National Bank Holdings Corporation Announces Third Quarter 2021 Financial Results

Rhea-AI Summary

National Bank Holdings Corporation (NYSE: NBHC) reported a third-quarter net income of $19.8 million or $0.64 per diluted share, a decrease from the previous quarter's $24.2 million or $0.77. The return on average tangible assets fell to 1.14%, while return on average tangible common equity decreased to 10.65%. The bank achieved record loan originations of $413.3 million, contributing to an annualized loan growth of 16.5%. Non-interest income rose to $28.5 million, driven primarily by increased mortgage banking income.

Positive

• Record quarterly loan originations of $413.3 million.
• Annualized loan growth up by 16.5% excluding PPP loans.
• Maintained excellent credit quality with annualized net charge-offs of just 0.02%.
• Strong Common Equity Tier 1 ratio at 14.57%.
• Non-interest income increased to $28.5 million.

Negative

• Net income decreased from $24.2 million in Q2 to $19.8 million in Q3.
• Return on average tangible assets fell from 1.41% to 1.14%.
• Non-interest expenses increased by $5.0 million, largely due to transaction-related costs.

DENVER, Oct. 19, 2021 (GLOBE NEWSWIRE) --

National Bank Holdings Corporation (NYSE: NBHC) reported:

		For the quarter
		3Q21				2Q21				3Q20
Net income ($000's)		$	19,825			$	24,200			$	27,893
Earnings per share - diluted		$	0.64			$	0.77			$	0.90
Return on average tangible assets(1)			1.14	%			1.41	%			1.76	%
Return on average tangible common equity(1)			10.65	%			13.41	%			16.49	%

                                                      

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

In announcing these results, Chief Executive Officer Tim Laney shared, “We are pleased with this quarter’s results, delivering quarterly earnings of $0.64 per diluted share and pre-provision net revenue growth of 16.2% annualized over the prior quarter. Excluding PPP loans, our teams delivered impressive annualized loan growth of 16.5% fueled by record quarterly loan originations. Our prudent approach to extending new credit continues to result in excellent credit quality with just two basis points of annualized net charge-offs for the quarter. We maintain ample liquidity and a strong Common Equity Tier 1 ratio of 14.57% which serves as a source of strength as we execute on our growth strategies.”

Mr. Laney added, “Earlier this quarter, we announced strategic investments in two fintech firms, Finstro Global Holdings Inc. and Figure Technologies. Finstro and Figure are our initial partners working with NBH to introduce a comprehensive digital financial ecosystem serving small and medium-sized businesses. We believe we are on the verge of creating a business that will provide small and medium-sized businesses with access to a full range of banking services and block chain payment alternatives.”

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

Net income totaled $19.8 million, or $0.64 per diluted share, during the third quarter of 2021, compared to $24.2 million, or $0.77 per diluted share during the second quarter. The return on average tangible assets was 1.14%, compared to 1.41%, and the return on average tangible common equity was 10.65%, compared to 13.41% last quarter.

Net Interest Income
Fully taxable equivalent net interest income totaled $48.9 million during the third quarter of 2021, an increase of $2.7 million. Excluding PPP loan fee income of $2.6 million, which was $0.5 million higher than last quarter, net interest income increased $2.2 million or 19.8% annualized. As of September 30, 2021, the remaining unamortized PPP loan fees totaled $2.4 million. The fully taxable equivalent net interest margin widened 11 basis points to 2.93% driven by excess cash liquidity being deployed into higher yielding originated loans. The yield on earning assets increased eight basis points, with the cost of deposits decreasing three basis points to 0.21%.

Loans
Total loans ended the quarter at $4.4 billion, an increase of $121.0 million over the prior quarter. Excluding PPP loans, total loans increased $173.9 million or 16.5% annualized, led by commercial loan growth of $138.2 million, or 19.2% annualized. Third quarter loan originations totaled a record $413.3 million, led by commercial loan originations of $301.7 million.

Asset Quality and Provision for Loan Losses
Net loan loss provision recorded during the quarter was zero compared to a release of $5.9 million in the prior quarter. The quarter’s loan growth was offset by strong asset quality and an improved outlook in the CECL model’s underlying economic forecast. Annualized net charge-offs totaled 0.02% of total loans, compared to 0.07%. Non-performing loans (comprised of non-accrual loans and non-accrual TDRs) improved three basis points to 0.29% of total loans, and non-performing assets improved five basis points to 0.39% of total loans and OREO. The allowance for credit losses as a percentage of total loans totaled 1.11%, compared to 1.14% at June 30, 2021.

Deposits
Average total deposits increased $33.9 million or 2.2% annualized, to $6.1 billion for the third quarter 2021. Average transaction deposits (defined as total deposits less time deposits) increased $67.6 million or 5.2% annualized. The mix of transaction deposits to total deposits improved 72 basis points to 85.7% at September 30, 2021. The loan to deposit ratio totaled 72.1% at September 30, 2021, compared to 69.8% at June 30, 2021.

Non-Interest Income
Non-interest income totaled $28.5 million, an increase of $3.3 million largely driven by higher mortgage banking income, which included a $1.3 million gain from the sale of mortgage servicing rights. Service charges and bank card fees increased a combined $0.3 million during the quarter. Included in other non-interest income was $0.8 million of deposit premium gain from the sale of one banking center during the third quarter. Additionally, other non-interest income included $0.4 million and $0.8 million of gains from fixed assets sales from banking center consolidations during the third and second quarters, respectively.

Non-Interest Expense
Non-interest expense totaled $51.3 million, an increase of $5.0 million, primarily due to transaction-related costs and higher performance-related compensation. Included in the quarter were $2.4 million of transaction-related expenses for the previously announced strategic investments in Finstro Global Holdings Inc. and Figure Technologies to further our vision for building a comprehensive digital financial ecosystem. Salaries and benefits increased $1.1 million largely due to higher performance-related compensation. Problem asset workout expense increased $0.8 million due to the write-down of one previously acquired OREO property. The fully taxable equivalent efficiency ratio totaled 65.9% at September 30, 2021, compared to 64.5% at June 30, 2021.

Income tax expense totaled $5.0 million during the third quarter, compared to $5.4 million. The effective tax rate for the third quarter 2021 was 20.0%, compared to 18.4% during the prior quarter, driven by an increase in the full year projected income. The lower rate compared to the statutory rate reflects the continued success of our tax strategies and tax-exempt income.

Capital
Capital ratios continue to be strong and in excess of federal bank regulatory agency “well capitalized” thresholds. The Tier 1 leverage ratios at September 30, 2021 for the consolidated company and NBH Bank were 10.43% and 8.91%, respectively. Shareholders’ equity totaled $844.7 million at September 30, 2021, decreasing $7.2 million primarily due to stock repurchase activity during the quarter.

Common book value per share increased $0.23 to $27.89 at September 30, 2021. The quarter’s earnings, net of dividends paid and share repurchases, increased the tangible common book value per share by $0.19 to $24.20 at September 30, 2021. Excluding accumulated other comprehensive income, the tangible book value per share increased $0.29 to $24.24 at September 30, 2021.

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

Year-Over-Year Review
(All comparisons refer to the first nine months of 2020, except as noted)

Net income totaled $70.8 million, or $2.27 per diluted share, an increase of $9.4 million or 15.3% over the first nine months of 2020. The return on average tangible assets increased three basis points to 1.39%, and the return on average tangible common equity increased 57 basis points to 13.04%.

Fully taxable equivalent net interest income totaled $141.5 million, decreasing $6.7 million or 4.5%, as a result of interest rate actions taken by the Federal Reserve during 2020 and lower non-PPP loan balances. Average earning assets increased $785.1 million, or 13.8%, primarily driven by increases in average interest bearing cash balances of $671.0 million and average investment securities of $411.5 million. The fully taxable equivalent net interest margin narrowed 56 basis points to 2.92% due to lower earning asset yields. The yield on earning assets decreased 82 basis points, driven by the remix of assets into lower-yielding cash balances. The cost of deposits decreased 25 basis points to 0.24%.

Loans outstanding totaled $4.4 billion, decreasing $134.4 million or 2.9%, due to loan payoffs including lower PPP loan balances of $271.5 million as a result of PPP loan forgiveness, which were partially offset by non-PPP loan growth. New loan originations over the trailing 12 months totaled $1.3 billion, led by commercial loan originations of $895.8 million including PPP loan originations of $121.1 million.

The Company recorded $9.4 million of net provision release during the first nine months of 2021, compared to $17.6 million of provision expense during the same period in 2020. The provision release was driven by strong asset quality and an improved outlook in the CECL model’s underlying economic forecast. Annualized net charge-offs totaled 0.03% of total loans, compared to 0.04% of total loans during the first nine months of 2020. Non-performing loans to total loans improved 12 basis points to 0.29%, compared to 0.41% at September 30, 2020. The allowance for credit losses totaled 1.11% of total loans, compared to 1.34% at September 30, 2020.

Average total deposits increased $865.7 million or 16.9%, to $6.0 billion for the first nine months of 2021. Average non-interest bearing demand deposits increased $956.6 million or 70.2%, and average transaction deposits increased $977.7 million, or 23.9%. The mix of transaction deposits to total deposits increased by 400 basis points to 85.7% at September 30, 2021. The mix of non-interest bearing demand deposits to total deposits improved to 39.9% from 27.3% at September 30, 2020.

Non-interest income totaled $87.1 million, representing a decrease of $19.8 million or 18.5%, driven by $26.3 million lower mortgage banking income due to slower refinance activity in 2021 and competition driving tighter gain on sale margins. Service charges and bank card fees increased a combined $2.0 million. Other non-interest income increased $4.6 million due to $3.5 million of gains from banking center-related sales activities during the first nine months of 2021.

Non-interest expense totaled $147.3 million, a decrease of $10.4 million or 6.6% driven by lower mortgage-related compensation as well as the Company’s strategic efforts to improve operating efficiency. Included in the nine months of 2021 were $2.5 million of transaction-related expenses for the previously announced investments in our digital financial ecosystem. Salaries and benefits decreased $10.7 million primarily due to lower mortgage banking related compensation. Occupancy and equipment decreased $1.7 million largely due to efficiencies gained from the completion of the previously announced banking center consolidations. Problem asset workout expense decreased $0.5 million.

Income tax expense totaled $16.1 million, an increase of $1.6 million, driven by 2021’s higher pre-tax income. Included in income tax expense was $0.4 million of tax benefit and $0.1 million of tax expense from stock compensation activity during the first nine months of 2021 and 2020, respectively. Adjusting for stock compensation activity, the effective tax rate for the first nine months of 2021 was 18.9%, consistent with 2020.

Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Wednesday, October 20, 2021. Interested parties may listen to this call by dialing (800) 367-2403 (United States) / 0800 031 4838 (United Kingdom) using the confirmation code of 7577774 and asking for the NBHC Q3 2021 Earnings Call. A telephonic replay of the call will be available beginning approximately four hours after the call’s completion through October 25, 2021, by dialing (888) 203-1112 using the confirmation code of 7577774. The earnings release and an on-line replay of the call will also be available on the Company’s website at www.nationalbankholdings.com by visiting the investor relations area.

About Non-GAAP Financial Measures
Certain of the financial measures and ratios we present, including “tangible assets,” “return on average tangible assets,” “tangible common equity,” “return on average tangible common equity,” “tangible common book value per share,” “tangible common book value, excluding accumulated other comprehensive loss, net of tax,” “tangible common book value per share, excluding accumulated other comprehensive loss, net of tax,” “tangible common equity to tangible assets,” and “fully taxable equivalent” metrics, are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.

These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.

A reconciliation of non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.

About National Bank Holdings Corporation
National Bank Holdings Corporation is a bank holding company created to build a leading community bank franchise delivering high quality client service and committed to stakeholder results. Through its bank subsidiary, NBH Bank, National Bank Holdings Corporation operates a network of 81 banking centers, serving individual consumers, small, medium and large businesses, and government and non-profit entities. Its banking centers are located in its core footprint of Colorado, the greater Kansas City region, Texas, Utah and New Mexico. Its comprehensive residential mortgage banking group primarily serves the bank’s core footprint. NBH Bank operates under the following brand names: Community Banks of Colorado and Community Banks Mortgage, a division of NBH Bank, in Colorado, Bank Midwest and Bank Midwest Mortgage in Kansas and Missouri, and Hillcrest Bank and Hillcrest Bank Mortgage in Texas, Utah and New Mexico. Additional information about National Bank Holdings Corporation can be found at www.nationalbankholdings.com.

For more information visit: cobnks.com, bankmw.com, hillcrestbank.com or nbhbank.com. Or, follow us on any of our social media sites:
Community Banks of Colorado: facebook.com/cobnks, twitter.com/cobnks, instagram.com/cobnks;
Bank Midwest: facebook.com/bankmw, twitter.com/bank_mw, instagram.com/bankmw;
Hillcrest Bank: facebook.com/hillcrestbank, twitter.com/hillcrest_bank;
NBH Bank: twitter.com/nbhbank;
or connect with any of our brands on LinkedIn.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contain words such as “anticipate,” “believe,” “can,” “would,” “should,” “could,” “may,” “predict,” “seek,” “potential,” “will,” “estimate,” “target,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “intend” or similar expressions that relate to the Company’s strategy, plans or intentions. Forward-looking statements involve certain important risks, uncertainties and other factors, any of which could cause actual results to differ materially from those in such statements. Such factors include, without limitation, the “Risk Factors” referenced in our most recent Form 10-K filed with the Securities and Exchange Commission (SEC), other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, and the following factors: ability to execute our business strategy; business and economic conditions; effects of any potential government shutdowns; economic, market, operational, liquidity, credit and interest rate risks associated with the Company’s business; effects of any changes in trade, monetary and fiscal policies and laws; changes imposed by regulatory agencies to increase capital standards; effects of inflation, as well as, interest rate, securities market and monetary supply fluctuations; changes in the economy or supply-demand imbalances affecting local real estate values; changes in consumer spending, borrowings and savings habits; with respect to our mortgage business, the inability to negotiate fees with investors for the purchase or our loans or our obligation to indemnify purchasers or repurchase related loans; the Company’s ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions, consolidations and other expansion opportunities; the Company's ability to realize anticipated benefits from enhancements or updates to its core operating systems from time to time without significant change in client service or risk to the Company's control environment; the Company's dependence on information technology and telecommunications systems of third party service providers and the risk of systems failures, interruptions or breaches of security; the Company’s ability to achieve organic loan and deposit growth and the composition of such growth; changes in sources and uses of funds; increased competition in the financial services industry; the effect of changes in accounting policies and practices; the share price of the Company’s stock; the Company's ability to realize deferred tax assets or the need for a valuation allowance; continued consolidation in the financial services industry; ability to maintain or increase market share and control expenses; costs and effects of changes in laws and regulations and of other legal and regulatory developments; technological changes; the timely development and acceptance of new products and services; the Company’s continued ability to attract, hire and maintain qualified personnel; ability to implement and/or improve operational management and other internal risk controls and processes and reporting system and procedures; regulatory limitations on dividends from the Company's bank subsidiary; changes in estimates of future credit reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; widespread natural and other disasters, pandemics, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; adverse effects due to the novel Coronavirus Disease 2019 (COVID-19) on the Company and its clients, counterparties, employees, and third-party service providers, and the adverse impacts on our business, financial position, results of operations, and prospects; impact of reputational risk; and success at managing the risks involved in the foregoing items. The Company can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of this press release, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.

Contact:
Analysts/Institutional Investors: Aldis Birkans, Chief Financial Officer, (720) 554-6640, ir@nationalbankholdings.com
Media: Jody Soper, Chief Marketing Officer, (303) 784-5925, Jody.Soper@nbhbank.com

NATIONAL BANK HOLDINGS CORPORATION FINANCIAL SUMMARY Consolidated Statements of Operations (Unaudited) (Dollars in thousands, except share and per share data)
	For the three months ended											For the nine months ended
	September 30,			June 30,				September 30,				September 30,				September 30,
	2021			2021				2020				2021				2020
Total interest and dividend income	$	50,801		$	48,450			$	52,302			$	148,464			$	164,714
Total interest expense		3,232			3,582				5,587				10,806				20,324
Net interest income		47,569			44,868				46,715				137,658				144,390
Taxable equivalent adjustment		1,315			1,279				1,275				3,862				3,843
Net interest income FTE(1)		48,884			46,147				47,990				141,520				148,233
Provision (release) expense for loan losses		—			(5,850	)			1,200				(9,425	)			17,630
Net interest income after provision for loan losses FTE(1)		48,884			51,997				46,790				150,945				130,603
Non-interest income:
Service charges		3,947			3,568				3,742				10,989				10,962
Bank card fees		4,530			4,614				4,039				13,217				11,206
Mortgage banking income		16,615			13,979				34,943				52,973				79,246
Other non-interest income		3,430			3,105				1,733				9,935				5,384
OREO-related income		—			—				75				35				103
Total non-interest income		28,522			25,266				44,532				87,149				106,901
Non-interest expense:
Salaries and benefits		32,556			31,439				38,614				97,518				108,251
Occupancy and equipment		6,469			6,131				6,878				19,150				20,854
Professional fees		3,251			649				714				4,642				2,082
Other non-interest expense		7,624			7,019				7,443				21,496				21,222
Problem asset workout		1,119			294				1,064				1,851				2,341
Loss (gain) on sale of OREO, net		—			221				(119	)			192				(25	)
Core deposit intangible asset amortization		295			296				295				887				887
Banking center consolidation-related expense		—			294				432				1,589				2,140
Total non-interest expense		51,314			46,343				55,321				147,325				157,752
Income before income taxes FTE(1)		26,092			30,920				36,001				90,769				79,752
Taxable equivalent adjustment		1,315			1,279				1,275				3,862				3,843
Income before income taxes		24,777			29,641				34,726				86,907				75,909
Income tax expense		4,952			5,441				6,833				16,070				14,487
Net income	$	19,825		$	24,200			$	27,893			$	70,837			$	61,422
Earnings per share - basic	$	0.64		$	0.78			$	0.91			$	2.29			$	1.99
Earnings per share - diluted		0.64			0.77				0.90				2.27				1.97

                                                      

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

NATIONAL BANK HOLDINGS CORPORATION Consolidated Statements of Financial Condition (Unaudited) (Dollars in thousands, except share and per share data)
	September 30, 2021				June 30, 2021				December 31, 2020				September 30, 2020
ASSETS
Cash and cash equivalents	$	807,370			$	1,004,493			$	605,565			$	445,103
Investment securities available-for-sale		657,833				605,798				661,955				572,523
Investment securities held-to-maturity		642,636				687,635				376,615				320,001
Non-marketable securities		46,964				24,637				22,073				33,614
Loans		4,421,760				4,300,757				4,353,726				4,556,121
Allowance for credit losses		(49,155	)			(49,030	)			(59,777	)			(60,979	)
Loans, net		4,372,605				4,251,727				4,293,949				4,495,142
Loans held for sale		158,066				134,805				247,813				273,003
Other real estate owned		4,325				5,124				4,730				4,590
Premises and equipment, net		94,114				95,019				106,982				108,860
Goodwill		115,027				115,027				115,027				115,027
Intangible assets, net		11,621				22,360				17,928				15,017
Other assets		190,430				189,503				207,313				217,796
Total assets	$	7,100,991			$	7,136,128			$	6,659,950			$	6,600,676
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Non-interest bearing demand deposits	$	2,447,099			$	2,437,328			$	2,111,045			$	1,533,676
Interest bearing demand deposits		546,597				555,865				514,286				976,133
Savings and money market		2,264,083				2,240,359				2,064,769				2,079,585
Total transaction deposits		5,257,779				5,233,552				4,690,100				4,589,394
Time deposits		876,841				924,501				986,132				1,027,066
Total deposits		6,134,620				6,158,053				5,676,232				5,616,460
Securities sold under agreements to repurchase		21,427				22,957				22,897				23,904
Other liabilities		100,228				103,252				140,130				160,955
Total liabilities		6,256,275				6,284,262				5,839,259				5,801,319
Shareholders' equity:
Common stock		515				515				515				515
Additional paid in capital		1,013,064				1,011,200				1,011,362				1,010,145
Retained earnings		273,900				260,821				223,175				202,238
Treasury stock		(441,366	)			(422,365	)			(424,127	)			(424,621	)
Accumulated other comprehensive (loss) income, net of tax		(1,397	)			1,695				9,766				11,080
Total shareholders' equity		844,716				851,866				820,691				799,357
Total liabilities and shareholders' equity	$	7,100,991			$	7,136,128			$	6,659,950			$	6,600,676
SHARE DATA
Average basic shares outstanding		30,800,590				30,947,206				30,784,896				30,756,116
Average diluted shares outstanding		31,064,815				31,226,351				31,032,648				30,924,223
Ending shares outstanding		30,288,131				30,800,985				30,634,291				30,594,412
Common book value per share	$	27.89			$	27.66			$	26.79			$	26.13
Tangible common book value per share(1) (non-GAAP)		24.20				24.01				23.09				22.40
Tangible common book value per share, excluding accumulated other comprehensive income(1) (non-GAAP)		24.24				23.95				22.77				22.04
CAPITAL RATIOS
Average equity to average assets		12.07	%			11.95	%			12.27	%			12.22	%
Tangible common equity to tangible assets(1)		10.49	%			10.53	%			10.80	%			10.57	%
Tier 1 leverage ratio		10.43	%			10.57	%			10.70	%			10.60	%
Common equity tier 1 risk-based capital ratio		14.57	%			15.31	%			14.70	%			14.25	%
Tier 1 risk-based capital ratio		14.57	%			15.31	%			14.70	%			15.40	%
Total risk-based capital ratio		15.48	%			16.27	%			15.83	%			15.40	%

                                                      

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

NATIONAL BANK HOLDINGS CORPORATION Loan Portfolio (Dollars in thousands)
Period End Loan Balances by Type
							September 30, 2021						September 30, 2021
							vs. June 30, 2021						vs. September 30, 2020
	September 30, 2021			June 30, 2021			% Change			September 30, 2020			% Change
Originated:
Commercial:
Commercial and industrial	$	1,352,481		$	1,253,745		7.9	%		$	1,228,550		10.1	%
Municipal and non-profit		878,988			860,740		2.1	%			883,065		(0.5	)%
Owner-occupied commercial real estate		504,415			479,286		5.2	%			460,487		9.5	%
Food and agribusiness		195,766			195,095		0.3	%			210,818		(7.1	)%
PPP loans(1)		76,794			129,643		(40.8	)%			348,257		(77.9	)%
Total commercial		3,008,444			2,918,509		3.1	%			3,131,177		(3.9	)%
Commercial real estate non-owner occupied		605,143			570,252		6.1	%			515,415		17.4	%
Residential real estate		608,158			600,124		1.3	%			614,449		(1.0	)%
Consumer		17,735			17,942		(1.2	)%			20,196		(12.2	)%
Total originated		4,239,480			4,106,827		3.2	%			4,281,237		(1.0	)%
Acquired:
Commercial:
Commercial and industrial		17,521			18,710		(6.4	)%			23,984		(26.9	)%
Municipal and non-profit		347			359		(3.3	)%			576		(39.8	)%
Owner-occupied commercial real estate		37,335			40,435		(7.7	)%			55,929		(33.2	)%
Food and agribusiness		3,653			3,913		(6.6	)%			5,740		(36.4	)%
Total commercial		58,856			63,417		(7.2	)%			86,229		(31.7	)%
Commercial real estate non-owner occupied		65,784			67,368		(2.4	)%			101,672		(35.3	)%
Residential real estate		57,344			62,805		(8.7	)%			86,478		(33.7	)%
Consumer		296			340		(12.9	)%			505		(41.4	)%
Total acquired		182,280			193,930		(6.0	)%			274,884		(33.7	)%
Total loans	$	4,421,760		$	4,300,757		2.8	%		$	4,556,121		(2.9	)%

                                                      

(1)	PPP loan balances are net of fees and costs and include principal totaling $79,242, $134,632 and $356,913 as of September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

Originations(1)
	Third quarter			Second quarter			First quarter				Fourth quarter			Third quarter
	2021			2021			2021				2020			2020
Commercial:
Commercial and industrial	$	196,289		$	147,030		$	23,390			$	96,625		$	11,354
Municipal and non-profit		43,516			25,131			7,999				25,348			6,083
Owner occupied commercial real estate		53,445			48,225			27,093				36,085			23,758
Food and agribusiness		8,442			26,956			(10,104	)			19,191			13,876
PPP loans		—			—			121,141				—			122
Total commercial		301,692			247,342			169,519				177,249			55,193
Commercial real estate non-owner occupied		55,392			58,532			49,195				52,018			24,937
Residential real estate		54,442			53,962			74,145				41,355			49,786
Consumer		1,810			2,267			1,353				1,858			2,980
Total	$	413,336		$	362,103		$	294,212			$	272,480		$	132,896

                                                      

(1)	Originations are defined as closed end funded loans and net fundings under revolving lines of credit. Net fundings (paydowns) under revolving lines of credit were $29,154, $59,520, ($26,395), $50,982 and ($27,899) as of the third, second and first quarters of 2021 and the fourth and third quarters of 2020, respectively.

NATIONAL BANK HOLDINGS CORPORATION Summary of Net Interest Margin (Dollars in thousands)
		For the three months ended											For the three months ended											For the three months ended
		September 30, 2021											June 30, 2021											September 30, 2020
		Average							Average				Average							Average				Average							Average
		balance				Interest			rate				balance				Interest			rate				balance				Interest			rate
Interest earning assets:
Originated loans FTE(1)(2)		$	4,137,001			$	41,865			4.01	%		$	4,077,142			$	40,036			3.94	%		$	4,343,335			$	40,973			3.75	%
Acquired loans			187,419				3,796			8.04	%			211,126				3,923			7.45	%			284,653				6,593			9.21	%
Loans held for sale			157,381				1,166			2.94	%			159,068				1,213			3.06	%			230,390				1,683			2.91	%
Investment securities available-for-sale			656,757				2,572			1.57	%			638,039				2,397			1.50	%			559,330				2,784			1.99	%
Investment securities held-to-maturity			671,053				2,178			1.30	%			572,534				1,723			1.20	%			242,511				1,253			2.07	%
Other securities			14,657				210			5.73	%			15,079				209			5.54	%			29,640				221			2.98	%
Interest earning deposits and securities purchased under agreements to resell			799,779				329			0.16	%			888,600				228			0.10	%			254,931				70			0.11	%
Total interest earning assets FTE(2)		$	6,624,047			$	52,116			3.12	%		$	6,561,588			$	49,729			3.04	%		$	5,944,790			$	53,577			3.59	%
Cash and due from banks		$	77,498										$	78,148										$	73,274
Other assets			463,553											472,142											525,324
Allowance for credit losses			(48,957	)										(54,984	)										(60,372	)
Total assets		$	7,116,141										$	7,056,894										$	6,483,016
Interest bearing liabilities:
Interest bearing demand, savings and money market deposits		$	2,803,071			$	1,516			0.21	%		$	2,789,681			$	1,572			0.23	%		$	2,957,604			$	1,990			0.27	%
Time deposits			903,935				1,711			0.75	%			937,579				2,004			0.86	%			1,038,983				3,501			1.34	%
Securities sold under agreements to repurchase			19,681				5			0.10	%			19,891				6			0.12	%			22,667				10			0.18	%
Federal Home Loan Bank advances			—				—			0.00	%			—				—			0.00	%			1,141				86			29.99	%
Total interest bearing liabilities		$	3,726,687			$	3,232			0.34	%		$	3,747,151			$	3,582			0.38	%		$	4,020,395			$	5,587			0.55	%
Demand deposits		$	2,422,976										$	2,368,810										$	1,515,058
Other liabilities			107,233											97,817											155,205
Total liabilities			6,256,896											6,213,778											5,690,658
Shareholders' equity			859,245											843,116											792,358
Total liabilities and shareholders' equity		$	7,116,141										$	7,056,894										$	6,483,016
Net interest income FTE(2)						$	48,884										$	46,147										$	47,990
Interest rate spread FTE(2)										2.78	%										2.66	%										3.04	%
Net interest earning assets		$	2,897,360										$	2,814,437										$	1,924,395
Net interest margin FTE(2)										2.93	%										2.82	%										3.21	%
Average transaction deposits		$	5,226,047										$	5,158,491										$	4,472,662
Average total deposits			6,129,982											6,096,070											5,511,645
Ratio of average interest earning assets to average interest bearing liabilities			177.75	%										175.11	%										147.87	%

                                                      

(1)	Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.
(2)	Presented on a fully taxable equivalent basis using the statutory tax rate of 21%. The tax equivalent adjustments included above are $1,315, $1,279 and $1,275 for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

NATIONAL BANK HOLDINGS CORPORATION Summary of Net Interest Margin (Dollars in thousands)
	For the nine months ended September 30, 2021										For the nine months ended September 30, 2020
	Average							Average			Average							Average
	balance				Interest			rate			balance				Interest			rate
Interest earning assets:
Originated loans FTE(1)(2)	$	4,073,529			$	121,461		3.99	%		$	4,273,332			$	128,392		4.01	%
Acquired loans		212,151				12,847		8.10	%			313,555				22,194		9.45	%
Loans held for sale		182,385				3,896		2.86	%			163,980				3,929		3.20	%
Investment securities available-for-sale		660,399				7,454		1.50	%			597,654				9,229		2.06	%
Investment securities held-to-maturity		555,818				5,317		1.28	%			207,107				3,689		2.37	%
Other securities		15,180				629		5.52	%			29,826				945		4.22	%
Interest earning deposits and securities purchased under agreements to resell		776,472				722		0.12	%			105,430				179		0.23	%
Total interest earning assets FTE(2)	$	6,475,934			$	152,326		3.14	%		$	5,690,884			$	168,557		3.96	%
Cash and due from banks	$	78,953									$	74,694
Other assets		476,856										510,941
Allowance for credit losses		(54,249	)									(54,077	)
Total assets	$	6,977,494									$	6,222,442
Interest bearing liabilities:
Interest bearing demand, savings and money market deposits	$	2,746,657			$	4,740		0.23	%		$	2,725,572			$	6,829		0.33	%
Time deposits		936,088				6,050		0.86	%			1,048,116				12,075		1.54	%
Securities sold under agreements to repurchase		20,310				16		0.11	%			30,322				125		0.55	%
Federal Home Loan Bank advances		—				—		0.00	%			127,456				1,295		1.36	%
Total interest bearing liabilities	$	3,703,055			$	10,806		0.39	%		$	3,931,466			$	20,324		0.69	%
Demand deposits	$	2,320,160									$	1,363,556
Other liabilities		108,503										147,929
Total liabilities		6,131,718										5,442,951
Shareholders' equity		845,776										779,491
Total liabilities and shareholders' equity	$	6,977,494									$	6,222,442
Net interest income FTE(2)					$	141,520									$	148,233
Interest rate spread FTE(2)								2.75	%									3.27	%
Net interest earning assets	$	2,772,879									$	1,759,418
Net interest margin FTE(2)								2.92	%									3.48	%
Average transaction deposits	$	5,066,817									$	4,089,128
Average total deposits		6,002,905										5,137,244
Ratio of average interest earning assets to average interest bearing liabilities		174.88	%									144.75	%

                                                      

(1)	Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.
(2)	Presented on a fully taxable equivalent basis using the statutory tax rate of 21%. The tax equivalent adjustments included above are $3,862 and $3,843 for the nine months ended September 30, 2021 and September 30, 2020, respectively.

NATIONAL BANK HOLDINGS CORPORATION Allowance for Credit Losses and Asset Quality (Dollars in thousands)
Allowance for Credit Losses Analysis
	As of and for the three months ended
	September 30, 2021				June 30, 2021				September 30, 2020
Beginning allowance for credit losses	$	49,030			$	55,057			$	60,465
Charge-offs		(322	)			(925	)			(619	)
Recoveries		101				198				133
Provision expense (release)		346				(5,300	)			1,000
Ending allowance for credit losses ("ACL")	$	49,155			$	49,030			$	60,979
Ratio of annualized net charge-offs to average total loans during the period		0.02	%			0.07	%			0.04	%
Ratio of annualized net charge-offs to average total loans excluding PPP loans during the period		0.02	%			0.07	%			0.04	%
Ratio of ACL to total loans outstanding at period end		1.11	%			1.14	%			1.34	%
Ratio of ACL to total loans outstanding excluding PPP loans at period end		1.13	%			1.18	%			1.45	%
Ratio of ACL to total non-performing loans at period end		382.59	%			353.22	%			322.95	%
Total loans	$	4,421,760			$	4,300,757			$	4,556,121
Average total loans during the period		4,352,557				4,312,128				4,677,630
Average total loans excluding PPP loans during the period		4,245,524				4,112,172				4,329,458
Total non-performing loans		12,848				13,881				18,882

Past Due and Non-accrual Loans

	September 30, 2021				June 30, 2021				September 30, 2020
Loans 30-89 days past due and still accruing interest	$	1,302			$	2,098			$	6,587
Loans 90 days past due and still accruing interest		495				767				161
Non-accrual loans		12,848				13,881				18,882
Total past due and non-accrual loans	$	14,645			$	16,746			$	25,630
Total 90 days past due and still accruing interest and non-accrual loans to total loans		0.30	%			0.34	%			0.42	%

Asset Quality Data

	September 30, 2021				June 30, 2021				September 30, 2020
Non-performing loans	$	12,848			$	13,881			$	18,882
OREO		4,325				5,124				4,590
Total non-performing assets	$	17,173			$	19,005			$	23,472
Accruing restructured loans	$	11,135			$	11,844			$	21,786
Total non-performing loans to total loans		0.29	%			0.32	%			0.41	%
Total non-performing loans to total loans excluding PPP loans		0.30	%			0.33	%			0.45	%
Total non-performing assets to total loans and OREO		0.39	%			0.44	%			0.51	%
Total non-performing assets to total loans and OREO excluding PPP loans		0.39	%			0.46	%			0.56	%

NATIONAL BANK HOLDINGS CORPORATION Key Ratios(1)
	As of and for the three months ended									As of and for the nine months ended
	September 30,			June 30,			September 30,			September 30,			September 30,
	2021			2021			2020			2021			2020
Return on average assets	1.11	%		1.38	%		1.71	%		1.36	%		1.32	%
Return on average tangible assets(2)	1.14	%		1.41	%		1.76	%		1.39	%		1.36	%
Return on average equity	9.15	%		11.51	%		14.00	%		11.20	%		10.53	%
Return on average tangible common equity(2)	10.65	%		13.41	%		16.49	%		13.04	%		12.47	%
Loan to deposit ratio (end of period)	72.08	%		69.84	%		81.12	%		72.08	%		81.12	%
Non-interest bearing deposits to total deposits (end of period)	39.89	%		39.58	%		27.31	%		39.89	%		27.31	%
Net interest margin(4)	2.85	%		2.74	%		3.13	%		2.84	%		3.39	%
Net interest margin FTE(2)(4)	2.93	%		2.82	%		3.21	%		2.92	%		3.48	%
Interest rate spread FTE(2)(5)	2.78	%		2.66	%		3.04	%		2.75	%		3.27	%
Yield on earning assets(3)	3.04	%		2.96	%		3.50	%		3.07	%		3.87	%
Yield on earning assets FTE(2)(3)	3.12	%		3.04	%		3.59	%		3.14	%		3.96	%
Cost of interest bearing liabilities(3)	0.34	%		0.38	%		0.55	%		0.39	%		0.69	%
Cost of deposits	0.21	%		0.24	%		0.40	%		0.24	%		0.49	%
Non-interest income to total revenue FTE(2)	36.85	%		35.38	%		48.13	%		38.11	%		41.90	%
Non-interest expense to average assets	2.86	%		2.63	%		3.39	%		2.82	%		3.39	%
Efficiency ratio	67.05	%		65.66	%		60.30	%		65.14	%		62.42	%
Efficiency ratio FTE(2)	65.91	%		64.48	%		59.47	%		64.04	%		61.48	%
Total Loans Asset Quality Data(6)(7)(8)
Non-performing loans to total loans	0.29	%		0.32	%		0.41	%		0.29	%		0.41	%
Non-performing loans to total loans excluding PPP loans	0.30	%		0.33	%		0.45	%		0.30	%		0.45	%
Non-performing assets to total loans and OREO	0.39	%		0.44	%		0.51	%		0.39	%		0.51	%
Non-performing assets to total loans and OREO excluding PPP loans	0.39	%		0.46	%		0.56	%		0.39	%		0.56	%
Allowance for credit losses to total loans	1.11	%		1.14	%		1.34	%		1.11	%		1.34	%
Allowance for credit losses to total loans excluding PPP loans	1.13	%		1.18	%		1.45	%		1.13	%		1.45	%
Allowance for credit losses to non-performing loans	382.59	%		353.22	%		322.95	%		382.59	%		322.95	%
Net charge-offs to average loans(1)	0.02	%		0.07	%		0.04	%		0.03	%		0.04	%

                                                      

(1)	Ratios are annualized.
(2)	Ratio represents non-GAAP financial measure. See non-GAAP reconciliations below.
(3)	Interest earning assets include assets that earn interest/accretion or dividends. Any market value adjustments on investment securities or loans are excluded from interest earning assets.
(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)	Non-performing loans consist of non-accruing loans and restructured loans on non-accrual.
(7)	Non-performing assets include non-performing loans and other real estate owned.
(8)	Total loans are net of unearned discounts and fees.

NATIONAL BANK HOLDINGS CORPORATION NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (Dollars in thousands, except share and per share data)
Tangible Common Book Value Ratios
	September 30, 2021				June 30, 2021				December 31, 2020				September 30, 2020
Total shareholders' equity	$	844,716			$	851,866			$	820,691			$	799,357
Less: goodwill and core deposit intangible assets, net		(121,688	)			(121,983	)			(122,575	)			(122,871	)
Add: deferred tax liability related to goodwill		9,841				9,612				9,155				8,927
Tangible common equity (non-GAAP)	$	732,869			$	739,495			$	707,271			$	685,413
Total assets	$	7,100,991			$	7,136,128			$	6,659,950			$	6,600,676
Less: goodwill and core deposit intangible assets, net		(121,688	)			(121,983	)			(122,575	)			(122,871	)
Add: deferred tax liability related to goodwill		9,841				9,612				9,155				8,927
Tangible assets (non-GAAP)	$	6,989,144			$	7,023,757			$	6,546,530			$	6,486,732
Tangible common equity to tangible assets calculations:
Total shareholders' equity to total assets		11.90	%			11.94	%			12.32	%			12.11	%
Less: impact of goodwill and core deposit intangible assets, net		(1.41	)%			(1.41	)%			(1.52	)%			(1.54	)%
Tangible common equity to tangible assets (non-GAAP)		10.49	%			10.53	%			10.80	%			10.57	%
Tangible common book value per share calculations:
Tangible common equity (non-GAAP)	$	732,869			$	739,495			$	707,271			$	685,413
Divided by: ending shares outstanding		30,288,131				30,800,985				30,634,291				30,594,412
Tangible common book value per share (non-GAAP)	$	24.20			$	24.01			$	23.09			$	22.40
Tangible common book value per share, excluding accumulated other comprehensive income calculations:
Tangible common equity (non-GAAP)	$	732,869			$	739,495			$	707,271			$	685,413
Accumulated other comprehensive loss (income), net of tax		1,397				(1,695	)			(9,766	)			(11,080	)
Tangible common book value, excluding accumulated other comprehensive loss (income), net of tax (non-GAAP)		734,266				737,800				697,505				674,333
Divided by: ending shares outstanding		30,288,131				30,800,985				30,634,291				30,594,412
Tangible common book value per share, excluding accumulated other comprehensive loss (income), net of tax (non-GAAP)	$	24.24			$	23.95			$	22.77			$	22.04

NATIONAL BANK HOLDINGS CORPORATION (Dollars in thousands, except share and per share data)
Return on Average Tangible Assets and Return on Average Tangible Equity
		As of and for the three months ended												As of and for the nine months ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2021				2021				2020				2021				2020
Net income		$	19,825			$	24,200			$	27,893			$	70,837			$	61,422
Add: impact of core deposit intangible amortization expense, after tax			227				228				226				682				680
Net income adjusted for impact of core deposit intangible amortization expense, after tax		$	20,052			$	24,428			$	28,119			$	71,519			$	62,102
Average assets		$	7,116,141			$	7,056,894			$	6,483,016			$	6,977,494			$	6,222,442
Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill			(112,026	)			(112,552	)			(114,122	)			(112,320	)			(114,406	)
Average tangible assets (non-GAAP)		$	7,004,115			$	6,944,342			$	6,368,894			$	6,865,174			$	6,108,036
Average shareholders' equity		$	859,245			$	843,116			$	792,358			$	845,776			$	779,491
Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill			(112,026	)			(112,552	)			(114,122	)			(112,320	)			(114,406	)
Average tangible common equity (non-GAAP)		$	747,219			$	730,564			$	678,236			$	733,456			$	665,085
Return on average assets			1.11	%			1.38	%			1.71	%			1.36	%			1.32	%
Return on average tangible assets (non-GAAP)			1.14	%			1.41	%			1.76	%			1.39	%			1.36	%
Return on average equity			9.15	%			11.51	%			14.00	%			11.20	%			10.53	%
Return on average tangible common equity (non-GAAP)			10.65	%			13.41	%			16.49	%			13.04	%			12.47	%

Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin
		As of and for the three months ended												As of and for the nine months ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2021				2021				2020				2021				2020
Interest income		$	50,801			$	48,450			$	52,302			$	148,464			$	164,714
Add: impact of taxable equivalent adjustment			1,315				1,279				1,275				3,862				3,843
Interest income FTE (non-GAAP)		$	52,116			$	49,729			$	53,577			$	152,326			$	168,557
Net interest income		$	47,569			$	44,868			$	46,715			$	137,658			$	144,390
Add: impact of taxable equivalent adjustment			1,315				1,279				1,275				3,862				3,843
Net interest income FTE (non-GAAP)		$	48,884			$	46,147			$	47,990			$	141,520			$	148,233
Average earning assets		$	6,624,047			$	6,561,588			$	5,944,790			$	6,475,934			$	5,690,884
Yield on earning assets			3.04	%			2.96	%			3.50	%			3.07	%			3.87	%
Yield on earning assets FTE (non-GAAP)			3.12	%			3.04	%			3.59	%			3.14	%			3.96	%
Net interest margin			2.85	%			2.74	%			3.13	%			2.84	%			3.39	%
Net interest margin FTE (non-GAAP)			2.93	%			2.82	%			3.21	%			2.92	%			3.48	%

Efficiency Ratio
		As of and for the three months ended												As of and for the nine months ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2021				2021				2020				2021				2020
Net interest income		$	47,569			$	44,868			$	46,715			$	137,658			$	144,390
Add: impact of taxable equivalent adjustment			1,315				1,279				1,275				3,862				3,843
Net interest income, FTE (non-GAAP)		$	48,884			$	46,147			$	47,990			$	141,520			$	148,233
Non-interest income		$	28,522			$	25,266			$	44,532			$	87,149			$	106,901
Non-interest expense		$	51,314			$	46,343			$	55,321			$	147,325			$	157,752
Less: core deposit intangible asset amortization			(295	)			(296	)			(295	)			(887	)			(887	)
Non-interest expense, adjusted for core deposit intangible asset amortization		$	51,019			$	46,047			$	55,026			$	146,438			$	156,865
Efficiency ratio			67.05	%			65.66	%			60.30	%			65.14	%			62.42	%
Efficiency ratio FTE (non-GAAP)			65.91	%			64.48	%			59.47	%			64.04	%			61.48	%

FAQ

What were the earnings per share for NBHC in Q3 2021?

The earnings per share for NBHC in Q3 2021 were $0.64.

How much did net income decrease in Q3 2021 for NBHC?

Net income for NBHC decreased from $24.2 million in Q2 2021 to $19.8 million in Q3 2021.

What was the loan growth percentage for NBHC in Q3 2021?

The annualized loan growth for NBHC in Q3 2021 was 16.5%, excluding PPP loans.

What was the return on average tangible common equity for NBHC in Q3 2021?

The return on average tangible common equity for NBHC in Q3 2021 was 10.65%.

What drove the increase in non-interest income for NBHC in Q3 2021?

The increase in non-interest income for NBHC in Q3 2021 was largely driven by higher mortgage banking income.