in the fair value of our investment securities due to market conditions outside of our control; financial or reputational impacts associated with the increased prevalence of fraud or other financial crimes; 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 if the loans fail to meet certain criteria, or higher rate of delinquencies and defaults as a result of the geographic concentration of our servicing portfolio; the Company’s ability to identify potential candidates for, obtain regulatory approval for, and consummate, integrate and realize operating efficiencies from, acquisitions, consolidations and other expansion opportunities; our ability to integrate acquisitions or consolidations and to achieve synergies, operating efficiencies and/or other expected benefits within expected timeframes, or at all, or within expected cost projections, and to preserve the goodwill of acquired financial institutions; 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, including those that could result in disclosure or misuse of confidential or proprietary client or other information; the Company’s ability to achieve organic loan and deposit growth and the competition for, and composition of, such growth; changes in sources and uses of funds; increased competition in the financial services industry; regulatory and financial impacts associated with the Company growing to over $10 billion in consolidated assets; increases in claims and litigation related to our fiduciary responsibilities in connection with our trust and wealth management business; the effect of changes in accounting policies and practices as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board (“FASB”) and other accounting standard setters; the share price of the Company’s stock; the Company’s ability to realize deferred tax assets or the need for a valuation allowance, or the effects of changes in tax laws on our deferred tax assets; 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, including, but not limited to, changes in regulation that affect the fees that we charge, the resolution of legal proceedings or regulatory or other government inquiries, and the results of regulatory examinations, reviews or other inquiries, and changes in regulations that apply to us as a Colorado state-chartered bank and a Wyoming state-chartered bank; technological changes, including with respect to the advancement of artificial intelligence; the timely development and acceptance of new products and services, including in the digital technology space our digital solution 2UniFi; changes in our management personnel and 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; financial, reputational, or strategic risks associated with our investments in financial technology companies and initiatives; widespread natural and other disasters, pandemics, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities through impacts on the economy and financial markets generally or on us or our counterparties specifically; a cybersecurity incident, data breach or a failure of a key information technology system; impact of reputational risk; other risks and uncertainties listed from time to time in the Company’s reports and documents filed with the Securities and Exchange Commission; 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.

Contacts:
Analysts/Institutional Investors:
Emily Gooden, Investor Relations Director, (720) 554-6640, [email protected]
Aldis Birkans, Chief Financial Officer, (720) 529-3314, [email protected]

Media:
Jody Soper, Chief Marketing Officer, (303) 784-5925, [email protected] 

 
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,
  2024   2024   2023   2024   2023
Total interest and dividend income $ 132,447   $ 131,732   $ 121,069   $ 264,179   $ 234,602
Total interest expense   48,873     47,702     31,285     96,575     49,929
Net interest income   83,574     84,030     89,784     167,604     184,673
Taxable equivalent adjustment   1,711     1,692     1,442     3,403     2,857
Net interest income FTE(1)   85,285     85,722     91,226     171,007     187,530
Provision expense for credit losses   2,776         1,700     2,776     2,600
Net interest income after provision for credit losses FTE(1)   82,509     85,722     89,526     168,231     184,930
Non-interest income:                            
Service charges   4,295     4,391     4,444     8,686     8,545
Bank card fees   4,882     4,578     5,091     9,460     9,728
Mortgage banking income   3,296     2,655     3,710     5,951     6,926
Other non-interest income   1,556     6,070     578     7,626     3,289
Total non-interest income   14,029     17,694     13,823     31,723     28,488
Non-interest expense:                            
Salaries and benefits   36,933     36,520     35,215     73,453     68,204
Occupancy and equipment   10,120     9,941     9,126     20,061     18,199
Professional fees   1,706     1,646     3,146     3,352     5,736
Data processing   4,117     4,066     2,959     8,183     6,711
Other non-interest expense   8,222     8,653     8,528     16,875     17,053
Other intangible assets amortization   1,977     2,008     2,007     3,985     3,370
Total non-interest expense   63,075     62,834     60,981     125,909     119,273
                             
Income before income taxes FTE(1)   33,463     40,582     42,368     74,045     94,145
Taxable equivalent adjustment   1,711     1,692     1,442     3,403     2,857
Income before income taxes   31,752     38,890     40,926     70,642     91,288
Income tax expense   5,617     7,499     8,369     13,116     18,448
Net income $ 26,135   $ 31,391   $ 32,557   $ 57,526   $ 72,840
Earnings per share – basic $ 0.68   $ 0.82   $ 0.86   $ 1.51   $ 1.92
Earnings per share – diluted   0.68     0.82     0.85     1.50     1.91

                                                      

(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, 2024   March 31, 2024   December 31, 2023   June 30, 2023
ASSETS                      
Cash and cash equivalents $ 144,993     $ 292,931     $ 190,826     $ 323,832  
Investment securities available-for-sale   691,076       685,666       628,829       659,347  
Investment securities held-to-maturity   554,686       570,850       585,052       619,400  
Non-marketable securities   72,987       73,439       90,477       88,849  
Loans   7,722,153       7,569,052       7,698,758       7,414,357  
Allowance for credit losses   (96,457 )     (97,607 )     (97,947 )     (92,581 )
Loans, net   7,625,696       7,471,445       7,600,811       7,321,776  
Loans held for sale   18,787       14,065       18,854       25,172  
Other real estate owned   1,526       4,064       4,088       3,458  
Premises and equipment, net   177,456       168,956       162,733       147,853  
Goodwill   306,043       306,043       306,043       306,043  
Intangible assets, net   62,356       64,212       66,025       74,914  
Other assets   315,245       315,805       297,326       301,313  
Total assets $ 9,970,851     $ 9,967,476     $ 9,951,064     $ 9,871,957  
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
Liabilities:                      
Non-interest bearing demand deposits $ 2,229,432     $ 2,292,917     $ 2,361,367     $ 2,628,942  
Interest bearing demand deposits   1,420,942       1,427,856       1,480,042       1,324,292  
Savings and money market   3,703,810       3,801,013       3,367,012       3,183,355  
Total transaction deposits   7,354,184       7,521,786       7,208,421       7,136,589  
Time deposits   1,022,741       995,976       981,970       984,269  
Total deposits   8,376,925       8,517,762       8,190,391       8,120,858  
Securities sold under agreements to repurchase   19,465       19,577       19,627       21,422  
Long-term debt   54,356       54,278       54,200       54,045  
Federal Home Loan Bank advances   35,000             340,000       385,000  
Other liabilities   237,461       144,029       134,039       143,298  
Total liabilities   8,723,207       8,735,646       8,738,257       8,724,623  
Shareholders’ equity:                      
Common stock   515       515       515       515  
Additional paid in capital   1,161,804       1,163,773       1,162,269       1,158,727  
Retained earnings   469,630       454,211       433,126       384,094  
Treasury stock   (303,880 )     (306,460 )     (306,702 )     (307,388 )
Accumulated other comprehensive loss, net of tax   (80,425 )     (80,209 )     (76,401 )     (88,614 )
Total shareholders’ equity   1,247,644       1,231,830       1,212,807       1,147,334  
Total liabilities and shareholders’ equity $ 9,970,851     $ 9,967,476     $ 9,951,064     $ 9,871,957  
SHARE DATA                      
Average basic shares outstanding   38,210,869       38,031,358       38,013,791       37,957,287  
Average diluted shares outstanding   38,372,777       38,188,480       38,162,538       38,107,326  
Ending shares outstanding   37,899,453       37,806,148       37,784,851       37,719,026  
Common book value per share $ 32.92     $ 32.58     $ 32.10     $ 30.42  
Tangible common book value per share(1) (non-GAAP)   23.74       23.32       22.77       20.95  
Tangible common book value per share, excluding accumulated other comprehensive loss(1) (non-GAAP)   25.86       25.44       24.79       23.30  
CAPITAL RATIOS                      
Average equity to average assets   12.57%       12.40%       11.97%       11.78%  
Tangible common equity to tangible assets(1)   9.35%       9.17%       8.96%       8.30%  
Tier 1 leverage ratio   10.20%       9.99%       9.74%       9.15%  
Common equity tier 1 risk-based capital ratio   12.41%       12.35%       11.89%       11.08%  
Tier 1 risk-based capital ratio   12.41%       12.35%       11.89%       11.08%  
Total risk-based capital ratio   14.32%       14.30%       13.80%       12.95%  

                                                      

(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, 2024vs. March 31, 2024% Change       June 30, 2024vs. June 30, 2023% Change
               
  June 30, 2024   March 31, 2024     June 30, 2023  
Originated:                        
Commercial:                        
Commercial and industrial $ 1,906,095   $ 1,777,328   7.2 %   $ 1,788,714   6.6 %
Municipal and non-profit   1,063,706     1,062,287   0.1 %     1,022,414   4.0 %
Owner-occupied commercial real estate   921,122     875,303   5.2 %     710,508   29.6 %
Food and agribusiness   248,401     241,654   2.8 %     263,086   (5.6 )%
Total commercial   4,139,324     3,956,572   4.6 %     3,784,722   9.4 %
Commercial real estate non-owner occupied   1,116,424     1,092,780   2.2 %     1,043,999   6.9 %
Residential real estate   923,313     923,103   0.0 %     877,907   5.2 %
Consumer   14,385     14,936   (3.7 )%     16,979   (15.3 )%
Total originated   6,193,446     5,987,391   3.4 %     5,723,607   8.2 %
                         
Acquired:                        
Commercial:                        
Commercial and industrial   124,104     132,532   (6.4 )%     163,139   (23.9 )%
Municipal and non-profit   288     294   (2.0 )%     310   (7.1 )%
Owner-occupied commercial real estate   232,890     234,486   (0.7 )%     245,605   (5.2 )%
Food and agribusiness   48,061     57,896   (17.0 )%     62,918   (23.6 )%
Total commercial   405,343     425,208   (4.7 )%     471,972   (14.1 )%
Commercial real estate non-owner occupied   752,040     767,419   (2.0 )%     847,946   (11.3 )%
Residential real estate   369,003     387,101   (4.7 )%     367,998   0.3 %
Consumer   2,321     1,933   20.1 %     2,834   (18.1 )%
Total acquired   1,528,707     1,581,661   (3.3 )%     1,690,750   (9.6 )%
Total loans $ 7,722,153   $ 7,569,052   2.0 %   $ 7,414,357   4.2 %
 
Loan Fundings(1)
               
  Second quarter   First quarter   Fourth quarter   Third quarter   Second quarter
  2024   2024     2023   2023   2023
Commercial:                            
Commercial and industrial $ 241,910   $ 53,978     $ 135,954   $ 89,297   $ 111,717
Municipal and non-profit   28,785     14,564       79,650     18,657     39,331
Owner occupied commercial real estate   102,615     35,128       75,631     67,322     62,649
Food and agribusiness   11,040     (7,204 )     10,646     16,191     6,017
Total commercial   384,350     96,466       301,881     191,467     219,714
Commercial real estate non-owner occupied   83,184     73,789       107,738     88,434     99,984
Residential real estate   36,124     29,468       48,925     42,514     40,814
Consumer   1,547     234       1,849     1,689     1,777
Total $ 505,205   $ 199,957     $ 460,393   $ 324,104   $ 362,289

                                                      

(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 $19,281, ($59,523), $16,954, ($12,877) and $13,766 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, 2024   March 31, 2024   June 30, 2023
    Average         Average   Average         Average   Average         Average
    balance   Interest   rate   balance   Interest   rate   balance   Interest   rate
Interest earning assets:                                                      
Originated loans FTE(1)(2)   $ 6,074,199     $ 101,794     6.74 %   $ 6,046,849     $ 100,914     6.71 %   $ 5,649,623     $ 86,547     6.14 %
Acquired loans     1,541,576       23,464     6.12 %     1,611,521       24,289     6.06 %     1,712,118       26,388     6.18 %
Loans held for sale     16,862       318     7.59 %     12,017       225     7.53 %     26,572       460     6.94 %
Investment securities available-for-sale     802,830       5,101     2.54 %     751,168       4,103     2.18 %     786,643       3,883     1.97 %
Investment securities held-to-maturity     564,818       2,419     1.71 %     579,160       2,514     1.74 %     630,547       2,808     1.78 %
Other securities     25,093       377     6.01 %     35,036       616     7.03 %     49,093       914     7.45 %
Interest earning deposits     92,388       685     2.98 %     91,579       763     3.35 %     144,391       1,511     4.20 %
Total interest earning assets FTE(2)   $ 9,117,766     $ 134,158     5.92 %   $ 9,127,330     $ 133,424     5.88 %   $ 8,998,987     $ 122,511     5.46 %
Cash and due from banks   $ 100,165                 $ 102,583                 $ 109,948              
Other assets     771,475                   756,230                   746,864              
Allowance for credit losses     (97,741 )                 (97,882 )                 (90,636 )            
Total assets   $ 9,891,665                 $ 9,888,261                 $ 9,765,163              
Interest bearing liabilities:                                                      
Interest bearing demand, savings and money market deposits   $ 5,109,924     $ 39,681     3.12 %   $ 4,947,811     $ 36,413     2.96 %   $ 4,282,972     $ 20,100     1.88 %
Time deposits     1,015,371       8,536     3.38 %     990,041       7,584     3.08 %     981,201       5,043     2.06 %
Securities sold under agreements to repurchase     17,449       5     0.12 %     18,929       6     0.13 %     20,264       5     0.10 %
Long-term debt     54,307       518     3.84 %     54,229       518     3.84 %     53,997       518     3.85 %
Federal Home Loan Bank advances     9,505       133     5.63 %     228,236       3,181     5.61 %     435,713       5,619     5.17 %
Total interest bearing liabilities   $ 6,206,556     $ 48,873     3.17 %   $ 6,239,246     $ 47,702     3.07 %   $ 5,774,147     $ 31,285     2.17 %
Demand deposits   $ 2,254,454                 $ 2,280,997                 $ 2,701,306              
Other liabilities     187,499                   141,735                   138,936              
Total liabilities     8,648,509                   8,661,978                   8,614,389              
Shareholders’ equity     1,243,156                   1,226,283                   1,150,774              
Total liabilities and shareholders’ equity   $ 9,891,665                 $ 9,888,261                 $ 9,765,163              
Net interest income FTE(2)         $ 85,285               $ 85,722               $ 91,226      
Interest rate spread FTE(2)                 2.75 %                 2.81 %                 3.29 %
Net interest earning assets   $ 2,911,210                 $ 2,888,084                 $ 3,224,840              
Net interest margin FTE(2)                 3.76 %                 3.78 %                 4.07 %
Average transaction deposits   $ 7,364,378                 $ 7,228,808                 $ 6,984,278              
Average total deposits     8,379,749                   8,218,849                   7,965,479              
Ratio of average interest earning assets to average interest bearing liabilities     146.91 %                 146.29 %                 155.85 %            

                                                      

(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 $1,711, $1,692 and $1,442 for the three months ended June 30, 2024, March 31, 2024 and June 30, 2023, respectively.
 
NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
(Dollars in thousands)
 
  For the six months ended June 30, 2024   For the six months ended June 30, 2023
  Average         Average   Average         Average
  balance   Interest   rate   balance   Interest   rate
Interest earning assets:                              
Originated loans FTE(1)(2) $ 6,060,524     $ 202,708   6.73 %   $ 5,582,536     $ 165,715   5.99 %
Acquired loans   1,576,548       47,753   6.09 %     1,741,508       53,411   6.18 %
Loans held for sale   14,440       543   7.56 %     24,176       806   6.72 %
Investment securities available-for-sale   776,999       9,204   2.37 %     798,385       7,872   1.97 %
Investment securities held-to-maturity   571,989       4,933   1.72 %     638,552       5,679   1.78 %
Other securities   30,065       993   6.61 %     50,223       1,812   7.22 %
Interest earning deposits   91,983       1,448   3.17 %     115,750       2,164   3.77 %
Total interest earning assets FTE(2) $ 9,122,548     $ 267,582   5.90 %   $ 8,951,130     $ 237,459   5.35 %
Cash and due from banks $ 101,374               $ 114,254            
Other assets   763,853                 717,563            
Allowance for credit losses   (97,812 )               (90,235 )          
Total assets $ 9,889,963               $ 9,692,712            
Interest bearing liabilities:                              
Interest bearing demand, savings and money market deposits $ 5,028,868     $ 76,094   3.04 %   $ 4,026,015     $ 27,859   1.40 %
Time deposits   1,002,706       16,120   3.23 %     952,023       8,333   1.77 %
Securities sold under agreements to repurchase   18,189       11   0.12 %     20,155       11   0.11 %
Long-term debt   54,268       1,036   3.84 %     53,958       1,036   3.87 %
Federal Home Loan Bank advances   118,871       3,314   5.61 %     516,326       12,690   4.96 %
Total interest bearing liabilities $ 6,222,902     $ 96,575   3.12 %   $ 5,568,477     $ 49,929   1.81 %
Demand deposits $ 2,267,725               $ 2,852,137            
Other liabilities   164,617                 137,065            
Total liabilities   8,655,244                 8,557,679            
Shareholders’ equity   1,234,719                 1,135,033            
Total liabilities and shareholders’ equity $ 9,889,963               $ 9,692,712            
Net interest income FTE(2)       $ 171,007             $ 187,530    
Interest rate spread FTE(2)             2.78 %               3.54 %
Net interest earning assets $ 2,899,646               $ 3,382,653            
Net interest margin FTE(2)             3.77 %               4.22 %
Average transaction deposits $ 7,296,593               $ 6,878,152            
Average total deposits   8,299,299                 7,830,175            
Ratio of average interest earning assets to average interest bearing liabilities   146.60 %               160.75 %          

                                                      

(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 $3,403 and $2,857 for the six months ended June 30, 2024 and June 30, 2023, 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, 2024   March 31, 2024   June 30, 2023
Beginning allowance for credit losses $ 97,607     $ 97,947     $ 90,343  
Charge-offs   (4,605 )     (278 )     (354 )
Recoveries   499       188       42  
Provision expense (release) for credit losses   2,956       (250 )     2,550  
Ending allowance for credit losses (“ACL”) $ 96,457     $ 97,607     $ 92,581  
Ratio of annualized net charge-offs to average total loans during the period   0.22%       0.00%       0.02%  
Ratio of ACL to total loans outstanding at period end   1.25%       1.29%       1.25%  
Ratio of ACL to total non-performing loans at period end   370.18%       272.52%       276.25%  
Total loans $ 7,722,153     $ 7,569,052     $ 7,414,357  
Average total loans during the period   7,582,506       7,632,635       7,338,585  
Total non-performing loans   26,057       35,817       33,514  
 
Past Due and Non-accrual Loans
         
  June 30, 2024   March 31, 2024   June 30, 2023
Loans 30-89 days past due and still accruing interest $ 27,159     $ 3,495     $ 7,261  
Loans 90 days past due and still accruing interest   3,498       1       246  
Non-accrual loans   26,057       35,817       33,514  
Total past due and non-accrual loans $ 56,714     $ 39,313     $ 41,021  
Total 90 days past due and still accruing interest and non-accrual loans to total loans   0.38%       0.47%       0.46%  
 
Asset Quality Data
 
  June 30, 2024   March 31, 2024   June 30, 2023
Non-performing loans $ 26,057     $ 35,817     $ 33,514  
OREO   1,526       4,064       3,458  
Total non-performing assets $ 27,583     $ 39,881     $ 36,972  
Total non-performing loans to total loans   0.34%       0.47%       0.45%  
Total non-performing assets to total loans and OREO   0.36%       0.53%       0.50%  
 
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,
  2024     2023     2023     2024     2023  
Return on average assets   1.06%       1.28%       1.34%       1.17%       1.52%  
Return on average tangible assets(2)   1.17%       1.39%       1.45%       1.28%       1.63%  
Return on average equity   8.46%       10.30%       11.35%       9.37%       12.94%  
Return on average tangible common equity(2)   12.44%       15.14%       17.24%       13.77%       19.05%  
Loan to deposit ratio (end of period)   92.18%       88.86%       91.30%       92.18%       91.30%  
Non-interest bearing deposits to total deposits (end of period)   26.61%       26.92%       32.37%       26.61%       32.37%  
Net interest margin(3)   3.69%       3.70%       4.00%       3.69%       4.16%  
Net interest margin FTE(2)(3)   3.76%       3.78%       4.07%       3.77%       4.22%  
Interest rate spread FTE(2)(4)   2.75%       2.81%       3.29%       2.78%       3.54%  
Yield on earning assets(5)   5.84%       5.80%       5.40%       5.82%       5.29%  
Yield on earning assets FTE(2)(5)   5.92%       5.88%       5.46%       5.90%       5.35%  
Cost of interest bearing liabilities   3.17%       3.07%       2.17%       3.12%       1.81%  
Cost of deposits   2.31%       2.15%       1.27%       2.23%       0.93%  
Non-interest income to total revenue FTE(2)   14.13%       17.11%       13.16%       15.65%       13.19%  
Non-interest expense to average assets   2.56%       2.56%       2.50%       2.56%       2.48%  
Efficiency ratio   64.62%       61.77%       58.86%       63.17%       55.95%  
Efficiency ratio excluding other intangible assets amortization FTE(2)   61.52%       58.82%       56.14%       60.14%       53.65%  
Pre-provision net revenue $ 34,528     $ 38,890     $ 42,626     $ 73,418     $ 93,888  
Pre-provision net revenue FTE(2)   36,239       40,582       44,068       76,821       96,745  
                             
Total Loans Asset Quality Data(6)(7)(8)                            
Non-performing loans to total loans   0.34%       0.47%       0.45%       0.34%       0.45%  
Non-performing assets to total loans and OREO   0.36%       0.53%       0.50%       0.36%       0.50%  
Allowance for credit losses to total loans   1.25%       1.29%       1.25%       1.25%       1.25%  
Allowance for credit losses to non-performing loans   370.18%       272.52%       276.25%       370.18%       276.25%  
Net charge-offs to average loans   0.22%       0.00%       0.02%       0.11%       0.02%  

                                                      

(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

 
    June 30, 2024   March 31, 2024   December 31, 2023   June 30, 2023
Total shareholders’ equity   $ 1,247,644     $ 1,231,830     $ 1,212,807     $ 1,147,334  
Less: goodwill and other intangible assets, net     (360,732 )     (362,709 )     (364,716 )     (368,732 )
Add: deferred tax liability related to goodwill     12,871       12,539       12,208       11,544  
Tangible common equity (non-GAAP)   $ 899,783     $ 881,660     $ 860,299     $ 790,146  
                         
Total assets   $ 9,970,851     $ 9,967,476     $ 9,951,064     $ 9,871,957  
Less: goodwill and other intangible assets, net     (360,732 )     (362,709 )     (364,716 )     (368,732 )
Add: deferred tax liability related to goodwill     12,871       12,539       12,208       11,544  
Tangible assets (non-GAAP)   $ 9,622,990     $ 9,617,306     $ 9,598,556     $ 9,514,769  
                         
Tangible common equity to tangible assets calculations:                        
Total shareholders’ equity to total assets     12.51%       12.36%       12.19%       11.62%  
Less: impact of goodwill and other intangible assets, net     (3.16)%       (3.19)%       (3.23)%       (3.32)%  
Tangible common equity to tangible assets (non-GAAP)     9.35%       9.17%       8.96%       8.30%  
                         
Tangible common book value per share calculations:                        
Tangible common equity (non-GAAP)   $ 899,783     $ 881,660     $ 860,299     $ 790,146  
Divided by: ending shares outstanding     37,899,453       37,806,148       37,784,851       37,719,026  
Tangible common book value per share (non-GAAP)   $ 23.74     $ 23.32     $ 22.77     $ 20.95  
                         
Tangible common book value per share, excluding accumulated other comprehensive loss calculations:                        
Tangible common equity (non-GAAP)   $ 899,783     $ 881,660     $ 860,299     $ 790,146  
Accumulated other comprehensive loss, net of tax     80,425       80,209       76,401       88,614  
Tangible common book value, excluding accumulated other comprehensive loss, net of tax (non-GAAP)     980,208       961,869       936,700       878,760  
Divided by: ending shares outstanding     37,899,453       37,806,148       37,784,851       37,719,026  
Tangible common book value per share, excluding accumulated other comprehensive loss, net of tax (non-GAAP)   $ 25.86     $ 25.44     $ 24.79     $ 23.30  
 
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,
    2024     2024     2023     2024     2023  
Net income   $ 26,135     $ 31,391     $ 32,557     $ 57,526     $ 72,840  
Add: impact of other intangible assets amortization expense, after tax     1,516       1,534       1,546       3,055       2,596  
Net income excluding the impact of other intangible assets amortization expense, after tax (non-GAAP)   $ 27,651     $ 32,925     $ 34,103     $ 60,581     $ 75,436  
                               
Average assets   $ 9,891,665     $ 9,888,261     $ 9,765,163     $ 9,889,963     $ 9,692,712  
Less: average goodwill and other intangible assets, net of deferred tax liability related to goodwill     (349,030 )     (351,383 )     (357,446 )     (350,040 )     (336,420 )
Average tangible assets (non-GAAP)   $ 9,542,635     $ 9,536,878     $ 9,407,717     $ 9,539,923     $ 9,356,292  
                               
Average shareholders’ equity   $ 1,243,156     $ 1,226,283     $ 1,150,774     $ 1,234,719     $ 1,135,033  
Less: average goodwill and other intangible assets, net of deferred tax liability related to goodwill     (349,030 )     (351,383 )     (357,446 )     (350,040 )     (336,420 )
Average tangible common equity (non-GAAP)   $ 894,126     $ 874,900     $ 793,328     $ 884,679     $ 798,613  
                               
Return on average assets     1.06%       1.28%       1.34%       1.17%       1.52%  
Return on average tangible assets (non-GAAP)     1.17%       1.39%       1.45%       1.28%       1.63%  
Return on average equity     8.46%       10.30%       11.35%       9.37%       12.94%  
Return on average tangible common equity (non-GAAP)     12.44%       15.14%       17.24%       13.77%       19.05%  
 
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,
    2024     2024     2023     2024     2023  
Interest income   $ 132,447     $ 131,732     $ 121,069        $ 264,179     $ 234,602  
Add: impact of taxable equivalent adjustment     1,711       1,692       1,442       3,403       2,857  
Interest income FTE (non-GAAP)   $ 134,158     $ 133,424     $ 122,511     $ 267,582     $ 237,459  
                               
Net interest income   $ 83,574     $ 84,030     $ 89,784     $ 167,604     $ 184,673  
Add: impact of taxable equivalent adjustment     1,711       1,692       1,442       3,403       2,857  
Net interest income FTE (non-GAAP)   $ 85,285     $ 85,722     $ 91,226     $ 171,007     $ 187,530  
                               
Average earning assets   $ 9,117,766     $ 9,127,330     $ 8,998,987     $ 9,122,548     $ 8,951,130  
Yield on earning assets     5.84%       5.80%       5.40%       5.82%       5.29%  
Yield on earning assets FTE (non-GAAP)     5.92%       5.88%       5.46%       5.90%       5.35%  
Net interest margin     3.69%       3.70%       4.00%       3.69%       4.16%  
Net interest margin FTE (non-GAAP)     3.76%       3.78%       4.07%       3.77%       4.22%  
 
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,
       2024     2024     2023     2024     2023  
Net interest income   $ 83,574     $ 84,030     $ 89,784     $ 167,604     $ 184,673  
Add: impact of taxable equivalent adjustment     1,711       1,692       1,442       3,403       2,857  
Net interest income FTE (non-GAAP)   $ 85,285     $ 85,722     $ 91,226     $ 171,007     $ 187,530  
                               
Non-interest income   $ 14,029     $ 17,694     $ 13,823     $ 31,723     $ 28,488  
                               
Non-interest expense   $ 63,075     $ 62,834     $ 60,981     $ 125,909     $ 119,273  
Less: other intangible assets amortization     (1,977 )     (2,008 )     (2,007 )     (3,985 )     (3,370 )
Non-interest expense excluding other intangible assets amortization (non-GAAP)   $ 61,098     $ 60,826     $ 58,974     $ 121,924     $ 115,903  
                               
Efficiency ratio     64.62%       61.77%       58.86%       63.17%       55.95%  
Efficiency ratio excluding other intangible assets amortization FTE (non-GAAP)     61.52%       58.82%       56.14%       60.14%       53.65%  
Pre-provision net revenue (non-GAAP)   $ 34,528     $ 38,890     $ 42,626     $ 73,418     $ 93,888  
Pre-provision net revenue, FTE (non-GAAP)     36,239       40,582       44,068       76,821       96,745  


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