National Bank Holdings Corporation Announces Fourth Quarter and Full Year 2015 Financial Results

28 Jan, 2016, 16:23 ET from National Bank Holdings Corporation

GREENWOOD VILLAGE, Colo., Jan. 28, 2016 /PRNewswire/ -- National Bank Holdings Corporation (NYSE: NBHC) reported net income of $3.3 million, or $0.11 per diluted share, for the fourth quarter of 2015, compared to net income of $1.6 million, or $0.05 per diluted share, for the third quarter of 2015 and $2.3 million, or $0.06 per diluted share, for the fourth quarter of 2014. For the full year 2015, net income totaled $4.9 million, or $0.14 per diluted share, compared to net income of $9.2 million, or $0.22 per diluted share, during 2014.

In announcing these results, Chief Executive Officer Tim Laney said, "We closed out 2015 with loan production of $967 million, realizing 20% year-over-year spot loan growth and 32% growth in our originated loan portfolio. We remain focused on building and maintaining a diverse, conservatively structured loan portfolio that protects against stress in any one sector.  Net charge-offs were only 12 basis points for the year, which were well within our guidance, and criticized and classified loan levels declined during the fourth quarter. We continued to grow our low-cost deposit base and have increased our average transaction deposits and repurchase agreements by $238 million, or 10% during 2015. We also delivered solid banking related non-interest income growth, which increased 9% over last year. We executed strategic expense initiatives throughout 2015, realizing a net 3.2% decrease in operating expenses compared to the prior year, and we expect to continue to reduce operating expenses during 2016."

Mr. Laney added, "We successfully repurchased 8.6 million shares throughout 2015, or 22% of our outstanding shares. Since early 2013, we have repurchased 42% of our shares outstanding, at a weighted average price of $19.88. Our capital position remains strong with excess capital of $135 million above a 9% leverage ratio as of year-end. Our excess capital is a source of strength and gives us flexibility to react to future opportunities to leverage capital in situations that we believe will create attractive returns for our shareholders."

Mr. Laney concluded, "We also completed three significant regulatory initiatives during the fourth quarter, including the termination of our operating agreement with the OCC, the termination of the loss-share agreements with the FDIC, and finally, the Bank's charter conversion from a national association to a Colorado state-chartered bank. These milestones in our company's history are expected to result in many future benefits, including cost efficiencies and greater clarity and comparability of our financial results."

Brian Lilly, Chief Financial Officer, added, "We continue to evaluate the progress of building our company by analyzing the financial results that are expected to emerge over time. We do this by excluding the impact of the non-cash FDIC indemnification asset amortization, FDIC loss-share income/expense, the large expense/income related to the workout of acquired problem assets, the impacts of the change in the warrant liability, severance expense accruals, banking center consolidation expense accruals, bargain purchase gain and one-time expenses from the acquisition of Pine River, and our core system conversion-related expenses, which can be seen in our non-GAAP reconciliation starting on page 16. These items negatively impacted the fourth quarter by a net $0.05 per diluted share. The additional $0.05 per diluted share would have resulted in an adjusted net income per diluted share of $0.16 for the fourth quarter of 2015 compared to an adjusted $0.17 for the prior quarter. The adjusted return on average tangible assets was 0.48% during the fourth quarter."

Fourth Quarter 2015 Highlights

(All comparisons refer to the third quarter of 2015, except as noted)

  • Grew total loans by $64.5 million, or 10.1% annualized, driven by $238.1 million in fourth quarter originations partially offset by higher than normal pay-downs. Strategic loans at December 31, 2015 increased a strong $507.2 million, or 25.9%, since December 31, 2014 on the strength of $966.9 million in loan originations.
  • Total loans ended 2015 at $2.6 billion, a 19.7% increase since December 31, 2014.
  • Net charge-offs in the non 310-30 portfolio were 0.09% of average non 310-30 loans during the fourth quarter and totaled 0.12% for the full year.
  • Successfully exited $23.5 million of the remaining non-strategic loan portfolio, a strong 65.1% annualized. Non-strategic loans decreased $81.9 million for the full year, or 40.6%, to just $119.8 million at December 31, 2015.
  • Added a net $2.7 million to accretable yield for the acquired loans accounted for under ASC 310-30.
  • Average transaction deposits increased $46.6 million, or 7.1% annualized, while cost of deposits remained flat at 0.35%.
  • Average demand deposits continued solid growth, adding $15.1 million, or 7.4% annualized, while total deposits remained relatively flat as higher-cost time deposits declined.
  • Net interest income totaled $39.9 million, a $1.2 million increase from the prior quarter.
  • Exited loss-share agreements with the FDIC, resulting in a $4.9 million gain.
  • Banking related non-interest income totaled $8.6 million, increasing $0.3 million, or 13.7% annualized.
  • Non-interest expenses increased $3.6 million, or 9.2%, from the prior quarter, driven by one-time expenses related to the core system conversion and efficiency initiatives.
  • Successfully completed bank charter conversion from a national association to a Colorado state-chartered bank.
  • At December 31, 2015, tangible common book value per share was $18.22 before consideration of the excess accretable yield value of $1.21 per share.

Fourth Quarter 2015 Results

(All comparisons refer to the third quarter of 2015, except as noted)

Net Interest Income

Net interest income totaled $39.9 million for the fourth quarter of 2015, a $1.2 million increase from the prior quarter driven by $1.0 million of accelerated 310-30 accretion and other accelerated discounts realized on acquired loans. The accelerated income plus lower levels of short-term investments widened the net interest margin 19 basis points to 3.73% from the prior quarter of 3.54% (fully taxable equivalent). Average interest earning assets totaled $4.3 billion and decreased $74.8 million, driven by an $84.2 million decrease in lower-yielding short-term investments.

Loans

Total loans ended the quarter at $2.6 billion, increasing $64.5 million, or 10.1% annualized, driven by new loan originations totaling $238.1 million. Strategic loans totaled $2.5 billion at December 31, 2015 and grew $88.1 million during the quarter, or 14.7% annualized. Included in strategic loans outstanding are $2.2 billion in originated balances, which increased $106.7 million, or 20.4% annualized, over the prior quarter and 32.5% over the fourth quarter of 2014. Consistent with the strategy of exiting the non-strategic loan portfolio, balances of non-strategic relationships ended the year at $119.8 million, decreasing $23.5 million during the quarter, a strong 65.1% annualized. Strategic loans include all originated loans in addition to those acquired loans inside our operating markets that meet our credit risk profile. Identification as strategic for acquired loans was made at the time of acquisition. Criteria utilized in the designation of an acquired loan as "strategic" include (a) geography, (b) total relationship with borrower and (c) credit metrics commensurate with our underwriting standards. 

Asset Quality and Provision for Loan Losses

Acquired troubled loans accounted for under 310-30 totaled $202.8 million at December 31, 2015 and decreased $18.1 million during the fourth quarter, an annualized decrease of 32.4%, reflecting workout efforts on these acquired loans. The quarterly fair value re-measurement on the 310-30 loans resulted in a favorable net transfer of $2.7 million from non-accretable difference to accretable yield, which will be recognized over the lives of the 310-30 pools. This increased the life-to-date economic benefit of the accretable yield transfers net of impairments on 310-30 loans to $203.7 million

Non 310-30 loans totaled $2.4 billion and represented 92.2% of total loans at December 31, 2015. These loans are comprised of originated loans and acquired loans not accounted for under 310-30. Net charge-offs within the non 310-30 portfolio totaled $2.1 million during the fourth quarter, primarily from a general industries commercial loan. Non-performing non 310-30 loans (comprised of non-accrual loans and non-accrual TDRs) decreased by $3.0 million at quarter end, representing 1.08% of total non 310-30 loans, compared to 1.24% at September 30, 2015. A provision for loan losses on the non 310-30 loans of $5.2 million was recorded during the fourth quarter of 2015, driven by loan growth, net charge-offs, and increased specific reserves of $2.6 million primarily from the previously mentioned commercial loan and one energy services loan.

Energy sector loan balances totaled $146.9 million at December 31, 2015, representing 5.7% of total loans, 3.4% of earning assets and 28.3% of the Bank's tier one capital, and decreased from $147.5 million in the prior quarter. Of the $146.9 million energy sector loans, $118.3 million or 80.5% related to the midstream and E&P sectors and $28.6 million or 19.5% related to the energy services sector. The energy portfolio is granular, with an average loan balance of $5.2 million per client. Two energy services clients with loan balances totaling $12.0 million were placed on non-accrual during the third quarter 2015. Non-accrual classification was determined to be prudent based on the clients' weakening liquidity and capital given prolonged stress on energy prices. One of these loans has a specific reserve of $2.1 million at December 31, 2015. The implied allowance for loan losses is 2.65% of energy sector loan balances.

Rick Newfield, Chief Risk Management Officer, said "We recognized the importance of a diversified and granular loan portfolio and established in-house concentration limits from day one. For example, no single industry sector can comprise more than 15% of total loan exposure, and we have tighter limits in place for several industries. We have also maintained granularity, with commercial loans originated in 2015 averaging $1.6 million. With respect to non-owner occupied commercial real estate, we have remained disciplined with balances representing just 85% of the Bank's tier one capital at December 31, 2015."

OREO ended the quarter at $20.8 million, increasing $1.8 million, driven by one loan transferred to OREO during the quarter. Gains on sales of OREO were $0.4 million during the fourth quarter compared to $0.2 million in the previous quarter.

Deposits

Transaction deposits (defined as total deposits less time deposits) averaged $2.6 billion during the fourth quarter, increasing $46.6 million, or 7.1% annualized. The increase was due to higher average demand deposits of $15.1 million, or 7.4% annualized, coupled with an increase in other low-cost transaction deposits of $31.5 million, or 7.0% annualized. Total deposits and client repurchase agreements averaged $4.0 billion during the fourth quarter, decreasing $37.8 million, driven by a $45.6 million decrease in higher-cost time deposits. Additionally, the average cost of total deposits remained unchanged from the prior quarter at 0.35%. The balance sheet continues to be strongly funded by client deposits and client repurchase agreements, and at December 31, 2015, these client fundings comprised 97.8% of total liabilities.

Non-Interest Income

Non-interest income totaled $15.4 million in the fourth quarter of 2015, increasing $11.7 million. FDIC-related non-interest income increased $10.7 million, driven by the termination of the loss-share agreements and the resulting gain of $4.9 million. Banking related non-interest income (excludes FDIC-related non-interest income, gain on previously charged-off acquired loans and OREO related income) totaled $8.6 million during the fourth quarter of 2015 and increased $0.3 million, or 13.7% annualized, compared to the prior quarter. A seasonal decrease in service charges was more than offset by an increase in mark-to-market adjustments of $0.6 million related to fair value interest rate swaps on fixed-rate term loans. OREO related income increased $1.3 million during the fourth quarter of 2015 primarily due to a valuation adjustment on one foreclosed property, offset by the bargain purchase gain recorded in the prior quarter.

"The early termination of the FDIC loss-share agreements had a positive impact on the fourth quarter, including a one-time pre-tax gain of $4.9 million, resulting primarily from the settlement payment made to the FDIC and the write-off of the remaining FDIC indemnification asset of $18.2 million and the clawback payable of $38.7 million." said Brian Lilly. "We are pleased with the mutually beneficial end to this partnership and the improvement in our financial transparency and comparability to industry peers going forward."

Non-Interest Expense

Total non-interest expense was $42.2 million during the fourth quarter of 2015, increasing $3.6 million. The increase was driven by one-time core system conversion-related expenses of $1.1 million, efficiency initiative expenses related to severance accruals and banking center consolidation expense accruals of $1.3 million, and the change in warrant liability fair value adjustments of $0.9 million. One-time non-interest expenses included in the fourth quarter totaled $3.7 million. Problem asset workout expenses totaled $1.5 million and decreased $0.1 million from the prior quarter. Problem asset workout expenses are expected to continue to fluctuate quarterly as the acquired problem asset portfolio is resolved.

This week, we announced plans to consolidate seven banking centers in our Community Banks of Colorado footprint during the second quarter of 2016 as part of our continued focus on operational efficiency. Six owned banking centers were classified as held-for-sale during the fourth quarter, resulting in a fair value impairment charge of $0.3 million. The payback period on the consolidation is expected to be less than one year. 

Income tax expense totaled $4.4 million, an effective tax rate of 56.6%, on pre-tax earnings of $7.7 million. Included in the tax expense is $1.9 million of deferred tax asset write-offs in connection with stock compensation agreements. Without this $1.9 million charge, tax expense would have been $2.5 million, an effective tax rate of 32.3%. 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 well in excess of federal bank regulatory agency "well capitalized" thresholds. Shareholders' equity totaled $617.5 million at December 31, 2015 and decreased $3.6 million from the prior quarter. The decrease in equity is due to a decrease of $8.6 million in accumulated other comprehensive income, net of tax, which was driven by the fair market value fluctuations of the available-for-sale investment securities portfolio, partially offset by a reclassification of the warrant liability to equity during the quarter totaling $3.1 million.

Tangible common book value per share decreased to $18.22 at December 31, 2015 from $18.31 in the prior quarter, driven by a change in accumulated other comprehensive income, net of tax, due to the fair market value fluctuations of the available-for-sale investment securities portfolio. The tangible common equity to tangible assets ratio increased to 11.98% at December 31, 2015 from 11.76% in the prior quarter, driven by a decrease in tangible assets. The leverage ratio at December 31, 2015 for the consolidated company and the Bank was 11.75% and 11.20%, respectively.

A common convention in the industry is to add the value of the accretable yield to the tangible book value per share. The value of the December 31, 2015 accretable yield balance on the 310-30 loans of $84.2 million would add $1.69 after-tax to the tangible book value per share. A more conservative methodology that management uses values the excess yield above a 4.0% yield (an approximate yield on new loan originations) and then considers the timing of the excess accreted interest income recognition discounted at 5%. This would add $1.21 after-tax to our tangible book value per share as of December 31, 2015, resulting in a tangible common book value per share of $19.43.

Year-Over-Year Review

(All comparisons refer to the full year 2014)

Net income for 2015 was $4.9 million, or $0.14 per diluted share, compared to net income of $9.2 million, or $0.22 per diluted share for 2014. Net interest income totaled $156.9 million and decreased $13.3 million, or 7.8%, primarily driven by lower levels of higher-yielding acquired loans. Average interest earning assets remained consistent as increases in the originated loan portfolio offset reductions in the investment portfolio and non-strategic acquired loans. The continued resolution of the higher-yielding acquired non-strategic loan portfolio and higher levels of lower-yielding short-term investments led to a 25 basis point narrowing of the fully taxable equivalent net interest margin to 3.60% from 3.85%.

Loan balances at December 31, 2015 totaled $2.6 billion and increased $425.3 million, or 19.7%. Strategic loans increased $507.2 million, or 25.9%, on the strength of loan originations. Loan originations during 2015 totaled $966.9 million, increasing 11.2%, as a result of continued market penetration. Non-strategic loans declined $81.9 million, or 40.6%, as a result of the continued workout progress that has been made on exiting acquired problem loans.

Average transaction deposits and client repurchase agreements totaled $2.7 billion during 2015 and increased $237.9 million, or 9.5%. The increase was driven by higher average demand deposits of $81.6 million, or 11.6%, coupled with an increase in other low-cost transaction deposits of $57.6 million, or 3.4%. Client repurchase agreements also increased $98.7 million, or 99.6%. Total deposits and client repurchase agreements averaged $4.0 billion during 2015, increasing $97.4 million from the prior year. The increase in total deposits was driven by growth in transaction deposits and client repurchase agreements, offset by a $140.6 million decrease in average time deposits as we continued to focus our deposit base on clients who were interested in market-rate time deposits and in developing a banking relationship. The mix of transaction deposits to total deposits improved to 68.9% at December 31, 2015 from 64.0% at prior year end. Additionally, the average cost of total deposits declined one basis point to 0.36% in 2015 from 0.37% during 2014. 

Provision for loan loss expense was $12.4 million during 2015, compared to $6.2 million during 2014, an increase of $6.2 million.  The increase in provision was primarily due to an increase in specific reserves of $5.6 million. The non 310-30 allowance was 1.09% of total non 310-30 loans compared to 0.90% in the prior year, increasing primarily due to the higher specific reserves and an increase in the general allowance as the originated portfolio becomes a larger component of non 310-30 loans. Net charge-offs on non 310-30 loans remained low at only 0.12% during 2015 compared to 0.05% during 2014.

Non-interest income was $21.4 million in 2015 compared to a negative $1.7 million in the prior year, an increase of $23.1 million. The increase was largely due to $21.1 million higher FDIC related income driven by $7.0 million less indemnification amortization, $9.2 million increase in other FDIC loss-share income, and a $4.9 million gain on the termination of the FDIC loss-share agreements. Banking related non-interest income totaled $33.0 million during 2015, increasing $2.6 million, or 8.6%, as a result of increases in bank card fees, gain on sale of mortgages, mark-to-market adjustments related to fair value interest rate swaps on fixed-rate term loans, and bank-owned life insurance income, and were somewhat offset by a decrease in overdraft fees.

Total non-interest expense was $158.0 million in 2015, increasing $8.0 million. The increase was driven by lower year-over-year OREO gains of $7.0 million, one-time core system conversion-related expenses of $3.0 million, efficiency initiative expenses related to severance accruals and banking center consolidation expense accruals of $2.4 million, change in warrant liability fair value adjustments of $3.1 million primarily due to the change in our stock price, and $2.1 million related to the addition of Pine River Valley Bank. These increases were partially offset by a net decrease in operating expenses of $4.8 million during 2015 and a $4.1 million contract termination expense in 2014. One-time non-interest expenses totaled $6.2 million during 2015 and are excluded from operating expenses in 2015. When further adjusted for the additional Pine River Valley Bank expenses, operating expenses decreased a net $4.8 million year-over-year, or 3.2%. Operating expense reductions were driven by lower compensation costs, banking center consolidations and successful vendor contract negotiations. Operating expenses exclude problem asset workout expenses, and one-time expenses related to the change in the warrant liability, contract termination expenses, banking center consolidation expense accruals, severance expense accruals, core system conversion-related expenses, and acquisition-related expenses.  

Included in our efficiency initiative expenses for 2015 are $1.4 million of banking center consolidation expense accruals from the consolidation of twelve, or 12.4%, of our total banking centers over the past year.

Conference Call

Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Friday, January 29, 2016. Interested parties may listen to this call by dialing (877) 272-6762 (United States) / (615) 800-6832 (International) using the Conference ID of 12866911 and asking for the National Bank Holdings Corporation Fourth Quarter Earnings conference call. A telephonic replay of the call will be available beginning approximately two hours after the call's completion through February 12, 2016, by dialing (855) 859-2056 (United States) / (404) 537-3406 (International) using the Conference ID of 12866911. The earnings release 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 "operating expenses," "tangible assets," "return on average tangible assets," "return on average tangible common equity," "tangible common book value," "tangible common book value per share," "tangible common equity," "tangible common equity to tangible assets," "fully taxable equivalent" metrics, "adjusted net income," "adjusted basic earnings per share," "adjusted diluted earnings per share," and "adjusted return on average tangible assets," 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 are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. In particular, the items that we exclude in our adjustments are not necessarily consistent with the items that our peers may exclude from their results of operations and key financial measures and therefore may limit the comparability of similarly named financial measures and ratios. 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 customer service and committed to shareholder results. National Bank Holdings Corporation operates a network of 97 banking centers located in Colorado, the greater Kansas City region and Texas. Through the Company's subsidiary, NBH Bank, it operates under the following brand names: Bank Midwest in Kansas and Missouri, Community Banks of Colorado in Colorado and Hillcrest Bank in Texas. Additional information about National Bank Holdings Corporation can be found at www.nationalbankholdings.com.

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 additional factors: ability to execute our business strategy; business and economic conditions; 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 consumer spending, borrowings and savings habits; the Company's ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions; the Company's ability to successfully convert core operating systems, at the estimated cost, without significant business interruption and to realize the anticipated benefits; 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 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 loan reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; widespread natural and other disasters, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; 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.

 

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 year ended

December 31, 

September 30, 

December 31, 

December 31, 

December 31, 

2015

2015

2014

2015

2014

Total interest and dividend income

$

43,492

$

42,311

$

46,280

$

171,407

$

184,662

Total interest expense

3,563

3,629

3,696

14,462

14,413

Net interest income before provision for loan losses

39,929

38,682

42,584

156,945

170,249

Provision for loan losses on 310-30 loans

198

110

(185)

366

(520)

Provision for loan losses on non 310-30 loans

5,225

3,600

1,450

12,078

6,729

Net interest income after provision for loan losses

34,506

34,972

41,319

144,501

164,040

Non-interest income:

Service charges

3,821

3,953

3,872

14,798

15,430

Bank card fees

2,841

2,808

2,575

10,898

10,123

Gain on sale of mortgages, net

389

628

326

1,963

1,000

Other non-interest income

1,521

896

1,253

5,306

3,810

Gain on previously charged-off acquired loans

466

46

62

609

737

OREO related write-ups and other income

1,508

183

1,030

2,379

3,807

Bargain purchase gain

1,048

1,048

FDIC indemnification asset amortization/gain on termination

4,873

(5,798)

(7,922)

(15,878)

(27,741)

Other FDIC loss-sharing income (expense)

(3)

(6,313)

325

(8,862)

Total non-interest income

15,419

3,761

(5,117)

21,448

(1,696)

Non-interest expense:

Salaries and benefits

21,331

20,454

20,574

83,018

82,834

Occupancy and equipment

6,234

6,098

6,263

24,490

25,101

Professional fees

1,489

924

1,077

4,495

3,257

Other non-interest expense

9,572

8,735

8,539

34,562

34,178

Problem asset workout

1,448

1,583

(8,531)

4,541

(1,868)

Intangible asset amortization

1,370

1,359

1,336

5,401

5,344

Loss (gain) from the change in fair value of warrant liability

464

(476)

(219)

106

(2,953)

Banking center consolidation related expenses

322

1,411

Contract termination expense

4,110

4,110

Total non-interest expense

42,230

38,677

33,149

158,024

150,003

Income before income taxes

7,695

56

3,053

7,925

12,341

Income tax expense (benefit)

4,355

(1,580)

774

3,044

3,165

Net income

$

3,340

$

1,636

$

2,279

$

4,881

$

9,176

Income per share - basic

$

0.11

$

0.05

$

0.06

$

0.14

$

0.22

Income per share - diluted

$

0.11

$

0.05

$

0.06

$

0.14

$

0.22

 

NATIONAL BANK HOLDINGS CORPORATION

Consolidated Statements of Condition (Unaudited)

(Dollars in thousands, except share and per share data)

December 31, 2015

September 30, 2015

December 31, 2014

ASSETS

Cash and cash equivalents

$

166,092

$

153,156

$

256,979

Securities purchased under agreements to resell

50,000

Investment securities available-for-sale

1,157,246

1,244,267

1,479,214

Investment securities held-to-maturity

427,503

445,069

530,590

Non-marketable securities

22,529

27,049

27,045

Loans receivable, net

2,587,673

2,523,128

2,162,409

Allowance for loan losses

(27,119)

(23,827)

(17,613)

Loans, net

2,560,554

2,499,301

2,144,796

Loans held for sale

13,292

11,246

5,146

FDIC indemnification asset, net

18,155

39,082

Other real estate owned

20,814

19,034

29,120

Premises and equipment, net

103,103

104,452

106,341

Goodwill

59,630

59,630

59,630

Intangible assets, net

12,429

13,799

16,883

Other assets

140,716

142,891

124,820

Total assets

$

4,683,908

$

4,788,049

$

4,819,646

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

Non-interest bearing demand deposits

$

815,054

$

820,269

$

732,580

Interest bearing demand deposits

436,745

408,341

386,121

Savings and money market

1,394,995

1,390,054

1,290,436

Total transaction deposits

2,646,794

2,618,664

2,409,137

Time deposits

1,193,883

1,255,973

1,357,051

Total deposits

3,840,677

3,874,637

3,766,188

Securities sold under agreements to repurchase

136,523

169,488

133,552

Federal Home Loan Bank advances

40,000

40,000

40,000

Other liabilities

49,164

82,731

85,331

Total liabilities

4,066,364

4,166,856

4,025,071

Shareholders' equity:

Common stock

513

513

512

Additional paid in capital

997,926

995,440

993,212

Retained earnings

38,670

36,778

40,528

Treasury stock

(419,660)

(420,274)

(245,516)

Accumulated other comprehensive income, net of tax

95

8,736

5,839

Total shareholders' equity

617,544

621,193

794,575

Total liabilities and shareholders' equity

$

4,683,908

$

4,788,049

$

4,819,646

SHARE DATA

Average basic shares outstanding

30,625,371

32,681,181

39,439,646

Average diluted shares outstanding

30,795,333

32,762,516

39,444,330

Ending shares outstanding

30,358,509

30,318,684

38,884,953

Common book value per share

$

20.34

$

20.49

$

20.43

Tangible common book value per share (1)

$

18.22

$

18.31

$

18.63

Tangible common book value per share, excluding accumulated other comprehensive income(1)

$

18.22

$

18.02

$

18.48

CAPITAL RATIOS

Average equity to average assets

13.17

%

13.76

%

16.75

%

Tangible common equity to tangible assets (1)

11.98

%

11.76

%

15.25

%

Leverage ratio

11.75

%

11.50

%

14.98

%

(1)

Represents a non-GAAP financial measure.  See non-GAAP reconciliation starting on page 16.

NATIONAL BANK HOLDINGS CORPORATION

Loan Portfolio Update

(Dollars in thousands)

Accounting Treatment Period End Loan Balances:

December 31, 2015

September 30, 2015

December 31, 2014

ASC 310-

Non 310-

Total

ASC 310-

Non 310-

Total

ASC 310-

Non 310-

Total

30 Loans

30 Loans(1)

Loans

30 Loans

30 Loans(1)

Loans

30 Loans

30 Loans(1)

Loans

Commercial

$

13,007

$

1,039,769

$

1,052,776

$

19,226

$

999,400

$

1,018,626

$

22,956

$

772,440

$

795,396

Agriculture

16,752

145,558

162,310

17,908

131,119

149,027

19,063

118,468

137,531

Commercial real estate

148,888

506,331

655,219

153,546

480,709

634,255

192,330

369,264

561,594

Residential real estate

21,452

662,550

684,002

26,975

659,475

686,450

40,761

591,939

632,700

Consumer

2,731

30,635

33,366

3,237

31,533

34,770

4,535

30,653

35,188

Total

$

202,830

$

2,384,843

$

2,587,673

$

220,892

$

2,302,236

$

2,523,128

$

279,645

$

1,882,764

$

2,162,409

(1)

Included in non 310-30 loans are originated loans of $2,180,267, $2,073,560, and $1,645,533 as of December 31, 2015, September 30, 2015, and December 31, 2014, respectively, and loans acquired under business combinations of $204,576, $228,676 and $237,231 as of December 31, 2015, September 30, 2015, and December 31, 2014, respectively.

 

Strategic/Non-Strategic Period End Loan Balances:

December 31, 2015

September 30, 2015

December 31, 2014

Non-

Non-

Non-

Strategic

strategic

Total

Strategic

strategic

Total

Strategic

strategic

Total

Commercial

$

1,047,053

$

5,723

$

1,052,776

$

997,676

$

20,950

$

1,018,626

$

765,114

$

30,282

$

795,396

Agriculture

160,824

1,486

162,310

147,311

1,716

149,027

135,559

1,972

137,531

Owner-occupied commercial real estate

200,218

12,115

212,333

186,983

12,507

199,490

140,729

19,228

159,957

Commercial real estate

353,001

89,885

442,886

342,197

92,568

434,765

275,311

126,326

401,637

Residential real estate

674,351

9,651

684,002

672,008

14,442

686,450

610,583

22,117

632,700

Consumer

32,398

968

33,366

33,606

1,164

34,770

33,371

1,817

35,188

Total

$

2,467,845

$

119,828

$

2,587,673

$

2,379,781

$

143,347

$

2,523,128

$

1,960,667

$

201,742

$

2,162,409

 

Originations:

Fourth

Third

Second

First

Fourth

quarter

quarter

quarter

quarter

quarter

2015

2015

2015

2015

2014

Commercial

$

123,739

$

151,434

$

147,321

$

129,120

$

102,732

Agriculture

24,194

11,295

19,019

3,605

4,952

Owner-occupied commercial real estate

13,395

12,095

17,566

12,778

11,139

Commercial real estate

23,260

36,480

38,113

21,898

27,617

Residential real estate

50,387

36,808

44,699

33,042

31,680

Consumer

3,086

5,616

4,669

3,247

4,111

Total

$

238,061

$

253,728

$

271,387

$

203,690

$

182,231

 

NATIONAL BANK HOLDINGS CORPORATION

Summary of Net Interest Margin

(Dollars in thousands)

Three months ended 

Three months ended 

Three months ended 

December 31, 2015

September 30, 2015

December 31, 2014

Average

Average

Average

Average

Average

Average

Balance

Interest

Rate

Balance

Interest

Rate

Balance

Interest

Rate

Interest earning assets:

ASC 310-30 loans

$

209,268

$

11,527

22.03

%

$

230,978

$

11,262

19.50

%

$

295,308

$

14,195

19.23

%

Non 310-30 loans(1)(2)(3)(4)

2,332,948

23,857

4.06

%

2,193,383

22,210

4.02

%

1,879,779

20,897

4.41

%

Investment securities available-for-sale

1,207,785

7,234

2.40

%

1,286,897

5,929

1.84

%

1,529,101

7,273

1.90

%

Investment securities held-to-maturity

436,930

1,431

1.31

%

461,530

3,215

2.79

%

545,735

3,855

2.83

%

Other securities

22,287

247

4.43

%

27,059

319

4.72

%

26,997

302

4.47

%

Interest earning deposits and securities purchased under agreements to resell

139,244

124

0.35

%

223,432

198

0.35

%

118,171

78

0.26

%

Total interest earning assets(4)

$

4,348,462

$

44,420

4.05

%

$

4,423,279

$

43,133

3.87

%

$

4,395,091

$

46,600

4.21

%

Cash and due from banks

$

57,579

$

66,288

$

57,031

Other assets

341,840

351,071

391,582

Allowance for loan losses

(24,748)

(21,176)

(17,260)

Total assets

$

4,723,133

$

4,819,462

$

4,826,444

Interest bearing liabilities:

Interest bearing demand, savings and money market deposits

$

1,812,345

$

1,184

0.26

%

$

1,780,799

$

1,167

0.26

%

$

1,677,494

$

1,075

0.25

%

Time deposits

1,222,829

2,151

0.70

%

1,268,476

2,257

0.71

%

1,375,779

2,420

0.70

%

Securities sold under agreements to repurchase

143,294

60

0.17

%

182,071

37

0.08

%

113,993

37

0.13

%

Federal Home Loan Bank advances

40,000

168

1.67

%

40,000

168

1.67

%

39,565

164

1.64

%

Total interest bearing liabilities

$

3,218,468

$

3,563

0.44

%

$

3,271,346

$

3,629

0.44

%

$

3,206,831

$

3,696

0.46

%

Demand deposits

$

825,979

$

810,895

$

728,345

Other liabilities

56,447

73,984

82,632

Total liabilities

4,100,894

4,156,225

4,017,808

Shareholders' equity

622,239

663,237

808,636

Total liabilities and shareholders' equity

$

4,723,133

$

4,819,462

$

4,826,444

Net interest income

$

40,857

$

39,504

$

42,904

Interest rate spread

3.61

%

3.43

%

3.75

%

Net interest earning assets

$

1,129,994

$

1,151,933

$

1,188,260

Net interest margin(4)

3.73

%

3.54

%

3.87

%

Ratio of average interest earning assets to average interest bearing liabilities

135.11

%

135.21

%

137.05

%

(1)

Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.

(2)

Includes originated loans with average balances of $2.1 billion, $2.0 billion and $1.6 billion, and interest income of $19.3 million, $18.3 million and $17.1 million, with tax equivalent yields of 3.78%, 3.85% and 4.24% for the three months ended December 31, 2015, September 30, 2015, and December 31, 2014, respectively.

(3)

Non 310-30 loans include loans held-for-sale. Average balances during the three months ended December 31, 2015, September 30, 2015, and December 31, 2014 were $9.4 million, $9.2 million and $3.6 million, and interest income was $166 thousand, $192 thousand and $83 thousand for the same periods, respectively.

(4)

Presented on a fully taxable equivalent basis using the statutory tax rate of 35%. The tax equivalent adjustments included above are $928 thousand, $822 thousand and $320 thousand for the three months ended December 31, 2015, September 30, 2015, and December 31, 2014, respectively.

 

 

NATIONAL BANK HOLDINGS CORPORATION

Summary of Net Interest Margin

(Dollars in thousands)

For the year ended December 31, 2015

For the year ended December 31, 2014

Average

Average

Average

Average

Balance

Interest

Rate

Balance

Interest

Rate

Interest earning assets:

ASC 310-30 loans

$

237,453

$

47,255

19.90

%

$

361,806

$

60,841

16.82

%

Non 310-30 loans(1)(2)(3)(4)

2,109,152

86,693

4.11

%

1,691,253

74,565

4.41

%

Investment securities available-for-sale

1,327,245

26,398

1.99

%

1,655,730

31,887

1.93

%

Investment securities held-to-maturity

476,924

11,747

2.46

%

588,909

16,764

2.85

%

Other securities

25,865

1,210

4.68

%

25,855

1,206

4.66

%

Interest earning deposits and securities purchased under agreements to resell

262,500

799

0.30

%

123,350

329

0.27

%

Total interest earning assets(4)

$

4,439,139

$

174,102

3.92

%

$

4,446,903

$

185,592

4.17

%

Cash and due from banks

$

59,526

$

57,763

Other assets

353,344

378,723

Allowance for loan losses

(20,939)

(15,460)

Total assets

$

4,831,070

$

4,867,929

Interest bearing liabilities:

Interest bearing demand, savings and money market deposits

$

1,758,965

$

4,524

0.26

%

$

1,701,344

$

4,323

0.25

%

Time deposits

1,281,171

9,085

0.71

%

1,421,726

9,797

0.69

%

Securities sold under agreements to repurchase

197,728

187

0.09

%

99,057

129

0.13

%

Federal Home Loan Bank advances

40,000

666

1.67

%

9,975

164

1.64

%

Total interest bearing liabilities

$

3,277,864

$

14,462

0.44

%

$

3,232,102

$

14,413

0.45

%

Demand deposits

$

782,431

$

700,809

Other liabilities

69,299

74,327

Total liabilities

4,129,594

4,007,238

Shareholders' equity

701,476

860,691

Total liabilities and shareholders' equity

$

4,831,070

$

4,867,929

Net interest income

$

159,640

$

171,179

Interest rate spread

3.48

%

3.72

%

Net interest earning assets

$

1,161,275

$

1,214,801

Net interest margin(4)

3.60

%

3.85

%

Ratio of average interest earning assets to average interest bearing liabilities

135.43

%

137.59

%

(1)

Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.

(2)

Includes originated loans with average balances of $1.9 billion and $1.4 billion, and interest income of $70.6 million and $58.1 million, with tax equivalent yields of 3.87% and 4.17% for 2015 and 2014, respectively.

(3)

Non 310-30 loans include loans held-for-sale. Average balances during 2015 and 2014 were $7.1 million and $3.1 million, and interest income was $589 thousand and $267 thousand for the same periods, respectively.

(4)

Presented on a fully taxable equivalent basis using the statutory tax rate of 35%. The tax equivalent adjustments included above are $2,695 thousand and $930 thousand for 2015 and 2014, respectively.

 

NATIONAL BANK HOLDINGS CORPORATION

(Dollars in thousands)

Allowance For Loan Losses Analysis (1):

As of and for the three months ended:

December 31, 2015

September 30, 2015

December 31, 2014

ASC

Non

ASC

Non

ASC

Non

310-30

310-30

310-30

310-30

310-30

310-30

Loans

Loans

Total

Loans

Loans

Total

Loans

Loans

Total

Beginning allowance for loan losses

$

875

$

22,952

$

23,827

$

765

$

19,476

$

20,241

$

907

$

15,684

$

16,591

Net charge-offs

3

(2,134)

(2,131)

(124)

(124)

(1)

(242)

(243)

Provision (recoupment)/ expense

198

5,225

5,423

110

3,600

3,710

(185)

1,450

1,265

Ending ALL

$

1,076

$

26,043

$

27,119

$

875

$

22,952

$

23,827

$

721

$

16,892

$

17,613

Ratio of annualized net charge-offs to average total loans during the period, respectively

(0.01)

%

0.36

%

0.33

%

0.00

%

0.02

%

0.02

%

0.00

%

0.05

%

0.04

%

Ratio of ALL to total loans outstanding at period end, respectively

0.53

%

1.09

%

1.05

%

0.40

%

1.00

%

0.94

%

0.26

%

0.90

%

0.81

%

Ratio of ALL to total non-performing loans at period end, respectively

0.00

%

101.54

%

105.74

%

0.00

%

80.13

%

83.18

%

0.00

%

156.22

%

162.89

%

Total loans

$

202,830

$

2,384,843

$

2,587,673

$

220,892

$

2,302,236

$

2,523,128

$

279,645

$

1,882,764

$

2,162,409

Average total loans during the period

$

209,268

$

2,323,527

$

2,532,795

$

230,978

$

2,184,169

$

2,415,147

$

295,308

$

1,876,203

$

2,171,511

Total non-performing loans

$

$

25,647

$

25,647

$

$

28,645

$

28,645

$

$

10,813

$

10,813

 

Past Due Loans (1):

December 31, 2015

September 30, 2015

December 31, 2014

ASC

Non 

ASC

Non 

ASC

Non 

 310-30

310-30

 310-30

310-30

 310-30

310-30

 Loans

Loans

Total

 Loans

Loans

Total

 Loans

Loans

Total

Loans 30-89 days past due and still accruing interest

$

3,941

$

6,716

$

10,657

$

2,035

$

1,561

$

3,596

$

7,016

$

1,142

$

8,158

Loans 90 days past due and still accruing interest

15,762

165

15,927

18,942

266

19,208

33,834

263

34,097

Non-accrual loans

25,647

25,647

28,645

28,645

10,813

10,813

Total past due and non-accrual loans

$

19,703

$

32,528

$

52,231

$

20,977

$

30,472

$

51,449

$

40,850

$

12,218

$

53,068

Total 90 days past due and still accruing interest and non-accrual loans to total loans, respectively

7.77

%

1.08

%

1.61

%

8.58

%

1.26

%

1.90

%

12.10

%

0.59

%

2.08

%

Total non-accrual loans to total loans, respectively

0.00

%

1.08

%

0.99

%

0.00

%

1.24

%

1.14

%

0.00

%

0.57

%

0.50

%

% of total past due and non-accrual loans that carry fair value marks

100.00

%

22.01

%

51.43

%

100.00

%

14.21

%

49.19

%

100.00

%

34.66

%

84.96

%

 

NATIONAL BANK HOLDINGS CORPORATION

(Dollars in thousands)

Asset Quality Data(1):

December 31, 2015

September 30, 2015

December 31, 2014

Non-accrual loans

$

7,854

$

7,288

$

3,840

Restructured loans on non-accrual

17,793

21,357

6,973

Total non-performing loans

25,647

28,645

10,813

OREO

20,814

19,034

29,120

Other repossessed assets

894

894

849

Total non-performing assets

$

47,355

$

48,573

$

40,782

Accruing restructured loans

$

8,403

$

11,028

$

19,275

Total non-performing loans to total loans

0.99

%

1.14

%

0.50

%

Total non-performing assets to total loans and OREO

1.81

%

1.91

%

1.86

%

(1)

Loans accounted for under ASC 310-30 may be considered performing, regardless of past due status, if the timing and expected cash flows on these loans can be reasonably estimated and if collection of the new carrying value is expected.

 

Changes in Accretable Yield:

For the three months ended

Life-to-date

December 31, 2015

September 30, 2015

December 31, 2014

December 31, 2015

Accretable yield at beginning of period

$

93,015

$

103,430

$

113,108

$

Additions through acquisitions

214,994

Reclassification from non-accretable difference to accretable yield

3,367

3,202

16,858

256,328

Reclassification to non-accretable difference from accretable yield

(642)

(2,355)

(2,308)

(27,983)

Accretion

(11,547)

(11,262)

(14,195)

(359,146)

Accretable yield at end of period

$

84,193

$

93,015

$

113,463

$

84,193

 

NATIONAL BANK HOLDINGS CORPORATION

Key Ratios

As of and for the

As of and for the

three months ended

year ended

December 31, 

September 30, 

December 31, 

December 31, 

December 31, 

2015

2015

2014

2015

2014

Key Ratios(1)

Return on average assets

0.28

%

0.13

%

0.19

%

0.10

%

0.19

%

Return on average tangible assets(2)

0.36

%

0.21

%

0.26

%

0.17

%

0.26

%

Adjusted return on average tangible assets(2)

0.48

%

0.52

%

0.71

%

0.54

%

0.66

%

Return on average equity

2.13

%

0.98

%

1.12

%

0.70

%

1.07

%

Return on average tangible common equity(2)

2.97

%

1.64

%

1.66

%

1.29

%

1.58

%

Interest earning assets to interest bearing liabilities (end of period)(3)

133.71

%

134.58

%

137.36

%

133.71

%

137.36

%

Loans to deposits ratio (end of period)

67.72

%

65.41

%

57.55

%

67.72

%

57.55

%

Non-interest bearing deposits to total deposits (end of period)

21.22

%

21.17

%

19.45

%

21.22

%

19.45

%

Net interest margin(4)

3.64

%

3.47

%

3.84

%

3.54

%

3.83

%

Net interest margin (fully taxable equivalent)(2)(4)

3.73

%

3.54

%

3.87

%

3.60

%

3.85

%

Interest rate spread(5)

3.61

%

3.43

%

3.75

%

3.48

%

3.72

%

Yield on earning assets(3)

3.97

%

3.79

%

4.18

%

3.86

%

4.15

%

Yield on earning assets (fully taxable equivalent)(2)(3)

4.05

%

3.87

%

4.21

%

3.92

%

4.17

%

Cost of interest bearing liabilities(3)

0.44

%

0.44

%

0.46

%

0.44

%

0.45

%

Cost of deposits

0.35

%

0.35

%

0.37

%

0.36

%

0.37

%

Non-interest expense to average assets

3.55

%

3.18

%

2.72

%

3.27

%

3.08

%

Efficiency ratio (fully taxable equivalent)(2)(6)

72.61

%

86.25

%

84.19

%

84.28

%

85.35

%

Adjusted efficiency ratio (fully taxable equivalent)(2)(6)

72.34

%

73.25

%

71.58

%

73.68

%

72.13

%

Asset Quality Data (7)(8)(9)

Non-performing loans to total loans

0.99

%

1.14

%

0.50

%

0.99

%

0.50

%

Non-performing assets to total loans and OREO

1.81

%

1.91

%

1.86

%

1.81

%

1.86

%

Allowance for loan losses to total loans

1.05

%

0.94

%

0.81

%

1.05

%

0.81

%

Allowance for loan losses to non-performing loans

105.74

%

83.18

%

162.89

%

105.74

%

162.89

%

Net charge-offs to average loans(1)

0.33

%

0.02

%

0.04

%

0.12

%

0.05

%

(1)

Ratios are annualized.

(2)

Ratio represents non-GAAP financial measure. See non-GAAP reconciliations starting on page 16.

(3)

Interest earning assets include assets that earn interest/accretion or dividends, except for the FDIC indemnification asset that may earn accretion but is not part of interest earning assets. Any market value adjustments on investment securities are excluded from interest-earning assets. Interest bearing liabilities include liabilities that must be paid interest.

(4)

Net interest margin represents net interest income, including accretion income on interest earning assets, as a percentage of average 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)

The efficiency ratio represents non-interest expense, less intangible asset amortization, as a percentage of net interest income plus non-interest income on a fully taxable equivalent basis.

(7)

Non-performing loans consist of non-accruing loans and restructured loans on non-accrual, but exclude any loans accounted for under ASC 310-30 in which the pool is still performing. These ratios may, therefore, not be comparable to similar ratios of our peers.

(8)

Non-performing assets include non-performing loans, other real estate owned and other repossessed assets.

(9)

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)

Statements of Financial Condition

December 31, 2015

September 30, 2015

December 31, 2014

Total shareholders' equity

$

617,544

$

621,193

$

794,575

Less: goodwill and intangible assets, net

(72,060)

(73,429)

(76,513)

Add: deferred tax liability related to goodwill

7,772

7,385

6,222

Tangible common equity (non-GAAP)

$

553,256

$

555,149

$

724,284

Total assets

$

4,683,908

$

4,788,049

$

4,819,646

Less: goodwill and intangible assets, net

(72,060)

(73,429)

(76,513)

Add: deferred tax liability related to goodwill

7,772

7,385

6,222

Tangible assets (non-GAAP)

$

4,619,620

$

4,722,005

$

4,749,355

Tangible common equity to tangible assets calculations:

Total shareholders' equity to total assets

13.18

%

12.97

%

16.49

%

Less: impact of goodwill and intangible assets, net

(1.20)

%

(1.21)

%

(1.24)

%

Tangible common equity to tangible assets (non-GAAP)

11.98

%

11.76

%

15.25

%

Common book value per share calculations:

Total shareholders' equity

$

617,544

$

621,193

$

794,575

Divided by: ending shares outstanding

30,358,509

30,318,684

38,884,953

Common book value per share

$

20.34

$

20.49

$

20.43

Tangible common book value per share calculations:

Tangible common equity (non-GAAP)

$

553,256

$

555,149

$

724,284

Divided by: ending shares outstanding

30,358,509

30,318,684

38,884,953

Tangible common book value per share (non-GAAP)

$

18.22

$

18.31

$

18.63

Tangible common book value per share, excluding accumulated other comprehensive income calculations:

Tangible common equity (non-GAAP)

$

553,256

$

555,149

$

724,284

Less: accumulated other comprehensive income, net of tax

(95)

(8,736)

(5,839)

Tangible common book value, excluding accumulated other comprehensive income, net of tax (non-GAAP)

553,161

546,413

718,445

Divided by: ending shares outstanding

30,358,509

30,318,684

38,884,953

Tangible common book value per share, excluding accumulated other comprehensive income, net of tax (non-GAAP)

$

18.22

$

18.02

$

18.48

 

Return on Average Tangible Assets and Return on Average Tangible Equity

As of and for the

As of and for the

three months ended

year ended

December 31, 2015

September 30, 2015

December 31, 2014

December 31, 2015

December 31, 2014

Net income

$

3,340

$

1,636

$

2,279

$

4,881

$

9,176

Add: impact of core deposit intangible amortization expense, after tax

836

829

815

3,295

3,260

Net income adjusted for impact of core deposit intangible amortization expense, after tax

$

4,176

$

2,465

$

3,094

$

8,176

$

12,436

Average assets

$

4,723,133

$

4,819,462

$

4,846,444

$

4,831,070

$

4,867,929

Less: average goodwill and intangible assets, net of deferred tax asset related to goodwill

64,954

66,575

71,080

66,549

73,074

Average tangible assets (non-GAAP)

$

4,658,179

$

4,752,887

$

4,775,364

$

4,764,521

$

4,794,855

Average shareholders' equity

$

622,239

$

663,237

$

808,636

$

701,476

$

860,691

Less: average goodwill and intangible assets, net of deferred tax asset related to goodwill

64,954

66,575

71,080

66,549

73,074

Average tangible common equity (non-GAAP)

$

557,285

$

596,662

$

737,556

$

634,927

$

787,617

Return on average assets (non-GAAP)

0.28

%

0.13

%

0.19

%

0.10

%

0.19

%

Return on average tangible assets (non-GAAP)

0.36

%

0.21

%

0.26

%

0.17

%

0.26

%

Return on average equity (non-GAAP)

2.13

%

0.98

%

1.12

%

0.70

%

1.07

%

Return on average tangible common equity (non-GAAP)

2.97

%

1.64

%

1.66

%

1.29

%

1.58

%

 

Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin

As of and for the

As of and for the

three months ended

year ended

December 31, 2015

September 30, 2015

December 31, 2014

December 31, 2015

December 31, 2014

Interest income

$

43,492

$

42,311

$

46,280

$

171,407

$

184,662

Add: impact of taxable equivalent adjustment

928

822

320

2,695

930

Interest income, fully taxable equivalent (non-GAAP)

$

44,420

$

43,133

$

46,600

$

174,102

$

185,592

Net interest income

$

39,929

$

38,682

$

42,584

$

156,945

$

170,249

Add: impact of taxable equivalent adjustment

928

822

320

2,695

930

Net interest income, fully taxable equivalent (non-GAAP)

$

40,857

$

39,504

$

42,904

$

159,640

$

171,179

Average earning assets

$

4,348,462

$

4,423,279

$

4,395,091

$

4,439,139

$

4,446,903

Yield on earning assets

3.97

%

3.79

%

4.18

%

3.86

%

4.15

%

Yield on earning assets, fully taxable equivalent (non-GAAP)

4.05

%

3.87

%

4.21

%

3.92

%

4.17

%

Net interest margin

3.64

%

3.47

%

3.84

%

3.54

%

3.83

%

Net interest margin, fully taxable equivalent (non-GAAP)

3.73

%

3.54

%

3.87

%

3.60

%

3.85

%

 

Adjusted Efficiency Ratio

As of and for the

As of and for the

three months ended

year ended

December 31, 2015

September 30, 2015

December 31, 2014

December 31, 2015

December 31, 2014

Net interest income

$

39,929

$

38,682

$

42,584

$

156,945

$

170,249

Add: impact of taxable equivalent adjustment

928

822

320

2,695

930

Net interest income, fully taxable equivalent (non-GAAP)

$

40,857

$

39,504

$

42,904

$

159,640

$

171,179

Non-interest income

$

15,419

$

3,761

$

(5,117)

$

21,448

$

(1,696)

Gain on sale of previously charged-off acquired loans

(466)

(46)

(62)

(609)

(737)

Impact of OREO related write-ups and other income

(1,508)

(183)

(1,030)

(2,379)

(3,807)

Bargain purchase gain

(1,048)

(1,048)

FDIC indemnification asset amortization/gain on termination

(4,873)

5,798

7,922

15,878

27,741

FDIC loss sharing (income) expense

3

6,313

(325)

8,862

Adjusted non-interest income (non-GAAP)

$

8,572

$

8,285

$

8,026

$

32,965

$

30,363

Non-interest expense adjusted for core deposit intangible asset amortization

$

40,860

$

37,318

$

31,813

$

152,623

$

144,659

Impact of change in fair value of warrant liabilities

(464)

476

219

(106)

2,953

Problem asset workout expense

(1,448)

(1,583)

8,531

(4,541)

1,868

Banking center consolidation related expenses

(322)

(1,411)

Contract termination expense

(4,110)

(4,110)

Severance expenses

(986)

(986)

Conversion related expenses

(1,732)

(659)

(2,967)

Acquisition related expenses

(153)

(547)

(700)

Adjusted non-interest expense (non-GAAP)

$

35,755

$

35,005

$

36,453

$

141,912

$

145,370

Efficiency ratio

73.82

%

87.93

%

84.91

%

85.55

%

85.82

%

Efficiency ratio (fully taxable equivalent) (non-GAAP)

72.61

%

86.25

%

84.19

%

84.28

%

85.35

%

Adjusted efficiency ratio (fully taxable equivalent) (non-GAAP)

72.34

%

73.25

%

71.58

%

73.68

%

72.13

%

 

Adjusted Financial Result

For the three months ended

For the year ended

December 31, 2015

September 30, 2015

December 31, 2014

December 31, 2015

December 31, 2014

Adjustments to diluted earnings per share:

Income per share - diluted

$

0.11

$

0.05

$

0.06

$

0.14

$

0.22

Adjustments to diluted earnings per share (non-GAAP)(1)

0.05

0.12

0.13

0.51

0.45

Adjusted diluted earnings per share (non-GAAP)(1)

$

0.16

$

0.17

$

0.19

$

0.65

$

0.67

Adjustments to return on average tangible assets:

Annualized adjustments to net income (non-GAAP)(1)

$

5,705

$

15,084

$

21,384

$

17,563

$

19,118

Divided by: average tangible assets (non-GAAP)

4,658,179

4,752,887

4,755,364

4,764,521

4,794,855

Adjustments to return on average tangible assets (non-GAAP)

0.12

%

0.31

%

0.45

%

0.37

%

0.40

%

Return on average tangible assets (non-GAAP)

0.36

%

0.21

%

0.26

%

0.17

%

0.26

%

Adjusted return on average tangible assets (non-GAAP)

0.48

%

0.52

%

0.71

%

0.54

%

0.66

%

Adjustments to net income:

Net income

$

3,340

$

1,636

$

2,279

$

4,881

$

9,176

Adjustments to net income (non-GAAP)(1)

1,438

3,802

5,390

17,563

19,118

Adjusted net income (non-GAAP)

$

4,778

$

5,438

$

7,669

$

22,444

$

28,294

(1)      Refer to table below for adjustments

Adjustments

Non-interest income adjustments:

Gain on recoveries of previously charged-off acquired loans

$

(466)

$

(46)

$

(62)

$

(609)

$

(737)

OREO related write-ups and other income

(1,508)

(183)

(1,030)

(2,379)

(3,807)

Bargain purchase gain

(1,048)

(1,048)

FDIC indemnification asset amortization/gain on termination

(4,873)

5,798

7,922

15,878

27,741

Other FDIC loss sharing expense (income)

3

6,313

(325)

8,862

Total non-interest income adjustments (non-GAAP)

$

(6,847)

$

4,524

$

13,143

$

11,517

$

32,059

Non-interest expense adjustments:

Problem asset workout expense

$

(1,448)

$

(1,583)

$

8,531

$

(4,541)

$

1,868

Impact of change in fair value of warrant liabilities

(464)

476

219

(106)

2,953

Contract termination expense

(4,110)

(4,110)

Severance expenses

(986)

(986)

Banking center consolidation related expenses

(322)

(1,411)

Conversion related expenses

(1,732)

(659)

(2,967)

Acquisition related expenses

(153)

(547)

(700)

Total non-interest expense adjustments (non-GAAP)

$

(5,105)

$

(2,313)

$

4,640

$

(10,711)

$

711

Pre-tax adjustments

(1,742)

6,837

8,503

22,228

31,348

Collective tax expense impact

3,180

(3,035)

(3,113)

(4,665)

(12,230)

Adjustments to net income (non-GAAP)

$

1,438

$

3,802

$

5,390

$

17,563

$

19,118

 

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SOURCE National Bank Holdings Corporation



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