National Bank Holdings Corporation Announces Fourth Quarter 2012 Financial Results

GREENWOOD VILLAGE, Colo.--()--National Bank Holdings Corporation (NYSE: NBHC) reported net income of $3.0 million, or $0.06 per diluted share for the fourth quarter of 2012 compared to the third quarter of 2012 net loss of $0.15 per diluted share. The third quarter included $10.8 million of after tax costs related to the successful initial public offering (IPO) in September 2012. Excluding the IPO related charges, net income for the third quarter of 2012 was $2.9 million, or $0.06 per diluted share.

“Our focus is on growing and expanding our relationships with individuals and small to mid-sized businesses. We realized our eighth consecutive quarter of increased loan production in the communities where we do business”

“We continued to build momentum during the quarter in the growth and expansion of client relationships,” said President and Chief Executive Officer Tim Laney. “This was evidenced by our eighth consecutive quarter of increased organic loan production and solid growth in our non-interest bearing client demand deposits.”

Fourth Quarter 2012 Highlights

  • Grew organic loan production for the eighth consecutive quarter, resulting in a 15.1% annualized growth in our strategic loan portfolio.
  • Grew average non-interest bearing demand deposit balances 16.6% annualized, driving an increase in average transaction deposits of 4.0% annualized and an 11 basis point decrease in total cost of deposits.
  • The net interest margin expanded to 4.09%, driven by higher yields on loans accounted for under ASC 310-30 loan pools and lower cost of deposits.
  • Net charge-offs on non 310-30 loans were 0.27% annualized.
  • Expenses before problem loan/OREO workout expenses were flat third to fourth quarter, adjusting for the third quarter IPO expenses.
  • Problem loan/OREO workout expenses totaled $10.0 million, increasing $4.3 million over the third quarter of 2012 due to higher OREO workout activity.
  • Added $8.9 million to accretable yield for the acquired loans accounted for under ASC 310-30. This was partially offset by $1.6 million in impairments.
  • Tangible book value per share was $19.17 before consideration of the excess accretable yield value of $0.50 per share.
  • Initiated regular quarterly dividend of $0.05 per share.
  • Approximately $400 million in excess strategic capital (above 10% Tier 1 Leverage), which positions us for future growth opportunities.

Fourth Quarter 2012 Results

(All comparisons refer to the third quarter of 2012, except as noted)

Net Interest Income

Net interest income totaled $49.6 million for the fourth quarter of 2012, and remained stable compared to the prior quarter. Despite the continued low interest rate environment, the fourth quarter net interest margin widened 17 basis points to 4.09%. The expansion of the net interest margin was benefitted by higher earning asset yields of 7 basis points and was driven by increased yields on loan pools accounted for under ASC 310-30. Yields earned on the ASC 310-30 loan pools improved 115 basis points from the prior quarter to 10.79% during the fourth quarter. In addition, the cost of deposits declined 11 basis points during the fourth quarter and continued to benefit from an improved deposit mix and lower costs of time deposits. The benefit of the wider net interest margin was offset by a decline in average interest earning assets of 3.9% as we continued our strategy of exiting non-strategic loans and slightly reduced the investment portfolio.

Loans

Strategic loans increased $41.2 million or 15.1% annualized over the prior quarter to $1.1 billion at December 31, 2012. We realized another quarter of increased production across the commercial loan categories and our residential mortgage promotions continue to generate new relationships. The credit quality of the strategic portfolio continues to be strong with only 0.6% in non-performing loans. Strategic loans include all originated loans in addition to those acquired loans inside our operating markets that meet our credit risk profile. 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 current underwriting standards.

“Our focus is on growing and expanding our relationships with individuals and small to mid-sized businesses. We realized our eighth consecutive quarter of increased loan production in the communities where we do business,” said Mr. Laney. “More important, we are realizing loan growth while maintaining very strong underwriting standards and doing business with clients we know and understand.”

Total loans ended the fourth quarter, 2012 at $1.8 billion representing a decrease from the prior quarter of $91.1 million or 18.7% annualized. The decrease reflects our strategy of exiting the non-strategic loan portfolio as adversely rated and other non-strategic relationships paid off or paid down. The non-strategic loans totaled $719.3 million at December 31, 2012 and decreased $132.2 million or 61.8% annualized from September 30, 2012.

Asset Quality and Provision for Loan Losses

“We continue to have one of the lowest risk balance sheets in the industry,” stated Chief Financial Officer Brian Lilly. “We have a risk weighted assets to total assets ratio of 34%, which is one of the lowest in the industry, and our loan portfolio has several risk mitigants including: 66% of the loan portfolio carries acquisition discounts, 33% of our loans have the added protection of FDIC loss share and 45% are accounted for in acquired loan pools, which requires a quarterly valuation update.”

Loans accounted for under ASC 310-30 (acquired loan pools) totaled $830.7 million at December 31, 2012 compared to $971.0 million at September 30, 2012. The quarterly fair value re-measurement on the acquired loan pools resulted in a transfer of $8.9 million from non-accretable to accretable yield while recording $1.6 million of impairment through the provision for credit losses thereby increasing the economic value of the acquired loan pools by an additional $7.3 million for the fourth quarter and $68.9 million on a life-to-date basis at December 31, 2012. The increase in accretable yield will be recognized over the remaining life of these loan pools with the quarter recognizing just $0.3 million of the fourth quarter increase in accretable yield.

The non 310-30 loans totaled $1.0 billion, or 55% of total loans, at December 31, 2012. These loans are primarily comprised of originated loans and acquired loans not accounted for under the ASC 310-30 acquired loan pool accounting. Net annualized charge-offs for the non 310-30 loans improved to 27 basis points for the fourth quarter 2012. The provision for loan losses on the non 310-30 loans of $1.1 million covered the net charge-offs and provided for new loan growth resulting in a non 310-30 allowance for loan losses to total non 310-30 loans ratio of 1.06% as of December 31, 2012. Other real estate owned decreased $43.7 million during the quarter primarily due to sales of $43.0 million.

Deposits

Average transaction deposits (defined as total deposits less time deposits) totaled $2.4 billion and grew 4.0% annualized during the fourth quarter. Our continued focus on building client relationships resulted in an annualized increase of 16.6% in average non-interest bearing demand deposits. We continued to restructure our deposit base by retaining only those acquired time deposit clients who were interested in market rate time deposits and developing a banking relationship and as a result, average time deposits decreased $231 million. At December 31, 2012 the mix of transaction deposits to total deposits improved to 58% from 55% at the end of the prior quarter and the cost of deposits decreased to 0.48% in the fourth quarter representing an improvement of 11 basis points from the prior quarter. The balance sheet continues to be primarily funded by client deposits and repurchase agreements, and at December 31, 2012, comprised 98.5% of total liabilities.

Non-Interest Income

Banking related non-interest income (excludes FDIC related income) totaled $10.9 million for the fourth quarter 2012 and increased $1.5 million over the prior quarter. The increase was driven by the recovery of $1.3 million from a previously charged-off acquired loan. An additional $1.8 million of FDIC indemnification asset negative accretion was recorded during the fourth quarter as compared to the third quarter, resulting from improvements in actual and expected cash flows on covered assets. Other FDIC loss sharing income totaled $2.8 million in the fourth quarter and increased $1.3 million due to an increase in amounts due from the FDIC, primarily related to covered OREO write-downs.

Non-Interest Expense

Non-interest expense totaled $51.4 million during the fourth quarter of 2012, a decrease of $8.6 million from the previous quarter. The decrease in non-interest expense during the quarter was largely due to elevated non-interest expenses in the third quarter related to $12.5 million of IPO related expenses, offset by increased OREO expenses in the fourth quarter. Excluding IPO related expenses and problem loan/OREO workout expenses, non-interest expense was flat compared to the prior quarter. Salaries and employee benefits decreased $5.3 million driven by $4.9 million lower stock-based compensation expense related to the IPO in the prior quarter and lower incentive-based compensation expense recorded during the fourth quarter. The $4.7 million linked quarter increase in OREO costs was primarily driven by the increased levels of workout results during the quarter. The OREO and problem loan expenses are expected to continue to fluctuate quarterly as we resolve the acquired problem asset portfolio.

Capital

The Company’s capital ratios continue to be well in excess of federal bank regulatory agency “well capitalized” thresholds. Shareholders’ equity totaled $1.1 billion and decreased $5.3 million during the fourth quarter, due to a $6.2 million decrease 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. Tangible book value per share decreased to $19.17 at December 31, 2012 from $19.30 at September 30, 2012, as a result of the decrease in accumulated other comprehensive income. The tangible common equity to tangible assets ratio ended December 31, 2012 at 18.85% representing an increase of 31 basis points from the prior quarter. This increase was driven by lower total assets at December 31, 2012.

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, 2012 accretable yield balance on the ASC 310-30 loans of $133.6 million would add $1.54 after-tax to the tangible book value per share. A more conservative methodology, that management uses, values the excess yield and then considers the timing of the accreted interest income recognition over time. Under this more conservative methodology, we first net the accretable yield on ASC 310-30 loans and the accretable yield on the FDIC indemnification asset and then calculate the excess of a 4.5% yield (an approximate yield on new loan originations), and finally discount the amounts at 5%. The result would add $0.50 after-tax to our tangible book value per share as of December 31, 2012.

Conference Call

Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Tuesday, January 29, 2013. Interested parties may listen to this call by dialing (877) 272-6762 (United States)/ (615) 800-6832 (International) using the Conference ID of 85388364 and ask 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, 2013, by dialing (855) 859-2056 (United States)/ (404) 537-3406 (International) using the Conference ID of 85388364. 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 tangible assets,” “return on tangible equity,” “tangible book value,” “tangible book value per share,” “pre-tax pre-provision net revenue to risk weighted assets,” “adjusted net revenue,” “adjusted non-interest expense,” and “tangible common equity,” are supplemental measures that are not required by, or are not presented in accordance with, accounting principles generally accepted in the United States, or “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. 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.

We believe that these measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however we acknowledge that our non-GAAP financial measures have a number of limitations relative to GAAP financial measures. First, certain non-GAAP financial measures exclude provisions for loan losses and income taxes, and both of these expenses significantly impact our financial statements. Additionally, 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 our 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 currently operates a network of 101 full-service banking centers, with the majority of those banking centers located in Colorado and the greater Kansas City region. Through the Company’s subsidiary, NBH Bank, N.A. it operates under the following brand names: Bank Midwest in Kansas and Missouri, Community Banks of Colorado in Colorado and California and Hillcrest Bank in Texas.

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 “believes,” “expects,” “may,” “should,” “will,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “targets” or “anticipates” or similar expressions that relate to the Company’s strategy, plans or intentions. Forward-looking statements are statements about future, not past, events and involve certain important risks and uncertainties, any of which could cause the Company’s actual results to differ materially from those expressed in forward-looking statements, including, without limitation, the factors more fully described under the caption “Risk Factors” in the last quarterly report we filed with the Securities and Exchange Commission and: (1) changes in business and economic conditions generally and in the financial services industry; (2) changes in the laws, regulations and the regulatory environment; (3) the Company’s ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions of banking franchises on attractive terms, or at all; (4) the Company’s ability to achieve organic loan and deposit growth and the composition of such growth; (5) a weakening of the economy which could materially impact credit quality trends and local real estate values; and (6) increased competition in the financial services industry, nationally, regionally or locally. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management’s estimates, expectations or beliefs as of such time. For a discussion of additional risks and uncertainties that may affect the future results of the Company, please see the Company’s filings with the Securities and Exchange Commission.

 
NATIONAL BANK HOLDINGS CORPORATION
FINANCIAL SUMMARY

Consolidated Statements of Operations (Unaudited)

(In thousands, except share and per share data)
         
For the three months ended For the twelve months ended
December 31, September 30, December 31, December 31, December 31,
2012 2012 2011 2012 2011
 
Total interest and dividend income $ 54,708 $ 56,042 $ 60,939 $ 233,485 $ 197,159
Total interest expense   5,124     6,546     10,948     29,234     41,696  
Net interest income before provision for loan losses   49,584     49,496     49,991     204,251     155,463  
Provision for loan losses on 310-30 loans 1,620 3,663 1,773 19,018 5,011
Provision for loan losses on non-310-30 loans   1,050     1,600     1,783     8,977     14,991  
Net interest income after provision for loan losses   46,914     44,233     46,435     176,256     135,461  
 
Non-interest income:
FDIC indemnification asset accretion (4,655 ) (2,832 ) (3,895 ) (13,820 ) (6,132 )
Other FDIC loss sharing income (expense) 2,791 1,503 (1,000 ) 12,069 1,410
Service charges 4,222 4,466 4,630 17,392 16,810
Bank card fees 2,531 2,484 2,215 9,699 7,611
Bargain purchase gain - - - - 60,520
Gain on sales of mortgages, net 328 283 286 1,214 1,103
Gain (loss) on sale of securities, net - - (24 ) 674 (645 )
Gain on recoveries of previously charged-off acquired loans 1,671 837 2,432 4,298 5,902
Other non-interest income   2,109     1,322     683     5,853     2,907  
Total non-interest income   8,997     8,063     5,327     37,379     89,486  
 
Non-interest expense:
Salaries and employee benefits 21,885 27,182 15,365 94,111 67,480
Occupancy and equipment 5,713 5,570 5,418 20,558 17,975
Professional fees 2,544 2,669 6,278 11,156 13,650
Other real estate owned expenses 8,161 3,468 4,503 20,313 7,064
Problem loan expenses 1,828 2,267 2,023 8,532 4,389
Intangible asset amortization 1,324 1,353 1,280 5,344 4,359
Initial public offering related expenses - 7,566 - 7,974 600
Acquisition related costs - - 642 870 4,935
Other non-interest expense   9,912     9,882     10,222     40,740     35,086  
Total non-interest expense   51,367     59,957     45,731     209,598     155,538  
 
Income (loss) before income taxes 4,544 (7,661 ) 6,031 4,037 69,409
Income tax expense   1,541     230     3,578     4,580     27,446  
Net income (loss) $ 3,003   $ (7,891 ) $ 2,453   $ (543 ) $ 41,963  
 
Income (loss) per share - basic $ 0.06 $ (0.15 ) $ 0.05 $ (0.01 ) $ 0.81
Income (loss) per share - diluted $ 0.06 $ (0.15 ) $ 0.05 $ (0.01 ) $ 0.81
 
     
NATIONAL BANK HOLDINGS CORPORATION

Consolidated Statements of Condition (Unaudited)

(Dollars in thousands, except share and per share data)
 
December 31, 2012 September 30, 2012 December 31, 2011
ASSETS
Cash and due from banks $ 90,505 $ 65,452 $ 93,862
Due from Federal Reserve Bank of Kansas City 579,267 496,893 1,421,734
Federal funds sold and interest bearing bank deposits   99,408     102,354     112,541  
Cash and cash equivalents 769,180 664,699 1,628,137
 
Investment securities available-for-sale 1,718,028 1,739,632 1,862,699
Investment securities held-to-maturity 577,486 643,661 6,801
Non-marketable securities 32,996 33,046 29,117
 
Loans receivable, net - covered 609,115 711,029 952,715
Loans receivable, net - non-covered   1,237,634     1,226,770     1,321,336  
Total loans, net 1,846,749 1,937,799 2,274,051
Allowance for loan losses   (15,380 )   (17,496 )   (11,527 )
Loans, net 1,831,369 1,920,303 2,262,524
 
Federal Deposit Insurance Corporation ("FDIC") indemnification asset, net 86,923 113,195 223,402
Other real estate owned 85,690 129,345 120,636
Premises and equipment, net 121,436 118,385 87,315
Goodwill 59,630 59,630 59,630
Intangible assets, net 27,575 28,901 32,923
Other assets   100,462     72,029     38,842  
Total assets $ 5,410,775   $ 5,522,826   $ 6,352,026  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing demand deposits $ 677,985 $ 648,808 $ 678,735
Interest bearing demand deposits 529,996 484,760 537,160
Savings and money market   1,240,020     1,202,938     1,062,562  
Total transaction deposits 2,448,001 2,336,506 2,278,457
Time deposits   1,752,718     1,945,218     2,784,596  
Total deposits 4,200,719 4,281,724 5,063,053
 
Securities sold under agreements to repurchase 53,685 46,192 47,597
Other liabilities   65,812     99,075     152,647  
Total liabilities 4,320,216 4,426,991 5,263,297
 
Stockholders' equity:
Common stock 523 522 522
Treasury stock (4 ) - -
Additional paid in capital 1,006,194 1,005,627 994,705
Retained earnings 43,273 42,934 46,480
Accumulated other comprehensive income, net of tax   40,573     46,752     47,022  
Total stockholders' equity   1,090,559     1,095,835     1,088,729  
Total liabilities and stockholders' equity $ 5,410,775   $ 5,522,826   $ 6,352,026  
 
 
SHARE DATA
Average basic shares outstanding 52,296,704 52,191,239 51,978,744
Average diluted shares outstanding 52,372,806 52,191,239 52,104,021
Ending shares outstanding 52,327,672 52,191,239 52,157,697
Common book value per share $ 20.84 $ 21.00 $ 20.87
Tangible common book value per share $ 19.17 $ 19.30 $ 19.10
 
CAPITAL RATIOS
Book equity to assets 20.16 % 19.84 % 17.14 %
Tangible common equity to tangible assets 18.85 % 18.54 % 15.91 %
Leverage ratio 18.21 % 17.70 % 15.10 %
 
 
NATIONAL BANK HOLDINGS CORPORATION
Loan Portfolio Update
(Dollars in thousands)
           
Strategic/Non-Strategic Period-End Loan Balances:
 
December 31, 2012 September 30, 2012
Strategic Non-strategic Total Strategic Non-strategic Total
Commercial $ 163,193 $ 107,512 $ 270,705 $ 143,255 $ 122,972 $ 266,227
Commercial real estate 278,907 534,654 813,561 287,583 625,041 912,624
Agriculture 160,962 12,444 173,406 145,295 15,961 161,256
Residential real estate 480,137 58,608 538,745 463,034 77,953 540,987
Consumer   44,267   6,065   50,332   47,114   9,591   56,705
Total $ 1,127,466 $ 719,283 $ 1,846,749 $ 1,086,281 $ 851,518 $ 1,937,799
 
Originations:
 
Commercial

Commercial
real estate

Agriculture

Residential
real estate

Consumer Total
First quarter 2011 $ 1,128 $ 5,194 $ 3,101 $ 14,170 $ 1,223 $ 24,816
Second quarter 2011 1,390 2,081 2,476 16,707 2,207 24,861
Third quarter 2011 14,226 818 651 16,908 2,772 35,375
Fourth quarter 2011 9,955 4,062 1,575 35,745 3,083 54,420
First quarter 2012 20,102 18,546 7,570 33,016 3,155 82,389
Second quarter 2012 10,799 6,816 22,444 40,123 4,057 84,239
Third quarter 2012 25,640 11,135 24,328 60,320 6,505 127,928
Fourth quarter 2012 30,988 20,993 28,978 52,778 6,025 139,762
 
Loss-Share Coverage and Accounting Treatment Period End Loan Balances:
 
December 31, 2012
Total covered loans Total non-covered loans
310-30 Non-310-30

Total
covered

310-30 Non-310-30

Total non-
covered

Commercial $ 73,802 $ 47,307 $ 121,109 $ 9,484 $ 140,112 $ 149,596
Commercial real estate 397,190 13,693 410,883 177,407 225,271 402,678
Agriculture 38,890 17,094 55,984 8,843 108,580 117,423
Residential real estate 18,956 2,180 21,136 87,144 430,465 517,609
Consumer   3   -   3   18,981   31,347   50,328
Total $ 528,841 $ 80,274 $ 609,115 $ 301,859 $ 935,775 $ 1,237,634
 
September 30, 2012
Total covered loans Total non-covered loans
310-30 Non-310-30

Total
covered

310-30 Non-310-30

Total non-
covered

Commercial $ 83,469 $ 57,416 $ 140,885 $ 14,195 $ 111,147 $ 125,342
Commercial real estate 477,427 11,081 488,508 187,344 236,772 424,116
Agriculture 44,738 14,939 59,677 11,206 90,373 101,579
Residential real estate 19,584 2,371 21,955 106,710 412,322 519,032
Consumer   4   -   4   26,359   30,342   56,701
Total $ 625,222 $ 85,807 $ 711,029 $ 345,814 $ 880,956 $ 1,226,770
 
           
NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
(Dollars in thousands)
 
Three months ended December 31, 2012 Three months ended September 30, 2012
Average Average Average Average
Balance Interest Rate Balance Interest Rate
 
Interest earning assets:
310-30 loans $ 890,787 $ 24,156 10.79 % $ 990,661 $ 24,008 9.64 %
Non 310-30 loans 1,029,059 16,210 6.27 % 968,652 16,097 6.61 %
Investment securities available-for-sale 1,676,518 8,269 1.96 % 1,747,254 9,302 2.12 %
Investment securities held-to-maturity 617,821 5,323 3.43 % 683,700 5,888 3.43 %
Other securities 33,036 393 4.73 % 33,067 377 4.54 %
Interest-bearing deposits   576,100     357 0.25 %   595,383     370 0.25 %
Total interest earning assets $ 4,823,321   $ 54,708 4.51 % $ 5,018,717   $ 56,042 4.44 %
Cash and due from banks 66,214 66,467
Other assets 541,354 585,735
Allowance for loan losses   (16,518 )   (15,817 )
Total assets $ 5,414,371   $ 5,655,102  
 
Interest bearing liabilities:
Savings deposits and interest bearing checking $ 1,693,737 $ 1,173 0.28 % $ 1,696,972 $ 1,341 0.31 %
Time deposits 1,832,790 3,930 0.85 % 2,063,622 5,178 1.00 %
Securities sold under agreements to repurchase   45,014     21 0.19 %   53,073     27 0.20 %
Total interest bearing liabilities $ 3,571,541   $ 5,124 0.57 % $ 3,813,667   $ 6,546 0.68 %
Non-interest bearing demand deposits 662,763 636,277
Other liabilities   89,450     107,415  
Total liabilities   4,323,754     4,557,359  
Stockholders' equity   1,090,617     1,097,743  
Total liabilities and stockholders' equity $ 5,414,371   $ 5,655,102  
 
Net interest income $ 49,584 $ 49,496
Interest rate spread 3.94 % 3.76 %
Net interest earning assets $ 1,251,780   $ 1,205,050  
Net interest margin 4.09 % 3.92 %

Ratio of average interest earning assets to average interest bearing liabilities

135.05

%

131.60 %
 
(1) Originated loans are net of deferred loan fees, less costs.
(2) Loan fees, less costs on originated loans, are included in interest income.
 
 
NATIONAL BANK HOLDINGS CORPORATION
(Dollars in thousands)
           
Allowance For Loan Losses Analysis (2):
As of and for the three months ended:
December 31, 2012 September 30, 2012
310-30 Non-310-30 Total 310-30 Non-310-30 Total
Beginning allowance for loan losses $ 7,110 $ 10,386 $ 17,496 $ 7,259 $ 10,035 $ 17,294
Net chargeoffs (4,078 ) (708 ) (4,786 ) (3,812 ) (1,249 ) (5,061 )
Provision   1,620     1,050     2,670     3,663     1,600     5,263  

Ending allowance for loan losses

$ 4,652   $ 10,728   $ 15,380   $ 7,110   $ 10,386   $ 17,496  
 

Annualized net charge-offs to average loans, respectively

1.82 % 0.27 % 0.99 % 1.53 % 0.51 % 1.03 %

% of net charge-offs from covered loans, respectively

55.19 % 6.09 % 47.92 % 69.02 % 21.10 % 57.19 %

Ratio of allowance for loan losses to total loans outstanding at period end, respectively

0.56 % 1.06 % 0.83 % 0.73 % 1.07 % 0.90 %

Ratio of non-performing loans to loans

- 4.02 % 2.21 % - 3.89 % 1.94 %

Ratio of allowance for loan losses to non-performing loans

- 26.25 % 37.64 % - 27.62 % 46.52 %

Ratio of allowance for loan losses to non-covered loans outstanding at period end, respectively

1.54 % 1.15 % 1.24 % 2.06 % 1.18 % 1.43 %

Ratio of allowance for loan losses to non-performing, non-covered loans

- 36.03 % 51.66 % - 34.52 % 58.14 %
 

Total loans outstanding at period end

$ 830,700 $ 1,016,049 $ 1,846,749 $ 971,036 $ 966,763 $ 1,937,799

Total average loans during the period

$ 890,787 $ 1,029,059 $ 1,919,846 $ 990,661 $ 968,652 $ 1,959,313
Non-covered loans $ 301,859 $ 935,775 $ 1,237,634 $ 345,814 $ 880,956 $ 1,226,770
Total non-performing loans $ - $ 40,864 $ 40,864 $ - $ 37,606 $ 37,606
Non-performing, non-covered loans $ - $ 29,772 $ 29,772 $ - $ 30,092 $ 30,092
 
Past Due Loans (2):
December 31, 2012 September 30, 2012
310-30 Non-310-30 Total 310-30 Non-310-30 Total
Non-accrual loans $ - $ 23,119 $ 23,119 $ - $ 21,976 $ 21,976

Loans 30-89 days past due and still accruing interest

18,413 4,580 22,993 47,772 14,018 61,790

Loans 90 days past due and still accruing interest

  155,440     25     155,465     143,953     50     144,003  
Total past due and non-accrual loans $ 173,853   $ 27,724   $ 201,577   $ 191,725   $ 36,044   $ 227,769  
 

Total past due and non-accrual loans to total loans, respectively

20.93 % 2.73 % 10.92 % 19.74 % 3.73 % 11.75 %

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

100.00 % 42.96 % 92.16 % 100.00 % 55.32 % 92.93 %

% of total past due and non-accrual loans that are covered by FDIC loss sharing agreements, respectively

75.49 % 22.26 % 68.17 % 66.78 % 33.14 % 61.45 %
 
Asset Quality Data (Covered/Non-covered) (2):
December 31, 2012 September 30, 2012
Non-covered Covered Total Non-covered Covered Total
Total non-accrual loans $ 17,074 $ 6,045 $ 23,119 $ 16,597 $ 5,379 $ 21,976
Total loans 90 days past due and still accruing interest 25 - 25 50 - 50
Accruing restructured loans (1)   12,673     5,047     17,720     13,445     2,135     15,580  
Total non-performing loans 29,772 11,092 40,864 30,092 7,514 37,606
OREO 41,072 44,618 85,690 64,822 64,523 129,345
Other repossessed assets   800     531     1,331     801     530     1,331  
Total non-performing assets $ 71,644   $ 56,241   $ 127,885   $ 95,715   $ 72,567   $ 168,282  
 
Allowance for loan losses - - $ 15,380 - - $ 17,496
 

Total non-performing loans to loans, respectively

2.41 % 1.82 % 2.21 % 2.45 % 1.06 % 1.94 %

Total non-performing assets to total assets

- - 2.36 % - - 3.05 %
 
(1) Includes restructured loans less than 90 days past due and still accruing.
(2) Loans accounted for under 310-30 were written down at the acquisition date and are carried at an amount estimated to be collectible and the related allowance for loan losses was not carried over to NBHC’s allowance. These loans are not classified as nonaccrual or non-performing. Any losses on these loans are charged against the non-accretable difference and are not recorded as charge-offs until the non-accretable difference is fully utilized. As a result of the accounting for purchased loans accounted for under 310-30, certain ratios are not comparable with those of other banks.
 
Changes in Accretable Yield
For the three months ended For the year ended Life-to-date
Dec 31, 2012 Sept 30, 2012 Dec 31, 2011 Dec 31, 2012 Dec 31, 2011 Dec 31, 2012
Accretable yield at beginning of period $ 148,868 $ 158,082 $ 93,116 $ 186,494 $ 74,329 $ -
Additions through acquisitions - - 96,625 - 130,321 214,994

Reclassification from non-accretable difference to accretable yield

13,145 17,491 20,773 60,119 45,871 105,990

Reclassification to non-accretable difference from accretable yield

(4,273 ) (2,697 ) (95 ) (12,621 ) (409 ) (13,030 )
Accretion   (24,155 )   (24,008 )   (23,925 )   (100,407 )   (63,618 )   (174,369 )
Accretable yield at end of period $ 133,585   $ 148,868   $ 186,494   $ 133,585   $ 186,494   $ 133,585  
 
         
NATIONAL BANK HOLDINGS CORPORATION
Key Ratios
 
For the three For the three For the three For the For the
months ended months ended months ended year ended year ended
December 31, September 30, December 31, December 31, December 31,

Key Ratios (1)

2012 2012 2011 2012 2011
Return on average assets 0.22 % -0.56 % 0.16 % -0.01 % 0.81 %
Return on average tangible assets (2) 0.28 % -0.51 % 0.21 % 0.05 % 0.88 %
Adjusted return on average assets (2) (3) 0.32 % 0.28 % 0.11 % 0.27 % 0.33 %
Adjusted return on average tangible assets (2) (3) 0.38 % 0.34 % 0.16 % 0.33 % 0.39 %
Return on average equity 1.10 % -2.86 % 0.88 % -0.05 % 4.01 %
Return on average tangible common equity (2) 1.51 % -2.79 % 1.27 % 0.27 % 4.63 %
Adjusted return on average equity (2) (3) 1.57 % 1.45 % 0.61 % 1.44 % 1.62 %
Adjusted return on average tangible equity (2) (3) 2.03 % 1.91 % 0.97 % 1.89 % 2.03 %
Return on risk weighted assets 0.66 % -1.65 % 0.51 % -0.03 % 2.21 %
Pre-tax, pre-provision net revenue to risk weighted assets (2) 1.58 % -0.50 % 2.00 % 1.76 % 4.70 %
Adjusted pre-tax, pre-provision net revenue to risk weighted assets (2) (3) 2.05 % 2.48 % 1.74 % 2.93 % 2.51 %
Interest-earning assets to interest-bearing liabilities (end of period) (4) 134.68 % 133.44 % 127.91 % 134.68 % 127.91 %
Loans to deposits ratio (end of period) 43.96 % 45.26 % 44.91 % 43.96 % 44.91 %
Non-interest bearing deposits to total deposits (end of period) 16.14 % 15.15 % 13.41 % 16.14 % 13.41 %
Yield on earning assets (4) 4.51 % 4.44 % 4.50 % 4.55 % 4.31 %
Cost of interest bearing liabilities (4) 0.57 % 0.68 % 1.00 % 0.74 % 1.15 %
Interest rate spread (5) 3.94 % 3.76 % 3.50 % 3.81 % 3.17 %
Net interest margin (6) 4.09 % 3.92 % 3.69 % 3.98 % 3.40 %
Non-interest expense to average assets 3.77 % 4.22 % 2.94 % 3.62 % 3.01 %
Adjusted non-interest expense to average assets (2) (3) 3.62 % 3.22 % 3.03 % 3.24 % 2.66 %
Efficiency ratio (7) 85.43 % 101.82 % 80.36 % 84.53 % 61.72 %
Adjusted efficiency ratio (2) (3) 81.74 % 77.09 % 82.60 % 75.67 % 71.91 %
 

Asset Quality Data (8) (9) (10)

Non-performing loans to total loans 2.21 % 1.94 % 2.23 % 2.21 % 2.23 %
Covered non-performing loans to total non-performing loans 27.14 % 19.98 % 29.19 % 27.14 % 29.19 %
Non-performing assets to total assets 2.36 % 3.05 % 2.72 % 2.36 % 2.72 %
Covered non-performing assets to total non-performing assets 43.98 % 43.12 % 53.55 % 43.98 % 53.55 %
Allowance for loan losses to total loans 0.83 % 0.90 % 0.51 % 0.83 % 0.51 %
Allowance for loan losses to total non-covered loans 1.24 % 1.43 % 0.87 % 1.24 % 0.87 %
Allowance for loan losses to non-performing loans 37.64 % 46.52 % 22.71 % 37.64 % 22.71 %
Net charge-offs to average loans 0.99 % 1.03 % -0.05 % 1.19 % 0.51 %
 
(1) Ratio are annualized.
(2) Ratio represents non-GAAP financial measure.
(3) "Adjusted" calculations exclude bargain purchase gains, initial public offering related expenses, stock based compensation expense, acquisition costs, and loss (gain) on sale of investment securities.
(4) Interest earning assets include assets that earn interest/accretion or dividends, except for the FDIC indemnification asset that earns 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.
(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) Net interest margin represents net interest income, including accretion income on interest earning assets, as a percentage of average interest earning assets.
(7) The efficiency ratio represents non-interest expense, less intangible asset amortization, as a percentage of net interest income plus non-interest income.
(8) Non-performing loans consist of non-accruing loans, loans 90 days or more past due and still accruing interest and restructured loans, 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.
(9) Non-performing assets include non-performing loans, other real estate owned and other repossessed assets.
(10) Total loans are net of unearned discounts and fees.
 
     
NATIONAL BANK HOLDINGS CORPORATION
Non-GAAP Financial Measures
(Dollars in thousands)
 
Statements of Financial Condition Non-GAAP Reconciliations
 
December 31, 2012 September 30, 2012 December 31, 2011
 
Total stockholders' equity $ 1,090,559 $ 1,095,835 $ 1,088,729
Less: goodwill (59,630 ) (59,630 ) (59,630 )
Less: intangibles   (27,575 )   (28,901 )   (32,923 )
Tangible common equity $ 1,003,354   $ 1,007,304   $ 996,176  
 
Total assets $ 5,410,775 $ 5,522,826 $ 6,352,026
Less: goodwill (59,630 ) (59,630 ) (59,630 )
Less: intangibles   (27,575 )   (28,901 )   (32,923 )
Tangible assets $ 5,323,570   $ 5,434,295   $ 6,259,473  
 
Total stockholders' equity to total assets 20.16 % 19.84 % 17.14 %
Less: impact of goodwill -0.90 % -0.88 % -0.79 %
Less: impact of intangibles   -0.41 %   -0.42 %   -0.44 %
Tangible common equity to tangible assets   18.85 %   18.54 %   15.91 %
 
Non-GAAP Earnings Per Share Reconciliation
 
For the three For the three For the three
months ended months ended months ended
December 31, 2012 September 30, 2012 December 31, 2011
 
Net income (loss) $ 3,003 $ (7,891 ) $ 2,453
Add: impact of initial public offering related expenses - 7,566 -
Add: impact of initial public offering related stock-based compensation, after tax   -     3,267     -  
Total impact of initial public offering related expenses   -     10,833     -  
Net income adjusted for initial public offering related items $ 3,003   $ 2,942   $ 2,453  
 
Income (loss) per share - diluted $ 0.06 $ (0.15 ) $ 0.05
Add: impact of initial public offering related expenses - 0.15 -
Add: impact of initial public offering related stock-based compensation, after tax   -     0.06     -  
Adjusted income per share - diluted $ 0.06   $ 0.06   $ 0.05  
 
         
NATIONAL BANK HOLDINGS CORPORATION
Non-GAAP Financial Measures
(Dollars in thousands)
 
For the three For the three For the three For the twelve For the twelve
months ended months ended months ended months ended months ended
December 31, September 30, December 31, December 31, December 31,
2012 2012 2011 2012 2011
 
Net income (loss) $ 3,003 $ (7,891 ) $ 2,453 $ (543 ) $ 41,963
Less: bargain purchase gain, after tax - - - - (36,589 )
Add: impact of initial public offering related expenses - 7,566 - 7,974 600
Add: impact of non initial public offering related stock-based compensation, after tax 1,304 1,068 (1,152 ) 4,927 7,596
Add: impact of initial public offering related stock-based compensation, after tax - 3,267 - 3,267 -
Add: impact of acquisition costs, after tax - - 388 526 2,984
Less: Gain (loss) on sale of investment securities, after tax   -     -     15     (408 )   400  
Adjusted net revenue, after tax $ 4,307   $ 4,010   $ 1,704   $ 15,743   $ 16,954  
 
Net income (loss) $ 3,003 $ (7,891 ) $ 2,453 $ (543 ) $ 41,963
Add: impact of income taxes 1,541 230 3,578 4,580 27,446
Add: impact of provision   2,670     5,263     3,556     27,995     20,002  
Pre-tax, pre-provision net income 7,214 (2,398 ) 9,587 32,032 89,411
Less: bargain purchase gain - - - - (60,520 )
Add: impact of initial public offering related expenses - 7,566 - 7,974 600
Add: impact of non initial public offering related stock-based compensation 2,156 1,730 (1,905 ) 8,144 12,564
Add: impact of initial public offering related stock-based compensation - 4,934 - 4,934 -
Add: impact of acquisition costs - - 642 870 4,935
Less: gain (loss) on sale of investment securities   -     -     24     (674 )   645  
Adjusted pre-tax, pre-provision net revenue $ 9,370   $ 11,832   $ 8,348   $ 53,280   $ 47,635  
 
Non-interest expense $ 51,367 $ 59,957 $ 45,731 $ 209,598 $ 155,538
Less: impact of initial public offering related expenses - (7,566 ) - (7,974 ) (600 )
Less: impact of non initial public offering related stock-based compensation (2,156 ) (1,730 ) 1,905 (8,144 ) (12,564 )
Less: impact of initial public offering related stock-based compensation - (4,934 ) - (4,934 ) -
Less: impact of acquisition costs   -     -     (642 )   (870 )   (4,935 )
Adjusted non-interest expense $ 49,211   $ 45,727   $ 46,994   $ 187,676   $ 137,439  
 
         
NATIONAL BANK HOLDINGS CORPORATION
Non-GAAP Financial Measures
 
For the three For the three For the three For the twelve For the twelve
months ended months ended months ended months ended months ended
December 31, September 30, December 31, December 31, December 31,
2012 2012 2011 2012 2011
 
Return on average assets 0.22 % -0.56 % 0.16 % -0.01 % 0.81 %
Less: bargain purchase gain, after tax 0.00 % 0.00 % 0.00 % 0.00 % -0.71 %
Add: impact of initial public offering related expenses 0.00 % 0.53 % 0.00 % 0.14 % 0.01 %
Add: impact of non initial public offering related stock-based compensation, after tax 0.10 % 0.08 % -0.07 % 0.09 % 0.15 %
Add: impact of initial public offering related stock-based compensation, after tax 0.00 % 0.23 % 0.00 % 0.06 % 0.00 %
Add: impact of acquisition costs, after tax 0.00 % 0.00 % 0.02 % 0.01 % 0.06 %
Less: gain (loss) on sale of investment securities, after tax 0.00 % 0.00 % 0.00 % -0.01 % 0.01 %
Adjusted return on average assets 0.32 % 0.28 % 0.11 % 0.27 % 0.33 %
 
Return on average assets 0.22 % -0.56 % 0.16 % -0.01 % 0.81 %
Add: impact of goodwill 0.00 % -0.01 % 0.00 % 0.00 % 0.01 %
Add: impact of other intangibles 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %
Add: impact of core deposit intangible expense 0.06 % 0.06 % 0.05 % 0.06 % 0.05 %
Return on average tangible assets 0.28 % -0.51 % 0.21 % 0.05 % 0.88 %
Less: bargain purchase gain, after tax 0.00 % 0.00 % 0.00 % 0.00 % -0.72 %
Add: impact of initial public offering related expenses 0.00 % 0.54 % 0.00 % 0.14 % 0.01 %
Add: impact of non initial public offering related stock-based compensation, after tax 0.10 % 0.08 % -0.08 % 0.09 % 0.15 %
Add: impact of initial public offering related stock-based compensation, after tax 0.00 % 0.23 % 0.00 % 0.06 % 0.00 %
Add: impact of acquisition costs, after tax 0.00 % 0.00 % 0.03 % 0.01 % 0.06 %
Less: gain (loss) on sale of investment securities, after tax 0.00 % 0.00 % 0.00 % -0.01 % 0.01 %
Adjusted return on average tangible assets 0.38 % 0.34 % 0.16 % 0.33 % 0.39 %
 
Return on average equity 1.10 % -2.86 % 0.88 % -0.05 % 4.01 %
Less: bargain purchase gain, after tax 0.00 % 0.00 % 0.00 % 0.00 % -3.50 %
Add: impact of initial public offering related expenses 0.00 % 2.74 % 0.00 % 0.73 % 0.06 %
Add: impact of non initial public offering related stock-based compensation, after tax 0.48 % 0.39 % -0.41 % 0.45 % 0.73 %
Add: impact of initial public offering related stock-based compensation, after tax 0.00 % 1.18 % 0.00 % 0.30 % 0.00 %
Add: impact of acquisition costs, after tax 0.00 % 0.00 % 0.14 % 0.05 % 0.29 %
Less: gain (loss) on sale of investment securities, after tax 0.00 % 0.00 % 0.01 % -0.04 % 0.04 %
Adjusted return on average equity 1.57 % 1.45 % 0.61 % 1.44 % 1.62 %
 
Return on average equity 1.10 % -2.86 % 0.88 % -0.05 % 4.01 %
Add: impact of goodwill 0.06 % -0.16 % 0.05 % 0.00 % 0.23 %
Add: impact of other intangibles 0.03 % -0.09 % 0.03 % 0.00 % 0.11 %
Add: impact of core deposit intangible expense 0.32 % 0.32 % 0.30 % 0.32 % 0.27 %
Return on average tangible equity 1.51 % -2.79 % 1.27 % 0.27 % 4.63 %
Less: bargain purchase gain, after tax 0.00 % 0.00 % 0.00 % 0.00 % -3.80 %
Add: impact of initial public offering related expenses 0.00 % 2.98 % 0.00 % 0.79 % 0.06 %
Add: impact of non initial public offering related stock-based compensation, after tax 0.52 % 0.42 % -0.45 % 0.49 % 0.79 %
Add: impact of initial public offering related stock-based compensation, after tax 0.00 % 1.29 % 0.00 % 0.33 % 0.00 %
Add: impact of acquisition costs, after tax 0.00 % 0.00 % 0.15 % 0.05 % 0.31 %
Less: gain (loss) on sale of investment securities, after tax 0.00 % 0.00 % 0.01 % -0.04 % 0.04 %
Adjusted return on average tangible equity 2.03 % 1.91 % 0.97 % 1.89 % 2.03 %
 
Return on risk weighted assets 0.66 % -1.65 % 0.51 % -0.03 % 2.21 %
Add: impact of income taxes 0.34 % 0.05 % 0.75 % 0.25 % 1.44 %
Add: impact of provision 0.58 % 1.10 % 0.74 % 1.54 % 1.05 %
Pre-tax, pre-provision net revenue to risk weighted assets 1.58 % -0.50 % 2.00 % 1.76 % 4.70 %
Less: bargain purchase gain 0.00 % 0.00 % 0.00 % 0.00 % -3.18 %
Add: impact of initial public offering related expenses 0.00 % 1.58 % 0.00 % 0.44 % 0.03 %
Add: impact of non initial public offering related stock-based compensation 0.47 % 0.36 % -0.40 % 0.45 % 0.66 %
Add: impact of initial public offering related stock-based compensation 0.00 % 1.03 % 0.00 % 0.27 % 0.00 %
Add: impact of acquisition costs 0.00 % 0.00 % 0.13 % 0.05 % 0.26 %
Less: gain (loss) on sale of investment securities 0.00 % 0.00 % 0.01 % -0.04 % 0.03 %
Adjusted pre-tax, pre-provision net revenue to risk weighted assets 2.05 % 2.48 % 1.74 % 2.93 % 2.51 %
 
Non-interest expense to average assets 3.77 % 4.22 % 2.94 % 3.62 % 3.01 %
Less: impact of initial public offering related expenses 0.00 % -0.53 % 0.00 % -0.14 % -0.01 %
Less: impact of non initial public offering related stock-based compensation -0.16 % -0.12 % 0.12 % -0.14 % -0.24 %
Less: impact of initial public offering related stock-based compensation 0.00 % -0.35 % 0.00 % -0.09 % 0.00 %
Less: impact of acquisition costs 0.00 % 0.00 % -0.04 % -0.02 % -0.10 %
Adjusted non-interest expense to average assets 3.62 % 3.22 % 3.03 % 3.24 % 2.66 %
 
Efficiency ratio 85.43 % 101.82 % 80.36 % 84.53 % 61.72 %
Add: bargain purchase gain 0.00 % 0.00 % 0.00 % 0.00 % 20.18 %
Add: gain (loss) on sale of investment securities 0.00 % 0.00 % -0.03 % 0.24 % -0.22 %
Less: impact of initial public offering related expenses 0.00 % -13.14 % 0.00 % -3.31 % -0.32 %
Less: impact of non initial public offering related stock-based compensation -3.68 % -3.01 % 3.44 % -3.38 % -6.79 %
Less: impact of initial public offering related stock-based compensation 0.00 % -8.57 % 0.00 % -2.05 % 0.00 %
Less: impact of acquisition costs 0.00 % 0.00 % -1.16 % -0.36 % -2.67 %
Adjusted efficiency ratio 81.74 % 77.09 % 82.60 % 75.67 % 71.91 %

Contacts

National Bank Holdings Corporation
Analysts/Investors:
Brian Lilly, 720-529-3315
Chief Financial Officer
blilly@nationalbankholdings.com
or
Media:
Kris Mapes, 720-529-3372
Executive Assistant
kmapes@nationalbankholdings.com

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Release Summary

National Bank Holdings Corporation Announces Fourth Quarter 2012 Financial Results

National Bank Holdings Corporation