National Bank Holdings Corporation Announces Fourth Quarter and Record Full Year 2020 Financial Results
DENVER, Jan. 21, 2021 (GLOBE NEWSWIRE) — National Bank Holdings Corporation (NYSE: NBHC) reported:
In announcing these results, Chief Executive Officer Tim Laney shared, “I am pleased to announce that our solid performance during the fourth quarter contributed to record full year earnings of $2.85 per share. In the face of the pandemic, my teammates came together to serve our clients and communities while also taking care of each other. An intense focus on the safety and soundness of the Bank resulted in full-year net charge-offs of just six basis points. The diversity and granularity of our loan portfolio continues to produce desirable results. Further, we built on our relationship banking model to grow our low cost transaction deposits 28.8% in the fourth quarter, compared to the same period in the prior year.”Mr. Laney added, “We are proud to have been recognized in Fortune’s 100 Fastest Growing Companies in 2020 and among the top public companies for shareholder value creation. With a strong Common Equity Tier 1 ratio of 14.70% coupled with a sizable liquidity position, we believe we are well positioned for growth in 2021. We will continue to execute our disciplined approach to pursuing growth opportunities while maintaining an intense focus on expense management as we prudently navigate the current economic challenges side-by-side with our clients and our communities.”Fourth Quarter 2020 Results
(All comparisons refer to the third quarter of 2020, except as noted)Net income totaled $27.2 million during the fourth quarter of 2020, or $0.87 per diluted share, compared to $27.9 million, or $0.90 per diluted share, during the third quarter of 2020. Adjusting for banking center consolidation-related expenses, net income totaled $27.3 million, or $0.88 per diluted share, compared to $28.2 million, or $0.91 per diluted share, during the third quarter of 2020. The return on average tangible assets was 1.67%, compared to 1.76% in the prior quarter, and the return on average tangible common equity was 15.55%, compared to 16.49%, in the prior quarter.Net Interest Income
Fully taxable equivalent net interest income totaled $49.8 million, increasing $1.8 million, driven by an increase in PPP-related income from PPP loan forgiveness. PPP loan fees were $5.2 million in the fourth quarter of 2020, compared to $1.5 million in the prior quarter. As of December 31, 2020, the remaining unamortized PPP loan fees totaled $3.4 million. The fully taxable equivalent net interest margin was 3.24%, widening three basis points from the prior quarter. The yield on earning assets decreased four basis points largely due to the remix of assets into lower-yielding cash balances, partially offset by accelerated loan fee income from PPP loan forgiveness. Our cost of funds decreased by seven basis points to 0.33%.Loans
Total loans ended the quarter at $4.4 billion, decreasing $202.4 million, of which $172.2 million was related to PPP loans forgiven during the quarter. Excluding PPP loans, total loans decreased by $30.2 million, or 2.9% annualized. During the quarter, we continued our careful approach to extending new credit as well as continuing an intense focus on managing credit risk and yield. Fourth quarter loan originations totaled $272.5 million, which were $140.0 million higher than the third quarter 2020 and $2.9 million higher than last year’s fourth quarter. We continue to maintain a granular and well diversified loan portfolio with self-imposed concentration limits. In light of the strain placed on industries by the COVID-19 pandemic, we have carefully evaluated and continue to closely monitor our entire loan portfolio. We have highlighted our current highly impacted industries and COVID-19 related loan modifications within the accompanying Supplemental Disclosure.Asset Quality and Provision for Loan Losses
No provision for loan losses was recorded during the fourth quarter under the CECL model due to the impact of the model’s underlying economic forecast, qualitative factors and a low level of charge-offs. Annualized net charge-offs totaled 0.11% of total loans, compared to 0.04% in the prior quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDRs) totaled 0.47% of total loans, compared to 0.41% at September 30, 2020. The allowance for credit losses as a percentage of total loans increased three basis points to 1.37% at December 31, 2020. Excluding PPP loans, non-performing loans totaled 0.49% of total loans, and the allowance for credit losses as a percentage of totals loans totaled 1.43% at December 31, 2020.Deposits
Average transaction deposits (defined as total deposits less time deposits) increased $172.1 million, or 15.3% annualized, and average total deposits increased $141.4 million, or 10.2% annualized, to $5.7 billion as of December 31, 2020. The mix of transaction deposits to total deposits improved 91 basis points to 82.6% at December 31, 2020. The loan to deposit ratio totaled 76.7% at December 31, 2020, compared to 81.1% at September 30, 2020.The cost of transaction deposits decreased three basis points from the prior quarter to 0.15%. The cost of total deposits decreased seven basis points from the prior quarter to 0.33%.Non-Interest Income
Non-interest income totaled $33.4 million during the fourth quarter, representing a decrease of $11.2 million, or 25.1%, entirely due to seasonal decreases in mortgage banking income. Service charges and bank card fees increased a combined $0.5 million, and OREO-related income increased $0.2 million.Non-Interest Expense
Non-interest expense totaled $48.4 million during the fourth quarter, representing a decrease of $6.9 million largely due to lower mortgage banking performance-related compensation. The fully taxable equivalent efficiency ratio improved 160 basis points to 57.9% at December 31, 2020, compared to 59.5% at September 30, 2020. Adjusting for banking center consolidation-related expense, the fully taxable equivalent efficiency ratio improved to 57.6% at December 31, 2020.Income tax expense totaled $6.3 million during the fourth quarter, compared to $6.8 million during the prior quarter. The effective tax rate was 18.9% and 19.7% for the fourth and third quarters, respectively.Capital
Capital ratios continue to be strong and in excess of federal bank regulatory agency “well capitalized” thresholds. The Tier 1 leverage ratio at December 31, 2020 for the consolidated company and NBH Bank was 10.70% and 9.23%, respectively. Shareholders’ equity totaled $820.7 million at December 31, 2020 and increased $21.3 million from the prior quarter due to higher retained earnings.Common book value per share increased $0.66 to $26.79 at December 31, 2020. The quarter’s earnings, net of dividends paid, increased the tangible common book value per share by $0.69 to $23.09 at December 31, 2020. Excluding accumulated other comprehensive income, the tangible book value per share increased $0.73 to $22.77 at December 31, 2020.Recent Events
The COVID-19 pandemic has caused substantial disruption to the communities we serve and has changed the way we live and work. We continue to remain committed to ensuring our associates, clients and communities are receiving the support they need during these challenging times. Our banking centers remain operational through our drive-thru services and on an appointment-only basis in the lobbies. We have continued to leverage our digital banking platform with our clients. Our teams have been working diligently to support our clients who are experiencing financial hardship due to COVID-19 through participation in the SBA’s Paycheck Protection Program, including assistance with PPP loan forgiveness applications, and loan modifications, as needed. While the initial release of the vaccine is promising, the length of time that the government-mandated measures must remain in place to address COVID-19 is unknown. The pandemic has already had a significantly negative impact to the U.S. labor market, consumer spending and business operations, and it is not clear how quickly the vaccine can be widely deployed and when government-mandated measures will be removed.Year-Over-Year Review
(All comparisons refer to the full year 2019, except as noted)Net income totaled a record $88.6 million during 2020, or $2.85 per diluted share, an increase of $8.2 million, or 10.2%. Adjusting for banking center consolidation-related expenses, net income totaled $90.4 million, or $2.91 per diluted share, an increase of $9.3 million, or 11.5%. The return on average tangible assets was 1.44%, compared to 1.42% in the prior year, and the return on average tangible common equity was 13.27%, compared to 13.07%, in the prior year. The adjusted return on average tangible assets was 1.47%, compared to 1.43% in the prior year, and the adjusted return on average tangible common equity was 13.54%, compared to 13.18% during the prior year.Fully taxable equivalent net interest income totaled $198.0 million, decreasing $12.8 million, or 6.1%, driven by declines in short-term interest rates as a result of monetary policy actions by the Federal Reserve. Average earning assets increased $427.8 million, or 8.0%, primarily driven by average loan growth of $255.7 million, including average PPP loan growth of $225.9 million, and average increases in interest-bearing cash balances of $182.8 million. These increases were partially offset by a decrease in average investment securities of $81.6 million. The fully taxable equivalent net interest margin narrowed 51 basis points to 3.42% due to lower earning asset yields. The yield on earning assets decreased 76 basis points, led by a 73 basis point decrease in the originated loan portfolio yields that resulted from a decline in short-term interest rates as a result of monetary policy actions by the Federal Reserve. The cost of deposits decreased 19 basis points to 0.45%.Loans outstanding totaled $4.4 billion, decreasing $61.7 million, or 1.4%, from the prior year, largely due to lower commercial and industrial loans of $140.9 million, or 10.0%, that were offset by PPP loans of $176.1 million. New loan originations over the trailing 12 months totaled $1.2 billion, led by commercial loan originations of $807.3 million, which included PPP loan originations of $358.9 million.Average non-interest bearing demand deposits increased $338.9 million, or 29.2%. Average transaction deposits increased $642.8 million, or 17.9%, and average total deposits increased $606.4 million, or 13.0%, to $5.3 billion as of December 31, 2020. Spot transaction deposits increased $1.0 billion to $4.7 billion at December 31, 2020, improving the mix of transaction deposits to total deposits by 490 basis points to 82.6% at December 31, 2020. The mix of non-interest bearing demand deposits to total deposits improved to 37.2% from 25.0% at December 31, 2019.A CECL model driven provision for loan losses of $17.6 million was recorded during 2020, including a $0.1 million provision for unfunded loan commitment reserves, to provide coverage for the impact of deteriorating economic conditions as a result of COVID-19. Net charge-offs on loans totaled 0.06% of total loans, compared to 0.19% in the prior year. Non-performing loans to total loans decreased two basis points to 0.47%, compared to 0.49% at December 31, 2019. The allowance for credit losses totaled 1.37% of total loans, compared to 0.88% at December 31, 2019 and included a CECL adoption Day 1 increase of $5.8 million. Excluding PPP loans, the allowance for credit losses as a percentage of total loans increased to 1.43% at December 31, 2020.Non-interest income totaled $140.3 million, representing an increase of $57.5 million, or 69.5%, driven by an increase in mortgage banking income. Service charges and bank card fees decreased a combined $2.1 million and were impacted by changes in consumer behavior due to COVID-19.Non-interest expense totaled $206.2 million, representing an increase of $25.4 million, or 14.1%, largely due to higher mortgage banking performance-related compensation. Banking center consolidation-related expense totaled $2.3 million, compared to $0.9 million during the prior year. The consolidations of 12 banking centers were announced in the second quarter of 2020 and were substantially complete at December 31, 2020. Other non-interest expense decreased by $1.4 million largely due to decreases in travel as well as marketing and development expenses. Additionally, included in the prior period were net gains on the sale of OREO of $7.2 million, compared to minimal net gains on the sale of OREO recorded in 2020.Income tax expense totaled $20.8 million, compared to $15.8 million during 2019. Included in income tax expense was $2.2 million of benefit during 2019 from stock compensation activity. The effective tax rate for 2020 was 19.0%, compared to 18.7% in the prior year, adjusting for stock compensation activity. The lower rate compared to the statutory rate reflects the continued success of our tax strategies and tax exempt income.Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Friday, January 22, 2021. Interested parties may listen to this call by dialing (877) 272-6762 / (615) 800-6832 (International) using the Conference ID of 4472264 and asking for the NBHC Fourth Quarter Earnings conference call. A telephonic replay of the call will be available beginning approximately four hours after the call’s completion through February 4, 2021, by dialing (855) 859-2056 (United States) / (404) 537-3406 (International) using the Conference ID of 4472264. The earnings release and an on-line replay of the call will also be available on the Company’s website at www.nationalbankholdings.com by visiting the investor relations area.About Non-GAAP Financial Measures
Certain of the financial measures and ratios we present, including “tangible assets,” “return on average tangible assets,” “tangible common equity,” “return on average tangible common equity,” “tangible common book value per share,” “tangible common book value, excluding accumulated other comprehensive loss, net of tax,” “tangible common book value per share, excluding accumulated other comprehensive loss, net of tax,” “tangible common equity to tangible assets,” “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 stakeholder results. Through its bank subsidiary, NBH Bank, National Bank Holdings Corporation operates a network of 89 banking centers, serving individual consumers, small, medium and large businesses, and government and non-profit entities. Its banking centers are located in its core footprint of Colorado, the greater Kansas City region, Texas, Utah and New Mexico. Its comprehensive residential mortgage banking group primarily serves the bank’s core footprint. NBH Bank operates under the following brand names: Community Banks of Colorado and Community Banks Mortgage, a division of NBH Bank, in Colorado, Bank Midwest and Bank Midwest Mortgage in Kansas and Missouri, and Hillcrest Bank and Hillcrest Bank Mortgage in Texas, Utah and New Mexico. Additional information about National Bank Holdings Corporation can be found at www.nationalbankholdings.com.For more information visit: cobnks.com, bankmw.com, hillcrestbank.com or nbhbank.com. Or, follow us on any of our social media sites:
Community Banks of Colorado: facebook.com/cobnks, twitter.com/cobnks, instagram.com/cobnks;
Bank Midwest: facebook.com/bankmw, twitter.com/bank_mw, instagram.com/bankmw;
Hillcrest Bank: facebook.com/hillcrestbank, twitter.com/hillcrest_bank;
NBH Bank: twitter.com/nbhbank;
or connect with any of our brands on LinkedIn.Forward-Looking 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: 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; with respect to our mortgage business, the inability to negotiate fees with investors for the purchase or our loans or our obligation to indemnify purchasers or repurchase related loans; the Company’s ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions, consolidations and other expansion opportunities; the Company’s ability to realize anticipated benefits from enhancements or updates to its core operating systems from time to time without significant change in client service or risk to the Company’s control environment; the Company’s dependence on information technology and telecommunications systems of third party service providers and the risk of systems failures, interruptions or breaches of security; the Company’s ability to achieve organic loan and deposit growth and the composition of such growth; changes in sources and uses of funds; increased competition in the financial services industry; the effect of changes in accounting policies and practices; the share price of the Company’s stock; the Company’s ability to realize deferred tax assets or the need for a valuation allowance; continued consolidation in the financial services industry; ability to maintain or increase market share and control expenses; costs and effects of changes in laws and regulations and of other legal and regulatory developments; technological changes; the timely development and acceptance of new products and services; the Company’s continued ability to attract, hire and maintain qualified personnel; ability to implement and/or improve operational management and other internal risk controls and processes and reporting system and procedures; regulatory limitations on dividends from the Company’s bank subsidiary; changes in estimates of future loan reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; widespread natural and other disasters, pandemics, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; adverse effects due to the novel Coronavirus Disease 2019 (COVID-19) on the Company and its clients, counterparties, employees, and third-party service providers, and the adverse impacts on our business, financial position, results of operations, and prospects; impact of reputational risk; and success at managing the risks involved in the foregoing items. The Company can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of this press release, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.Contact:
Analysts/Institutional Investors: Aldis Birkans, Chief Financial Officer, (720) 554-6640, ir@nationalbankholdings.com
Media: Jody Soper, Chief Marketing Officer, (303) 784-5925, Jody.Soper@nbhbank.com
NATIONAL BANK HOLDINGS CORPORATION
FINANCIAL SUMMARY
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