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National Bank Holdings Corporation Announces Fourth Quarter and Record Full Year 2021 Financial Results
Source: Nasdaq GlobeNewswire / 20 Jan 2022 16:10:01 America/New_York
DENVER, Jan. 20, 2022 (GLOBE NEWSWIRE) -- National Bank Holdings Corporation (NYSE: NBHC) reported:
For the quarter For the year 4Q21 3Q21 4Q20 2021 2020 Net income ($000's) $ 22,769 $ 19,825 $ 27,169 $ 93,606 $ 88,591 Earnings per share - diluted $ 0.74 $ 0.64 $ 0.87 $ 3.01 $ 2.85 Return on average tangible assets(1) 1.30 % 1.14 % 1.67 % 1.37 % 1.44 % Return on average tangible common equity(1) 12.37 % 10.65 % 15.55 % 12.87 % 13.27 % (1 ) Quarterly ratios are annualized. See non-GAAP reconciliations below. In announcing these results, Chief Executive Officer Tim Laney shared, “We finished the year with strong momentum delivering fourth quarter earnings of $0.74 per diluted share and record full year earnings of $3.01 per diluted share. For the second consecutive quarter, our team delivered record loan originations. We delivered annualized loan growth of 13.4% in the fourth quarter, excluding PPP loans. Our credit metrics remain solid with just three basis points of net charge-offs for the year and a record low non-performing loans ratio of 0.24%. We have carried our momentum into the new year, and we are well positioned to execute on our growth strategies with ample liquidity and a strong capital position.”
Mr. Laney added, “We will continue to focus on growing our core business while also innovating and building the partnerships that will help us deliver a comprehensive digital financial ecosystem for our clients. By reducing costs and providing real-time information for our small and medium sized businesses, we have an opportunity to reduce their stress and save them precious time that they can devote to executing their business strategies.”
Fourth Quarter 2021 Results
(All comparisons refer to the third quarter of 2021, except as noted)Net income totaled $22.8 million, or $0.74 per diluted share, an increase of $2.9 million or 14.8% over the third quarter. The return on average tangible assets increased sixteen basis points to 1.30%, and the return on average tangible common equity increased 172 basis points to 12.37%.
Net Interest Income
Fully taxable equivalent net interest income totaled $50.8 million during the fourth quarter of 2021, an increase of $1.9 million. Excluding Paycheck Protection Program (“PPP”) loan fee income of $1.8 million, which was $0.7 million lower than last quarter, net interest income increased $2.6 million or 22.5% annualized. The fully taxable equivalent net interest margin widened 10 basis points to 3.03% driven by excess cash liquidity being deployed into higher yielding originated loans. The yield on earnings assets increased nine basis points, with the cost of deposits decreasing three basis points to a record low 0.18%.Loans
Total loans ended the quarter at $4.5 billion, an increase of $91.6 million over the prior quarter. Excluding PPP loans, total loans increased $146.7 million or 13.4% annualized, led by commercial loan growth of $150.2 million or 19.9% annualized. For the second consecutive quarter, we generated record quarterly loan originations totaling $475.4 million, led by commercial loan originations of $370.9 million.Asset Quality and Provision for Loan Losses
The Company recorded $0.1 million of provision expense, compared to zero loan loss provision last quarter. The quarter’s provision was driven by loan growth partially offset by strong asset quality and an improved outlook in the CECL model’s underlying economic forecast. Annualized net charge-offs totaled 0.02% consistent with the prior quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDRs) improved five basis points to a record low 0.24% of total loans, and non-performing assets remained consistent at 0.39% of total loans and OREO. The allowance for credit losses as a percentage of total loans totaled 1.10%, compared to 1.11% at September 30, 2021.Deposits
Average total deposits increased $28.4 million or 1.8% annualized, to $6.2 billion for the fourth quarter 2021. Average transaction deposits (defined as total deposits less time deposits) increased $80.6 million or 6.1% annualized. The mix of transaction deposits to total deposits improved 90 basis points to 86.6% at December 31, 2021. The loan to deposit ratio increased 39 basis points to 72.5%.Non-Interest Income
Non-interest income totaled $23.2 million, a decrease of $5.3 million largely driven by lower mortgage banking income. Included in other non-interest income were $2.0 million of unrealized gains from equity method investments. Included in the quarter was $1.1 million of banking center consolidation-related income, compared to $1.2 million in the prior quarter.Non-Interest Expense
Non-interest expense totaled $44.5 million, a decrease of $6.8 million from the prior quarter. Salaries and benefits decreased $2.6 million largely due to lower mortgage-related compensation. Included in the prior quarter were $2.4 million of transaction-related expenses for the strategic investment in Finstro Global Holdings Inc. and Figure Technologies. The fully taxable equivalent efficiency ratio improved to 59.7% at December 31, 2021, compared to 65.9% at September 30, 2021.Income tax expense totaled $5.3 million during the fourth quarter, compared to $5.0 million. Included in income tax expense was $0.2 million of benefit from stock compensation activity during the fourth quarter. Adjusting for stock compensation activity, the effective tax rate was 19.8%, compared to 20.0% in the prior quarter. The lower rate compared to the statutory rate reflects the continued success of our tax strategies and tax-exempt income.
Capital
Capital ratios continue to be strong and in excess of federal bank regulatory agency “well capitalized” thresholds. The Tier 1 leverage ratios at December 31, 2021 for the consolidated company and NBH Bank were 10.39% and 9.09%, respectively. Shareholders’ equity totaled $840.1 million at December 31, 2021, decreasing $4.6 million primarily due to higher accumulated other comprehensive loss.Common book value per share increased $0.15 to $28.04 at December 31, 2021. Tangible common book value per share increased $0.13 to $24.33 at December 31, 2021 driven by the quarter’s earnings, net of dividends paid and share repurchases. Excluding accumulated other comprehensive loss, the tangible book value per share increased $0.32 to $24.56 at December 31, 2021.
Recent Events
The COVID-19 pandemic has caused disruption and is likely to continue to present challenges to our business. We continue to remain committed to ensuring our associates, clients and communities are receiving the support they need through our banking centers and our digital banking platform. Our teams have been working diligently to support our clients who are experiencing financial hardship due to COVID-19 through participation in the SBA’s Paycheck Protection Program, including assistance with PPP loan forgiveness applications, and loan modifications, as needed. While access to vaccines in the United States has increased, the efficacy of those vaccines, the impact of emerging targeted vaccine mandates and new variants of the virus, and the length of time that the government-mandated measures must remain in place or potentially be reinstituted to address COVID-19 are unknown. The pandemic has had a negative impact to the U.S. labor market, consumer spending and business operations, and it is not clear how long new outbreaks of COVID-19 cases will have a continued impact.Year-Over-Year Review
(All comparisons refer to the full year 2020, except as noted)Net income totaled a record $93.6 million, or $3.01 per diluted share, an increase of $5.0 million or 5.7% over the prior year. The return on average tangible assets was 1.37% compared to 1.44% in the prior year, and the return on average tangible common equity was 12.87%, compared to 13.27%.
Fully taxable equivalent net interest income totaled $192.3 million, decreasing $5.7 million or 2.9%, as a result of interest rate actions taken by the Federal Reserve during 2020. Average earning assets increased $725.4 million, or 12.5%, primarily driven by increases in average interest bearing cash balances of $544.9 million and average investment securities of $404.3 million. The fully taxable equivalent net interest margin narrowed 47 basis points to 2.95% due to lower earning asset yields. The yield on earning assets decreased 69 basis points, driven by the remix of assets into lower-yielding cash balances. The cost of deposits decreased 22 basis points to 0.23%.
Loans outstanding totaled $4.5 billion, increasing $159.7 million or 3.7%. Excluding PPP loans, total loans increased $314.1 million or 7.5%, led by commercial loan growth of $272.8 million, or 9.5%. New loan originations over the trailing 12 months totaled a record $1.5 billion, led by commercial loan originations of $1.1 billion including PPP loan originations of $121.1 million.
The Company recorded $9.3 million of net provision release during 2021, compared to $17.6 million of provision expense in the prior year. The provision release was driven by strong asset quality and an improved outlook in the CECL model’s underlying economic forecast. Net charge-offs totaled 0.03% of total loans, compared to 0.06% of total loans in the prior year. Non-performing loans to total loans improved 23 basis points to 0.24%, compared to 0.47% at December 31, 2020. The allowance for credit losses totaled 1.10% of total loans, compared to 1.37% at December 31, 2020.
Average total deposits increased $775.2 million or 14.7%, to $6.0 billion during 2021. Average non-interest bearing demand deposits increased $857.2 million or 57.2%, and average transaction deposits increased $898.5 million, or 21.2%. The mix of transaction deposits to total deposits increased by 400 basis points to 86.6%, and the mix of non-interest bearing demand deposits to total deposits improved 305 basis points to 40.2% at December 31, 2021.
Non-interest income totaled $110.4 million, a decrease of $29.9 million or 21.3%, driven by $39.0 million lower mortgage banking income due to slower refinance activity in 2021 and competition driving tighter gain on sale margins. Bank card fees increased $2.2 million. Other non-interest income increased $2.9 million due to unrealized gains from equity method investments. Included in 2021 was $4.6 million of banking center consolidation-related income, compared to $0.3 million in 2020.
Non-interest expense totaled $191.8 million, a decrease of $14.3 million or 7.0%, driven by lower mortgage-related compensation as well as the Company’s strategic efforts to improve operating efficiency. Included in 2021 were $2.5 million of transaction-related professional fees for the previously announced investments in our digital financial ecosystem. Salaries and benefits decreased $13.7 million primarily due to lower mortgage banking related compensation. Occupancy and equipment decreased $2.2 million largely due to efficiencies gained from banking center consolidations. Problem asset workout expense decreased $1.1 million, and gain on sale of OREO increased $0.4 million.
Income tax expense totaled $21.4 million, an increase of $0.6 million, driven by 2021’s higher pre-tax income. Included in income tax expense was $0.6 million of tax benefit and $0.1 million of tax expense from stock compensation activity during 2021 and 2020, respectively. Adjusting for stock compensation activity, the effective tax rate for 2021 was 19.1%, compared to 19.0% for 2020.
Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Friday, January 21, 2022. Interested parties may listen to this call by dialing (800) 289-0720/+44 (0)330 336 9601 (United Kingdom) using the confirmation code of 2454367 and asking for the NBHC Q4 2021 Earnings Call. A telephonic replay of the call will be available beginning approximately four hours after the call’s completion through January 26, 2022, by dialing (888) 203-1112 using the confirmation code of 2454367. The earnings release and an on-line replay of the call will also be available on the Company’s website at www.nationalbankholdings.com by visiting the investor relations area.About Non-GAAP Financial Measures
Certain of the financial measures and ratios we present, including “tangible assets,” “return on average tangible assets,” “tangible common equity,” “return on average tangible common equity,” “tangible common book value per share,” “tangible common book value, excluding accumulated other comprehensive loss, net of tax,” “tangible common book value per share, excluding accumulated other comprehensive loss, net of tax,” “tangible common equity to tangible assets,” and “fully taxable equivalent” metrics, are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.
A reconciliation of non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.
About National Bank Holdings Corporation
National Bank Holdings Corporation is a bank holding company created to build a leading community bank franchise delivering high quality client service and committed to stakeholder results. Through its bank subsidiary, NBH Bank, National Bank Holdings Corporation operates a network of 81 banking centers, serving individual consumers, small, medium and large businesses, and government and non-profit entities. Its banking centers are located in its core footprint of Colorado, the greater Kansas City region, Texas, Utah and New Mexico. Its comprehensive residential mortgage banking group primarily serves the bank’s core footprint. NBH Bank operates under the following brand names: Community Banks of Colorado and Community Banks Mortgage, a division of NBH Bank, in Colorado, Bank Midwest and Bank Midwest Mortgage in Kansas and Missouri, and Hillcrest Bank and Hillcrest Bank Mortgage in Texas, Utah and New Mexico. Additional information about National Bank Holdings Corporation can be found at www.nationalbankholdings.com.For more information visit: cobnks.com, bankmw.com, hillcrestbank.com or nbhbank.com. Or, follow us on any of our social media sites:
Community Banks of Colorado: facebook.com/cobnks, twitter.com/cobnks, instagram.com/cobnks;
Bank Midwest: facebook.com/bankmw, twitter.com/bank_mw, instagram.com/bankmw;
Hillcrest Bank: facebook.com/hillcrestbank, twitter.com/hillcrest_bank;
NBH Bank: twitter.com/nbhbank;
or connect with any of our brands on LinkedIn.Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contain words such as “anticipate,” “believe,” “can,” “would,” “should,” “could,” “may,” “predict,” “seek,” “potential,” “will,” “estimate,” “target,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “intend” or similar expressions that relate to the Company’s strategy, plans or intentions. Forward-looking statements involve certain important risks, uncertainties and other factors, any of which could cause actual results to differ materially from those in such statements. Such factors include, without limitation, the “Risk Factors” referenced in our most recent Form 10-K filed with the Securities and Exchange Commission (SEC), other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, and the following factors: ability to execute our business strategy; business and economic conditions; effects of any potential government shutdowns; economic, market, operational, liquidity, credit and interest rate risks associated with the Company’s business; effects of any changes in trade, monetary and fiscal policies and laws; changes imposed by regulatory agencies to increase capital standards; effects of inflation, as well as, interest rate, securities market and monetary supply fluctuations; changes in the economy or supply-demand imbalances affecting local real estate values; changes in consumer spending, borrowings and savings habits; with respect to our mortgage business, the inability to negotiate fees with investors for the purchase of our loans or our obligation to indemnify purchasers or repurchase related loans; the Company’s ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions, consolidations and other expansion opportunities; the Company's ability to realize anticipated benefits from enhancements or updates to its core operating systems from time to time without significant change in client service or risk to the Company's control environment; the Company's dependence on information technology and telecommunications systems of third party service providers and the risk of systems failures, interruptions or breaches of security; the Company’s ability to achieve organic loan and deposit growth and the composition of such growth; changes in sources and uses of funds; increased competition in the financial services industry; the effect of changes in accounting policies and practices; the share price of the Company’s stock; the Company's ability to realize deferred tax assets or the need for a valuation allowance; continued consolidation in the financial services industry; ability to maintain or increase market share and control expenses; costs and effects of changes in laws and regulations and of other legal and regulatory developments; technological changes; the timely development and acceptance of new products and services; the Company’s continued ability to attract, hire and maintain qualified personnel; ability to implement and/or improve operational management and other internal risk controls and processes and reporting system and procedures; regulatory limitations on dividends from the Company's bank subsidiary; changes in estimates of future credit reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; widespread natural and other disasters, pandemics, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; adverse effects due to the novel Coronavirus Disease 2019 (COVID-19) on the Company and its clients, counterparties, employees, and third-party service providers, and the adverse impacts on our business, financial position, results of operations, and prospects; impact of reputational risk; and success at managing the risks involved in the foregoing items. The Company can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of this press release, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.
Contact:
Analysts/Institutional Investors: Aldis Birkans, Chief Financial Officer, (720) 554-6640, ir@nationalbankholdings.com
Media: Jody Soper, Chief Marketing Officer, (303) 784-5925, Jody.Soper@nbhbank.com
NATIONAL BANK HOLDINGS CORPORATION
FINANCIAL SUMMARY
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except share and per share data)For the three months ended For the years ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Total interest and dividend income $ 52,501 $ 50,801 $ 53,288 $ 200,965 $ 218,002 Total interest expense 3,015 3,232 4,732 13,821 25,056 Net interest income 49,486 47,569 48,556 187,144 192,946 Taxable equivalent adjustment 1,299 1,315 1,260 5,161 5,103 Net interest income FTE(1) 50,785 48,884 49,816 192,305 198,049 Provision expense (release) for loan losses 132 — — (9,293 ) 17,630 Net interest income after provision for loan losses FTE(1) 50,653 48,884 49,816 201,598 180,419 Non-interest income: Service charges 3,905 3,947 4,000 14,894 14,962 Bank card fees 4,476 4,530 4,240 17,693 15,446 Mortgage banking income 10,387 16,615 23,138 63,360 102,384 Other non-interest income 3,388 2,266 1,493 9,752 6,823 OREO-related income — — 284 35 387 Banking center consolidation-related income 1,059 1,164 202 4,630 256 Total non-interest income 23,215 28,522 33,357 110,364 140,258 Non-interest expense: Salaries and benefits 29,986 32,556 32,919 127,504 141,170 Occupancy and equipment 6,133 6,469 6,619 25,283 27,473 Professional fees 781 3,251 864 5,423 2,946 Other non-interest expense 7,764 7,624 6,725 29,260 27,947 Problem asset workout 212 1,119 807 2,063 3,148 Gain on sale of OREO, net (667 ) — (13 ) (475 ) (38 ) Core deposit intangible asset amortization 296 295 296 1,183 1,183 Banking center consolidation-related expense — — 208 1,589 2,348 Total non-interest expense 44,505 51,314 48,425 191,830 206,177 Income before income taxes FTE(1) 29,363 26,092 34,748 120,132 114,500 Taxable equivalent adjustment 1,299 1,315 1,260 5,161 5,103 Income before income taxes 28,064 24,777 33,488 114,971 109,397 Income tax expense 5,295 4,952 6,319 21,365 20,806 Net income $ 22,769 $ 19,825 $ 27,169 $ 93,606 $ 88,591 Earnings per share - basic $ 0.75 $ 0.64 $ 0.88 $ 3.04 $ 2.87 Earnings per share - diluted 0.74 0.64 0.87 3.01 2.85 (1 ) Net interest income is presented on a GAAP basis and fully taxable equivalent (FTE) basis, as the Company believes this non-GAAP measure is the preferred industry measurement for this item. The FTE adjustment is for the tax benefit on certain tax exempt loans using the federal tax rate of 21% for each period presented. NATIONAL BANK HOLDINGS CORPORATION
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands, except share and per share data)December 31, 2021 September 30, 2021 December 31, 2020 ASSETS Cash and cash equivalents $ 845,695 $ 807,370 $ 605,565 Investment securities available-for-sale 691,847 657,833 661,955 Investment securities held-to-maturity 609,012 642,636 376,615 Non-marketable securities 50,740 46,964 22,073 Loans 4,513,383 4,421,760 4,353,726 Allowance for credit losses (49,694 ) (49,155 ) (59,777 ) Loans, net 4,463,689 4,372,605 4,293,949 Loans held for sale 139,142 158,066 247,813 Other real estate owned 7,005 4,325 4,730 Premises and equipment, net 96,747 94,114 106,982 Goodwill 115,027 115,027 115,027 Intangible assets, net 12,322 11,621 17,928 Other assets 182,785 190,430 207,313 Total assets $ 7,214,011 $ 7,100,991 $ 6,659,950 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Non-interest bearing demand deposits $ 2,506,265 $ 2,447,099 $ 2,111,045 Interest bearing demand deposits 555,401 546,597 514,286 Savings and money market 2,332,591 2,264,083 2,064,769 Total transaction deposits 5,394,257 5,257,779 4,690,100 Time deposits 833,916 876,841 986,132 Total deposits 6,228,173 6,134,620 5,676,232 Securities sold under agreements to repurchase 22,768 21,427 22,897 Long-term debt 39,478 — — Other liabilities 83,486 100,228 140,130 Total liabilities 6,373,905 6,256,275 5,839,259 Shareholders' equity: Common stock 515 515 515 Additional paid in capital 1,014,294 1,013,064 1,011,362 Retained earnings 289,876 273,900 223,175 Treasury stock (457,616 ) (441,366 ) (424,127 ) Accumulated other comprehensive (loss) income, net of tax (6,963 ) (1,397 ) 9,766 Total shareholders' equity 840,106 844,716 820,691 Total liabilities and shareholders' equity $ 7,214,011 $ 7,100,991 $ 6,659,950 SHARE DATA Average basic shares outstanding 30,338,265 30,800,590 30,784,896 Average diluted shares outstanding 30,715,500 31,064,815 31,032,648 Ending shares outstanding 29,958,764 30,288,131 30,634,291 Common book value per share $ 28.04 $ 27.89 $ 26.79 Tangible common book value per share(1) (non-GAAP) 24.33 24.20 23.09 Tangible common book value per share, excluding accumulated other comprehensive income(1) (non-GAAP) 24.56 24.24 22.77 CAPITAL RATIOS Average equity to average assets 11.88 % 12.07 % 12.27 % Tangible common equity to tangible assets(1) 10.26 % 10.49 % 10.80 % Tier 1 leverage ratio 10.39 % 10.43 % 10.70 % Common equity tier 1 risk-based capital ratio 14.26 % 14.57 % 14.70 % Tier 1 risk-based capital ratio 14.26 % 14.57 % 14.70 % Total risk-based capital ratio 15.92 % 15.48 % 15.83 % (1 ) Represents a non-GAAP financial measure. See non-GAAP reconciliations below. NATIONAL BANK HOLDINGS CORPORATION
Loan Portfolio
(Dollars in thousands)Period End Loan Balances by Type
December 31, 2021 December 31, 2021 vs. September 30, 2021 vs. December 31, 2020 December 31, 2021 September 30, 2021 % Change December 31, 2020 % Change Originated: Commercial: Commercial and industrial $ 1,458,218 $ 1,352,481 7.8 % $ 1,248,530 16.8 % Municipal and non-profit 928,705 878,988 5.7 % 870,410 6.7 % Owner-occupied commercial real estate 503,663 504,415 (0.1 )% 464,417 8.5 % Food and agribusiness 200,412 195,766 2.4 % 205,189 (2.3 )% PPP loans(1) 21,677 76,794 (71.8 )% 176,106 (87.7 )% Total commercial 3,112,675 3,008,444 3.5 % 2,964,652 5.0 % Commercial real estate non-owner occupied 611,765 605,143 1.1 % 542,642 12.7 % Residential real estate 616,135 608,158 1.3 % 581,555 5.9 % Consumer 17,336 17,735 (2.2 )% 18,581 (6.7 )% Total originated 4,357,911 4,239,480 2.8 % 4,107,430 6.1 % Acquired: Commercial: Commercial and industrial 16,252 17,521 (7.2 )% 22,102 (26.5 )% Municipal and non-profit 340 347 (2.0 )% 381 (10.8 )% Owner-occupied commercial real estate 29,973 37,335 (19.7 )% 51,821 (42.2 )% Food and agribusiness 3,177 3,653 (13.0 )% 5,108 (37.8 )% Total commercial 49,742 58,856 (15.5 )% 79,412 (37.4 )% Commercial real estate non-owner occupied 52,964 65,784 (19.5 )% 89,354 (40.7 )% Residential real estate 52,521 57,344 (8.4 )% 77,105 (31.9 )% Consumer 245 296 (17.2 )% 425 (42.4 )% Total acquired 155,472 182,280 (14.7 )% 246,296 (36.9 )% Total loans $ 4,513,383 $ 4,421,760 2.1 % $ 4,353,726 3.7 % (1 ) PPP loan balances are net of fees and costs and include principal totaling $22,300, $79,242 and $179,531 as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively. Originations(1)
Fourth quarter Third quarter Second quarter First quarter Fourth quarter 2021 2021 2021 2021 2020 Commercial: Commercial and industrial $ 229,529 $ 196,289 $ 147,030 $ 23,390 $ 96,625 Municipal and non-profit 101,450 43,516 25,131 7,999 25,348 Owner occupied commercial real estate 28,914 53,445 48,225 27,093 36,085 Food and agribusiness 11,016 8,442 26,956 (10,104 ) 19,191 PPP loans — — — 121,141 — Total commercial 370,909 301,692 247,342 169,519 177,249 Commercial real estate non-owner occupied 46,128 55,392 58,532 49,195 52,018 Residential real estate 55,873 54,442 53,962 74,145 41,355 Consumer 2,524 1,810 2,267 1,353 1,858 Total $ 475,434 $ 413,336 $ 362,103 $ 294,212 $ 272,480 (1 ) Originations are defined as closed end funded loans and net fundings under revolving lines of credit. Net fundings (paydowns) under revolving lines of credit were $138,777, $29,154, $59,520, ($26,395) and $50,982 as of the fourth, third, second and first quarters of 2021 and the fourth quarter of 2020, respectively. NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
(Dollars in thousands)For the three months ended For the three months ended For the three months ended December 31, 2021 September 30, 2021 December 31, 2020 Average Average Average Average Average Average balance Interest rate balance Interest rate balance Interest rate Interest earning assets: Originated loans FTE(1)(2) $ 4,296,318 $ 43,066 3.98 % $ 4,137,001 $ 41,865 4.01 % $ 4,129,155 $ 43,200 4.16 % Acquired loans 172,567 4,493 10.33 % 187,419 3,796 8.04 % 259,233 5,715 8.77 % Loans held for sale 166,470 1,214 2.89 % 157,381 1,166 2.94 % 248,326 1,699 2.72 % Investment securities available-for-sale 689,994 2,560 1.48 % 656,757 2,572 1.57 % 574,642 2,177 1.52 % Investment securities held-to-maturity 637,250 1,994 1.25 % 671,053 2,178 1.30 % 369,812 1,410 1.53 % Other securities 14,590 209 5.73 % 14,657 210 5.73 % 18,195 212 4.66 % Interest earning deposits and securities purchased under agreements to resell 678,729 264 0.15 % 799,779 329 0.16 % 509,150 135 0.11 % Total interest earning assets FTE(2) $ 6,655,918 $ 53,800 3.21 % $ 6,624,047 $ 52,116 3.12 % $ 6,108,513 $ 54,548 3.55 % Cash and due from banks $ 79,058 $ 77,498 $ 73,768 Other assets 460,664 463,553 514,053 Allowance for credit losses (49,069 ) (48,957 ) (60,844 ) Total assets $ 7,146,571 $ 7,116,141 $ 6,635,490 Interest bearing liabilities: Interest bearing demand, savings and money market deposits $ 2,847,562 $ 1,500 0.21 % $ 2,803,071 $ 1,516 0.21 % $ 2,746,597 $ 1,776 0.26 % Time deposits 851,779 1,312 0.61 % 903,935 1,711 0.75 % 1,008,297 2,949 1.16 % Securities sold under agreements to repurchase 20,420 7 0.14 % 19,681 5 0.10 % 23,410 7 0.12 % Long-term debt 24,599 196 3.16 % — — 0.00 % — — 0.00 % Total interest bearing liabilities $ 3,744,360 $ 3,015 0.32 % $ 3,726,687 $ 3,232 0.34 % $ 3,778,304 $ 4,732 0.50 % Demand deposits $ 2,459,063 $ 2,422,976 $ 1,898,171 Other liabilities 94,345 107,233 144,532 Total liabilities 6,297,768 6,256,896 5,821,007 Shareholders' equity 848,803 859,245 814,483 Total liabilities and shareholders' equity $ 7,146,571 $ 7,116,141 $ 6,635,490 Net interest income FTE(2) $ 50,785 $ 48,884 $ 49,816 Interest rate spread FTE(2) 2.89 % 2.78 % 3.05 % Net interest earning assets $ 2,911,558 $ 2,897,360 $ 2,330,209 Net interest margin FTE(2) 3.03 % 2.93 % 3.24 % Average transaction deposits $ 5,306,625 $ 5,226,047 $ 4,644,768 Average total deposits 6,158,404 6,129,982 5,653,065 Ratio of average interest earning assets to average interest bearing liabilities 177.76 % 177.75 % 161.67 % (1 ) Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan. (2 ) Presented on a fully taxable equivalent basis using the statutory tax rate of 21%. The tax equivalent adjustments included above are $1,299, $1,315 and $1,260 for the three months ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively. NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
(Dollars in thousands)For the year ended December 31, 2021 For the year ended December 31, 2020 Average Average Average Average balance Interest rate balance Interest rate Interest earning assets: Originated loans FTE(1)(2) $ 4,129,684 $ 164,527 3.98 % $ 4,237,091 $ 171,592 4.05 % Acquired loans 202,174 17,340 8.58 % 299,901 27,909 9.31 % Loans held for sale 178,373 5,110 2.86 % 185,182 5,628 3.04 % Investment securities available-for-sale 667,859 10,014 1.50 % 591,870 11,406 1.93 % Investment securities held-to-maturity 576,343 7,311 1.27 % 248,006 5,099 2.06 % Other securities 15,032 838 5.57 % 26,903 1,157 4.30 % Interest earning deposits and securities purchased under agreements to resell 751,835 986 0.13 % 206,911 314 0.15 % Total interest earning assets FTE(2) $ 6,521,300 $ 206,126 3.16 % $ 5,795,864 $ 223,105 3.85 % Cash and due from banks $ 78,979 $ 74,461 Other assets 472,775 511,721 Allowance for credit losses (52,943 ) (55,778 ) Total assets $ 7,020,111 $ 6,326,268 Interest bearing liabilities: Interest bearing demand, savings and money market deposits $ 2,772,091 $ 6,240 0.23 % $ 2,730,857 $ 8,605 0.32 % Time deposits 914,837 7,362 0.80 % 1,038,107 15,024 1.45 % Securities sold under agreements to repurchase 20,338 23 0.11 % 28,585 132 0.46 % Long-term debt 6,200 196 3.16 % — — 0.00 % Federal Home Loan Bank advances — — 0.00 % 95,418 1,295 1.36 % Total interest bearing liabilities $ 3,713,466 $ 13,821 0.37 % $ 3,892,967 $ 25,056 0.64 % Demand deposits $ 2,355,171 $ 1,497,940 Other liabilities 104,935 147,075 Total liabilities 6,173,572 5,537,982 Shareholders' equity 846,539 788,286 Total liabilities and shareholders' equity $ 7,020,111 $ 6,326,268 Net interest income FTE(2) $ 192,305 $ 198,049 Interest rate spread FTE(2) 2.79 % 3.21 % Net interest earning assets $ 2,807,834 $ 1,902,897 Net interest margin FTE(2) 2.95 % 3.42 % Average transaction deposits $ 5,127,262 $ 4,228,797 Average total deposits 6,042,099 5,266,904 Ratio of average interest earning assets to average interest bearing liabilities 175.61 % 148.88 % (1 ) Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan. (2 ) Presented on a fully taxable equivalent basis using the statutory tax rate of 21%. The tax equivalent adjustments included above are $5,161 and $5,103 for the years ended December 31, 2021 and December 31, 2020, respectively. NATIONAL BANK HOLDINGS CORPORATION
Allowance for Credit Losses and Asset Quality
(Dollars in thousands)Allowance for Credit Losses Analysis
As of and for the three months ended December 31, 2021 September 30, 2021 December 31, 2020 Beginning allowance for credit losses $ 49,155 $ 49,030 $ 60,979 Charge-offs (268 ) (322 ) (1,259 ) Recoveries 72 101 57 Provision expense 735 346 — Ending allowance for credit losses ("ACL") $ 49,694 $ 49,155 $ 59,777 Ratio of annualized net charge-offs to average total loans during the period 0.02 % 0.02 % 0.11 % Ratio of annualized net charge-offs to average total loans excluding PPP loans during the period 0.02 % 0.02 % 0.11 % Ratio of ACL to total loans outstanding at period end 1.10 % 1.11 % 1.37 % Ratio of ACL to total loans outstanding excluding PPP loans at period end 1.11 % 1.13 % 1.43 % Ratio of ACL to total non-performing loans at period end 458.77 % 382.59 % 293.21 % Total loans $ 4,513,383 $ 4,421,760 $ 4,353,726 Average total loans during the period 4,490,391 4,352,557 4,431,694 Average total loans excluding PPP loans during the period 4,437,880 4,245,524 4,160,520 Total non-performing loans 10,832 12,848 20,387 Past Due and Non-accrual Loans
December 31, 2021 September 30, 2021 December 31, 2020 Loans 30-89 days past due and still accruing interest $ 1,687 $ 1,302 $ 968 Loans 90 days past due and still accruing interest 420 495 162 Non-accrual loans 10,832 12,848 20,387 Total past due and non-accrual loans $ 12,939 $ 14,645 $ 21,517 Total 90 days past due and still accruing interest and non-accrual loans to total loans 0.25 % 0.30 % 0.47 % Asset Quality Data
December 31, 2021 September 30, 2021 December 31, 2020 Non-performing loans $ 10,832 $ 12,848 $ 20,387 OREO 7,005 4,325 4,730 Other repossessed assets — — 17 Total non-performing assets $ 17,837 $ 17,173 $ 25,134 Accruing restructured loans $ 7,186 $ 11,135 $ 13,945 Total non-performing loans to total loans 0.24 % 0.29 % 0.47 % Total non-performing loans to total loans excluding PPP loans 0.24 % 0.30 % 0.49 % Total non-performing assets to total loans and OREO 0.39 % 0.39 % 0.58 % Total non-performing assets to total loans and OREO excluding PPP loans 0.40 % 0.39 % 0.60 % NATIONAL BANK HOLDINGS CORPORATION
Key Ratios(1)As of and for the three months ended As of and for the years ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Return on average assets 1.26 % 1.11 % 1.63 % 1.33 % 1.40 % Return on average tangible assets(2) 1.30 % 1.14 % 1.67 % 1.37 % 1.44 % Return on average equity 10.64 % 9.15 % 13.27 % 11.06 % 11.24 % Return on average tangible common equity(2) 12.37 % 10.65 % 15.55 % 12.87 % 13.27 % Loan to deposit ratio (end of period) 72.47 % 72.08 % 76.70 % 72.47 % 76.70 % Non-interest bearing deposits to total deposits (end of period) 40.24 % 39.89 % 37.19 % 40.24 % 37.19 % Net interest margin(3) 2.95 % 2.85 % 3.16 % 2.87 % 3.33 % Net interest margin FTE(2)(3) 3.03 % 2.93 % 3.24 % 2.95 % 3.42 % Interest rate spread FTE(2)(5) 2.89 % 2.78 % 3.05 % 2.79 % 3.21 % Yield on earning assets(4) 3.13 % 3.04 % 3.47 % 3.08 % 3.76 % Yield on earning assets FTE(2)(4) 3.21 % 3.12 % 3.55 % 3.16 % 3.85 % Cost of interest bearing liabilities(4) 0.32 % 0.34 % 0.50 % 0.37 % 0.64 % Cost of deposits 0.18 % 0.21 % 0.33 % 0.23 % 0.45 % Non-interest income to total revenue FTE(2) 31.37 % 36.85 % 40.11 % 36.46 % 41.46 % Non-interest expense to average assets 2.47 % 2.86 % 2.90 % 2.73 % 3.26 % Efficiency ratio 60.81 % 67.05 % 58.76 % 64.08 % 61.52 % Efficiency ratio FTE(2) 59.74 % 65.91 % 57.87 % 62.99 % 60.59 % Total Loans Asset Quality Data(6)(7)(8) Non-performing loans to total loans 0.24 % 0.29 % 0.47 % 0.24 % 0.47 % Non-performing loans to total loans excluding PPP loans 0.24 % 0.30 % 0.49 % 0.24 % 0.49 % Non-performing assets to total loans and OREO 0.39 % 0.39 % 0.58 % 0.39 % 0.58 % Non-performing assets to total loans and OREO excluding PPP loans 0.40 % 0.39 % 0.60 % 0.40 % 0.60 % Allowance for credit losses to total loans 1.10 % 1.11 % 1.37 % 1.10 % 1.37 % Allowance for credit losses to total loans excluding PPP loans 1.11 % 1.13 % 1.43 % 1.11 % 1.43 % Allowance for credit losses to non-performing loans 458.77 % 382.59 % 293.21 % 458.77 % 293.21 % Net charge-offs to average loans(1) 0.02 % 0.02 % 0.11 % 0.03 % 0.06 % (1 ) Ratios are annualized. (2 ) Ratio represents non-GAAP financial measure. See non-GAAP reconciliations below. (3 ) Net interest margin represents net interest income, including accretion income on interest earning assets, as a percentage of average interest earning assets. (4 ) Interest earning assets include assets that earn interest/accretion or dividends. Any market value adjustments on investment securities or loans are excluded from interest earning assets. (5 ) Interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average cost of interest bearing liabilities. (6 ) Non-performing loans consist of non-accruing loans and restructured loans on non-accrual. (7 ) Non-performing assets include non-performing loans and other real estate owned. (8 ) Total loans are net of unearned discounts and fees. NATIONAL BANK HOLDINGS CORPORATION
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
(Dollars in thousands, except share and per share data)Tangible Common Book Value Ratios
December 31, 2021 September 30, 2021 December 31, 2020 Total shareholders' equity $ 840,106 $ 844,716 $ 820,691 Less: goodwill and core deposit intangible assets, net (121,392 ) (121,688 ) (122,575 ) Add: deferred tax liability related to goodwill 10,070 9,841 9,155 Tangible common equity (non-GAAP) $ 728,784 $ 732,869 $ 707,271 Total assets $ 7,214,011 $ 7,100,991 $ 6,659,950 Less: goodwill and core deposit intangible assets, net (121,392 ) (121,688 ) (122,575 ) Add: deferred tax liability related to goodwill 10,070 9,841 9,155 Tangible assets (non-GAAP) $ 7,102,689 $ 6,989,144 $ 6,546,530 Tangible common equity to tangible assets calculations: Total shareholders' equity to total assets 11.65 % 11.90 % 12.32 % Less: impact of goodwill and core deposit intangible assets, net (1.39 )% (1.41 )% (1.52 )% Tangible common equity to tangible assets (non-GAAP) 10.26 % 10.49 % 10.80 % Tangible common book value per share calculations: Tangible common equity (non-GAAP) $ 728,784 $ 732,869 $ 707,271 Divided by: ending shares outstanding 29,958,764 30,288,131 30,634,291 Tangible common book value per share (non-GAAP) $ 24.33 $ 24.20 $ 23.09 Tangible common book value per share, excluding accumulated other comprehensive income calculations: Tangible common equity (non-GAAP) $ 728,784 $ 732,869 $ 707,271 Accumulated other comprehensive loss (income), net of tax 6,963 1,397 (9,766 ) Tangible common book value, excluding accumulated other comprehensive loss (income), net of tax (non-GAAP) 735,747 734,266 697,505 Divided by: ending shares outstanding 29,958,764 30,288,131 30,634,291 Tangible common book value per share, excluding accumulated other comprehensive loss (income), net of tax (non-GAAP) $ 24.56 $ 24.24 $ 22.77 NATIONAL BANK HOLDINGS CORPORATION
(Dollars in thousands, except share and per share data)Return on Average Tangible Assets and Return on Average Tangible Equity
As of and for the three months ended As of and for the years ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Net income $ 22,769 $ 19,825 $ 27,169 $ 93,606 $ 88,591 Add: impact of core deposit intangible amortization expense, after tax 227 227 228 909 910 Net income adjusted for impact of core deposit intangible amortization expense, after tax $ 22,996 $ 20,052 $ 27,397 $ 94,515 $ 89,501 Average assets $ 7,146,571 $ 7,116,141 $ 6,635,490 $ 7,020,111 $ 6,326,268 Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill (111,508 ) (112,026 ) (113,594 ) (111,944 ) (114,031 ) Average tangible assets (non-GAAP) $ 7,035,063 $ 7,004,115 $ 6,521,896 $ 6,908,167 $ 6,212,237 Average shareholders' equity $ 848,803 $ 859,245 $ 814,483 $ 846,539 $ 788,286 Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill (111,508 ) (112,026 ) (113,594 ) (111,944 ) (114,031 ) Average tangible common equity (non-GAAP) $ 737,295 $ 747,219 $ 700,889 $ 734,595 $ 674,255 Return on average assets 1.26 % 1.11 % 1.63 % 1.33 % 1.40 % Return on average tangible assets (non-GAAP) 1.30 % 1.14 % 1.67 % 1.37 % 1.44 % Return on average equity 10.64 % 9.15 % 13.27 % 11.06 % 11.24 % Return on average tangible common equity (non-GAAP) 12.37 % 10.65 % 15.55 % 12.87 % 13.27 % Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin
As of and for the three months ended As of and for the years ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Interest income $ 52,501 $ 50,801 $ 53,288 $ 200,965 $ 218,002 Add: impact of taxable equivalent adjustment 1,299 1,315 1,260 5,161 5,103 Interest income FTE (non-GAAP) $ 53,800 $ 52,116 $ 54,548 $ 206,126 $ 223,105 Net interest income $ 49,486 $ 47,569 $ 48,556 $ 187,144 $ 192,946 Add: impact of taxable equivalent adjustment 1,299 1,315 1,260 5,161 5,103 Net interest income FTE (non-GAAP) $ 50,785 $ 48,884 $ 49,816 $ 192,305 $ 198,049 Average earning assets $ 6,655,918 $ 6,624,047 $ 6,108,513 $ 6,521,300 $ 5,795,864 Yield on earning assets 3.13 % 3.04 % 3.47 % 3.08 % 3.76 % Yield on earning assets FTE (non-GAAP) 3.21 % 3.12 % 3.55 % 3.16 % 3.85 % Net interest margin 2.95 % 2.85 % 3.16 % 2.87 % 3.33 % Net interest margin FTE (non-GAAP) 3.03 % 2.93 % 3.24 % 2.95 % 3.42 % Efficiency Ratio
As of and for the three months ended As of and for the years ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Net interest income $ 49,486 $ 47,569 $ 48,556 $ 187,144 $ 192,946 Add: impact of taxable equivalent adjustment 1,299 1,315 1,260 5,161 5,103 Net interest income, FTE (non-GAAP) $ 50,785 $ 48,884 $ 49,816 $ 192,305 $ 198,049 Non-interest income $ 23,215 $ 28,522 $ 33,357 $ 110,364 $ 140,258 Non-interest expense $ 44,505 $ 51,314 $ 48,425 $ 191,830 $ 206,177 Less: core deposit intangible asset amortization (296 ) (295 ) (296 ) (1,183 ) (1,183 ) Non-interest expense, adjusted for core deposit intangible asset amortization $ 44,209 $ 51,019 $ 48,129 $ 190,647 $ 204,994 Efficiency ratio 60.81 % 67.05 % 58.76 % 64.08 % 61.52 % Efficiency ratio FTE (non-GAAP) 59.74 % 65.91 % 57.87 % 62.99 % 60.59 % 
