NBHC National Bank Holdings Corporation

In announcing these results, Chief Executive Officer Tim Laney shared, “We delivered a 10.8% increase in our quarterly earnings to $0.94 per diluted share and a solid return on average tangible common equity of 18.38%. After adjusting for acquisition expenses, year over year pre-provision net revenues grew 54.6%. Year-to-date net income increased $54.4 million or 100% over the prior period to $108.9 million, or $2.85 per diluted share. Our disciplined approach to extending credit and diligence in monitoring our loan book resulted in excellent credit quality with just one basis point of annualized quarterly net charge-offs. We maintain a granular average deposit base and grew our diversified core deposits 5.9% annualized. Our total deposit beta through this interest rate cycle has been 28%.”

Mr. Laney added, “We enter the fourth quarter from a position of strength. We operate in high-performing markets where our relationship-based banking model continues to generate a positive impact in our communities and attractive shareholder returns. Our strong balance sheet, solid capital position and diversified funding sources provide optionality to be leveraged for future growth.”

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

Net income totaled $36.1 million or $0.94 per diluted share, an increase of 10.8% over the second quarter. Fully taxable equivalent pre-provision net revenue totaled $48.1 million, an increase of 9.2% over the second quarter. The return on average tangible assets increased 13 basis points to 1.58%, and the return on average tangible common equity increased 114 basis points to 18.38%.

Net Interest IncomeFully taxable equivalent net interest income totaled $89.4 million, compared to $91.2 million in the prior quarter, as an increase in loan interest income was offset by an increase in the cost of funds. The fully taxable equivalent net interest margin totaled 3.92%, narrowing 15 basis points as the 14 basis point increase in earning asset yields was offset by a 32 basis point increase in the cost of funds. Average earning assets increased $40.9 million, primarily driven by loan growth. The cost of funds totaled 1.80%, compared to 1.48% during the second quarter.

LoansTotal loans increased $64.1 million or 3.4% annualized to $7.5 billion at September 30, 2023. We generated quarterly loan fundings totaling $324.1 million, led by commercial loan fundings of $191.5 million. The average interest rate on the third quarter’s loan originations was 8.6% compared to 8.2%.

Asset Quality and Provision for Credit LossesThe Company recorded $1.1 million of provision expense for credit losses, compared to $1.7 million in the prior quarter. The current quarter’s provision expense was primarily driven by loan growth. Annualized net charge-offs improved to 0.01% of average total loans during the third quarter, compared to 0.02% in the prior quarter. Non-performing loans (comprised of non-accrual loans and non-accrual TDMs) improved one basis point to 0.44% of total loans, and non-performing assets improved one basis point to 0.49% of total loans and OREO. The allowance for credit losses as a percentage of loans remained a consistent 1.25% at September 30, 2023.

DepositsWe maintain a granular and well diversified deposit base with no exposure to venture capital or crypto deposits. Average total deposits increased $116.1 million, or 5.8% annualized, to $8.1 billion during the third quarter 2023, compared to $8.0 billion during the second quarter 2023. The loan to deposit ratio totaled 91.8% at September 30, 2023. Average transaction deposits (defined as total deposits less time deposits) increased $104.5 million to $7.1 billion.

We improved our balance sheet funding mix during the third quarter and utilized the funding provided by the quarter’s deposit growth to pay down $68.2 million of Federal Home Loan Bank advances. The mix of transaction deposits remained a consistent 87.8% of total deposits at September 30, 2023.

Non-Interest IncomeNon-interest income increased $5.5 million to $19.4 million during the third quarter. Excluding $4.1 million of impairments related to venture capital investments classified as non-marketable securities included in the prior quarter, non-interest income increased $1.4 million and included a $1.1 million gain from the sale of mortgage servicing rights. Service charges and bank card fees increased $0.3 million.

Non-Interest ExpenseNon-interest expense decreased $0.4 million to $60.6 million largely due to Cambr related acquisition expenses incurred in the second quarter. The efficiency ratio improved 230 basis points to 56.6% for the third quarter, compared to 58.9%. The fully taxable equivalent efficiency ratio improved 224 basis points to 53.9% for the third quarter, excluding other intangible assets amortization.

Income tax expense totaled $9.3 million during the third quarter, compared to $8.4 million in the prior quarter. The increase in income tax expense was due to an increase in pre-tax income. The effective tax rate remained consistent at 20.5% for the third quarter.

CapitalCapital ratios continue to be strong and in excess of federal bank regulatory agency “well capitalized” thresholds. The Tier 1 leverage ratio totaled 9.56% at September 30, 2023, and the common equity tier 1 capital ratio totaled 11.61% at September 30, 2023. Shareholders’ equity totaled $1.2 billion at September 30, 2023 increasing $16.3 million, largely due to higher retained earnings partially offset by an increase in accumulated other comprehensive loss.

Common book value per share increased $0.41 to $30.83 at September 30, 2023. Tangible common book value per share increased $0.48 to $21.43 as this quarter’s earnings outpaced the quarterly dividend and a $0.32 per share increase in accumulated other comprehensive loss.

Year-Over-Year Review(All comparisons refer to the first nine months of 2022, except as noted)

Net income increased $54.4 million or 99.7% to $108.9 million, or $2.85 per diluted share, compared to net income of $54.6 million, or $1.77 per diluted share, for the first nine months of 2022. The increase over the same period prior year was driven by higher net interest income from our organic balance sheet growth, revenues from strategic acquisition growth, and a benefit to our net interest income from increases in the Federal Reserve Bank’s interest rates. Fully taxable equivalent pre-provision net revenue increased $59.4 million, or 69.6%, to $144.9 million. The return on average tangible assets increased 58 basis points to 1.61%, and the return on average tangible common equity increased 864 basis points to 18.81%.

The first nine months of 2022 included $13.6 million of non-recurring acquisition-related expenses from our 2022 acquisitions. Adjusting for these expenses in the prior period, net income for the first nine months of 2023 increased $43.9 million or 67.5%, and fully taxable equivalent pre-provision net revenue increased $51.2 million, or 54.6%. The adjusted return on average tangible assets increased 38 basis points to 1.61%, and the adjusted return on average tangible common equity increased 671 basis points to 18.81% for the first nine months of 2023.

Fully taxable equivalent net interest income totaled $276.9 million, an increase of $101.1 million or 57.5%. Average earning assets increased $2.2 billion, or 31.5%, including average originated loan growth of $1.1 billion and average acquired loan growth of $1.5 billion. The fully taxable equivalent net interest margin widened 68 basis points to 4.12%, benefitting from a 182 basis point increase in earning asset yields to 5.44%. Average interest bearing liabilities increased $1.8 billion to $5.7 billion at September 30, 2023, and the cost of funds totaled 1.40%, compared to 0.19% in the same period prior year.

Loans outstanding totaled $7.5 billion increasing $1.8 billion, or 30.7%, from organic loan growth and loans acquired through the Rock Canyon Bank and Bank of Jackson Hole acquisitions in the second half of 2022. New loan fundings over the trailing 12 months totaled $1.6 billion, led by commercial loan fundings of $0.8 billion.  

The Company recorded $3.7 million of provision expense for credit losses for the first nine months of 2023, compared to provision expense of $14.9 million in the same period prior year. The current period’s provision expense was driven by loan growth and higher reserve requirements. Provision expense for the first nine months of 2022 included $5.4 million of Day 1 reserve requirements for a 2022 acquisition. Annualized net charge-offs decreased one basis points to 0.02% of average total loans during the first nine months of 2023. Non-performing loans to total loans was 0.44%, compared to 0.26% in the same period prior year, and non-performing assets to total loans and OREO was 0.49% at September 30, 2023, compared to 0.32%. The allowance for credit losses totaled 1.25% of total loans, compared to 1.15% at September 30, 2022.

Average total deposits increased $1.6 billion or 25.9% to $7.9 billion, primarily due to higher deposit balances driven by the strategic growth from our recent acquisitions. Average transaction deposits increased $1.5 billion or 26.7%, and average non-interest bearing demand deposits increased $264.0 million or 10.6%. The mix of transaction deposits to total deposits remained consistent at 87.8%, and the mix of non-interest bearing demand deposits to total deposits was 30.5%, compared to 40.2% at September 30, 2022.

Non-interest income totaled $47.9 million, a decrease of $5.3 million or 10.0%, largely driven by $9.5 million of lower mortgage banking income due to lower purchase and refinance activity, as well as competition driving tighter gains on sale margins. This decrease was partially offset by $1.5 million of trust income, $1.3 million of gains on SBA loan sales, as well as 2023’s Cambr income, all of which are new and diversified sources of fee revenue. Service charges and bank card fees increased a combined $2.8 million compared to the same period prior year. Included in non-interest income during 2023 was $4.4 million in impairments related to venture capital investments classified as non-marketable securities and a $1.1 million gain from the sale of mortgage servicing rights.

Non-interest expense totaled $179.9 million, an increase of $36.3 million, or 25.3%, primarily due to an increase in core operating expenses driven by our 2022 acquisitions. Included in other non-interest expense is $4.0 million higher FDIC deposit insurance expense as a result of our recent acquisitions and an increase in the FDIC assessment rate effective January 2023. Included in the first nine months of 2022 were non-recurring acquisition-related expenses of $8.3 million related to our 2022 acquisitions.

Income tax expense totaled $27.8 million, an increase of $15.8 million from the same period last year, driven by higher pre-tax income. The effective tax rate was 20.3% for the first nine months of 2023, compared to 18.0% in the prior year.

Conference CallManagement will host a conference call to review the results at 11:00 a.m. Eastern Time on Wednesday, October 25, 2023. Interested parties may listen to this call by dialing (877) 400-0505 using the participant passcode of 9162801 and asking for the NBHC Q3 2023 Earnings Call. The earnings release and a link to the replay of the call will be available on the Company’s website at www.nationalbankholdings.com by visiting the investor relations area.

About National Bank Holdings CorporationNational Bank Holdings Corporation is a bank holding company created to build a leading community bank franchise, delivering high quality client service and committed to stakeholder results. Through its bank subsidiaries, NBH Bank and Bank of Jackson Hole Trust, National Bank Holdings Corporation operates a network of over 95 banking centers, serving individual consumers, small, medium and large businesses, and government and non-profit entities. Its banking centers are located in its core footprint of Colorado, the greater Kansas City region, Utah, Wyoming, Texas, New Mexico and Idaho. Its comprehensive residential mortgage banking group primarily serves the bank’s core footprint. Its trust and wealth management business is operated in its core footprint under the Bank of Jackson Hole Trust charter. NBH Bank operates under a single state charter through the following brand names as divisions of NBH Bank: in Colorado, Community Banks of Colorado and Community Banks Mortgage; in Kansas and Missouri, Bank Midwest and Bank Midwest Mortgage; in Texas, Utah, New Mexico and Idaho, Hillcrest Bank and Hillcrest Bank Mortgage; and in Wyoming, Bank of Jackson Hole and Bank of Jackson Hole Mortgage. Additional information about National Bank Holdings Corporation can be found at www.nationalbankholdings.com.

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

About Non-GAAP Financial MeasuresCertain of the financial measures and ratios we present, including “tangible assets,” “return on average tangible assets,” “tangible common equity,” “return on average tangible common equity,” “tangible common book value per share,” “tangible common book value, excluding accumulated other comprehensive loss, net of tax,” “tangible common book value per share, excluding accumulated other comprehensive loss, net of tax,” “tangible common equity to tangible assets,” “non-interest expense adjusted for other intangible assets amortization and acquisition-related expenses,” “non-interest expense adjusted for acquisition-related expenses,” “efficiency ratio adjusted for other intangible assets amortization and acquisition-related expenses,” “adjusted net income,” “adjusted earnings per share – diluted,” “net income adjusted for the impact of other intangible assets amortization expense and acquisition-related expenses, after tax,” “net income excluding the impact of other intangible assets amortization expense, after tax,” “adjusted return on average tangible assets,” “adjusted return on average tangible common equity,” “pre-provision net revenue,” “pre-provision net revenue adjusted for acquisition-related expenses,” and “fully taxable equivalent” metrics, are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.

These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance. A reconciliation of non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.

Forward-Looking StatementsThis press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contain words such as “anticipate,” “believe,” “can,” “would,” “should,” “could,” “may,” “predict,” “seek,” “potential,” “will,” “estimate,” “target,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “intend” or similar expressions that relate to the Company’s strategy, plans or intentions. Forward-looking statements involve certain important risks, uncertainties and other factors, any of which could cause actual results to differ materially from those in such statements. Such factors include, without limitation, the “Risk Factors” referenced in our most recent Form 10-K filed with the Securities and Exchange Commission (SEC), other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, and the following factors: difficulties in integrating the NBHC, Community Bancorporation, Bancshares of Jackson Hole Incorporated, or Cambr Solutions, LLC businesses or fully realizing cost savings and other benefits; business disruption following the mergers; ability to execute our business strategy (including our digital strategy); business and economic conditions; effects of any potential government shutdowns; economic, market, operational, liquidity, credit and interest rate risks associated with the Company’s business; effects of any changes in trade, monetary and fiscal policies and laws; changes imposed by regulatory agencies to increase capital standards; effects of inflation, as well as, interest rate, securities market and monetary supply fluctuations; changes in the economy or supply-demand imbalances affecting local real estate values; changes in consumer spending, borrowings and savings habits; with respect to our mortgage business, the inability to negotiate fees with investors for the purchase of our loans or our obligation to indemnify purchasers or repurchase related loans; the Company’s ability to identify potential candidates for, consummate, integrate and realize operating efficiencies from, acquisitions, consolidations and other expansion opportunities; the Company's ability to realize anticipated benefits from enhancements or updates to its core operating systems from time to time without significant change in client service or risk to the Company's control environment; the Company's dependence on information technology and telecommunications systems of third-party service providers and the risk of systems failures, interruptions or breaches of security; the Company’s ability to achieve organic loan and deposit growth and the composition of such growth; changes in sources and uses of funds; increased competition in the financial services industry; the effect of changes in accounting policies and practices; the share price of the Company’s stock; the Company's ability to realize deferred tax assets or the need for a valuation allowance; the effects of tax legislation, including the potential of future increases to prevailing tax rules, or challenges to our positions; continued consolidation in the financial services industry; ability to maintain or increase market share and control expenses; costs and effects of changes in laws and regulations and of other legal and regulatory developments; technological changes; the timely development and acceptance of new products and services, including in the digital technology space our digital solution 2UniFi; the Company’s continued ability to attract, hire and maintain qualified personnel; ability to implement and/or improve operational management and other internal risk controls and processes and reporting system and procedures; regulatory limitations on dividends from our bank subsidiaries; changes in estimates of future credit reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; widespread natural and other disasters, pandemics, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; a cybersecurity incident, data breach or a failure of a key information technology system; impact of reputational risk; and success at managing the risks involved in the foregoing items. The Company can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of this press release, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.

Contact:Analysts/Institutional Investors: Aldis Birkans, Chief Financial Officer, (720) 554-6640, ir@nationalbankholdings.com Media: Jody Soper, Chief Marketing Officer, (303) 784-5925, Jody.Soper@nbhbank.comNATIONAL BANK HOLDINGS CORPORATIONFINANCIAL SUMMARYConsolidated Statements of Operations (Unaudited)(Dollars in thousands, except share and per share data)

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

NATIONAL BANK HOLDINGS CORPORATIONLoan Portfolio (Dollars in thousands)

Period End Loan Balances by Type

Loan Fundings(1)

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

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

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

Allowance for Credit Losses Analysis

Past Due and Non-accrual Loans

Asset Quality Data

NATIONAL BANK HOLDINGS CORPORATIONKey Metrics(1)

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

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

Return on Average Tangible Assets and Return on Average Tangible Equity

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