Exhibit 99.1

 

National Bank Holdings Corporation Announces Fourth Quarter 2012 Financial Results

Greenwood Village, Colorado - (BusinessWire) – National Bank Holdings Corporation (NYSE: NBHC) reported net income of $3.0 million, or $0.06 per diluted share for the fourth quarter of 2012 compared to the third quarter of 2012 net loss of $0.15 per diluted share. The third quarter included $10.8 million of after tax costs related to the successful initial public offering (IPO) in September 2012. Excluding the IPO related charges, net income for the third quarter of 2012 was $2.9 million, or $0.06 per diluted share.

“We continued to build momentum during the quarter in the growth and expansion of client relationships,” said President and Chief Executive Officer Tim Laney. “This was evidenced by our eighth consecutive quarter of increased organic loan production and solid growth in our non-interest bearing client demand deposits.”

Fourth Quarter 2012 Highlights

 

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Grew organic loan production for the eighth consecutive quarter, resulting in a 15.1% annualized growth in our strategic loan portfolio.

 

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Grew average non-interest bearing demand deposit balances 16.6% annualized, driving an increase in average transaction deposits of 4.0% annualized and an 11 basis point decrease in total cost of deposits.

 

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The net interest margin expanded to 4.09%, driven by higher yields on loans accounted for under ASC 310-30 loan pools and lower cost of deposits.

 

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Net charge-offs on non 310-30 loans were 0.27% annualized.

 

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Expenses before problem loan/OREO workout expenses were flat third to fourth quarter, adjusting for the third quarter IPO expenses.

 

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Problem loan/OREO workout expenses totaled $10.0 million, increasing $4.3 million over the third quarter of 2012 due to higher OREO workout activity.

 

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Added $8.9 million to accretable yield for the acquired loans accounted for under ASC 310-30. This was partially offset by $1.6 million in impairments.

 

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Tangible book value per share was $19.17 before consideration of the excess accretable yield value of $0.50 per share.

 

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Initiated regular quarterly dividend of $0.05 per share.

 

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Approximately $400 million in excess strategic capital (above 10% Tier 1 Leverage), which positions us for future growth opportunities.

Fourth Quarter 2012 Results

(All comparisons refer to the third quarter of 2012, except as noted)

Net Interest Income

Net interest income totaled $49.6 million for the fourth quarter of 2012, and remained stable compared to the prior quarter. Despite the continued low interest rate environment, the fourth quarter net interest margin widened 17 basis points to 4.09%. The expansion of the net interest margin was benefitted by higher earning asset yields of 7 basis points and was driven by increased yields on loan pools accounted for under ASC 310-30. Yields earned on the ASC 310-30 loan pools improved 115 basis points from the prior quarter to 10.79% during the fourth quarter. In

 

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addition, the cost of deposits declined 11 basis points during the fourth quarter and continued to benefit from an improved deposit mix and lower costs of time deposits. The benefit of the wider net interest margin was offset by a decline in average interest earning assets of 3.9% as we continued our strategy of exiting non-strategic loans and slightly reduced the investment portfolio.

Loans

Strategic loans increased $41.2 million or 15.1% annualized over the prior quarter to $1.1 billion at December 31, 2012. We realized another quarter of increased production across the commercial loan categories and our residential mortgage promotions continue to generate new relationships. The credit quality of the strategic portfolio continues to be strong with only 0.6% in non-performing loans. Strategic loans include all originated loans in addition to those acquired loans inside our operating markets that meet our credit risk profile. Criteria utilized in the designation of an acquired loan as “strategic” include (a) geography, (b) total relationship with borrower and (c) credit metrics commensurate with our current underwriting standards.

“Our focus is on growing and expanding our relationships with individuals and small to mid-sized businesses. We realized our eighth consecutive quarter of increased loan production in the communities where we do business,” said Mr. Laney. “More important, we are realizing loan growth while maintaining very strong underwriting standards and doing business with clients we know and understand.”

Total loans ended the fourth quarter, 2012 at $1.8 billion representing a decrease from the prior quarter of $91.1 million or 18.7% annualized. The decrease reflects our strategy of exiting the non-strategic loan portfolio as adversely rated and other non-strategic relationships paid off or paid down. The non-strategic loans totaled $719.3 million at December 31, 2012 and decreased $132.2 million or 61.8% annualized from September 30, 2012.

Asset Quality and Provision for Loan Losses

“We continue to have one of the lowest risk balance sheets in the industry,” stated Chief Financial Officer Brian Lilly. “We have a risk weighted assets to total assets ratio of 34%, which is one of the lowest in the industry, and our loan portfolio has several risk mitigants including: 66% of the loan portfolio carries acquisition discounts, 33% of our loans have the added protection of FDIC loss share and 45% are accounted for in acquired loan pools, which requires a quarterly valuation update.”

Loans accounted for under ASC 310-30 (acquired loan pools) totaled $830.7 million at December 31, 2012 compared to $971.0 million at September 30, 2012. The quarterly fair value re-measurement on the acquired loan pools resulted in a transfer of $8.9 million from non-accretable to accretable yield while recording $1.6 million of impairment through the provision for credit losses thereby increasing the economic value of the acquired loan pools by an additional $7.3 million for the fourth quarter and $68.9 million on a life-to-date basis at December 31, 2012. The increase in accretable yield will be recognized over the remaining life of these loan pools with the quarter recognizing just $0.3 million of the fourth quarter increase in accretable yield.

The non 310-30 loans totaled $1.0 billion, or 55% of total loans, at December 31, 2012. These loans are primarily comprised of originated loans and acquired loans not accounted for under the ASC 310-30 acquired loan pool accounting. Net annualized charge-offs for the non 310-30 loans improved to 27 basis points for the fourth quarter 2012. The provision for loan losses on the non 310-30 loans of $1.1 million covered the net charge-offs and provided for new loan growth resulting in a non 310-30 allowance for loan losses to total non 310-30 loans ratio of 1.06% as of December 31, 2012. Other real estate owned decreased $43.7 million during the quarter primarily due to sales of $43.0 million.

 

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Deposits

Average transaction deposits (defined as total deposits less time deposits) totaled $2.4 billion and grew 4.0% annualized during the fourth quarter. Our continued focus on building client relationships resulted in an annualized increase of 16.6% in average non-interest bearing demand deposits. We continued to restructure our deposit base by retaining only those acquired time deposit clients who were interested in market rate time deposits and developing a banking relationship and as a result, average time deposits decreased $231 million. At December 31, 2012 the mix of transaction deposits to total deposits improved to 58% from 55% at the end of the prior quarter. The balance sheet continues to be primarily funded by client deposits and repurchase agreements, and at December 31, 2012, comprised 98.5% of total liabilities.

Non-Interest Income

Banking related non-interest income (excludes FDIC related income) totaled $10.9 million for the fourth quarter 2012 and increased $1.5 million over the prior quarter. The increase was driven by the recovery of $1.3 million from a previously charged-off acquired loan. An additional $1.8 million of FDIC indemnification asset negative accretion was recorded during the fourth quarter as compared to the third quarter, resulting from improvements in actual and expected cash flows on covered assets. Other FDIC loss sharing income totaled $2.8 million in the fourth quarter and increased $1.3 million due to an increase in amounts due from the FDIC, primarily related to covered OREO write-downs.

Non-Interest Expense

Non-interest expense totaled $51.4 million during the fourth quarter of 2012, a decrease of $8.6 million from the previous quarter. The decrease in non-interest expense during the quarter was largely due to elevated non-interest expenses in the third quarter related to $12.5 million of IPO related expenses, offset by increased OREO expenses in the fourth quarter. Excluding IPO related expenses and problem loan/OREO workout expenses, non-interest expense was flat compared to the prior quarter. Salaries and employee benefits decreased $5.3 million driven by $4.9 million lower stock-based compensation expense related to the IPO in the prior quarter and lower incentive-based compensation expense recorded during the fourth quarter. The $4.7 million linked quarter increase in OREO costs was primarily driven by the increased levels of workout results during the quarter. The OREO and problem loan expenses are expected to continue to fluctuate quarterly as we resolve the acquired problem asset portfolio.

Capital

The Company’s capital ratios continue to be well in excess of federal bank regulatory agency “well capitalized” thresholds. Shareholders’ equity totaled $1.1 billion and decreased $5.3 million during the fourth quarter, due to a $6.2 million decrease in accumulated other comprehensive income, net of tax, which was driven by the fair market value fluctuations of the available-for-sale investment securities portfolio. Tangible book value per share decreased to $19.17 at December 31, 2012 from $19.30 at September 30, 2012, as a result of the decrease in accumulated other comprehensive income. The tangible common equity to tangible assets ratio ended December 31, 2012 at 18.85% representing an increase of 31 basis points from the prior quarter. This increase was driven by lower total assets at December 31, 2012.

A common convention in the industry is to add the value of the accretable yield to the tangible book value per share. The value of the December 31, 2012 accretable yield balance on the ASC 310-30 loans of $133.6 million would add $1.54 after-tax to the tangible book value per share. A more conservative methodology, that management uses, values the excess yield and then considers the timing of the accreted interest income recognition over time. Under this more conservative methodology, we first net the accretable yield on ASC 310-30 loans and the accretable yield on the FDIC indemnification asset and then calculate the excess of a 4.5% yield (an approximate yield on new loan originations), and finally discount the amounts at 5%. The result would add $0.50 after-tax to our tangible book value per share as of December 31, 2012.

 

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Conference Call

Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Tuesday, January 29, 2013. Interested parties may listen to this call by dialing (877) 272-6762 (United States)/ (615) 800-6832 (International) using the Conference ID of 85388364 and ask for the National Bank Holdings Corporation Fourth Quarter Earnings conference call. A telephonic replay of the call will be available beginning approximately two hours after the call’s completion through February 12, 2013, by dialing (855) 859-2056 (United States)/ (404) 537-3406 (International) using the Conference ID of 85388364. 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 tangible assets,” “return on tangible equity,” “tangible book value,” “tangible book value per share,” “pre-tax pre-provision net revenue to risk weighted assets,” “adjusted net revenue,” “adjusted non-interest expense,” and “tangible common equity,” are supplemental measures that are not required by, or are not presented in accordance with, accounting principles generally accepted in the United States, or “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. 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.

We believe that these measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however we acknowledge that our non-GAAP financial measures have a number of limitations relative to GAAP financial measures. First, certain non-GAAP financial measures exclude provisions for loan losses and income taxes, and both of these expenses significantly impact our financial statements. Additionally, the items that we exclude in our adjustments are not necessarily consistent with the items that our peers may exclude from their results of operations and key financial measures and therefore may limit the comparability of similarly named financial measures and ratios. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.

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

About National Bank Holdings Corporation

National Bank Holdings Corporation is a bank holding company created to build a leading community bank franchise delivering high quality customer service and committed to shareholder results. National Bank Holdings Corporation currently operates a network of 101 full-service banking centers, with the majority of those banking centers located in Colorado and the greater Kansas City region. Through the Company’s subsidiary, NBH Bank, N.A. it operates under the following brand names: Bank Midwest in Kansas and Missouri, Community Banks of Colorado in Colorado and California and Hillcrest Bank in Texas.

 

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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 “believes,” “expects,” “may,” “should,” “will,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “targets” or “anticipates” or similar expressions that relate to the Company’s strategy, plans or intentions. Forward-looking statements are statements about future, not past, events and involve certain important risks and uncertainties, any of which could cause the Company’s actual results to differ materially from those expressed in forward-looking statements, including, without limitation, the factors more fully described under the caption “Risk Factors” in the last quarterly report we filed with the Securities and Exchange Commission and: (1) changes in business and economic conditions generally and in the financial services industry; (2) changes in the laws, regulations and the regulatory environment; (3) the Company’s ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions of banking franchises on attractive terms, or at all; (4) the Company’s ability to achieve organic loan and deposit growth and the composition of such growth; (5) a weakening of the economy which could materially impact credit quality trends and local real estate values; and (6) increased competition in the financial services industry, nationally, regionally or locally. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management’s estimates, expectations or beliefs as of such time. For a discussion of additional risks and uncertainties that may affect the future results of the Company, please see the Company’s filings with the Securities and Exchange Commission.

Contacts:

Analysts/Investors: Brian Lilly, Chief Financial Officer, (720) 529-3315, blilly@nationalbankholdings.com Media: Kris Mapes, Executive Assistant, (720) 529-3372, kmapes@nationalbankholdings.com

 

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NATIONAL BANK HOLDINGS CORPORATION

FINANCIAL SUMMARY

Consolidated Statements of Operations (Unaudited)

(In thousands, except share and per share data)

 

		For the three months ended												For the twelve months ended
		December 31,				September 30,				December 31,				December 31,				December 31,
		2012				2012				2011				2012				2011
Total interest and dividend income		$	54,708			$	56,042			$	60,939			$	233,485			$	197,159
Total interest expense			5,124				6,546				10,948				29,234				41,696
Net interest income before provision for loan losses			49,584				49,496				49,991				204,251				155,463
Provision for loan losses on 310-30 loans			1,620				3,663				1,773				19,018				5,011
Provision for loan losses on non 310-30 loans			1,050				1,600				1,783				8,977				14,991
Net interest income after provision for loan losses			46,914				44,233				46,435				176,256				135,461
Non-interest income:
FDIC indemnification asset accretion			(4,655	)			(2,832	)			(3,895	)			(13,820	)			(6,132	)
Other FDIC loss sharing income (expense)			2,791				1,503				(1,000	)			12,069				1,410
Service charges			4,222				4,466				4,630				17,392				16,810
Bank card fees			2,531				2,484				2,215				9,699				7,611
Bargain purchase gain			—				—				—				—				60,520
Gain on sales of mortgages, net			328				283				286				1,214				1,103
Gain (loss) on sale of securities, net			—				—				(24	)			674				(645	)
Gain on recoveries of previously charged-off acquired loans			1,671				837				2,432				4,298				5,902
Other non-interest income			2,109				1,322				683				5,853				2,907
Total non-interest income			8,997				8,063				5,327				37,379				89,486
Non-interest expense:
Salaries and employee benefits			21,885				27,182				15,365				94,111				67,480
Occupancy and equipment			5,713				5,570				5,418				20,558				17,975
Professional fees			2,544				2,669				6,278				11,156				13,650
Other real estate owned expenses			8,161				3,468				4,503				20,313				7,064
Problem loan expenses			1,828				2,267				2,023				8,532				4,389
Intangible asset amortization			1,324				1,353				1,280				5,344				4,359
Initial public offering related expenses			—				7,566				—				7,974				600
Acquisition related costs			—				—				642				870				4,935
Other non-interest expense			9,912				9,882				10,222				40,740				35,086
Total non-interest expense			51,367				59,957				45,731				209,598				155,538
Income (loss) before income taxes			4,544				(7,661	)			6,031				4,037				69,409
Income tax expense			1,541				230				3,578				4,580				27,446
Net income (loss)		$	3,003			$	(7,891	)		$	2,453			$	(543	)		$	41,963
Income (loss) per share - basic		$	0.06			$	(0.15	)		$	0.05			$	(0.01	)		$	0.81
Income (loss) per share - diluted		$	0.06			$	(0.15	)		$	0.05			$	(0.01	)		$	0.81

 

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NATIONAL BANK HOLDINGS CORPORATION

Consolidated Statements of Condition (Unaudited)

(Dollars in thousands, except share and per share data)

 

		December 31, 2012				September 30, 2012				December 31, 2011
ASSETS
Cash and due from banks		$	90,505			$	65,452			$	93,862
Due from Federal Reserve Bank of Kansas City			579,267				496,893				1,421,734
Federal funds sold and interest bearing bank deposits			99,408				102,354				112,541
Cash and cash equivalents			769,180				664,699				1,628,137
Investment securities available-for-sale			1,718,028				1,739,632				1,862,699
Investment securities held-to-maturity			577,486				643,661				6,801
Non-marketable securities			32,996				33,046				29,117
Loans receivable, net - covered			609,115				711,029				952,715
Loans receivable, net - non-covered			1,237,634				1,226,770				1,321,336
Total loans, net			1,846,749				1,937,799				2,274,051
Allowance for loan losses			(15,380	)			(17,496	)			(11,527	)
Loans, net			1,831,369				1,920,303				2,262,524
Federal Deposit Insurance Corporation (“FDIC”) indemnification asset, net			86,923				113,195				223,402
Other real estate owned			85,690				129,345				120,636
Premises and equipment, net			121,436				118,385				87,315
Goodwill			59,630				59,630				59,630
Intangible assets, net			27,575				28,901				32,923
Other assets			100,462				72,029				38,842
Total assets		$	5,410,775			$	5,522,826			$	6,352,026
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Non-interest bearing demand deposits		$	677,985			$	648,808			$	678,735
Interest bearing demand deposits			529,996				484,760				537,160
Savings and money market			1,240,020				1,202,938				1,062,562
Total transaction deposits			2,448,001				2,336,506				2,278,457
Time deposits			1,752,718				1,945,218				2,784,596
Total deposits			4,200,719				4,281,724				5,063,053
Securities sold under agreements to repurchase			53,685				46,192				47,597
Other liabilities			65,812				99,075				152,647
Total liabilities			4,320,216				4,426,991				5,263,297
Stockholders’ equity:
Common stock			523				522				522
Treasury stock			(4	)			—				—
Additional paid in capital			1,006,194				1,005,627				994,705
Retained earnings			43,273				42,934				46,480
Accumulated other comprehensive income, net of tax			40,573				46,752				47,022
Total stockholders’ equity			1,090,559				1,095,835				1,088,729
Total liabilities and stockholders’ equity		$	5,410,775			$	5,522,826			$	6,352,026
SHARE DATA
Average basic shares outstanding			52,296,704				52,191,239				51,978,744
Average diluted shares outstanding			52,372,806				52,191,239				52,104,021
Ending shares outstanding			52,327,672				52,191,239				52,157,697
Common book value per share		$	20.84			$	21.00			$	20.87
Tangible common book value per share		$	19.17			$	19.30			$	19.10
CAPITAL RATIOS
Book equity to assets			20.16	%			19.84	%			17.14	%
Tangible common equity to tangible assets			18.85	%			18.54	%			15.91	%
Leverage ratio			18.21	%			17.70	%			15.10	%

 

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NATIONAL BANK HOLDINGS CORPORATION

Loan Portfolio Update

(Dollars in thousands)

Strategic/Non-Strategic Period-End Loan Balances:

 

		December 31, 2012												September 30, 2012
		Strategic				Non-strategic				Total				Strategic				Non-strategic				Total
Commercial		$	163,193			$	107,512			$	270,705			$	143,255			$	122,972			$	266,227
Commercial real estate			278,907				534,654				813,561				287,583				625,041				912,624
Agriculture			160,962				12,444				173,406				145,295				15,961				161,256
Residential real estate			480,137				58,608				538,745				463,034				77,953				540,987
Consumer			44,267				6,065				50,332				47,114				9,591				56,705
Total		$	1,127,466			$	719,283			$	1,846,749			$	1,086,281			$	851,518			$	1,937,799
Originations:
		Commercial				Commercial real estate				Agriculture				Residential real estate				Consumer				Total
First quarter 2011		$	1,128			$	5,194			$	3,101			$	14,170			$	1,223			$	24,816
Second quarter 2011			1,390				2,081				2,476				16,707				2,207				24,861
Third quarter 2011			14,226				818				651				16,908				2,772				35,375
Fourth quarter 2011			9,955				4,062				1,575				35,745				3,083				54,420
First quarter 2012			20,102				18,546				7,570				33,016				3,155				82,389
Second quarter 2012			10,799				6,816				22,444				40,123				4,057				84,239
Third quarter 2012			25,640				11,135				24,328				60,320				6,505				127,928
Fourth quarter 2012			30,988				20,993				28,978				52,778				6,025				139,762

Loss-Share Coverage and Accounting Treatment Period End Loan Balances:

 

		December 31, 2012
		Total covered loans												Total non-covered loans
		310-30				Non-310-30				Total covered				310-30				Non-310-30				Total non- covered
Commercial		$	73,802			$	47,307			$	121,109			$	9,484			$	140,112			$	149,596
Commercial real estate			397,190				13,693				410,883				177,407				225,271				402,678
Agriculture			38,890				17,094				55,984				8,843				108,580				117,423
Residential real estate			18,956				2,180				21,136				87,144				430,465				517,609
Consumer			3				—				3				18,981				31,347				50,328
Total		$	528,841			$	80,274			$	609,115			$	301,859			$	935,775			$	1,237,634
		September 30, 2012
		Total covered loans												Total non-covered loans
		310-30				Non-310-30				Total covered				310-30				Non-310-30				Total non- covered
Commercial		$	83,469			$	57,416			$	140,885			$	14,195			$	111,147			$	125,342
Commercial real estate			477,427				11,081				488,508				187,344				236,772				424,116
Agriculture			44,738				14,939				59,677				11,206				90,373				101,579
Residential real estate			19,584				2,371				21,955				106,710				412,322				519,032
Consumer			4				—				4				26,359				30,342				56,701
Total		$	625,222			$	85,807			$	711,029			$	345,814			$	880,956			$	1,226,770

 

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NATIONAL BANK HOLDINGS CORPORATION

Summary of Net Interest Margin

(Dollars in thousands)

 

		Three months ended December 31, 2012												Three months ended September 30, 2012
		Average Balance				Interest				Average Rate				Average Balance				Interest				Average Rate
Interest earning assets:
310-30 loans		$	890,787			$	24,156				10.79	%		$	990,661			$	24,008				9.64	%
Non 310-30 loans			1,029,059				16,210				6.27	%			968,652				16,097				6.61	%
Investment securities available-for-sale			1,676,518				8,269				1.96	%			1,747,254				9,302				2.12	%
Investment securities held-to-maturity			617,821				5,323				3.43	%			683,700				5,888				3.43	%
Other securities			33,036				393				4.73	%			33,067				377				4.54	%
Interest-bearing deposits			576,100				357				0.25	%			595,383				370				0.25	%
Total interest earning assets		$	4,823,321			$	54,708				4.51	%		$	5,018,717			$	56,042				4.44	%
Cash and due from banks			66,214												66,467
Other assets			541,354												585,735
Allowance for loan losses			(16,518	)											(15,817	)
Total assets		$	5,414,371											$	5,655,102
Interest bearing liabilities:
Savings deposits and interest bearing checking		$	1,693,737			$	1,173				0.28	%		$	1,696,972			$	1,341				0.31	%
Time deposits			1,832,790				3,930				0.85	%			2,063,622				5,178				1.00	%
Securities sold under agreements to repurchase			45,014				21				0.19	%			53,073				27				0.20	%
Total interest bearing liabilities		$	3,571,541			$	5,124				0.57	%		$	3,813,667			$	6,546				0.68	%
Non-interest bearing demand deposits			662,763												636,277
Other liabilities			89,450												107,415
Total liabilities			4,323,754												4,557,359
Stockholders’ equity			1,090,617												1,097,743
Total liabilities and stockholders’ equity		$	5,414,371											$	5,655,102
Net interest income						$	49,584											$	49,496
Interest rate spread											3.94	%											3.76	%
Net interest earning assets		$	1,251,780											$	1,205,050
Net interest margin											4.09	%											3.92	%
Ratio of average interest earning assets to average interest bearing liabilities			135.05	%											131.60	%

 

(1)	Originated loans are net of deferred loan fees, less costs.

(2)	Loan fees, less costs on originated loans, are included in interest income.

 

9

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NATIONAL BANK HOLDINGS CORPORATION

(Dollars in thousands)

Allowance For Loan Losses Analysis (2):

 

		As of and for the three months ended:
		December 31, 2012												September 30, 2012
		310-30				Non 310-30				Total				310-30				Non 310-30				Total
Beginning allowance for loan losses		$	7,110			$	10,386			$	17,496			$	7,259			$	10,035			$	17,294
Net chargeoffs			(4,078	)			(708	)			(4,786	)			(3,812	)			(1,249	)			(5,061	)
Provision			1,620				1,050				2,670				3,663				1,600				5,263
Ending allowance for loan losses		$	4,652			$	10,728			$	15,380			$	7,110			$	10,386			$	17,496
Annualized net charge-offs to average loans, respectively			1.82	%			0.27	%			0.99	%			1.53	%			0.51	%			1.03	%
% of net charge-offs from covered loans, respectively			55.19	%			6.09	%			47.92	%			69.02	%			21.10	%			57.19	%
Ratio of allowance for loan losses to total loans outstanding at period end, respectively			0.56	%			1.06	%			0.83	%			0.73	%			1.07	%			0.90	%
Ratio of non-performing loans to loans			—				4.02	%			2.21	%			—				3.89	%			1.94	%
Ratio of allowance for loan losses to non-performing loans			—				26.25	%			37.64	%			—				27.62	%			46.52	%
Ratio of allowance for loan losses to non-covered loans outstanding at period end, respectively			1.54	%			1.15	%			1.24	%			2.06	%			1.18	%			1.43	%
Ratio of allowance for loan losses to non-performing, non-covered loans			—				36.03	%			51.66	%			—				34.52	%			58.14	%
Total loans outstanding at period end		$	830,700			$	1,016,049			$	1,846,749			$	971,036			$	966,763			$	1,937,799
Total average loans during the period		$	890,787			$	1,029,059			$	1,919,846			$	990,661			$	968,652			$	1,959,313
Non-covered loans		$	301,859			$	935,775			$	1,237,634			$	345,814			$	880,956			$	1,226,770
Total non-performing loans		$	—			$	40,864			$	40,864			$	—			$	37,606			$	37,606
Non-performing, non-covered loans		$	—			$	29,772			$	29,772			$	—			$	30,092			$	30,092

Past Due Loans (2):

 

		December 31, 2012												September 30, 2012
		310-30				Non 310-30				Total				310-30				Non 310-30				Total
Non-accrual loans		$	—			$	23,119			$	23,119			$	—			$	21,976			$	21,976
Loans 30-89 days past due and still accruing interest			18,413				4,580				22,993				47,772				14,018				61,790
Loans 90 days past due and still accruing interest			155,440				25				155,465				143,953				50				144,003
Total past due and non-accrual loans		$	173,853			$	27,724			$	201,577			$	191,725			$	36,044			$	227,769
Total past due and non-accrual loans to total loans, respectively			20.93	%			2.73	%			10.92	%			19.74	%			3.73	%			11.75	%
% of total past due and non-accrual loans that carry fair value marks			100.00	%			42.96	%			92.16	%			100.00	%			55.32	%			92.93	%
% of total past due and non-accrual loans that are covered by FDIC loss sharing agreements, respectively			75.49	%			22.26	%			68.17	%			66.78	%			33.14	%			61.45	%

 

10

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NATIONAL BANK HOLDINGS CORPORATION

(Dollars in thousands)

Asset Quality Data (Covered/Non-covered) (2):

 

		December 31, 2012												September 30, 2012
		Non-covered				Covered				Total				Non-covered				Covered				Total
Total non-accrual loans		$	17,074			$	6,045			$	23,119			$	16,597			$	5,379			$	21,976
Total loans 90 days past due and still accruing interest			25				—				25				50				—				50
Accruing restructured loans (1)			12,673				5,047				17,720				13,445				2,135				15,580
Total non-performing loans			29,772				11,092				40,864				30,092				7,514				37,606
OREO			41,072				44,618				85,690				64,822				64,523				129,345
Other repossessed assets			800				531				1,331				801				530				1,331
Total non-performing assets		$	71,644			$	56,241			$	127,885			$	95,715			$	72,567			$	168,282
Allowance for loan losses			—				—			$	15,380				—				—			$	17,496
Total non-performing loans to loans, respectively			2.41	%			1.82	%			2.21	%			2.45	%			1.06	%			1.94	%
Total non-performing assets to total assets			—				—				2.36	%			—				—				3.05	%

 

(1)	Includes restructured loans less than 90 days past due and still accruing.

(2)

Loans accounted for under 310-30 were written down at the acquisition date and are carried at an amount estimated to be collectible and the related allowance for loan losses was not carried over to NBHC’s allowance. These loans are not classified as nonaccrual or non-performing. Any losses on these loans are charged against the non-accretable difference and are not recorded as charge-offs until the non-accretable difference is fully utilized. As a result of the accounting for purchased loans accounted for under 310-30, certain ratios are not comparable with those of other banks.

Changes in Accretable Yield

 

		For the three months ended												For the year ended								Life-to-date
		Dec 31, 2012				Sept 30, 2012				Dec 31, 2011				Dec 31, 2012				Dec 31, 2011				Dec 31, 2012
Accretable yield at beginning of period		$	148,868			$	158,082			$	93,116			$	186,494			$	74,329			$	—
Additions through acquisitions			—				—				96,625				—				130,321				214,994
Reclassification from non-accretable difference to accretable yield			13,145				17,491				20,773				60,119				45,871				105,990
Reclassification to non-accretable difference from accretable yield			(4,273	)			(2,697	)			(95	)			(12,621	)			(409	)			(13,030	)
Accretion			(24,155	)			(24,008	)			(23,925	)			(100,407	)			(63,618	)			(174,369	)
Accretable yield at end of period		$	133,585			$	148,868			$	186,494			$	133,585			$	186,494			$	133,585

 

11

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NATIONAL BANK HOLDINGS CORPORATION

Key Ratios

 

		For the three months ended December 31, 2012				For the three months ended September 30, 2012				For the three months ended December 31, 2011				For the year ended December 31, 2012				For the year ended December 31, 2011
Key Ratios (1)
Return on average assets			0.22	%			-0.56	%			0.16	%			-0.01	%			0.81	%
Return on average tangible assets (2)			0.28	%			-0.51	%			0.21	%			0.05	%			0.88	%
Adjusted return on average assets (2) (3)			0.32	%			0.28	%			0.11	%			0.27	%			0.33	%
Adjusted return on average tangible assets (2) (3)			0.38	%			0.34	%			0.16	%			0.33	%			0.39	%
Return on average equity			1.10	%			-2.86	%			0.88	%			-0.05	%			4.01	%
Return on average tangible common equity (2)			1.51	%			-2.79	%			1.27	%			0.27	%			4.63	%
Adjusted return on average equity (2) (3)			1.57	%			1.45	%			0.61	%			1.44	%			1.62	%
Adjusted return on average tangible equity (2) (3)			2.03	%			1.91	%			0.97	%			1.89	%			2.03	%
Return on risk weighted assets			0.66	%			-1.65	%			0.51	%			-0.03	%			2.21	%
Pre-tax, pre-provision net revenue to risk weighted assets (2)			1.58	%			-0.50	%			2.00	%			1.76	%			4.70	%
Adjusted pre-tax, pre-provision net revenue to risk weighted assets (2) (3)			2.05	%			2.48	%			1.74	%			2.93	%			2.51	%
Interest-earning assets to interest-bearing liabilities (end of period) (4)			134.68	%			133.44	%			127.91	%			134.68	%			127.91	%
Loans to deposits ratio (end of period)			43.96	%			45.26	%			44.91	%			43.96	%			44.91	%
Non-interest bearing deposits to total deposits (end of period)			16.14	%			15.15	%			13.41	%			16.14	%			13.41	%
Yield on earning assets (4)			4.51	%			4.44	%			4.50	%			4.55	%			4.31	%
Cost of interest bearing liabilities (4)			0.57	%			0.68	%			1.00	%			0.74	%			1.15	%
Interest rate spread (5)			3.94	%			3.76	%			3.50	%			3.81	%			3.17	%
Net interest margin (6)			4.09	%			3.92	%			3.69	%			3.98	%			3.40	%
Non-interest expense to average assets			3.77	%			4.22	%			2.94	%			3.62	%			3.01	%
Adjusted non-interest expense to average assets (2) (3)			3.62	%			3.22	%			3.03	%			3.24	%			2.66	%
Efficiency ratio (7)			85.43	%			101.82	%			80.36	%			84.53	%			61.72	%
Adjusted efficiency ratio (2) (3)			81.74	%			77.09	%			82.60	%			75.67	%			71.91	%
Asset Quality Data (8) (9) (10)
Non-performing loans to total loans			2.21	%			1.94	%			2.23	%			2.21	%			2.23	%
Covered non-performing loans to total non-performing loans			27.14	%			19.98	%			29.19	%			27.14	%			29.19	%
Non-performing assets to total assets			2.36	%			3.05	%			2.72	%			2.36	%			2.72	%
Covered non-performing assets to total non-performing assets			43.98	%			43.12	%			53.55	%			43.98	%			53.55	%
Allowance for loan losses to total loans			0.83	%			0.90	%			0.51	%			0.83	%			0.51	%
Allowance for loan losses to total non-covered loans			1.24	%			1.43	%			0.87	%			1.24	%			0.87	%
Allowance for loan losses to non-performing loans			37.64	%			46.52	%			22.71	%			37.64	%			22.71	%
Net charge-offs to average loans			0.99	%			1.03	%			-0.05	%			1.19	%			0.51	%

 

(1)	Ratio are annualized.

(2)	Ratio represents non-GAAP financial measure.

(3)	“Adjusted” calculations exclude bargain purchase gains, initial public offering related expenses, stock based compensation expense, acquisition costs, and loss (gain) on sale of investment securities.

(4)

Interest earning assets include assets that earn interest/accretion or dividends, except for the FDIC indemnification asset that earns accretion but is not part of interest earning assets. Any market value adjustments on investment securities are excluded from interest-earning assets. Interest bearing liabilities include liabilities that must be paid interest.

(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)	Net interest margin represents net interest income, including accretion income on interest earning assets, as a percentage of average interest earning assets.

(7)	The efficiency ratio represents non-interest expense, less intangible asset amortization, as a percentage of net interest income plus non-interest income.

(8)

Non-performing loans consist of non-accruing loans, loans 90 days or more past due and still accruing interest and restructured loans, but exclude any loans accounted for under ASC 310-30 in which the pool is still performing. These ratios may, therefore, not be comparable to similar ratios of our peers.

(9)	Non-performing assets include non-performing loans, other real estate owned and other repossessed assets.

(10)	Total loans are net of unearned discounts and fees.

 

12

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NATIONAL BANK HOLDINGS CORPORATION

Non-GAAP Financial Measures

(Dollars in thousands)

Statements of Financial Condition Non-GAAP Reconciliations

 

		December 31, 2012				September 30, 2012				December 31, 2011
Total stockholders’ equity		$	1,090,559			$	1,095,835			$	1,088,729
Less: goodwill			(59,630	)			(59,630	)			(59,630	)
Less: intangibles			(27,575	)			(28,901	)			(32,923	)
Tangible common equity		$	1,003,354			$	1,007,304			$	996,176
Total assets		$	5,410,775			$	5,522,826			$	6,352,026
Less: goodwill			(59,630	)			(59,630	)			(59,630	)
Less: intangibles			(27,575	)			(28,901	)			(32,923	)
Tangible assets		$	5,323,570			$	5,434,295			$	6,259,473
Total stockholders’ equity to total assets			20.16	%			19.84	%			17.14	%
Less: impact of goodwill			-0.90	%			-0.88	%			-0.79	%
Less: impact of intangibles			-0.41	%			-0.42	%			-0.44	%
Tangible common equity to tangible assets			18.85	%			18.54	%			15.91	%

Non-GAAP Earnings Per Share Reconciliation

 

		For the three months  ended December 31, 2012				For the three months  ended September 30, 2012				For the three months  ended December 31, 2011
Net income (loss)		$	3,003			$	(7,891	)		$	2,453
Add: impact of initial public offering related expenses			—				7,566				—
Add: impact of initial public offering related stock-based compensation, after tax			—				3,267				—
Total impact of initial public offering related expenses			—				10,833				—
Net income adjusted for initial public offering related items		$	3,003			$	2,942			$	2,453
Income (loss) per share - diluted		$	0.06			$	(0.15	)		$	0.05
Add: impact of initial public offering related expenses			—				0.15				—
Add: impact of initial public offering related stock-based compensation, after tax			—				0.06				—
Adjusted income per share - diluted		$	0.06			$	0.06			$	0.05

 

13

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NATIONAL BANK HOLDINGS CORPORATION

Non-GAAP Financial Measures

(Dollars in thousands)

 

		For the three				For the three				For the three				For the twelve				For the twelve
		months ended				months ended				months ended				months ended				months ended
		December 31,				September 30,				December 31,				December 31,				December 31,
		2012				2012				2011				2012				2011
Net income (loss)		$	3,003			$	(7,891	)		$	2,453			$	(543	)		$	41,963
Less: bargain purchase gain, after tax			—				—				—				—				(36,589	)
Add: impact of initial public offering related expenses			—				7,566				—				7,974				600
Add: impact of non initial public offering related stock-based compensation, after tax			1,304				1,068				(1,152	)			4,927				7,596
Add: impact of initial public offering related stock-based compensation, after tax			—				3,267				—				3,267				—
Add: impact of acquisition costs, after tax			—				—				388				526				2,984
Less: Gain (loss) on sale of investment securities, after tax			—				—				15				(408	)			400
Adjusted net revenue, after tax		$	4,307			$	4,010			$	1,704			$	15,743			$	16,954
Net income (loss)		$	3,003			$	(7,891	)		$	2,453			$	(543	)		$	41,963
Add: impact of income taxes			1,541				230				3,578				4,580				27,446
Add: impact of provision			2,670				5,263				3,556				27,995				20,002
Pre-tax, pre-provision net income			7,214				(2,398	)			9,587				32,032				89,411
Less: bargain purchase gain			—				—				—				—				(60,520	)
Add: impact of initial public offering related expenses			—				7,566				—				7,974				600
Add: impact of non initial public offering related stock-based compensation			2,156				1,730				(1,905	)			8,144				12,564
Add: impact of initial public offering related stock-based compensation			—				4,934				—				4,934				—
Add: impact of acquisition costs			—				—				642				870				4,935
Less: gain (loss) on sale of investment securities			—				—				24				(674	)			645
Adjusted pre-tax, pre-provision net revenue		$	9,370			$	11,832			$	8,348			$	53,280			$	47,635
Non-interest expense		$	51,367			$	59,957			$	45,731			$	209,598			$	155,538
Less: impact of initial public offering related expenses			—				(7,566	)			—				(7,974	)			(600	)
Less: impact of non initial public offering related stock-based compensation			(2,156	)			(1,730	)			1,905				(8,144	)			(12,564	)
Less: impact of initial public offering related stock-based compensation			—				(4,934	)			—				(4,934	)			—
Less: impact of acquisition costs			—				—				(642	)			(870	)			(4,935	)
Adjusted non-interest expense		$	49,211			$	45,727			$	46,994			$	187,676			$	137,439

 

14

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NATIONAL BANK HOLDINGS CORPORATION

Non-GAAP Financial Measures

 

		For the three				For the three				For the three				For the twelve				For the twelve
		months ended				months ended				months ended				months ended				months ended
		December 31,				September 30,				December 31,				December 31,				December 31,
		2012				2012				2011				2012				2011
Return on average assets			0.22	%			-0.56	%			0.16	%			-0.01	%			0.81	%
Less: bargain purchase gain, after tax			0.00	%			0.00	%			0.00	%			0.00	%			-0.71	%
Add: impact of initial public offering related expenses			0.00	%			0.53	%			0.00	%			0.14	%			0.01	%
Add: impact of non initial public offering related stock-based compensation, after tax			0.10	%			0.08	%			-0.07	%			0.09	%			0.15	%
Add: impact of initial public offering related stock-based compensation, after tax			0.00	%			0.23	%			0.00	%			0.06	%			0.00	%
Add: impact of acquisition costs, after tax			0.00	%			0.00	%			0.02	%			0.01	%			0.06	%
Less: gain (loss) on sale of investment securities, after tax			0.00	%			0.00	%			0.00	%			-0.01	%			0.01	%
Adjusted return on average assets			0.32	%			0.28	%			0.11	%			0.27	%			0.33	%
Return on average assets			0.22	%			-0.56	%			0.16	%			-0.01	%			0.81	%
Add: impact of goodwill			0.00	%			-0.01	%			0.00	%			0.00	%			0.01	%
Add: impact of other intangibles			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%
Add: impact of core deposit intangible expense			0.06	%			0.06	%			0.05	%			0.06	%			0.05	%
Return on average tangible assets			0.28	%			-0.51	%			0.21	%			0.05	%			0.88	%
Less: bargain purchase gain, after tax			0.00	%			0.00	%			0.00	%			0.00	%			-0.72	%
Add: impact of initial public offering related expenses			0.00	%			0.54	%			0.00	%			0.14	%			0.01	%
Add: impact of non initial public offering related stock-based compensation, after tax			0.10	%			0.08	%			-0.08	%			0.09	%			0.15	%
Add: impact of initial public offering related stock-based compensation, after tax			0.00	%			0.23	%			0.00	%			0.06	%			0.00	%
Add: impact of acquisition costs, after tax			0.00	%			0.00	%			0.03	%			0.01	%			0.06	%
Less: gain (loss) on sale of investment securities, after tax			0.00	%			0.00	%			0.00	%			-0.01	%			0.01	%
Adjusted return on average tangible assets			0.38	%			0.34	%			0.16	%			0.33	%			0.39	%
Return on average equity			1.10	%			-2.86	%			0.88	%			-0.05	%			4.01	%
Less: bargain purchase gain, after tax			0.00	%			0.00	%			0.00	%			0.00	%			-3.50	%
Add: impact of initial public offering related expenses			0.00	%			2.74	%			0.00	%			0.73	%			0.06	%
Add: impact of non initial public offering related stock-based compensation, after tax			0.48	%			0.39	%			-0.41	%			0.45	%			0.73	%
Add: impact of initial public offering related stock-based compensation, after tax			0.00	%			1.18	%			0.00	%			0.30	%			0.00	%
Add: impact of acquisition costs, after tax			0.00	%			0.00	%			0.14	%			0.05	%			0.29	%
Less: gain (loss) on sale of investment securities, after tax			0.00	%			0.00	%			0.01	%			-0.04	%			0.04	%
Adjusted return on average equity			1.57	%			1.45	%			0.61	%			1.44	%			1.62	%
Return on average equity			1.10	%			-2.86	%			0.88	%			-0.05	%			4.01	%
Add: impact of goodwill			0.06	%			-0.16	%			0.05	%			0.00	%			0.23	%
Add: impact of other intangibles			0.03	%			-0.09	%			0.03	%			0.00	%			0.11	%
Add: impact of core deposit intangible expense			0.32	%			0.32	%			0.30	%			0.32	%			0.27	%
Return on average tangible equity			1.51	%			-2.79	%			1.27	%			0.27	%			4.63	%
Less: bargain purchase gain, after tax			0.00	%			0.00	%			0.00	%			0.00	%			-3.80	%
Add: impact of initial public offering related expenses			0.00	%			2.98	%			0.00	%			0.79	%			0.06	%
Add: impact of non initial public offering related stock-based compensation, after tax			0.52	%			0.42	%			-0.45	%			0.49	%			0.79	%
Add: impact of initial public offering related stock-based compensation, after tax			0.00	%			1.29	%			0.00	%			0.33	%			0.00	%
Add: impact of acquisition costs, after tax			0.00	%			0.00	%			0.15	%			0.05	%			0.31	%
Less: gain (loss) on sale of investment securities, after tax			0.00	%			0.00	%			0.01	%			-0.04	%			0.04	%
Adjusted return on average tangible equity			2.03	%			1.91	%			0.97	%			1.89	%			2.03	%
Return on risk weighted assets			0.66	%			-1.65	%			0.51	%			-0.03	%			2.21	%
Add: impact of income taxes			0.34	%			0.05	%			0.75	%			0.25	%			1.44	%
Add: impact of provision			0.58	%			1.10	%			0.74	%			1.54	%			1.05	%
Pre-tax, pre-provision net revenue to risk weighted assets			1.58	%			-0.50	%			2.00	%			1.76	%			4.70	%
Less: bargain purchase gain			0.00	%			0.00	%			0.00	%			0.00	%			-3.18	%
Add: impact of initial public offering related expenses			0.00	%			1.58	%			0.00	%			0.44	%			0.03	%
Add: impact of non initial public offering related stock-based compensation			0.47	%			0.36	%			-0.40	%			0.45	%			0.66	%
Add: impact of initial public offering related stock-based compensation			0.00	%			1.03	%			0.00	%			0.27	%			0.00	%
Add: impact of acquisition costs			0.00	%			0.00	%			0.13	%			0.05	%			0.26	%
Less: gain (loss) on sale of investment securities			0.00	%			0.00	%			0.01	%			-0.04	%			0.03	%
Adjusted pre-tax, pre-provision net revenue to risk weighted assets			2.05	%			2.48	%			1.74	%			2.93	%			2.51	%
Non-interest expense to average assets			3.77	%			4.22	%			2.94	%			3.62	%			3.01	%
Less: impact of initial public offering related expenses			0.00	%			-0.53	%			0.00	%			-0.14	%			-0.01	%
Less: impact of non initial public offering related stock-based compensation			-0.16	%			-0.12	%			0.12	%			-0.14	%			-0.24	%
Less: impact of initial public offering related stock-based compensation			0.00	%			-0.35	%			0.00	%			-0.09	%			0.00	%
Less: impact of acquisition costs			0.00	%			0.00	%			-0.04	%			-0.02	%			-0.10	%
Adjusted non-interest expense to average assets			3.62	%			3.22	%			3.03	%			3.24	%			2.66	%
Efficiency ratio			85.43	%			101.82	%			80.36	%			84.53	%			61.72	%
Add: bargain purchase gain			0.00	%			0.00	%			0.00	%			0.00	%			20.18	%
Add: gain (loss) on sale of investment securities			0.00	%			0.00	%			-0.03	%			0.24	%			-0.22	%
Less: impact of initial public offering related expenses			0.00	%			-13.14	%			0.00	%			-3.31	%			-0.32	%
Less: impact of non initial public offering related stock-based compensation			-3.68	%			-3.01	%			3.44	%			-3.38	%			-6.79	%
Less: impact of initial public offering related stock-based compensation			0.00	%			-8.57	%			0.00	%			-2.05	%			0.00	%
Less: impact of acquisition costs			0.00	%			0.00	%			-1.16	%			-0.36	%			-2.67	%
Adjusted efficiency ratio			81.74	%			77.09	%			82.60	%			75.67	%			71.91	%

 

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