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National Bank Holdings Corporation Announces Record Third Quarter 2020 Financial Results

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DENVER, Oct. 20, 2020 (GLOBE NEWSWIRE) -- National Bank Holdings Corporation (NYSE: NBHC) reported:

                   
  For the quarter For the quarter - adjusted(1)
  3Q20 2Q20 3Q19 3Q20 2Q20  3Q19
Net income ($000's) $ 27,893  $17,705  $21,642  $ 28,224  $19,015  $22,331 
Earnings per share - diluted $ 0.90  $0.57  $0.69  $ 0.91  $0.62  $0.71 
Return on average tangible assets(2)  1.76%  1.16%  1.51%  1.78%  1.25%  1.56%
Return on average tangible common equity(2)  16.49%  10.98%  13.68%  16.69%  11.78%  14.11%

                                                      

(1)    See non-GAAP reconciliations below.
(2 Quarterly ratios are annualized.

In announcing these results, Chief Executive Officer Tim Laney shared, “Despite the challenges presented in 2020, we delivered record quarterly earnings of $0.90 per diluted share and record-breaking fee income. We are prudently supporting our clients and ensuring the safety and soundness of our bank all while maintaining excellent credit quality with annualized net charge-offs of just four basis points.” 

Mr. Laney added, “I am proud of our teammates tireless efforts to support our clients and communities, and we are honored to be recognized as the Small Business Association’s Colorado 2020 Job Creation Lender of the Year. We feel confident that our strong Common Equity Tier 1 ratio of 14.25%, coupled with a diverse and granular credit portfolio and a sizable liquidity position, continues to enable us to navigate this challenging economy from a position of strength.” 

Third Quarter 2020 Results
(All comparisons refer to the second quarter of 2020, except as noted)

Net income totaled $27.9 million during the third quarter of 2020, or $0.90 per diluted share, an increase of $10.2 million, or 57.5%. Adjusting for banking center consolidation-related expenses, net income totaled $28.2 million, or $0.91 per diluted share, an increase of $9.2 million, or 48.4%. The return on average tangible assets was 1.76%, compared to 1.16% in the prior quarter, and the return on average tangible common equity was 16.49%, compared to 10.98%, in the prior quarter. The adjusted return on average tangible assets was 1.78%, compared to 1.25% in the prior quarter, and the adjusted return on average tangible common equity was 16.69%, compared to 11.78% during the second quarter.

Net Interest Income
Fully taxable equivalent net interest income totaled $48.0 million, decreasing $0.6 million, driven by lower earning asset yields due to changes in the mix of earning assets. The fully taxable equivalent net interest margin narrowed 18 basis points from the prior quarter to 3.21%, 13 basis points of which was driven by elevated cash balances. The yield on earning assets decreased 25 basis points due to the excess cash liquidity and the continued impact of the decline in short-term interest rates. Our cost of funds decreased by 10 basis points to 0.55%.

Loans
Total loans ended the quarter at $4.6 billion, decreasing $226.3 million, or 18.8% annualized. During the quarter, we took a very careful approach to extending new credit as well as continuing an intense focus on managing credit risk and yield. This led to third quarter loan originations of $132.9 million, which were more than offset by higher levels of paydowns and payoffs. 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
Provision for loan losses of $1.2 million was recorded during the quarter under the CECL model and included a $0.2 million provision for unfunded loan commitment reserves. Annualized net charge-offs improved to 0.04% of total loans, compared to 0.05% in the prior quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDRs) decreased during the quarter, and the ratio of non-performing loans to total loans improved one basis point to 0.41%. The allowance for credit losses as a percentage of total loans increased eight basis points to 1.34% at September 30, 2020. Excluding PPP loans, non-performing loans remained at 0.45% of total loans, and the allowance for credit losses as a percentage of totals loans increased nine basis points to 1.45% at September 30, 2020.

Deposits
Average transaction deposits (defined as total deposits less time deposits) increased $316.6 million, or 30.3% annualized, and average total deposits increased $306.8 million, or 23.4% annualized, to $5.5 billion as of September 30, 2020. Average non-interest bearing demand deposits increased $78.4 million, and average interest-bearing demand, savings and money market deposits increased $238.2 million. The mix of transaction deposits to total deposits improved 114 basis points to 81.7% at September 30, 2020. The loan to deposit ratio totaled 81.1% at September 30, 2020, compared to 88.3% at June 30, 2020.

The cost of transaction deposits decreased one basis point from the prior quarter to 0.18%. The cost of total deposits decreased seven basis points from the prior quarter to 0.40%, and the total cost of funds decreased 10 basis points.

Non-Interest Income
Non-interest income totaled $44.5 million during the third quarter, representing an increase of $5.7 million, or 14.7%. Mortgage banking income reached a quarterly record of $34.9 million, an increase of $4.3 million. Service charges and bank card fees increased a combined $1.0 million, and other non-interest income increased $0.3 million.

Non-Interest Expense
Non-interest expense totaled $55.3 million during the third quarter, representing an increase of $1.6 million, due to higher mortgage banking performance-related compensation. Banking center consolidation-related expenses of $0.4 million were recorded during the third quarter as compared to $1.7 million during the prior quarter. The consolidations of 12 banking centers were announced in the second quarter of 2020 and are expected to be substantially completed by year end. The fully taxable equivalent efficiency ratio improved to 59.5% at September 30, 2020, compared to 61.1% at June 30, 2020. Adjusting for banking center consolidation-related expense, the fully taxable equivalent efficiency ratio improved 16 basis points to 59.0% at September 30, 2020.

Income tax expense totaled $6.8 million during the third quarter, compared to $4.4 million during the prior quarter. The effective tax rate was 19.7% and 20.0% for the third and second 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 September 30, 2020 for the consolidated company and NBH Bank was 10.60% and 9.23%, respectively. Shareholders’ equity totaled $799.4 million at September 30, 2020 and increased $22.4 million from the prior quarter due to higher retained earnings.

Common book value per share increased $0.71 to $26.13 at September 30, 2020. The quarter’s earnings, net of dividends paid, increased the tangible common book value per share by $0.73 to $22.40 at September 30, 2020. Excluding accumulated other comprehensive income, the tangible book value per share increased $0.77 to $22.04 at September 30, 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. All of 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. The length of the pandemic and the efficacy of the extraordinary government-mandated measures that have been put into place to address it are unknown, but have already had, and are likely to continue to have, a significantly negative impact to the U.S. labor market, consumer spending and business operations.

Year-Over-Year Review
(All comparisons refer to the first nine months of 2019, except as noted)

Net income totaled a record $61.4 million during the first nine months of 2020, or $1.97 per diluted share, an increase of $0.6 million. Adjusting for banking center consolidation-related expenses, net income totaled $63.1 million, or $2.03 per diluted share, an increase of $1.5 million. The return on average tangible assets was 1.36%, compared to 1.45% in the prior period, and the return on average tangible common equity was 12.47%, compared to 13.43%, in the prior period. The adjusted return on average tangible assets was 1.39%, compared to 1.46% in the prior period, and the adjusted return on average tangible common equity was 12.80%, compared to 13.58% during the prior period.

Fully taxable equivalent net interest income totaled $148.2 million, decreasing $11.0 million, or 6.9%. Average earning assets increased $346.4 million, or 6.5%, primarily driven by average loan growth of $339.0 million, including average PPP loan growth of $210.7 million, partially offset by a decrease in average investment securities of $147.7 million. The fully taxable equivalent net interest margin narrowed 50 basis points to 3.48% due to lower earning asset yields. The yield on earning assets decreased 71 basis points, led by an 83 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 funds decreased 27 basis points to 0.69%.

Loans outstanding totaled $4.6 billion and increased $154.2 million, or 3.5%, led by PPP loans of $348.3 million that were partially offset by lower commercial and industrial loans of $151.5 million, or 10.8%. New loan originations over the trailing 12 months totaled $1.2 billion, led by commercial loan originations of $812.6 million, which included PPP loan originations of $358.9 million.

Average non-interest bearing demand deposits increased $210.8 million, or 18.3%. Average transaction deposits increased $510.3 million, or 14.3%, and average total deposits increased $479.8 million, or 10.3%, to $5.1 billion as of September 30, 2020. Spot transaction deposits increased $922.8 million to $4.6 billion at September 30, 2020, improving the mix of transaction deposits to total deposits by 420 basis points to 81.7% at September 30, 2020. The mix of non-interest bearing demand deposits to total deposits improved 117 basis points to 27.3% at September 30, 2020.

A CECL model driven provision for loan losses of $17.6 million was recorded during the first nine months of 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. Annualized net charge-offs on loans totaled 0.04% of total loans, compared to 0.23% in the prior period. Non-performing loans to total loans decreased 17 basis points to 0.41%, compared to 0.58% at September 30, 2019. The allowance for credit losses totaled 1.34% of total loans, compared to 0.88% at September 30, 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 57 basis points to 1.45% at September 30, 2020.

Non-interest income totaled $106.9 million, representing an increase of $44.4 million, or 71.1%, driven by an increase in mortgage banking income. Service charges and bank card fees decreased a combined $2.3 million and other non-interest income decreased $0.5 million.

Non-interest expense totaled $157.8 million, representing an increase of $23.1 million, or 17.2%. Mortgage banking commissions increased by $12.9 million, and banking center consolidation-related expense totaled $2.1 million compared to $0.9 million during the prior period. Other non-interest expense decreased by $1.3 million largely due to a decrease in FDIC deposit insurance fees and marketing and development expense. 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 $14.5 million, compared to $12.0 million during the first nine months of 2019. Included in income tax expense was $0.1 million of expense during the first nine months of 2020 and $2.2 million of benefit during the first nine months of 2019 from stock compensation activity. Adjusting for stock compensation activity, the effective tax rate for the first nine months of 2020 was 18.9%, compared to 19.4% in the prior period. 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 Wednesday, October 21, 2020. Interested parties may listen to this call by dialing (877) 272-6762 / (615) 800-6832 (International) using the Conference ID of 2471788 and asking for the NBHC Third Quarter Earnings conference call. A telephonic replay of the call will be available beginning approximately four hours after the call’s completion through November 4, 2020, by dialing (855) 859-2056 (United States) / (404) 537-3406 (International) using the Conference ID of 2471788. 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 97 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, Texas, Utah and New Mexico. 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 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; 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: Angela Petrucci, Chief Administrative Officer, (720) 529-3349, 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, 
 2020  2020 2019  2020  2019 
Total interest and dividend income$ 52,302  $ 53,744 $ 61,372  $ 164,714  $ 182,985 
Total interest expense  5,587    6,416   9,587    20,324    27,543 
Net interest income  46,715    47,328   51,785    144,390    155,442 
Taxable equivalent adjustment  1,275    1,301   1,264    3,843    3,775 
Net interest income FTE(1)  47,990    48,629   53,049    148,233    159,217 
Provision for loan losses  1,200    10,271   5,690    17,630    10,463 
Net interest income after provision for loan losses FTE(1)  46,790    38,358   47,359    130,603    148,754 
Non-interest income:              
Service charges  3,742    3,094   4,617    10,962    13,479 
Bank card fees  4,039    3,654   3,752    11,206    10,946 
Mortgage banking income  34,943    30,630   14,702    79,246    32,037 
Other non-interest income  1,733    1,459   1,661    5,384    5,861 
OREO-related income  75    —   27    103    147 
Total non-interest income  44,532    38,837   24,759    106,901    62,470 
Non-interest expense:              
Salaries and benefits  38,614    36,457   33,522    108,251    92,079 
Occupancy and equipment  6,878    7,078   6,825    20,854    20,428 
Professional fees  714    759   743    2,082    2,598 
Other non-interest expense  7,443    6,778   7,422    21,222    22,498 
Problem asset workout  1,064    629   602    2,341    2,450 
(Gain) loss on sale of OREO, net  (119)   55   (6,514)   (25)   (7,200)
Core deposit intangible asset amortization  295    296   295    887    887 
Banking center consolidation-related expense  432    1,708   898    2,140    898 
Total non-interest expense  55,321    53,760   43,793    157,752    134,638 
               
Income before income taxes FTE(1)  36,001    23,435   28,325    79,752    76,586 
Taxable equivalent adjustment  1,275    1,301   1,264    3,843    3,775 
Income before income taxes  34,726    22,134   27,061    75,909    72,811 
Income tax expense  6,833    4,429   5,419    14,487    11,965 
Net income$ 27,893  $ 17,705 $ 21,642  $ 61,422  $ 60,846 
Earnings per share - basic$ 0.91  $ 0.57 $ 0.69  $ 1.99  $ 1.95 
Earnings per share - diluted  0.90    0.57   0.69    1.97    1.93 

                                                      

(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.


            
NATIONAL BANK HOLDINGS CORPORATION
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands, except share and per share data)
            
 September 30, 2020 June 30, 2020 December 31, 2019 September 30, 2019
ASSETS           
Cash and cash equivalents$ 445,103  $142,385  $110,190  $116,919 
Investment securities available-for-sale  572,523   610,735   638,249   661,129 
Investment securities held-to-maturity  320,001   215,183   182,884   189,982 
Non-marketable securities  29,598   30,188   29,751   27,277 
Loans  4,556,121   4,782,383   4,415,406   4,401,917 
Allowance for credit losses  (60,979)  (60,465)  (39,064)  (38,710)
Loans, net  4,495,142   4,721,918   4,376,342   4,363,207 
Loans held for sale  273,003   204,856   117,444   204,602 
Other real estate owned  4,590   6,491   7,300   7,904 
Premises and equipment, net  108,860   110,019   112,151   110,692 
Goodwill  115,027   115,027   115,027   115,027 
Intangible assets, net  15,017   12,175   11,361   11,578 
Other assets  221,812   216,454   194,813   181,733 
Total assets$ 6,600,676  $6,385,431  $5,895,512  $5,990,050 
LIABILITIES AND SHAREHOLDERS' EQUITY           
Liabilities:           
Non-interest bearing demand deposits$ 1,533,676  $1,502,948  $1,184,945  $1,237,189 
Interest bearing demand deposits  976,133   955,951   738,496   681,113 
Savings and money market  2,079,585   1,903,427   1,755,538   1,748,257 
Total transaction deposits  4,589,394   4,362,326   3,678,979   3,666,559 
Time deposits  1,027,066   1,051,563   1,058,153   1,067,301 
Total deposits  5,616,460   5,413,889   4,737,132   4,733,860 
Securities sold under agreements to repurchase  23,904   24,504   56,935   62,735 
Federal Home Loan Bank advances  —   15,000   207,675   303,897 
Other liabilities  160,955   155,071   126,850   136,232 
Total liabilities  5,801,319   5,608,464   5,128,592   5,236,724 
Shareholders' equity:           
Common stock  515   515   515   515 
Additional paid in capital  1,010,145   1,008,773   1,009,223   1,007,628 
Retained earnings  202,238   180,537   164,082   150,866 
Treasury stock  (424,621)  (425,053)  (408,962)  (408,770)
Accumulated other comprehensive income, net of tax  11,080   12,195   2,062   3,087 
Total shareholders' equity  799,357   776,967   766,920   753,326 
Total liabilities and shareholders' equity$ 6,600,676  $6,385,431  $5,895,512  $5,990,050 
SHARE DATA           
Average basic shares outstanding  30,756,116   30,731,758   31,299,989   31,281,970 
Average diluted shares outstanding  30,924,223   30,857,606   31,525,911   31,508,999 
Ending shares outstanding  30,594,412   30,569,011   31,176,627   31,169,086 
Common book value per share$ 26.13  $25.42  $24.60  $24.17 
Tangible common book value per share(1) (non-GAAP)  22.40   21.67   20.89   20.45 
Tangible common book value per share, excluding accumulated other comprehensive income(1) (non-GAAP)  22.04   21.27   20.83   20.35 
CAPITAL RATIOS           
Average equity to average assets 12.22%  12.21%  12.91%  12.79%
Tangible common equity to tangible assets(1) 10.57%  10.56%  11.27%  10.85%
Tier 1 leverage ratio 10.60%  10.53%  11.04%  10.89%
Common equity tier 1 risk-based capital ratio 14.25%  13.21%  13.21%  12.93%
Total risk-based capital ratio 15.40%  14.26%  14.08%  13.79%

                                                      

(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, 2020
vs. June 30, 2020
   September 30, 2020
vs. September 30, 2019
 September 30, 2020 June 30, 2020 % Change September 30, 2019 % Change
Originated:            
Commercial:            
Commercial and industrial$ 1,228,550 $1,360,679 (9.7)% $1,369,615 (10.3)%
Municipal and non-profit  883,065  912,287 (3.2)%  843,763 4.7%
Owner-occupied commercial real estate  460,487  455,846 1.0%  378,956 21.5%
Food and agribusiness  210,818  213,789 (1.4)%  230,869 (8.7)%
PPP loans(1)  348,257  348,689 (0.1)%   100.0%
Total commercial  3,131,177  3,291,290 (4.9)%  2,823,203 10.9%
Commercial real estate non-owner occupied  515,415  540,412 (4.6)%  501,771 2.7%
Residential real estate  614,449  631,032 (2.6)%  659,246 (6.8)%
Consumer  20,196  20,370 (0.9)%  21,378 (5.5)%
Total originated  4,281,237  4,483,104 (4.5)%  4,005,598 6.9%
             
Acquired:            
Commercial:            
Commercial and industrial  23,984  27,461 (12.7)%  34,409 (30.3)%
Municipal and non-profit  576  593 (2.9)%  3,939 (85.4)%
Owner-occupied commercial real estate  55,929  65,052 (14.0)%  78,297 (28.6)%
Food and agribusiness  5,740  6,237 (8.0)%  8,618 (33.4)%
Total commercial  86,229  99,343 (13.2)%  125,263 (31.2)%
Commercial real estate non-owner occupied  101,672  101,412 0.3%  139,410 (27.1)%
Residential real estate  86,478  97,982 (11.7)%  130,831 (33.9)%
Consumer  505  542 (6.8)%  815 (38.0)%
Total acquired  274,884  299,279 (8.2)%  396,319 (30.6)%
Total loans$ 4,556,121 $4,782,383 (4.7)% $4,401,917 3.5%

                                                      

(1)    PPP loan balances are net of fees and costs and include principal totaling $356,913.


               
Originations(1)              
               
 Third quarter Second quarter First quarter Fourth quarter Third quarter
 2020 2020 2020 2019 2019
Commercial:              
Commercial and industrial$ 11,354 $(8,726) $118,999  $69,048 $144,554 
Municipal and non-profit  6,083  49,679   13,968   46,114  31,482 
Owner occupied commercial real estate  23,758  22,078   37,372   46,965  16,149 
Food and agribusiness  13,876  (10,480)  (6,787)  20,348  (4,894)
PPP loans  122  358,798         
Total commercial  55,193  411,349   163,552   182,475  187,291 
Commercial real estate non-owner occupied  24,937  18,992   80,792   41,256  79,929 
Residential real estate  49,786  29,024   46,273   43,493  49,022 
Consumer  2,980  2,206   2,320   2,315  2,986 
Total$ 132,896 $461,571  $292,937  $269,539 $319,228 

                                                      

(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 ($27,899), ($55,826), $48,789, $1,756 and $37,062 as of the third quarter 2020, second quarter 2020, first quarter 2020, fourth quarter 2019, and third quarter 2019, 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, 2020 June 30, 2020 September 30, 2019
  Average    Average Average    Average Average    Average
  balance Interest rate balance Interest rate balance Interest rate
Interest earning assets:                           
Originated loans FTE(1)(2) $ 4,343,335  $ 40,973  3.75% $4,432,725  $42,440  3.85% $3,886,503  $46,736  4.77%
Acquired loans   284,653    6,593  9.21%  312,723   6,722  8.65%  425,079   8,907  8.31%
Loans held for sale   230,390    1,683  2.91%  157,887   1,310  3.34%  139,281   1,328  3.78%
Investment securities available-for-sale   559,330    2,784  1.99%  607,132   3,050  2.01%  687,989   3,696  2.15%
Investment securities held-to-maturity   242,511    1,253  2.07%  189,360   1,201  2.54%  199,519   1,384  2.77%
Other securities   29,640    221  2.98%  30,087   310  4.12%  27,227   418  6.14%
Interest earning deposits and securities purchased under agreements to resell   254,931    70  0.11%  36,758   12  0.13%  19,809   167  3.34%
Total interest earning assets FTE(2) $ 5,944,790  $ 53,577  3.59% $5,766,672  $55,045  3.84% $5,385,407  $62,636  4.61%
Cash and due from banks $ 73,274        $76,041        $76,866       
Other assets   525,324         532,867         443,724       
Allowance for credit losses   (60,372)        (56,984)        (40,212)      
Total assets $ 6,483,016        $6,318,596        $5,865,785       
Interest bearing liabilities:                           
Interest bearing demand, savings and money market deposits $ 2,957,604  $ 1,990  0.27% $2,719,433  $1,951  0.29% $2,438,399  $3,609  0.59%
Time deposits   1,038,983    3,501  1.34%  1,048,772   4,136  1.59%  1,073,140   4,365  1.61%
Securities sold under agreements to repurchase   22,667    10  0.18%  23,485   18  0.31%  65,722   204  1.23%
Federal Home Loan Bank advances   1,141    86  29.99%  163,263   311  0.77%  231,926   1,409  2.41%
Total interest bearing liabilities $ 4,020,395  $ 5,587  0.55% $3,954,953  $6,416  0.65% $3,809,187  $9,587  1.00%
Demand deposits $ 1,515,058        $1,436,671        $1,193,357       
Other liabilities   155,205         155,379         112,927       
Total liabilities   5,690,658         5,547,003         5,115,471       
Shareholders' equity   792,358         771,593         750,314       
Total liabilities and shareholders' equity $ 6,483,016        $6,318,596        $5,865,785       
Net interest income FTE(2)    $ 47,990       $48,629       $53,049   
Interest rate spread FTE(2)        3.04%        3.19%        3.61%
Net interest earning assets $ 1,924,395        $1,811,719        $1,576,220       
Net interest margin FTE(2)        3.21%        3.39%        3.91%
Average transaction deposits $ 4,472,662        $4,156,104        $3,631,756       
Average total deposits   5,511,645         5,204,876         4,704,896       
Ratio of average interest earning assets to average interest bearing liabilities  147.87%        145.81%        141.38%      

                                                      

(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 $1,275, $1,301 and $1,264 for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.


 
NATIONAL BANK HOLDINGS CORPORATION
Summary of Net Interest Margin
(Dollars in thousands)
 
                
 For the nine months ended September 30, 2020 For the nine months ended September 30, 2019
 Average         Average Average         Average
 balance Interest rate balance Interest rate
Interest earning assets:               
Originated loans FTE(1)(2)$ 4,273,332  $ 128,392 4.01% $ 3,782,765  $ 137,036 4.84%
Acquired loans  313,555    22,194 9.45%   465,165    28,467 8.18%
Loans held for sale  163,980    3,929 3.20%   90,143    2,750 4.08%
Investment securities available-for-sale  597,654    9,229 2.06%   737,744    12,059 2.18%
Investment securities held-to-maturity  207,107    3,689 2.37%   214,696    4,568 2.84%
Other securities  29,826    945 4.22%   27,513    1,299 6.30%
Interest earning deposits and securities purchased under agreements to resell  105,430    179 0.23%   26,468    581 2.93%
Total interest earning assets FTE(2)$ 5,690,884  $ 168,557 3.96% $ 5,344,494  $ 186,760 4.67%
Cash and due from banks$ 74,694       $ 76,863      
Other assets  510,941         424,271      
Allowance for credit losses  (54,077)        (37,939)     
Total assets$ 6,222,442       $ 5,807,689      
Interest bearing liabilities:               
Interest bearing demand, savings and money market deposits$ 2,725,572  $ 6,829 0.33% $ 2,426,136  $ 10,176 0.56%
Time deposits  1,048,116    12,075 1.54%   1,078,549    12,062 1.50%
Securities sold under agreements to repurchase  30,322    125 0.55%   61,313    519 1.13%
Federal Home Loan Bank advances  127,456    1,295 1.36%   258,348    4,786 2.48%
Total interest bearing liabilities$ 3,931,466  $ 20,324 0.69% $ 3,824,346  $ 27,543 0.96%
Demand deposits$ 1,363,556       $ 1,152,718      
Other liabilities  147,929         101,724      
Total liabilities  5,442,951         5,078,788      
Shareholders' equity  779,491         728,901      
Total liabilities and shareholders' equity$ 6,222,442       $ 5,807,689      
Net interest income FTE(2)   $ 148,233      $ 159,217  
Interest rate spread FTE(2)      3.27%       3.71%
Net interest earning assets$ 1,759,418       $ 1,520,148      
Net interest margin FTE(2)      3.48%       3.98%
Average transaction deposits$ 4,089,128       $ 3,578,854      
Average total deposits  5,137,244         4,657,403      
Ratio of average interest earning assets to average interest bearing liabilities 144.75%       139.75%     

                                                      

(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 $3,843 and $3,775 for the nine months ended September 30, 2020 and September 30, 2019, respectively.


 
NATIONAL BANK HOLDINGS CORPORATION
Allowance for Credit Losses and Asset Quality
(Dollars in thousands)
         
Allowance for Credit Losses Analysis
 As of and for the three months ended
 September 30, 2020 June 30, 2020 September 30, 2019
Beginning allowance for credit losses$ 60,465  $50,956  $40,082 
Charge-offs  (619)  (852)  (7,101)
Recoveries  133   236   39 
Provision  1,000   10,125   5,690 
Ending allowance for credit losses ("ACL")$ 60,979  $60,465  $38,710 
Ratio of annualized net charge-offs to average total loans during the period 0.04%  0.05%  0.65%
Ratio of annualized net charge-offs to average total loans excluding PPP loans during the period 0.04%  0.05%  0.65%
Ratio of ACL to total loans outstanding at period end 1.34%  1.26%  0.88%
Ratio of ACL to total loans outstanding excluding PPP loans at period end 1.45%  1.36%  0.88%
Ratio of ACL to total non-performing loans at period end 322.95%  302.34%  152.41%
Total loans$ 4,556,121  $4,782,383  $4,401,917 
Average total loans during the period  4,677,630   4,794,466   4,329,590 
Average total loans excluding PPP loans during the period  4,329,458   4,512,010   4,329,590 
Total non-performing loans  18,882   19,999   25,398 


Past Due and Non-accrual Loans         
         
 September 30, 2020 June 30, 2020 September 30, 2019
Loans 30-89 days past due and still accruing interest$ 6,587  $3,932  $6,723 
Loans 90 days past due and still accruing interest  161   2,444   1,968 
Non-accrual loans  18,882   19,999   25,398 
Total past due and non-accrual loans$ 25,630  $26,375  $34,089 
Total 90 days past due and still accruing interest and non-accrual loans to total loans 0.42%  0.47%  0.62%


Asset Quality Data        
         
 September 30, 2020 June 30, 2020 September 30, 2019
Non-performing loans$ 18,882  $ 19,999  $ 25,398 
OREO  4,590    6,491    7,904 
Total non-performing assets$ 23,472  $ 26,490  $ 33,302 
Accruing restructured loans$ 21,786  $ 20,284  $ 7,384 
Total non-performing loans to total loans 0.41%  0.42%  0.58%
Total non-performing loans to total loans excluding PPP loans 0.45%  0.45%  0.58%
Total non-performing assets to total loans and OREO 0.51%  0.55%  0.76%
Total non-performing assets to total loans and OREO excluding PPP loans 0.56%  0.60%  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, 
 2020     2020     2019     2020  2019 
Key Ratios(1)         
Return on average assets1.71% 1.13% 1.46% 1.32% 1.40%
Return on average tangible assets(2)1.76% 1.16% 1.51% 1.36% 1.45%
Return on average tangible assets, adjusted(2)1.78% 1.25% 1.56% 1.39% 1.46%
Return on average equity14.00% 9.23% 11.44% 10.53% 11.16%
Return on average tangible common equity(2)16.49% 10.98% 13.68% 12.47% 13.43%
Return on average tangible common equity, adjusted(2)16.69% 11.78% 14.11% 12.80% 13.58%
Loan to deposit ratio (end of period)81.12% 88.34% 92.99% 81.12% 92.99%
Non-interest bearing deposits to total deposits (end of period)27.31% 27.76% 26.13% 27.31% 26.13%
Net interest margin(4)3.13% 3.30% 3.81% 3.39% 3.89%
Net interest margin FTE(2)(4)3.21% 3.39% 3.91% 3.48% 3.98%
Interest rate spread FTE(2)(5)3.04% 3.19% 3.61% 3.27% 3.71%
Yield on earning assets(3)3.50% 3.75% 4.52% 3.87% 4.58%
Yield on earning assets FTE(2)(3)3.59% 3.84% 4.61% 3.96% 4.67%
Cost of interest bearing liabilities(3)0.55% 0.65% 1.00% 0.69% 0.96%
Cost of deposits0.40% 0.47% 0.67% 0.49% 0.64%
Non-interest income to total revenue FTE(2)48.13% 44.40% 31.82% 41.90% 28.18%
Non-interest expense to average assets3.39% 3.42% 2.96% 3.39% 3.10%
Non-interest expense to average assets, adjusted(2)3.37% 3.31% 2.90% 3.34% 3.08%
Efficiency ratio60.30% 62.05% 56.83% 62.42% 61.38%
Efficiency ratio FTE(2)59.47% 61.13% 55.90% 61.48% 60.33%
Efficiency ratio FTE, adjusted(2)59.01% 59.17% 54.75% 60.64% 59.93%
          
Total Loans Asset Quality Data(6)(7)(8)         
Non-performing loans to total loans0.41% 0.42% 0.58% 0.41% 0.58%
Non-performing loans to total loans excluding PPP loans0.45% 0.45% 0.58% 0.45% 0.58%
Non-performing assets to total loans and OREO0.51% 0.55% 0.76% 0.51% 0.76%
Non-performing assets to total loans and OREO excluding PPP loans0.56% 0.60% 0.76% 0.56% 0.76%
Allowance for credit losses to total loans1.34% 1.26% 0.88% 1.34% 0.88%
Allowance for credit losses to total loans excluding PPP loans1.45% 1.36% 0.88% 1.45% 0.88%
Allowance for credit losses to non-performing loans322.95% 302.34% 152.41% 322.95% 152.41%
Net charge-offs to average loans(1)0.04% 0.05% 0.65% 0.04% 0.23%

                                                      

(1)    Quarter-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.
(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.
(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, 2020 June 30, 2020 December 31, 2019 September 30, 2019
Total shareholders' equity$ 799,357  $776,967  $766,920  $753,326 
Less: goodwill and core deposit intangible assets, net  (122,871)  (123,166)  (123,758)  (124,054)
Add: deferred tax liability related to goodwill  8,927   8,698   8,241   8,012 
Tangible common equity (non-GAAP)$ 685,413  $662,499  $651,403  $637,284 
            
Total assets$ 6,600,676  $6,385,431  $5,895,512  $5,990,050 
Less: goodwill and core deposit intangible assets, net  (122,871)  (123,166)  (123,758)  (124,054)
Add: deferred tax liability related to goodwill  8,927   8,698   8,241   8,012 
Tangible assets (non-GAAP)$ 6,486,732  $6,270,963  $5,779,995  $5,874,008 
            
Tangible common equity to tangible assets calculations:           
Total shareholders' equity to total assets 12.11%  12.17%  13.01%  12.58%
Less: impact of goodwill and core deposit intangible assets, net (1.54)%  (1.61)%  (1.74)%  (1.73)%
Tangible common equity to tangible assets (non-GAAP) 10.57%  10.56%  11.27%  10.85%
            
Tangible common book value per share calculations:           
Tangible common equity (non-GAAP)$ 685,413  $662,499  $651,403  $637,284 
Divided by: ending shares outstanding  30,594,412   30,569,011   31,176,627   31,169,086 
Tangible common book value per share (non-GAAP)$ 22.40  $21.67  $20.89  $20.45 
            
Tangible common book value per share, excluding accumulated other comprehensive income calculations:           
Tangible common equity (non-GAAP)$ 685,413  $662,499  $651,403  $637,284 
Accumulated other comprehensive income, net of tax  (11,080)  (12,195)  (2,062)  (3,087)
Tangible common book value, excluding accumulated other comprehensive income, net of tax (non-GAAP)  674,333   650,304   649,341   634,197 
Divided by: ending shares outstanding  30,594,412   30,569,011   31,176,627   31,169,086 
Tangible common book value per share, excluding accumulated other comprehensive income, net of tax (non-GAAP)$ 22.04  $21.27  $20.83  $20.35 


 
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,
 2020
 2020
 2019
 2020
 2019
Net income$ 27,893  $17,705  $21,642  $ 61,422  $60,846 
Add: impact of core deposit intangible amortization expense, after tax  226   227   224    680   674 
Net income adjusted for impact of core deposit intangible amortization expense, after tax$ 28,119  $17,932  $21,866  $ 62,102  $61,520 
               
Average assets$ 6,483,016  $6,318,596  $5,865,785  $ 6,222,442  $5,807,689 
Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill  (114,122)  (114,631)  (116,188)   (114,406)  (116,481)
Average tangible assets (non-GAAP)$ 6,368,894  $6,203,965  $5,749,597  $ 6,108,036  $5,691,208 
               
Average shareholders' equity$ 792,358  $771,593  $750,314  $ 779,491  $728,901 
Less: average goodwill and core deposit intangible asset, net of deferred tax liability related to goodwill  (114,122)  (114,631)  (116,188)   (114,406)  (116,481)
Average tangible common equity (non-GAAP)$ 678,236  $656,962  $634,126  $ 665,085  $612,420 
               
Return on average assets 1.71%  1.13%  1.46%  1.32%  1.40%
Return on average tangible assets (non-GAAP) 1.76%  1.16%  1.51%  1.36%  1.45%
Return on average equity 14.00%  9.23%  11.44%  10.53%  11.16%
Return on average tangible common equity (non-GAAP) 16.49%  10.98%  13.68%  12.47%  13.43%


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,
 2020
 2020
 2019
 2020
 2019
Interest income$ 52,302  $53,744  $61,372     $ 164,714  $182,985 
Add: impact of taxable equivalent adjustment  1,275   1,301   1,264    3,843   3,775 
Interest income FTE (non-GAAP)$ 53,577  $55,045  $62,636  $ 168,557  $186,760 
               
Net interest income$ 46,715  $47,328  $51,785  $ 144,390  $155,442 
Add: impact of taxable equivalent adjustment  1,275   1,301   1,264    3,843   3,775 
Net interest income FTE (non-GAAP)$ 47,990  $48,629  $53,049  $ 148,233  $159,217 
               
Average earning assets$ 5,944,790  $5,766,672  $5,385,407  $ 5,690,884  $5,344,494 
Yield on earning assets 3.50%  3.75%  4.52%  3.87%  4.58%
Yield on earning assets FTE (non-GAAP) 3.59%  3.84%  4.61%  3.96%  4.67%
Net interest margin 3.13%  3.30%  3.81%  3.39%  3.89%
Net interest margin FTE (non-GAAP) 3.21%  3.39%  3.91%  3.48%  3.98%


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, 
 2020     2020     2019     2020     2019 
Net interest income$ 46,715  $ 47,328  $ 51,785  $ 144,390  $ 155,442 
Add: impact of taxable equivalent adjustment  1,275    1,301    1,264    3,843    3,775 
Net interest income, FTE (non-GAAP)$ 47,990  $ 48,629  $ 53,049  $ 148,233  $ 159,217 
               
Non-interest income$ 44,532  $ 38,837  $ 24,759  $ 106,901  $ 62,470 
               
Non-interest expense$ 55,321  $ 53,760  $ 43,793  $ 157,752  $ 134,638 
Less: core deposit intangible asset amortization  (295)   (296)   (295)   (887)   (887)
Non-interest expense, adjusted for core deposit intangible asset amortization$ 55,026  $ 53,464  $ 43,498  $ 156,865  $ 133,751 
               
Non-interest expense, adjusted for core deposit intangible asset amortization$ 55,026  $ 53,464  $ 43,498  $ 156,865  $ 133,751 
Banking center consolidation-related expense  (432)   (1,708)   (898)   (2,140)   (898)
Adjusted non-interest expense (non-GAAP)$ 54,594  $ 51,756  $ 42,600  $ 154,725  $ 132,853 
               
Efficiency ratio 60.30%  62.05%  56.83%  62.42%  61.38%
Efficiency ratio FTE (non-GAAP) 59.47%  61.13%  55.90%  61.48%  60.33%
Adjusted efficiency ratio FTE (non-GAAP) 59.01%  59.17%  54.75%  60.64%  59.93%


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,
  2020
 2020
 2019
 2020
 2019
Adjustments to net income:               
Net income $ 27,893  $17,705  $21,642  $ 61,422  $60,846 
Adjustments(1)   331   1,310   689    1,641   689 
Adjusted net income (non-GAAP) $ 28,224  $19,015  $22,331  $ 63,063  $61,535 
                
Adjustments to earnings per share:               
Earnings per share - diluted $ 0.90  $0.57  $0.69  $ 1.97  $1.93 
Adjustments(1)   0.01   0.05   0.02    0.06   0.02 
Adjusted earnings per share - diluted (non-GAAP) $ 0.91  $0.62  $0.71  $ 2.03  $1.95 
                
Adjustments to return on average tangible assets:               
Adjusted net income (non-GAAP) $ 28,224  $19,015  $22,331  $ 63,063  $61,535 
Add: impact of core deposit intangible amortization expense, after tax   226   227   224    680   674 
Net income adjusted for impact of core deposit intangible amortization expense, after tax   28,450   19,242   22,555    63,743   62,209 
Average tangible assets (non-GAAP)   6,368,894   6,203,965   5,749,597    6,108,036   5,691,208 
Adjusted return on average tangible assets (non-GAAP)  1.78%  1.25%  1.56%  1.39%  1.46%
                
Adjustments to return on average tangible common equity:               
Net income adjusted for impact of core deposit intangible amortization expense, after tax $ 28,450  $19,242  $22,555  $ 63,743  $62,209 
Average tangible common equity (non-GAAP)   678,236   656,962   634,126    665,085   612,420 
Adjusted return on average tangible common equity (non-GAAP)  16.69%  11.78%  14.11%  12.80%  13.58%
                
Adjustments to non-interest expense:               
Non-interest expense $ 55,321  $53,760  $43,793  $ 157,752  $134,638 
Adjustments(1)   432   1,708   898    2,140   898 
Adjusted non-interest expense (non-GAAP)   54,889   52,052   42,895    155,612   133,740 
Non-interest expense to average assets, adjusted (non-GAAP)  3.37%  3.31%  2.90%  3.34%  3.08%
                
(1) Adjustments:               
Non-interest expense adjustments:               
Banking center consolidation-related expense $ 432  $1,708  $898  $ 2,140  $898 
Tax expense impact   (101)  (398)  (209)   (499)  (209)
Adjustments (non-GAAP) $ 331  $1,310  $689  $ 1,641  $689 
                     

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Third Quarter 2020 NBHC Supplemental Disclosure

National Bank Holdings Corp

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About NBHC

national bank holdings corporation operates as the bank holding company for nbh bank that provides various banking products and financial services to commercial, business, and consumer clients in the united states. the company offers deposit products, including checking accounts, savings accounts, money market accounts, and other deposit accounts, including fixed-rate and fixed maturity time deposits. it also provides commercial and industrial loans and leases, such as working capital loans, equipment loans, lender finance loans, food and agriculture loans, government and non-profit loans, owner occupied commercial real estate loans, and other commercial loans and leases. the company also offers non-owner occupied commercial real estate loans consisting of loans on commercial properties, such as office buildings, warehouse/distribution buildings, multi-family, hospitality, and retail buildings; small business administration loans to support manufacturers, distributors, and service prov