Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-35654 NATIONAL BANK HOLDINGS CORPORATION (Exact name of registrant as specified in its charter) Delaware 27-0563799 (State or ...

National Bank Holdings Corporation (NYSE:NBHC) Q4 2019 Results Conference Call January 24, 2020 11:00 AM ET Company Participants Tim Laney - Chairman, President and CEO Aldis Birkans - CFO Rick Newfield - Chief Risk Management Officer Conference Call Participants Chris McGratty - KBW Gordon McGuire - Stephens Inc. Jake Stern - D.A. Davidson Andrew Liesch - Piper Sandler Operator Good morning everyone and welcome to the National Bank Holdings Corporation 2019 Fourth Quarter Earnings Call. My name is Amy, and ...

[Cover Page and Filing Information](index=1&type=section&id=Cover%20Page) This section identifies the document as a Quarterly Report (Form 10-Q) for NATIONAL BANK HOLDINGS CORPORATION, detailing its filing period and key trading information - The document is a Quarterly Report (Form 10-Q) filed by NATIONAL BANK HOLDINGS CORPORATION for the quarterly period ended September 30, 2019[1](index=1&type=chunk)[2](index=2&type=chunk) **Trading and Stock Information:** | Metric | Value | | :--- | :--- | | Trading Symbol | NBHC | | Exchange | NYSE | | Class A Common Stock Outstanding (as of Nov 4, 2019) | 31,171,126 shares | [Table of Contents](index=2&type=section&id=Table%20of%20Contents) This section provides an organized listing of all chapters and sub-sections contained within the report for easy navigation [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that the report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - This report contains forward-looking statements based on current expectations and projections, which involve estimates, known and unknown risks, assumptions, and uncertainties that could cause actual results to differ materially[7](index=7&type=chunk) - Key factors that could cause actual results to differ include changes in business strategy, economic conditions, regulatory policies, interest rates, real estate values, consumer habits, acquisition integration, dependence on third-party IT, loan and deposit growth, competition, accounting policies, tax legislation, legal proceedings, technological changes, and cybersecurity incidents[8](index=8&type=chunk)[9](index=9&type=chunk)[11](index=11&type=chunk) [Part I. Financial Information](index=6&type=section&id=Part%20I.%20Financial%20Information) This part presents the unaudited consolidated financial statements and management's discussion and analysis of the Company's financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements of National Bank Holdings Corporation and its subsidiaries for the period ended September 30, 2019, including statements of financial condition, operations, comprehensive income, changes in shareholders' equity, and cash flows, along with accompanying notes. The statements are prepared in accordance with U.S. GAAP and rely on management's significant estimates - The notes provide detailed information and explanations supporting the consolidated financial statements, covering basis of presentation, recent accounting pronouncements, investment securities, loans, allowance for loan losses, leases, OREO, goodwill and intangibles, borrowings, regulatory capital, revenue recognition, stock-based compensation, common stock, earnings per share, derivatives, commitments, contingencies, fair value measurements, and acquisition activities[25](index=25&type=chunk) - Management's estimates are crucial for financial reporting, particularly for asset valuation, loan loss allowance, and fair value measurements, and actual results could differ significantly from these estimates[27](index=27&type=chunk) [Consolidated Statements of Financial Condition](index=6&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) This statement provides a snapshot of the Company's assets, liabilities, and shareholders' equity at specific points in time, highlighting changes in key financial positions **Consolidated Statements of Financial Condition (in thousands of dollars):** | Metric | Sep 30, 2019 | Dec 31, 2018 | Change | | :-------------------------------- | :----------- | :----------- | :------- | | Total Assets | $5,990,050 | $5,676,666 | +$313,384 | | Loans, net | $4,363,207 | $4,056,616 | +$306,591 | | Total Deposits | $4,733,860 | $4,535,621 | +$198,239 | | Total Liabilities | $5,236,724 | $4,981,660 | +$255,064 | | Total Shareholders' Equity | $753,326 | $695,006 | +$58,320 | - Loans held for sale increased significantly from **$48.1 million** at December 31, 2018, to **$204.6 million** at September 30, 2019[13](index=13&type=chunk) - Non-interest bearing demand deposits increased by **$165.2 million**, contributing to overall deposit growth[13](index=13&type=chunk) [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) This statement details the Company's revenues, expenses, and net income over specific periods, reflecting its profitability and operational performance **Consolidated Statements of Operations (in thousands of dollars, except per share data):** | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Interest and Dividend Income | $61,372 | $55,909 | $182,985 | $163,611 | | Total Interest Expense | $9,587 | $6,137 | $27,543 | $16,806 | | Net Interest Income before Provision | $51,785 | $49,772 | $155,442 | $146,805 | | Provision for Loan Losses | $5,690 | $807 | $10,463 | $2,721 | | Total Non-interest Income | $24,759 | $18,061 | $62,470 | $55,458 | | Total Non-interest Expense | $43,793 | $44,432 | $134,638 | $146,477 | | Net Income | $21,642 | $18,240 | $60,846 | $44,216 | | Income per share—diluted | $0.69 | $0.58 | $1.93 | $1.41 | - Net income increased by **$3.4 million (18.6%)** for the three months and **$16.6 million (37.6%)** for the nine months ended September 30, 2019, compared to the prior year periods[15](index=15&type=chunk) - Provision for loan losses saw a significant increase, rising from **$807 thousand** to **$5.7 million** for the three months and from **$2.7 million** to **$10.5 million** for the nine months[15](index=15&type=chunk) [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents net income alongside other comprehensive income items, such as unrealized gains or losses on available-for-sale securities, to arrive at total comprehensive income **Consolidated Statements of Comprehensive Income (in thousands of dollars):** | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income | $21,642 | $18,240 | $60,846 | $44,216 | | Other Comprehensive Income (Loss) | $1,581 | $(2,807) | $14,362 | $(12,493) | | Comprehensive Income | $23,223 | $15,433 | $75,208 | $31,723 | - Other comprehensive income experienced a significant positive swing, moving from a loss of **$2.8 million** in Q3 2018 to a gain of **$1.6 million** in Q3 2019, and from a loss of **$12.5 million** to a gain of **$14.4 million** for the nine months, primarily due to net unrealized gains on available-for-sale securities[17](index=17&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This statement tracks the changes in the Company's shareholders' equity over a period, reflecting the impact of net income, dividends, stock-based compensation, and other comprehensive income **Consolidated Statements of Changes in Shareholders' Equity (in thousands of dollars):** | Metric | Balance Dec 31, 2018 | Net Income | Stock-based Compensation | Cash Dividends Declared | Other Comprehensive Income | Balance Sep 30, 2019 | | :-------------------------- | :------------------- | :--------- | :----------------------- | :---------------------- | :------------------------- | :------------------- | | Total Shareholders' Equity | $695,006 | $60,846 | $3,325 | $(17,226) | $14,362 | $753,326 | - Total shareholders' equity increased by **$58.3 million** from **$695.0 million** at December 31, 2018, to **$753.3 million** at September 30, 2019, primarily driven by net income and other comprehensive income[20](index=20&type=chunk) - Cash dividends declared for the nine months ended September 30, 2019, totaled **$17.2 million ($0.55 per share)**[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement categorizes cash inflows and outflows into operating, investing, and financing activities, providing insight into the Company's liquidity and solvency **Consolidated Statements of Cash Flows (in thousands of dollars):** | Cash Flow Activity | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Net cash (used in) provided by operating activities | $(60,604) | $23,070 | | Net cash (used in) provided by investing activities | $(108,628) | $34,092 | | Net cash provided by (used in) financing activities | $176,595 | $(193,067) | | Decrease in cash, cash equivalents and restricted cash | $7,363 | $(135,905) | | Cash, cash equivalents and restricted cash at end of period | $126,919 | $121,459 | - Operating activities shifted from providing **$23.1 million** in 2018 to using **$60.6 million** in 2019, largely due to changes in loans held for sale and loan accretion[24](index=24&type=chunk) - Financing activities provided **$176.6 million** in 2019, a significant change from using **$193.1 million** in 2018, driven by a net increase in deposits and FHLB advances[24](index=24&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information essential for a comprehensive understanding of the Company's financial statements, accounting policies, and significant estimates [Note 1 Basis of Presentation](index=11&type=section&id=Note%201%20Basis%20of%20Presentation) This note describes the Company's corporate structure, its primary banking subsidiary, and the accounting principles and practices used in preparing the financial statements - National Bank Holdings Corporation (NBHC) is a Delaware-incorporated bank holding company, with NBH Bank as its wholly-owned Colorado state-chartered subsidiary, operating **105 banking centers**[25](index=25&type=chunk) - The interim unaudited consolidated financial statements are prepared in accordance with U.S. GAAP and banking industry practices, and reflect management's necessary adjustments, which are of a normal recurring nature[26](index=26&type=chunk) [Note 2 Recent Accounting Pronouncements](index=11&type=section&id=Note%202%20Recent%20Accounting%20Pronouncements) This note outlines the adoption of new accounting standards, such as ASU 2016-02 for Leases, and the anticipated impact of future standards like CECL on the Company's financial reporting - The Company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, recognizing **$30.5 million** in right-of-use assets and related lease liabilities, with a **$0.3 million** cumulative-effect adjustment to retained earnings[29](index=29&type=chunk)[31](index=31&type=chunk) - ASU 2016-13, Financial Instruments - Credit Losses (CECL), becomes effective on January 1, 2020. The Company is implementing a third-party vendor solution and expects the adoption to potentially increase the allowance for loan losses by changing from an 'incurred loss' to an 'expected loss' model[32](index=32&type=chunk) [Note 3 Investment Securities](index=13&type=section&id=Note%203%20Investment%20Securities) This note details the composition, fair value, and unrealized gains or losses of the Company's available-for-sale and held-to-maturity investment securities portfolio - Total investment securities decreased from **$1.0 billion** at December 31, 2018, to **$0.9 billion** at September 30, 2019, comprising **$0.7 billion** of available-for-sale (AFS) securities and **$0.2 billion** of held-to-maturity (HTM) securities[34](index=34&type=chunk) **Available-for-Sale Securities (in millions of dollars):** | Metric | Sep 30, 2019 | Dec 31, 2018 | Change | | :----------------------------------- | :----------- | :----------- | :------- | | Fair Value | $661.1 | $791.1 | -$130.0 | | Gross Unrealized Gains | $6.5 | $2.3 | +$4.2 | | Gross Unrealized Losses | $(5.2) | $(20.9) | +$15.7 | | Securities with Unrealized Losses (Fair Value) | $298.4 | $682.9 | -$384.5 | **Held-to-Maturity Securities (in millions of dollars):** | Metric | Sep 30, 2019 | Dec 31, 2018 | Change | | :----------------------------------- | :----------- | :----------- | :------- | | Amortized Cost | $190.0 | $235.4 | -$45.4 | | Fair Value | $190.7 | $230.9 | -$40.2 | | Gross Unrealized Gains | $1.1 | $0.002 | +$1.1 | | Gross Unrealized Losses | $(0.47) | $(4.47) | +$4.0 | | Securities with Unrealized Losses (Fair Value) | $40.2 | $229.6 | -$189.4 | [Note 4 Loans](index=19&type=section&id=Note%204%20Loans) This note provides a detailed breakdown of the Company's loan portfolio by segment, highlighting growth trends and the recorded investment in impaired loans **Loan Portfolio Composition (in thousands of dollars):** | Loan Segment | Sep 30, 2019 | % of Total | Dec 31, 2018 | % of Total | Change | | :-------------------------------- | :----------- | :--------- | :----------- | :--------- | :------- | | Commercial | $2,948,467 | 67.0% | $2,644,571 | 64.6% | +$303,896 | | Commercial real estate non-owner occupied | $641,180 | 14.6% | $592,212 | 14.5% | +$48,968 | | Residential real estate | $790,077 | 17.9% | $830,815 | 20.3% | -$40,738 | | Consumer | $22,193 | 0.5% | $24,710 | 0.6% | -$2,517 | | Total Loans | $4,401,917 | 100.0% | $4,092,308 | 100.0% | +$309,609 | - Total loans increased by **$309.6 million (7.6%)** since December 31, 2018, primarily driven by growth in commercial and commercial real estate non-owner occupied segments[50](index=50&type=chunk) - Recorded investment in impaired loans increased from **$31.1 million** at December 31, 2018, to **$37.0 million** at September 30, 2019, with a related allowance for loan losses of **$1.8 million**[55](index=55&type=chunk) [Note 5 Allowance for Loan Losses](index=29&type=section&id=Note%205%20Allowance%20for%20Loan%20Losses) This note details the changes in the Allowance for Loan Losses (ALL), including provisions and net charge-offs, and its adequacy to cover probable loan losses - The Allowance for Loan Losses (ALL) increased to **$38.7 million** at September 30, 2019, from **$35.7 million** at December 31, 2018[65](index=65&type=chunk) - Provision for originated and acquired loan losses was **$5.7 million** for the three months and **$10.5 million** for the nine months ended September 30, 2019, including **$4.2 million** and **$6.6 million**, respectively, related to one previously identified acquired commercial loan[68](index=68&type=chunk) - Net charge-offs on originated and acquired loans totaled **$7.1 million** for the three months and **$7.4 million** for the nine months ended September 30, 2019, including **$6.6 million** for the aforementioned commercial loan[68](index=68&type=chunk) [Note 6 Leases](index=31&type=section&id=Note%206%20Leases) This note outlines the impact of adopting the new lease accounting standard, including the recognition of right-of-use assets and lease liabilities on the balance sheet - Upon adoption of ASU 2016-02, Leases, on January 1, 2019, the Company recognized **$30.5 million** in right-of-use (ROU) assets and related lease liabilities, with a **$0.3 million** cumulative-effect adjustment to retained earnings[70](index=70&type=chunk)[71](index=71&type=chunk) - As of September 30, 2019, ROU assets totaled **$30.7 million** and lease liabilities totaled **$30.9 million**[71](index=71&type=chunk) - The weighted-average remaining lease term for operating leases was **5.3 years** at September 30, 2019, with a weighted-average discount rate of **3.34%**[73](index=73&type=chunk) [Note 7 Other Real Estate Owned](index=34&type=section&id=Note%207%20Other%20Real%20Estate%20Owned) This note details the changes in Other Real Estate Owned (OREO), including sales, gains, and impairment charges, reflecting the Company's management of foreclosed properties - Other Real Estate Owned (OREO) decreased to **$7.9 million** at September 30, 2019, from **$10.6 million** at December 31, 2018[76](index=76&type=chunk) - Sales of OREO properties resulted in net gains of **$7.2 million** for the nine months ended September 30, 2019, compared to **$0.4 million** in the prior year[76](index=76&type=chunk) - Impairments on OREO totaled **$872 thousand** for the nine months ended September 30, 2019[76](index=76&type=chunk) [Note 8 Goodwill and Intangible Assets](index=34&type=section&id=Note%208%20Goodwill%20and%20Intangible%20Assets) This note provides information on the Company's goodwill and other intangible assets, including core deposit intangibles and mortgage servicing rights, and related amortization or impairment - Goodwill remained at **$115.0 million** with no impairment recorded during the three or nine months ended September 30, 2019[77](index=77&type=chunk) - The net carrying amount of core deposit intangibles decreased to **$9.0 million** at September 30, 2019, from **$9.9 million** at December 31, 2018, with amortization expense of **$0.9 million** for the nine months ended September 30, 2019[78](index=78&type=chunk) - The fair value of mortgage servicing rights was **$2.6 million** at September 30, 2019, down from **$3.7 million** at September 30, 2018. Impairment of **$453 thousand** was recognized for the nine months ended September 30, 2019[81](index=81&type=chunk)[82](index=82&type=chunk) [Note 9 Borrowings](index=35&type=section&id=Note%209%20Borrowings) This note details the Company's various borrowing activities, including securities sold under repurchase agreements and Federal Home Loan Bank (FHLB) advances, and associated interest expenses - Securities sold under agreements to repurchase totaled **$62.7 million** at September 30, 2019, a decrease from **$66.0 million** at December 31, 2018[84](index=84&type=chunk) - Federal Home Loan Bank (FHLB) advances totaled **$303.9 million** at September 30, 2019, including **$278.9 million** in overnight advances and a **$15.0 million** term advance. The Bank has a total available credit of **$1.0 billion** from the FHLB[85](index=85&type=chunk) - Interest expense related to FHLB advances and other short-term borrowings was **$4.8 million** for the nine months ended September 30, 2019, significantly higher than **$1.7 million** in the prior year[86](index=86&type=chunk) [Note 10 Regulatory Capital](index=37&type=section&id=Note%2010%20Regulatory%20Capital) This note confirms the Company's and NBH Bank's compliance with Basel III capital requirements, detailing key capital ratios and their comparison to adequately capitalized thresholds - Both the Company and NBH Bank met all Basel III capital requirements at September 30, 2019, with the Bank maintaining regulatory capital ratios in excess of the levels established for well-capitalized institutions[89](index=89&type=chunk) **Consolidated Capital Ratios (September 30, 2019):** | Ratio | Actual | Required to be Adequately Capitalized | | :-------------------------------- | :------- | :------------------------------------ | | Tier 1 leverage ratio | 10.9% | 4.0% | | Common equity tier 1 risk-based capital | 12.9% | 7.0% | | Tier 1 risk-based capital ratio | 12.9% | 8.5% | | Total risk-based capital ratio | 13.8% | 10.5% | - The capital conservation buffer requirement, which adds a **2.5%** capital requirement above existing regulatory minimums, was fully phased in on January 1, 2019[88](index=88&type=chunk) [Note 11 Revenue from Contracts with Clients](index=38&type=section&id=Note%2011%20Revenue%20from%20Contracts%20with%20Clients) This note clarifies the application of ASC Topic 606 to non-interest revenue streams and provides a breakdown of in-scope revenue, emphasizing the transactional nature of contracts - ASC Topic 606, Revenue from Contracts with Customers, is applicable to non-interest revenue streams such as deposit-related fees, interchange fees, and merchant income, but not to revenue associated with financial instruments like loans and securities, or mortgage servicing rights[92](index=92&type=chunk) **Non-Interest Income In-Scope of Topic 606 (in thousands of dollars):** | Revenue Stream | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | Change | | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | Service Charges and other fees | $14,822 | $15,328 | -$506 | | Bank card fees | $10,946 | $10,720 | +$226 | | Total In-scope | $25,768 | $26,048 | -$280 | - The Company does not typically have significant contract balances or capitalize contract acquisition costs due to the transactional or short-term nature of its revenue contracts[98](index=98&type=chunk)[99](index=99&type=chunk) [Note 12 Stock-based Compensation and Benefits](index=40&type=section&id=Note%2012%20Stock-based%20Compensation%20and%20Benefits) This note details the expenses and unrecognized costs related to the Company's stock option plans, restricted stock awards, performance stock units, and employee stock purchase plan - Stock option expense totaled **$0.5 million** for the nine months ended September 30, 2019, with **$1.0 million** of total unrecognized compensation cost remaining, expected to be recognized over a weighted average period of **2.2 years**[103](index=103&type=chunk) - Unrecognized compensation cost related to non-vested restricted stock awards and performance stock units totaled **$2.7 million** and **$2.9 million**, respectively, as of September 30, 2019[107](index=107&type=chunk) - Under the Employee Stock Purchase Plan (ESPP), employees purchased **16,556 shares** during the nine months ended September 30, 2019[109](index=109&type=chunk) [Note 13 Common Stock](index=42&type=section&id=Note%2013%20Common%20Stock) This note provides information on the number of common shares outstanding and the remaining authorization under the Company's share repurchase program - The Company had **31,169,086 shares** of Class A common stock outstanding at September 30, 2019[110](index=110&type=chunk) - As of September 30, 2019, **$12.6 million** remained authorized under the **$50.0 million** share repurchase program approved on August 5, 2016. No shares were repurchased during the three or nine months ended September 30, 2019[111](index=111&type=chunk)[308](index=308&type=chunk) [Note 14 Earnings Per Share](index=42&type=section&id=Note%2014%20Earnings%20Per%20Share) This note presents the calculation of diluted earnings per share, reflecting the impact of net income and weighted average shares outstanding **Diluted Earnings Per Share (in thousands of dollars, except per share data):** | Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Net Income | $60,846 | $44,216 | | Income allocated to common shareholders | $60,777 | $44,167 | | Diluted Earnings Per Share | $1.93 | $1.41 | | Weighted average shares outstanding for diluted EPS | 31,537,334 shares | 31,388,786 shares | - Diluted earnings per share increased to **$1.93** for the nine months ended September 30, 2019, from **$1.41** in the prior year[114](index=114&type=chunk) [Note 15 Derivatives](index=44&type=section&id=Note%2015%20Derivatives) This note describes the Company's use of derivative financial instruments, primarily interest rate swaps, for risk management and balance sheet repricing strategies - The Company uses derivative financial instruments, primarily interest rate swaps, for risk management, including fair value hedges and economic hedges, to manage interest rate risk and achieve desired balance sheet repricing[115](index=115&type=chunk) - The notional amount of interest rate swaps designated as fair value hedges decreased to **$427.2 million** at September 30, 2019, from **$473.4 million** at December 31, 2018[120](index=120&type=chunk) - Matched interest rate swap transactions (non-designated hedges) with commercial banking clients significantly increased to an aggregate notional amount of **$462.4 million** at September 30, 2019, from **$206.8 million** at December 31, 2018[122](index=122&type=chunk) [Note 16 Commitments and Contingencies](index=49&type=section&id=Note%2016%20Commitments%20and%20Contingencies) This note outlines the Company's off-balance sheet commitments, such as loan funding and letters of credit, and addresses potential impacts from legal proceedings **Total Unfunded Commitments (in thousands of dollars):** | Commitment Type | Sep 30, 2019 | Dec 31, 2018 | Change | | :-------------------------------- | :----------- | :----------- | :------- | | Commitments to fund loans | $216,363 | $183,946 | +$32,417 | | Unfunded commitments under lines of credit | $584,779 | $589,573 | -$4,794 | | Commercial and standby letters of credit | $11,705 | $10,558 | +$1,147 | | Total Unfunded Commitments | $812,847 | $784,077 | +$28,770 | - The Company recorded a repurchase reserve of **$2.5 million** at September 30, 2019, down from **$3.4 million** at December 31, 2018, for expected losses related to mortgage loan representations and warranties[138](index=138&type=chunk) - Management does not believe that any potential, threatened, or pending litigation will have a material adverse effect on the Company's liquidity, financial condition, or results of operations[139](index=139&type=chunk) [Note 17 Fair Value Measurements](index=51&type=section&id=Note%2017%20Fair%20Value%20Measurements) This note explains the categorization of financial instruments into fair value hierarchy levels and provides tables for recurring and non-recurring fair value adjustments - Fair value measurements categorize financial instruments into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[140](index=140&type=chunk)[146](index=146&type=chunk) **Recurring Fair Value Assets (September 30, 2019, in thousands of dollars):** | Asset Type | Level 1 | Level 2 | Level 3 | Total | | :----------------------------------- | :------ | :------ | :------ | :------ | | Investment securities available-for-sale | $0 | $660,491 | $0 | $660,491 | | Loans held for sale | $0 | $204,602 | $0 | $204,602 | | Interest rate swap derivatives | $0 | $11,006 | $0 | $11,006 | | Mortgage banking derivatives | $0 | $0 | $2,358 | $2,358 | | Total Assets at Fair Value | $0 | $876,099 | $2,358 | $878,457 | **Non-Recurring Fair Value Adjustments (9 Months Ended Sep 30, 2019, in thousands of dollars):** | Asset Type | Total | Losses from fair value changes | | :-------------------------- | :---- | :----------------------------- | | Impaired loans | $37,002 | $7,571 | | Other real estate owned | $7,904 | $872 | | Premises and equipment | $3,385 | $898 | | Mortgage servicing rights | $2,879 | $453 | [Note 18 Fair Value of Financial Instruments](index=56&type=section&id=Note%2018%20Fair%20Value%20of%20Financial%20Instruments) This note defines the fair value of financial instruments and provides a comparison of carrying amounts to estimated fair values for key balance sheet items - The fair value of a financial instrument is defined as the price that would be exchanged between willing parties in an orderly transaction, determined using quoted market prices or estimates based on present value and other valuation techniques[162](index=162&type=chunk) **Fair Value of Key Financial Instruments (September 30, 2019, in thousands of dollars):** | Instrument | Carrying Amount | Estimated Fair Value | | :-------------------------- | :-------------- | :------------------- | | Loans receivable | $4,401,917 | $4,518,410 | | Deposit transaction accounts | $3,666,559 | $3,666,559 | | Time deposits | $1,067,301 | $1,067,793 | [Note 19 Acquisition Activities](index=58&type=section&id=Note%2019%20Acquisition%20Activities) This note details the Company's acquisition of Peoples, Inc., including the purchase price, recognized goodwill and intangible assets, and associated acquisition-related costs - On January 1, 2018, the Company completed its acquisition of Peoples, Inc. for **$146.4 million** (cash and stock), with Peoples National Bank and Peoples Bank merging into NBH Bank[165](index=165&type=chunk) - In connection with the acquisition, the Company recorded **$55.4 million** of goodwill, a **$10.5 million** core deposit intangible asset, and a **$4.3 million** mortgage servicing rights intangible asset[168](index=168&type=chunk) - Acquisition-related costs of **$8.0 million** (pre-tax) were included in the Company's consolidated statements of operations for the nine months ended September 30, 2018[165](index=165&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=61&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's perspective on the Company's financial condition, results of operations, and key performance indicators for the period ended September 30, 2019, discussing trends, significant changes, and future outlook. It also includes reconciliations of non-GAAP financial measures [Overview](index=61&type=section&id=Overview) This section provides a high-level summary of the Company's strategic focus on client relationships and its financial position, including total assets, loans, deposits, and equity - The Company focuses on building client relationships and providing simple, fair-minded financial solutions, leveraging its established presence in core markets that are outperforming national averages for growth opportunities[173](index=173&type=chunk) **Financial Snapshot (as of September 30, 2019, in billions of dollars):** | Metric | Value | | :----- | :---- | | Assets | $6.0 | | Loans | $4.4 | | Deposits | $4.7 | | Equity | $0.8 | [Operating Highlights and Key Challenges](index=61&type=section&id=Operating%20Highlights%20and%20Key%20Challenges) This section summarizes the Company's financial performance, including net income and loan growth, alongside asset quality trends and significant non-interest expense changes, while also addressing external challenges - Net income for the nine months ended September 30, 2019, was **$60.8 million ($1.93 diluted EPS)**, up from **$44.2 million ($1.41 diluted EPS)** in the prior year. Adjusted for non-recurring acquisition expenses, prior year net income would have been **$50.5 million ($1.61 diluted EPS)**[176](index=176&type=chunk) - Total loans reached **$4.4 billion**, an annualized increase of **10.1%** since December 31, 2018, driven by record loan originations of **$1.3 billion** over the trailing 12 months[177](index=177&type=chunk)[183](index=183&type=chunk) - Non-performing loans decreased to **0.58%** of total loans at September 30, 2019, from **0.60%** at December 31, 2018. The provision for loan losses increased to **$10.5 million** for the nine months, including **$6.6 million** related to one previously acquired commercial loan[179](index=179&type=chunk)[183](index=183&type=chunk) - The fully taxable equivalent (FTE) net interest margin widened **six basis points** to **3.98%** for the nine months ended September 30, 2019[181](index=181&type=chunk) - Non-interest expense decreased by **$11.8 million** for the nine months, primarily due to **$7.2 million** in net gains on OREO sales and the absence of **$8.0 million** in non-recurring acquisition costs from the prior year. A **$0.9 million** impairment charge was recorded for planned banking center consolidations[182](index=182&type=chunk)[184](index=184&type=chunk) - Key challenges include a declining interest rate environment (three Federal Reserve rate cuts), trade tensions, cybersecurity, and increased competition from non-traditional banking participants[187](index=187&type=chunk)[191](index=191&type=chunk) [Performance Overview](index=67&type=section&id=Performance%20Overview) This section presents key annualized performance ratios, including returns on assets and equity, net interest margin, efficiency, and asset quality metrics, demonstrating operational and financial health **Key Performance Ratios (Annualized, 9 Months Ended Sep 30):** | Metric | 2019 | 2018 | | :----------------------------------- | :--- | :--- | | Return on average tangible assets (non-GAAP) | 1.45% | 1.11% | | Return on average tangible common equity (non-GAAP) | 13.43% | 11.36% | | Net interest margin FTE (non-GAAP) | 3.98% | 3.92% | | Efficiency ratio FTE (non-GAAP) | 60.33% | 70.38% | | Non-performing loans to total loans | 0.58% | 0.63% | | Allowance for loan losses to non-performing loans | 152.41% | 138.25% | - The FTE efficiency ratio improved significantly to **60.33%** for the nine months ended September 30, 2019, from **70.38%** in the prior year, indicating better operational efficiency[193](index=193&type=chunk) - Asset quality improved, with non-performing loans to total loans decreasing to **0.58%** and the allowance for loan losses to non-performing loans increasing to **152.41%**[193](index=193&type=chunk) [About Non-GAAP Financial Measures](index=69&type=section&id=About%20Non-GAAP%20Financial%20Measures) This section explains the Company's use of non-GAAP financial measures to provide supplemental insights into performance and facilitate comparisons, emphasizing their non-substitute nature to GAAP - The Company uses non-GAAP financial measures (e.g., tangible assets, adjusted efficiency ratio) to provide supplemental information for financial and operational decision-making and to facilitate period-to-period comparisons, by excluding items not indicative of primary business operations or presenting metrics on a fully taxable equivalent basis[196](index=196&type=chunk) - These non-GAAP measures are not substitutes for GAAP financial information, and reconciliations to comparable GAAP measures are provided to ensure transparency[197](index=197&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=69&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides detailed reconciliations of non-GAAP financial measures, such as tangible common book value and adjusted performance ratios, to their most directly comparable GAAP equivalents **Tangible Common Book Value Ratios (as of Sep 30):** | Metric | 2019 | 2018 | | :----------------------------------- | :----- | :----- | | Tangible common equity (non-GAAP, in thousands of dollars) | $637,284 | $554,869 | | Tangible assets (non-GAAP, in thousands of dollars) | $5,874,008 | $5,466,908 | | Tangible common equity to tangible assets (non-GAAP) | 10.85% | 10.15% | | Tangible common book value per share (non-GAAP) | $20.45 | $18.04 | **Adjusted Performance Ratios (9 Months Ended Sep 30):** | Metric | 2019 | 2018 (Adjusted) | | :----------------------------------- | :--- | :-------------- | | Adjusted return on average tangible assets (non-GAAP) | 1.45% | 1.27% | | Adjusted return on average tangible common equity (non-GAAP) | 13.43% | 12.94% | | Adjusted efficiency ratio FTE (non-GAAP) | 60.33% | 66.51% | - The adjusted efficiency ratio FTE improved to **60.33%** for the nine months ended September 30, 2019, from an adjusted **66.51%** in the prior year, reflecting enhanced operational efficiency[202](index=202&type=chunk) [Application of Critical Accounting Policies](index=73&type=section&id=Application%20of%20Critical%20Accounting%20Policies) This section highlights the significant judgments and material estimates involved in applying critical accounting policies, particularly for acquired loans and the Allowance for Loan Losses - The preparation of financial statements requires significant judgment and material estimates, particularly concerning the accounting for acquired loans and the determination of the Allowance for Loan Losses (ALL)[204](index=204&type=chunk) - These critical accounting policies and estimates are further detailed in the Company's 2018 Annual Report on Form 10-K[205](index=205&type=chunk) [Financial Condition](index=75&type=section&id=Financial%20Condition) The Company's financial condition at September 30, 2019, showed an increase in total assets, primarily driven by loan growth, funded by an increase in lower-cost transaction deposits. Investment securities decreased, and asset quality remained strong with improved non-performing asset ratios [Investment securities](index=75&type=section&id=Investment%20securities) This section discusses the decrease in total investment securities, specifically available-for-sale and held-to-maturity portfolios, primarily due to maturities and paydowns used to fund loan growth - Total investment securities decreased by **$175.7 million (16.7%)** to **$0.9 billion** at September 30, 2019, from **$1.0 billion** at December 31, 2018[206](index=206&type=chunk) - Available-for-sale (AFS) securities decreased by **$130.0 million** to **$661.1 million**, primarily due to maturities and paydowns, with proceeds utilized to fund loan originations[208](index=208&type=chunk)[272](index=272&type=chunk) - Held-to-maturity (HTM) securities decreased by **$45.4 million (19.3%)** to **$190.0 million**, also due to maturities and paydowns[214](index=214&type=chunk) [Loans overview](index=77&type=section&id=Loans%20overview) This section provides an overview of the Company's loan portfolio, highlighting significant growth in total loans, particularly in commercial segments, driven by strong new loan originations - The total loan portfolio increased by **$309.6 million (10.1% annualized)** to **$4.4 billion** at September 30, 2019, driven by new loan originations[220](index=220&type=chunk) - Originated and acquired loans grew by **$323.3 million (10.7% annualized)**, primarily led by commercial loan growth of **$342.2 million (18.4% annualized)**[220](index=220&type=chunk) - Loan originations over the trailing 12 months totaled a record **$1.3 billion**, with commercial loan originations accounting for **$869.0 million**[224](index=224&type=chunk) [Asset quality](index=84&type=section&id=Asset%20quality) This section assesses the Company's asset quality, noting improvements in non-performing asset ratios and an increase in the Allowance for Loan Losses to cover probable losses - Total non-performing assets to total loans and OREO decreased to **0.76%** at September 30, 2019, from **0.85%** at December 31, 2018, indicating improved asset quality[237](index=237&type=chunk) - Non-performing loans increased slightly by **$0.9 million** to **$25.4 million**, but as a percentage of total loans, they decreased to **0.58%** from **0.60%**[237](index=237&type=chunk) - The Allowance for Loan Losses (ALL) increased to **$38.7 million** at September 30, 2019, from **$35.7 million** at December 31, 2018, and is deemed adequate to cover probable losses[253](index=253&type=chunk) [Deposits](index=90&type=section&id=Deposits) This section highlights the growth in total deposits, particularly non-interest bearing demand deposits, and an improved mix of lower-cost transaction deposits - Total deposits increased by **$198.2 million (4.4%)** to **$4.73 billion** during the nine months ended September 30, 2019[258](index=258&type=chunk) - Non-interest bearing demand deposits increased by **$165.2 million (15.4%)**, and the mix of transaction deposits to total deposits improved to **77.5%** from **76.2%**, reflecting a focus on long-term banking relationships[257](index=257&type=chunk)[258](index=258&type=chunk) - Time deposits decreased by **$13.2 million (1.2%)** to **$1.07 billion**, with **$731.1 million** scheduled to mature within 12 months[257](index=257&type=chunk)[259](index=259&type=chunk) [Other borrowings](index=91&type=section&id=Other%20borrowings) This section details the Company's other borrowing sources, including securities sold under repurchase agreements and FHLB advances, and the associated interest expense trends - Securities sold under agreements to repurchase decreased to **$62.7 million** at September 30, 2019, from **$66.0 million** at December 31, 2018[260](index=260&type=chunk) - Federal Home Loan Bank (FHLB) advances totaled **$303.9 million** at September 30, 2019, with the Bank having access to a **$1.0 billion** line of credit and term financing from the FHLB[260](index=260&type=chunk) - Interest expense related to FHLB advances and other short-term borrowings was **$4.8 million** for the nine months ended September 30, 2019, up from **$1.7 million** in the prior year[261](index=261&type=chunk) [Results of Operations](index=92&type=section&id=Results%20of%20Operations) The Company reported increased net income for the three and nine months ended September 30, 2019, driven by higher net interest income and non-interest income, partially offset by increased provision for loan losses. Efficiency improved, and tax expense was influenced by stock compensation benefits [Overview of results of operations](index=93&type=section&id=Overview%20of%20results%20of%20operations) This section provides a summary of the Company's net income and diluted earnings per share, including adjustments for non-recurring acquisition expenses from the prior year **Net Income and EPS (in thousands of dollars, except per share data):** | Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income | $60,846 | $44,216 | | Diluted EPS | $1.93 | $1.41 | - Adjusting for **$6.3 million** in after-tax non-recurring acquisition expenses in 2018, net income for the nine months ended September 30, 2018, would have been **$50.5 million ($1.61 diluted EPS)**[264](index=264&type=chunk) [Net interest income](index=93&type=section&id=Net%20interest%20income) This section analyzes the growth in fully taxable equivalent (FTE) net interest income and the widening of the net interest margin, driven by increased earning asset yields and higher cost of funds - Fully taxable equivalent (FTE) net interest income increased by **$9.1 million (6.1%)** to **$159.2 million** for the nine months ended September 30, 2019[277](index=277&type=chunk) - The FTE net interest margin widened **six basis points** to **3.98%** for the nine months ended September 30, 2019[277](index=277&type=chunk) - The yield on earning assets increased **32 basis points** to **4.67%**, primarily driven by a **41 basis point** increase in originated loan portfolio yields due to higher new loan yields[277](index=277&type=chunk) - The cost of funds increased **37 basis points** to **0.96%** for the nine months ended September 30, 2019, with the cost of deposits increasing **21 basis points** to **0.64%** due to higher savings, money market, and time deposit rates[280](index=280&type=chunk) [Provision for loan losses](index=102&type=section&id=Provision%20for%20loan%20losses) This section details the significant increase in the provision for loan losses, primarily attributed to supporting originated loan growth and specific charge-offs on a commercial loan - Total provision for loan losses was **$5.7 million** for the three months and **$10.5 million** for the nine months ended September 30, 2019, significantly higher than the prior year periods[288](index=288&type=chunk) - The increase in provision was primarily to support originated loan growth and net charge-offs, including **$6.6 million** related to one previously acquired commercial loan that was placed on non-accrual[288](index=288&type=chunk) - For loans accounted for under ASC 310-30, a recoupment of **$11 thousand** and **$51 thousand** was recorded for the three and nine months ended September 30, 2019, respectively, due to re-measurements of expected cash flows[289](index=289&type=chunk) [Non-interest income](index=102&type=section&id=Non-interest%20income) This section analyzes the increase in total non-interest income, driven by higher mortgage banking income, partially offset by a decrease in OREO-related income - Total non-interest income increased by **$7.0 million (12.6%)** to **$62.5 million** for the nine months ended September 30, 2019[290](index=290&type=chunk) - Mortgage banking income increased by **$7.3 million (29.7%)** for the nine months ended September 30, 2019, primarily due to higher levels of 1-4 family mortgage loans sold in the secondary market[290](index=290&type=chunk) - OREO-related income decreased significantly by **$0.8 million (83.9%)** for the nine months ended September 30, 2019[290](index=290&type=chunk) [Non-interest expense](index=104&type=section&id=Non-interest%20expense) This section details the decrease in total non-interest expense, primarily due to net gains on OREO sales and the absence of prior-year acquisition costs, despite an impairment charge for banking center consolidations - Total non-interest expense decreased by **$11.8 million (8.1%)** to **$134.6 million** for the nine months ended September 30, 2019[293](index=293&type=chunk) - The decrease was primarily driven by **$7.2 million** in net gains on OREO sales and the absence of **$8.0 million** in non-recurring acquisition costs from the prior year[293](index=293&type=chunk) - A **$0.9 million** fair value impairment charge was recorded to other non-interest expense during the third quarter of 2019, related to the planned consolidation of four banking centers[294](index=294&type=chunk) [Income taxes](index=104&type=section&id=Income%20taxes) This section discusses the increase in income tax expense, influenced by tax benefits from stock compensation activity, and presents the adjusted effective tax rate - Income tax expense increased to **$12.0 million** for the nine months ended September 30, 2019, from **$8.8 million** in the prior year[295](index=295&type=chunk) - Tax expense was lowered by a **$2.2 million** tax benefit from stock compensation activity in 2019 and **$1.3 million** in 2018[295](index=295&type=chunk) - The adjusted effective tax rate for the nine months ended September 30, 2019, was **19.4%**, compared to **19.1%** in the prior year[295](index=295&type=chunk) [Liquidity and Capital Resources](index=104&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the Company's liquidity position, including on-balance sheet liquidity and available credit lines, and confirms compliance with all regulatory capital requirements - Total on-balance sheet liquidity decreased by **$246.6 million** to **$436.6 million** at September 30, 2019, primarily due to lower unencumbered investment securities[299](index=299&type=chunk) - The Bank has access to a **$1.0 billion** line of credit and term financing from the FHLB, with **$303.9 million** utilized at September 30, 2019[300](index=300&type=chunk) - The Company and the Bank met all Basel III capital adequacy requirements at September 30, 2019, with the Bank's regulatory capital ratios exceeding the levels for well-capitalized institutions[305](index=305&type=chunk) - A quarterly dividend of **$0.20 per common share** was declared on November 6, 2019[309](index=309&type=chunk) [Asset/Liability Management and Interest Rate Risk](index=108&type=section&id=Asset%2FLiability%20Management%20and%20Interest%20Rate%20Risk) This section describes how the Company manages interest rate risk through asset/liability strategies, including net interest income simulations, and discusses its asset sensitivity - Interest rate risk is managed by the Asset Liability Committee and Board of Directors using net interest income simulations and market value of portfolio equity analyses[310](index=310&type=chunk)[311](index=311&type=chunk) - The Company was asset sensitive at September 30, 2019, but decreased its asset sensitivity during the nine months by shifting the balance sheet mix towards more fixed-rate assets in a declining rate environment[314](index=314&type=chunk)[315](index=315&type=chunk) **Projected Net Interest Income Impact from Rate Shifts (September 30, 2019):** | Hypothetical Shift in Interest Rates (in basis points) | % Change in Projected Net Interest Income | | :------------------------------------------ | :---------------------------------------- | | +200 | 5.96% | | +100 | 3.05% | | -100 | (4.13)% | [Off-Balance Sheet Activities](index=110&type=section&id=Off-Balance%20Sheet%20Activities) This section outlines the Company's off-balance sheet commitments, such as loan commitments and letters of credit, and assesses their associated credit, market, and operational risks - The Company had loan commitments totaling **$801.1 million** and standby letters of credit totaling **$11.7 million** at September 30, 2019[318](index=318&type=chunk) - These off-balance sheet activities contain credit, market, and operational risk, but the Company does not anticipate any material losses[318](index=318&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=110&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item refers to the 'Asset/Liability Management and Interest Rate Risk' section within Management's Discussion and Analysis for disclosures about market risk - Information regarding quantitative and qualitative disclosures about market risk is incorporated by reference from the 'Asset/Liability Management and Interest Rate Risk' section in Part I, Item 2[319](index=319&type=chunk) [Item 4. Controls and Procedures](index=110&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, conducted an evaluation of the effectiveness of disclosure controls and procedures, concluding they were effective as of September 30, 2019. No material changes to internal controls over financial reporting occurred during the quarter - Management, with the participation of the principal executive officer and principal financial officer, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2019[320](index=320&type=chunk) - There were no changes in the Company's internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[321](index=321&type=chunk) [Part II. Other Information](index=111&type=section&id=Part%20II.%20Other%20Information) This part includes disclosures on legal proceedings, risk factors, equity security sales, and other miscellaneous information pertinent to the Company's operations [Item 1. Legal Proceedings](index=111&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in various litigation matters incidental to its business but does not believe any current proceedings will have a material adverse effect on its financial condition or operations - The Company is not presently party to any legal proceedings the resolution of which is believed to have a material adverse effect on its business, prospects, financial condition, liquidity, results of operation, cash flows, or capital levels[324](index=324&type=chunk) [Item 1A. Risk Factors](index=111&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 - There have been no material changes to the risk factors disclosed in Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2018[325](index=325&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=111&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's purchases of common stock related to stock incentive plans and the remaining authorization under its publicly announced share repurchase program **Shares Purchased (July 1 - August 31, 2019):** | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------- | :----------------------------- | :--------------------------- | | July 1 - July 30, 2019 | 38 shares | $37.04 | | August 1 - August 31, 2019 | 212 shares | $33.69 | | Total | 250 shares | $34.20 | - These shares were purchased pursuant to the Company's stock incentive plans, not through publicly announced programs, for satisfaction of stock option exercise prices, restricted stock settlements, and tax withholdings[326](index=326&type=chunk) - As of September 30, 2019, **$12,562,825** remained available for purchase under the **$50.0 million** common stock repurchase program authorized on August 5, 2016[327](index=327&type=chunk) [Item 5. Other Information](index=111&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - No other information is reported in this section[328](index=328&type=chunk) [Item 6. Exhibits](index=112&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate documents, certifications, and XBRL interactive data files - Exhibits include corporate governance documents (Second Amended and Restated Certificate of Incorporation and By-Laws), CEO and CFO certifications (pursuant to Sarbanes-Oxley Act), and XBRL interactive data files[331](index=331&type=chunk) [Signatures](index=113&type=section&id=SIGNATURES) This section confirms the official signing and filing of the report by the Company's Chief Financial Officer and Treasurer - The report was signed on behalf of National Bank Holdings Corporation by Aldis Birkans, Chief Financial Officer and Treasurer, on November 6, 2019[334](index=334&type=chunk)

National Bank Holdings Corporation (NYSE:NBHC) Q3 2019 Earnings Conference Call October 23, 2019 11:00 AM ET Company Participants Tim Laney - Chairman, President & CEO Aldis Birkans - CFO Rick Newfield - Chief Risk Management Officer Conference Call Participants Jeff Rulis - DA Davidson Gordon McGuire - Stephens Bob Shone - Piper Jaffray Kelly Motta - KBW Tim O'Brien - Sandler O'Neill Operator Good morning, everyone, and welcome to the National Bank Holdings Corporation 2019 Third Quarter Earnings Call. My ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-35654 NATIONAL BANK HOLDINGS CORPORATION (Exact name of registrant as specified in its charter) Delaware 27-0563799 (State or ot ...

Financial Data and Key Metrics Changes - The company reported record quarterly net income of $20.3 million and earnings per diluted share of $0.64 for Q2 2019, representing a 7.2% increase on a linked-quarter basis and a 15.8% increase year-over-year [6][22] - Earnings assets grew at an annualized rate of 10.7%, driven by loan and deposit growth, as well as strong performance from the residential mortgage group [6][12] - The annualized net charge-offs on originated and acquired loans were only two basis points, indicating strong credit quality [6][15] Business Line Data and Key Metrics Changes - Commercial loan growth was strong at 18.5% annualized, with total originated and acquired loans outstanding growing 8.3% annualized [7][10] - New loan originations for the quarter totaled $290.5 million, with year-to-date loan balances growing 12.4% annualized [7][9] - Non-interest-bearing deposits grew at an annualized rate of 17.2%, now representing 24.9% of total deposits [10][12] Market Data and Key Metrics Changes - The company’s markets are performing better than national averages, contributing to strong growth in transaction deposits [5][10] - The average transaction deposit cost was just 40 basis points, supporting net interest income growth despite declining market rates [12][13] Company Strategy and Development Direction - The company aims to maintain a diversified loan portfolio and is focused on growing core banking relationships while managing expenses efficiently [24][56] - The management is open to potential M&A opportunities but emphasizes a methodical approach to any acquisitions [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a 10% growth in originated and acquired loan balances for the full year 2019, supported by strong local economies [9][24] - The company anticipates a slight decrease in net interest margin due to expected interest rate cuts but remains optimistic about overall performance [13][14] Other Important Information - The effective tax rate for the quarter was 13.6%, with expectations for the remainder of 2019 to be in the range of 18.5% to 19.5% [22] - Non-interest income reached a record $20.7 million, driven by strong performance in service charges and bank card fees [16][18] Q&A Session Summary Question: Capital plans and M&A discussions - Management indicated they are in discussions with potential partners and are open to M&A opportunities, but will proceed cautiously [28][29] Question: Fee income growth in mortgage banking - The company aims to keep mortgage banking revenue below 15% of total revenue and views refinancing revenue as a hedge against rate pressures [32][34] Question: Credit profile and industry outlook - Management is monitoring credit quality closely, particularly in sectors like agriculture, and has selectively exited higher-risk areas [36][39] Question: Lending environment and competition - The company is experiencing strong yields and pricing in its commercial banking space, benefiting from rational competition in its core markets [68][70] Question: Growth in specific geographic markets - All markets are performing well, with notable growth in Colorado, Texas, and new teams in Salt Lake City and Kansas City [94][95]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ◻TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-35654 NATIONAL BANK HOLDINGS CORPORATION (Exact name of registrant as specified in its charter) (State or other jurisdiction of i ...

National Bank Holdings Corp. (NYSE:NBHC) Q1 2019 Earnings Conference Call April 24, 2019 11:00 AM ET Company Participants Tim Laney - President and Chief Executive Officer Aldis Birkans - Chief Financial Officer Rick Newfield - Chief Risk Management Officer Conference Call Participants Jeffrey Rulis - D.A. Davidson & Company Timothy O'Brien - Sandler O'Neill Partners Kelly Motta - Keefe, Bruyette & Woods Bob Shone - Piper Jaffray Jeff Rulis - D.A. Davidson Operator Good morning everyone and welcome to the N ...

PART I [Business](index=6&type=section&id=Item%201.%20Business) National Bank Holdings Corporation (NBHC) is a bank holding company with **$5.7 billion** in assets as of December 31, 2018, operating **104** banking centers primarily in Colorado and Kansas City, focusing on organic growth and selective acquisitions like Peoples, Inc Company Snapshot (as of December 31, 2018) | Metric | Value | | :--- | :--- | | Total Assets | **$5.7 billion** | | Total Loans | **$4.1 billion** | | Total Deposits | **$4.5 billion** | | Shareholders' Equity | **$0.7 billion** | | Banking Centers | **104** | - The company's long-term business model focuses on organic growth through strong banking relationships, complemented by a disciplined strategy of selective acquisitions of financial institutions[15](index=15&type=chunk) - On January 1, 2018, the company acquired Peoples, Inc., adding **$875.4 million** in assets, **$542.7 million** in loans, and **$729.9 million** in low-cost deposits; this acquisition also added a significant retail mortgage platform with over **$1 billion** in production[22](index=22&type=chunk) - The company's core markets include Colorado, the greater Kansas City region, New Mexico, Texas, and Utah, with a focus on markets with attractive demographics and business growth trends[24](index=24&type=chunk)[25](index=25&type=chunk) [Products and Services](index=10&type=section&id=Products%20and%20Services) NBH Bank offers a full range of traditional banking products to commercial, business, and consumer clients, including various loan types, comprehensive treasury management solutions, residential mortgages, and diverse deposit products - Commercial banking services include a wide range of loan products such as commercial and industrial loans, owner-occupied and non-owner occupied commercial real estate loans, and SBA loans[35](index=35&type=chunk)[37](index=37&type=chunk)[39](index=39&type=chunk) - The company offers a comprehensive suite of treasury management solutions for business clients, including online/mobile banking, credit cards, wire transfers, remote deposit capture, and fraud prevention services[40](index=40&type=chunk) - Residential real estate lending includes traditional mortgages, a majority of which are sold in the secondary market, providing a significant source of fee income; the Peoples acquisition added substantial capabilities in this area[43](index=43&type=chunk) - A variety of consumer and business deposit products are offered, including checking, savings, money market accounts, and time deposits, with a focus on attracting low-cost transaction deposits[45](index=45&type=chunk) [Supervision and Regulation](index=16&type=section&id=Supervision%20and%20Regulation) NBHC operates in a highly regulated environment, supervised by the Federal Reserve, with its subsidiary NBH Bank subject to dual regulation by the Colorado Division of Banking and the Federal Reserve, adhering to capital adequacy requirements and consumer protection laws - NBHC is a bank holding company subject to regulation, supervision, and examination by the Federal Reserve under the Bank Holding Company Act (BHCA)[54](index=54&type=chunk)[58](index=58&type=chunk) - NBH Bank is a Colorado state-chartered bank and a member of the Federal Reserve Bank of Kansas City, making it subject to dual regulation by the Colorado Division of Banking and the Federal Reserve; its deposits are insured by the FDIC[60](index=60&type=chunk) - The company and its bank subsidiary are subject to minimum capital requirements, including a common equity tier 1 ratio of **4.5%**, a total tier 1 ratio of **6%**, and a total capital ratio of **8%**; a capital conservation buffer of **2.5%** became effective in 2019[66](index=66&type=chunk)[68](index=68&type=chunk) - The Dodd-Frank Act codified the "source of strength" doctrine, requiring the holding company (NBHC) to provide financial assistance to its subsidiary bank (NBH Bank) in the event of financial distress[72](index=72&type=chunk)[74](index=74&type=chunk) - The Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), enacted in May 2018, modified certain Dodd-Frank Act rules and introduced regulatory relief for community banks, including a simplified "Community Bank Leverage Ratio"[100](index=100&type=chunk)[101](index=101&type=chunk) [Risk Factors](index=27&type=page&id=Item%201A.%20Risk%20Factors) The company faces diverse risks from banking operations, growth strategies, and the highly regulated financial industry, encompassing credit risk, economic sensitivity, competition, technology dependence, and regulatory compliance challenges [Risks Relating to Our Banking Operations](index=27&type=section&id=Risks%20Relating%20to%20Our%20Banking%20Operations) Key operational risks include the company's limited operating history, sensitivity to economic conditions and credit risk, intense competition, dependence on information technology and key personnel, and exposure to cybersecurity threats and interest rate fluctuations - The company's business is highly susceptible to credit risk, where borrowers may be unable to repay loans, and the value of collateral, particularly real estate, may be insufficient to cover the debt[110](index=110&type=chunk) - The allowance for loan losses (ALL) involves a high degree of subjectivity and may prove insufficient to absorb inherent losses, potentially requiring increases that would decrease net income and capital[112](index=112&type=chunk)[114](index=114&type=chunk) - The company faces significant competition from national, regional, and local financial institutions, as well as non-traditional providers like FinTech companies, which could adversely affect market share and profitability[124](index=124&type=chunk)[125](index=125&type=chunk) - Dependence on information technology and telecommunications systems from third-party providers exposes the company to risks of system failures, interruptions, or security breaches that could disrupt operations and damage its reputation[133](index=133&type=chunk)[134](index=134&type=chunk) - Information security risks, including cyber-attacks, phishing, and data breaches, have increased; a failure to prevent such breaches could result in financial losses, reputational damage, and regulatory scrutiny[135](index=135&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) [Risks Relating to our Growth Strategy](index=40&type=section&id=Risks%20Relating%20to%20our%20Growth%20Strategy) The company's growth strategy, relying on organic expansion and acquisitions, presents risks related to managing growth, obtaining regulatory approvals, intense competition for targets, and potential inaccuracies in projected operating results or due diligence failures - Expansionary activity places significant demands on operations and management, and the inability to effectively manage growth could materially and adversely affect the company[147](index=147&type=chunk) - Acquisitions require approval from governmental regulatory agencies like the Federal Reserve, which could deny applications or impose conditions that restrict growth or reduce the benefits of a transaction[148](index=148&type=chunk)[151](index=151&type=chunk) - The company encounters intense competition from other banking organizations and investment funds for a limited number of acquisition opportunities, which may drive up prices and make consummating deals on attractive terms difficult[153](index=153&type=chunk) - There is a risk that delinquencies and losses in acquired loan portfolios may exceed initial forecasts, and due diligence may fail to identify all material issues, potentially leading to write-downs and significant losses[158](index=158&type=chunk)[159](index=159&type=chunk) [Risks Relating to the Regulation of Our Industry](index=44&type=section&id=Risks%20Relating%20to%20the%20Regulation%20of%20Our%20Industry) Operating in a highly regulated environment, the company faces significant compliance costs and risks from the Dodd-Frank Act, potential noncompliance with laws like the Bank Secrecy Act, the Federal Reserve's "source of strength" doctrine, and limitations on dividend payments - The Dodd-Frank Act has resulted in changes to regulatory capital requirements, the creation of new regulatory agencies, and new rules for consumer financial products, which limit business activities and increase compliance costs[161](index=161&type=chunk)[162](index=162&type=chunk) - The company is subject to extensive regulation and supervision that governs nearly all aspects of its operations; failure to comply can lead to restrictions, fines, and other penalties[164](index=164&type=chunk) - Under the "source of strength" doctrine, the Federal Reserve may require the company to act as a source of financial and managerial strength to its subsidiary bank, including making capital injections into a troubled subsidiary[168](index=168&type=chunk) - Noncompliance with the Bank Secrecy Act and other anti-money laundering statutes could result in significant civil money penalties, fines, and restrictions on the company's ability to execute its business plan, including acquisitions[170](index=170&type=chunk) - The company's ability to pay dividends is subject to regulatory limitations, including guidelines from the Federal Reserve regarding capital adequacy and the potential for regulators to prohibit payments if deemed an unsafe or unsound practice[173](index=173&type=chunk) [Unresolved Staff Comments](index=49&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are **no unresolved staff comments**[175](index=175&type=chunk) [Properties](index=49&type=section&id=Item%202.%20Properties) The company's principal executive offices are in Colorado, with operations in Missouri, and as of December 31, 2018, it operated **104** banking centers across five states, with **73 owned** and **31 leased** - As of December 31, 2018, the company operated **104 banking centers**: **50** in Colorado, **46** in Kansas and Missouri, **six** in New Mexico, and **two** in Texas[175](index=175&type=chunk) - Of the **104 banking centers**, **73** locations were owned by the company and **31** were leased[175](index=175&type=chunk) [Legal Proceedings](index=49&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various litigation matters incidental to its business but is not currently party to any legal proceedings expected to have a material adverse effect on its operations or financial condition - The company is not presently party to any legal proceedings that it believes would have a **material adverse effect** on its business, prospects, financial condition, results of operations, or liquidity[176](index=176&type=chunk) [Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no mine safety disclosures to report - **None**[177](index=177&type=chunk) PART II [Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=51&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A common stock trades on the NYSE under 'NBHC,' with a history of increasing quarterly cash dividends and a share repurchase program with **$12.6 million** remaining available as of year-end 2018, alongside active equity compensation plans Quarterly Cash Dividends Paid Per Share | Quarter | 2018 | 2017 | | :--- | :--- | :--- | | Fourth | **$0.17** | **$0.09** | | Third | **$0.14** | **$0.09** | | Second | **$0.14** | **$0.09** | | First | **$0.09** | **$0.07** | | **Total** | **$0.54** | **$0.34** | - On August 5, 2016, the Board of Directors authorized a share repurchase program for up to **$50.0 million** of common stock; as of December 31, 2018, **$12,562,825** remained available for purchase under this authorization[183](index=183&type=chunk) - The company has two primary equity compensation plans: the 2014 Omnibus Incentive Plan, with **5,254,682 shares** available for issuance, and the 2014 Employee Stock Purchase Plan (ESPP), with **342,644 shares** available for issuance as of December 31, 2018[184](index=184&type=chunk)[185](index=185&type=chunk) [Selected Financial Data](index=53&type=section&id=Item%206.%20Selected%20Financial%20Data) This section summarizes five years of historical consolidated financial data from 2014 to 2018, showing significant growth in total loans from **$2.2 billion** to **$4.1 billion** and total assets from **$4.8 billion** to **$5.7 billion**, alongside fluctuating net income and key performance ratios Selected Historical Financial Data (in thousands, except per share data) | | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Financial Condition Data:** | | | | | | | Total assets | **$5,676,666** | **$4,843,465** | **$4,573,046** | **$4,683,908** | **$4,819,646** | | Loans, net | **$4,056,616** | **$3,147,683** | **$2,831,747** | **$2,560,554** | **$2,144,796** | | Deposits | **$4,535,621** | **$3,979,559** | **$3,868,649** | **$3,840,677** | **$3,766,188** | | Total shareholders' equity | **$695,006** | **$532,407** | **$536,189** | **$617,544** | **$794,575** | | **Operations Data:** | | | | | | | Net interest income | **$197,437** | **$146,306** | **$145,640** | **$156,945** | **$170,249** | | Net income | **$61,451** | **$14,579** | **$23,060** | **$4,881** | **$9,176** | | **Per Share Data:** | | | | | | | Income per share, diluted | **$1.95** | **$0.53** | **$0.79** | **$0.14** | **$0.22** | | Book value per share | **$22.59** | **$19.81** | **$20.32** | **$20.34** | **$20.43** | | **Key Ratios:** | | | | | | | Return on average assets | **1.10%** | **0.31%** | **0.50%** | **0.10%** | **0.19%** | | Net interest margin | **3.85%** | **3.36%** | **3.39%** | **3.54%** | **3.83%** | - The company presents several non-GAAP financial measures, such as tangible common book value and return on average tangible assets, which it believes provide meaningful supplemental information by excluding items not indicative of primary business operations[199](index=199&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=62&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion analyzes the company's financial condition and operating results for 2018, highlighting the Peoples, Inc. acquisition's impact on asset, loan, and deposit growth, a sharp rise in net income to **$61.5 million**, and strong credit quality with non-performing loans at **0.60%** - Net income for 2018 was **$61.5 million** (**$1.95** per diluted share), a significant increase from **$14.6 million** (**$0.53** per diluted share) in 2017; after adjusting for one-time acquisition expenses, 2018 net income was **$67.8 million** (**$2.16** per diluted share)[215](index=215&type=chunk)[300](index=300&type=chunk) - Total loans grew by **$913.4 million** (**28.7%**) in 2018, driven by the Peoples acquisition and a record **$1.2 billion** in new loan originations[218](index=218&type=chunk) - Credit quality remained strong, with non-performing loans as a percentage of total loans decreasing to **0.60%** at year-end 2018 from **0.66%** at year-end 2017, and net charge-offs were minimal at **0.02%** for 2018[217](index=217&type=chunk) - Fully taxable equivalent (FTE) net interest income increased by **$49.8 million** (**32.7%**) in 2018, and the FTE net interest margin expanded by **43 basis points** to **3.93%**, driven by higher asset yields[219](index=219&type=chunk)[313](index=313&type=chunk) - Capital ratios remain strong and in excess of regulatory requirements, with a consolidated tier 1 leverage ratio of **10.5%** and a common equity tier 1 risk-based capital ratio of **12.9%** as of December 31, 2018[222](index=222&type=chunk) [Financial Condition](index=69&type=section&id=Financial%20Condition) As of December 31, 2018, total assets increased to **$5.7 billion** from **$4.8 billion**, with total loans reaching **$4.1 billion** due to the Peoples acquisition and record originations, while deposits grew to **$4.5 billion** with a favorable shift towards transaction deposits Loan Portfolio Composition (in thousands) | Loan Type | Dec 31, 2018 | Dec 31, 2017 | % Change | | :--- | :--- | :--- | :--- | | Total originated | **$3,568,936** | **$2,953,339** | **20.8%** | | Total acquired | **$452,493** | **$104,985** | **>100%** | | ASC 310-30 loans | **$70,879** | **$120,623** | **(41.2)%** | | **Total loans** | **$4,092,308** | **$3,178,947** | **28.7%** | Asset Quality Ratios | Ratio | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | Non-performing loans to total loans | **0.60%** | **0.66%** | | Non-performing assets to total loans and OREO | **0.85%** | **0.99%** | | Allowance for loan losses to total loans | **0.87%** | **0.98%** | Deposit Composition (in thousands) | Deposit Type | Dec 31, 2018 | Dec 31, 2017 | % Change | | :--- | :--- | :--- | :--- | | Total transaction deposits | **$3,455,092** | **$2,861,509** | **20.7%** | | Total time deposits | **$1,080,529** | **$1,118,050** | **(3.4)%** | | **Total deposits** | **$4,535,621** | **$3,979,559** | **14.0%** | [Results of Operations](index=90&type=section&id=Results%20of%20Operations) For 2018, net income was **$61.5 million**, significantly up from **$14.6 million** in 2017, driven by a **$49.8 million** increase in fully taxable equivalent net interest income, a decrease in loan loss provision, and substantial growth in non-interest income and expense due to the Peoples acquisition Net Interest Income and Margin (FTE) | Metric | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net Interest Income (in thousands) | **$201,919** | **$152,158** | **$149,721** | | Net Interest Margin | **3.93%** | **3.50%** | **3.49%** | - The provision for loan losses decreased to **$5.2 million** in 2018 from **$13.0 million** in 2017, primarily due to strong credit quality and lower required provisions for originated loan growth[323](index=323&type=chunk) - Non-interest income increased by **80.5%** to **$70.8 million** in 2018, largely due to a **$28.0 million** increase in mortgage banking income following the Peoples acquisition[302](index=302&type=chunk)[326](index=326&type=chunk) - Non-interest expense rose by **38.5%** to **$189.3 million** in 2018, primarily driven by the addition of Peoples' operations, including **$8.0 million** in one-time acquisition costs[303](index=303&type=chunk)[329](index=329&type=chunk) [Liquidity and Capital Resources](index=99&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$683.2 million** in on-balance sheet liquidity and **$1.1 billion** in available FHLB credit, while its capital ratios significantly exceed all regulatory requirements for being well-capitalized under Basel III rules - Total on-balance sheet liquidity was **$683.2 million** at December 31, 2018, comprised of cash, interest-bearing deposits, and unencumbered investment securities[337](index=337&type=chunk) - The company has access to **$1.1 billion** in available credit from the Federal Home Loan Bank (FHLB), of which **$301.7 million** was utilized as of December 31, 2018[344](index=344&type=chunk) Consolidated Capital Ratios (December 31, 2018) | Ratio | Actual | Required to be Adequately Capitalized | | :--- | :--- | :--- | | Tier 1 leverage ratio | **10.5%** | **4.0%** | | Common equity tier 1 risk-based capital | **12.9%** | **7.0%** | | Tier 1 risk-based capital ratio | **12.9%** | **8.5%** | | Total risk-based capital ratio | **13.8%** | **10.5%** | [Quantitative and Qualitative Disclosures about Market Risk](index=105&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section incorporates information on asset/liability management and interest rate risk from Item 7, indicating the company was asset sensitive at year-end 2018, projecting increased net interest income in a rising interest rate environment - The information required by this item is provided under the caption Asset/Liability Management and Interest Rate Risk in Item 7[360](index=360&type=chunk) Interest Rate Sensitivity Analysis on Net Interest Income | Hypothetical Rate Shift (bps) | % Change in Projected NII (Dec 31, 2018) | | :--- | :--- | | +200 | **5.86%** | | +100 | **2.98%** | | -100 | **(4.84)%** | [Financial Statements and Supplementary Data](index=107&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for the three-year period ended December 31, 2018, including the Consolidated Statements of Financial Condition, Operations, Comprehensive Income, Changes in Shareholders' Equity, and Cash Flows, along with detailed explanatory notes - The independent registered public accounting firm, KPMG LLP, issued an **unqualified opinion** on the consolidated financial statements, stating they present fairly, in all material respects, the financial position and results of operations in conformity with U.S. GAAP[362](index=362&type=chunk) [Consolidated Financial Statements](index=108&type=section&id=Consolidated%20Financial%20Statements) The core financial statements show total assets of **$5.68 billion** and total shareholders' equity of **$695.0 million** as of December 31, 2018, with net income of **$61.5 million** for 2018, a significant increase from prior years Consolidated Statement of Financial Condition Highlights (in thousands) | | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | **$109,556** | **$257,364** | | Loans, net | **$4,056,616** | **$3,147,683** | | Total assets | **$5,676,666** | **$4,843,465** | | **Liabilities & Equity** | | | | Total deposits | **$4,535,621** | **$3,979,559** | | Total liabilities | **$4,981,660** | **$4,311,058** | | Total shareholders' equity | **$695,006** | **$532,407** | Consolidated Statement of Operations Highlights (in thousands) | | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net interest income | **$197,437** | **$146,306** | **$145,640** | | Provision for loan losses | **$5,197** | **$12,972** | **$23,651** | | Non-interest income | **$70,775** | **$39,205** | **$40,027** | | Non-interest expense | **$189,334** | **$136,677** | **$136,009** | | **Net income** | **$61,451** | **$14,579** | **$23,060** | [Notes to Consolidated Financial Statements](index=113&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide essential context, detailing the Peoples, Inc. acquisition for **$146.4 million** with **$55.4 million** goodwill, a **$35.7 million** allowance for loan losses, confirmation of exceeding regulatory capital requirements, stock-based compensation plans, and the use of derivatives for hedging interest rate risk - The acquisition of Peoples, Inc. on January 1, 2018, for a total consideration of **$146.4 million**, resulted in the recognition of **$55.4 million** in goodwill[451](index=451&type=chunk)[453](index=453&type=chunk) - The allowance for loan losses (ALL) was **$35.7 million** at year-end 2018, with an ALL to total loans ratio of **0.87%**; the provision for loan losses for the year was **$5.2 million**[495](index=495&type=chunk) - The company uses interest rate swaps to manage interest rate risk; as of December 31, 2018, it had swaps with a notional amount of **$473.4 million** designated as fair value hedges against its fixed-rate loan portfolio[567](index=567&type=chunk) - As of December 31, 2018, the company had **$773.5 million** in loan commitments and **$10.6 million** in standby letters of credit[578](index=578&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosures](index=183&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) The company reported no changes in or disagreements with its accountants on any matter of accounting principles or practices or financial statement disclosure - There were **no changes in or disagreements** with accountants on accounting and financial disclosures[613](index=613&type=chunk) [Controls and Procedures](index=183&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2018, with KPMG LLP issuing an unqualified opinion on the latter - Based on an evaluation as of December 31, 2018, the principal executive officer and principal financial officer concluded that the company's **disclosure controls and procedures were effective**[614](index=614&type=chunk) - Management concluded that the company's **internal control over financial reporting was effective** as of December 31, 2018; this assessment was audited by KPMG LLP, which also issued an **unqualified opinion**[615](index=615&type=chunk)[618](index=618&type=chunk) - There were **no changes in internal control over financial reporting** during the period that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[616](index=616&type=chunk) [Other Information](index=185&type=section&id=Item%209B.%20Other%20Information) The company reported no other information for this item - **None**[625](index=625&type=chunk) PART III [Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters](index=185&type=section&id=Items%2010-14) Information for **Items 10 through 14**, covering directors, executive officers, corporate governance, executive compensation, security ownership, certain relationships, related transactions, director independence, and principal accountant fees and services, is incorporated by reference from the company's 2019 Annual Meeting of Shareholders proxy statement - Information for **Items 10, 11, 12, 13, and 14** is incorporated by reference from the Registrant's definitive proxy statement for its 2019 Annual Meeting of Shareholders[627](index=627&type=chunk)[629](index=629&type=chunk)[630](index=630&type=chunk)[631](index=631&type=chunk)[632](index=632&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=186&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the annual report, including the consent of the independent registered public accounting firm and certifications by the CEO and CFO - This section provides a list of all financial statements, schedules, and exhibits filed with the annual report, including the consent of the independent registered public accounting firm and certifications by the CEO and CFO[635](index=635&type=chunk)[636](index=636&type=chunk)[641](index=641&type=chunk)

NBH Holdings Corp (NYSE:NBHC) Q4 2018 Results Earnings Conference Call January 25, 2019 11:00 AM ET Company Participants Tim Laney - Chairman, President, Chief Executive Officer Aldis Birkans - Chief Financial Officer, Treasurer Rick Newfield - Chief Risk Management Officer Conference Call Participants Jeff Pusich - D.A. Davidson Matt Olney - Stephens Tim O'Brien - Sandler O'Neill Chris McGratty - KBW Operator Good morning everyone and welcome to the National Bank Holdings Corporation 2018 fourth quarter ea ...