Authorization

National Bank Holdings Corporation Announces Record Second Quarter 2019 Financial Results

DENVER, July 23, 2019 /PRNewswire/ -- National Bank Holdings Corporation (NYSE: NBHC) reported:A 






For the quarter








2Q19








1Q19








2Q18



Net income ($000's)



$



20,282








$



18,922








$



17,512



Earnings per share - diluted



$



0.64








$



0.60








$



0.56



Return on average tangible assets(1)








1.44%













1.39%













1.31%



Return on average tangible common equity(1)








13.45%













13.15%













13.52%

































(1)








Quarterly ratios are annualized.

National Bank Holdings Corporation Announces Record Second Quarter 2019 Financial Results
In announcing these results, Chief Executive Officer Tim Laney shared, "We are pleased to report another record quarter with earnings of $0.64 per share. Our relationship banking strategy continues to produce strong results. Specifically, we produced annualized earning asset growth of 10.7%, average annualized non-interest bearing demand deposit growth of 17.2% and record-breaking fee income. Year-to-date, our teams have delivered loan growth of 12.4% annualized, all while maintaining annualized net charge-offs of only 0.02%."Mr. Laney added, "We believe that our win-win focus on building relationships that benefit our clients and our company will continue to contribute to solid financial performance through the second half of the year. The commitment of our associates in providing simple and fair-minded solutions is creating meaningful returns for our shareholders and our communities."Second Quarter 2019 Results
(All comparisons refer to the first quarter of 2019, except as noted)Net income totaled a record $20.3 million during the second quarter of 2019, or $0.64 per diluted share, compared to $18.9 million during the last quarter, or $0.60 per diluted share. The return on average tangible assets increased five basis points to 1.44% and the return on average tangible common equity increased 30 basis points to 13.45%.Net Interest Income
Fully taxable equivalent net interest income totaled $53.8 million and increased $1.4 million, or 10.6% annualized, driven by strong earning asset growth and higher earning asset yields. Fully taxable equivalent net interest margin narrowed five basis points from the prior quarter to 4.00%. The increase in net interest income was driven by average earning asset growth of $139.9 million, or 10.7% annualized, and a four basis point increase in earning asset yields, which more than offset the 13 basis point increase in cost of funds. Loans
Originated loans and acquired loans not accounted for under 310-30 ("acquired loans") ended the quarter at $4.3 billion, increasing $86.3 million, or 8.3% annualized, led by originated and acquired commercial loan growth of $126.1 million, or 18.5% annualized. Total second quarter loan originations were $290.5 million, led by commercial loan originations of $210.6 million. The fully taxable equivalent yield on originated loans outstanding increased two basis points during the second quarter of 2019 to 4.90% due to higher new loan yields.Asset Quality and Provision for Loan Losses
Provision for loan losses of $3.2 million was recorded during the quarter to support originated loan growth and included a $2.4 million specific reserve recorded for one previously acquired commercial loan placed on non-accrual during the quarter. Annualized net charge-offs on originated and acquired loans totaled 0.02%, consistent with the prior quarter. Non-performing originated and acquired loans (comprised of non-accrual loans and non-accrual TDRs) were 0.79% of total originated and acquired loans, compared to 0.63% at March 31, 2019, increasing due to the loan discussed above. The originated and acquired allowance for loan losses was 0.93% of originated and acquired loans, compared to 0.88% in the prior quarter. Acquired problem loans accounted for under 310-30 totaled $60.6 million at June 30, 2019 and decreased $2.9 million from the first quarter of 2019. Deposits
Average non-interest bearing demand deposits increased $47.6 million, or 17.2% annualized. Average transaction deposits (defined as total deposits less time deposits) increased $67.2 million, or 7.7% annualized, and average total deposits increased $72.7 million to $4.7 billion, or 6.3% annualized. The cost of deposits was 0.66%, an increase of eight basis points from the prior quarter and 24 basis points over the second quarter of last year. The mix of transaction deposits to total deposits totaled 76.9%, and the mix of non-interest bearing demand deposits to total deposits totaled 24.9%.Non-Interest Income
Non-interest income totaled $20.7 million and increased $3.6 million primarily due to higher mortgage banking income of $3.5 million, driven by higher levels of 1-4 family mortgage loans sold in the secondary market. Service charges and bank card fees increased a combined $0.6 million and were mostly offset by a decrease in other non-interest income of $0.4 million, due to lower swap fee income during the quarter. Non-Interest Expense
Non-interest expense totaled $46.5 million and increased $2.1 million from the prior quarter, primarily driven by higher residential banking commissions. Gain on sale of OREO and problem asset workout expense totaled a net expense of $0.4 million, a decrease of $0.3 million from the prior quarter. Other non-interest expense decreased $0.4 million from the prior quarter.Income tax expense totaled $3.2 million during the second quarter of 2019, compared to $3.4 million during the prior quarter. Included in income tax expense during the second and first quarters of 2019 was $1.3 million and $0.8 million of tax benefit from stock compensation activity, respectively. Adjusting for the stock compensation activity, the effective tax rate for the second quarter of 2019 was 19.4% compared to 18.5% during the first quarter of 2019. 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 leverage ratio at June 30, 2019 for the consolidated company and NBH Bank was 10.60% and 8.79%, respectively. Shareholders' equity totaled $733.9 million at June 30, 2019 and increased $18.9 million from the prior quarter. The increase in shareholders' equity was due to higher retained earnings and accumulated other comprehensive income, driven by the fair market value fluctuations of the available-for-sale investment securities portfolio.Common book value per share increased $0.47 to $23.57 at June 30, 2019. The tangible common book value per share was $19.83 at June 30, 2019 and increased $0.52 due to the higher retained earnings and accumulated other comprehensive income. Excluding accumulated other comprehensive income, the tangible book value was $19.78. 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 June 30, 2019 accretable yield balance on the 310-30 loans of $31.1 million would add $0.76 after-tax to the tangible book value per share. A more conservative methodology that management uses values the excess yield above 5.0% and then considers the timing of the excess accreted interest income recognition discounted at 5.0%. This would add $0.53 after-tax to our tangible book value per share as of June 30, 2019, resulting in a tangible common book value per share of $20.36.A  Year-Over-Year Review
(All comparisons refer to the first six months of 2018, except as noted)Fully taxable equivalent net interest income totaled $106.2 million and increased $7.0 million, or 7.0%. Average earning assets increased $182.7 million, or 3.6%, primarily driven by originated loan growth. The fully taxable equivalent net interest margin widened 13 basis points to 4.03%. The yield on earning assets increased 40 basis points, led by a 50 basis point increase in the originated loan portfolio yields due to higher new loan yields and short-term rate increases, and was partially offset by an increase in the cost of funds of 38 basis points from 0.56% to 0.94%. Originated and acquired loans outstanding totaled $4.3 billion and increased $527.1 million, or 14.1%, led by originated and acquired commercial loan growth of $568.1 million, or 24.8%. New loan originations over the trailing twelve months totaled $1.2 billion, led by commercial loan originations of $869.9 million. The 310-30 loan portfolio declined $22.4 million, or 27.0%, to $60.6 million at June 30, 2019. Average non-interest bearing demand deposits increased $68.6 million, or 6.5%. Total deposits averaged $4.6 billion, decreasing $6.2 million from the first six months of 2018, as the $71.7 million decrease in average time deposits was mostly replaced by an increase of $65.6 million in average transaction deposits. Spot transaction deposits increased $107.2 million to $3.6 billion at June 30, 2019, improving the mix of transaction deposits to total deposits to 76.9% from 75.6% at June 30, 2018. The mix of non-interest bearing demand deposits to total deposits improved to 24.9% compared to 23.7% at June 30, 2018. Provision for loan loss expense was $4.8 million, compared to $1.9 million during the first six months of 2018. Provision for loan loss expense included a $2.4 million specific reserve recorded during the second quarter of 2019 for one previously acquired commercial loan placed on non-accrual during the second quarter of 2019. Annualized net charge-offs on originated and acquired loans totaled 0.02%, compared to 0.05% last year. Non-performing originated and acquired loans increased to 0.79% from 0.68% at June 30, 2018. The originated and acquired allowance for loan losses totaled 0.93% of originated and acquired loans compared to 0.86% at June 30, 2018.Non-interest income totaled $37.7 million during the first six months of 2019, representing an increase of $0.3 million from last year. Mortgage banking income increased $0.5 million, other non-interest income increased $0.4 million and service charges and bank card fees increased a combined $0.1 million. These increases were partially offset by a $0.7 million decrease in OREO-related income during the period. Non-interest expense totaled $90.8 million during the first six months of 2019, representing a decrease of $11.2 million, primarily driven by $8.0 million of non-recurring acquisition costs during the first six months of 2018 and efficiencies gained from the integration of the Peoples acquisition. Income tax expense totaled $6.5 million during the first six months of 2019 compared to $4.5 million last year, an increase of $2.0 million. Included in income tax expense was $2.1 million and $1.2 million of tax benefit from stock compensation activity during the first six months of 2019 and 2018, respectively. Adjusting for the stock compensation activity, the effective tax rate for the first six months of 2019 was 19.0%, compared to 17.7% in the prior period.Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Wednesday, July 24, 2019. Interested parties may listen to this call by dialing (877) 272-6762 / (615) 800-6832 (International) using the Conference ID of 7492217 and asking for the NBHC Second Quarter Earnings conference call. A telephonic replay of the call will be available beginning approximately four hours after the call's completion through August 7, 2019, by dialing (855) 859-2056 (United States) / (404) 537-3406 (International) using the Conference ID of 7492217. 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," "tangible common equity to tangible assets," "adjusted efficiency ratio," "adjusted non-interest expense," "adjusted non-interest expense to average assets," "adjusted net income," "adjusted earnings per share - diluted," "adjusted return on average tangible assets," "adjusted return on average tangible common equity," 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 shareholder results. Through its bank subsidiary, NBH Bank, National Bank Holdings Corporation operates a network of 105 banking centers, serving individual consumers, small, medium and large businesses, and government and non-profit entities. The bank's core geographic footprint consists of Colorado, the greater Kansas City region, New Mexico, Texas and Utah. NBH Bank operates under the following brand names: Community Banks of Colorado in Colorado, Bank Midwest in Kansas and Missouri and Hillcrest Bank in New Mexico, Texas and Utah. It also operates as Community Banks Mortgage, a division of NBH Bank, in Arizona and Colorado. 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 a prolonged government shutdown; 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; 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 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.A 

NATIONAL BANK HOLDINGS CORPORATIONFINANCIAL SUMMARYConsolidated Statements of Operations (Unaudited)(Dollars in thousands, except share and per share data)



















































































For the three months ended








For the six months ended








JuneA 30,A 








MarchA 31,A 








JuneA 30,A 








JuneA 30,A 








JuneA 30,A 








2019








2019








2018








2019








2018



Total interest and dividend income



$



62,193








$



59,420








$



54,911








$



121,613








$



107,702



Total interest expense








9,702













8,254













5,525













17,956













10,669



Net interest income








52,491













51,166













49,386













103,657













97,033



Taxable equivalent adjustment








1,285













1,227













1,099













2,512













2,162



Net interest income FTE(1)








53,776













52,393













50,485













106,169













99,195



Provision for loan losses








3,239













1,534













1,873













4,773













1,914



Net interest income after provision for loan losses FTE(1)








50,537













50,859













48,612













101,396













97,281



Non-interest income:









































































Service charges








4,541













4,321













4,371













8,862













8,881



Bank card fees








3,766













3,428













3,672













7,194













7,034



Mortgage banking income








10,398













6,937













8,911













17,335













16,882



Other non-interest income








1,896













2,304













2,157













4,200













3,760



OREO-related income








59













61













451













120













841



Total non-interest income








20,660













17,051













19,562













37,711













37,398



Non-interest expense:









































































Salaries and benefits








30,667













27,890













29,123













58,557













59,795



Occupancy and equipment








6,721













6,882













7,190













13,603













15,145



Professional fees








1,041













814













738













1,855













3,557



Other non-interest expense








7,319













7,757













8,298













15,076













20,622



Problem asset workout








725













1,123













775













1,848













1,556



(Gain) loss on sale of OREO, net








(318)













(368)













(14)













(686)













64



Core deposit intangible asset amortization








296













296













653













592













1,306



Total non-interest expense








46,451













44,394













46,763













90,845













102,045














































































Income before income taxes FTE(1)








24,746













23,516













21,411













48,262













32,634



Taxable equivalent adjustment








1,285













1,227













1,099













2,512













2,162



Income before income taxes








23,461













22,289













20,312













45,750













30,472



Income tax expense








3,179













3,367













2,800













6,546













4,495



Net income



$



20,282








$



18,922








$



17,512








$



39,204








$



25,977



Earnings per share - basic



$



0.65








$



0.61








$



0.57








$



1.26








$



0.85



Earnings per share - diluted



$



0.64








$



0.60








$



0.56








$



1.24








$



0.83











































(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 the three months ended June 30, 2019, March 31, 2019 and June 30, 2018. See non-GAAP reconciliations below.



NATIONAL BANK HOLDINGS CORPORATIONConsolidated Statements of Financial Condition (Unaudited)(Dollars in thousands, except share and per share data)




































































JuneA 30,A 2019








MarchA 31,A 2019








DecemberA 31,A 2018








JuneA 30,A 2018



ASSETS


























































Cash and cash equivalents



$



91,159








$



105,258








$



109,556








$



137,917



Investment securities available-for-sale








710,206













749,537













791,102













856,751



Investment securities held-to-maturity








206,361













221,727













235,398













266,197



Non-marketable securities








30,726













24,574













27,555













20,070



Loans








4,330,263













4,246,941













4,092,308













3,825,555



Allowance for loan losses








(40,082)













(37,055)













(35,692)













(32,230)



Loans, net








4,290,181













4,209,886













4,056,616













3,793,325



Loans held for sale








105,866













59,324













48,120













113,057



Other real estate owned








7,054













9,394













10,596













35,469



Premises and equipment, net








111,171













109,594













109,986













111,415



Goodwill








115,027













115,027













115,027













115,027



Intangible assets, net








12,267













12,981













13,470













14,693



Other assets








177,984













185,364













159,240













183,335



Total assets



$



5,858,002








$



5,802,666








$



5,676,666








$



5,647,256



LIABILITIES AND SHAREHOLDERS' EQUITY


























































Liabilities:


























































Non-interest bearing demand deposits



$



1,167,399








$



1,172,683








$



1,072,029








$



1,099,601



Interest bearing demand deposits








691,527













696,332













688,255













682,998



Savings and money market








1,747,434













1,764,341













1,694,808













1,716,534



Total transaction deposits








3,606,360













3,633,356













3,455,092













3,499,133



Time deposits








1,081,637













1,081,092













1,080,529













1,132,331



Total deposits








4,687,997













4,714,448













4,535,621













4,631,464



Securities sold under agreements to repurchase








60,430













59,543













66,047













73,441



Federal Home Loan Bank advances








272,414













228,421













301,660













188,334



Other liabilities








103,244













85,252













78,332













93,832



Total liabilities








5,124,085













5,087,664













4,981,660













4,987,071



Shareholders' equity:


























































Common stock








515













515













515













515



Additional paid in capital








1,006,008













1,012,974













1,014,399













1,012,175



Retained earnings








135,210













120,879













106,990













81,182



Treasury stock








(409,322)













(413,226)













(415,623)













(416,281)



Accumulated other comprehensive income (loss), net of tax








1,506













(6,140)













(11,275)













(17,406)



Total shareholders' equity








733,917













715,002













695,006













660,185



Total liabilities and shareholders' equity



$



5,858,002








$



5,802,666








$



5,676,666








$



5,647,256



SHARE DATA


























































Average basic shares outstanding








31,155,264













30,961,187













30,888,238













30,735,427



Average diluted shares outstanding








31,604,658













31,497,538













31,492,342













31,387,175



Ending shares outstanding








31,139,044













30,958,581













30,769,063













30,726,789



Common book value per share



$



23.57








$



23.10








$



22.59








$



21.49



Tangible common book value per share(1) (non-GAAP)



$



19.83








$



19.31








$



18.77








$



17.61



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



$



19.78








$



19.51








$



19.13








$



18.18



CAPITAL RATIOS


























































Average equity to average assets








12.46%













12.39%













12.15%













11.63%



Tangible common equity to tangible assets(1)








10.75%













10.52%













10.39%













9.79%



Leverage ratio








10.60%













10.63%













10.51%













9.92%



Tier 1 risk-based capital ratio








12.87%













12.84%













12.91%













12.62%



Total risk-based capital ratio








13.78%













13.72%













13.79%













13.47%











































(1)








Represents a non-GAAP financial measure. See non-GAAP reconciliations below.



NATIONAL BANK HOLDINGS CORPORATIONLoan Portfolio (Dollars in thousands)








Period End Loan Balances by Type











































JuneA 30,A 2019























JuneA 30,A 2019




























vs. March 31, 2019


















A vs. June 30, 2018








JuneA 30,A 2019








MarchA 31,A 2019








% Change








JuneA 30,A 2018








% Change



Originated:































































Commercial:































































Commercial and industrial



$



2,079,812








$



1,971,692








5.5%








$



1,611,864








29.0%



Owner-occupied commercial real estate








379,462













347,064








9.3%













286,298








32.5%



Food and agriculture








236,865













228,765








3.5%













188,185








25.9%



Energy








43,242













55,368








(21.9)%













37,221








16.2%



Total commercial








2,739,381













2,602,889








5.2%













2,123,568








29.0%



Commercial real estate non-owner occupied








459,242













472,073








(2.7)%













411,953








11.5%



Residential real estate








660,657













664,852








(0.6)%













625,940








5.5%



Consumer








21,731













21,070








3.1%













23,235








(6.5)%



Total originated








3,881,011













3,760,884








3.2%













3,184,696








21.9%




































































Acquired:































































Commercial:
See also:
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