NATIONAL BANK HOLDINGS CORPORATION GREENWOOD VILLAGE, Colo., Jan. 29, 2015 /PRNewswire/ -- National Bank Holdings Corporation (NYSE: NBHC) reported net income of $2.3 million, or $0.06 per diluted share, for the fourth quarter of 2014, compared to net income of $3.3 million, or $0.08 per diluted share, for the third quarter of 2014 and $1.0 million, or $0.02 per diluted share, for the fourth quarter of 2013. For the full year 2014, net income totaled $9.2 million, or $0.22 per diluted share, compared to net income of $6.9 million, or $0.14 per diluted share, during 2013.
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In announcing these results, Chief Executive Officer Tim Laney said, "We finished out 2014 with loan production of $182.2 million, realizing 17% year-over-year spot loan growth and 30% growth in our strategic loan portfolio. We remain focused on building and maintaining a diverse, conservatively structured loan portfolio, and that commitment continues to result in excellent credit quality. This is evidenced by the extremely low full year net charge-offs of our non 310-30 loan portfolio of just six basis points. We have done this while also realizing attractive economic gains from the acquired distressed non-strategic portfolio. We are now down to the last $202 million of these loans, from a starting point of almost $2 billion. The accelerated pace of the FDIC indemnification asset amortization is a direct reflection of the continued strong performance of these acquired portfolios.
We also continue to manage all other available levers of our business. We have maintained a low-cost deposit base and have increased our transaction deposits and repurchase agreements by $100 million since last year. We are also pleased to announce that we have entered into a new agreement for our core processing services that will enable us to provide improved services to our clients while also significantly reducing our operating expenses following our anticipated conversion later this year."
Mr. Laney added, "During the fourth quarter, we repurchased another 991 thousand shares, or 2.5% of our outstanding shares. Since early 2013, we have repurchased 13.5 million shares, or 25.8% of shares outstanding, at a weighted average price of $19.70. We intend to continue to use share repurchases as a lever for capital management."
Brian Lilly, Chief Financial Officer, added, "We had a very productive quarter operationally, with a lot of moving pieces. We continue to believe that it is important to evaluate the progress of building our company by analyzing the financial results that are expected to emerge over time. We do this by excluding the impact of the non-cash FDIC indemnification asset amortization, FDIC loss-share income, the large expense/income related to OREO and problem loan workouts, the impacts of the change in the warrant liability, the contract termination expenses that were accrued during the fourth quarter of 2014, and the banking center closure related charges that were accrued in the third quarter of 2013, which can be seen in our non-GAAP reconciliation starting on page 16. These items negatively impacted the fourth quarter by a net $0.13 per diluted share and negatively impacted the year by a net $0.45 per diluted share. The net impact of these items may fluctuate on a quarterly basis, but is expected to decrease over time in connection with the expiration of the FDIC loss-sharing agreements over the next couple of years and the decreasing problem asset workout expenses. These adjustments resulted in an adjusted net earnings per diluted share of $0.19 for the fourth quarter and $0.67 for the year. On the same adjusted basis, the adjusted return on average tangible assets increased five basis points over the prior quarter to 0.71% during the fourth quarter and increased nine basis points from the prior year to 0.66% for the full year of 2014. This analysis provides better clarity to the emerging profitability and the progress toward reaching our goal of 1% return on average tangible assets."
Fourth Quarter 2014 Highlights
(All comparisons refer to the third quarter of 2014, except as noted)
-- Grew the strategic loan portfolio by $40.5 million, or 8.4% annualized,
driven by $182.2 million in fourth quarter originations. The
originations were offset by higher than normal pay-downs and early
pay-offs, particularly in the agriculture portfolio. Strategic loans at
December 31, 2014 increased a strong $456.6 million, or 30.4% since
December 31, 2013.
-- Credit quality remained strong, as annualized net charge-offs in the non
310-30 portfolio were only 0.05% during the fourth quarter and 0.06% for
the full year.
-- Successfully exited $49.4 million of the remaining non-strategic loan
portfolio, a strong 78.1% annualized. Non-strategic loans decreased
$148.2 million for the full year, or 42.4%, to just $201.7 million at
December 31, 2014.
-- Total loans ended 2014 at $2.2 billion, a 16.6% increase since December
31, 2013.
-- Added a net $14.6 million to accretable yield for the acquired loans
accounted for under ASC 310-30. The favorable results of the quarterly
re-yielding also caused a $10.6 million increase in the future non-cash
amortization of the FDIC indemnification asset.
-- Average demand deposits continued solid growth, adding $13.1 million, or
7.3% annualized, while total deposits remained relatively flat as
higher-cost time deposits declined.
-- Net interest income totaled $42.6 million, a $0.7 million increase from
the prior quarter. The quarterly increase was primarily driven by a 12
basis point widening of the net interest margin to 3.87% (fully taxable
equivalent) as increased client paydowns/payoffs resulted in higher
pre-payment fees and 310-30 accelerated accretion added $1.7 million of
interest income during the fourth quarter and was partially offset by
lower average earning assets.
-- FDIC loss-share related non-interest income resulted in an increase in
net expense of $7.0 million, driven by strong covered asset performance
and the sharing of large gains on sales of OREO.
-- Non-interest expenses decreased $4.8 million, or 12.7%, from the prior
quarter.
-- Repurchased 991,100 shares during the fourth quarter, or 2.5% of
outstanding shares. Since early 2013, 13.5 million shares have been
repurchased, or 25.8% of then outstanding shares, at a weighted average
price of $19.70.
-- At December 31, 2014, tangible common book value per share was $18.63
before consideration of the excess accretable yield value of $0.83 per
share.
Fourth Quarter 2014 Results
(All comparisons refer to the third quarter of 2014, except as noted)
Net Interest Income
Net interest income totaled $42.6 million for the fourth quarter of 2014, a $0.7 million increase from the prior quarter as the net interest margin widened 12 basis points to 3.87% from the prior quarter of 3.75% (fully taxable equivalent) while average interest earning assets decreased $58.7 million, or 1.3%, to $4.4 billion. The continued strategy of remixing the earning assets through the origination of strategic loans coupled with particularly strong reductions in non-strategic loans during the fourth quarter and the run-off of the investment securities portfolios resulted in the slight decline in the average interest earning assets. The net interest margin widening of 12 basis points was driven by a 14 basis point increase in the yield on interest earning assets to 4.21% from 4.07% in the prior quarter. The higher yield was primarily driven by $0.9 million in pre-payment fees on originated loans coupled with $0.8 million of accelerated accretion within the 310-30 loan portfolio.
Loans
Strategic loans totaled $2.0 billion at December 31, 2014 and grew $40.5 million during the quarter, or 8.4% annualized. Included in strategic loans outstanding are $1.6 billion in originated balances, which increased $46.1 million, or 11.4% annualized, over the prior quarter. Loan originations totaled $182.2 million and decreased $21.1 million, or 10.4%, from the prior quarter. Higher than normal pay-downs contributed to a $9.0 million decrease in total loans during the fourth quarter, which ended the quarter at $2.2 billion. Consistent with the strategy of exiting the non-strategic loan portfolio, balances of non-strategic relationships ended the year at $201.7 million, decreasing $49.4 million during the quarter, a strong 78.1% annualized. Strategic loans include all originated loans in addition to those acquired loans inside our operating markets that meet our credit risk profile. Identification as strategic for acquired loans was made at the time of acquisition. Criteria utilized in the designation of an acquired loan as "strategic" include (a) geography, (b) total relationship with borrower and (c) credit metrics commensurate with our underwriting standards.
Conservative concentration limits have been followed, and as such, energy sector loans totaled $175.5 million at December 31, 2014, representing 8.1% of total loans and 4.0% of earning assets. Clients in this sector were carefully selected at origination for strong capitalization, low leverage, and seasoned management teams. Loans have been conservatively structured to mitigate stress associated with declining oil and gas prices.
Asset Quality and Provision for Loan Losses
Purchased troubled loans accounted for under 310-30 totaled $279.6 million at December 31, 2014 and decreased $40.9 million during the fourth quarter, an annualized decrease of 50.7%, reflecting workout efforts on these purchased loans. The quarterly fair value re-measurement on the 310-30 loans resulted in a favorable net transfer of $14.6 million from non-accretable difference to accretable yield, which will be recognized over the lives of the 310-30 pools. This increased the life-to-date economic benefit of the accretable yield transfers net of impairments on 310-30 loans to $186.1 million.
Non 310-30 loans totaled $1.9 billion and represented 87.1% of total loans at December 31, 2014. These loans are comprised of originated loans and acquired loans not accounted for under 310-30. Net charge-offs within the non 310-30 portfolio remained low at just 0.05% annualized, which reflects the prudent underwriting and well-selected clients within this portfolio. Non-performing non 310-30 loans (comprised of non-accrual loans and non-accrual TDR's) decreased to $10.8 million at quarter end, representing 0.57% of total non 310-30 loans, compared to 1.02% at September 30, 2014, as a result of pay-downs and pay-offs of several non-performing loans. A provision for loan losses on the non 310-30 loans of $1.5 million was recorded during the fourth quarter of 2014, which was $0.3 million lower than the prior quarter.
OREO ended the quarter at $29.1 million, decreasing $16.8 million, primarily due to strong OREO sales during the quarter. The gains on these sales of OREO were $10.4 million, of which $8.9 million were covered by loss-sharing agreements with the FDIC. Of the $29.1 million OREO at December 31, 2014, $18.5 million, or 63.4%, were covered by loss-sharing agreements with the FDIC.
Deposits
Transaction deposits (defined as total deposits less time deposits) and client repurchase agreements averaged $2.5 billion during the fourth quarter, increasing $10.9 million, or 1.7% annualized, on the strength of a $13.1 million, or 7.3% annualized, increase in average demand deposits. Total deposits and client repurchase agreements averaged $3.9 billion during the fourth quarter, decreasing $26.2 million, or 2.7% annualized, and was driven by a $37.1 million decrease in higher-cost time deposits. Additionally, the average cost of total deposits remained unchanged from the prior quarter at 0.37%. The balance sheet continues to be strongly funded by client deposits and client repurchase agreements and at December 31, 2014, these client fundings comprised 96.9% of total liabilities.
Non-Interest Income
Banking related non-interest income (excludes FDIC-related non-interest income, gain on previously charged-off acquired loans and OREO related income) totaled $8.0 million during the fourth quarter of 2014 and increased $0.2 million, or 8.2% annualized, compared to the prior quarter. A seasonal decrease in service charges was more than offset by an increase in bank owned life insurance income.
FDIC loss-share related non-interest income totaled a negative $14.2 million for the quarter and was $7.0 million higher than the prior quarter primarily due to a $5.4 million increase in other FDIC loss-sharing income (expense) related to the sharing of gains on sales of several covered OREO properties. As of December 31, 2014, the FDIC indemnification asset was $39.1 million. Our current projection for the amortization of the FDIC indemnification asset is between $18.0 million and $28.0 million in 2015. The benefit of the increased client cash flows is primarily captured in the 310-30 accretable yield over the remaining life of the loans as most of the FDIC covered assets are accounted for in the 310-30 loan pools.
"We had a strong uptick in the success of our workout efforts regarding our purchased troubled loan portfolio and related OREO assets this quarter," said Brian Lilly. "While this means higher returns on the covered loans, it also means we have to share the gains with the FDIC and as a result, we have lower expected reimbursements from the FDIC. This translates into additional non-cash write-downs of the FDIC indemnification asset receivable. In the fourth quarter, this receivable write-down was $7.9 million, or $0.12 per diluted share. While we expect that the FDIC loss-share related non-interest income will continue to fluctuate and be a reflection of our workout efforts, our current expectation is that the non-cash write-down of the FDIC indemnification asset receivable will be between $0.30 and $0.46 per diluted share in 2015."
Non-Interest Expense
Total non-interest expense was $33.1 million during the fourth quarter of 2014, decreasing $4.8 million from the previous quarter. Operating expenses totaled $37.8 million and increased $0.4 million, driven by a $0.3 million increase in marketing-related expenses related to the timing of marketing campaigns. The quarter included a $4.1 million contract termination charge related to the termination of a core processing system contract and the entry into a new core processing contract with a different partner. In addition to enhanced product and service offerings, this strategic move will provide a cash payback on our core processing system change in less than one year.
OREO and problem loan expenses totaled a net gain of $8.5 million and improved $10.4 million from the prior quarter. The improvement was attributable to an $8.8 million increase in gains on the sale of OREO during the quarter, coupled with a $1.6 million decrease in OREO and problem loan expenses. OREO and problem loan expenses are expected to continue to fluctuate quarterly as we resolve the acquired problem asset portfolio.
Income tax expense totaled $0.8 million during the fourth quarter, an effective tax rate of 25.3% compared to 16.9% in the third quarter. A benefit from tax planning strategies implemented during the third quarter was offset with the write-off of deferred tax assets related to expired stock-based compensation.
Capital
Capital ratios continue to be strong and well in excess of federal bank regulatory agency "well capitalized" thresholds. Shareholders' equity totaled $794.6 million at December 31, 2014 and decreased $14.4 million from the prior quarter, due to the repurchase of 991,100 shares, and was partially offset by a $3.9 million increase 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. The shares repurchased represented a 2.5% reduction in shares outstanding during the quarter and brings the cumulative shares repurchased since early 2013 to 25.8% of the shares then outstanding.
Tangible common book value per share at December 31, 2014 was $18.63, compared to $18.49 at September 30, 2014, and the tangible common equity to tangible assets ratio decreased 29 basis points to 15.25% at December 31, 2014.
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, 2014 accretable yield balance on the 310-30 loans of $113.5 million would add $1.78 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. Under this more conservative methodology, we first net the accretable yield on 310-30 loans and the amortization of the FDIC indemnification asset and then calculate the excess above a 4.0% yield (an approximate yield on new loan originations), and finally discount the amounts at 5%. The result would add $0.83 after-tax to our tangible book value per share as of December 31, 2014.
Year-Over-Year Review
(All comparisons refer to the full year 2013)
Net income for 2014 was $9.2 million, or $0.22 per diluted share, compared to net income of $6.9 million for 2013, or $0.14 per diluted share. Net interest income totaled $170.2 million during 2014 and decreased $8.7 million, or 4.9%, from 2013, primarily driven by lower earning assets. Average interest earning assets decreased $251.6 million, or 5.4%, from the prior year, largely due to the successful repurchase of 6.1 million shares and a reduction in the investment portfolio. The decrease in interest earning assets was partially offset by a four basis point widening of the net interest margin to 3.85% from 3.81% (fully taxable equivalent). The continued resolution of the higher-yielding acquired non-strategic loan portfolio was mostly offset by strong organic growth in the strategic loan portfolio. As a result, the yield on interest earning assets increased by one basis point and was complemented by a three basis point decrease in the cost of interest bearing liabilities.
Loan balances as of December 31, 2014 totaled $2.2 billion and increased $308.3 million, or 16.6%, since December 31, 2013. Strategic loans increased $456.6 million since December 31, 2013, a 30.4% increase, on the strength of loan originations. Loan originations during 2014 totaled $869.2 million, increasing 21.7% in 2013 as a result of continued market penetration. Non-strategic loans declined $148.2 million from a year ago, a 42.4% decrease, as a result of the continued workout progress that has been made on exiting acquired problem loans.
Average transaction deposits and client repurchase agreements totaled $2.5 billion during 2014 and increased $37.1 million from 2013, or 1.5%, and were led by a $40.6 million, or 6.1%, increase in average demand deposits as a result of our strategic focus on relationship banking. Total deposits and client repurchase agreements averaged $3.9 billion during 2014, decreasing $148.9 million from the prior year. The decrease was primarily due to a $186.0 million decline in average time deposits as we continued to focus our deposit base on clients who were interested in market-rate time deposits and in developing a banking relationship, coupled with the California banking center and limited-service retirement center exits on December 31, 2013. The mix of transaction deposits to total deposits improved to 64.0% at December 31, 2014 from 61.0% at December 31, 2013. Additionally, the average cost of total deposits declined four basis points to 0.37% in 2014 from 0.41% during 2013.
Provision for loan loss expense was $6.2 million during 2014, compared to $4.3 million during 2013, an increase of $1.9 million. The increase in provision was primarily due to loan growth as credit quality remained excellent and non 310-30 net charge-offs were significantly lower at only 0.06% during 2014 compared to 0.27% during 2013.
Non-interest income was a negative $1.7 million in 2014 compared to income of $20.2 million in 2013, a decrease of $21.9 million. The decrease was largely due to $20.5 million lower FDIC loss-share related income. An additional $8.8 million of non-cash FDIC indemnification asset amortization and an $11.7 million decline in other FDIC loss-sharing income from the same period in 2013 was due to better performance of the underlying covered assets coupled with lower problem loan and OREO expenses. Banking fees of $30.4 million during 2014 were up $0.2 million compared to the same period in 2013 as a result of increases in bank card fees, swap fees and bank owned life insurance income and were somewhat offset by a decrease in service charges.
Non-interest expense totaled $150.0 million in 2014 compared to $184.0 million during 2013, a decrease of $34.0 million, or 18.5%. Operating expenses of $150.7 million during 2014 decreased $12.4 million from 2013. The 7.6% year-over-year decrease in operating expenses was primarily due to lower salaries and benefits of $7.2 million as we continue to focus on operational efficiencies. OREO and problem loan expenses declined $18.5 million and were driven by $6.2 million higher net gains on OREO sales coupled with lower levels of OREO and problem loan expenses of $12.3 million. 2014 included a $4.1 million contract termination accrual related to a change in our core system provider and 2013 included $3.4 million of expenses related to banking center closures. The change in the warrant liability contributed $3.8 million to the year-over-year decline in non-interest expenses.
Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Friday, January 30, 2015. Interested parties may listen to this call by dialing (877) 272-6762 (United States)/(615) 800-6832 (International) using the Conference ID of 40552925 and asking for the National Bank Holdings Corporation Fourth Quarter Earnings conference call. A telephonic replay of the call will be available beginning approximately two hours after the call's completion through February 13, 2015, by dialing (855) 859-2056 (United States)/(404) 537-3406 (International) using the Conference ID of 40552925. 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," "return on average tangible common equity," "tangible common book value," "tangible common book value per share," "tangible common equity," "tangible common equity to tangible assets," "fully taxable equivalent" metrics, "adjusted net income," "adjusted basic earnings per share," "adjusted diluted earnings per share," and "adjusted return on average tangible assets," are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as "non-GAAP financial measures." We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.
These non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. In particular, the items that we exclude in our adjustments are not necessarily consistent with the items that our peers may exclude from their results of operations and key financial measures and therefore may limit the comparability of similarly named financial measures and ratios. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.
A reconciliation of non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.
About National Bank Holdings Corporation
National Bank Holdings Corporation is a bank holding company created to build a leading community bank franchise delivering high quality customer service and committed to shareholder results. National Bank Holdings Corporation operates a network of 97 banking centers located in Colorado, the greater Kansas City region and Texas. Through the Company's subsidiary, NBH Bank, N.A., it operates under the following brand names: Bank Midwest in Kansas and Missouri, Community Banks of Colorado in Colorado and Hillcrest Bank in Texas. Additional information about National Bank Holdings Corporation can be found at www.nationalbankholdings.com.
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contain words such as "anticipate," "believe," "can," "would," "should," "could," "may," "predict," "seek," "potential," "will," "estimate," "target," "plan," "project," "continuing," "ongoing," "expect," "intend" or similar expressions that relate to the Company's strategy, plans or intentions. Forward-looking statements involve certain important risks, uncertainties and other factors, any of which could cause actual results to differ materially from those in such statements. Such factors include, without limitation, the "Risk Factors" referenced in our most recent Form 10-K filed with the Securities and Exchange Commission (SEC), other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, and the following additional factors: ability to execute our business strategy; business and economic conditions; economic, market, operational, liquidity, credit and interest rate risks associated with the Company's business; effects of any changes in trade, monetary and fiscal policies and laws; changes imposed by regulatory agencies to increase capital standards; effects of inflation, as well as, interest rate, securities market and monetary supply fluctuations; changes in consumer spending, borrowings and savings habits; the Company's ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions; the Company's ability to successfully convert core operating systems, at the estimated cost, without significant business interruption and to realize the anticipated benefits; the Company's ability to achieve organic loan and deposit growth and the composition of such growth; changes in sources and uses of funds; increased competition in the financial services industry; the effect of changes in accounting policies and practices; the share price of the Company's stock; the Company's ability to realize deferred tax assets or the need for a valuation allowance; continued consolidation in the financial services industry; ability to maintain or increase market share and control expenses; costs and effects of changes in laws and regulations and of other legal and regulatory developments; technological changes; the timely development and acceptance of new products and services; the Company's continued ability to attract and maintain qualified personnel; ability to implement and/or improve operational management and other internal risk controls and processes and reporting system and procedures; regulatory limitations on dividends from the Company's bank subsidiary; changes in estimates of future loan reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; widespread natural and other disasters, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; impact of reputational risk; and success at managing the risks involved in the foregoing items. The Company can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of this press release, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.
NATIONAL BANK HOLDINGS CORPORATION
FINANCIAL SUMMARY
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except share and per share data)
For the three months ended For the years ended
-------------------------- -------------------
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Total interest and
dividend income $46,280 $45,492 $47,377 $184,662 $195,475
Total interest expense 3,696 3,597 3,787 14,413 16,514
Net interest income
before provision for
loan losses 42,584 41,895 43,590 170,249 178,961
------ ------
Provision for loan
losses on 310-30
loans (185) (191) (230) (520) 769
Provision for loan
losses on non 310-30
loans 1,450 1,706 1,002 6,729 3,527
----- ----- ----- ----- -----
Net interest income
after provision for
loan losses 41,319 40,380 42,818 164,040 174,665
------ ------ ------ ------- -------
Non-interest income:
FDIC indemnification
asset amortization (7,922) (6,252) (7,117) (27,741) (18,960)
Other FDIC loss-
sharing income
(expense) (6,313) (943) (467) (8,862) 2,811
Service charges 3,872 4,148 4,011 15,430 15,955
Bank card fees 2,575 2,615 2,447 10,123 9,956
Gain on sale of
mortgages, net 326 264 233 1,000 1,358
Other non-interest
income 1,253 836 932 3,810 2,901
Gain on previously
charged-off acquired
loans 62 147 221 737 1,339
OREO related write-
ups and other income 1,030 799 2,104 3,807 4,817
----- --- ----- ----- -----
Total non-interest
income (expense) (5,117) 1,614 2,364 (1,696) 20,177
------ ----- ----- ------ ------
Non-interest expense:
Salaries and benefits 20,574 21,058 20,639 82,834 90,002
Occupancy and
equipment 6,263 6,155 6,309 25,101 24,700
Professional fees 1,077 854 689 3,257 3,734
Other non-interest
expense 8,539 7,973 10,017 34,178 39,373
(Gain) loss from the
change in fair value
of warrant liability (219) (1,256) 682 (2,953) 820
Intangible asset
amortization 1,336 1,336 1,337 5,344 5,346
Other real estate
owned expenses
(income) (8,979) 594 3,282 (5,350) 10,957
Problem loan expenses 448 1,267 1,283 3,482 5,644
Contract termination
expenses 4,110 - - 4,110 -
Banking center closure
related expenses - - - - 3,389
--- --- --- --- -----
Total non-interest
expense 33,149 37,981 44,238 150,003 183,965
------ ------ ------ ------- -------
Income before income
taxes 3,053 4,013 944 12,341 10,877
Income tax expense
(benefit) 774 676 (56) 3,165 3,950
--- --- --- ----- -----
Net income $2,279 $3,337 $1,000 $9,176 $6,927
====== ====== ====== ====== ======
Income per share -
basic $0.06 $0.08 $0.02 $0.22 $0.14
Income per share -
diluted $0.06 $0.08 $0.02 $0.22 $0.14
NATIONAL BANK HOLDINGS CORPORATION
Consolidated Statements of Condition (Unaudited)
(Dollars in thousands, except share and per share data)
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
ASSETS
Cash and cash equivalents $256,979 $118,659 $189,460
Investment securities
available-for-sale 1,479,214 1,553,641 1,785,528
Investment securities held-
to-maturity 530,590 557,464 641,907
Non-marketable securities 27,045 21,640 31,663
Loans receivable, net 2,162,409 2,171,372 1,854,094
Allowance for loan losses (17,613) (16,591) (12,521)
------- ------- -------
Loans, net 2,144,796 2,154,781 1,841,573
Loans held for sale 5,146 5,252 5,787
FDIC indemnification asset,
net 39,082 44,413 64,447
Other real estate owned 29,120 45,885 70,125
Premises and equipment, net 106,341 108,100 115,219
Goodwill 59,630 59,630 59,630
Intangible assets, net 16,883 18,220 22,229
Other assets 124,820 125,122 86,547
------- -------
Total assets $4,819,646 $4,812,807 $4,914,115
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Non-interest bearing
demand deposits $732,580 $724,186 $674,989
Interest bearing demand
deposits 386,121 369,917 386,762
Savings and money market 1,290,436 1,307,285 1,280,871
--------- --------- ---------
Total transaction deposits 2,409,137 2,401,388 2,342,622
Time deposits 1,357,051 1,396,070 1,495,687
--------- --------- ---------
Total deposits 3,766,188 3,797,458 3,838,309
Securities sold under
agreements to repurchase 133,552 109,946 99,547
Federal Home Loan Bank
advances 40,000 - -
Other liabilities 85,331 96,441 78,467
------ ------ ------
Total liabilities 4,025,071 4,003,845 4,016,323
Shareholders' equity:
Common stock 512 512 512
Additional paid in capital 993,212 992,587 990,216
Retained earnings 40,528 40,197 39,966
Treasury stock (245,516) (226,230) (126,146)
Accumulated other
comprehensive income
(loss), net of tax 5,839 1,896 (6,756)
----- ----- ------
Total shareholders' equity 794,575 808,962 897,792
------- -------
Total liabilities and
shareholders' equity $4,819,646 $4,812,807 $4,914,115
========== ========== ==========
SHARE DATA
Average basic shares
outstanding 39,439,646 41,837,485 47,378,400
Average diluted shares
outstanding 39,444,330 41,841,685 47,494,341
Ending shares outstanding 38,884,953 39,862,824 44,918,336
Common book value per share $20.43 $20.29 $19.99
Tangible common book value
per share (1) $18.63 $18.49 $18.27
Tangible common book value
per share, excluding
accumulated other
comprehensive income
(loss) (1) $18.48 $18.44 $18.42
CAPITAL RATIOS
Average equity to average
assets 16.75% 17.50% 19.02%
Tangible common equity to
tangible assets (1) 15.25% 15.54% 16.97%
Leverage ratio 14.98% 15.23% 16.63%
(1) Represents a non-GAAP financial
measure. See non-GAAP
reconciliations.
NATIONAL BANK HOLDINGS CORPORATION
Loan Portfolio Update
(Dollars in thousands)
Accounting Treatment and Loss-Share Coverage Period End Loan Balances:
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
ASC 310- Non 310-30 Total ASC 310- Non 310-30 Total Loans ASC 310- Non 310-30 Total Loans
30 Loans Loans Loans 30 Loans Loans 30 Loans Loans
-------- ----- ----- -------- ----- -------- -----
Commercial $22,956 $772,440 $795,396 $37,665 $717,507 $755,172 $61,511 $421,984 $483,495
Agriculture 19,063 118,468 137,531 20,071 142,801 162,872 27,000 132,952 159,952
Commercial
real estate 192,330 369,264 561,594 213,871 380,445 594,316 291,198 283,022 574,220
Residential
real estate 40,761 591,939 632,700 43,979 579,420 623,399 63,011 536,913 599,924
Consumer 4,535 30,653 35,188 5,007 30,606 35,613 8,160 28,343 36,503
----- ------ ------ ----- ------ ------ ----- ------ ------
Total $279,645 $1,882,764 $2,162,409 $320,593 $1,850,779 $2,171,372 $450,880 $1,403,214 $1,854,094
======== ========== ========== ======== ========== ========== ======== ========== ==========
Covered $160,876 $32,821 $193,697 $183,486 $35,982 $219,468 $259,364 $50,033 $309,397
Non-covered 118,769 1,849,943 1,968,712 137,107 1,814,797 1,951,904 191,516 1,353,181 1,544,697
------- --------- --------- ------- --------- --------- ------- --------- ---------
Total $279,645 $1,882,764 $2,162,409 $320,593 $1,850,779 $2,171,372 $450,880 $1,403,214 $1,854,094
======== ========== ========== ======== ========== ========== ======== ========== ==========
Strategic/Non-Strategic Period-End Loan Balances:
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Strategic Non- Total Strategic Non- Total Strategic Non- Total
strategic strategic strategic
---
Commercial $765,114 $30,282 $795,396 $707,999 $47,173 $755,172 $411,589 $71,906 $483,495
Agriculture 135,559 1,972 137,531 160,851 2,021 162,872 154,811 5,141 159,952
Owner-
occupied
commercial
real estate 140,729 19,228 159,957 144,223 19,988 164,211 123,386 30,306 153,692
Commercial
real estate 275,311 126,326 401,637 273,949 156,156 430,105 210,265 210,263 420,528
Residential
real estate 610,583 22,117 632,700 599,523 23,876 623,399 570,455 29,469 599,924
Consumer 33,371 1,817 35,188 33,640 1,973 35,613 33,599 2,904 36,503
------ ----- ------ ------ ----- ------ ------ ----- ------
Total $1,960,667 $201,742 $2,162,409 $1,920,185 $251,187 $2,171,372 $1,504,105 $349,989 $1,854,094
========== ======== ========== ========== ======== ========== ========== ======== ==========
Originations:
Fourth Third Second First Fourth
quarter quarter quarter quarter quarter
2014 2014 2014 2014 2013
---- ---- ---- ---- ----
Commercial $102,732 $110,083 $133,671 $130,096 $159,931
Agriculture 4,952 7,014 10,288 4,959 23,610
Owner-occupied
commercial real
estate 11,139 10,293 28,803 21,002 6,380
Commercial real
estate 27,617 33,817 45,903 29,633 14,579
Residential real
estate 31,680 35,404 44,539 27,812 36,113
Consumer 4,111 6,678 3,556 3,461 3,594
----- ----- ----- -----
Total $182,231 $203,289 $266,760 $216,963 $244,207
======== ======== ======== ======== ========
NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin (Fully taxable equivalent adjusted)
(Dollars in thousands)
Three months ended Three months ended Three months ended
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ---- ------- -------- ----
Interest earning assets:
ASC 310-30 loans $295,308 $14,195 19.23% $341,405 $14,368 16.83% $475,562 $17,045 14.34%
Non 310-30 loans(1)(2)(3)(4) 1,879,779 20,897 4.41% 1,767,106 19,266 4.33% 1,310,450 16,220 4.91%
Investment securities
available-for-sale 1,529,101 7,273 1.90% 1,614,621 7,693 1.91% 1,864,960 8,886 1.91%
Investment securities held-
to-maturity 545,735 3,855 2.83% 575,289 4,056 2.82% 655,805 4,676 2.85%
Other securities 26,997 302 4.47% 21,649 245 4.53% 31,700 389 4.91%
Interest earning deposits and
securities purchased under
agreements to resell 118,171 78 0.26% 133,752 95 0.28% 234,739 161 0.27%
------- --- ------- --- ------- ---
Total interest earning
assets(4) $4,395,091 $46,600 4.21% $4,453,822 $45,723 4.07% $4,573,216 $47,377 4.11%
========== ======= ========== ======= ========== =======
Cash and due from banks 57,031 57,056 60,961
Other assets 391,582 360,532 391,974
Allowance for loan losses (17,260) (16,601) (11,977)
------- ------- -------
Total assets $4,826,444 $4,854,809 $5,014,174
========== ========== ==========
Interest bearing liabilities:
Interest bearing demand,
savings and money market
deposits $1,677,494 $1,075 0.25% $1,689,692 $1,092 0.26% $1,667,653 $1,031 0.25%
Time deposits 1,375,779 2,420 0.70% 1,412,916 2,471 0.69% 1,544,223 2,715 0.70%
Securities sold under
agreements to repurchase 113,993 37 0.13% 104,020 34 0.13% 107,985 41 0.15%
Federal Home Loan Bank
advances 39,565 164 1.64% - - 0.00% - - 0.00%
------ --- --- --- --- ---
Total interest bearing
liabilities $3,206,831 $3,696 0.46% $3,206,628 $3,597 0.44% $3,319,861 $3,787 0.45%
========== ====== ========== ====== ========== ======
Demand deposits 728,345 715,198 676,959
Other liabilities 82,632 83,632 63,518
------ ------ ------
Total liabilities 4,017,808 4,005,458 4,060,338
--------- --------- ---------
Shareholders' equity 808,636 849,351 953,836
------- ------- -------
Total liabilities and
shareholders' equity $4,826,444 $4,854,809 $5,014,174
========== ========== ==========
Net interest income $42,904 $42,126 $43,590
======= ======= =======
Interest rate spread 3.75% 3.63% 3.66%
Net interest earning assets $1,188,260 $1,247,194 $1,253,355
========== ========== ==========
Net interest margin(4) 3.87% 3.75% 3.78%
Ratio of average interest
earning assets to average
interest bearing liabilities 137.05% 138.89% 137.75%
(1) Originated
loans are
net of
deferred
loan fees,
less costs,
which are
included in
interest
income over
the life of
the loan.
(2) Includes
originated
loans with
average
balances of
$1.6
billion,
$1.5 billion
and $972.3
million, and
interest
income of
$17.1
million,
$15.4
million and
$10.7
million,
with yields
of 4.16%,
4.07% and
4.39% for
the three
months ended
December 31,
2014,
September
30, 2014 and
December 31,
2013,
respectively.
(3) Non 310-30
loans
include
loans held-
for-sale.
Average
balances
during the
three months
ended
December 31,
2014,
September
30, 2014 and
December 31,
2013 were
$3.6
million,
$3.8 million
and $2.8
million, and
interest
income was
$83
thousand,
$81 thousand
and $67
thousand for
the same
periods,
respectively.
(4) Presented on
a fully
taxable
equivalent
basis using
the
statutory
tax rate of
35%. The
tax
equivalent
adjustments
included
above are
$320
thousand,
$231
thousand and
$0 for the
three months
ended
December 31,
2014,
September
30, 2014 and
December 31,
2013,
respectively.
NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin (Fully taxable equivalent adjusted)
(Dollars in thousands)
For the year ended December 31, 2014 For the year ended December 31, 2013
------------------------------------ ------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
Interest earning assets:
ASC 310-30 loans $361,806 $60,841 16.82% $620,709 $76,661 12.35%
Non 310-30 loans(1)(2)(3)(4) 1,691,253 74,565 4.41% 1,133,895 62,387 5.50%
Investment securities
available-for-sale 1,655,730 31,887 1.93% 1,951,039 35,460 1.82%
Investment securities held-
to-maturity 588,909 16,764 2.85% 597,920 18,485 3.09%
Other securities 25,855 1,206 4.66% 32,135 1,559 4.85%
Interest earning deposits and
securities purchased under
agreements to resell 123,350 329 0.27% 362,854 923 0.25%
------- --- ------- ---
Total interest earning
assets(4) $4,446,903 $185,592 4.17% $4,698,552 $195,475 4.16%
========== ======== ========== ========
Cash and due from banks 57,763 60,922
Other assets 378,723 428,426
Allowance for loan losses (15,460) (12,690)
------- -------
Total assets $4,867,929 $5,175,210
========== ==========
Interest bearing liabilities:
Interest bearing demand,
savings and money market
deposits $1,701,344 $4,323 0.25% $1,719,507 $4,271 0.25%
Time deposits 1,421,726 9,797 0.69% 1,607,676 12,122 0.75%
Securities sold under
agreements to repurchase 99,057 129 0.13% 84,354 121 0.14%
Federal Home Loan Bank
advances 9,975 164 1.64% - - 0.00%
----- --- --- ---
Total interest bearing
liabilities $3,232,102 $14,413 0.45% $3,411,537 $16,514 0.48%
========== ======= ========== =======
Demand deposits 700,809 660,254
Other liabilities 74,327 64,666
------ ------
Total liabilities 4,007,238 4,136,457
--------- ---------
Shareholders' equity 860,691 1,038,753
------- ---------
Total liabilities and
shareholders' equity $4,867,929 $5,175,210
========== ==========
Net interest income $171,179 $178,961
======== ========
Interest rate spread 3.72% 3.68%
Net interest earning assets $1,214,801 $1,287,015
========== ==========
Net interest margin(4) 3.85% 3.81%
Ratio of average interest
earning assets to average
interest bearing liabilities 137.59% 137.73%
(1) Originated
loans are
net of
deferred
loan fees,
less costs,
which are
included in
interest
income over
the life of
the loan.
(2) Includes
originated
loans with
average
balances of
$1.4 billion
and $734.0
million, and
interest
income of
$58.1
million and
$33.6
million,
with yields
of 4.10% and
4.57% for
the 2014 and
2013,
respectively.
(3) Non 310-30
loans
include
loans held-
for-sale.
Average
balances
during 2014
and 2013
were $3.1
million and
$5.4
million, and
interest
income was
$267
thousand and
$329
thousand for
the same
periods,
respectively.
(4) Presented on
a fully
taxable
equivalent
basis using
the
statutory
tax rate of
35%. The
tax
equivalent
adjustments
included
above are
$930
thousand and
$0 for 2014
and 2013,
respectively.
NATIONAL BANK HOLDINGS CORPORATION
(Dollars in thousands)
Allowance For Loan Losses Analysis (1):
As of and for the three months ended:
-------------------------------------
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
ASC 310- Non 310-30 Total ASC 310- Non 310-30 Total ASC 310- Non 310-30 Total
30 30 30
--- ---
Beginning allowance for loan losses $907 $15,684 $16,591 $1,098 $14,474 $15,572 $1,604 $9,815 $11,419
Net charge-offs (1) (242) (243) - (496) (496) (94) 424 330
Provision (recoupment)/expense (185) 1,450 1,265 (191) 1,706 1,515 (230) 1,002 772
Ending allowance for loan losses $721 $16,892 $17,613 $907 $15,684 $16,591 $1,280 $11,241 $12,521
==== ======= ======= ==== ======= ======= ====== ======= =======
Ratio of annualized net charge-offs to average
total loans during the period, respectively 0.00% 0.05% 0.04% 0.00% 0.11% 0.09% 0.08% (0.13)% (0.07)%
Ratio of allowance for loan losses to total
loans outstanding at period end, respectively 0.26% 0.90% 0.81% 0.28% 0.85% 0.76% 0.28% 0.80% 0.68%
Ratio of allowance for loan losses to total non-
performing loans at period end, respectively 0.00% 156.22% 162.89% 0.00% 82.83% 87.62% 8.63% 118.11% 51.43%
Total loans $279,645 $1,882,764 $2,162,409 $320,593 $1,850,779 $2,171,372 $450,880 $1,403,214 $1,854,094
341,405
Average total loans during the period $295,308 $1,876,203 $2,171,511 $ $1,763,279 $2,104,684 $475,562 $1,307,631 $1,783,193
Total non-performing loans(2) $ - $10,813 $10,813 $ - $18,936 $18,936 $14,827 $9,517 $24,344
Past Due Loans(1):
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
ASC 310-30 Non 310-30 Total ASC 310-30 Non 310-30 Total ASC 310-30 Non 310-30 Total
Loans Loans Loans Loans Loans Loans
----- ----- ----- ----- ----- -----
Non-accrual loans $ - $3,840 $3,840 $ - $15,272 $15,272 $14,827 $5,943 $20,770
Restructured
loans on non-
accrual - 6,973 6,973 - 3,664 3,664 - 3,574 3,574
Loans 30-89 days
past due and
still accruing
interest 7,016 1,142 8,158 30,761 5,452 36,213 11,245 2,854 14,099
Loans 90 days
past due and
still accruing
interest 33,834 263 34,097 42,930 225 43,155 55,864 129 55,993
Total past due
and non-accrual
loans $40,850 $12,218 $53,068 $73,691 $24,613 $98,304 $81,936 $12,500 $94,436
======= ======= ======= ======= ======= ======= ======= ======= =======
Total 90 days
past due and
still accruing
interest and
non-accrual
loans to total
loans,
respectively 12.10% 0.59% 2.08% 13.39% 1.04% 2.86% 15.68% 0.69% 4.33%
Total non-
accrual loans to
total loans,
respectively 0.00% 0.57% 0.50% 0.00% 1.02% 0.87% 3.29% 0.68% 1.31%
% of total past
due and non-
accrual loans
that carry fair
value marks 100.00% 34.66% 84.96% 100.00% 27.68% 81.89% 100.00% 52.23% 93.68%
% of total past
due and non-
accrual loans
that are covered
by FDIC loss
sharing
agreements,
respectively 87.41% 11.39% 69.91% 84.23% 6.55% 64.78% 77.63% 18.27% 69.77%
NATIONAL BANK HOLDINGS CORPORATION
(Dollars in thousands)
Asset Quality Data (Covered/Non-covered)(1):
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Non-covered Covered Total Non-covered Covered Total Non-covered Covered Total
----------- ------- ----- ----------- ------- ----- ----------- ------- -----
Non-accrual loans $3,729 $111 $3,840 $15,124 $147 $15,271 $5,672 $15,098 $20,770
Restructured loans on non-
accrual 5,767 1,206 6,973 2,272 1,393 3,665 1,901 1,673 3,574
----- ----- ----- ----- ----- ----- ----- ----- -----
Total non-performing loans(2) 9,496 1,317 10,813 17,396 1,540 18,936 7,573 16,771 24,344
OREO 10,653 18,467 29,120 15,753 30,132 45,885 31,300 38,825 70,125
Other repossessed assets 829 20 849 869 20 889 784 302 1,086
--- --- --- --- --- --- --- --- -----
Total non-performing assets $20,978 $19,804 $40,782 $34,018 $31,692 $65,710 $39,657 $55,898 $95,555
======= ======= ======= ======= ======= ======= ======= ======= =======
Loans 90 days or more past
due and still accruing
interest $188 $75 $263 $225 $ - $225 $14 $115 $129
Accruing restructured
loans(3) $9,489 $9,786 $19,275 $15,758 $9,277 $25,035 $5,891 $5,714 $11,605
Allowance for loan losses $17,613 $16,591 $12,521
Total non-performing loans
to total non-covered, total
covered, and total loans,
respectively 0.48% 0.68% 0.50% 0.89% 0.70% 0.87% 0.49% 5.42% 1.31%
Loans 90 days or more past
due and still accruing
interest to total non-
covered loans, total covered
loans, and total loans,
respectively 0.01% 0.04% 0.01% 0.01% 0.00% 0.01% 0.00% 0.04% 0.01%
Total non-performing assets to total
assets 0.85% 1.37% 1.94%
Allowance for loan losses to non-
performing loans 162.89% 87.62% 51.43%
(1) Loans accounted for under ASC
310-30 may be considered
performing, regardless of past
due status, if the timing and
expected cash flows on these
loans can be reasonably
estimated and if collection of
the new carrying value is
expected.
(2) Non-performing loans were
redefined during the third
quarter of 2014 to only
include non-accrual loans and
restructured loans on non-
accrual. All previous periods
have been restated.
(3) Includes restructured loans
less than 90 days past due and
still accruing interest.
Changes in Accretable
Yield:
For the three months ended Life-to-date
-------------------------- ------------
December 31, September 30, December 31, December 31,
2014 2014 2013 2014
---- ---- ---- ----
Accretable yield at beginning of
period $113,108 $116,095 $124,086 $ -
Additions through acquisitions - - - 214,994
Reclassification from non-
accretable difference to
accretable yield 16,858 11,736 25,343 233,936
Reclassification to non-
accretable difference from
accretable yield (2,308) (355) (1,760) (23,596)
Accretion (14,195) (14,368) (17,045) (311,871)
Accretable yield at end of period $113,463 $113,108 $130,624 $113,463
======== ======== ======== ========
NATIONAL BANK HOLDINGS CORPORATION
Key Ratios
As of and for the As of and for the
three months ended years ended
------------------ -----------
December 31, September December 31, December 31, December 31,
2014 30, 2014 2013 2014 2013
------------- ---------- ------------ ------------- ------------
Key Ratios(1)
------------
Return on
average
assets 0.19% 0.27% 0.08% 0.19% 0.13%
Return on
average
tangible
assets(2) 0.26% 0.34% 0.15% 0.26% 0.20%
Return on
average
equity 1.12% 1.56% 0.42% 1.07% 0.67%
Return on
average
tangible
common
equity(2) 1.66% 2.12% 0.82% 1.58% 1.06%
Return on risk
weighted
assets 0.37% 0.53% 0.19% 0.37% 0.33%
Interest
earning
assets to
interest
bearing
liabilities
(end of
period)(3) 137.36% 137.71% 137.05% 137.36% 137.05%
Loans to
deposits
ratio (end of
period) 57.55% 57.32% 48.46% 57.55% 48.46%
Average equity
to average
assets 16.75% 17.50% 19.02% 17.68% 20.07%
Non-interest
bearing
deposits to
total
deposits (end
of period) 19.45% 19.07% 17.59% 19.45% 17.59%
Net interest
margin 3.84% 3.73% 3.78% 3.83% 3.81%
Net interest
margin (fully
taxable
equivalent)(2)(4) 3.87% 3.75% 3.78% 3.85% 3.81%
Interest rate
spread(5) 3.75% 3.63% 3.66% 3.72% 3.68%
Yield on
earning
assets 4.18% 4.05% 4.11% 4.15% 4.16%
Yield on
earning
assets (fully
taxable
equivalent)(2)(3) 4.21% 4.07% 4.11% 4.17% 4.16%
Cost of
interest
bearing
liabilities(3) 0.46% 0.44% 0.45% 0.45% 0.48%
Cost of
deposits 0.37% 0.37% 0.38% 0.37% 0.41%
Non-interest
expense to
average
assets 2.72% 3.10% 3.50% 3.08% 3.55%
Efficiency
ratio 84.91% 84.22% 93.36% 85.82% 89.70%
Efficiency
ratio (fully
taxable
equivalent)
(2)(6) 84.19% 83.78% 93.36% 85.35% 89.70%
Adjusted
efficiency
ratio (fully
taxable
equivalent)(2)(6) 71.58% 72.10% 73.52% 72.13% 75.46%
Asset Quality
Data
(7)(8)(9)
-------------
Non-
performing
loans to
total loans 0.50% 0.87% 1.31% 0.50% 1.31%
Covered non-
performing
loans to
total non-
performing
loans 12.18% 8.13% 68.89% 12.18% 68.89%
Non-
performing
assets to
total assets 0.85% 1.37% 1.94% 0.85% 1.94%
Covered non-
performing
assets to
total non-
performing
assets 48.56% 48.23% 58.50% 48.56% 58.50%
Allowance for
loan losses
to total
loans 0.81% 0.76% 0.68% 0.81% 0.68%
Allowance for
loan losses
to total non-
covered loans 0.89% 0.85% 0.81% 0.89% 0.81%
Allowance for
loan losses
to non-
performing
loans 162.89% 87.62% 51.43% 162.89% 51.43%
Net charge-
offs to
average loans 0.04% 0.09% (0.07)% 0.05% 0.41%
(1) Ratios are
annualized.
(2) Ratio represents
non-GAAP
financial
measure. See
non-GAAP
reconciliations
starting on
page 16.
(3) Interest earning
assets include
assets that
earn interest/
accretion or
dividends,
except for the
FDIC
indemnification
asset that may
earn accretion
but is not part
of interest
earning assets.
Any market
value
adjustments on
investment
securities are
excluded from
interest-
earning assets.
Interest
bearing
liabilities
include
liabilities
that must be
paid interest.
(4) Net interest
margin
represents net
interest
income,
including
accretion
income on
interest
earning assets,
as a percentage
of average
interest
earning assets.
(5) Interest rate
spread
represents the
difference
between the
weighted
average yield
on interest
earning assets
and the
weighted
average cost of
interest
bearing
liabilities.
(6) The efficiency
ratio
represents non-
interest
expense, less
intangible
asset
amortization,
as a percentage
of net interest
income plus
non-interest
income on a
fully taxable
equivalent
basis.
(7) Non-performing
loans consist
of non-
accruing loans
and
restructured
loans on non-
accrual, but
exclude any
loans accounted
for under ASC
310-30 in
which the pool
is still
performing.
These ratios
may, therefore,
not be
comparable to
similar ratios
of our peers.
(8) Non-performing
assets include
non-performing
loans, other
real estate
owned and other
repossessed
assets.
(9) Total loans are
net of unearned
discounts and
fees.
NATIONAL BANK HOLDINGS CORPORATION
Non-GAAP Financial Measures
(Dollars in thousands, except share and per share data)
Statements of Financial Condition Non-GAAP Reconciliations
December 31, 2014 September 30, 2014 December 31,
2013
----
Total shareholders' equity $794,575 $808,962 $897,792
Less: goodwill and intangible assets,
net (76,513) (77,850) (81,859)
Add: deferred tax liability related to
goodwill 6,222 5,834 4,671
Tangible common equity (non-GAAP) $724,284 $736,946 $820,604
======== ======== ========
Total assets $4,819,646 $4,812,807 $4,914,115
Less: goodwill and intangible assets,
net (76,513) (77,850) (81,859)
Add: deferred tax liability related to
goodwill 6,222 5,834 4,671
Tangible assets (non-GAAP) $4,749,355 $4,740,791 $4,836,927
========== ========== ==========
Tangible common equity to tangible
assets calculations:
Total shareholders' equity to total
assets 16.49% 16.81% 18.27%
Less: impact of goodwill and intangible
assets, net (1.24%) (1.27%) (1.30%)
------ ------ ------
Tangible common equity to tangible
assets (non-GAAP) 15.25% 15.54% 16.97%
===== ===== =====
Common book value per share
calculations:
Total shareholders' equity $794,575 $808,962 $897,792
Divided by: ending shares outstanding 38,884,953 39,862,824 44,918,336
---------- ---------- ----------
Common book value per share $20.43 $20.29 $19.99
====== ====== ======
Tangible common book value per share
calculations:
Tangible common equity (non-GAAP) $724,284 $736,946 $820,604
Divided by: ending shares outstanding 38,884,953 39,862,824 44,918,336
----------
Tangible common book value per share
(non-GAAP) $18.63 $18.49 $18.27
====== ====== ======
Tangible common book value per share,
excluding accumulated other
comprehensive income (loss)
calculations:
Tangible common equity (non-GAAP) $724,284 $736,946 $820,604
Less: accumulated other comprehensive
income (loss), net of tax (5,839) (1,896) 6,756
------ ------ -----
Tangible common book value, excluding
accumulated other comprehensive income
(loss), net of tax (non-GAAP) 718,445 735,050 827,360
Divided by: ending shares outstanding 38,884,953 39,862,824 44,918,336
----------
Tangible common book value per share,
excluding accumulated other
comprehensive income (loss), net of
tax (non-GAAP) $18.48 $18.44 $18.42
====== ====== ======
Return on Average Tangible Assets and Return on Average Tangible Equity
As of and for the As of and for the
three months ended years ended
------------------ -----------
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Net income $2,279 $3,337 $1,000 $9,176 $6,927
Add: impact of core
deposit intangible
amortization
expense, after tax 815 815 809 3,260 3,235
--- --- --- ----- -----
Net income adjusted
for impact of core
deposit intangible
amortization
expense, after tax $3,094 $4,152 $1,809 $12,436 $10,162
====== ====== ====== ======= =======
Average assets $4,846,444 $4,854,809 $5,014,174 $4,867,929 $5,175,210
Less: average
goodwill and
intangible assets,
net of deferred
tax asset related
to goodwill 71,080 72,781 77,973 73,074 79,964
------ ------ ------ ------ ------
Average tangible
assets (non-GAAP) $4,775,364 $4,782,028 $4,936,201 $4,794,855 $5,095,246
========== ========== ========== ========== ==========
Average
shareholder's
equity $808,636 $849,351 $953,836 $860,691 $1,038,753
Less: average
goodwill and
intangible assets,
net of deferred
tax asset related
to goodwill 71,080 72,781 77,973 73,074 79,964
Average tangible
common equity
(non-GAAP) $737,556 $776,570 $875,863 $787,617 $958,789
======== ======== ======== ======== ========
Return on average
assets 0.19% 0.27% 0.08% 0.19% 0.13%
Return on average
tangible assets
(non-GAAP) 0.26% 0.34% 0.15% 0.26% 0.20%
Return on average
equity 1.12% 1.56% 0.42% 1.07% 0.67%
Return on average
tangible common
equity (non-GAAP) 1.66% 2.12% 0.82% 1.58% 1.06%
Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin
As of and for the As of and for the
three months ended years ended
------------------ -----------
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Interest income $46,280 $45,492 $47,377 $184,662 $195,475
Add: impact of
taxable equivalent
adjustment 320 231 - 930 -
--- --- --- --- ---
Interest income,
fully taxable
equivalent (non-
GAAP) $46,600 $45,723 $47,377 $185,592 $195,475
======= ======= ======= ======== ========
Net interest income $42,584 $41,895 $43,590 $170,249 $178,961
Add: impact of
taxable equivalent
adjustment 320 231 - 930 -
--- --- --- --- ---
Net interest
income, fully
taxable equivalent
(non-GAAP) $42,904 $42,126 $43,590 $171,179 $178,961
======= ======= ======= ======== ========
Average earning
assets 4,395,091 4,453,822 4,573,216 4,446,903 4,698,552
Yield on earning
assets 4.18% 4.05% 4.11% 4.15% 4.16%
Yield on earning
assets,fully
taxable equivalent
(non-GAAP) 4.21% 4.07% 4.11% 4.17% 4.16%
Net interest margin 3.84% 3.73% 3.78% 3.83% 3.81%
Net interest
margin, fully
taxable equivalent
(non-GAAP) 3.87% 3.75% 3.78% 3.85% 3.81%
Adjusted Efficiency Ratio
As of and for the As of and for the
three months ended years ended
------------------ -----------
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Net interest income $42,584 $41,895 $43,590 $170,249 $178,961
Add: impact of
taxable equivalent
adjustment 320 231 - 930 -
--- --- --- --- ---
Net interest income,
fully taxable
equivalent (non-
GAAP) $42,904 $42,126 $43,590 $171,179 $178,961
======= ======= ======= ======== ========
Non-interest income $(5,117) $1,614 $2,364 $(1,696) $20,177
Add: FDIC
indemnification
asset amortization 7,922 6,252 7,117 27,741 18,960
Add: FDIC loss
sharing income
(expense) 6,313 943 467 8,862 (2,811)
Less: gain on sale of
previously charged-
off acquired loans (62) (147) (221) (737) (1,339)
Less: impact of OREO
related write-ups
and other income (1,030) (799) (2,104) (3,807) (4,817)
------ ---- ------ ------ ------
Adjusted non-
interest income
(non-GAAP) $8,026 $7,863 $7,623 $30,363 $30,170
====== ====== ====== ======= =======
Non-interest expense
adjusted for core
deposit intangible
asset amortization $31,813 $36,645 $42,901 $144,659 $178,619
Less: impact of
change in fair value
of warrant
liabilities 219 1,256 (682) 2,953 (820)
Less: other real
estate owned
expenses 8,979 (594) (3,282) 5,350 (10,957)
Less: problem loan
expenses (448) (1,267) (1,283) (3,482) (5,644)
Less: deconversion
expenses (4,110) - - (4,110) -
Less: banking center
closure related
expenses - - - - (3,389)
--- --- --- --- ------
Adjusted non-
interest expense
(non-GAAP) $36,453 $36,040 $37,654 $145,370 $157,809
======= ======= ======= ======== ========
Efficiency ratio 84.91% 84.22% 93.36% 85.82% 89.70%
Efficiency ratio
(fully taxable
equivalent) (non-
GAAP) 84.19% 83.78% 93.36% 85.35% 89.70%
Adjusted efficiency
ratio (fully taxable
equivalent) (non-
GAAP) 71.57% 72.10% 73.52% 72.13% 75.46%
Adjusted Financial Results
For the three months ended For the years ended
-------------------------- -------------------
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Adjustments to diluted
earnings per share:
Income per share - diluted $0.06 $0.08 $0.02 $0.22 $0.14
Adjustments to diluted
earnings per share (non-
GAAP)(1) 0.13 0.09 0.13 0.45 0.37
Adjusted diluted earnings
per share (non-GAAP)(1) $0.19 $0.17 $0.15 $0.67 $0.51
===== ===== ===== ===== =====
Adjustments to return on
average tangible assets:
Annualized adjustments to
net income (non-GAAP)(1) $21,384 $15,064 $24,772 $19,118 $18,908
Divided by: average
tangible assets (non-
GAAP) 4,755,364 4,782,029 4,936,201 4,794,855 5,095,246
Adjustments to return on
average tangible assets
(non-GAAP) 0.45% 0.32% 0.50% 0.40% 0.37%
Return on average tangible
assets (non-GAAP) 0.26% 0.34% 0.15% 0.26% 0.20%
Adjusted return on average
tangible assets (non-
GAAP) 0.71% 0.66% 0.65% 0.66% 0.57%
==== ==== ==== ==== ====
Adjustments to net income:
Net income $2,279 $3,337 $1,000 $9,176 $6,927
Adjustments to net income
(non-GAAP)(1) 5,390 3,797 6,244 19,118 18,908
Adjusted net income (non-
GAAP) $7,669 $7,134 $7,244 $28,294 $25,835
====== ====== ====== ======= =======
(1) Adjustments
Non-interest income
adjustments:
Plus: FDIC indemnification
asset amortization $7,922 $6,252 $7,117 $27,741 $18,960
Plus: other FDIC loss
sharing income (loss) 6,313 943 467 8,862 (2,811)
Less: gain on recoveries
of previously charged-
off acquired loans (62) (147) (221) (737) (1,339)
Less: OREO related write-
ups and other income (1,030) (799) (2,104) (3,807) (4,817)
Total non-interest income
adjustments (non-GAAP) $13,143 $6,249 $5,259 $32,059 $9,993
------- ------ ------ ------- ------
Non-interest expense
adjustments:
Less: other real estate
owned expenses (income) $8,979 $(594) $(3,282) $5,350 $(10,957)
Less: problem loan
expenses (448) (1,267) (1,283) (3,482) (5,644)
Plus: warrant change 219 1,256 (682) 2,953 (820)
Less: contract termination
expenses (4,110) - - (4,110) -
Less: banking center
closure related expenses - - - - (3,389)
--- --- --- --- ------
Total non-interest
expense adjustments (non-
GAAP) $4,640 $(605) $(5,247) $711 $(20,810)
------ ----- ------- ---- --------
Pre-tax adjustments 8,503 6,854 10,506 31,348 30,803
----- -----
Collective tax expense
impact (3,113) (3,057) (4,262) (12,230) (11,895)
Adjustments to net income
(non-GAAP) $5,390 $3,797 $6,244 $19,118 $18,908
====== ====== ====== ======= =======
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SOURCE National Bank Holdings Corporation
