National Bank Holdings Corporation Announces Fourth Quarter and Record Full Year 2021 Financial Results

Greenwood Village, Colorado, UNITED STATES


DENVER, Jan. 20, 2022 (GLOBE NEWSWIRE) -- National Bank Holdings Corporation (NYSE: NBHC) reported:

                
  For the quarter For the year
  4Q21 3Q21 4Q20 2021 2020
Net income ($000's) $ 22,769  $19,825  $27,169  $ 93,606  $88,591 
Earnings per share - diluted $ 0.74  $0.64  $0.87  $ 3.01  $2.85 
Return on average tangible assets(1)  1.30%  1.14%  1.67%  1.37%  1.44%
Return on average tangible common equity(1)  12.37%  10.65%  15.55%  12.87%  13.27%

                                                      

(1) Quarterly ratios are annualized. See non-GAAP reconciliations below.
    

In announcing these results, Chief Executive Officer Tim Laney shared, “We finished the year with strong momentum delivering fourth quarter earnings of $0.74 per diluted share and record full year earnings of $3.01 per diluted share. For the second consecutive quarter, our team delivered record loan originations. We delivered annualized loan growth of 13.4% in the fourth quarter, excluding PPP loans. Our credit metrics remain solid with just three basis points of net charge-offs for the year and a record low non-performing loans ratio of 0.24%. We have carried our momentum into the new year, and we are well positioned to execute on our growth strategies with ample liquidity and a strong capital position.”

Mr. Laney added, “We will continue to focus on growing our core business while also innovating and building the partnerships that will help us deliver a comprehensive digital financial ecosystem for our clients. By reducing costs and providing real-time information for our small and medium sized businesses, we have an opportunity to reduce their stress and save them precious time that they can devote to executing their business strategies.”

Fourth Quarter 2021 Results
(All comparisons refer to the third quarter of 2021, except as noted)

Net income totaled $22.8 million, or $0.74 per diluted share, an increase of $2.9 million or 14.8% over the third quarter. The return on average tangible assets increased sixteen basis points to 1.30%, and the return on average tangible common equity increased 172 basis points to 12.37%.

Net Interest Income
Fully taxable equivalent net interest income totaled $50.8 million during the fourth quarter of 2021, an increase of $1.9 million. Excluding Paycheck Protection Program (“PPP”) loan fee income of $1.8 million, which was $0.7 million lower than last quarter, net interest income increased $2.6 million or 22.5% annualized. The fully taxable equivalent net interest margin widened 10 basis points to 3.03% driven by excess cash liquidity being deployed into higher yielding originated loans. The yield on earnings assets increased nine basis points, with the cost of deposits decreasing three basis points to a record low 0.18%.

Loans
Total loans ended the quarter at $4.5 billion, an increase of $91.6 million over the prior quarter. Excluding PPP loans, total loans increased $146.7 million or 13.4% annualized, led by commercial loan growth of $150.2 million or 19.9% annualized. For the second consecutive quarter, we generated record quarterly loan originations totaling $475.4 million, led by commercial loan originations of $370.9 million.

Asset Quality and Provision for Loan Losses
The Company recorded $0.1 million of provision expense, compared to zero loan loss provision last quarter. The quarter’s provision was driven by loan growth partially offset by strong asset quality and an improved outlook in the CECL model’s underlying economic forecast. Annualized net charge-offs totaled 0.02% consistent with the prior quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDRs) improved five basis points to a record low 0.24% of total loans, and non-performing assets remained consistent at 0.39% of total loans and OREO. The allowance for credit losses as a percentage of total loans totaled 1.10%, compared to 1.11% at September 30, 2021.

Deposits
Average total deposits increased $28.4 million or 1.8% annualized, to $6.2 billion for the fourth quarter 2021. Average transaction deposits (defined as total deposits less time deposits) increased $80.6 million or 6.1% annualized. The mix of transaction deposits to total deposits improved 90 basis points to 86.6% at December 31, 2021. The loan to deposit ratio increased 39 basis points to 72.5%.

Non-Interest Income
Non-interest income totaled $23.2 million, a decrease of $5.3 million largely driven by lower mortgage banking income. Included in other non-interest income were $2.0 million of unrealized gains from equity method investments. Included in the quarter was $1.1 million of banking center consolidation-related income, compared to $1.2 million in the prior quarter.

Non-Interest Expense
Non-interest expense totaled $44.5 million, a decrease of $6.8 million from the prior quarter. Salaries and benefits decreased $2.6 million largely due to lower mortgage-related compensation. Included in the prior quarter were $2.4 million of transaction-related expenses for the strategic investment in Finstro Global Holdings Inc. and Figure Technologies. The fully taxable equivalent efficiency ratio improved to 59.7% at December 31, 2021, compared to 65.9% at September 30, 2021.

Income tax expense totaled $5.3 million during the fourth quarter, compared to $5.0 million. Included in income tax expense was $0.2 million of benefit from stock compensation activity during the fourth quarter. Adjusting for stock compensation activity, the effective tax rate was 19.8%, compared to 20.0% in the prior quarter. 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 December 31, 2021 for the consolidated company and NBH Bank were 10.39% and 9.09%, respectively. Shareholders’ equity totaled $840.1 million at December 31, 2021, decreasing $4.6 million primarily due to higher accumulated other comprehensive loss.

Common book value per share increased $0.15 to $28.04 at December 31, 2021. Tangible common book value per share increased $0.13 to $24.33 at December 31, 2021 driven by the quarter’s earnings, net of dividends paid and share repurchases. Excluding accumulated other comprehensive loss, the tangible book value per share increased $0.32 to $24.56 at December 31, 2021.

Recent Events
The COVID-19 pandemic has caused disruption and is likely to continue to present challenges to our business. We continue to remain committed to ensuring our associates, clients and communities are receiving the support they need through our banking centers and our digital banking platform. Our teams have been working diligently to support our clients who are experiencing financial hardship due to COVID-19 through participation in the SBA’s Paycheck Protection Program, including assistance with PPP loan forgiveness applications, and loan modifications, as needed. While access to vaccines in the United States has increased, the efficacy of those vaccines, the impact of emerging targeted vaccine mandates and new variants of the virus, and the length of time that the government-mandated measures must remain in place or potentially be reinstituted to address COVID-19 are unknown. The pandemic has had a negative impact to the U.S. labor market, consumer spending and business operations, and it is not clear how long new outbreaks of COVID-19 cases will have a continued impact.

Year-Over-Year Review
(All comparisons refer to the full year 2020, except as noted)

Net income totaled a record $93.6 million, or $3.01 per diluted share, an increase of $5.0 million or 5.7% over the prior year. The return on average tangible assets was 1.37% compared to 1.44% in the prior year, and the return on average tangible common equity was 12.87%, compared to 13.27%.

Fully taxable equivalent net interest income totaled $192.3 million, decreasing $5.7 million or 2.9%, as a result of interest rate actions taken by the Federal Reserve during 2020. Average earning assets increased $725.4 million, or 12.5%, primarily driven by increases in average interest bearing cash balances of $544.9 million and average investment securities of $404.3 million. The fully taxable equivalent net interest margin narrowed 47 basis points to 2.95% due to lower earning asset yields. The yield on earning assets decreased 69 basis points, driven by the remix of assets into lower-yielding cash balances. The cost of deposits decreased 22 basis points to 0.23%.

Loans outstanding totaled $4.5 billion, increasing $159.7 million or 3.7%. Excluding PPP loans, total loans increased $314.1 million or 7.5%, led by commercial loan growth of $272.8 million, or 9.5%. New loan originations over the trailing 12 months totaled a record $1.5 billion, led by commercial loan originations of $1.1 billion including PPP loan originations of $121.1 million.

The Company recorded $9.3 million of net provision release during 2021, compared to $17.6 million of provision expense in the prior 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 0.03% of total loans, compared to 0.06% of total loans in the prior year. Non-performing loans to total loans improved 23 basis points to 0.24%, compared to 0.47% at December 31, 2020. The allowance for credit losses totaled 1.10% of total loans, compared to 1.37% at December 31, 2020.

Average total deposits increased $775.2 million or 14.7%, to $6.0 billion during 2021. Average non-interest bearing demand deposits increased $857.2 million or 57.2%, and average transaction deposits increased $898.5 million, or 21.2%. The mix of transaction deposits to total deposits increased by 400 basis points to 86.6%, and the mix of non-interest bearing demand deposits to total deposits improved 305 basis points to 40.2% at December 31, 2021.

Non-interest income totaled $110.4 million, a decrease of $29.9 million or 21.3%, driven by $39.0 million lower mortgage banking income due to slower refinance activity in 2021 and competition driving tighter gain on sale margins. Bank card fees increased $2.2 million. Other non-interest income increased $2.9 million due to unrealized gains from equity method investments. Included in 2021 was $4.6 million of banking center consolidation-related income, compared to $0.3 million in 2020.

Non-interest expense totaled $191.8 million, a decrease of $14.3 million or 7.0%, driven by lower mortgage-related compensation as well as the Company’s strategic efforts to improve operating efficiency. Included in 2021 were $2.5 million of transaction-related professional fees for the previously announced investments in our digital financial ecosystem. Salaries and benefits decreased $13.7 million primarily due to lower mortgage banking related compensation. Occupancy and equipment decreased $2.2 million largely due to efficiencies gained from banking center consolidations. Problem asset workout expense decreased $1.1 million, and gain on sale of OREO increased $0.4 million.

Income tax expense totaled $21.4 million, an increase of $0.6 million, driven by 2021’s higher pre-tax income. Included in income tax expense was $0.6 million of tax benefit and $0.1 million of tax expense from stock compensation activity during 2021 and 2020, respectively. Adjusting for stock compensation activity, the effective tax rate for 2021 was 19.1%, compared to 19.0% for 2020.

Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Friday, January 21, 2022. Interested parties may listen to this call by dialing (800) 289-0720/+44 (0)330 336 9601 (United Kingdom) using the confirmation code of 2454367 and asking for the NBHC Q4 2021 Earnings Call. A telephonic replay of the call will be available beginning approximately four hours after the call’s completion through January 26, 2022, by dialing (888) 203-1112 using the confirmation code of 2454367. 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 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.

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 the following brand names: Community Banks of Colorado and Community Banks Mortgage, a division of NBH Bank, in Colorado, Bank Midwest and Bank Midwest Mortgage in Kansas and Missouri, and Hillcrest Bank and Hillcrest Bank Mortgage in Texas, Utah and New Mexico. 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.

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 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; 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; 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; 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.com

NATIONAL BANK HOLDINGS CORPORATION
FINANCIAL SUMMARY
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except share and per share data)

               
 For the three months ended  For the years ended
 December 31,     September 30,     December 31,     December 31,     December 31, 
 2021 2021 2020 2021 2020
Total interest and dividend income$ 52,501  $50,801 $53,288  $ 200,965  $218,002 
Total interest expense  3,015   3,232  4,732    13,821   25,056 
Net interest income  49,486   47,569  48,556    187,144   192,946 
Taxable equivalent adjustment  1,299   1,315  1,260    5,161   5,103 
Net interest income FTE(1)  50,785   48,884  49,816    192,305   198,049 
Provision expense (release) for loan losses  132         (9,293)  17,630 
Net interest income after provision for loan losses FTE(1)  50,653   48,884  49,816    201,598   180,419 
Non-interest income:              
Service charges  3,905   3,947  4,000    14,894   14,962 
Bank card fees  4,476   4,530  4,240    17,693   15,446 
Mortgage banking income  10,387   16,615  23,138    63,360   102,384 
Other non-interest income  3,388   2,266  1,493    9,752   6,823 
OREO-related income      284    35   387 
Banking center consolidation-related income  1,059   1,164  202    4,630   256 
Total non-interest income  23,215   28,522  33,357    110,364   140,258 
Non-interest expense:              
Salaries and benefits  29,986   32,556  32,919    127,504   141,170 
Occupancy and equipment  6,133   6,469  6,619    25,283   27,473 
Professional fees  781   3,251  864    5,423   2,946 
Other non-interest expense  7,764   7,624  6,725    29,260   27,947 
Problem asset workout  212   1,119  807    2,063   3,148 
Gain on sale of OREO, net  (667)    (13)   (475)  (38)
Core deposit intangible asset amortization  296   295  296    1,183   1,183 
Banking center consolidation-related expense      208    1,589   2,348 
Total non-interest expense  44,505   51,314  48,425    191,830   206,177 
               
Income before income taxes FTE(1)  29,363   26,092  34,748    120,132   114,500 
Taxable equivalent adjustment  1,299   1,315  1,260    5,161   5,103 
Income before income taxes  28,064   24,777  33,488    114,971   109,397 
Income tax expense  5,295   4,952  6,319    21,365   20,806 
Net income$ 22,769  $19,825 $27,169  $ 93,606  $88,591 
Earnings per share - basic$ 0.75  $0.64 $0.88  $ 3.04  $2.87 
Earnings per share - diluted  0.74   0.64  0.87    3.01   2.85 

                                                      

(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)

         
 December 31, 2021 September 30, 2021    December 31, 2020
ASSETS        
Cash and cash equivalents$ 845,695  $807,370  $605,565 
Investment securities available-for-sale  691,847   657,833   661,955 
Investment securities held-to-maturity  609,012   642,636   376,615 
Non-marketable securities  50,740   46,964   22,073 
Loans  4,513,383   4,421,760   4,353,726 
Allowance for credit losses  (49,694)  (49,155)  (59,777)
Loans, net  4,463,689   4,372,605   4,293,949 
Loans held for sale  139,142   158,066   247,813 
Other real estate owned  7,005   4,325   4,730 
Premises and equipment, net  96,747   94,114   106,982 
Goodwill  115,027   115,027   115,027 
Intangible assets, net  12,322   11,621   17,928 
Other assets  182,785   190,430   207,313 
Total assets$ 7,214,011  $7,100,991  $6,659,950 
LIABILITIES AND SHAREHOLDERS' EQUITY        
Liabilities:        
Non-interest bearing demand deposits$ 2,506,265  $2,447,099  $2,111,045 
Interest bearing demand deposits  555,401   546,597   514,286 
Savings and money market  2,332,591   2,264,083   2,064,769 
Total transaction deposits  5,394,257   5,257,779   4,690,100 
Time deposits  833,916   876,841   986,132 
Total deposits  6,228,173   6,134,620   5,676,232 
Securities sold under agreements to repurchase  22,768   21,427   22,897 
Long-term debt  39,478       
Other liabilities  83,486   100,228   140,130 
Total liabilities  6,373,905   6,256,275   5,839,259 
Shareholders' equity:        
Common stock  515   515   515 
Additional paid in capital  1,014,294   1,013,064   1,011,362 
Retained earnings  289,876   273,900   223,175 
Treasury stock  (457,616)  (441,366)  (424,127)
Accumulated other comprehensive (loss) income, net of tax  (6,963)  (1,397)  9,766 
Total shareholders' equity  840,106   844,716   820,691 
Total liabilities and shareholders' equity$ 7,214,011  $7,100,991  $6,659,950 
SHARE DATA        
Average basic shares outstanding  30,338,265   30,800,590   30,784,896 
Average diluted shares outstanding  30,715,500   31,064,815   31,032,648 
Ending shares outstanding  29,958,764   30,288,131   30,634,291 
Common book value per share$ 28.04  $27.89  $26.79 
Tangible common book value per share(1) (non-GAAP)  24.33   24.20   23.09 
Tangible common book value per share, excluding accumulated other comprehensive income(1) (non-GAAP)  24.56   24.24   22.77 
CAPITAL RATIOS        
Average equity to average assets 11.88%  12.07%  12.27%
Tangible common equity to tangible assets(1) 10.26%  10.49%  10.80%
Tier 1 leverage ratio 10.39%  10.43%  10.70%
Common equity tier 1 risk-based capital ratio 14.26%  14.57%  14.70%
Tier 1 risk-based capital ratio 14.26%  14.57%  14.70%
Total risk-based capital ratio 15.92%  15.48%  15.83%

                                                      

(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

             
     December 31, 2021   December 31, 2021
     vs. September 30, 2021   vs. December 31, 2020
 December 31, 2021 September 30, 2021 % Change December 31, 2020 % Change
Originated:            
Commercial:            
Commercial and industrial$ 1,458,218 $1,352,481 7.8% $1,248,530 16.8%
Municipal and non-profit  928,705  878,988 5.7%  870,410 6.7%
Owner-occupied commercial real estate  503,663  504,415 (0.1)%  464,417 8.5%
Food and agribusiness  200,412  195,766 2.4%  205,189 (2.3)%
PPP loans(1)  21,677  76,794 (71.8)%  176,106 (87.7)%
Total commercial  3,112,675  3,008,444 3.5%  2,964,652 5.0%
Commercial real estate non-owner occupied  611,765  605,143 1.1%  542,642 12.7%
Residential real estate  616,135  608,158 1.3%  581,555 5.9%
Consumer  17,336  17,735 (2.2)%  18,581 (6.7)%
Total originated  4,357,911  4,239,480 2.8%  4,107,430 6.1%
             
Acquired:            
Commercial:            
Commercial and industrial  16,252  17,521 (7.2)%  22,102 (26.5)%
Municipal and non-profit  340  347 (2.0)%  381 (10.8)%
Owner-occupied commercial real estate  29,973  37,335 (19.7)%  51,821 (42.2)%
Food and agribusiness  3,177  3,653 (13.0)%  5,108 (37.8)%
Total commercial  49,742  58,856 (15.5)%  79,412 (37.4)%
Commercial real estate non-owner occupied  52,964  65,784 (19.5)%  89,354 (40.7)%
Residential real estate  52,521  57,344 (8.4)%  77,105 (31.9)%
Consumer  245  296 (17.2)%  425 (42.4)%
Total acquired  155,472  182,280 (14.7)%  246,296 (36.9)%
Total loans$ 4,513,383 $4,421,760 2.1% $4,353,726 3.7%

                                                      

(1)    PPP loan balances are net of fees and costs and include principal totaling $22,300, $79,242 and $179,531 as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively.


Originations(1)

               
 Fourth quarter Third quarter Second quarter First quarter Fourth quarter
 2021 2021 2021 2021  2020
Commercial:              
Commercial and industrial$ 229,529 $196,289 $147,030 $23,390  $96,625
Municipal and non-profit  101,450  43,516  25,131  7,999   25,348
Owner occupied commercial real estate  28,914  53,445  48,225  27,093   36,085
Food and agribusiness  11,016  8,442  26,956  (10,104)  19,191
PPP loans       121,141   
Total commercial  370,909  301,692  247,342  169,519   177,249
Commercial real estate non-owner occupied  46,128  55,392  58,532  49,195   52,018
Residential real estate  55,873  54,442  53,962  74,145   41,355
Consumer  2,524  1,810  2,267  1,353   1,858
Total$ 475,434 $413,336 $362,103 $294,212  $272,480

                                                      

(1)    Originations are defined as closed end funded loans and net fundings under revolving lines of credit. Net fundings (paydowns) under revolving lines of credit were $138,777, $29,154, $59,520, ($26,395) and $50,982 as of the fourth, third, second and first quarters of 2021 and the fourth quarter of 2020, 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
  December 31, 2021 September 30, 2021 December 31, 2020
  Average          Average    Average          Average    Average          Average
  balance Interest rate balance Interest rate balance Interest rate
Interest earning assets:                           
Originated loans FTE(1)(2) $ 4,296,318  $ 43,066  3.98% $4,137,001  $41,865  4.01% $4,129,155  $43,200  4.16%
Acquired loans   172,567    4,493  10.33%  187,419   3,796  8.04%  259,233   5,715  8.77%
Loans held for sale   166,470    1,214  2.89%  157,381   1,166  2.94%  248,326   1,699  2.72%
Investment securities available-for-sale   689,994    2,560  1.48%  656,757   2,572  1.57%  574,642   2,177  1.52%
Investment securities held-to-maturity   637,250    1,994  1.25%  671,053   2,178  1.30%  369,812   1,410  1.53%
Other securities   14,590    209  5.73%  14,657   210  5.73%  18,195   212  4.66%
Interest earning deposits and securities purchased under agreements to resell   678,729    264  0.15%  799,779   329  0.16%  509,150   135  0.11%
Total interest earning assets FTE(2) $ 6,655,918  $ 53,800  3.21% $6,624,047  $52,116  3.12% $6,108,513  $54,548  3.55%
Cash and due from banks $ 79,058        $77,498        $73,768       
Other assets   460,664         463,553         514,053       
Allowance for credit losses   (49,069)        (48,957)        (60,844)      
Total assets $ 7,146,571        $7,116,141        $6,635,490       
Interest bearing liabilities:                           
Interest bearing demand, savings and money market deposits $ 2,847,562  $ 1,500  0.21% $2,803,071  $1,516  0.21% $2,746,597  $1,776  0.26%
Time deposits   851,779    1,312  0.61%  903,935   1,711  0.75%  1,008,297   2,949  1.16%
Securities sold under agreements to repurchase   20,420    7  0.14%  19,681   5  0.10%  23,410   7  0.12%
Long-term debt   24,599    196  3.16%       0.00%       0.00%
Total interest bearing liabilities $ 3,744,360  $ 3,015  0.32% $3,726,687  $3,232  0.34% $3,778,304  $4,732  0.50%
Demand deposits $ 2,459,063        $2,422,976        $1,898,171       
Other liabilities   94,345         107,233         144,532       
Total liabilities   6,297,768         6,256,896         5,821,007       
Shareholders' equity   848,803         859,245         814,483       
Total liabilities and shareholders' equity $ 7,146,571        $7,116,141        $6,635,490       
Net interest income FTE(2)    $ 50,785       $48,884       $49,816   
Interest rate spread FTE(2)        2.89%        2.78%        3.05%
Net interest earning assets $ 2,911,558        $2,897,360        $2,330,209       
Net interest margin FTE(2)        3.03%        2.93%        3.24%
Average transaction deposits $ 5,306,625        $5,226,047        $4,644,768       
Average total deposits   6,158,404         6,129,982         5,653,065       
Ratio of average interest earning assets to average interest bearing liabilities  177.76%        177.75%        161.67%      

                                                      

(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 $1,299, $1,315 and $1,260 for the three months ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively.


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

                
 For the year ended December 31, 2021 For the year ended December 31, 2020
 Average         Average Average         Average
 balance Interest rate balance Interest rate
Interest earning assets:               
Originated loans FTE(1)(2)$ 4,129,684  $ 164,527 3.98% $4,237,091  $171,592 4.05%
Acquired loans  202,174    17,340 8.58%  299,901   27,909 9.31%
Loans held for sale  178,373    5,110 2.86%  185,182   5,628 3.04%
Investment securities available-for-sale  667,859    10,014 1.50%  591,870   11,406 1.93%
Investment securities held-to-maturity  576,343    7,311 1.27%  248,006   5,099 2.06%
Other securities  15,032    838 5.57%  26,903   1,157 4.30%
Interest earning deposits and securities purchased under agreements to resell  751,835    986 0.13%  206,911   314 0.15%
Total interest earning assets FTE(2)$ 6,521,300  $ 206,126 3.16% $5,795,864  $223,105 3.85%
Cash and due from banks$ 78,979       $74,461      
Other assets  472,775        511,721      
Allowance for credit losses  (52,943)       (55,778)     
Total assets$ 7,020,111       $6,326,268      
Interest bearing liabilities:               
Interest bearing demand, savings and money market deposits$ 2,772,091  $ 6,240 0.23% $2,730,857  $8,605 0.32%
Time deposits  914,837    7,362 0.80%  1,038,107   15,024 1.45%
Securities sold under agreements to repurchase  20,338    23 0.11%  28,585   132 0.46%
Long-term debt  6,200    196 3.16%      0.00%
Federal Home Loan Bank advances     0.00%  95,418   1,295 1.36%
Total interest bearing liabilities$ 3,713,466  $ 13,821 0.37% $3,892,967  $25,056 0.64%
Demand deposits$ 2,355,171       $1,497,940      
Other liabilities  104,935        147,075      
Total liabilities  6,173,572        5,537,982      
Shareholders' equity  846,539        788,286      
Total liabilities and shareholders' equity$ 7,020,111       $6,326,268      
Net interest income FTE(2)   $ 192,305      $198,049  
Interest rate spread FTE(2)      2.79%       3.21%
Net interest earning assets$ 2,807,834       $1,902,897      
Net interest margin FTE(2)      2.95%       3.42%
Average transaction deposits$ 5,127,262       $4,228,797      
Average total deposits  6,042,099        5,266,904      
Ratio of average interest earning assets to average interest bearing liabilities 175.61%       148.88%     

                                                      

(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 $5,161 and $5,103 for the years ended December 31, 2021 and December 31, 2020, 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
 December 31, 2021 September 30, 2021 December 31, 2020
Beginning allowance for credit losses$ 49,155  $49,030  $60,979 
Charge-offs  (268)  (322)  (1,259)
Recoveries  72   101   57 
Provision expense  735   346    
Ending allowance for credit losses ("ACL")$ 49,694  $49,155  $59,777 
Ratio of annualized net charge-offs to average total loans during the period 0.02%  0.02%  0.11%
Ratio of annualized net charge-offs to average total loans excluding PPP loans during the period 0.02%  0.02%  0.11%
Ratio of ACL to total loans outstanding at period end 1.10%  1.11%  1.37%
Ratio of ACL to total loans outstanding excluding PPP loans at period end 1.11%  1.13%  1.43%
Ratio of ACL to total non-performing loans at period end 458.77%  382.59%  293.21%
Total loans$ 4,513,383  $4,421,760  $4,353,726 
Average total loans during the period  4,490,391   4,352,557   4,431,694 
Average total loans excluding PPP loans during the period  4,437,880   4,245,524   4,160,520 
Total non-performing loans  10,832   12,848   20,387 


Past Due and Non-accrual Loans

         
 December 31, 2021 September 30, 2021 December 31, 2020
Loans 30-89 days past due and still accruing interest$ 1,687  $1,302  $968 
Loans 90 days past due and still accruing interest  420   495   162 
Non-accrual loans  10,832   12,848   20,387 
Total past due and non-accrual loans$ 12,939  $14,645  $21,517 
Total 90 days past due and still accruing interest and non-accrual loans to total loans 0.25%  0.30%  0.47%


Asset Quality Data

         
 December 31, 2021 September 30, 2021 December 31, 2020
Non-performing loans$ 10,832  $12,848  $20,387 
OREO  7,005   4,325   4,730 
Other repossessed assets       17 
Total non-performing assets$ 17,837  $17,173  $25,134 
Accruing restructured loans$ 7,186  $11,135  $13,945 
Total non-performing loans to total loans 0.24%  0.29%  0.47%
Total non-performing loans to total loans excluding PPP loans 0.24%  0.30%  0.49%
Total non-performing assets to total loans and OREO 0.39%  0.39%  0.58%
Total non-performing assets to total loans and OREO excluding PPP loans 0.40%  0.39%  0.60%


NATIONAL BANK HOLDINGS CORPORATION
Key Ratios(1)

          
 As of and for the three months ended  As of and for the years ended
 December 31,     September 30,     December 31,     December 31,  December 31, 
 2021    2021    2020    2021 2020
Return on average assets1.26% 1.11% 1.63% 1.33% 1.40%
Return on average tangible assets(2)1.30% 1.14% 1.67% 1.37% 1.44%
Return on average equity10.64% 9.15% 13.27% 11.06% 11.24%
Return on average tangible common equity(2)12.37% 10.65% 15.55% 12.87% 13.27%
Loan to deposit ratio (end of period)72.47% 72.08% 76.70% 72.47% 76.70%
Non-interest bearing deposits to total deposits (end of period)40.24% 39.89% 37.19% 40.24% 37.19%
Net interest margin(3)2.95% 2.85% 3.16% 2.87% 3.33%
Net interest margin FTE(2)(3)3.03% 2.93% 3.24% 2.95% 3.42%
Interest rate spread FTE(2)(5)2.89% 2.78% 3.05% 2.79% 3.21%
Yield on earning assets(4)3.13% 3.04% 3.47% 3.08% 3.76%
Yield on earning assets FTE(2)(4)3.21% 3.12% 3.55% 3.16% 3.85%
Cost of interest bearing liabilities(4)0.32% 0.34% 0.50% 0.37% 0.64%
Cost of deposits0.18% 0.21% 0.33% 0.23% 0.45%
Non-interest income to total revenue FTE(2)31.37% 36.85% 40.11% 36.46% 41.46%
Non-interest expense to average assets2.47% 2.86% 2.90% 2.73% 3.26%
Efficiency ratio60.81% 67.05% 58.76% 64.08% 61.52%
Efficiency ratio FTE(2)59.74% 65.91% 57.87% 62.99% 60.59%
          
Total Loans Asset Quality Data(6)(7)(8)         
Non-performing loans to total loans0.24% 0.29% 0.47% 0.24% 0.47%
Non-performing loans to total loans excluding PPP loans0.24% 0.30% 0.49% 0.24% 0.49%
Non-performing assets to total loans and OREO0.39% 0.39% 0.58% 0.39% 0.58%
Non-performing assets to total loans and OREO excluding PPP loans0.40% 0.39% 0.60% 0.40% 0.60%
Allowance for credit losses to total loans1.10% 1.11% 1.37% 1.10% 1.37%
Allowance for credit losses to total loans excluding PPP loans1.11% 1.13% 1.43% 1.11% 1.43%
Allowance for credit losses to non-performing loans458.77% 382.59% 293.21% 458.77% 293.21%
Net charge-offs to average loans(1)0.02% 0.02% 0.11% 0.03% 0.06%

                                                      

(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 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.
(5)    Interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average cost of interest bearing liabilities.
(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

         
 December 31, 2021 September 30, 2021 December 31, 2020
Total shareholders' equity$ 840,106  $844,716  $820,691 
Less: goodwill and core deposit intangible assets, net  (121,392)  (121,688)  (122,575)
Add: deferred tax liability related to goodwill  10,070   9,841   9,155 
Tangible common equity (non-GAAP)$ 728,784  $732,869  $707,271 
         
Total assets$ 7,214,011  $7,100,991  $6,659,950 
Less: goodwill and core deposit intangible assets, net  (121,392)  (121,688)  (122,575)
Add: deferred tax liability related to goodwill  10,070   9,841   9,155 
Tangible assets (non-GAAP)$ 7,102,689  $6,989,144  $6,546,530 
         
Tangible common equity to tangible assets calculations:        
Total shareholders' equity to total assets 11.65%  11.90%  12.32%
Less: impact of goodwill and core deposit intangible assets, net (1.39)%  (1.41)%  (1.52)%
Tangible common equity to tangible assets (non-GAAP) 10.26%  10.49%  10.80%
         
Tangible common book value per share calculations:        
Tangible common equity (non-GAAP)$ 728,784  $732,869  $707,271 
Divided by: ending shares outstanding  29,958,764   30,288,131   30,634,291 
Tangible common book value per share (non-GAAP)$ 24.33  $24.20  $23.09 
         
Tangible common book value per share, excluding accumulated other comprehensive income calculations:        
Tangible common equity (non-GAAP)$ 728,784  $732,869  $707,271 
Accumulated other comprehensive loss (income), net of tax  6,963   1,397   (9,766)
Tangible common book value, excluding accumulated other comprehensive loss (income), net of tax (non-GAAP)  735,747   734,266   697,505 
Divided by: ending shares outstanding  29,958,764   30,288,131   30,634,291 
Tangible common book value per share, excluding accumulated other comprehensive loss (income), net of tax (non-GAAP)$ 24.56  $24.24  $22.77 


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 years ended
  December 31,     September 30,     December 31,     December 31,     December 31, 
  2021    2021    2020    2021    2020
Net income $ 22,769  $19,825  $27,169  $ 93,606  $88,591 
Add: impact of core deposit intangible amortization expense, after tax   227   227   228    909   910 
Net income adjusted for impact of core deposit intangible amortization expense, after tax $ 22,996  $20,052  $27,397  $ 94,515  $89,501 
                
Average assets $ 7,146,571  $7,116,141  $6,635,490  $ 7,020,111  $6,326,268 
Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill   (111,508)  (112,026)  (113,594)   (111,944)  (114,031)
Average tangible assets (non-GAAP) $ 7,035,063  $7,004,115  $6,521,896  $ 6,908,167  $6,212,237 
                
Average shareholders' equity $ 848,803  $859,245  $814,483  $ 846,539  $788,286 
Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill   (111,508)  (112,026)  (113,594)   (111,944)  (114,031)
Average tangible common equity (non-GAAP) $ 737,295  $747,219  $700,889  $ 734,595  $674,255 
                
Return on average assets  1.26%  1.11%  1.63%  1.33%  1.40%
Return on average tangible assets (non-GAAP)  1.30%  1.14%  1.67%  1.37%  1.44%
Return on average equity  10.64%  9.15%  13.27%  11.06%  11.24%
Return on average tangible common equity (non-GAAP)  12.37%  10.65%  15.55%  12.87%  13.27%


Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin

                
  As of and for the three months ended As of and for the years ended
  December 31,  September 30,  December 31,  December 31,  December 31, 
  2021 2021 2020 2021 2020
Interest income $ 52,501     $50,801     $53,288     $ 200,965  $218,002 
Add: impact of taxable equivalent adjustment   1,299   1,315   1,260    5,161   5,103 
Interest income FTE (non-GAAP) $ 53,800  $52,116  $54,548  $ 206,126  $223,105 
                
Net interest income $ 49,486  $47,569  $48,556  $ 187,144  $192,946 
Add: impact of taxable equivalent adjustment   1,299   1,315   1,260    5,161   5,103 
Net interest income FTE (non-GAAP) $ 50,785  $48,884  $49,816  $ 192,305  $198,049 
                
Average earning assets $ 6,655,918  $6,624,047  $6,108,513  $ 6,521,300  $5,795,864 
Yield on earning assets  3.13%  3.04%  3.47%  3.08%  3.76%
Yield on earning assets FTE (non-GAAP)  3.21%  3.12%  3.55%  3.16%  3.85%
Net interest margin  2.95%  2.85%  3.16%  2.87%  3.33%
Net interest margin FTE (non-GAAP)  3.03%  2.93%  3.24%  2.95%  3.42%

Efficiency Ratio

                
  As of and for the three months ended As of and for the years ended
     December 31,     September 30,     December 31,     December 31,     December 31, 
     2021     2021    2020    2021     2020
Net interest income $ 49,486  $47,569  $48,556  $ 187,144  $192,946 
Add: impact of taxable equivalent adjustment   1,299   1,315   1,260    5,161   5,103 
Net interest income, FTE (non-GAAP) $ 50,785  $48,884  $49,816  $ 192,305  $198,049 
                
Non-interest income $ 23,215  $28,522  $33,357  $ 110,364  $140,258 
                
Non-interest expense $ 44,505  $51,314  $48,425  $ 191,830  $206,177 
Less: core deposit intangible asset amortization   (296)  (295)  (296)   (1,183)  (1,183)
Non-interest expense, adjusted for core deposit intangible asset amortization $ 44,209  $51,019  $48,129  $ 190,647  $204,994 
                
Efficiency ratio  60.81%  67.05%  58.76%  64.08%  61.52%
Efficiency ratio FTE (non-GAAP)  59.74%  65.91%  57.87%  62.99%  60.59%