National Bank Holdings Corporation Announces First Quarter 2024 Financial Results

DENVER, April 24, 2024 (GLOBE NEWSWIRE) — National Bank Holdings Corporation (NYSE: NBHC) reported:

                   
    For the quarter(1)
    1Q24   4Q23   1Q23
Net income ($000’s)   $ 31,391     $ 33,121     $ 40,283  
Earnings per share – diluted   $ 0.82     $ 0.87     $ 1.06  
Return on average assets     1.28 %     1.33 %     1.70 %
Return on average tangible assets(2)     1.39 %     1.44 %     1.80 %
Return on average equity     10.30 %     11.10 %     14.60 %
Return on average tangible common equity(2)     15.14 %     16.56 %     20.86 %

                                                      

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

In announcing these results, Chief Executive Officer Tim Laney shared, “We are pleased to deliver quarterly earnings of $0.82 per diluted share and a solid return on average tangible common equity of 15.14%. Our diverse revenue streams delivered strong fee income growth of 40.8% annualized over the prior quarter. Our prudent approach to extending credit coupled with our granular and diverse loan portfolio delivered zero basis points of annualized net charge-offs. We grew our core deposits 6.8% over the first quarter 2023, while preserving a low deposit beta of 37.5% this rate cycle. We maintain a strong balance sheet, solid capital position, and diversified funding sources.”

Mr. Laney added, “We remain focused on delivering best-in-class banking solutions for our clients, while protecting our Company through solid banking practices. We are committed to operating as a source of strength and stability for our clients and communities and look forward to providing meaningful returns for our stakeholders in 2024.”

First Quarter 2024 Results
(All comparisons refer to the fourth quarter of 2023, except as noted)

Net income totaled $31.4 million or $0.82 per diluted share, compared to $33.1 million or $0.87 per diluted share. Fully taxable equivalent pre-provision net revenue totaled $40.6 million, compared to $45.1 million. The return on average tangible assets totaled 1.39%, compared to 1.44%, and the return on average tangible common equity totaled 15.14%, compared to 16.56%.

Net Interest Income
Fully taxable equivalent net interest income totaled $85.7 million, compared to $91.2 million. Net interest income for the fourth quarter of 2023 included $2.9 million of accelerated loan fee income and one additional day. The fully taxable equivalent net interest margin was 3.78%, narrowing 17 basis points primarily driven by the fourth quarter’s accelerated loan fee income noted above.

Loans
Loans totaled $7.6 billion, compared to $7.7 billion at December 31, 2023. We generated quarterly loan fundings totaling $200.0 million, led by commercial loan fundings of $96.5 million. The average interest rate on the first quarter’s loan originations increased sixteen basis points to 8.8%.

Asset Quality and Provision for Credit Losses
The Company recorded no provision expense for credit losses, compared to $4.6 million in the prior quarter. Annualized net charge-offs were 0.00% of average total loans, compared to 0.02% in the prior quarter. Non-performing loans totaled 0.47% of total loans at March 31, 2024, compared to 0.37%, and non-performing assets totaled 0.53% of total loans and OREO at March 31, 2024, compared to 0.42%. The allowance for credit losses as a percentage of loans increased two basis points to 1.29% at March 31, 2024.

Deposits
Average total deposits increased $90.3 million, or 4.5% annualized, to $8.2 billion during the first quarter 2024. The loan to deposit ratio decreased 514 basis points to 88.9% at March 31, 2024. Average transaction deposits (defined as total deposits less time deposits) increased $86.8 million to $7.2 billion.

We improved our balance sheet funding mix during the first quarter and utilized funding provided by the quarter’s deposit growth to pay down $340.0 million of Federal Home Loan Bank advances. The mix of transaction deposits to total deposits was 88.3% and 88.0% at March 31, 2024 and December 31, 2023, respectively.

Non-Interest Income
Non-interest income increased $1.6 million, or 40.8% annualized, to $17.7 million during the first quarter driven by our diversified sources of fee revenue. Other non-interest income increased $1.8 million and included increases in SBA loan income, trust income, and a $0.6 million gain from the sale of a banking center building. Mortgage banking income increased $0.6 million, and service charges and bank card fees decreased $0.8 million due to seasonality.

Non-Interest Expense
Non-interest expense increased $0.7 million to $62.8 million during the first quarter. Salaries and benefits increased $2.1 million largely due to higher payroll taxes, and data processing increased $1.2 million. These increases were partially offset by a decrease in professional fees of $0.9 million, and a decrease in other non-interest expense of $1.4 million primarily driven by $0.7 million of one-time asset write-downs in the prior quarter. The efficiency ratio totaled 61.8% for the first quarter, compared to 58.8% for the fourth quarter. The fully taxable equivalent efficiency ratio totaled 58.8% for the first quarter, compared to 56.0%, excluding other intangible assets amortization.

Income tax expense totaled $7.5 million, compared to $5.8 million in the prior quarter. The effective tax rate was 19.3%, compared to 14.9% for the fourth quarter. The fourth quarter of 2023 benefitted from $2.0 million of research and development tax credits.

Capital
Capital ratios continue to be strong and in excess of federal bank regulatory agency “well capitalized” thresholds. The tier 1 leverage ratio totaled 9.99%, and the common equity tier 1 capital ratio totaled 12.35% at March 31, 2024. Shareholders’ equity totaled $1.2 billion at March 31, 2024, increasing $19.0 million, largely due to $21.1 million of higher retained earnings, partially offset by a $3.8 million increase in accumulated other comprehensive loss.

Common book value per share increased $0.48 to $32.58 at March 31, 2024. Tangible common book value per share increased $0.55 to $23.32 as this quarter’s earnings outpaced the quarterly dividend and a $0.10 increase in accumulated other comprehensive loss.

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

Net income totaled $31.4 million, or $0.82 per diluted share, compared to net income of $40.3 million, or $1.06 per diluted share, for the first quarter 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 $40.6 million, compared to $52.7 million. The return on average tangible assets totaled 1.39%, compared to 1.80%, and the return on average tangible common equity was 15.14%, compared to 20.86%.

Fully taxable equivalent net interest income totaled $85.7 million, compared to $96.3 million. Average earning assets increased $224.6 million, or 2.5%, including average loan growth of $372.4 million. The fully taxable equivalent net interest margin narrowed 61 basis points to 3.78%, as the increase in earning asset yields was offset by an increase in the cost of funds. Average interest bearing liabilities increased $878.7 million due to higher deposit balances, and the cost of funds totaled 2.25%, compared to 0.90% in the same period prior year.

Loans outstanding totaled $7.6 billion, increasing $223.8 million or 3.0%, from organic loan growth. New loan fundings over the trailing twelve months totaled $1.3 billion, led by commercial loan fundings of $0.8 billion.  

The Company recorded no provision expense for credit losses during 2024, compared to provision expense of $0.9 million in the first quarter of 2023. Annualized net charge-offs decreased one basis point to 0.00% of average total loans during the first quarter 2024. The non-performing loans ratio was 0.47% at March 31, 2024, compared to 0.13%, and non-performing assets to total loans and OREO was 0.53% at March 31, 2024, compared to 0.18%. The allowance for credit losses as a percentage of loans increased six basis points to 1.29% at March 31, 2024.

Average total deposits increased $525.5 million or 6.8% to $8.2 billion, primarily due to higher deposit balances driven by the strategic growth from our recent acquisitions. Average transaction deposits increased $458.0 million or 6.8%. The mix of transaction deposits to total deposits was 88.3%, compared to 87.1% at March 31, 2023.

Non-interest income totaled $17.7 million, an increase of $3.0 million or 20.7%, driven by our diversified sources of fee revenue. Other non-interest income increased $3.4 million and included increases in SBA loan income, trust income, Cambr income, fair value adjustments on company-owned life insurance, swap fee income and a $0.6 million gain from the sale of a banking center building. Mortgage banking income decreased $0.6 million.

Non-interest expense totaled $62.8 million, an increase of $4.5 million or 7.8%. Salaries and benefits increased $3.5 million primarily due to payroll tax credits realized in the first quarter 2023. Occupancy and equipment increased $0.9 million and other intangible assets amortization increased $0.6 million due to intangible assets acquired through our Cambr acquisition in April of 2023. These increases were partially offset by a decrease of $0.9 million in professional fees.

Income tax expense totaled $7.5 million, a decrease of $2.6 million from the first quarter last year, driven by lower pre-tax income. The effective tax rate was 19.3% and 20.0% for the first quarters 2024 and 2023, respectively.

Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Thursday, April 25, 2024. Interested parties may listen to this call by dialing (866) 400-0049 using the participant passcode of 4874281 and asking for the NBHC Q1 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 time-frames, 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) 554-6640, [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
  March 31,       December 31,       March 31, 
  2024   2023   2023
Total interest and dividend income $ 131,732   $ 134,703   $ 113,533
Total interest expense   47,702     45,202     18,644
Net interest income   84,030     89,501     94,889
Taxable equivalent adjustment   1,692     1,667     1,414
Net interest income FTE(1)   85,722     91,168     96,303
Provision expense for credit losses       4,570     900
Net interest income after provision for credit losses FTE(1)   85,722     86,598     95,403
Non-interest income:                
Service charges   4,391     4,831     4,101
Bank card fees   4,578     4,915     4,637
Mortgage banking income   2,655     2,020     3,216
Other non-interest income   6,070     4,298     2,711
Total non-interest income   17,694     16,064     14,665
Non-interest expense:                
Salaries and benefits   36,520     34,470     32,989
Occupancy and equipment   9,941     10,186     9,073
Professional fees   1,646     2,513     2,590
Data processing   4,066     2,853     3,752
Other non-interest expense   8,653     10,065     8,525
Other intangible assets amortization   2,008     2,008     1,363
Total non-interest expense   62,834     62,095     58,292
                 
Income before income taxes FTE(1)   40,582     40,567     51,776
Taxable equivalent adjustment   1,692     1,667     1,414
Income before income taxes   38,890     38,900     50,362
Income tax expense   7,499     5,779     10,079
Net income $ 31,391   $ 33,121   $ 40,283
Earnings per share – basic $ 0.82   $ 0.87   $ 1.06
Earnings per share – diluted   0.82     0.87     1.06

                                                      

(1 )      Net interest income is presented on a GAAP basis and fully taxable equivalent (FTE) basis, as the Company believes this non-GAAP measure is the preferred industry measurement for this item. The FTE adjustment is for the tax benefit on certain tax exempt loans using the federal tax rate of 21% for each period presented.
       

NATIONAL BANK HOLDINGS CORPORATION
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands, except share and per share data)

  March 31, 2024   December 31, 2023   March 31, 2023
ASSETS                
Cash and cash equivalents $ 292,931     $ 190,826     $ 369,705  
Investment securities available-for-sale   685,666       628,829       695,485  
Investment securities held-to-maturity   570,850       585,052       637,921  
Non-marketable securities   73,439       90,477       120,733  
Loans   7,569,052       7,698,758       7,345,298  
Allowance for credit losses   (97,607 )     (97,947 )     (90,343 )
Loans, net   7,471,445       7,600,811       7,254,955  
Loans held for sale   14,065       18,854       24,594  
Other real estate owned   4,064       4,088       3,458  
Premises and equipment, net   168,956       162,733       140,417  
Goodwill   306,043       306,043       279,132  
Intangible assets, net   64,212       66,025       58,619  
Other assets   315,805       297,326       332,204  
Total assets $ 9,967,476     $ 9,951,064     $ 9,917,223  
LIABILITIES AND SHAREHOLDERS’ EQUITY                
Liabilities:                
Non-interest bearing demand deposits $ 2,292,917     $ 2,361,367     $ 2,920,891  
Interest bearing demand deposits   1,427,856       1,480,042       1,098,172  
Savings and money market   3,801,013       3,367,012       2,584,128  
Total transaction deposits   7,521,786       7,208,421       6,603,191  
Time deposits   995,976       981,970       978,489  
Total deposits   8,517,762       8,190,391       7,581,680  
Securities sold under agreements to repurchase   19,577       19,627       21,492  
Long-term debt   54,278       54,200       53,968  
Federal Home Loan Bank advances         340,000       1,000,000  
Other liabilities   144,029       134,039       126,356  
Total liabilities   8,735,646       8,738,257       8,783,496  
Shareholders’ equity:                
Common stock   515       515       515  
Additional paid in capital   1,163,773       1,162,269       1,160,436  
Retained earnings   454,211       433,126       361,440  
Treasury stock   (306,460 )     (306,702 )     (310,037 )
Accumulated other comprehensive loss, net of tax   (80,209 )     (76,401 )     (78,627 )
Total shareholders’ equity   1,231,830       1,212,807       1,133,727  
Total liabilities and shareholders’ equity $ 9,967,476     $ 9,951,064     $ 9,917,223  
SHARE DATA                
Average basic shares outstanding   38,031,358       38,013,791       37,785,488  
Average diluted shares outstanding   38,188,480       38,162,538       38,074,973  
Ending shares outstanding   37,806,148       37,784,851       37,641,381  
Common book value per share $ 32.58     $ 32.10     $ 30.12  
Tangible common book value per share(1) (non-GAAP)   23.32       22.77       21.76  
Tangible common book value per share, excluding accumulated other comprehensive loss(1) (non-GAAP)   25.44       24.79       23.85  
CAPITAL RATIOS                
Average equity to average assets   12.40 %     11.97 %     11.63 %
Tangible common equity to tangible assets(1)   9.17 %     8.96 %     8.53 %
Tier 1 leverage ratio   9.99 %     9.74 %     9.46 %
Common equity tier 1 risk-based capital ratio   12.35 %     11.89 %     11.32 %
Tier 1 risk-based capital ratio   12.35 %     11.89 %     11.32 %
Total risk-based capital ratio   14.30 %     13.80 %     13.17 %

                                                      

(1 )      Represents a non-GAAP financial measure. See non-GAAP reconciliations below.
       

NATIONAL BANK HOLDINGS CORPORATION
Loan Portfolio
(Dollars in thousands)

Period End Loan Balances by Type

          March 31, 2024       March 31, 2024
          vs. December 31, 2023       vs. March 31, 2023
  March 31, 2024   December 31, 2023   % Change   March 31, 2023   % Change
Originated:                        
Commercial:                        
Commercial and industrial $ 1,777,328   $ 1,825,425   (2.6 )%   $ 1,818,415   (2.3 )%
Municipal and non-profit   1,062,287     1,083,457   (2.0 )%     979,801   8.4 %
Owner-occupied commercial real estate   875,303     879,686   (0.5 )%     674,231   29.8 %
Food and agribusiness   241,654     265,902   (9.1 )%     270,197   (10.6 )%
Total commercial   3,956,572     4,054,470   (2.4 )%     3,742,644   5.7 %
Commercial real estate non-owner occupied   1,092,780     1,071,529   2.0 %     979,150   11.6 %
Residential real estate   923,103     919,139   0.4 %     864,544   6.8 %
Consumer   14,936     16,686   (10.5 )%     16,766   (10.9 )%
Total originated   5,987,391     6,061,824   (1.2 )%     5,603,104   6.9 %
                         
Acquired:                        
Commercial:                        
Commercial and industrial   132,532     141,484   (6.3 )%     172,368   (23.1 )%
Municipal and non-profit   294     299   (1.7 )%     316   (7.0 )%
Owner-occupied commercial real estate   234,486     244,087   (3.9 )%     248,883   (5.8 )%
Food and agribusiness   57,896     58,695   (1.4 )%     64,739   (10.6 )%
Total commercial   425,208     444,565   (4.4 )%     486,306   (12.6 )%
Commercial real estate non-owner occupied   767,419     785,221   (2.3 )%     845,374   (9.2 )%
Residential real estate   387,101     404,648   (4.3 )%     407,254   (4.9 )%
Consumer   1,933     2,500   (22.7 )%     3,260   (40.7 )%
Total acquired   1,581,661     1,636,934   (3.4 )%     1,742,194   (9.2 )%
Total loans $ 7,569,052   $ 7,698,758   (1.7 )%   $ 7,345,298   3.0 %
                             

Loan Fundings(1)

  First quarter   Fourth quarter   Third quarter   Second quarter   First quarter
  2024   2023   2023   2023   2023
Commercial:                            
Commercial and industrial $ 53,978     $ 135,954   $ 89,297   $ 111,717   $ 107,013  
Municipal and non-profit   14,564       79,650     18,657     39,331     22,526  
Owner occupied commercial real estate   35,128       75,631     67,322     62,649     33,912  
Food and agribusiness   (7,204 )     10,646     16,191     6,017     (6,564 )
Total commercial   96,466       301,881     191,467     219,714     156,887  
Commercial real estate non-owner occupied   73,789       107,738     88,434     99,984     185,875  
Residential real estate   29,468       48,925     42,514     40,814     49,406  
Consumer   234       1,849     1,689     1,777     1,717  
Total $ 199,957     $ 460,393   $ 324,104   $ 362,289   $ 393,885  

                                                      

(1 )      Loan fundings are defined as closed end funded loans and net fundings under revolving lines of credit. Net (paydowns) fundings under revolving lines of credit were ($59,523), $16,954, ($12,877), $13,766 and ($7,096) for the periods noted in the table above, respectively.
       

NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
(Dollars in thousands)

                                                 
    For the three months ended   For the three months ended   For the three months ended
    March 31, 2024   December 31, 2023   March 31, 2023
    Average               Average      Average               Average      Average               Average
    balance   Interest   rate   balance   Interest   rate   balance   Interest   rate
Interest earning assets:                                                
Originated loans FTE(1)(2)   $ 6,046,849     $ 100,914   6.71 %   $ 5,985,610     $ 102,504   6.79 %   $ 5,514,704     $ 79,167   5.82 %
Acquired loans     1,611,521       24,289   6.06 %     1,646,696       25,407   6.12 %     1,771,224       27,023   6.19 %
Loans held for sale     12,017       225   7.53 %     16,599       321   7.67 %     21,753       346   6.45 %
Investment securities available-for-sale     751,168       4,103   2.18 %     739,471       3,715   2.01 %     810,257       3,989   1.97 %
Investment securities held-to-maturity     579,160       2,514   1.74 %     594,149       2,596   1.75 %     646,646       2,871   1.78 %
Other securities     35,036       616   7.03 %     40,355       741   7.34 %     51,366       898   6.99 %
Interest earning deposits     91,579       763   3.35 %     125,097       1,086   3.44 %     86,790       653   3.05 %
Total interest earning assets FTE(2)   $ 9,127,330     $ 133,424   5.88 %   $ 9,147,977     $ 136,370   5.91 %   $ 8,902,740     $ 114,947   5.24 %
Cash and due from banks   $ 102,583               $ 105,323               $ 118,607            
Other assets     756,230                 730,220                 687,940            
Allowance for credit losses     (97,882 )               (94,466 )               (89,831 )          
Total assets   $ 9,888,261               $ 9,889,054               $ 9,619,456            
Interest bearing liabilities:                                                
Interest bearing demand, savings and money market deposits   $ 4,947,811     $ 36,413   2.96 %   $ 4,751,563     $ 32,887   2.75 %   $ 3,766,203     $ 7,759   0.84 %
Time deposits     990,041       7,584   3.08 %     986,513       6,876   2.77 %     922,521       3,290   1.45 %
Securities sold under agreements to repurchase     18,929       6   0.13 %     17,812       5   0.11 %     20,045       6   0.12 %
Long-term debt     54,229       518   3.84 %     54,151       518   3.80 %     53,918       518   3.90 %
Federal Home Loan Bank advances     228,236       3,181   5.61 %     348,775       4,916   5.59 %     597,833       7,071   4.80 %
Total interest bearing liabilities   $ 6,239,246     $ 47,702   3.07 %   $ 6,158,814     $ 45,202   2.91 %   $ 5,360,520     $ 18,644   1.41 %
Demand deposits   $ 2,280,997               $ 2,390,457               $ 3,004,643            
Other liabilities     141,735                 155,619                 135,175            
Total liabilities     8,661,978                 8,704,890                 8,500,338            
Shareholders’ equity     1,226,283                 1,184,164                 1,119,118            
Total liabilities and shareholders’ equity   $ 9,888,261               $ 9,889,054               $ 9,619,456            
Net interest income FTE(2)         $ 85,722             $ 91,168             $ 96,303    
Interest rate spread FTE(2)               2.81 %               3.00 %               3.83 %
Net interest earning assets   $ 2,888,084               $ 2,989,163               $ 3,542,220            
Net interest margin FTE(2)               3.78 %               3.95 %               4.39 %
Average transaction deposits   $ 7,228,808               $ 7,142,020               $ 6,770,846            
Average total deposits     8,218,849                 8,128,533                 7,693,367            
Ratio of average interest earning assets to average interest bearing liabilities     146.29 %               148.53 %               166.08 %          

                                                      

(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 $1,692, $1,667 and $1,414 for the three months ended March 31, 2024, December 31, 2023 and March 31, 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
  March 31, 2024   December 31, 2023   March 31, 2023
Beginning allowance for credit losses $ 97,947     $ 93,446     $ 89,553  
Charge-offs   (278 )     (357 )     (325 )
Recoveries   188       58       65  
Provision (release) expense for credit losses   (250 )     4,800       1,050  
Ending allowance for credit losses (“ACL”) $ 97,607     $ 97,947     $ 90,343  
Ratio of annualized net charge-offs to average total loans during the period   0.00 %     0.02 %     0.01 %
Ratio of ACL to total loans outstanding at period end   1.29 %     1.27 %     1.23 %
Ratio of ACL to total non-performing loans at period end   272.52 %     346.99 %     946.40 %
Total loans $ 7,569,052     $ 7,698,758     $ 7,345,298  
Average total loans during the period   7,632,635       7,594,725       7,257,639  
Total non-performing loans   35,817       28,228       9,546  
                       

Past Due and Non-accrual Loans

                 
  March 31, 2024   December 31, 2023   March 31, 2023
Loans 30-89 days past due and still accruing interest $ 3,495     $ 12,232     $ 2,308  
Loans 90 days past due and still accruing interest   1       591       185  
Non-accrual loans   35,817       28,228       9,546  
Total past due and non-accrual loans $ 39,313     $ 41,051     $ 12,039  
Total 90 days past due and still accruing interest and non-accrual loans to total loans   0.47 %     0.37 %     0.13 %
                       

Asset Quality Data

  March 31, 2024   December 31, 2023   March 31, 2023
Non-performing loans $ 35,817     $ 28,228     $ 9,546  
OREO   4,064       4,088       3,458  
Total non-performing assets $ 39,881     $ 32,316     $ 13,004  
Total non-performing loans to total loans   0.47 %     0.37 %     0.13 %
Total non-performing assets to total loans and OREO   0.53 %     0.42 %     0.18 %
                       

NATIONAL BANK HOLDINGS CORPORATION
Key Metrics(1)

                 
  As of and for the three months ended
  March 31,    December 31,    March 31, 
  2024   2023   2023
Return on average assets   1.28 %     1.33 %     1.70 %
Return on average tangible assets(2)   1.39 %     1.44 %     1.80 %
Return on average equity   10.30 %     11.10 %     14.60 %
Return on average tangible common equity(2)   15.14 %     16.56 %     20.86 %
Loan to deposit ratio (end of period)   88.86 %     94.00 %     96.88 %
Non-interest bearing deposits to total deposits (end of period)   26.92 %     28.83 %     38.53 %
Net interest margin(3)   3.70 %     3.88 %     4.32 %
Net interest margin FTE(2)(3)   3.78 %     3.95 %     4.39 %
Interest rate spread FTE(2)(4)   2.81 %     3.00 %     3.83 %
Yield on earning assets(5)   5.80 %     5.84 %     5.17 %
Yield on earning assets FTE(2)(5)   5.88 %     5.91 %     5.24 %
Cost of interest bearing liabilities   3.07 %     2.91 %     1.41 %
Cost of deposits   2.15 %     1.94 %     0.58 %
Non-interest income to total revenue FTE(2)   17.11 %     14.98 %     13.22 %
Non-interest expense to average assets   2.56 %     2.49 %     2.46 %
Efficiency ratio   61.77 %     58.82 %     53.21 %
Efficiency ratio excluding other intangible assets amortization FTE(2)   58.82 %     56.03 %     51.30 %
Pre-provision net revenue $ 38,890     $ 43,470     $ 51,262  
Pre-provision net revenue FTE(2)   40,582       45,137       52,676  
                 
Total Loans Asset Quality Data(6)(7)(8)                
Non-performing loans to total loans   0.47 %     0.37 %     0.13 %
Non-performing assets to total loans and OREO   0.53 %     0.42 %     0.18 %
Allowance for credit losses to total loans   1.29 %     1.27 %     1.23 %
Allowance for credit losses to non-performing loans   272.52 %     346.99 %     946.40 %
Net charge-offs to average loans   0.00 %     0.02 %     0.01 %

                                                      

(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

    March 31, 2024   December 31, 2023   March 31, 2023
Total shareholders’ equity   $ 1,231,830     $ 1,212,807     $ 1,133,727  
Less: goodwill and other intangible assets, net     (362,709 )     (364,716 )     (325,828 )
Add: deferred tax liability related to goodwill     12,539       12,208       11,212  
Tangible common equity (non-GAAP)   $ 881,660     $ 860,299     $ 819,111  
                   
Total assets   $ 9,967,476     $ 9,951,064     $ 9,917,223  
Less: goodwill and other intangible assets, net     (362,709 )     (364,716 )     (325,828 )
Add: deferred tax liability related to goodwill     12,539       12,208       11,212  
Tangible assets (non-GAAP)   $ 9,617,306     $ 9,598,556     $ 9,602,607  
                   
Tangible common equity to tangible assets calculations:                  
Total shareholders’ equity to total assets     12.36 %     12.19 %     11.43 %
Less: impact of goodwill and other intangible assets, net     (3.19 )%     (3.23 )%     (2.90 )%
Tangible common equity to tangible assets (non-GAAP)     9.17 %     8.96 %     8.53 %
                   
Tangible common book value per share calculations:                  
Tangible common equity (non-GAAP)   $ 881,660     $ 860,299     $ 819,111  
Divided by: ending shares outstanding     37,806,148       37,784,851       37,641,381  
Tangible common book value per share (non-GAAP)   $ 23.32     $ 22.77     $ 21.76  
                   
Tangible common book value per share, excluding accumulated other comprehensive loss calculations:                  
Tangible common equity (non-GAAP)   $ 881,660     $ 860,299     $ 819,111  
Accumulated other comprehensive loss, net of tax     80,209       76,401       78,627  
Tangible common book value, excluding accumulated other comprehensive loss, net of tax (non-GAAP)     961,869       936,700       897,738  
Divided by: ending shares outstanding     37,806,148       37,784,851       37,641,381  
Tangible common book value per share, excluding accumulated other comprehensive loss, net of tax (non-GAAP)   $ 25.44     $ 24.79     $ 23.85  
                         

NATIONAL BANK HOLDINGS CORPORATION
(Dollars in thousands, except share and per share data)

Return on Average Tangible Assets and Return on Average Tangible Equity

    As of and for the three months ended
    March 31,       December 31,       March 31, 
    2024      2023      2023
Net income   $ 31,391     $ 33,121     $ 40,283  
Add: impact of other intangible assets amortization expense, after tax     1,534       1,541       1,049  
Net income excluding the impact of other intangible assets amortization expense, after tax (non-GAAP)   $ 32,925     $ 34,662     $ 41,332  
                   
Average assets   $ 9,888,261     $ 9,889,054     $ 9,619,456  
Less: average goodwill and other intangible assets, net of deferred tax liability related to goodwill     (351,383 )     (353,712 )     (315,493 )
Average tangible assets (non-GAAP)   $ 9,536,878     $ 9,535,342     $ 9,303,963  
                   
Average shareholders’ equity   $ 1,226,283     $ 1,184,164     $ 1,119,118  
Less: average goodwill and other intangible assets, net of deferred tax liability related to goodwill     (351,383 )     (353,712 )     (315,493 )
Average tangible common equity (non-GAAP)   $ 874,900     $ 830,452     $ 803,625  
                   
Return on average assets     1.28 %     1.33 %     1.70 %
Return on average tangible assets (non-GAAP)     1.39 %     1.44 %     1.80 %
Return on average equity     10.30 %     11.10 %     14.60 %
Return on average tangible common equity (non-GAAP)     15.14 %     16.56 %     20.86 %
                         

Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin

                   
    As of and for the three months ended
    March 31,    December 31,    March 31, 
    2024   2023   2023
Interest income   $ 131,732        $ 134,703        $ 113,533  
Add: impact of taxable equivalent adjustment     1,692       1,667       1,414  
Interest income FTE (non-GAAP)   $ 133,424     $ 136,370     $ 114,947  
                   
Net interest income   $ 84,030     $ 89,501     $ 94,889  
Add: impact of taxable equivalent adjustment     1,692       1,667       1,414  
Net interest income FTE (non-GAAP)   $ 85,722     $ 91,168     $ 96,303  
                   
Average earning assets   $ 9,127,330     $ 9,147,977     $ 8,902,740  
Yield on earning assets     5.80 %     5.84 %     5.17 %
Yield on earning assets FTE (non-GAAP)     5.88 %     5.91 %     5.24 %
Net interest margin     3.70 %     3.88 %     4.32 %
Net interest margin FTE (non-GAAP)     3.78 %     3.95 %     4.39 %
                         

Efficiency Ratio and Pre-Provision Net Revenue

    As of and for the three months ended
       March 31,       December 31,       March 31, 
       2024      2023      2023
Net interest income   $ 84,030     $ 89,501     $ 94,889  
Add: impact of taxable equivalent adjustment     1,692       1,667       1,414  
Net interest income FTE (non-GAAP)   $ 85,722     $ 91,168     $ 96,303  
                   
Non-interest income   $ 17,694     $ 16,064     $ 14,665  
                   
Non-interest expense   $ 62,834     $ 62,095     $ 58,292  
Less: other intangible assets amortization     (2,008 )     (2,008 )     (1,363 )
Non-interest expense excluding other intangible assets amortization (non-GAAP)   $ 60,826     $ 60,087     $ 56,929  
                   
Efficiency ratio     61.77 %     58.82 %     53.21 %
Efficiency ratio excluding other intangible assets amortization FTE (non-GAAP)     58.82 %     56.03 %     51.30 %
Pre-provision net revenue (non-GAAP)   $ 38,890     $ 43,470     $ 51,262  
Pre-provision net revenue, FTE (non-GAAP)     40,582       45,137       52,676  


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