National Bank Holdings Corporation Announces Record Third Quarter 2019 Financial Results

Tuesday, 22. October 2019 22:10

DENVER, Oct. 22, 2019 (GLOBE NEWSWIRE) -- National Bank Holdings Corporation (NYSE: NBHC) reported: 

         
 For the quarter
 3Q19 2Q19 3Q18
Net income ($000's)$ 21,642  $ 20,282  $ 18,240 
Earnings per share - diluted$ 0.69  $ 0.64  $ 0.58 
Return on average tangible assets(1) 1.51%  1.44%  1.35%
Return on average tangible common equity(1) 13.68%  13.45%  13.39%

                                                      

(1) Quarterly ratios are annualized.

In announcing these results, Chief Executive Officer Tim Laney shared, “Our team delivered another record quarter with earnings of $0.69 per share. Annualized year to date loans grew 10.7% and average non-interest bearing demand deposits grew 12.9% annualized during the quarter. We realized record fee income with strong performance from our residential banking and consumer banking groups. We also remain very focused on expense management, and we believe we are setting ourselves up to realize additional efficiencies as we look ahead to 2020.”

Mr. Laney added, “We have entered the fourth quarter with momentum and strong capital that positions us well for future growth. We have a proven track record of executing on our strategies, and we will continue to prudently deploy our capital in order to create value for our clients and shareholders.”

Third Quarter 2019 Results
(All comparisons refer to the second quarter of 2019, except as noted)

Net income totaled a record $21.6 million during the third quarter of 2019, or $0.69 per diluted share, compared to $20.3 million during the last quarter, or $0.64 per diluted share. The return on average tangible assets increased seven basis points to 1.51% and the return on average tangible common equity increased 23 basis points to 13.68%.

Net Interest Income
Fully taxable equivalent net interest income totaled $53.0 million and decreased $0.7 million, or 5.4% annualized, driven by lower earning asset yields. Fully taxable equivalent net interest margin narrowed nine basis points from the prior quarter to 3.91%, entirely driven by the two 25 basis point fed funds rate cuts. The yield on earnings assets decreased 12 basis points and was slightly offset by a one basis point decrease in the cost of funds.

Loans
Originated loans and acquired loans not accounted for under 310-30 (“acquired loans”) ended the quarter at $4.3 billion, increasing $75.0 million, or 7.0% annualized, led by originated and acquired commercial loan growth of $69.1 million, or 9.6% annualized. Total third quarter loan originations were $319.2 million, led by commercial loan originations of $187.3 million.

Acquired loans accounted for under 310-30 totaled $57.2 million at September 30, 2019 and decreased $3.4 million from the second quarter of 2019.

Asset Quality and Provision for Loan Losses
Provision for loan losses of $5.7 million was recorded during the quarter to support originated loan growth and net charge-offs, and included $4.2 million for one previously identified acquired commercial loan that was placed on non-accrual last quarter. Net charge-offs for the quarter totaled $7.1 million, of which $6.6 million was related to the loan described above. Annualized net charge-offs on originated and acquired loans totaled 0.66%, increasing from 0.02% in the prior quarter, driven by the acquired commercial loan charge-off. Non-performing originated and acquired loans (comprised of non-accrual loans and non-accrual TDRs) improved to 0.58% of total originated and acquired loans, compared to 0.79% at June 30, 2019. The originated and acquired allowance for loan losses was 0.89% of originated and acquired loans, compared to 0.93% in the prior quarter.

Deposits
Average non-interest bearing demand deposits increased $37.6 million, or 12.9% annualized. Average transaction deposits (defined as total deposits less time deposits) increased $46.4 million, or 5.1% annualized, and average total deposits increased $35.5 million to $4.7 billion, or 3.0% annualized. The cost of transaction deposits totaled 0.39%, a decrease of one basis point from the prior quarter. The cost of total deposits totaled 0.67%, an increase of one basis point from the prior quarter and 20 basis points over the third quarter of last year. The mix of transaction deposits to total deposits improved to 77.5% compared to 76.9% at June 30, 2019, and the mix of non-interest bearing demand deposits to total deposits improved to 26.1% compared to 24.9% at June 30, 2019.

Non-Interest Income
Non-interest income totaled $24.8 million and increased $4.1 million primarily due to higher mortgage banking income of $4.3 million, driven by higher levels of 1-4 family mortgage loans sold in the secondary market. Service charges and bank card fees remained consistent and other non-interest income decreased $0.2 million.

Non-Interest Expense
Non-interest expense totaled $43.8 million and decreased $2.7 million from the prior quarter, primarily driven by gains on the sale of OREO properties totaling $6.5 million, partially offset by higher residential banking commissions.

As part of our continued focus on improving operating efficiencies and investing in digital solutions for our clients, we will consolidate four banking centers in our Colorado and Kansas City markets during the fourth quarter of 2019. A fair value impairment charge of $0.9 million was recorded to other non-interest expense during the third quarter of 2019 related to the planned consolidations, with an expected earn back of less than one year.

Income tax expense totaled $5.4 million during the third quarter of 2019, compared to $3.2 million during the prior quarter. Included in income tax expense during the second quarter of 2019 was $1.3 million of tax benefit from stock compensation activity. The effective tax rate for the third quarter of 2019 was 20.0%, compared to 19.4% during the second quarter of 2019, adjusting for the stock compensation activity. The lower rate compared to the statutory rate reflects the continued success of our tax strategies and tax exempt income.

Capital
Capital ratios continue to be strong and in excess of federal bank regulatory agency “well capitalized” thresholds. The leverage ratio at September 30, 2019 for the consolidated company and NBH Bank was 10.89% and 8.84%, respectively. Shareholders’ equity totaled $753.3 million at September 30, 2019 and increased $19.4 million from the prior quarter. The increase in shareholders’ equity was primarily due to higher retained earnings and accumulated other comprehensive income, driven by the fair market value fluctuations of the available-for-sale investment securities portfolio.

Common book value per share increased $0.60 to $24.17 at September 30, 2019. The tangible common book value per share was $20.45 at September 30, 2019 and increased $0.62 due to the higher retained earnings and accumulated other comprehensive income. Excluding accumulated other comprehensive income, the tangible book value was $20.35.

Year-Over-Year Review
(All comparisons refer to the first nine months of 2018, except as noted)

Fully taxable equivalent net interest income totaled $159.2 million and increased $9.1 million, or 6.1%. Average earning assets increased $220.0 million, or 4.3%, primarily driven by originated loan growth of $698.5 million. The fully taxable equivalent net interest margin widened six basis points to 3.98%. The yield on earning assets increased 32 basis points, led by a 41 basis point increase in the originated loan portfolio yields due to higher new loan yields, and was partially offset by an increase in the cost of funds of 37 basis points from 0.59% to 0.96%.

Originated and acquired loans outstanding totaled $4.3 billion and increased $514.3 million, or 13.4%, led by originated and acquired commercial loan growth of $512.4 million, or 21.2%. New loan originations over the trailing 12 months totaled $1.3 billion, led by commercial loan originations of $869.0 million. The 310-30 loan portfolio declined $17.7 million, or 23.7%, to $57.2 million at September 30, 2019.

Average non-interest bearing demand deposits increased $78.1 million, or 7.3%. Average transaction deposits increased $85.0 million, or 2.4%, and average total deposits increased $19.5 million, or 0.4%, to $4.7 billion. Spot transaction deposits increased $172.2 million to $3.7 billion at September 30, 2019, improving the mix of transaction deposits to total deposits to 77.5% from 75.7% at September 30, 2018. The mix of non-interest bearing demand deposits to total deposits improved to 26.1% from 23.6% at September 30, 2018.

Provision for loan loss expense was $10.5 million, compared to $2.7 million during the first nine months of 2018. Provision for loan loss expense during the first nine months of 2019 included $6.6 million related to one previously acquired commercial loan. Annualized net charge-offs on originated and acquired loans totaled 0.24%, compared to 0.00% during the first nine months of 2018, increasing due to the acquired commercial loan charge-off. Non-performing originated and acquired loans decreased to 0.58% from 0.64% at September 30, 2018. The originated and acquired allowance for loan losses totaled 0.89% of originated and acquired loans compared to 0.88% at September 30, 2018.

Non-interest income totaled $62.5 million during the first nine months of 2019, representing an increase of $7.0 million, or 12.6%, from last year. Mortgage banking income increased $7.3 million, or 29.7%, service charges and bank card fees increased a combined $0.2 million and other non-interest income increased $0.2 million. These increases were partially offset by a $0.8 million decrease in income on OREO properties during the period.

Non-interest expense totaled $134.6 million during the first nine months of 2019, representing a decrease of $11.8 million, driven by $7.2 million of net gains on the sale of OREO properties recorded during the period and efficiencies gained from the integration of the Peoples acquisition. Additionally, included in the prior period were $8.0 million of non-recurring acquisition costs. Other non-interest expense during the first nine months of 2019 included $0.9 million of expense related to the consolidations of four banking centers.

Income tax expense totaled $12.0 million during the first nine months of 2019, compared to $8.8 million last year, an increase of $3.2 million. Included in income tax expense was $2.2 million and $1.3 million of tax benefit from stock compensation activity during the first nine months of 2019 and 2018, respectively. Adjusting for the stock compensation activity, the effective tax rate for the first nine months of 2019 was 19.4%, compared to 19.1% in the prior period.

Conference Call
Management will host a conference call to review the results at 11:00 a.m. Eastern Time on Wednesday, October 23, 2019. Interested parties may listen to this call by dialing (877) 272-6762 / (615) 800-6832 (International) using the Conference ID of 6784839 and asking for the NBHC Third Quarter Earnings conference call. A telephonic replay of the call will be available beginning approximately five hours after the call’s completion through November 5, 2019, by dialing (855) 859-2056 (United States) / (404) 537-3406 (International) using the Conference ID of 6784839. 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 shareholder results. Through its bank subsidiary, NBH Bank, National Bank Holdings Corporation operates a network of 105 banking centers, serving individual consumers, small, medium and large businesses, and government and non-profit entities. The bank’s core geographic footprint consists of Colorado, the greater Kansas City region, New Mexico, Texas and Utah. NBH Bank operates under the following brand names: Community Banks of Colorado in Colorado, Bank Midwest in Kansas and Missouri and Hillcrest Bank in New Mexico, Texas and Utah. It also operates as Community Banks Mortgage, a division of NBH Bank, in Colorado. Additional information about National Bank Holdings Corporation can be found at www.nationalbankholdings.com

For more information visit: cobnks.com, bankmw.com, hillcrestbank.com or nbhbank.com. Or, follow us on any of our social media sites:
Community Banks of Colorado: facebook.com/cobnks, twitter.com/cobnks, instagram.com/cobnks;
Bank Midwest: facebook.com/bankmw, twitter.com/bank_mw, instagram.com/bankmw;
Hillcrest Bank: facebook.com/hillcrestbank, twitter.com/hillcrest_bank;
NBH Bank: twitter.com/nbhbank;
or connect with any of our brands on LinkedIn.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contain words such as “anticipate,” “believe,” “can,” “would,” “should,” “could,” “may,” “predict,” “seek,” “potential,” “will,” “estimate,” “target,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “intend” or similar expressions that relate to the Company’s strategy, plans or intentions. Forward-looking statements involve certain important risks, uncertainties and other factors, any of which could cause actual results to differ materially from those in such statements. Such factors include, without limitation, the “Risk Factors” referenced in our most recent Form 10-K filed with the Securities and Exchange Commission (SEC), other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, and the following factors: ability to execute our business strategy; business and economic conditions; effects of a prolonged government shutdown; economic, market, operational, liquidity, credit and interest rate risks associated with the Company’s business; effects of any changes in trade, monetary and fiscal policies and laws; changes imposed by regulatory agencies to increase capital standards; effects of inflation, as well as, interest rate, securities market and monetary supply fluctuations; changes in the economy or supply-demand imbalances affecting local real estate values; changes in consumer spending, borrowings and savings habits; the Company’s ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions, consolidations and other expansion opportunities; the Company's ability to realize anticipated benefits from enhancements or updates to its core operating systems from time to time without significant change in client service or risk to the Company's control environment; the Company's dependence on information technology and telecommunications systems of third party service providers and the risk of systems failures, interruptions or breaches of security; the Company’s ability to achieve organic loan and deposit growth and the composition of such growth; changes in sources and uses of funds; increased competition in the financial services industry; the effect of changes in accounting policies and practices; the share price of the Company’s stock; the Company's ability to realize deferred tax assets or the need for a valuation allowance; continued consolidation in the financial services industry; ability to maintain or increase market share and control expenses; costs and effects of changes in laws and regulations and of other legal and regulatory developments; technological changes; the timely development and acceptance of new products and services; the Company’s continued ability to attract, hire and maintain qualified personnel; ability to implement and/or improve operational management and other internal risk controls and processes and reporting system and procedures; regulatory limitations on dividends from the Company's bank subsidiary; changes in estimates of future loan reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; widespread natural and other disasters, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; impact of reputational risk; and success at managing the risks involved in the foregoing items. The Company can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of this press release, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.

Contact:
Analysts/Institutional Investors: Aldis Birkans, Chief Financial Officer, Treasurer, (720) 529-3314, ir@nationalbankholdings.com
Media: Whitney Bartelli, Chief Marketing Officer, (816) 298-2203, media@nbhbank.com

NATIONAL BANK HOLDINGS CORPORATION
FINANCIAL SUMMARY
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except share and per share data)

               
 For the three months ended  For the nine months ended
 September 30,  June 30,  September 30,  September 30,  September 30, 
 2019
 2019  2018  2019
 2018 
Total interest and dividend income$ 61,372  $ 62,193  $ 55,909  $ 182,985  $ 163,611 
Total interest expense  9,587    9,702    6,137    27,543    16,806 
Net interest income  51,785    52,491    49,772    155,442    146,805 
Taxable equivalent adjustment  1,264    1,285    1,126    3,775    3,288 
Net interest income FTE(1)  53,049    53,776    50,898    159,217    150,093 
Provision for loan losses  5,690    3,239    807    10,463    2,721 
Net interest income after provision for loan losses FTE(1)  47,359    50,537    50,091    148,754    147,372 
Non-interest income:              
Service charges  4,617    4,541    4,592    13,479    13,473 
Bank card fees  3,752    3,766    3,686    10,946    10,720 
Mortgage banking income  14,702    10,398    7,819    32,037    24,701 
Other non-interest income  1,661    1,896    1,892    5,861    5,651 
OREO related income  27    59    72    147    913 
Total non-interest income  24,759    20,660    18,061    62,470    55,458 
Non-interest expense:              
Salaries and benefits  33,522    30,667    28,127    92,079    87,910 
Occupancy and equipment  6,825    6,721    6,925    20,428    22,070 
Professional fees  743    1,041    1,117    2,598    4,686 
Other non-interest expense  8,320    7,319    7,537    23,396    28,159 
Problem asset workout  602    725    665    2,450    2,221 
Gain on sale of OREO, net  (6,514)   (318)   (450)   (7,200)   (386)
Core deposit intangible asset amortization  295    296    511    887    1,817 
Total non-interest expense  43,793    46,451    44,432    134,638    146,477 
               
Income before income taxes FTE(1)  28,325    24,746    23,720    76,586    56,353 
Taxable equivalent adjustment  1,264    1,285    1,126    3,775    3,288 
Income before income taxes  27,061    23,461    22,594    72,811    53,065 
Income tax expense  5,419    3,179    4,354    11,965    8,849 
Net income$ 21,642  $ 20,282  $ 18,240  $ 60,846  $ 44,216 
Earnings per share - basic$ 0.69  $ 0.65  $ 0.59  $ 1.95  $ 1.44 
Earnings per share - diluted$ 0.69  $ 0.64  $ 0.58  $ 1.93  $ 1.41 

                                                      

(1) Net interest income is presented on a GAAP basis and fully taxable equivalent (FTE) basis, as the Company believes this non-GAAP measure is the preferred industry measurement for this item. The FTE adjustment is for the tax benefit on certain tax exempt loans using the federal tax rate of 21% for each period presented. See non-GAAP reconciliations below.

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

            
 September 30, 2019 June 30, 2019 December 31, 2018 September 30, 2018
ASSETS           
Cash and cash equivalents$ 116,919  $ 91,159  $ 109,556  $ 111,459 
Investment securities available-for-sale  661,129    710,206    791,102    796,549 
Investment securities held-to-maturity  189,982    206,361    235,398    249,464 
Non-marketable securities  27,277    30,726    27,555    16,975 
Loans  4,401,917    4,330,263    4,092,308    3,905,311 
Allowance for loan losses  (38,710)   (40,082)   (35,692)   (33,813)
Loans, net  4,363,207    4,290,181    4,056,616    3,871,498 
Loans held for sale  204,602    105,866    48,120    80,506 
Other real estate owned  7,904    7,054    10,596    35,135 
Premises and equipment, net  110,692    111,171    109,986    110,824 
Goodwill  115,027    115,027    115,027    115,027 
Intangible assets, net  11,578    12,267    13,470    13,937 
Other assets  181,733    177,984    159,240    183,730 
Total assets$ 5,990,050  $ 5,858,002  $ 5,676,666  $ 5,585,104 
LIABILITIES AND SHAREHOLDERS' EQUITY           
Liabilities:           
Non-interest bearing demand deposits$ 1,237,189  $ 1,167,399  $ 1,072,029  $ 1,089,631 
Interest bearing demand deposits  681,113    691,527    688,255    675,213 
Savings and money market  1,748,257    1,747,434    1,694,808    1,729,563 
Total transaction deposits  3,666,559    3,606,360    3,455,092    3,494,407 
Time deposits  1,067,301    1,081,637    1,080,529    1,119,625 
Total deposits  4,733,860    4,687,997    4,535,621    4,614,032 
Securities sold under agreements to repurchase  62,735    60,430    66,047    55,695 
Federal Home Loan Bank advances  303,897    272,414    301,660    144,540 
Other liabilities  136,232    103,244    78,332    97,772 
Total liabilities  5,236,724    5,124,085    4,981,660    4,912,039 
Shareholders' equity:           
Common stock  515    515    515    515 
Additional paid in capital  1,007,628    1,006,008    1,014,399    1,013,314 
Retained earnings  150,866    135,210    106,990    95,055 
Treasury stock  (408,770)   (409,322)   (415,623)   (415,605)
Accumulated other comprehensive income (loss), net of tax  3,087    1,506    (11,275)   (20,214)
Total shareholders' equity  753,326    733,917    695,006    673,065 
Total liabilities and shareholders' equity$ 5,990,050  $ 5,858,002  $ 5,676,666  $ 5,585,104 
SHARE DATA           
Average basic shares outstanding  31,281,970    31,155,264    30,888,238    30,869,683 
Average diluted shares outstanding  31,508,999    31,604,658    31,492,342    31,540,716 
Ending shares outstanding  31,169,086    31,139,044    30,769,063    30,759,595 
Common book value per share$ 24.17  $ 23.57  $ 22.59  $ 21.88 
Tangible common book value per share(1) (non-GAAP)$ 20.45  $ 19.83  $ 18.77  $ 18.04 
Tangible common book value per share, excluding accumulated other comprehensive income(1) (non-GAAP)$ 20.35  $ 19.78  $ 19.13  $ 18.70 
CAPITAL RATIOS           
Average equity to average assets 12.79%  12.46%  12.15%  12.02%
Tangible common equity to tangible assets(1) 10.85%  10.75%  10.39%  10.15%
Leverage ratio 10.89%  10.60%  10.51%  10.31%
Tier 1 risk-based capital ratio 12.93%  12.87%  12.91%  12.87%
Total risk-based capital ratio 13.79%  13.78%  13.79%  13.75%

                                                      

(1) Represents a non-GAAP financial measure. See non-GAAP reconciliations below.

NATIONAL BANK HOLDINGS CORPORATION
Loan Portfolio
(Dollars in thousands)

Period End Loan Balances by Type

             
     September 30, 2019   September 30, 2019
     vs. June 30, 2019    vs. September 30, 2018
 September 30, 2019 June 30, 2019 % Change September 30, 2018 % Change
Originated:            
Commercial:            
Commercial and industrial$ 2,167,076 $ 2,079,812 4.2% $ 1,693,456 28.0%
Owner-occupied commercial real estate  378,956   379,462 (0.1)%   313,711 20.8%
Food and agriculture  230,869   236,865 (2.5)%   207,990 11.0%
Energy  46,302   43,242 7.1%   42,620 8.6%
Total commercial  2,823,203   2,739,381 3.1%   2,257,777 25.0%
Commercial real estate non-owner occupied  501,771   459,242 9.3%   407,786 23.0%
Residential real estate  659,246   660,657 (0.2)%   635,360 3.8%
Consumer  21,378   21,731 (1.6)%   24,246 (11.8)%
Total originated  4,005,598   3,881,011 3.2%   3,325,169 20.5%
             
Acquired:            
Commercial:            
Commercial and industrial  37,613   44,550 (15.6)%   61,150 (38.5)%
Owner-occupied commercial real estate  67,673   75,106 (9.9)%   94,990 (28.8)%
Food and agriculture  3,716   4,080 (8.9)%   5,916 (37.2)%
Total commercial  109,002   123,736 (11.9)%   162,056 (32.7)%
Commercial real estate non-owner occupied  104,949   125,021 (16.1)%   161,615 (35.1)%
Residential real estate  124,354   138,909 (10.5)%   179,146 (30.6)%
Consumer  815   994 (18.0)%   2,404 (66.1)%
Total acquired  339,120   388,660 (12.7)%   505,221 (32.9)%
             
ASC 310-30 loans  57,199   60,592 (5.6)%   74,921 (23.7)%
Total loans$ 4,401,917 $ 4,330,263 1.7% $ 3,905,311 12.7%

Originated and Acquired Loan Balances by Loan Segment

             
     September 30, 2019    September 30, 2019
     vs. June 30, 2019     vs. September 30, 2018
 September 30, 2019 June 30, 2019 % Change September 30, 2018 % Change
Commercial$ 2,932,205 $ 2,863,117 2.4% $ 2,419,833 21.2%
Commercial real estate non-owner occupied  606,720   584,263 3.8%   569,401 6.6%
Residential real estate  783,600   799,566 (2.0)%   814,506 (3.8)%
Consumer  22,193   22,725 (2.3)%   26,650 (16.7)%
Total originated and acquired loans$ 4,344,718 $ 4,269,671 1.8% $ 3,830,390 13.4%

Originations(1)

               
 Third quarter Second quarter First quarter Fourth quarter Third quarter
 2019 2019 2019 2018 2018
Commercial:              
Commercial and industrial$ 172,969  $ 163,138  $ 153,547 $ 213,335 $ 123,440
Owner occupied commercial real estate  16,149    41,380    26,405   34,727   35,549
Food and agriculture  (4,894)   18,217    15,213   14,046   23,833
Energy  3,067    (12,098)   6,138   7,640   5,412
Total commercial  187,291    210,637    201,303   269,748   188,234
Commercial real estate non-owner occupied  79,929    36,632    69,125   41,031   42,300
Residential real estate  49,022    40,012    38,627   51,017   40,293
Consumer  2,986    3,264    1,958   2,592   3,797
Total$ 319,228  $ 290,545  $ 311,013 $ 364,388 $ 274,624

                                                      

(1) Originations are defined as closed end funded loans and net fundings under revolving lines of credit. Net funding under revolving lines of credit were $37,062, $48,955, $105,235, $6,263 and $34,070 as of the third quarter 2019, second quarter 2019, first quarter 2019, fourth quarter 2018 and third quarter 2018, respectively.

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

                            
  For the three months ended  For the three months ended For the three months ended
  September 30, 2019 June 30, 2019 September 30, 2018
  Average    Average Average    Average Average    Average
  balance Interest rate balance Interest rate balance Interest rate
Interest earning assets:                           
Originated loans FTE(1)(2) $ 3,886,503  $ 46,736  4.77% $ 3,821,981  $ 46,728  4.90% $ 3,215,369  $ 36,496  4.50%
Acquired loans   366,522    5,656  6.12%   406,232    6,325  6.25%   533,261    7,891  5.87%
ASC 310-30 loans   58,557    3,251  22.21%   61,750    3,294  21.34%   80,629    4,785  23.74%
Loans held for sale   139,281    1,328  3.78%   87,222    934  4.30%   99,933    1,134  4.50%
Investment securities available-for-sale   687,989    3,696  2.15%   738,970    4,002  2.17%   858,469    4,482  2.09%
Investment securities held-to-maturity   199,519    1,384  2.77%   215,497    1,533  2.85%   259,169    1,807  2.79%
Other securities   27,227    418  6.14%   28,425    458  6.45%   18,048    269  5.96%
Interest earning deposits and securities purchased under agreements to resell   19,809    167  3.34%   27,079    204  3.02%   39,259    171  1.73%
Total interest earning assets FTE(2) $ 5,385,407  $ 62,636  4.61% $ 5,387,156  $ 63,478  4.73% $ 5,104,137  $ 57,035  4.43%
Cash and due from banks $ 76,866        $ 75,780        $ 80,334       
Other assets   443,724          419,368          424,873       
Allowance for loan losses   (40,212)         (37,743)         (33,024)      
Total assets $ 5,865,785        $ 5,844,561        $ 5,576,320       
Interest bearing liabilities:                           
Interest bearing demand, savings and money market deposits $ 2,438,399  $ 3,609  0.59% $ 2,429,686  $ 3,559  0.59% $ 2,411,875  $ 2,269  0.37%
Time deposits   1,073,140    4,365  1.61%   1,084,011    4,090  1.51%   1,126,377    3,183  1.12%
Securities sold under agreements to repurchase   65,722    204  1.23%   57,571    162  1.13%   59,214    51  0.34%
Federal Home Loan Bank advances   231,926    1,409  2.41%   294,524    1,891  2.58%   129,542    634  1.94%
Total interest bearing liabilities $ 3,809,187  $ 9,587  1.00% $ 3,865,792  $ 9,702  1.01% $ 3,727,008  $ 6,137  0.65%
Demand deposits $ 1,193,357        $ 1,155,710        $ 1,096,780       
Other liabilities   112,927          94,968          82,017       
Total liabilities   5,115,471          5,116,470          4,905,805       
Shareholders' equity   750,314          728,091          670,515       
Total liabilities and shareholders' equity $ 5,865,785        $ 5,844,561        $ 5,576,320       
Net interest income FTE(2)    $ 53,049       $ 53,776       $ 50,898   
Interest rate spread FTE(2)        3.61%        3.72%        3.78%
Net interest earning assets $ 1,576,220        $ 1,521,364        $ 1,377,129       
Net interest margin FTE(2)        3.91%        4.00%        3.96%
Average transaction deposits $ 3,631,756        $ 3,585,396        $ 3,508,655       
Average total deposits $ 4,704,896        $ 4,669,407        $ 4,635,032       
Ratio of average interest earning assets to average interest bearing liabilities  141.38%        139.35%        136.95%      

                                                      

(1) Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.
(2) Presented on a fully taxable equivalent basis using the statutory tax rate of 21%. The tax equivalent adjustments included above are $1,264, $1,285 and $1,126 for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively.

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

                
 For the nine months ended September 30, 2019 For the nine months ended September 30, 2018
 Average    Average Average    Average
 balance Interest rate balance Interest rate
Interest earning assets:               
Originated loans FTE(1)(2)$ 3,782,765  $ 137,036 4.84% $ 3,084,274  $ 102,115 4.43%
Acquired loans  403,446    18,235 6.04%   589,291    25,508 5.79%
ASC 310-30 loans  61,719    10,232 22.10%   96,904    15,009 20.65%
Loans held for sale  90,143    2,750 4.08%   79,350    2,650 4.47%
Investment securities available-for-sale  737,744    12,059 2.18%   903,039    14,097 2.08%
Investment securities held-to-maturity  214,696    4,568 2.84%   263,995    5,528 2.79%
Other securities  27,513    1,299 6.30%   16,959    761 5.98%
Interest earning deposits and securities purchased under agreements to resell  26,468    581 2.93%   90,726    1,231 1.81%
Total interest earning assets FTE(2)$ 5,344,494  $ 186,760 4.67% $ 5,124,538  $ 166,899 4.35%
Cash and due from banks$ 76,863       $ 91,914      
Other assets  424,271         418,753      
Allowance for loan losses  (37,939)        (32,026)     
Total assets$ 5,807,689       $ 5,603,179      
Interest bearing liabilities:               
Interest bearing demand, savings and money market deposits$ 2,426,136  $ 10,176 0.56% $ 2,419,235  $ 6,042 0.33%
Time deposits  1,078,549    12,062 1.50%   1,144,051    8,908 1.04%
Securities sold under agreements to repurchase  61,313    519 1.13%   94,938    137 0.19%
Federal Home Loan Bank advances  258,348    4,786 2.48%   125,745    1,719 1.83%
Total interest bearing liabilities$ 3,824,346  $ 27,543 0.96% $ 3,783,969  $ 16,806 0.59%
Demand deposits$ 1,152,718       $ 1,074,659      
Other liabilities  101,724         88,974      
Total liabilities  5,078,788         4,947,602      
Shareholders' equity  728,901         655,577      
Total liabilities and shareholders' equity$ 5,807,689       $ 5,603,179      
Net interest income FTE(2)   $ 159,217      $ 150,093  
Interest rate spread FTE(2)      3.71%       3.76%
Net interest earning assets$ 1,520,148       $ 1,340,569      
Net interest margin FTE(2)      3.98%       3.92%
Average transaction deposits$ 3,578,854       $ 3,493,894      
Average total deposits$ 4,657,403       $ 4,637,945      
Ratio of average interest earning assets to average interest bearing liabilities 139.75%       135.43%     

                                                      

(1) Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.
(2) Presented on a fully taxable equivalent basis using the statutory tax rate of 21%. The tax equivalent adjustments included above are $3,775 and $3,288 for the nine months ended September 30, 2019 and September 30, 2018, respectively.

NATIONAL BANK HOLDINGS CORPORATION
Allowance for Loan Losses and Asset Quality
(Dollars in thousands)

Allowance for Loan Losses Analysis

                           
 As of and for the three months ended
 September 30, 2019 June 30, 2019 September 30, 2018
 Originated ASC   Originated ASC   Originated ASC  
 and acquired 310-30   and acquired 310-30   and acquired 310-30  
 loans loans Total loans loans Total loans loans Total
Beginning allowance for loan losses$ 39,891  $ 191  $ 40,082  $ 36,840  $ 215  $ 37,055  $ 32,029  $ 201  $ 32,230 
Charge-offs  (7,101)   —    (7,101)   (294)   —    (294)   (393)   —    (393)
Recoveries  39    —    39    82    —    82    1,170    —    1,170 
Provision (recoupment)  5,701    (11)   5,690    3,263    (24)   3,239    800    6    806 
Ending ALL$ 38,530  $ 180  $ 38,710  $ 39,891  $ 191  $ 40,082  $ 33,606  $ 207  $ 33,813 
Ratio of annualized net charge-offs (recoveries) to average total loans during the period, respectively 0.66%  0.00%  0.65%  0.02%  0.00%  0.02%  (0.08)%  0.00%  (0.08)%
Ratio of ALL to total loans outstanding at period end, respectively 0.89%  0.31%  0.88%  0.93%  0.32%  0.93%  0.88%  0.28%  0.87%
Ratio of ALL to total non-performing loans at period end, respectively(1) 151.70%  0.00%  152.41%  118.36%  0.00%  118.93%  137.40%  0.00%  138.25%
Total loans$ 4,344,718  $ 57,199  $ 4,401,917  $ 4,269,671  $ 60,592  $ 4,330,263  $ 3,830,390  $ 74,921  $ 3,905,311 
Average total loans during the period$ 4,271,033  $ 58,557  $ 4,329,590  $ 4,228,213  $ 61,750  $ 4,289,963  $ 3,748,630  $ 80,629  $ 3,829,259 
Total non-performing loans(1)$ 25,398  $ —  $ 25,398  $ 33,703  $ —  $ 33,703  $ 24,458  $ —  $ 24,458 

                                                     

(1) Loans accounted for under ASC 310-30 may be considered performing, regardless of past due status, if the timing and expected cash flows on these loans can be reasonably estimated and if collection of the new carrying value is expected.

Originated and Acquired Loans

         
 September 30, 2019 June 30, 2019 September 30, 2018
Loans 30-89 days past due and still accruing interest$ 6,723  $ 11,067  $ 7,915 
Loans 90 days past due and still accruing interest  1,968    34    560 
Non-accrual loans  25,398    33,703    24,458 
Total past due and non-accrual loans$ 34,089  $ 44,804  $ 32,933 
Total 90 days past due and still accruing interest and non-accrual loans to total originated and acquired loans 0.63%  0.79%  0.65%
Total non-accrual loans to total originated and acquired loans 0.58%  0.79%  0.64%

NATIONAL BANK HOLDINGS CORPORATION
Asset Quality
(Dollars in thousands)

Asset Quality Data

         
 September 30, 2019 June 30, 2019 September 30, 2018
Non-performing loans$ 25,398  $ 33,703  $ 24,458 
OREO:        
Originated and acquired  3,656    2,618    5,293 
Transferred from 310-30 loans  4,248    4,436    29,842 
Total OREO  7,904    7,054    35,135 
Total non-performing assets$ 33,302  $ 40,757  $ 59,593 
Accruing restructured loans$ 7,384  $ 2,633  $ 7,770 
Total non-performing loans to total loans 0.58%  0.78%  0.63%
Total non-performing assets to total loans and OREO 0.76%  0.94%  1.51%
Total non-performing assets (excluding OREO transferred from 310-30 loans) to total loans and OREO (excluding OREO transferred from 310-30) 0.66%  0.84%  0.76%

NATIONAL BANK HOLDINGS CORPORATION
Key Ratios

          
 As of and for the three months ended  As of and for the nine months ended
 September 30,  June 30,  September 30,  September 30,  September 30, 
 2019 2019 2018 2019 2018
Key Ratios(1)         
Return on average assets1.46% 1.39% 1.30% 1.40% 1.06%
Return on average tangible assets(2)1.51% 1.44% 1.35% 1.45% 1.11%
Return on average tangible assets, adjusted(2)1.51% 1.44% 1.35% 1.45% 1.27%
Return on average equity11.44% 11.17% 10.79% 11.16% 9.02%
Return on average tangible common equity(2)13.68% 13.45% 13.39% 13.43% 11.36%
Return on average tangible common equity, adjusted(2)13.68% 13.45% 13.39% 13.43% 12.94%
Loan to deposit ratio (end of period)92.99% 92.37% 84.64% 92.99% 84.64%
Non-interest bearing deposits to total deposits (end of period)26.13% 24.90% 23.62% 26.13% 23.62%
Net interest margin(4)3.81% 3.91% 3.87% 3.89% 3.83%
Net interest margin FTE(2)(4)3.91% 4.00% 3.96% 3.98% 3.92%
Interest rate spread FTE(2)(5)3.61% 3.72% 3.78% 3.71% 3.76%
Yield on earning assets(3)4.52% 4.63% 4.35% 4.58% 4.27%
Yield on earning assets FTE(2)(3)4.61% 4.73% 4.43% 4.67% 4.35%
Cost of interest bearing liabilities(3)1.00% 1.01% 0.65% 0.96% 0.59%
Cost of deposits0.67% 0.66% 0.47% 0.64% 0.43%
Non-interest income to total revenue FTE(2)31.82% 27.76% 26.19% 28.18% 26.98%
Non-interest expense to average assets2.96% 3.19% 3.16% 3.10% 3.50%
Non-interest expense to average assets, adjusted(2)2.96% 3.19% 3.16% 3.10% 3.31%
Efficiency ratio56.83% 63.10% 64.75% 61.38% 71.52%
Efficiency ratio FTE(2)55.90% 62.01% 63.69% 60.33% 70.38%
Efficiency ratio FTE, adjusted for acquisition-related costs(2)55.90% 62.01% 63.69% 60.33% 66.51%
          
Originated and Acquired Loans Asset Quality Data(6)(7)(8)         
Non-performing loans to total originated and acquired loans0.58% 0.79% 0.64% 0.58% 0.64%
Allowance for loan losses to total originated and acquired loans0.89% 0.93% 0.88% 0.89% 0.88%
Allowance for loan losses to non-performing loans151.70% 118.36% 137.40% 151.70% 137.40%
Net charge-offs (recoveries) to average loans(1)0.66% 0.02% (0.08)% 0.24% 0.00%
          
Total Loans Asset Quality Data(6)(7)(8)         
Non-performing loans to total loans0.58% 0.78% 0.63% 0.58% 0.63%
Non-performing assets to total loans and OREO0.76% 0.94% 1.51% 0.76% 1.51%
Allowance for loan losses to total loans0.88% 0.93% 0.87% 0.88% 0.87%
Allowance for loan losses to non-performing loans152.41% 118.93% 138.25% 152.41% 138.25%
Net charge-offs (recoveries) to average loans(1)0.65% 0.02% (0.08)% 0.23% 0.01%

                                                      

(1)Quarter-to-date and year-to-date ratios are annualized.
(2)Ratio represents non-GAAP financial measure. See non-GAAP reconciliations below.
(3)Interest earning assets include assets that earn interest/accretion or dividends. Any market value adjustments on investment securities or loans are excluded from interest earning assets. Interest bearing liabilities include liabilities that must be paid interest.
(4)Net interest margin represents net interest income, including accretion income on interest earning assets, as a percentage of average interest earning assets.
(5)Interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average cost of interest bearing liabilities.
(6)Non-performing loans consist of non-accruing loans and restructured loans on non-accrual, 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.
(7)Non-performing assets include non-performing loans and other real estate owned.
(8)Total loans are net of unearned discounts and fees.

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

Tangible Common Book Value Ratios

            
 September 30, 2019 June 30, 2019 December 31, 2018 September 30, 2018
Total shareholders' equity$ 753,326  $ 733,917  $ 695,006  $ 673,065 
Less: goodwill and core deposit intangible assets, net  (124,054)   (124,350)   (124,941)   (125,294)
Add: deferred tax liability related to goodwill  8,012    7,784    7,327    7,098 
Tangible common equity (non-GAAP)$ 637,284  $ 617,351  $ 577,392  $ 554,869 
            
Total assets$ 5,990,050  $ 5,858,002  $ 5,676,666  $ 5,585,104 
Less: goodwill and core deposit intangible assets, net  (124,054)   (124,350)   (124,941)   (125,294)
Add: deferred tax liability related to goodwill  8,012    7,784    7,327    7,098 
Tangible assets (non-GAAP)$ 5,874,008  $ 5,741,436  $ 5,559,052  $ 5,466,908 
            
Tangible common equity to tangible assets calculations:           
Total shareholders' equity to total assets 12.58%  12.53%  12.24%  12.05%
Less: impact of goodwill and core deposit intangible assets, net (1.73)%  (1.78)%  (1.85)%  (1.90)%
Tangible common equity to tangible assets (non-GAAP) 10.85%  10.75%  10.39%  10.15%
            
Tangible common book value per share calculations:           
Tangible common equity (non-GAAP)$ 637,284  $ 617,351  $ 577,392  $ 554,869 
Divided by: ending shares outstanding  31,169,086    31,139,044    30,769,063    30,759,595 
Tangible common book value per share (non-GAAP)$ 20.45  $ 19.83  $ 18.77  $ 18.04 
            
Tangible common book value per share, excluding accumulated other comprehensive (income) loss calculations:           
Tangible common equity (non-GAAP)$ 637,284  $ 617,351  $ 577,392  $ 554,869 
Accumulated other comprehensive (income) loss, net of tax  (3,087)   (1,506)   11,275    20,214 
Tangible common book value, excluding accumulated other comprehensive (income) loss, net of tax (non-GAAP)  634,197    615,845    588,667    575,083 
Divided by: ending shares outstanding  31,169,086    31,139,044    30,769,063    30,759,595 
Tangible common book value per share, excluding accumulated other comprehensive (income) loss, net of tax (non-GAAP)$ 20.35  $ 19.78  $ 19.13  $ 18.70 

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

Return on Average Tangible Assets and Return on Average Tangible Equity

               
 As of and for the three months ended As of and for the nine months ended
 September 30,  June 30,  September 30,  September 30,  September 30, 
 2019 2019 2018 2019 2018
Net income$ 21,642  $ 20,282  $ 18,240  $ 60,846  $ 44,216 
Add: impact of core deposit intangible amortization expense, after tax  224    225    388    674    1,381 
Net income adjusted for impact of core deposit intangible amortization expense, after tax$ 21,866  $ 20,507  $ 18,628  $ 61,520  $ 45,597 
               
Average assets$ 5,865,785  $ 5,844,561  $ 5,576,320  $ 5,807,689  $ 5,603,179 
Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill  (116,188)   (116,712)   (118,435)   (116,481)   (119,040)
Average tangible assets (non-GAAP)$ 5,749,597  $ 5,727,849  $ 5,457,885  $ 5,691,208  $ 5,484,139 
               
Average shareholders' equity$ 750,314  $ 728,091  $ 670,515  $ 728,901  $ 655,577 
Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill  (116,188)   (116,712)   (118,435)   (116,481)   (119,040)
Average tangible common equity (non-GAAP)$ 634,126  $ 611,379  $ 552,080  $ 612,420  $ 536,537 
               
Return on average assets 1.46%  1.39%  1.30%  1.40%  1.06%
Return on average tangible assets (non-GAAP) 1.51%  1.44%  1.35%  1.45%  1.11%
Return on average equity 11.44%  11.17%  10.79%  11.16%  9.02%
Return on average tangible common equity (non-GAAP) 13.68%  13.45%  13.39%  13.43%  11.36%

Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin

               
 As of and for the three months ended As of and for the nine months ended
 September 30,  June 30,  September 30,  September 30,  September 30, 
 2019 2019 2018 2019 2018
Interest income$ 61,372  $ 62,193  $ 55,909  $ 182,985  $ 163,611 
Add: impact of taxable equivalent adjustment  1,264    1,285    1,126    3,775    3,288 
Interest income FTE (non-GAAP)$ 62,636  $ 63,478  $ 57,035  $ 186,760  $ 166,899 
               
Net interest income$ 51,785  $ 52,491  $ 49,772  $ 155,442  $ 146,805 
Add: impact of taxable equivalent adjustment  1,264    1,285    1,126    3,775    3,288 
Net interest income FTE (non-GAAP)$ 53,049  $ 53,776  $ 50,898  $ 159,217  $ 150,093 
               
Average earning assets$ 5,385,407  $ 5,387,156  $ 5,104,137  $ 5,344,494  $ 5,124,538 
Yield on earning assets 4.52%  4.63%  4.35%  4.58%  4.27%
Yield on earning assets FTE (non-GAAP) 4.61%  4.73%  4.43%  4.67%  4.35%
Net interest margin 3.81%  3.91%  3.87%  3.89%  3.83%
Net interest margin FTE (non-GAAP) 3.91%  4.00%  3.96%  3.98%  3.92%

Efficiency Ratio

               
 As of and for the three months ended As of and for the nine months ended
 September 30,  June 30,  September 30,  September 30,  September 30, 
 2019 2019 2018 2019 2018
Net interest income$ 51,785  $ 52,491  $ 49,772  $ 155,442  $ 146,805 
Add: impact of taxable equivalent adjustment  1,264    1,285    1,126    3,775    3,288 
Net interest income, FTE (non-GAAP)$ 53,049  $ 53,776  $ 50,898  $ 159,217  $ 150,093 
               
Non-interest income$ 24,759  $ 20,660  $ 18,061  $ 62,470  $ 55,458 
               
Non-interest expense$ 43,793  $ 46,451  $ 44,432  $ 134,638  $ 146,477 
Less: core deposit intangible asset amortization  (295)   (296)   (511)   (887)   (1,817)
Non-interest expense, adjusted for core deposit intangible asset amortization$ 43,498  $ 46,155  $ 43,921  $ 133,751  $ 144,660 
               
Non-interest expense, adjusted for core deposit intangible asset amortization$ 43,498  $ 46,155  $ 43,921  $ 133,751  $ 144,660 
Non-recurring Peoples acquisition-related expenses  —    —    —    —    (7,957)
Adjusted non-interest expense (non-GAAP)$ 43,498  $ 46,155  $ 43,921  $ 133,751  $ 136,703 
               
Efficiency ratio 56.83%  63.10%  64.75%  61.38%  71.52%
Efficiency ratio FTE (non-GAAP) 55.90%  62.01%  63.69%  60.33%  70.38%
Adjusted efficiency ratio FTE (non-GAAP) 55.90%  62.01%  63.69%  60.33%  66.51%

Adjusted Financial Results

               
 As of and for the three months ended  As of and for the nine months ended
 September 30,  June 30,  September 30,  September 30,  September 30, 
 2019 2019 2018 2019 2018
Adjustments to net income:              
Net income$ 21,642  $ 20,282  $ 18,240  $ 60,846  $ 44,216 
Adjustments(1)  —    —    —    —    6,321 
Adjusted net income (non-GAAP)$ 21,642  $ 20,282  $ 18,240  $ 60,846  $ 50,537 
               
Adjustments to income per share:              
Earnings per share - diluted$ 0.69  $ 0.64  $ 0.58  $ 1.93  $ 1.41 
Adjustments(1)  —    —    —    —    0.20 
Adjusted earnings per share - diluted (non-GAAP)$ 0.69  $ 0.64  $ 0.58  $ 1.93  $ 1.61 
               
Adjustments to return on average tangible assets:              
Adjusted net income (non-GAAP)$ 21,642  $ 20,282  $ 18,240  $ 60,846  $ 50,537 
Add: impact of core deposit intangible amortization expense, after tax  224    225    388    674    1,381 
Net income adjusted for impact of core deposit intangible amortization expense, after tax  21,866    20,507    18,628    61,520    51,918 
Average tangible assets (non-GAAP)  5,749,597    5,727,849    5,457,885    5,691,208    5,484,139 
Adjusted return on average tangible assets (non-GAAP) 1.51%  1.44%  1.35%  1.45%  1.27%
               
Adjustments to return on average tangible common equity:              
Net income adjusted for impact of core deposit intangible amortization expense, after tax$ 21,866  $ 20,507  $ 18,628  $ 61,520  $ 51,918 
Average tangible common equity (non-GAAP)  634,126    611,379    552,080    612,420    536,537 
Adjusted return on average tangible common equity (non-GAAP) 13.68%  13.45%  13.39%  13.43%  12.94%
               
Adjustments to non-interest expense:              
Non-interest expense$ 43,793  $ 46,451  $ 44,432  $ 134,638  $ 146,477 
Adjustments(1)  —    —    —    —    7,957 
Adjusted non-interest expense (non-GAAP)  43,793    46,451    44,432    134,638    138,520 
Non-interest expense to average assets, adjusted (non-GAAP) 2.96%  3.19%  3.16%  3.10%  3.31%
               
(1) Adjustments:              
Non-interest expense adjustments:              
Non-recurring Peoples acquisition-related expenses$ —  $ —  $ —  $ —  $ 7,957 
Total pre-tax adjustments (non-GAAP)  —    —    —    —    7,957 
Collective tax expense impact  —    —    —    —    (1,636)
Adjustments (non-GAAP)$ —  $ —  $ —  $ —  $ 6,321 

 

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