NBHC National Bank Holdings Corporation

In announcing these results, Chief Executive Officer Tim Laney shared, “I am pleased to announce that our solid fourth quarter results contributed to record full year earnings of $142.0 million or $3.72 per share with a return on average tangible common equity of 18.23%. After adjusting for acquisition expenses, we grew pre-provision net revenues by 32.4% year over year. Our teams delivered 6.6% organic loan growth while adhering to our disciplined concentration limits and underwriting standards. Our credit quality remains strong with just two basis points of net charge-offs for the year.”

Mr. Laney added, “We continue to adhere to sound banking principles, which consistently produce solid results. We delivered strong deposit and capital growth during 2023, growing average total deposits by 18.7% and tangible book value by 10.4%. We enter 2024 from a position of strength, with a strong balance sheet, solid capital position and diversified funding sources. We will prudently navigate any economic environment, and we are well positioned to continue to serve our clients and communities in 2024.”

Fourth Quarter 2023 Results(All comparisons refer to the third quarter of 2023, except as noted)

Net income totaled $33.1 million or $0.87 per diluted share, compared to $36.1 million or $0.94 per diluted share. Fully taxable equivalent pre-provision net revenue totaled $45.1 million, compared to $48.1 million. The return on average tangible assets totaled 1.44%, compared to 1.58%, and the return on average tangible common equity totaled 16.56%, compared to 18.38%.

Net Interest IncomeFully taxable equivalent net interest income increased $1.8 million to $91.2 million. The increase in loan interest income, which included accelerated loan fee income of $2.9 million, outpaced an increase in the cost of funds during the quarter. The fully taxable equivalent net interest margin widened three basis points to 3.95%, and average earning assets increased $108.1 million driven by $182.5 million of average originated loan growth. The cost of funds totaled 2.10%, compared to 1.80% during the third quarter.

LoansTotal loans increased $220.3 million or 11.7% annualized to $7.7 billion at December 31, 2023. We generated quarterly loan fundings totaling $460.4 million, led by commercial loan fundings of $301.9 million. The average interest rate on the fourth quarter’s loan originations totaled 8.6%, consistent with the third quarter.

Asset Quality and Provision for Credit LossesThe Company recorded $4.6 million of provision expense for credit losses, compared to $1.1 million in the prior quarter. The current quarter’s provision expense was primarily driven by loan growth and a specific reserve on one non-performing loan. Annualized net charge-offs totaled 0.02% of average total loans, compared to 0.01% in the prior quarter. Non-performing loans improved seven basis points to 0.37% of total loans, and non-performing assets improved seven basis points to 0.42% of total loans and OREO. The allowance for credit losses as a percentage of loans increased two basis points to 1.27% at December 31, 2023.

DepositsWe maintain a granular and well diversified deposit base with no exposure to venture capital or crypto deposits. Average total deposits increased $47.0 million, or 2.3% annualized, to $8.1 billion during the fourth quarter 2023. The loan to deposit ratio totaled 94.0% at December 31, 2023. Average transaction deposits (defined as total deposits less time deposits) increased $53.2 million to $7.1 billion. The mix of transaction deposits to total deposits was 88.0% and 87.8% at December 31, 2023 and September 30, 2023, respectively.

Non-Interest IncomeNon-interest income decreased $3.3 million to $16.1 million during the fourth quarter, largely driven by $2.7 million lower mortgage banking income. Included in the third quarter’s mortgage banking income was a $1.1 million gain from the sale of mortgage servicing rights. Service charges and bank card fees remained consistent with the prior quarter.

Non-Interest ExpenseNon-interest expense increased $1.5 million to $62.1 million during the fourth quarter. Occupancy and equipment increased $1.0 million partially driven by a $0.3 million impairment on equipment. Other non-interest expense increased $1.4 million due to various items including $0.7 million of one-time asset write-downs. The efficiency ratio totaled 58.8% for the fourth quarter, compared to 56.6% for the third quarter. The fully taxable equivalent efficiency ratio totaled 56.0% for the fourth quarter compared to 53.9%, excluding other intangible assets amortization.

Income tax expense totaled $5.8 million, compared to $9.3 million in the prior quarter. The decrease in income tax expense during the quarter was largely due to $2.0 million of research and development tax credits recognized in the fourth quarter. The effective tax rate was 14.9%, compared to 20.5% for the third quarter.

CapitalCapital ratios continue to be strong and in excess of federal bank regulatory agency “well capitalized” thresholds. The Tier 1 leverage ratio totaled 9.74% at December 31, 2023, and the common equity tier 1 capital ratio totaled 11.89% at December 31, 2023. Shareholders’ equity totaled $1.2 billion at December 31, 2023, increasing $49.2 million, largely due to $22.9 million of higher retained earnings and a $24.5 million decrease in accumulated other comprehensive loss.

Common book value per share increased $1.27 to $32.10 at December 31, 2023. Tangible common book value per share increased $1.34 to $22.77 driven by the quarter’s earnings and a $0.65 improvement in accumulated other comprehensive loss.

Year-Over-Year Review(All comparisons refer to the full year 2022, except as noted)

Net income increased $70.8 million or 99.3% to a record $142.0 million, or $3.72 per diluted share, compared to net income of $71.3 million, or $2.18 per diluted share in the prior year. The increase over prior year was driven by higher net interest income from our organic balance sheet growth, revenues from strategic acquisition growth, and a benefit to our net interest income from increases in the Federal Reserve Bank’s interest rates. Fully taxable equivalent pre-provision net revenue increased $61.6 million, or 47.9%, to $190.0 million. The return on average tangible assets increased 62 basis points to 1.57%, and the return on average tangible common equity increased 832 basis points to 18.23%.

Prior year included $36.8 million of non-recurring acquisition-related expenses from our 2022 acquisitions. Adjusting for these expenses in the prior year, 2023 net income increased $42.5 million or 42.7%, and fully taxable equivalent pre-provision net revenue increased $46.5 million, or 32.4%. The adjusted return on average tangible assets increased 25 basis points to 1.57%, and the adjusted return on average tangible common equity increased 448 basis points to 18.23% for 2023.

Fully taxable equivalent net interest income totaled $368.1 million, an increase of $95.7 million or 35.1%. Average earning assets increased $1.7 billion, or 23.5%, including average originated loan growth of $971.6 million and average acquired loan growth of $1.1 billion. The fully taxable equivalent net interest margin widened 35 basis points to 4.08%, benefitting from a 159 basis point increase in earning asset yields to 5.56%. Average interest bearing liabilities increased $1.6 billion to $5.8 billion at December 31, 2023, and the cost of funds totaled 1.58%, compared to 0.26% in the prior year.

Loans outstanding totaled $7.7 billion increasing $478.3 million, or 6.6%, from organic loan growth. New loan fundings in 2023 totaled $1.5 billion, led by commercial loan fundings of $0.9 billion.  

The Company recorded $8.3 million of provision expense for credit losses during 2023, compared to provision expense of $36.7 million in the prior year. The current year’s provision expense was driven by loan growth and higher reserve requirements. Provision expense for 2022 included $21.7 million of Day 1 reserve requirements for our 2022 acquisitions. Annualized net charge-offs decreased one basis point to 0.02% of average total loans during 2023. Non-performing loans to total loans was 0.37%, compared to 0.23% in the prior year, and non-performing assets to total loans and OREO was 0.42% at December 31, 2023, compared to 0.28%. The allowance for credit losses increased three basis points to 1.27% at December 31, 2023.

Average total deposits increased $1.3 billion or 18.7% to $8.0 billion, primarily due to higher deposit balances driven by the strategic growth from our recent acquisitions. Average transaction deposits increased $1.1 billion or 18.8%, and average non-interest bearing demand deposits increased $8.0 million. The mix of transaction deposits to total deposits was 88.0%, compared to 88.9% at December 31, 2022, and the mix of non-interest bearing demand deposits to total deposits was 28.8%, compared to 39.8% at December 31, 2022.

Non-interest income totaled $63.9 million, a decrease of $3.4 million, largely driven by $10.1 million of lower mortgage banking income due to lower purchase and refinance activity, as well as competition driving tighter gain on sale margins. Service charges and bank card fees increased a combined $3.2 million compared to prior year. Included in non-interest income was $1.5 million higher trust income, $1.3 million higher gains on SBA loan sales, $0.9 million higher fair value adjustments on company-owned life insurance, as well as the addition of Cambr income in 2023. Included in 2023 were $4.0 million in net impairments related to venture capital investments classified as non-marketable securities.

Non-interest expense totaled $242.0 million, an increase of $30.7 million, or 14.6%, primarily due to an increase in core operating expenses driven by our 2022 acquisitions. Included in other non-interest expense is $4.9 million higher FDIC deposit insurance expense as a result of our 2022 acquisitions and an increase in the FDIC assessment rate effective January 2023. Included in 2022 were non-recurring acquisition-related expenses of $15.1 million related to our 2022 acquisitions.

Income tax expense totaled $33.6 million, an increase of $18.6 million from last year, driven by higher pre-tax income. The effective tax rate was 19.1% for 2023, compared to 17.3% in the prior year.

Conference CallManagement will host a conference call to review the results at 11:00 a.m. Eastern Time on Wednesday, January 24, 2024. Interested parties may listen to this call by dialing (888) 394-8218 using the participant passcode of 6606926 and asking for the NBHC Q4 2023 Earnings Call. The earnings release and a link to the replay of the call will be available on the Company’s website at www.nationalbankholdings.com by visiting the investor relations area.

About National Bank Holdings CorporationNational 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 subsidiaries, NBH Bank and Bank of Jackson Hole Trust, National Bank Holdings Corporation operates a network of over 90 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, Utah, Wyoming, Texas, New Mexico and Idaho. Its comprehensive residential mortgage banking group primarily serves the bank’s core footprint. Its trust and wealth management business is operated in its core footprint under the Bank of Jackson Hole Trust charter. NBH Bank operates under a single state charter through the following brand names as divisions of NBH Bank: in Colorado, Community Banks of Colorado and Community Banks Mortgage; in Kansas and Missouri, Bank Midwest and Bank Midwest Mortgage; in Texas, Utah, New Mexico and Idaho, Hillcrest Bank and Hillcrest Bank Mortgage; and in Wyoming, Bank of Jackson Hole and Bank of Jackson Hole Mortgage. Additional information about National Bank Holdings Corporation can be found at www.nationalbankholdings.com. 

For more information visit: cobnks.com, bankmw.com, hillcrestbank.com, bankofjacksonhole.com, or nbhbank.com, or connect with any of our brands on LinkedIn.

About Non-GAAP Financial MeasuresCertain 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,” “non-interest expense adjusted for other intangible assets amortization and acquisition-related expenses,” “non-interest expense adjusted for acquisition-related expenses,” “efficiency ratio adjusted for other intangible assets amortization and acquisition-related expenses,” “adjusted net income,” “adjusted earnings per share – diluted,” “net income adjusted for the impact of other intangible assets amortization expense and acquisition-related expenses, after tax,” “net income excluding the impact of other intangible assets amortization expense, after tax,” “adjusted return on average tangible assets,” “adjusted return on average tangible common equity,” “pre-provision net revenue,” “pre-provision net revenue adjusted for acquisition-related expenses,” 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.

Forward-Looking StatementsThis 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: difficulties in integrating the NBHC, Community Bancorporation, Bancshares of Jackson Hole Incorporated, or Cambr Solutions, LLC businesses or fully realizing cost savings and other benefits; business disruption following the mergers; ability to execute our business strategy (including our digital 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; the effects of tax legislation, including the potential of future increases to prevailing tax rules, or challenges to our positions; 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, including in the digital technology space our digital solution 2UniFi; 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 our bank subsidiaries; 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; a cybersecurity incident, data breach or a failure of a key information technology system; 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 CORPORATIONFINANCIAL SUMMARYConsolidated Statements of Operations (Unaudited)(Dollars in thousands, except share and per share data)

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

NATIONAL BANK HOLDINGS CORPORATIONLoan Portfolio (Dollars in thousands)

Period End Loan Balances by Type

Loan Fundings(1)

NATIONAL BANK HOLDINGS CORPORATIONSummary of Net Interest Margin(Dollars in thousands)

NATIONAL BANK HOLDINGS CORPORATIONSummary of Net Interest Margin(Dollars in thousands)

NATIONAL BANK HOLDINGS CORPORATIONAllowance for Credit Losses and Asset Quality(Dollars in thousands)

Allowance for Credit Losses Analysis

Past Due and Non-accrual Loans

Asset Quality Data

NATIONAL BANK HOLDINGS CORPORATIONKey Metrics(1)

NATIONAL BANK HOLDINGS CORPORATIONNON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS(Dollars in thousands, except share and per share data)

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NATIONAL BANK HOLDINGS CORPORATION(Dollars in thousands, except share and per share data)

Return on Average Tangible Assets and Return on Average Tangible Equity

Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin

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