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National Bank Holdings Corporation Announces First Quarter 2022 Financial Results and Agreement to Acquire Rock Canyon Bank
Source: Nasdaq GlobeNewswire / 18 Apr 2022 15:30:01 America/Chicago
DENVER, April 18, 2022 (GLOBE NEWSWIRE) -- National Bank Holdings Corporation (NYSE: NBHC) reported:
For the quarter 1Q22 4Q21 1Q21 Net income ($000's) $ 18,352 $ 22,769 $ 26,812 Earnings per share - diluted $ 0.60 $ 0.74 $ 0.86 Return on average tangible assets(1) 1.07% 1.30% 1.65% Return on average tangible common equity(1) 10.31% 12.37% 15.20% (1) Ratios are annualized. See non-GAAP reconciliations below. Today National Bank Holdings Corporation (the “Company” or “NBHC”), the holding company for NBH Bank, announces the signing of a definitive merger agreement to acquire Community Bancorporation (“CB”), the holding company for Rock Canyon Bank, headquartered in Provo, Utah and operating in the greater Salt Lake City region. Upon completion of the exclusively negotiated transaction, NBHC will have approximately $9.6 billion in pro forma assets, including $6.0 billion in total loans, and $8.4 billion in total deposits when combined with the previously announced acquisition of Bancshares of Jackson Hole Incorporated. NBHC will also become the #1 third-party SBA loan volume originator in the state of Utah.
“Our focus on expanding NBHC’s presence in high performing U.S. markets is again demonstrated by the announcement of our intent to acquire Rock Canyon Bank,” said Tim Laney, Chairman, President and CEO of National Bank Holdings Corporation. “Rock Canyon Bank’s highly successful SBA business strategy de-risks the balance sheet, produces strong fee income, and is scalable across our franchise. Equally important, this acquisition strengthens our position as a premier regional bank serving the fast-growing Salt Lake City region. Rock Canyon Bank clients will continue to enjoy the exceptional service and local decision making they have come to expect. They will also benefit from enhanced service offerings including expanded commercial loan and treasury management solutions.”
“We are pleased to have found a partner in NBH Bank that shares our commitment to serving local businesses by providing highly personalized service that supports our clients’ and our communities’ success,” said Park Roney, President and CEO of Community Bancorporation and Chairman of Rock Canyon Bank. “NBH Bank has earned a reputation as an outstanding bank and is our partner of choice.”
Tod Monsen, CEO of Rock Canyon Bank went on to say, “NBH Bank brings us best-in-class banking solutions for our clients, and I am looking forward to working alongside their proven and high energy leadership team as we work to take our performance to the next level.”
Under the terms of the agreement, CB shareholders will receive approximately $16.1 million of cash consideration and approximately 3.1 million shares of NBHC common stock, subject to certain potential adjustments. The transaction has a value of $136.0 million in the aggregate, based on NBHC’s closing price of $38.69 on April 14, 2022.
In announcing NBHC’s first quarter 2022 results, Tim Laney shared, “We’re off to a solid start delivering quarterly earnings of $0.60 per diluted share. Our teams delivered record first quarter loan fundings driving strong annualized core loan growth of 15.8%. We continue to deliver on our proven track record of maintaining excellent credit quality with a record low non-performing loans ratio of 0.24%. Our excess liquidity coupled with a fortress balance sheet leaves the bank well positioned to address any implications of an economic downturn, while also providing optionality to be leveraged for future growth.”
First Quarter 2022 Results
(All comparisons refer to the fourth quarter of 2021, except as noted)Net income totaled $18.4 million, or $0.60 per diluted share, during the first quarter of 2022, compared to $22.8 million or $0.74 per diluted share during the fourth quarter of 2021. The return on average tangible assets was 1.07%, compared to 1.30%, and the return on average tangible common equity was 10.31%, compared to 12.37%.
Net Interest Income
Fully taxable equivalent net interest income totaled $48.0 million during the first quarter of 2022, a decrease of $2.8 million driven by $1.9 million lower accretion income from acquired loans, $1.4 million lower Paycheck Protection Program (“PPP”) loan fee income and a $0.9 million decrease from two fewer calendar days. These decreases were partially offset by higher loan volumes and yields as well as lower cost of funds. The fully taxable equivalent net interest margin narrowed 13 basis points to 2.90% due to lower accretion income from acquired loans and lower PPP loan fees. While the impact of the 25 basis point increase in the federal funds rate on March 16, 2022 had a nominal impact on the Company’s first quarter 2022 results, the Company’s net interest income in future periods will benefit from this rate increase. The yield on earnings assets decreased 13 basis points, and the cost of deposits improved one basis point to a record low 0.17%.Loans
Total loans ended the quarter at $4.7 billion, an increase of $160.9 million over the prior quarter. Excluding PPP loans of $7.6 million and $21.7 million for the first and fourth quarters respectively, total loans increased $174.9 million or 15.8% annualized, led by commercial loan growth of $152.9 million or 19.7% annualized. We generated record first quarter loan fundings totaling $419.7 million, led by commercial loan fundings of $305.3 million.Asset Quality and Provision for Loan Losses
The Company recorded $0.3 million of provision release during the quarter driven by strong asset quality. Annualized net charge-offs totaled 0.05%, compared to 0.02% in the prior quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDRs) remained a record low 0.24% of total loans, and non-performing assets decreased four basis points to 0.35% of total loans and OREO. The allowance for credit losses as a percentage of total loans totaled 1.04%, compared to 1.10% at December 31, 2021.Deposits
Average total deposits increased $33.8 million or 2.2% annualized, to $6.2 billion for the first quarter 2022. Average transaction deposits (defined as total deposits less time deposits) increased $63.7 million or 4.9% annualized. The mix of transaction deposits to total deposits improved 78 basis points to 87.4% at March 31, 2022. The loan to deposit ratio increased 97 basis points to 73.4%.Non-Interest Income
Non-interest income totaled $19.1 million, a decrease of $4.2 million primarily driven by $2.2 million lower unrealized gains from equity method investments included in the prior quarter and $0.7 million lower mortgage banking income. Service charges and bank card fees decreased a combined $0.5 million during the quarter due to seasonality.Non-Interest Expense
Non-interest expense totaled $44.1 million, a decrease of $0.4 million from the prior quarter. Salaries and benefits decreased $0.7 million largely due to two fewer calendar days. Included in the first quarter 2022 were $0.3 million of gains on sale of OREO, compared to $0.7 million in the prior quarter. The fully taxable equivalent efficiency ratio was 65.3% at March 31, 2022, compared to 59.7% at December 31, 2021.Income tax expense totaled $3.6 million during the first quarter, compared to $5.3 million. The effective tax rate for the first quarter 2022 was 16.4%, compared to 18.6% for the full year 2021. The lower rate compared to the statutory rate reflects the continued success of our tax strategies and tax-exempt income.
Capital
Capital ratios continue to be strong and in excess of federal bank regulatory agency “well capitalized” thresholds. The Tier 1 leverage ratios at March 31, 2022 for the consolidated company and NBH Bank were 10.48% and 9.09%, respectively. Shareholders’ equity totaled $820.2 million at March 31, 2022, decreasing $19.9 million primarily due to a higher accumulated other comprehensive loss.Common book value per share decreased $0.71 to $27.33 at March 31, 2022. Tangible common book value per share decreased $0.69 to $23.64 at March 31, 2022 as this quarter’s earnings, net of dividends paid, were outpaced by the increase in accumulated other comprehensive loss. Excluding accumulated other comprehensive loss, the tangible book value per share increased $0.37 to $24.93 at March 31, 2022.
Year-Over-Year Review
(All comparisons refer to the first quarter 2021, except as noted)Net income totaled $18.4 million, or $0.60 per diluted share, for the first quarter of 2022, compared to $26.8 million, or $0.86 per diluted share for the first quarter of 2021. The decrease was largely due to $12.7 million lower mortgage banking income, due to lower refinance activity in 2022. The return on average tangible assets was 1.07%, compared to 1.65% in the same period prior year, and the return on average tangible common equity was 10.31%, compared to 15.20%.
Fully taxable equivalent net interest income totaled $48.0 million, an increase of $1.5 million or 3.2%. Average earning assets increased $464.6 million, or 7.4%, including originated loan growth of $356.9 million. The fully taxable equivalent net interest margin narrowed 12 basis points to 2.90%, due to lower earning asset yields, which were partially offset by a decrease in the cost of funds. The yield on earning assets decreased 20 basis points driven by lower PPP loan forgiveness activity. The cost of deposits decreased 11 basis points to a record low 0.17%.
Loans outstanding totaled $4.7 billion, increasing $371.0 million or 8.6%. Excluding PPP loans of $7.6 million and $217.7 million for the first quarters 2022 and 2021 respectively, total loans increased $581.0 million or 14.2%, led by commercial loan growth of $534.6 million, or 19.4%. New loan fundings over the trailing 12 months totaled a record $1.7 billion, led by commercial loan fundings of $1.2 billion.
The Company recorded $0.3 million of provision release during the first quarter, compared to a provision release of $3.6 million in the same period last year. The provision release was driven by strong asset quality and an improved outlook in the CECL model’s underlying economic forecast. Net charge-offs totaled 0.05% of total loans, compared to 0.01% of total loans in the same period last year. Non-performing loans to total loans improved 14 basis points to 0.24% at March 31, 2022. The allowance for credit losses totaled 1.04% of total loans, compared to 1.28% at March 31, 2021.
Average total deposits increased $413.4 million or 7.2%, to $6.2 billion. Average non-interest bearing demand deposits increased $268.3 million or 12.4%, and average transaction deposits increased $559.0 million, or 11.6%. The mix of transaction deposits to total deposits increased by 319 basis points to 87.4%, and the mix of non-interest bearing demand deposits to total deposits improved 189 basis points to 40.1% at March 31, 2022.
Non-interest income totaled $19.1 million, a decrease of $14.3 million or 42.9%, driven by $12.7 million lower mortgage banking income due to lower refinance activity in 2022, as well as competition driving tighter gain on sale margins. Other non-interest income decreased $1.0 million due to $0.5 million lower unrealized gains on equity method investments. Included in the first quarter of 2022 was $0.7 million of banking center consolidation-related income, compared to $1.5 million in the same period last year. Service charges and bank card fees increased a combined $0.3 million compared to the first quarter 2021.
Non-interest expense totaled $44.1 million, a decrease of $5.6 million or 11.2%. Salaries and benefits decreased $4.2 million largely due to lower mortgage banking-related compensation. Occupancy and equipment decreased $0.2 million due to efficiencies gained from banking center consolidations. Problem asset workout expense decreased $0.3 million, and gain on sale of OREO increased $0.2 million.
Income tax expense totaled $3.6 million, a decrease of $2.1 million from the first quarter last year, driven by lower pre-tax income.
Acquisition of Rock Canyon Bank
Rock Canyon Bank was founded in 1991, and as of December 31, 2021 had $814.3 million in total assets, including $494.2 million in total loans, and $736.6 million in total deposits. Rock Canyon Bank is the leading third-party SBA loan originator in the state of Utah. Upon the close of the transaction, Rock Canyon Bank will operate as Hillcrest Bank. Please refer to the accompanying acquisition disclosure for additional transaction details.BofA Securities, Inc. served as financial advisor and Squire Patton Boggs (US) LLP served as legal counsel to National Bank Holdings Corporation. Kirton McConkie served as legal counsel to Community Bancorporation.
Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Tuesday, April 19, 2022. Interested parties may listen to this call by dialing (800) 289-0720/+44 (0)330 165 4012 (United Kingdom) using the confirmation code of 2525902 and asking for the NBHC Q1 2022 Earnings Call. A telephonic replay of the call will be available beginning approximately four hours after the call’s completion through April 24, 2022, by dialing (888) 203-1112 using the confirmation code of 2525902. The earnings release and an on-line replay of the call will also be available on the Company’s website at www.nationalbankholdings.com by visiting the investor relations area.About National Bank Holdings Corporation
National Bank Holdings Corporation is a bank holding company created to build a leading community bank franchise delivering high quality client service and committed to stakeholder results. Through its bank subsidiary, NBH Bank, National Bank Holdings Corporation operates a network of 81 banking centers, serving individual consumers, small, medium and large businesses, and government and non-profit entities. Its banking centers are located in its core footprint of Colorado, the greater Kansas City region, Texas, Utah and New Mexico. Its comprehensive residential mortgage banking group primarily serves the bank’s core footprint. NBH Bank operates under 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; and in Texas, Utah and New Mexico, Hillcrest Bank and Hillcrest Bank 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 or nbhbank.com. Or, follow us on any of our social media sites:
Community Banks of Colorado: facebook.com/cobnks, twitter.com/cobnks, instagram.com/cobnks;
Bank Midwest: facebook.com/bankmw, twitter.com/bank_mw, instagram.com/bankmw;
Hillcrest Bank: facebook.com/hillcrestbank, twitter.com/hillcrest_bank;
NBH Bank: twitter.com/nbhbank;
or connect with any of our brands on LinkedIn.About Non-GAAP Financial Measures
Certain of the financial measures and ratios we present, including “tangible assets,” “return on average tangible assets,” “tangible common equity,” “return on average tangible common equity,” “tangible common book value per share,” “tangible common book value, excluding accumulated other comprehensive loss, net of tax,” “tangible common book value per share, excluding accumulated other comprehensive loss, net of tax,” “tangible common equity to tangible assets,” and “fully taxable equivalent” metrics, are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.
A reconciliation of non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contain words such as “anticipate,” “believe,” “can,” “would,” “should,” “could,” “may,” “predict,” “seek,” “potential,” “will,” “estimate,” “target,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “intend” or similar expressions that relate to the Company’s strategy, plans or intentions. Forward-looking statements involve certain important risks, uncertainties and other factors, any of which could cause actual results to differ materially from those in such statements. Such factors include, without limitation, the “Risk Factors” referenced in our most recent Form 10-K filed with the Securities and Exchange Commission (SEC), other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, and the following factors: ability to obtain regulatory approvals and meet other closing conditions to the mergers on the expected terms and schedule; delay in closing the mergers; difficulties and delays in integrating the NBHC, Community Bancorporation, and Bancshares of Jackson Hole Incorporated businesses or fully realizing cost savings and other benefits; business disruption following the proposed transactions; ability to execute our business strategy; business and economic conditions; effects of any potential government shutdowns; economic, market, operational, liquidity, credit and interest rate risks associated with the Company’s business; effects of any changes in trade, monetary and fiscal policies and laws; changes imposed by regulatory agencies to increase capital standards; effects of inflation, as well as, interest rate, securities market and monetary supply fluctuations; changes in the economy or supply-demand imbalances affecting local real estate values; changes in consumer spending, borrowings and savings habits; with respect to our mortgage business, the inability to negotiate fees with investors for the purchase of our loans or our obligation to indemnify purchasers or repurchase related loans; the Company’s ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions, consolidations and other expansion opportunities; the Company's ability to realize anticipated benefits from enhancements or updates to its core operating systems from time to time without significant change in client service or risk to the Company's control environment; the Company's dependence on information technology and telecommunications systems of third-party service providers and the risk of systems failures, interruptions or breaches of security; the Company’s ability to achieve organic loan and deposit growth and the composition of such growth; changes in sources and uses of funds; increased competition in the financial services industry; the effect of changes in accounting policies and practices; the share price of the Company’s stock; the Company's ability to realize deferred tax assets or the need for a valuation allowance; the effects of tax legislation, including the potential of future increases to prevailing tax rules, or challenges to our position; continued consolidation in the financial services industry; ability to maintain or increase market share and control expenses; costs and effects of changes in laws and regulations and of other legal and regulatory developments; technological changes; the timely development and acceptance of new products and services, including in the digital technology space our digital solution 2UniFi; the Company’s continued ability to attract, hire and maintain qualified personnel; ability to implement and/or improve operational management and other internal risk controls and processes and reporting system and procedures; regulatory limitations on dividends from the Company's bank subsidiary; changes in estimates of future credit reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; widespread natural and other disasters, pandemics, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; a cybersecurity incident, data breach or a failure of a key information technology system; adverse effects due to the novel Coronavirus Disease 2019 (COVID-19) on the Company and its clients, counterparties, employees, and third-party service providers, and the adverse impacts on our business, financial position, results of operations, and prospects; impact of reputational risk; and success at managing the risks involved in the foregoing items. The Company can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of this press release, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.
Contact:
Analysts/Institutional Investors: Aldis Birkans, Chief Financial Officer, (720) 554-6640, ir@nationalbankholdings.com
Media: Jody Soper, Chief Marketing Officer, (303) 784-5925, Jody.Soper@nbhbank.comNATIONAL 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, 2022 2021 2021 Total interest and dividend income $ 49,525 $ 52,501 $ 49,213 Total interest expense 2,864 3,015 3,992 Net interest income 46,661 49,486 45,221 Taxable equivalent adjustment 1,313 1,299 1,268 Net interest income FTE(1) 47,974 50,785 46,489 Provision (release) expense for loan losses (322 ) 132 (3,575 ) Net interest income after provision for loan losses FTE(1) 48,296 50,653 50,064 Non-interest income: Service charges 3,710 3,905 3,474 Bank card fees 4,123 4,476 4,073 Mortgage banking income 9,666 10,387 22,379 Other non-interest income 847 3,388 1,847 OREO-related income — — 35 Banking center consolidation-related income 708 1,059 1,553 Total non-interest income 19,054 23,215 33,361 Non-interest expense: Salaries and benefits 29,336 29,986 33,523 Occupancy and equipment 6,396 6,133 6,550 Professional fees 814 781 742 Other non-interest expense 7,352 7,764 6,853 Problem asset workout 163 212 438 Gain on sale of OREO, net (275 ) (667 ) (29 ) Core deposit intangible asset amortization 296 296 296 Banking center consolidation-related expense — — 1,295 Total non-interest expense 44,082 44,505 49,668 Income before income taxes FTE(1) 23,268 29,363 33,757 Taxable equivalent adjustment 1,313 1,299 1,268 Income before income taxes 21,955 28,064 32,489 Income tax expense 3,603 5,295 5,677 Net income $ 18,352 $ 22,769 $ 26,812 Earnings per share - basic $ 0.61 $ 0.75 $ 0.87 Earnings per share - diluted 0.60 0.74 0.86 (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, 2022 December 31, 2021 March 31, 2021 ASSETS Cash and cash equivalents $ 786,385 $ 845,695 $ 822,518 Investment securities available-for-sale 790,384 691,847 666,915 Investment securities held-to-maturity 567,055 609,012 520,823 Non-marketable securities 54,568 50,740 15,493 Loans 4,674,238 4,513,383 4,303,246 Allowance for credit losses (48,810 ) (49,694 ) (55,057 ) Loans, net 4,625,428 4,463,689 4,248,189 Loans held for sale 90,152 139,142 228,888 Other real estate owned 5,063 7,005 5,669 Premises and equipment, net 95,133 96,747 101,830 Goodwill 115,027 115,027 115,027 Intangible assets, net 13,505 12,322 20,205 Other assets 198,812 182,785 203,944 Total assets $ 7,341,512 $ 7,214,011 $ 6,949,501 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Non-interest bearing demand deposits $ 2,554,820 $ 2,506,265 $ 2,295,704 Interest bearing demand deposits 595,137 555,401 557,850 Savings and money market 2,412,081 2,332,591 2,199,420 Total transaction deposits 5,562,038 5,394,257 5,052,974 Time deposits 802,772 833,916 948,676 Total deposits 6,364,810 6,228,173 6,001,650 Securities sold under agreements to repurchase 24,744 22,768 19,405 Long-term debt 39,505 39,478 — Other liabilities 92,238 83,486 96,456 Total liabilities 6,521,297 6,373,905 6,117,511 Shareholders' equity: Common stock 515 515 515 Additional paid in capital 1,014,332 1,014,294 1,010,798 Retained earnings 301,220 289,876 243,446 Treasury stock (457,219 ) (457,616 ) (423,254 ) Accumulated other comprehensive (loss) income, net of tax (38,633 ) (6,963 ) 485 Total shareholders' equity 820,215 840,106 831,990 Total liabilities and shareholders' equity $ 7,341,512 $ 7,214,011 $ 6,949,501 SHARE DATA Average basic shares outstanding 30,120,195 30,338,265 30,828,262 Average diluted shares outstanding 30,479,261 30,715,500 31,143,322 Ending shares outstanding 30,008,781 29,958,764 30,715,790 Common book value per share $ 27.33 $ 28.04 $ 27.09 Tangible common book value per share(1) (non-GAAP) 23.64 24.33 23.41 Tangible common book value per share, excluding accumulated other comprehensive income(1) (non-GAAP) 24.93 24.56 23.40 CAPITAL RATIOS Average equity to average assets 11.74 % 11.88 % 12.36 % Tangible common equity to tangible assets(1) 9.81 % 10.26 % 10.52 % Tier 1 leverage ratio 10.48 % 10.39 % 10.80 % Common equity tier 1 risk-based capital ratio 13.94 % 14.26 % 15.23 % Tier 1 risk-based capital ratio 13.94 % 14.26 % 15.23 % Total risk-based capital ratio 15.56 % 15.92 % 16.30 % (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, 2022 March 31, 2022 vs. December 31,
2021vs. March 31,
2021March 31, 2022 December 31, 2021 % Change March 31, 2021 % Change Originated: Commercial: Commercial and industrial $ 1,551,447 $ 1,479,895 4.8 % $ 1,395,461 11.2 % Municipal and non-profit 949,125 928,705 2.2 % 850,663 11.6 % Owner-occupied commercial real estate 554,345 503,663 10.1 % 476,625 16.3 % Food and agribusiness 205,899 200,412 2.7 % 178,419 15.4 % Total commercial 3,260,816 3,112,675 4.8 % 2,901,168 12.4 % Commercial real estate non-owner occupied 634,928 611,765 3.8 % 553,184 14.8 % Residential real estate 626,763 616,135 1.7 % 604,001 3.8 % Consumer 17,321 17,336 (0.1 )% 17,671 (2.0 )% Total originated 4,539,828 4,357,911 4.2 % 4,076,024 11.4 % Acquired: Commercial: Commercial and industrial 15,800 16,252 (2.8 )% 20,405 (22.6 )% Municipal and non-profit 335 340 (1.5 )% 370 (9.5 )% Owner-occupied commercial real estate 21,329 29,973 (28.8 )% 50,607 (57.9 )% Food and agribusiness 2,976 3,177 (6.3 )% 4,129 (27.9 )% Total commercial 40,440 49,742 (18.7 )% 75,511 (46.4 )% Commercial real estate non-owner occupied 46,431 52,964 (12.3 )% 81,176 (42.8 )% Residential real estate 47,314 52,521 (9.9 )% 70,141 (32.5 )% Consumer 225 245 (8.2 )% 394 (42.9 )% Total acquired 134,410 155,472 (13.5 )% 227,222 (40.8 )% Total loans $ 4,674,238 $ 4,513,383 3.6 % $ 4,303,246 8.6 % Loan Fundings(1)
First quarter Fourth quarter Third quarter Second quarter First quarter 2022 2021 2021 2021 2021 Commercial: Commercial and industrial $ 169,168 $ 229,529 $ 196,289 $ 147,030 $ 144,531 Municipal and non-profit 49,906 101,450 43,516 25,131 7,999 Owner occupied commercial real estate 67,597 28,914 53,445 48,225 27,093 Food and agribusiness 18,620 11,016 8,442 26,956 (10,104 ) Total commercial 305,291 370,909 301,692 247,342 169,519 Commercial real estate non-owner occupied 63,416 46,128 55,392 58,532 49,195 Residential real estate 49,040 55,873 54,442 53,962 74,145 Consumer 1,904 2,524 1,810 2,267 1,353 Total $ 419,651 $ 475,434 $ 413,336 $ 362,103 $ 294,212 (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 $66,430, $138,777, $29,154, $59,520 and ($26,395) as of the first quarter of 2022 and the fourth, third, second and first quarter of 2021, 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, 2022 December 31, 2021 March 31, 2021 Average Average Average Average Average Average balance Interest rate balance Interest rate balance Interest rate Interest earning assets: Originated loans FTE(1)(2) $ 4,361,919 $ 42,085 3.91% $ 4,296,318 $ 43,066 3.98% $ 4,004,994 $ 39,560 4.01% Acquired loans 147,638 2,568 7.05% 172,567 4,493 10.33% 238,468 5,128 8.72% Loans held for sale 93,639 756 3.27% 166,470 1,214 2.89% 231,521 1,517 2.66% Investment securities available-for-sale 751,646 2,849 1.52% 689,994 2,560 1.48% 686,731 2,485 1.45% Investment securities held-to-maturity 589,830 2,012 1.36% 637,250 1,994 1.25% 421,119 1,416 1.34% Other securities 14,590 209 5.73% 14,590 209 5.73% 15,818 210 5.31% Interest earning deposits and securities purchased under agreements to resell 743,239 359 0.20% 678,729 264 0.15% 639,273 165 0.10% Total interest earning assets FTE(2) $ 6,702,501 $ 50,838 3.08% $ 6,655,918 $ 53,800 3.21% $ 6,237,924 $ 50,481 3.28% Cash and due from banks $ 79,383 $ 79,058 $ 81,253 Other assets 442,098 460,664 495,222 Allowance for credit losses (49,584 ) (49,069 ) (58,915 ) Total assets $ 7,174,398 $ 7,146,571 $ 6,755,484 Interest bearing liabilities: Interest bearing demand, savings and money market deposits $ 2,936,158 $ 1,437 0.20% $ 2,847,562 $ 1,500 0.21% $ 2,645,487 $ 1,652 0.25% Time deposits 821,814 1,094 0.54% 851,779 1,312 0.61% 967,447 2,335 0.98% Securities sold under agreements to repurchase 22,770 7 0.12% 20,420 7 0.14% 21,377 5 0.09% Long-term debt 39,489 326 3.35% 24,599 196 3.16% — — 0.00% Total interest bearing liabilities $ 3,820,231 $ 2,864 0.30% $ 3,744,360 $ 3,015 0.32% $ 3,634,311 $ 3,992 0.45% Demand deposits $ 2,434,198 $ 2,459,063 $ 2,165,868 Other liabilities 78,027 94,345 120,607 Total liabilities 6,332,456 6,297,768 5,920,786 Shareholders' equity 841,942 848,803 834,698 Total liabilities and shareholders' equity $ 7,174,398 $ 7,146,571 $ 6,755,484 Net interest income FTE(2) $ 47,974 $ 50,785 $ 46,489 Interest rate spread FTE(2) 2.78% 2.89% 2.83% Net interest earning assets $ 2,882,270 $ 2,911,558 $ 2,603,613 Net interest margin FTE(2) 2.90% 3.03% 3.02% Average transaction deposits $ 5,370,356 $ 5,306,625 $ 4,811,355 Average total deposits 6,192,170 6,158,404 5,778,802 Ratio of average interest earning assets to average interest bearing liabilities 175.45% 177.76% 171.64% (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 $1,313, $1,299 and $1,268 for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, 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, 2022 December 31, 2021 March 31, 2021 Beginning allowance for credit losses $ 49,694 $ 49,155 $ 59,777 Charge-offs (634 ) (268 ) (302 ) Recoveries 75 72 182 Provision (release) expense (325 ) 735 (4,600 ) Ending allowance for credit losses ("ACL") $ 48,810 $ 49,694 $ 55,057 Ratio of annualized net charge-offs to average total loans during the period 0.05% 0.02% 0.01% Ratio of ACL to total loans outstanding at period end 1.04% 1.10% 1.28% Ratio of ACL to total non-performing loans at period end 440.01% 458.77% 336.25% Total loans $ 4,674,238 $ 4,513,383 $ 4,303,246 Average total loans during the period 4,520,205 4,490,391 4,277,481 Total non-performing loans 11,093 10,832 16,374 Past Due and Non-accrual Loans
March 31, 2022 December 31, 2021 March 31, 2021 Loans 30-89 days past due and still accruing interest $ 3,034 $ 1,687 $ 1,867 Loans 90 days past due and still accruing interest 389 420 1,021 Non-accrual loans 11,093 10,832 16,374 Total past due and non-accrual loans $ 14,516 $ 12,939 $ 19,262 Total 90 days past due and still accruing interest and non-accrual loans to total loans 0.25% 0.25% 0.40% Asset Quality Data
March 31, 2022 December 31, 2021 March 31, 2021 Non-performing loans $ 11,093 $ 10,832 $ 16,374 OREO 5,063 7,005 5,669 Other repossessed assets — — 17 Total non-performing assets $ 16,156 $ 17,837 $ 22,060 Accruing restructured loans $ 4,979 $ 7,186 $ 13,822 Total non-performing loans to total loans 0.24% 0.24% 0.38% Total non-performing assets to total loans and OREO 0.35% 0.39% 0.51% NATIONAL BANK HOLDINGS CORPORATION
Key Ratios(1)As of and for the three months ended March 31, December 31, March 31, 2022 2021 2021 Return on average assets 1.04% 1.26% 1.61% Return on average tangible assets(2) 1.07% 1.30% 1.65% Return on average equity 8.84% 10.64% 13.03% Return on average tangible common equity(2) 10.31% 12.37% 15.20% Loan to deposit ratio (end of period) 73.44% 72.47% 71.70% Non-interest bearing deposits to total deposits (end of period) 40.14% 40.24% 38.25% Net interest margin(3) 2.82% 2.95% 2.94% Net interest margin FTE(2)(3) 2.90% 3.03% 3.02% Interest rate spread FTE(2)(4) 2.78% 2.89% 2.83% Yield on earning assets(5) 3.00% 3.13% 3.20% Yield on earning assets FTE(2)(5) 3.08% 3.21% 3.28% Cost of interest bearing liabilities(5) 0.30% 0.32% 0.45% Cost of deposits 0.17% 0.18% 0.28% Non-interest income to total revenue FTE(2) 28.43% 31.37% 41.78% Non-interest expense to average assets 2.49% 2.47% 2.98% Efficiency ratio 66.63% 60.81% 62.83% Efficiency ratio FTE(2) 65.32% 59.74% 61.83% Total Loans Asset Quality Data(6)(7)(8) Non-performing loans to total loans 0.24% 0.24% 0.38% Non-performing assets to total loans and OREO 0.35% 0.39% 0.51% Allowance for credit losses to total loans 1.04% 1.10% 1.28% Allowance for credit losses to non-performing loans 440.01% 458.77% 336.25% Net charge-offs to average loans(1) 0.05% 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 restructured loans on non-accrual. (7) Non-performing assets include non-performing loans and other real estate owned. (8) Total loans are net of unearned discounts and fees. NATIONAL BANK HOLDINGS CORPORATION
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
(Dollars in thousands, except share and per share data)Tangible Common Book Value Ratios
March 31, 2022 December 31, 2021 March 31, 2021 Total shareholders' equity $ 820,215 $ 840,106 $ 831,990 Less: goodwill and core deposit intangible assets, net (121,096 ) (121,392 ) (122,280 ) Add: deferred tax liability related to goodwill 10,298 10,070 9,384 Tangible common equity (non-GAAP) $ 709,417 $ 728,784 $ 719,094 Total assets $ 7,341,512 $ 7,214,011 $ 6,949,501 Less: goodwill and core deposit intangible assets, net (121,096 ) (121,392 ) (122,280 ) Add: deferred tax liability related to goodwill 10,298 10,070 9,384 Tangible assets (non-GAAP) $ 7,230,714 $ 7,102,689 $ 6,836,605 Tangible common equity to tangible assets calculations: Total shareholders' equity to total assets 11.17% 11.65% 11.97% Less: impact of goodwill and core deposit intangible assets, net (1.36)% (1.39)% (1.45)% Tangible common equity to tangible assets (non-GAAP) 9.81% 10.26% 10.52% Tangible common book value per share calculations: Tangible common equity (non-GAAP) $ 709,417 $ 728,784 $ 719,094 Divided by: ending shares outstanding 30,008,781 29,958,764 30,715,790 Tangible common book value per share (non-GAAP) $ 23.64 $ 24.33 $ 23.41 Tangible common book value per share, excluding accumulated other comprehensive income calculations: Tangible common equity (non-GAAP) $ 709,417 $ 728,784 $ 719,094 Accumulated other comprehensive loss (income), net of tax 38,633 6,963 (485 ) Tangible common book value, excluding accumulated other comprehensive loss (income), net of tax (non-GAAP) 748,050 735,747 718,609 Divided by: ending shares outstanding 30,008,781 29,958,764 30,715,790 Tangible common book value per share, excluding accumulated other comprehensive loss (income), net of tax (non-GAAP) $ 24.93 $ 24.56 $ 23.40 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, 2022 2021 2021 Net income $ 18,352 $ 22,769 $ 26,812 Add: impact of core deposit intangible amortization expense, after tax 227 227 228 Net income adjusted for impact of core deposit intangible amortization expense, after tax $ 18,579 $ 22,996 $ 27,040 Average assets $ 7,174,398 $ 7,146,571 $ 6,755,484 Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill (110,973 ) (111,508 ) (113,074 ) Average tangible assets (non-GAAP) $ 7,063,425 $ 7,035,063 $ 6,642,410 Average shareholders' equity $ 841,942 $ 848,803 $ 834,698 Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill (110,973 ) (111,508 ) (113,074 ) Average tangible common equity (non-GAAP) $ 730,969 $ 737,295 $ 721,624 Return on average assets 1.04% 1.26% 1.61% Return on average tangible assets (non-GAAP) 1.07% 1.30% 1.65% Return on average equity 8.84% 10.64% 13.03% Return on average tangible common equity (non-GAAP) 10.31% 12.37% 15.20% 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, 2022 2021 2021 Interest income $ 49,525 $ 52,501 $ 49,213 Add: impact of taxable equivalent adjustment 1,313 1,299 1,268 Interest income FTE (non-GAAP) $ 50,838 $ 53,800 $ 50,481 Net interest income $ 46,661 $ 49,486 $ 45,221 Add: impact of taxable equivalent adjustment 1,313 1,299 1,268 Net interest income FTE (non-GAAP) $ 47,974 $ 50,785 $ 46,489 Average earning assets $ 6,702,501 $ 6,655,918 $ 6,237,924 Yield on earning assets 3.00% 3.13% 3.20% Yield on earning assets FTE (non-GAAP) 3.08% 3.21% 3.28% Net interest margin 2.82% 2.95% 2.94% Net interest margin FTE (non-GAAP) 2.90% 3.03% 3.02% Efficiency Ratio
As of and for the three months ended March 31, December 31, March 31, 2022 2021 2021 Net interest income $ 46,661 $ 49,486 $ 45,221 Add: impact of taxable equivalent adjustment 1,313 1,299 1,268 Net interest income, FTE (non-GAAP) $ 47,974 $ 50,785 $ 46,489 Non-interest income $ 19,054 $ 23,215 $ 33,361 Non-interest expense $ 44,082 $ 44,505 $ 49,668 Less: core deposit intangible asset amortization (296 ) (296 ) (296 ) Non-interest expense, adjusted for core deposit intangible asset amortization $ 43,786 $ 44,209 $ 49,372 Efficiency ratio 66.63% 60.81% 62.83% Efficiency ratio FTE (non-GAAP) 65.32% 59.74% 61.83% A Media Snippet accompanying this announcement is available by clicking on the image or link below:
