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National Bank Holdings Posts 4th Quarter 2013 Financial Results and Increases Share Repurchase Authorization

January 31, 2014

National Bank Holdings Corp. reported net income of $1.0 million , or $0.02 per diluted share, for the fourth quarter of 2013, compared to net income of $0.9 million , or $0.02 per diluted share, for the third quarter of 2013. According to a release, in announcing these results, President and Chief Executive Officer Tim Laney said, "We are pleased to report continued strength and momentum in our loan production during the fourth quarter with $244.2 million in new loan originations and total loans growing by $111.3 million , or 25.3 percent annualized. We are realizing solid growth while maintaining strong credit quality, as reflected by total charge-offs on originated loans of just three basis points during 2013." Laney continued, "In just over three years, we have acquired four banks with $2.8 billion in loans. Almost $2 billion of these loans were determined to be distressed or non-strategic. We closed out 2013 with non-strategic loan balances at $350.0 million and with strong workout performance as evidenced by a pickup of $166.7 million of net accretable yield. At the same time, we have grown our strategic portfolio from $800 million to over $1.5 billion and our organic loan growth has outpaced our aggressive reduction in non- strategic loans, resulting in net loan growth during the second half of 2013. To put organic loan growth in perspective - new loan fundings of approximately $714 million represented a 65 percent increase over 2012." Laney added, "We end 2013 with a focus on levering our momentum in loan production to expand client relationships and realize solid growth in fee income and transaction account balances during 2014." With regard to mergers and acquisitions, Laney shared, "We are not pleased with the current pace of acquisitions but remain confident that there are opportunities to leverage capital in situations that we believe will create attractive returns for our investors. In the interim, we expect to continue to opportunistically buy in our shares, as evidenced by the 7.4 million shares that have been repurchased to date, representing a 14.2 percent reduction in total shares outstanding. To take advantage of future opportunities, we recently increased our share repurchase program to $50 million . Further, we believe these repurchases could serve to offset any future share issuances for acquisitions." Fourth Quarter 2013 Highlights -Grew the strategic loan portfolio by $174.5 million , or 52.1 percent annualized, driven by $244.2 million in originations, a 27.4 percent linked quarter increase in originations and a 74.7 percent increase over the fourth quarter last year. -Successfully exited $63.2 million , or 60.7 percent annualized, of the non-strategic loan portfolio. -Total loans increased $111.3 million , or 25.3 percent annualized, over September 30, 2013 . -Increased client cash flow estimates resulted in a net addition of $23.6 million to accretable yield for the acquired loans accounted for under ASC 310-30, complemented by $0.2 million in provision recoupments within that portfolio. -Credit quality of the non 310-30 loan portfolio continued to improve, with non-performing loans decreasing to 1.51 percent of total non 310-30 loans at December 31, 2013 from 2.31 percent at September 30, 2013 . -Net interest income totaled $43.6 million , decreasing $1.9 million from the prior quarter. The third quarter had the benefit of $2.5 million from the early pay off of one ASC 310-30 loan pool. -Operating expenses before the banking center closure charges, problem loan/OREO workout expenses and fair value changes to the warrant liability decreased $2.2 million from the prior quarter driven by efficiency initiatives. -Problem loan/OREO workout expenses totaled $4.6 million , increasing $3.0 million from the prior quarter as the third quarter included the benefit of $3.5 million of OREO gains. -Repurchased 6,306,551 shares at a weighted average price of $20.00 per share and announced a new $35 million share repurchase authorization. -Tangible common book value per share was $18.27 before consideration of the excess accretable yield value of $0.75 per share. Net interest income totaled $43.6 million for the fourth quarter of 2013, decreasing $1.9 million compared to the prior quarter. The linked quarter decrease was largely reflective of an early payoff of one loan pool in the third quarter, which resulted in an immediate recognition of $2.5 million of accretable yield at that time. Excluding the $2.5 million of accretable yield recognized in the prior quarter, the net interest income increased slightly as strong originations have helped stabilize interest income. Interest earning assets declined $174.0 million , largely due to the $126.1 million of cash used to repurchase shares during the fourth quarter. Higher yields on the ASC 310-30 loan portfolio (acquired loan pools) were realized as a result of the continued improvements in expected cash flows on these loans and the resulting transfers to accretable yield in recent quarters. The increase in yield on the ASC 310-30 loans was offset by lower average balances in the ASC 310-30 portfolio as we continue to actively exit the non-strategic loan portfolio. A three basis point decrease in yield earned on interest earning assets was complemented by a one basis point decrease in the cost of interest bearing deposits and client repurchase agreements. As a result, the fourth quarter net interest margin narrowed by two basis points to 3.78 percent. During the fourth quarter total loans increased $111.3 million , or 25.3 percent annualized, ending at $1.9 billion . Strategic loans totaled $1.5 billion at December 31, 2013 and increased $174.5 million , or 52.1 percent annualized, on the strength of $244.2 million in loan originations, a $52.5 million increase from the third quarter of 2013, and a 74.7 percent increase over the fourth quarter of 2012. Included in strategic loans outstanding are $1.1 billion in originated balances, which increased $206.4 million , or 93.4 percent annualized, over the prior quarter. Consistent with the strategy of exiting the non-strategic loan portfolio, balances of non-strategic relationships decreased $63.2 million during the quarter, or 60.7 percent annualized, to $350.0 million , as adversely rated and other non-strategic relationships paid off or paid down. Strategic loans include all originated loans in addition to those acquired loans inside the Company's operating markets that meet its credit risk profile. Identification as strategic for acquired loans was made at the time of acquisition. Criteria utilized in the designation of an acquired loan as "strategic" include (a) geography, (b) total relationship with borrower and (c) credit metrics commensurate with the Company's current underwriting standards. More information: ((Comments on this story may be sent to ))

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