strategy, as well as changes in our business strategy or development plans; economic, market, operational, liquidity, credit and interest rate risks associated with our business; effects of any changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board; our ability to integrate acquisitions and to achieve synergies, operating efficiencies and/or other expected benefits within expected time-frames, or at all, or within expected cost projections, and to preserve the goodwill of acquired our ability to achieve organic loan and deposit growth and the composition of such growth; increased competition in the financial services industry, nationally, regionally or locally, resulting in, among other things, lower risk-adjusted returns; technological changes; changes in personnel and our continued ability to ability to implement and/or improve operational management and other internal risk controls and processes and our reporting system and procedures; inability to receive dividends from our subsidiary bank and to changes in estimates of future loan reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; impact of reputational risk on such matters as business generation and retention; and ASSETS Cash and due from banks Due from Federal Reserve Bank of Kansas City Federal funds sold and interest bearing bank deposits Cash and cash equivalents Investment securities available-for-sale (at fair value) Investment securities held-to-maturity (fair value of $522,867 and $584,551 at March 31, 2013 and December 31, 2012, respectively) Non-marketable securities Loans (including covered loans of $537,096 and $608,222 at March 31, 2013 and December 31, 2012, respectively) Allowance for loan losses Loans, net Loans held for sale Federal Deposit Insurance Corporation (“FDIC”) indemnification asset, net Other real estate owned Premises and equipment, net Goodwill Intangible assets, net Other assets Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities: Deposits: Non-interest bearing demand deposits Interest bearing demand deposits Savings and money market Time deposits Total deposits Securities sold under agreements to repurchase Due to FDIC Other liabilities Total liabilities Stockholders’ equity: Common stock, par value $0.01 per share: 400,000,000 million shares authorized and 53,266,577 and 53,279,579 shares issued and 52,314,909 and 52,327,672 shares outstanding at March 31, 2013 and December 31, 2012, respectively Additional paid in capital Retained earnings Treasury stock of 240 shares at December 31, 2012, at cost Accumulated other comprehensive income, net of tax Total stockholders’ equity Total liabilities and stockholders’ equity Interest and dividend income: Interest and fees on loans Interest and dividends on investment securities Dividends on non-marketable securities Interest on interest-bearing bank deposits Total interest and dividend income Interest expense: Interest on deposits Interest on borrowings Total interest expense Net interest income before provision for loan losses Provision for loan losses Net interest income after provision for loan losses Non-interest income: FDIC indemnification asset accretion FDIC loss sharing income Service charges Bank card fees Gain on sales of mortgages, net Gain on sale of securities, net Gain on recoveries of previously charged-off acquired loans Other non-interest income Total non-interest income Non-interest expense: Salaries and employee benefits Occupancy and equipment Professional fees Telecommunications and data processing Marketing and business development Supplies and printing Other real estate owned expenses Problem loan expenses Intangible asset amortization FDIC deposit insurance ATM/debit card expenses Initial public offering related expenses Acquisition related costs Loss (gain) from the change in fair value of warrant liability Other non-interest expense Total non-interest expense Income before income taxes Income tax expense Net income Income per share—basic Income per share—diluted Weighted average number of common shares outstanding: Basic Diluted Net income Other comprehensive loss, net of tax: Securities available-for-sale: Net unrealized losses arising during the period, net of tax benefit of $1,872 and $439 for the three months ended March 31, 2013 and 2012, respectively Reclassification adjustment for net securities gains included in net income, net of tax expense of $0 and $263 for the three months ended March 31, 2013 and 2012, respectively Reclassification adjustment for net unrealized holding gains on securities transferred between available-for-sale and held-to-maturity, net of tax of $0 and $15,159 for the three months ended March 31, 2013 and 2012, respectively Net unrealized holding gains on securities transferred between available-for-sale to held-to-maturity: Net unrealized holding gains on securities transferred, net of tax of $0 and $15,159 for the three months ended March 31, 2013 and 2012, respectively Less: amortization of net unrealized holding gains to income, net of tax benefit of $1,218 and $0 for the three months ended March 31, 2013 and 2012 Other comprehensive loss Comprehensive income (loss) Balance, December 31, 2011 Stock-based compensation Net income Other comprehensive loss Balance, March 31, 2012 Balance, December 31, 2012 Stock-based compensation (Purchase) /retirement of treasury shares Dividends paid ($0.05 per share) Net income Other comprehensive loss Balance, March 31, 2013 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash used in operating activities: Provision for loan losses Depreciation and amortization Gain on sale of securities, net Current income tax benefit Deferred income tax benefit Discount accretion, net of premium amortization Loan accretion Net gain on sale of mortgage loans Proceeds from sales of loans held for sale Amortization of indemnification asset Gain on the sale of other real estate owned, net Impairment on other real estate owned Stock-based compensation Decrease in due to FDIC, net Decrease (increase) in other assets Decrease in other liabilities Net cash used in operating activities Cash flows from investing activities: Sale of FHLB stock Sales of investment securities available-for-sale Maturities of investment securities available-for-sale Maturities of investment securities held-to-maturity Purchase and settlement of investment securities available-for-sale Net decrease in loans Purchase of premises and equipment Proceeds from sales of other real estate owned Decrease in FDIC indemnification asset Net cash provided by investing activities Cash flows from financing activities: Net decrease in deposits Increase (decrease) in repurchase agreements Payment of dividends Repurchase of common stock Net cash used in financing activities Decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental disclosure of cash flow information: Cash paid during the period for interest Cash paid during the period for taxes Supplemental schedule of non-cash investing activities: Loans transferred to other real estate owned at fair value FDIC indemnification asset claims transferred to other assets Available-for-sale investment securities transferred to investment securities held-to-maturity Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income—In February 2013, the Asset backed securities Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises Other securities Total Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises Total 2012 Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Other securities Total investment securities available-for-sale an available-for-sale classification to the held-to-maturity classification. During the Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises Total investment securities held-to-maturity Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Other securities Total investment securities held-to-maturity Commercial Commercial real estate Agriculture Residential real estate Consumer Total Covered Non-covered Total Commercial Commercial real estate Agriculture Residential real estate Consumer Covered Non-covered Total flows. Loans excluded from ASC 310-30 Commercial Commercial real estate Construction Acquisition/development Multifamily Owner-occupied Non owner-occupied Total commercial real estate Agriculture Residential real estate Sr lien Jr lien Total residential real estate Consumer Total loans excluded from ASC 310-30 Covered loans excluded from ASC 310-30 Non-covered loans excluded from ASC 310-30 Total loans excluded from ASC 310-30 Loans accounted for under ASC 310-30 Commercial Commercial real estate Agriculture Residential real estate Consumer Total loans accounted for under ASC 310-30 Covered loans accounted for under ASC 310-30 Non-covered loans accounted for under ASC 310-30 Total loans accounted for under ASC 310-30 Total loans Covered loans Non-covered loans Total loans Loans excluded from ASC 310-30 Commercial Commercial real estate Construction Acquisition development Multifamily Owner-occupied Non owner-occupied Total commercial real estate Agriculture Residential real estate Sr lien Jr lien Total residential real estate Consumer Total loans excluded from ASC 310-30 Covered loans excluded from ASC 310-30 Non-covered loans excluded from ASC 310-30 Total loans excluded from ASC 310-30 Loans accounted for under ASC 310-30 Commercial Commercial real estate Agriculture Residential real estate Consumer Total loans accounted for under ASC 310-30 Covered loans accounted for under ASC 310-30 Non-covered loans accounted for under ASC 310-30 Total loans accounted for under ASC 310-30 Total loans Covered loans Non-covered loans Total loans Loans excluded from ASC 310-30 Commercial Commercial real estate Construction Acquisition/development Multifamily Owner-occupied Non owner-occupied Total commercial real estate Agriculture Residential real estate Sr lien Jr lien Total residential real estate Consumer Total loans excluded from ASC 310-30 Covered loans excluded from ASC 310-30 Non-covered loans excluded from ASC 310-30 Total loans excluded from ASC 310-30 Loans accounted for under ASC 310-30 Commercial Commercial real estate Agriculture Residential real estate Consumer Total loans accounted for under ASC 310-30 Covered loans accounted for under ASC 310-30 Non-covered loans accounted for under ASC 310-30 Total loans accounted for under ASC 310-30 Total loans Total covered Total non-covered Total loans Loans excluded from ASC 310-30 Commercial Commercial real estate Construction Acquisition/development Multifamily Owner-occupied Non owner-occupied Total commercial real estate Agriculture Residential real estate Sr lien Jr lien Total residential real estate Consumer Total loans excluded from ASC 310-30 Covered loans excluded from ASC 310-30 Non-covered loans excluded from ASC Topic 310-30 Total loans excluded from ASC 310-30 Loans accounted for under ASC 310-30 Commercial Commercial real estate Agriculture Residential real estate Consumer Total loans accounted for under ASC 310-30 Covered loans accounted for under ASC 310-30 Non-covered loans accounted for under ASC 310-30 Total loans accounted for under ASC 310-30 Total loans Total covered Total non-covered Total loans restructurings (“TDR’s”) described below. If a specific allowance is warranted based on the borrower’s overall financial condition, the specific allowance is calculated based on discounted cash flows using the loan’s initial contractual effective interest rate or the fair value of the collateral less selling costs for collateral dependent loans. With no related allowance recorded: Commercial Commercial real estate Construction Acquisition/development Multifamily Owner-occupied Non-owner occupied Total commercial real estate Agriculture Residential real estate Sr. lien 1-4 family closed end Jr. lien 1-4 family closed end Total residential real estate Consumer Total impaired loans with no related allowance recorded With a related allowance recorded: Commercial Commercial real estate Construction Acquisition/development Multifamily Owner-occupied Non-owner occupied Total commercial real estate Agriculture Residential real estate Sr. lien 1-4 family closed end Jr. lien 1-4 family open end Total residential real estate Consumer Total impaired loans with a related allowance recorded Total impaired loans With no related allowance recorded: Commercial Commercial real estate Construction Acquisition/development Multifamily Owner-occupied Non owner-occupied Total commercial real estate Agriculture Residential real estate Sr. lien 1-4 family closed end Jr. lien 1-4 family closed end Total residential real estate Consumer Total impaired loans with no related allowance recorded With a related allowance recorded: Commercial Commercial real estate Construction Acquisition/development Multifamily Owner-occupied Non owner-occupied Total commercial real estate Agriculture Residential real estate Sr. lien 1-4 family closed end Jr. lien 1-4 family closed end Total residential real estate Consumer Total impaired loans with a related allowance recorded Total impaired loans concession by the Company to the borrower from their original terms due to borrower financial difficulties in order to facilitate repayment. Additionally, if a borrower’s repayment obligation has been discharged by a court, and that debt has not been reaffirmed by the borrower, regardless of past due status, the loan is considered to be a troubled debt restructuring (“TDR”). At 2012 Commercial Commercial real estate Agriculture Residential real estate Consumer Total Commercial Commercial real estate Agriculture Residential real estate Consumer Total Commercial Commercial real estate Agriculture Residential real estate Consumer Total Accretable yield beginning balance Reclassification from non-accretable difference Reclassification to non-accretable difference Accretion Accretable yield ending balance Contractual cash flows Non-accretable difference Accretable yield Loans accounted for under ASC Topic 310-30 Beginning balance Non 310-30 beginning balance Charge-offs Recoveries Provision Non 310-30 ending balance 310-30 beginning balance Charge-offs Recoveries Provision 310-30 ending balance Ending balance Ending allowance balance attributable to: Non 310-30 loans individually evaluated for impairment Non 310-30 loans collectively evaluated for impairment 310-30 loans Total ending allowance balance Loans: Non 310-30 individually evaluated for impairment Non 310-30 collectively evaluated for impairment 310-30 loans Total loans Beginning balance Non 310-30 beginning balance Charge-offs Recoveries Provision Non 310-30 ending balance 310-30 beginning balance Charge-offs Recoveries Provision 310-30 ending balance Ending balance Ending allowance balance attributable to: Non 310-30 loans individually evaluated for impairment Non 310-30 loans collectively evaluated for impairment 310-30 loans Total ending allowance balance Loans: Non 310-30 individually evaluated for impairment Non 310-30 collectively evaluated for impairment 310-30 loans Total loans new loan originations and provide for charge offs. or charge-off of loans or OREO, any differences between the carrying value of the covered assets versus the payments received during the resolution process, that are reimbursable by the FDIC, are recognized in the consolidated statements of operations as FDIC loss sharing income. Any gains or losses realized from the resolution of covered assets reduce or increase, respectively, the amount recoverable from the FDIC. Balance at beginning of period Accretion FDIC portion of charge-offs exceeding fair value marks Reduction for claims filed Balance at end of period Beginning balance Transfers from loan portfolio, at fair value Impairments Sales Gain on sale of OREO Ending balance Three months or less Over 3 months through 6 months Over 6 months through 12 months Over 12 months through 24 months Over 24 months through 36 months Over 36 months through 48 months Over 48 months through 60 months Thereafter Total time deposits Interest bearing demand deposits Money market accounts Savings accounts Time deposits Total Tier 1 leverage ratio Consolidated NBH Bank, N.A. Tier 1 risk-based capital ratio (2) Consolidated NBH Bank, N.A. Total risk-based capital ratio (2) Consolidated NBH Bank, N.A. Clawback liability amortization Clawback liability remeasurement Reimbursement (to) from FDIC for (gain) loss on sale of and income from covered OREO Reimbursement to FDIC for recoveries FDIC reimbursement of costs of resolution of covered assets Total Risk-free interest rate Expected volatility Expected term (years) Dividend yield Outstanding at December 31, 2012 Granted Forfeited Exercised Outstanding at March 31, 2013 Options fully vested and exercisable at March 31, 2013 Options expected to vest The following table summarizes restricted stock activity for the six months ended June 30, 2013: Basic earnings (loss) per share: Income available to common stockholders (numerator) Weighted average common shares outstanding (denominator) Basic earnings per share Diluted earnings per share: Income available to common stockholders (numerator) Weighted average common shares outstanding Plus: effect of dilutive securities Restricted stock (with no performance restrictions) Weighted average shares applicable to diluted earnings per share (denominator) Diluted earnings per share Level 1—Includes assets or liabilities in which the inputs to the valuation methodologies are based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2—Includes assets or liabilities in which the inputs to the valuation methodologies are based on similar assets or liabilities in inactive markets, quoted prices for identical or similar assets or liabilities in inactive markets, and inputs other than quoted prices that are observable, such as interest rates, yield curves, volatilities, prepayment speeds, and other inputs obtained from observable market input. Level 3—Includes assets or liabilities in which the inputs to the valuation methodology are based on at least one significant assumption that is not observable in the marketplace. These valuations may rely on management’s judgment and may include internally-developed model-based valuation techniques. 2012. Assets: Investment securities available-for-sale: Asset backed securities Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises Other securities Total assets at fair value Liabilities: Warrant liability Clawback liability Total liabilities at fair value Balance at December 31, 2012 Change in value Accretion Settlement Net change in Level 3 Balance at March 31, 2013 Other real estate owned Impaired loans Valuation Technique Unobservable Input Other securities Impaired loans Clawback liability Asset purchase premium $98 million - Warrant liability ASSETS: Cash and cash equivalents U.S. Treasury securities available-for-sale Asset backed securities available-for-sale Mortgage-backed securities—residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises available-for-sale Mortgage-backed securities—other residential mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored enterprises available-for-sale Other securities Mortgage-backed securities—residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises held-to-maturity Capital stock of FHLB Capital stock of FRB Loans receivable Loans held-for-sale Accrued interest receivable LIABILITIES: Deposit transaction accounts Time deposits Securities sold under agreements to repurchase Due to FDIC Warrant liability Accrued interest payable As of As of As of As of Organic loan originations totaled A As of Transaction accounts increased to Average transaction account deposit balances grew As of Our average annual yield on our loan portfolio was Expenses before problem loan/OREO workout expenses Problem loan/OREO workout expenses totaled As of As of The after-tax accretable yield on ASC 310-30 loans plus the after-tax yield on the FDIC Indemnification asset, net, in excess of 4.5%, an approximate yield on new loan originations, and discounted at 5%, adds Tangible book value per share was Key Ratios (1) Return on average assets Return on average tangible assets (2) Return on average equity Return on average tangible common equity (2) Return on risk weighted assets (2) Interest-earning assets to interest-bearing liabilities (end of period) (3) Loans to deposits ratio (end of period) Non-interest bearing deposits to total deposits (end of period) Net interest margin (4) Interest rate spread (5) Yield on earning assets (3) Cost of interest bearing liabilities (3) Cost of deposits Non-interest expense to average assets Efficiency ratio (6) Asset Quality Data (7) (8) (9) Non-performing loans to total loans Covered non-performing loans to total non-performing loans Non-performing assets to total assets Covered non-performing assets to total non-performing assets Allowance for loan losses to total loans Allowance for loan losses to total non-covered loans Allowance for loan losses to non-performing loans Net charge-offs to average loans Total stockholders’ equity Less: goodwill Less: intangibles Tangible common equity Total assets Less: goodwill Less: intangibles Tangible assets Total stockholders’ equity to total assets Less: impact of goodwill and intangibles Tangible common equity to tangible assets Return on average assets Add: impact of goodwill and intangibles Add: impact of core deposit intangible expense, after tax Return on average tangible assets Return on average equity Add: impact of goodwill and intangibles Add: impact of core deposit intangible expense, after tax Return on average tangible common equity Common book value per share calculations: Total stockholders’ equity Divided by: ending shares outstanding Common book value per share Tangible common book value per share calculations: Tangible common equity Divided by: ending shares outstanding Tangible common book value per share business combinations and the application of acquisition accounting, the accounting for acquired loans and the related FDIC indemnification asset, the determination of the ALL, and the valuation of stock-based compensation. These critical accounting policies and estimates are summarized in the sections captioned “Application of Critical Accounting Policies” in U.S. Treasury securities U.S. Government sponsored agency and government sponsored enterprises obligations Asset backed securities Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises Other securities Total investment securities available-for-sale U.S. Treasury securities Asset backed securities Mortgage-backed Residential mortgage Other residential MBS Other securities Total Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises Total investment securities held-to-maturity Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises Total investment securities held-to-maturity Due in one year or less Due after one year through five year Due after five years through ten years Due after ten years Other Securities Total To analyze: We look at: Commercial Commercial real estate Agriculture Residential real estate Consumer Covered Non-covered Total Commercial Commercial real estate Agriculture Residential real estate Consumer Covered Non-covered Total Commercial Commercial real estate Agriculture Residential real estate Consumer Total Commercial Commercial real estate Agriculture Residential real estate Consumer Total Commercial Commercial real estate Agriculture Residential real estate Consumer Total loans Covered Non-covered Total loans Commercial Commercial real estate Agriculture Residential real estate Consumer Total covered loans Covered Non-covered Total loans Commercial Commercial real estate Agriculture Residential real estate Consumer Total loans with > 1 year maturity Covered Non-covered Total loans with > 1 year maturity Commercial Commercial real estate Agriculture Residential real estate Consumer Total loans with > 1 year maturity Covered Non-covered Total loans with > 1 year maturity Contractual cash flows Nonaccretable difference Accretable yield Total loans accounted for under ASC Topic 310-30 Balance at beginning of year Reclassification from non-accretable difference Reclassification to non-accretable difference Accretion income Balance at end of period Remaining accretable yield on loans accounted for under ASC Topic 310-30 Remaining accretable fair value mark on loans not accounted for under ASC Topic 310-30 Total remaining accretable yield and fair value mark Non-accrual loans: Commercial loans Commercial real estate loans Agriculture Residential real estate loans Consumer loans Total non-accrual loans Loans past due 90 days or more and still accruing interest: Commercial loans Commercial real estate loans Agriculture Residential real estate loans Consumer loans Total accruing loans 90 days past due Accruing restructured loans(1) Total non-performing loans OREO Other repossessed assets Total non-performing assets Allowance for loan losses Total non-performing loans to total non-covered, total covered, and total loans, respectively Total non-performing assets to total assets Allowance for loan losses to non-performing loans loss-sharing agreements. Loans 30-89 days past due and still accruing interest Loans 90 days past due and still accruing interest Non-accrual loans Total past due and non-accrual loans Total covered loans Total past due and non-accrual loans to total 310-30 loans, total non 310-30 loans and total loans, respectively % of total past due and non-accrual loans that carry fair value adjustments % of total past due and non-accrual loans that are covered by FDIC loss sharing agreements the the likelihood of receiving financial support from any guarantors; the adequacy and present value of future cash flows, less disposal costs, of any collateral; the impact current economic conditions may have on the Commercial Commercial real estate Agriculture Residential real estate Consumer economic/external conditions; loan administration, loan structure and procedures; risk tolerance/experience; loan growth; concentrations; other June 30, 2012. Beginning allowance for loan losses Charge-offs: Commercial Commercial real estate Agriculture Residential real estate Consumer Total charge-offs Recoveries Net charge-offs Provision for loan loss Ending allowance for loan losses Ratio of net charge-offs during the period (annualized) to average total loans during the period, respectively Ratio of allowance for loan losses to total loans outstanding at period end, respectively Ratio of allowance for loan losses to non-covered loans outstanding at period end Ratio of allowance for non 310-30 loan losses to total non-performing loans at period end Ratio of allowance for non 310-30 loan losses to non-performing, non-covered loans at period end Total loans Average total loans outstanding during the period Non-covered loans Total non-performing loans Non-performing, covered loans Commercial Commercial real estate Agriculture Residential real estate Consumer and overdrafts Total Commercial Commercial real estate Agriculture Residential real estate Consumer and overdrafts Total presented (in thousands): 310-30 and charge offs of $0.6 million related to non ASC 310-30 loans and ASC 310-30 loans, respectively. Beginning balance Transfers from loan portfolio Impairments Sales Gain (loss) on sale of OREO Ending Balance FDIC indemnification-claimed Minority interest in participated other real estate owned Accrued interest on interest bearing bank deposits and investment securities Accrued interest on loans Accrued income taxes receivable and deferred tax asset Other Total other assets Accrued income taxes receivable and the deferred tax assets increased $30.6 million during the six months ended June 30, 2013 as a result of declines in unrealized gains on our available-for-sale securities and due to the current recognition of taxable income from the purchase discount related to loans acquired in the Hillcrest Bank, Bank of Choice and Community Banks of Colorado transactions that had previously been deferred for income tax purposes. These deferred gains are recognized for income tax purposes as the loans are collected and as covered loans are worked out through the FDIC indemnification process. Participant interest in other real estate owned Accrued income taxes payable Accrued interest payable Accrued expenses Warrant liability Other liabilities Total other liabilities statements in our 2012 Annual Report on Form 10-K. Non-interest bearing demand deposits Interest bearing demand deposits Savings accounts Money market accounts Total transaction deposits Time deposits < $100,000 Time deposits³ $100,000 Total time deposits Total deposits respectively. acquisitions, and an increase of $1.7 million in salaries as we have built out key areas of our corporate functions. Interest earning assets: 310-30 loans Non 310-30 loans (1)(2) Investment securities available-for-sale Investment securities held-to-maturity Other securities Interest bearing deposits Total interest earning assets Cash and due from banks Other assets Allowance for loan losses Total assets Interest bearing liabilities: Interest bearing demand, savings and money market deposits Time deposits Securities sold under agreements to repurchase Total interest bearing liabilities Demand deposits Other liabilities Total liabilities Stockholders’ equity Total liabilities and stockholders’ equity Net interest income Interest rate spread Net interest earning assets Net interest margin Ratio of average interest earning assets to average interest bearing liabilities reflective of our exit strategy Interest income: 310-30 loans Non 310-30 loans (1)(2)(3) Investment securities available-for-sale Investment securities held-to-maturity Other securities Interest bearing deposits Total interest income Interest expense: Interest bearing demand, savings and money market deposits Time deposits Securities sold under agreements to repurchase Total interest expense Net change in net interest income Non-interest bearing demand Interest bearing demand Money market accounts Savings accounts Time deposits Total average deposits Provision for impairment on loans accounted for under ASC Topic 310-30 Provision for loan losses Total provision for loan losses FDIC indemnification asset accretion FDIC loss sharing income Service charges Bank card fees Gain on sale of mortgages, net Gain on sale of securities, net Gain on recoveries of previously charged-off acquired loans Other non-interest income Total non-interest income Clawback liability amortization Clawback liability remeasurement Reimbursement (to) from FDIC for (gain) loss on sale of and income from covered OREO Reimbursement to FDIC for recoveries FDIC reimbursement of costs of resolution of covered assets Total million, respectively, compared to $0.3 million and $1.8 million during the same periods in the prior year. Salaries and employee benefits Occupancy and equipment Professional fees Telecommunications and data processing Marketing and business development Supplies and printing Other real estate owned expenses Problem loan expenses Intangible asset amortization FDIC deposit insurance ATM/debit card expenses Initial public offering related expenses Acquisition related costs Loss (gain) from change in fair value of warrant liability Other non-interest expense Total non-interest expense during the fourth quarter of 2011. Income tax expense for the six months ended June 30, 2013 and 2012 totaled $3.2 million and $2.8 million, respectively, equating to effective tax expense rates of 38.7% and 39.3%. statements in our 2012 Annual Report on Form 10-K. Cash and due from banks Due from Federal Reserve Bank of Kansas City Federal funds sold and interest bearing bank deposits Pledgeable investment securities, at fair value Total % Change in Projected Net Interest Income Rates (in bps) March 31, 2013 December 31, 2012 200 100 -50 changes in interest rates. In response to this strategy, non-maturing deposit accounts have been steadily increasing and totaled Period January 1 - January 31, 2013 February 1 - February 28, 2013 March 1 - March 31, 2013 Total /s/ Brian F. Lillyxý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 March 31,June 30, 2013¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Delaware 27-0563799 5570 DTC Parkway,xý No ¨xý No ¨Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer Smaller Reporting Company ¨ xýMay 10,August 9, 2013, NBHC had outstanding 46,298,87645,409,579 shares of Class A voting common stock and 5,967,619 shares of Class B non-voting common stock, each with $0.01$0.01 par value per share. Page Item 1. 8Item 2. 34Item 3. 65Item 4. 65Part II.Other Information Item 1. 65Item 1A. 65Item 2. 66Item 5 Other Information Item 6. 67 68Exhibit 31.1 Certification of Principal Executive OfficerCEO Pursuant to Section 302 of Sarbanes- Oxley Act of 2002 Exhibit 31.2 Certification of Chief Financial OfficerCFO Pursuant to Section 302 of Sarbanes- Oxley Act of 2002 Exhibit 32.132 CertificationCertifications of Principal Executive Officer PursuantCEO and CFO pursuant to 18 U.S.C. Section 1350 Exhibit 32.2Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350statements.statements within the meaning of the Private Securities Litigation Reform Act of 1995, notwithstanding that such statements are not specifically identified. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,“believe,” “can,” “would,” “should,” “could,” “may,” “predicts,“predict,” “anticipate,” “seek,” “potential,” “should,” “will,” “estimate,” “plans,“target,” “projects,“plan,” “project,” “continuing,” “ongoing,” “expects,“expect,” “intends”“intend” and similar words or phrases. These statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties. Our actual results could differ materially from those expressed in or contemplated by such forward-looking statements as a result of a variety of factors, some of which are more fully described in Part II under the caption “Risk Factors.”Any or all of our forward-looking statements in this report may turn out to be inaccurate. The inclusion of such forward-looking statements should not be regarded as a representation by us that we will achieve the results expressed in or contemplated by such forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, liquidity, results of operations, business strategy and growth prospects. There arethatany of which could cause our actual results level of activity, performance or achievements to differ materially from those in such statements and, therefore, you are cautioned not to place undue reliance on such statements. Factors that could cause actual results to differ from those discussed in the results, level of activity, performance or achievements expressed in or contemplated by the forward lookingforward-looking statements including,include, but are not limited to:strategy;regulatory environment, including changes in regulation that affect the fees that we charge;financial services industry;banking franchisesfinancial institutions on attractive terms, or at all;banking franchises;businesschanges in sources and economic conditions generallyuses of funds, including loans, deposits and in the financial services industry;changes in the economy or supply-demand imbalances affecting local real estate values;volatility and directioneffect of market interest rates;effects of any changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve;the ability in certain states to amend the state constitution to impose restrictions on financial services by a simple majority of the people who actually vote;governmental legislation and regulation, including changes in accounting regulationpolicies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters;standards;failure of politicians to reach consensus on a bipartisan basis;acts of war or terrorism, natural disasters such as tornadoes, flooding, hail stormsincrease market share and damaging winds, earthquakes, hurricanes or fires, or thecontrol expenses;pandemic flu;changes in laws and regulations and of other legal and regulatory developments, including, but not limited to, changes in regulation that affect the fees that we charge, the resolution of legal proceedings or regulatory or other governmental inquiries, and the results of regulatory examinations, reviews or other inquires.users;our clients;the Company’sour management personnel;consolidation in the financial services industry;maintain or increase market share;a weakening of the economy which could materially impact credit quality trends and the ability to generate quality loans;the impact of current economic conditions and the Company’s performance, liquidity, financial condition and prospects and on its ability to obtain attractive third-party funding to meet its liquidity needs;fluctuations in face value of investment securities due to market conditions;changes in fiscal, monetary and related policies of the U.S. federal government, its agencies and government sponsored entities; service debt, pay dividends to our common stockholders and satisfy obligations as they become due;costs and effects of legal and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries, and the results of regulatory examinations or reviews;changes in capital classification;the Company’sAll forward-looking statements are necessarily only estimates of future results. Accordingly, actual results may differ materially from those expressed in or contemplated by the particular forward-looking statement, and, therefore, you are cautioned not to place undue reliance on such statements. forward-looking statement is qualified in its entirety by reference to the matters discussed elsewhere in this report. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law. March 31,
2013 December 31,
2012 $ 57,446 $ 90,505 266,290 579,267 95,457 99,408 419,193 769,180 2,106,882 1,718,028 517,017 577,486 32,947 32,996 1,765,450 1,832,702 (12,889 ) (15,380 ) 1,752,561 1,817,322 7,034 5,368 75,698 86,923 83,330 94,808 121,082 121,436 59,630 59,630 26,239 27,575 55,930 100,023 $ 5,257,543 $ 5,410,775 $ 654,002 $ 677,985 487,222 529,996 1,263,083 1,240,020 1,656,494 1,752,718 4,060,801 4,200,719 53,110 53,685 31,011 31,271 25,878 34,541 4,170,800 4,320,216 523 523 1,007,401 1,006,194 42,692 43,273 — (4 ) 36,127 40,573 1,086,743 1,090,559 $ 5,257,543 $ 5,410,775 June 30, 2013 December 31, 2012 ASSETS Cash and due from banks $ 62,095 $ 90,505 Due from Federal Reserve Bank of Kansas City 190,072 579,267 Interest bearing bank deposits 50,589 99,408 Cash and cash equivalents 302,756 769,180 Securities purchased under agreements to resell 100,000 — Investment securities available-for-sale (at fair value) 2,046,536 1,718,028 Investment securities held-to-maturity (fair value of $586,830 and $584,551 at June 30, 2013 and December 31, 2012, respectively) 592,661 577,486 Non-marketable securities 31,775 32,996 Loans (including covered loans of $453,805 and $608,222 at June 30, 2013 and December 31, 2012, respectively) 1,723,287 1,832,702 Allowance for loan losses (11,847 ) (15,380 ) Loans, net 1,711,440 1,817,322 Loans held for sale 6,288 5,368 Federal Deposit Insurance Corporation (“FDIC”) indemnification asset, net 59,883 86,923 Other real estate owned 79,299 94,808 Premises and equipment, net 120,746 121,436 Goodwill 59,630 59,630 Intangible assets, net 24,902 27,575 Other assets 84,772 100,023 Total assets $ 5,220,688 $ 5,410,775 LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities: Deposits: Non-interest bearing demand deposits $ 667,786 $ 677,985 Interest bearing demand deposits 476,215 529,996 Savings and money market 1,246,760 1,240,020 Time deposits 1,596,966 1,752,718 Total deposits 3,987,727 4,200,719 Securities sold under agreements to repurchase 122,879 53,685 Due to FDIC 31,245 31,271 Other liabilities 34,594 34,541 Total liabilities 4,176,445 4,320,216 Stockholders’ equity: Common stock, par value $0.01 per share: 400,000,000 shares authorized; 52,463,641 and 53,279,579 shares issued; 51,377,198 and 52,327,672 shares outstanding at June 30, 2013 and December 31, 2012, respectively 514 523 Additional paid in capital 991,538 1,006,194 Retained earnings 42,941 43,273 Treasury stock of 240 shares at December 31, 2012, at cost — (4 ) Accumulated other comprehensive income, net of tax 9,250 40,573 Total stockholders’ equity 1,044,243 1,090,559 Total liabilities and stockholders’ equity $ 5,220,688 $ 5,410,775 For the three months ended, March 31, 2013 March 31, 2012 $ 36,135 $ 46,591 13,248 15,106 394 381 321 812 50,098 62,890 4,511 9,603 18 29 4,529 9,632 45,569 53,258 1,417 7,836 44,152 45,422 (4,669 ) (3,687 ) 3,276 3,699 3,687 4,376 2,469 2,301 306 309 — 674 443 1,533 1,639 1,065 7,151 10,270 22,956 22,413 5,965 4,537 1,396 2,671 3,469 3,731 1,379 918 356 379 4,719 8,621 2,331 1,711 1,336 1,336 1,047 1,351 1,005 775 — 321 — 855 (627 ) 726 2,552 2,628 47,884 52,973 3,419 2,719 1,337 1,076 $ 2,082 $ 1,643 $ 0.04 $ 0.03 $ 0.04 $ 0.03 52,320,622 52,176,863 52,346,525 52,303,771 For the three months ended For the six months ended June 30, June 30, 2013 2012 2013 2012 Interest and dividend income: Interest and fees on loans $ 34,320 $ 42,594 $ 70,455 $ 89,185 Interest and dividends on investment securities 13,596 16,454 26,844 31,560 Dividends on non-marketable securities 388 384 782 765 Interest on interest-bearing bank deposits 174 413 495 1,225 Total interest and dividend income 48,478 59,845 98,576 122,735 Interest expense: Interest on deposits 4,171 7,900 8,682 17,503 Interest on borrowings 20 32 38 61 Total interest expense 4,191 7,932 8,720 17,564 Net interest income before provision for loan losses 44,287 51,913 89,856 105,171 Provision for loan losses 1,670 12,226 3,087 20,062 Net interest income after provision for loan losses 42,617 39,687 86,769 85,109 Non-interest income: FDIC indemnification asset accretion (2,966 ) (2,646 ) (7,635 ) (6,333 ) FDIC loss sharing income 1,193 4,076 4,469 7,775 Service charges 3,923 4,328 7,610 8,704 Bank card fees 2,558 2,383 5,027 4,684 Gain on sales of mortgages, net 474 294 780 603 Gain on sale of securities, net — — — 674 Gain on previously charged-off acquired loans 451 257 894 1,790 Other non-interest income 1,691 1,357 3,330 2,422 Total non-interest income 7,324 10,049 14,475 20,319 Non-interest expense: Salaries and employee benefits 23,768 22,631 46,724 45,044 Occupancy and equipment 5,870 4,738 11,835 9,275 Professional fees 858 3,272 2,254 5,943 Telecommunications and data processing 3,286 3,488 6,755 7,219 Marketing and business development 732 1,612 2,111 2,530 Supplies and printing 498 828 854 1,207 Other real estate owned expenses 2,497 63 7,216 8,684 Problem loan expenses 896 2,726 3,227 4,437 Intangible asset amortization 1,337 1,331 2,673 2,667 FDIC deposit insurance 1,006 1,161 2,053 2,512 ATM/debit card expenses 1,107 1,223 2,112 1,998 Initial public offering related expenses — 87 — 408 Acquisition related costs — 15 — 870 Loss (gain) from the change in fair value of warrant liability 324 (589 ) (303 ) 137 Other non-interest expense 3,051 2,715 5,603 5,343 Total non-interest expense 45,230 45,301 93,114 98,274 Income before income taxes 4,711 4,435 8,130 7,154 Income tax expense 1,813 1,733 3,150 2,809 Net income $ 2,898 $ 2,702 $ 4,980 $ 4,345 Income per share—basic $ 0.06 $ 0.05 $ 0.10 $ 0.08 Income per share—diluted $ 0.06 $ 0.05 $ 0.10 $ 0.08 Weighted average number of common shares outstanding: Basic 52,055,434 52,191,239 52,187,295 52,184,051 Diluted 52,081,326 52,319,170 52,213,193 52,311,348 For the three months
ended March 31, 2013 2012 $ 2,082 $ 1,643 (2,501 ) (755 ) — (411 ) — (23,711 ) $ (2,501 ) $ (24,877 ) — 23,711 (1,945 ) — (1,945 ) 23,711 (4,446 ) (1,166 ) $ (2,364 ) $ 477 For the three months ended For the six months ended June 30, June 30, 2013 2012 2013 2012 Net income $ 2,898 $ 2,702 $ 4,980 $ 4,345 Other comprehensive income (loss), net of tax: Securities available-for-sale: Net unrealized gains (losses) arising during the period, net of tax benefit (expense) of $15,838 and ($1,549) for the three months ended June 30, 2013 and 2012, respectively; and net of tax benefit (expense) of $17,711 and ($847) for the six months ended June 30, 2013 and 2012, respectively. (25,300 ) 2,488 (27,801 ) 1,733 Reclassification adjustment for net securities gains included in net income, net of tax expense of $263 for the six months ended June 30, 2012. — — — (411 ) Reclassification adjustment for net unrealized holding gains on securities transferred between available-for-sale and held-to-maturity, net of tax expense of $15,159 for the six months ended June 30, 2012. — — — (23,711 ) (25,300 ) $ 2,488 (27,801 ) $ (22,389 ) Net unrealized holding gains on securities transferred between available-for-sale to held-to-maturity: Net unrealized holding gains on securities transferred, net of tax expense of $15,159 for the six months ended June 30, 2012. — — — 23,711 Less: amortization of net unrealized holding gains to income, net of tax benefit of $987 and $1,182 for the three months ended June 30, 2013 and 2012, respectively; and net of tax benefit of $2,205 and $1,182 for the six months ended June 30, 2013 and 2012, respectively. (1,577 ) (1,913 ) (3,522 ) (1,913 ) (1,577 ) (1,913 ) (3,522 ) 21,798 Other comprehensive income (loss) (26,877 ) 575 (31,323 ) (591 ) Comprehensive income (loss) $ (23,979 ) $ 3,277 $ (26,343 ) $ 3,754 ThreeMarch 31,June 30, 2013 and 2012 Common
stock Additional
paid-in
capital Retained
earnings Treasury
stock Accumulated
other
comprehensive
income, net Total $ 522 $ 994,705 $ 46,480 $ — $ 47,022 $ 1,088,729 — 2,183 — — — 2,183 — — 1,643 — — 1,643 — — — — (1,166 ) (1,166 ) 522 996,888 48,123 — 45,856 1,091,389 523 1,006,194 43,273 (4 ) 40,573 1,090,559 — 1,441 — — — 1,441 — (234 ) — 4 — (230 ) — — (2,663 ) — — (2,663 ) — — 2,082 — — 2,082 — — — — (4,446 ) (4,446 ) $ 523 $ 1,007,401 $ 42,692 $ — $ 36,127 $ 1,086,743 Total Balance, December 31, 2011 $ 522 $ 994,705 $ 46,480 $ — $ 47,022 $ 1,088,729 Net income — — 4,345 — — 4,345 Stock-based compensation — 4,258 — — — 4,258 Other comprehensive loss — — — — (591 ) (591 ) Balance, June 30, 2012 522 998,963 50,825 — 46,431 1,096,741 Balance, December 31, 2012 523 1,006,194 43,273 (4 ) 40,573 1,090,559 Net income — — 4,980 — — 4,980 Stock-based compensation — 2,667 — — — 2,667 (Repurchase) /retirement of shares (9 ) (17,323 ) — 4 — (17,328 ) Dividends paid ($0.10 per share) — — (5,312 ) — — (5,312 ) Other comprehensive loss — — — — (31,323 ) (31,323 ) Balance, June 30, 2013 $ 514 $ 991,538 $ 42,941 $ — $ 9,250 $ 1,044,243 For the three months ended
March 31, 2013 2012 $ 2,082 $ 1,643 1,417 7,836 3,812 2,498 — (674 ) (6,739 ) (3,102 ) (3,574 ) (14,840 ) 5,466 960 (24,293 ) (37,417 ) (306 ) (309 ) 10,921 12,987 4,669 3,687 (1,805 ) (849 ) 4,526 5,089 1,441 2,183 (260 ) (323 ) 409 (4,755 ) (3,443 ) (6,561 ) (5,677 ) (31,947 ) 49 30 — 20,794 158,532 120,546 57,599 107 (554,355 ) (773,774 ) 58,313 158,055 (2,122 ) (31,941 ) 25,726 12,676 55,287 6,079 (200,971 ) (487,428 ) (139,918 ) (290,904 ) (575 ) 26,453 (2,616 ) — (230 ) — (143,339 ) (264,451 ) (349,987 ) (783,826 ) 769,180 1,628,137 $ 419,193 $ 844,311 $ 4,906 $ 12,897 $ 8,580 $ 17,459 $ 17,043 $ 40,899 $ 9,132 $ 32,361 $ — $ 754,063 For the six months ended June 30, 2013 2012 Cash flows from operating activities: Net income $ 4,980 $ 4,345 Adjustments to reconcile net income to net cash used in operating activities: Provision for loan losses 3,087 20,062 Depreciation and amortization 7,683 5,596 Gain on sale of securities, net — (674 ) Current income tax expense 3,721 — Deferred income tax benefit (10,445 ) (2,965 ) Discount accretion, net of premium amortization 10,274 2,375 Loan accretion (46,210 ) (66,135 ) Net gain on sale of mortgage loans (780 ) (603 ) Origination of loans held for sale (32,678 ) (26,893 ) Proceeds from sales of loans held for sale 31,734 26,476 Amortization of indemnification asset 7,635 6,333 Gain on the sale of other real estate owned, net (3,932 ) (4,040 ) Impairment on other real estate owned 7,148 7,213 Stock-based compensation 2,667 4,258 Decrease in due to FDIC, net (26 ) (33,981 ) Decrease (increase) in other assets (3,530 ) (1,261 ) Decrease in other liabilities (3,995 ) (26,349 ) Net cash used in operating activities (22,667 ) (86,243 ) Cash flows from investing activities: Purchase of FHLB of Des Moines stock — (4,018 ) Sale of FHLB stock 1,221 — Purchase of FRB stock — 59 Sales of investment securities available-for-sale — 20,794 Maturities of investment securities held-to-maturity 107,338 53,156 Maturities of investment securities available-for-sale 314,954 220,487 Purchase of investment securities held-to-maturity (127,784 ) (2,234 ) Purchase of investment securities available-for-sale (693,977 ) (936,281 ) Increase in securities purchased under agreements to resell (100,000 ) — Net decrease in loans 124,430 304,587 Purchase of premises and equipment (4,320 ) (33,831 ) Proceeds from sales of other real estate owned 37,672 35,851 Decrease in FDIC indemnification asset 63,052 27,715 Net cash used in investing activities (277,414 ) (313,715 ) Cash flows from financing activities: Net decrease in deposits (212,992 ) (533,504 ) Increase in repurchase agreements 69,194 9,911 Payment of dividends (5,217 ) — Repurchase of shares (17,328 ) — Net cash used in financing activities (166,343 ) (523,593 ) Decrease in cash and cash equivalents (466,424 ) (923,551 ) Cash and cash equivalents at beginning of the year 769,180 1,628,137 Cash and cash equivalents at end of period $ 302,756 $ 704,586 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 9,241 $ 22,048 Cash paid during the period for taxes $ 9,892 $ 20,441 Supplemental schedule of non-cash investing activities: Loans transferred to other real estate owned at fair value $ 25,379 $ 56,100 FDIC indemnification asset claims transferred to other assets $ 21,049 $ 74,075 Available-for-sale investment securities transferred to investment securities held-to-maturity $ — $ 754,063 March 31,Company’sCompany's acquisitions to date and it offers consumer and commercial banking through 101 full-service banking centers that are predominately located in the greater Kansas City area and Colorado. have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and serve to update the National Bank Holdings Corporation Annual Report on Form 10-K for the year ended December 31, 2012.2012. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and where applicable, with general practices in the banking industry or guidelines prescribed by bank regulatory agencies, however,agencies. However, they may not include all information and notes necessary to constitute a complete set of financial statements under GAAP applicable to annual periods and accordingly should be read in conjunction with the financial information contained in the Form 10-K. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results presented. All such adjustments are of a normal recurring nature. All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications of prior years’years' amounts are made whenever necessary to conform to current period presentation. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.Company’sCompany's significant accounting policies followed in the preparation of the consolidated financial statements are disclosed in Note 2 of the audited financial statements and notes for the year ended December 31, 2012 and are contained in the Company’sCompany's Annual Report on Form 10-K, referenced above. During the six months ended June 30, 2013, the Company began entering into agreements with certain financial institutions whereby the Company purchases securities under agreements to resell as of a specified future date at a specified price plus accrued interest. The securities purchased under agreements to resell are carried at the contractual amounts at which the securities will subsequently be resold, including accrued interest. The securities purchased under agreement to resell are subject to a master netting arrangement; however, the Company has not offset any of the amounts shown in the consolidated financial statements. The securities are pledged as collateral by the counterparties and are held by a third party custodian. The collateral is valued daily and additional collateral may be obtained or refunded as necessary to maintain full collateralization of these transactions. There have been no other significant changes to the application of significant accounting policies since December 31, 2012.Accounting for Indemnification Assets—In October 2012, the Financial Accounting Standards Board (“FASB”) released Accounting Standards Update (“ASU”) 2012-06Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution. This guidance clarified that any amortization of changes in the value of an indemnification asset should be limited to the contractual term of the indemnification agreement (that is, the lesser of the term of the indemnification agreement and the remaining life of the indemnified assets). This guidance resulted in no changes to the accounting for the Company’s indemnification asset.FASBFinancial Accounting Standards Board ("FASB") issued ASUAccounting Standards Update ("ASU") 2013-02,“Comprehensive Income-Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” This guidance requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. Entities are also required to present significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required to be reclassified to net income in its entirety in the same accounting period. Other amounts that are not required to be reclassified to net income are to be cross-referenced to other disclosures that provide additional detail about those amounts. The Company was required to adopt this update retrospectively for the quarter ended March 31, 2013.in 2013 with retrospective application. Adoption of this update affects the presentation of the components of comprehensive income in theDisclosures About Offsetting Assets and Liabilities—In December 2011, the FASB issued ASU 2011-11,Disclosures about Offsetting Assets and Liabilities. Under the ASU, an entity will be required to disclose both gross and net information about instruments and transactions eligible for offset in the balance sheet, as well as instruments and transactions subject to an agreement similar to a master netting agreement. In January 2013, the FASB released ASU 2013-01,Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which amended ASU 2011-11 to specifically include only derivatives accounted for under Topic 815, repurchase and reverse repurchase agreements, and securities borrowing and lending transactions that are either offset or subject to an enforceable master netting arrangement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods therein, with retrospective application required. The adoption of these accounting pronouncements did not have a material impact on the Company’s consolidated financial statements.NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013$2.6$2.6 billion at March 31,June 30, 2013, an increase from $2.3$2.3 billion at December 31, 2012.2012. Included in the aforementioned $2.6$2.6 billion was $2.1$2.0 billion of available-for-sale securities and $517.0 million$0.6 billion of held-to-maturity securities. March 31, 2013 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value $ 68,253 $ 76 $ — $ 68,329 602,092 17,519 (1 ) 619,610 1,403,209 17,047 (1,732 ) 1,418,524 419 — — 419 $ 2,073,973 $ 34,642 $ (1,733 ) $ 2,106,882 June 30, 2013 Fair Value Asset backed securities $ 43,568 $ 10 $ — $ 43,578 Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises 553,871 8,376 (2,112 ) 560,135 Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises 1,456,908 12,706 (27,210 ) 1,442,404 Other securities 419 — — 419 Total $ 2,054,766 $ 21,092 $ (29,322 ) $ 2,046,536 December 31, 2012 Fair Value U.S. Treasury securities $ 300 $ — $ — $ 300 Asset backed securities 89,881 122 — 90,003 Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises 658,169 19,849 (1 ) 678,017 Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises 931,979 17,630 (320 ) 949,289 Other securities 419 — — 419 Total $ 1,680,748 $ 37,601 $ (321 ) $ 1,718,028 March 31,June 30, 2013 and December 31, 2012, mortgage-backed securities represented 96.7%97.9% and 94.7%, respectively, of the Company’s available-for-sale investment portfolio and all mortgage-backed securities were backed by government sponsored enterprises (“GSE”) collateral such as Federal Home Loan Mortgage Corporation (“FHLMC”) and Federal National Mortgage Association (“FNMA”), and the government sponsored agency Government National Mortgage Association (“GNMA”).March 31, March 31, 2013 Less than 12 months 12 months or more Total Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses $ — $ — $ 16 $ (1 ) $ 16 $ (1 ) 432,755 (1,732 ) — — 432,755 (1,732 ) $ 432,755 $ (1,732 ) $ 16 $ (1 ) $ 432,771 $ (1,733 ) June 30, 2013 Less than 12 months 12 months or more Total Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises $ 264,915 $ (2,111 ) $ 15 $ (1 ) $ 264,930 $ (2,112 ) Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises 1,010,827 (27,210 ) — — 1,010,827 (27,210 ) Total $ 1,275,742 $ (29,321 ) $ 15 $ (1 ) $ 1,275,757 $ (29,322 ) December 31, 2012 Less than 12 months 12 months or more Total Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises $ 17 $ — $ 8 $ (1 ) $ 25 $ (1 ) Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises 130,686 (320 ) — — 130,686 (320 ) Total $ 130,703 $ (320 ) $ 8 $ (1 ) $ 130,711 $ (321 ) March 31,June 30, 2013 or December 31, 2012.2012. The Company had no intention to sell these securities before recovery of their amortized cost and believes it will not be required to sell the securities before the recovery of their amortized cost.$82.7$166.1 million at March 31,June 30, 2013 and $89.2$89.2 millionDecember 31, 2012.2012. The decreaseincrease of pledged available-for-sale investment securities was primarily attributable to paydowns on the underlyingincrease in securities sold under agreements to repurchase during the threesix months ended March 31, 2013.June 30, 2013. Certain investment securities may also be pledged as collateral should the Company utilize its line of credit at the FHLB of Des Moines; however, no investment securities were pledged for this purpose at March 31,June 30, 2013 or December 31, 2012.March 31,June 30, 2013 (in thousands): Amortized
Cost Fair Value $ — $ — 68,258 68,333 238,841 242,408 1,766,455 1,795,722 419 419 $ 2,073,973 $ 2,106,882 Fair Value Due in one year or less $ — $ — Due after one year through five years 43,576 43,586 Due after five years through ten years 220,611 219,889 Due after ten years 1,790,160 1,782,642 Other securities 419 419 Total investment securities available-for-sale $ 2,054,766 $ 2,046,536 3.63.8 years as of March 31,June 30, 2013 and 3.4 years as of December 31, 2012.2012. This estimate is based on assumptions and actual results may differ. Other securities of $0.4$0.4 million have no stated contractualmaturity date as of March 31, 2013.June 30, 2013.March 31,June 30, 2013 and December 31, 2012 the Company held $517.0$592.7 million and $577.5$577.5 million of held-to-maturity investment securities, respectively. During the first quarter of 2012 the Company transferred securities with a fair value of $754.1$754.1 million fromNATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013three monthsix months ended March 31,has not purchased or sold any$127.8 million of held-to-maturity investment securities. Held-to-maturity investment securities are summarized as follows as of the dates indicated (in thousands): March 31, 2013 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value $ 517,017 $ 5,850 $ — $ 522,867 $ 517,017 $ 5,850 $ — $ 522,867 June 30, 2013 Fair Value Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises $ 509,690 $ — $ (3,528 ) $ 506,162 Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises 82,971 — (2,303 ) 80,668 Total investment securities held-to-maturity $ 592,661 $ — $ (5,831 ) $ 586,830 December 31, 2012 Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises $ 577,486 $ 7,065 $ — $ 584,551 Total investment securities held-to-maturity $ 577,486 $ 7,065 $ — $ 584,551 March 31,June 30, 2013 (in thousands): Amortized
Cost Fair Value $ — $ — — — — — 517,017 522,867 — — $ 517,017 $ 522,867 Fair Value Due in one year or less $ — $ — Due after one year through five years — — Due after five years through ten years — — Due after ten years 592,661 586,830 Other securities — — Total investment securities held-to-maturity $ 592,661 $ 586,830 $139.1$149.5 million and $127.9$127.9 million at March 31,June 30, 2013 and December 31, 2012, respectively. Actual maturities of mortgage-backed securities may differ from scheduled maturities depending on the repayment characteristics and experience of the underlying financial instruments. The estimated weighted average expected life of the held-to-maturityheld-to-maturity mortgage-backed securities portfolio as of March 31,June 30, 2013 and December 31, 2012 was 4.0 and 3.8 years. years, respectively. This estimateestimate is based on assumptions and actual results may differ.2010, and new loans originated by the Company.2010. The majority of the loans acquired in the Hillcrest Bank and Community Banks of Colorado transactions are covered by loss sharing agreements with the FDIC, and covered loans are presented separately from non-covered loans due to the FDIC loss sharing agreements associated with these loans. Covered loans comprised 30.4%26.3% of the total loan portfolio at March 31,June 30, 2013, compared to 33.2% of the total loan portfolio at December 31, 2012.NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013The carrying value of loans are net of discounts on loans excluded from Accounting Standards Codification (“ASC”) Topic 310-30Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality, and fees and costs of $16.3 million and $20.4 million as of March 31, 2013 and December 31, 2012 respectively. .March 31,June 30, 2013 and December 31, 2012. The carrying value of loans are net of discounts on loans excluded from Accounting Standards Codification (“ASC”) Topic 310-30 , and fees and costs of $15.6 million and $20.4 million as of June 30, 2013 and December 31, 2012, respectively (in thousands): March 31, 2013 ASC 310-30
Loans Non ASC 310-30
Loans Total Loans % of
Total $ 78,928 $ 185,802 $ 264,730 15.0 % 490,608 256,132 746,740 42.3 % 46,580 118,157 164,737 9.3 % 101,386 446,185 547,571 31.0 % 12,747 28,925 41,672 2.4 % $ 730,249 $ 1,035,201 $ 1,765,450 100.0 % $ 466,677 $ 70,419 $ 537,096 30.4 % 263,572 964,782 1,228,354 69.6 % $ 730,249 $ 1,035,201 $ 1,765,450 100.0 % December 31, 2012 ASC 310-30
Loans Non ASC 310-30
Loans Total Loans % of
Total $ 83,169 $ 187,419 $ 270,588 14.8 % 566,035 238,964 804,999 43.9 % 47,733 125,674 173,407 9.5 % 106,100 427,277 533,377 29.1 % 18,984 31,347 50,331 2.7 % $ 822,021 $ 1,010,681 $ 1,832,702 100.0 % $ 527,948 $ 80,274 $ 608,222 33.2 % 294,073 930,407 1,224,480 66.8 % $ 822,021 $ 1,010,681 $ 1,832,702 100.0 % June 30, 2013 Total Loans Commercial $ 73,326 $ 203,889 $ 277,215 16.1 % Commercial real estate 409,361 267,655 677,016 39.3 % Agriculture 42,121 113,428 155,549 9.0 % Residential real estate 81,779 492,354 574,133 33.3 % Consumer 10,878 28,496 39,374 2.3 % Total $ 617,465 $ 1,105,822 $ 1,723,287 100.0 % Covered $ 389,484 $ 64,321 $ 453,805 26.3 % Non-covered 227,981 1,041,501 1,269,482 73.7 % Total $ 617,465 $ 1,105,822 $ 1,723,287 100.0 % December 31, 2012 Total Loans Commercial $ 83,169 $ 187,419 $ 270,588 14.8 % Commercial real estate 566,035 238,964 804,999 43.9 % Agriculture 47,733 125,674 173,407 9.5 % Residential real estate 106,100 427,277 533,377 29.1 % Consumer 18,984 31,347 50,331 2.7 % Total $ 822,021 $ 1,010,681 $ 1,832,702 100.0 % Covered $ 527,948 $ 80,274 $ 608,222 33.2 % Non-covered 294,073 930,407 1,224,480 66.8 % Total $ 822,021 $ 1,010,681 $ 1,832,702 100.0 % LoansAll loans accounted for under ASC Topic 310-30 were not classified as non-performingperforming assets at the respective acquisition dates, at March 31, 2013 or at December 31, 2012, regardless of past due status, as the carrying value of all of the respective pools’ cash flows were considered estimable. During the six months ended June 30, 2013, the Company determined that the cash flows of one covered commercial and industrial loan pool, with a balance of $18.7 million at June 30, 2013, were no longer reasonably estimable, and probable of collection. Therefore, interestin accordance with the guidance in ASC 310-30, this pool was put on non-accrual status. Interest income was recognized on all accruing loans accounted for under ASC 310-30 through accretion of the difference between the carrying value of the loans and the expected cash flows, was recognized on all acquired loans accounted for under ASC Topic 310-30.March 31,Topic 310-30 that are 90 days or more past due and still accreting are generally considered to be performing and are included in loans 90 days or more past due and still accruing. At March 31,June 30, 2013 and December 31, 2012 $18.0, $14.2 million and $23.1$23.1 million, respectively, of loans excluded from the scope of ASC 310-30 were on non-accrual and $18.7 million of loans accounted for outside the scope ofunder ASC Topic 310-30 were on non-accrual.non-accrual status at June 30, 2013. Loan delinquency for all loans is shown in the following tables at March 31,June 30, 2013 and December 31, 2012, respectively (in thousands): Total Loans March 31, 2013 30-59
days past
due 60-89
days
past
due Greater
than 90
days past
due Total past
due Current Total
loans Loans > 90
days past
due and
still
accruing Non-
accrual $ 327 $ 1,751 $ 498 $ 2,576 $ 183,226 $ 185,802 $ — $ 2,887 — — 131 131 6,942 7,073 131 — 47 — 14 61 9,662 9,723 — 15 — — — — 12,679 12,679 — 191 95 — 209 304 62,408 62,712 — 850 1,130 243 5,123 6,496 157,449 163,945 — 7,834 1,272 243 5,477 6,992 249,140 256,132 131 8,890 1,216 — — 1,216 116,941 118,157 — 227 1,884 327 1,238 3,449 392,683 396,132 — 5,418 405 9 146 560 49,493 50,053 42 274 2,289 336 1,384 4,009 442,176 446,185 42 5,692 392 24 3 419 28,506 28,925 3 269 5,496 2,354 7,362 15,212 1,019,989 1,035,201 176 17,965 186 1,751 472 2,409 68,010 70,419 — 4,082 5,310 603 6,890 12,803 951,979 964,782 176 13,883 5,496 2,354 7,362 15,212 1,019,989 1,035,201 176 17,965 668 523 6,239 7,430 71,498 78,928 6,239 — 13,047 8,999 97,950 119,996 370,612 490,608 97,950 — 656 — 2,637 3,293 43,287 46,580 2,637 — 3,396 721 5,052 9,169 92,217 101,386 5,052 — 171 18 597 786 11,961 12,747 597 — 17,938 10,261 112,475 140,674 589,575 730,249 112,475 — 10,502 8,546 88,361 107,409 359,268 466,677 88,361 — 7,436 1,715 24,114 33,265 230,307 263,572 24,114 — 17,938 10,261 112,475 140,674 589,575 730,249 112,475 — $ 23,434 $ 12,615 $ 119,837 $ 155,886 $ 1,609,564 $ 1,765,450 $ 112,651 $ 17,965 $ 10,688 $ 10,297 $ 88,833 $ 109,818 $ 427,278 $ 537,096 $ 88,361 $ 4,082 12,746 2,318 31,004 46,068 1,182,286 1,228,354 24,290 13,883 $ 23,434 $ 12,615 $ 119,837 $ 155,886 $ 1,609,564 $ 1,765,450 $ 112,651 $ 17,965 Total Loans June 30, 2013 Current Loans excluded from ASC 310-30 Commercial $ 604 $ 81 $ 879 $ 1,564 $ 202,325 $ 203,889 $ 20 $ 1,714 Commercial real estate Construction — — — — 6,516 6,516 — — Acquisition/development 47 404 — 451 10,727 11,178 — 1 Multifamily 935 — — 935 7,802 8,737 — 186 Owner-occupied 71 172 106 349 70,106 70,455 — 893 Non owner-occupied 138 — 4,713 4,851 165,918 170,769 — 5,277 Total commercial real estate 1,191 576 4,819 6,586 261,069 267,655 — 6,357 Agriculture 20 — — 20 113,408 113,428 — 205 Residential real estate Senior lien 1,149 102 1,417 2,668 437,779 440,447 — 5,214 Junior lien 151 47 220 418 51,489 51,907 — 458 Total residential real estate 1,300 149 1,637 3,086 489,268 492,354 — 5,672 Consumer 320 17 5 342 28,154 28,496 5 256 Total loans excluded from ASC 310-30 3,435 823 7,340 11,598 1,094,224 1,105,822 25 14,204 Covered loans excluded from ASC 310-30 393 56 688 1,137 63,184 64,321 — 2,747 Non-covered loans excluded from ASC 310-30 3,042 767 6,652 10,461 1,031,040 1,041,501 25 11,457 Total loans excluded from ASC 310-30 3,435 823 7,340 11,598 1,094,224 1,105,822 25 14,204 Loans accounted for under ASC 310-30 Commercial 746 123 5,401 6,270 67,056 73,326 5,324 18,661 Commercial real estate 2,600 9,078 81,618 93,296 316,065 409,361 81,618 — Agriculture 2,154 — 2,688 4,842 37,279 42,121 2,688 — Residential real estate 1,410 817 3,453 5,680 76,099 81,779 3,453 — Consumer 153 100 61 314 10,564 10,878 61 — Total loans accounted for under ASC 310-30 7,063 10,118 93,221 110,402 507,063 617,465 93,144 18,661 Covered loans accounted for under ASC 310-30 2,781 6,357 75,461 84,599 304,885 389,484 75,384 18,661 Non-covered loans accounted for under ASC 310-30 4,282 3,761 17,760 25,803 202,178 227,981 17,760 — Total loans accounted for under ASC 310-30 7,063 10,118 93,221 110,402 507,063 617,465 93,144 18,661 Total loans $ 10,498 $ 10,941 $ 100,561 $ 122,000 $ 1,601,287 $ 1,723,287 $ 93,169 $ 32,865 Covered loans $ 3,174 $ 6,413 $ 76,149 $ 85,736 $ 368,069 $ 453,805 $ 75,384 $ 21,408 Non-covered loans 7,324 4,528 24,412 36,264 1,233,218 1,269,482 17,785 11,457 Total loans $ 10,498 $ 10,941 $ 100,561 $ 122,000 $ 1,601,287 $ 1,723,287 $ 93,169 $ 32,865 March 31, Total Loans December 31, 2012 30-59
days past
due 60-89
days
past
due Greater
than 90
days past
due Total past
due Current Total
loans Loans > 90
days past
due and
still
accruing Non-
accrual $ 846 $ 148 $ 1,122 $ 2,116 $ 185,303 $ 187,419 $ — $ 4,500 — — — — 3,915 3,915 — — 1,948 — — 1,948 8,485 10,433 — 75 — — 34 34 13,387 13,421 — 237 97 106 1,074 1,277 56,490 57,767 — 3,365 — 122 5,123 5,245 148,183 153,428 — 7,992 2,045 228 6,231 8,504 230,460 238,964 — 11,669 33 40 11 84 125,590 125,674 — 251 1,261 119 1,825 3,205 373,243 376,448 22 5,815 181 — 110 291 50,538 50,829 — 593 1,442 119 1,935 3,496 423,781 427,277 22 6,408 447 48 3 498 30,849 31,347 3 291 4,813 583 9,302 14,698 995,983 1,010,681 25 23,119 75 51 2,062 2,188 78,086 80,274 — 6,045 4,738 532 7,240 12,510 917,897 930,407 25 17,074 4,813 583 9,302 14,698 995,983 1,010,681 25 23,119 521 563 5,621 6,705 76,464 83,169 5,621 — 10,060 3,928 129,656 143,644 422,391 566,035 129,656 — 1,247 16 2,768 4,031 43,702 47,733 2,768 — 1,247 207 5,463 6,917 99,183 106,100 5,463 — 297 327 3,253 3,877 15,107 18,984 3,253 — 13,372 5,041 146,761 165,174 656,847 822,021 146,761 — 9,855 3,613 116,883 130,351 397,597 527,948 116,883 — 3,517 1,428 29,878 34,823 259,250 294,073 29,878 — 13,372 5,041 146,761 165,174 656,847 822,021 146,761 — $ 18,185 $ 5,624 $ 156,063 $ 179,872 $ 1,652,830 $ 1,832,702 $ 146,786 $ 23,119 $ 9,930 $ 3,664 $ 118,945 $ 132,539 $ 475,683 $ 608,222 $ 116,883 $ 6,045 8,255 1,960 37,118 47,333 1,177,147 1,224,480 29,903 17,074 $ 18,185 $ 5,624 $ 156,063 $ 179,872 $ 1,652,830 $ 1,832,702 $ 146,786 $ 23,119 Total Loans December 31, 2012 Current Loans excluded from ASC 310-30 Commercial $ 846 $ 148 $ 1,122 $ 2,116 $ 185,303 $ 187,419 $ — $ 4,500 Commercial real estate Construction — — — — 3,915 3,915 — — Acquisition/development 1,948 — — 1,948 8,485 10,433 — 75 Multifamily — — 34 34 13,387 13,421 — 237 Owner-occupied 97 106 1,074 1,277 56,490 57,767 — 3,365 Non owner-occupied — 122 5,123 5,245 148,183 153,428 — 7,992 Total commercial real estate 2,045 228 6,231 8,504 230,460 238,964 — 11,669 Agriculture 33 40 11 84 125,590 125,674 — 251 Residential real estate Senior lien 1,261 119 1,825 3,205 373,243 376,448 22 5,815 Junior lien 181 — 110 291 50,538 50,829 — 593 Total residential real estate 1,442 119 1,935 3,496 423,781 427,277 22 6,408 Consumer 447 48 3 498 30,849 31,347 3 291 Total loans excluded from ASC 310-30 4,813 583 9,302 14,698 995,983 1,010,681 25 23,119 Covered loans excluded from ASC 310-30 75 51 2,062 2,188 78,086 80,274 — 6,045 Non-covered loans excluded from ASC 310-30 4,738 532 7,240 12,510 917,897 930,407 25 17,074 Total loans excluded from ASC 310-30 4,813 583 9,302 14,698 995,983 1,010,681 25 23,119 Loans accounted for under ASC 310-30 Commercial 521 563 5,621 6,705 76,464 83,169 5,621 — Commercial real estate 10,060 3,928 129,656 143,644 422,391 566,035 129,656 — Agriculture 1,247 16 2,768 4,031 43,702 47,733 2,768 — Residential real estate 1,247 207 5,463 6,917 99,183 106,100 5,463 — Consumer 297 327 3,253 3,877 15,107 18,984 3,253 — Total loans accounted for under ASC 310-30 13,372 5,041 146,761 165,174 656,847 822,021 146,761 — Covered loans accounted for under ASC 310-30 9,855 3,613 116,883 130,351 397,597 527,948 116,883 — Non-covered loans accounted for under ASC 310-30 3,517 1,428 29,878 34,823 259,250 294,073 29,878 — Total loans accounted for under ASC 310-30 13,372 5,041 146,761 165,174 656,847 822,021 146,761 — Total loans $ 18,185 $ 5,624 $ 156,063 $ 179,872 $ 1,652,830 $ 1,832,702 $ 146,786 $ 23,119 Covered loans $ 9,930 $ 3,664 $ 118,945 $ 132,539 $ 475,683 $ 608,222 $ 116,883 $ 6,045 Non-covered loans 8,255 1,960 37,118 47,333 1,177,147 1,224,480 29,903 17,074 Total loans $ 18,185 $ 5,624 $ 156,063 $ 179,872 $ 1,652,830 $ 1,832,702 $ 146,786 $ 23,119 March 31,March 31,June 30, 2013 and December 31, 2012, respectively (in thousands): Total Loans March 31, 2013 Pass Special
Mention Substandard Doubtful Total $ 148,360 $ 1,500 $ 34,643 $ 1,299 $ 185,802 7,073 — — — 7,073 3,652 — 6,071 — 9,723 7,791 3,727 1,121 40 12,679 51,767 988 9,957 — 62,712 120,233 27,726 15,663 323 163,945 190,516 32,441 32,812 363 256,132 98,659 16,262 3,236 — 118,157 386,217 2,163 7,086 666 396,132 47,813 209 2,032 (1 ) 50,053 434,030 2,372 9,118 665 446,185 28,650 — 264 11 28,925 900,215 52,575 80,073 2,338 1,035,201 36,063 935 31,602 1,819 70,419 864,152 51,640 48,471 519 964,782 900,215 52,575 80,073 2,338 1,035,201 29,098 2,074 46,516 1,240 78,928 152,416 57,672 279,329 1,191 490,608 34,321 1,510 10,749 — 46,580 55,855 6,522 39,009 — 101,386 10,928 634 1,185 — 12,747 282,618 68,412 376,788 2,431 730,249 154,705 53,610 257,128 1,234 466,677 127,913 14,802 119,660 1,197 263,572 282,618 68,412 376,788 2,431 730,249 $ 1,182,833 $ 120,987 $ 456,861 $ 4,769 $ 1,765,450 $ 190,768 $ 54,545 $ 288,730 $ 3,053 $ 537,096 992,065 66,442 168,131 1,716 1,228,354 $ 1,182,833 $ 120,987 $ 456,861 $ 4,769 $ 1,765,450 Total Loans June 30, 2013 Pass Substandard Doubtful Total Loans excluded from ASC 310-30 Commercial $ 155,575 $ 6,118 $ 41,724 $ 472 $ 203,889 Commercial real estate Construction 6,516 — — — 6,516 Acquisition/development 2,344 2,766 6,068 — 11,178 Multifamily 7,587 — 1,113 37 8,737 Owner-occupied 61,770 877 7,808 — 70,455 Non owner-occupied 134,175 27,283 9,311 — 170,769 Total commercial real estate 212,392 30,926 24,300 37 267,655 Agriculture 111,792 784 852 — 113,428 Residential real estate Senior lien 431,305 1,708 6,860 574 440,447 Junior lien 49,446 206 2,255 — 51,907 Total residential real estate 480,751 1,914 9,115 574 492,354 Consumer 28,234 — 255 7 28,496 Total loans excluded from ASC 310-30 988,744 39,742 76,246 1,090 1,105,822 Covered loans excluded from ASC 310-30 33,346 3,637 26,485 853 64,321 Non-covered loans excluded from ASC 310-30 955,398 36,105 49,761 237 1,041,501 Total loans excluded from ASC 310-30 988,744 39,742 76,246 1,090 1,105,822 Loans accounted for under ASC 310-30 Commercial 26,903 3,078 42,161 1,184 73,326 Commercial real estate 145,617 29,644 227,927 6,173 409,361 Agriculture 30,217 2,135 9,769 — 42,121 Residential real estate 50,147 6,381 25,251 — 81,779 Consumer 9,449 583 846 — 10,878 Total loans accounted for under ASC 310-30 262,333 41,821 305,954 7,357 617,465 Covered loans accounted for under ASC 310-30 143,764 28,616 210,880 6,224 389,484 Non-covered loans accounted for under ASC 310-30 118,569 13,205 95,074 1,133 227,981 Total loans accounted for under ASC 310-30 262,333 41,821 305,954 7,357 617,465 Total loans $ 1,251,077 $ 81,563 $ 382,200 $ 8,447 $ 1,723,287 Total covered $ 177,110 $ 32,253 $ 237,365 $ 7,077 $ 453,805 Total non-covered 1,073,967 49,310 144,835 1,370 1,269,482 Total loans $ 1,251,077 $ 81,563 $ 382,200 $ 8,447 $ 1,723,287 March 31, Total Loans December 31, 2012 Pass Special
Mention Substandard Doubtful Total $ 137,537 $ 9,776 $ 38,696 $ 1,410 $ 187,419 3,915 — — — 3,915 6,727 — 3,706 — 10,433 8,409 3,798 1,201 13 13,421 44,129 4,006 9,632 — 57,767 104,307 29,394 19,411 316 153,428 167,487 37,198 33,950 329 238,964 120,471 1,359 3,844 — 125,674 365,571 2,240 8,106 531 376,448 48,359 251 2,214 5 50,829 413,930 2,491 10,320 536 427,277 31,050 — 276 21 31,347 870,475 50,824 87,086 2,296 1,010,681 32,117 9,974 36,427 1,756 80,274 838,358 40,850 50,659 540 930,407 870,475 50,824 87,086 2,296 1,010,681 29,719 3,628 42,101 7,721 83,169 162,122 60,787 329,869 13,257 566,035 34,599 1,242 11,892 — 47,733 57,697 6,614 41,789 — 106,100 14,489 723 3,772 — 18,984 298,626 72,994 429,423 20,978 822,021 159,430 57,056 292,174 19,288 527,948 139,196 15,938 137,249 1,690 294,073 298,626 72,994 429,423 20,978 822,021 $ 1,169,101 $ 123,818 $ 516,509 $ 23,274 $ 1,832,702 $ 191,547 $ 67,030 $ 328,601 $ 21,044 $ 608,222 977,554 56,788 187,908 2,230 1,224,480 $ 1,169,101 $ 123,818 $ 516,509 $ 23,274 $ 1,832,702 Total Loans December 31, 2012 Pass Substandard Doubtful Total Loans excluded from ASC 310-30 Commercial $ 137,537 $ 9,776 $ 38,696 $ 1,410 $ 187,419 Commercial real estate Construction 3,915 — — — 3,915 Acquisition/development 6,727 — 3,706 — 10,433 Multifamily 8,409 3,798 1,201 13 13,421 Owner-occupied 44,129 4,006 9,632 — 57,767 Non owner-occupied 104,307 29,394 19,411 316 153,428 Total commercial real estate 167,487 37,198 33,950 329 238,964 Agriculture 120,471 1,359 3,844 — 125,674 Residential real estate Senior lien 365,571 2,240 8,106 531 376,448 Junior lien 48,359 251 2,214 5 50,829 Total residential real estate 413,930 2,491 10,320 536 427,277 Consumer 31,050 — 276 21 31,347 Total loans excluded from ASC 310-30 870,475 50,824 87,086 2,296 1,010,681 Covered loans excluded from ASC 310-30 32,117 9,974 36,427 1,756 80,274 Non-covered loans excluded from ASC 310-30 838,358 40,850 50,659 540 930,407 Total loans excluded from ASC 310-30 870,475 50,824 87,086 2,296 1,010,681 Loans accounted for under ASC 310-30 Commercial 29,719 3,628 42,101 7,721 83,169 Commercial real estate 162,122 60,787 329,869 13,257 566,035 Agriculture 34,599 1,242 11,892 — 47,733 Residential real estate 57,697 6,614 41,789 — 106,100 Consumer 14,489 723 3,772 — 18,984 Total loans accounted for under ASC 310-30 298,626 72,994 429,423 20,978 822,021 Covered loans accounted for under ASC 310-30 159,430 57,056 292,174 19,288 527,948 Non-covered loans accounted for under ASC 310-30 139,196 15,938 137,249 1,690 294,073 Total loans accounted for under ASC 310-30 298,626 72,994 429,423 20,978 822,021 Total loans $ 1,169,101 $ 123,818 $ 516,509 $ 23,274 $ 1,832,702 Total covered $ 191,547 $ 67,030 $ 328,601 $ 21,044 $ 608,222 Total non-covered 977,554 56,788 187,908 2,230 1,224,480 Total loans $ 1,169,101 $ 123,818 $ 516,509 $ 23,274 $ 1,832,702 NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013As of March 31,At June 30, 2013, the Company has measured $20.4$15.4 million of impaired loans using discounted cash flows and the loan’s initial contractual effective interest rate and $7.9$5.1 million of impaired loans based on the fair value of the collateral less selling costs. $8.4$9.2 million of impaired loans that individually are less than $250$250 thousand each, are measured through our general ALL reserves due to their relatively small size. Inclusiveunpaid principal balance ofrecorded investment in impaired loans was $44.2$29.7 million and $51.5, $9.8 million at March 31, 2013 and December 31, 2012, respectively.At March 31, 2013, the Company’s unpaid principal balance and recorded investment of impaired loanswhich was $44.2 million and $36.6 million, respectively. The commercial, commercial real estate and residential real estate segments held the largest concentrations of recorded investments related to impaired loans at March 31, 2013. The commercial and commercial real estate loan segments held the largest concentrations of impaired loans of $14.3 million and $13.4 million, respectively. Of the $14.3 million of recorded investment in the commercial real estate segment, $11.9 million was not covered by the FDIC loss sharing agreements, leaving $2.4 million covered by the FDIC loss sharing agreements. The $11.9 million of commercial real estate loans not covered by the FDIC loss sharing agreements were primarily comprised of four loans with a recorded investment totaling $9.2 million. In the commercial loan segment, $7.2 million of the $13.4 million total recorded investment was not covered by the FDIC loss sharing agreements and $6.1 million was covered by the FDIC loss sharing agreements. The non-covered recorded investment of the commercial segment was primarily the result of one loan with a recorded investment of $6.0 million. The residential real estate segment had impaired loans with a recorded investment of $8.2 million at March 31, 2013, of which $6.7 million were not covered by the FDIC loss sharing agreements and $1.5 million were covered by the FDIC loss sharing agreements. The consumer loan segment held eight loans, none of which were covered by the loss sharing agreements, with a recorded investment of principal balance of $0.5 million. TheseImpaired loans had a collective related allowance for loan losses allocated to them of $2.2$1.0 million at March 31, 2013. The table below shows additionalJune 30, 2013. Additional information regarding impaired loans at March 31,June 30, 2013 is set forth in the table below (in thousands): Impaired Loans June 30, 2013 With no related allowance recorded: Commercial $ 7,619 $ 7,606 $ — $ 8,079 $ 218 Commercial real estate Construction — — — — — Acquisition/development — — — — — Multifamily — — — — — Owner-occupied 4,301 4,017 — 4,086 154 Non-owner occupied 6,275 4,953 — 5,312 — Total commercial real estate 10,576 8,970 — 9,398 154 Agriculture — — — — — Residential real estate Senior lien 628 619 — 620 2 Junior lien — — — — — Total residential real estate 628 619 — 620 2 Consumer — — — — — Total impaired loans with no related allowance recorded 18,823 17,195 — 18,097 374 With a related allowance recorded: Commercial 6,709 1,677 296 1,708 6 Commercial real estate Construction — — — — — Acquisition/development — 1 — — — Multifamily 191 186 37 193 — Owner-occupied 996 793 7 808 7 Non-owner occupied 906 760 5 765 7 Total commercial real estate 2,093 1,740 49 1,766 14 Agriculture 224 206 1 204 — Residential real estate Senior lien 7,830 7,070 610 7,166 42 Junior lien 1,704 1,509 17 1,523 25 Total residential real estate 9,534 8,579 627 8,689 67 Consumer 328 307 8 323 2 Total impaired loans with a related allowance recorded 18,888 12,509 981 12,690 89 Total impaired loans $ 37,711 $ 29,704 $ 981 $ 30,787 $ 463 March 31, Impaired Loans March 31, 2013 Unpaid
principal
balance Recorded
investment Allowance
for loan
losses
allocated Average
recorded
investment Interest
income
recognized $ 10,596 $ 10,266 $ — $ 11,033 $ 128 — — — — — — — — — — — — — — — 5,156 5,011 — 5,036 80 2,040 1,842 — 1,862 5 7,196 6,853 — 6,898 85 — — — — — 371 364 — 364 1 — — — — — 371 364 — 364 1 — — — — — 18,163 17,483 — 18,295 214 8,175 3,115 1,125 3,172 3 — — — — — 15 15 — 15 — 194 191 40 196 — 958 743 5 763 4 7,434 6,512 326 6,544 3 8,601 7,461 371 7,518 7 248 227 1 240 — 7,439 6,757 710 6,791 21 1,112 1,093 11 1,096 11 8,551 7,850 721 7,887 32 488 469 13 479 4 26,063 19,122 2,231 19,296 46 $ 44,226 $ 36,605 $ 2,231 $ 37,591 $ 260 March 31,June 30, 2012, the Company’s unpaid principal balance and recorded investment ofin impaired loans was $48.8$49.9 million and $36.9, $7.8 million respectively. The commercial real estate and commercial loan segments held the largest concentrations of impaired loans of $20.5 million and $12.2 million, respectively. Of the $20.5 million of recorded investment in the commercial real estate segment, $18.4 millionwhich was not covered by the FDIC loss sharing agreements, leaving $2.1 million covered by the FDIC loss sharing agreements. The $18.4 million of commercial real estate loans not covered by the FDIC loss sharing agreements were primarily comprised of 5 loans with an unpaid principal balance of $13.5 million. In the commercial loan segment, $8.7 million of the $12.2 million total recorded investment was not covered by the FDIC loss sharing agreements and $3.5 million was covered by the FDIC loss sharing agreements. The non-covered recorded investment of the commercial segment was primarily the result of one loan with aNATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013recorded investment of $5.8 million, while the covered recorded investment of the commercial segment was primarily one loan with a recorded investment of $1.1 million. The residential real estate segment had impaired loans with a recorded investment of $4.1 million at March 31, 2012, of which $2.6 million were not covered by the FDIC loss sharing agreements and $1.6 million were covered by the FDIC loss sharing agreements. These loans had a collective related allowance for loan losses allocated to them of $0.8March 31, 2012.June 30, 2012. The table below shows additional information regarding impaired loans at March 31,June 30, 2012 (in thousands): Impaired Loans March 31, 2012 Unpaid
principal
balance Recorded
investment Allowance
for loan
losses
allocated Average
recorded
investment Interest
income
recognized $ 20,904 $ 10,757 $ — $ 13,003 $ 100 — — — — — 6,493 6,207 — 6,129 84 203 195 — — — 3,064 2,797 — 2,608 14 10,820 9,926 — 10,049 17 20,580 19,125 — 18,786 115 32 31 — — — 2,488 2,326 — 389 17 338 242 — — — 2,826 2,568 — 389 17 10 10 — — — 44,352 32,491 — 32,178 232 1,492 1,492 277 2,206 26 — — — — — — — — — — — — — — — — — — — — 1,394 1,334 81 1,358 — 1,394 1,334 81 1,358 — — — — — — 1,587 1,579 426 1,603 — — — — — — 1,587 1,579 426 1,603 — — — — — — 4,473 4,405 784 5,167 26 $ 48,825 $ 36,896 $ 784 $ 37,345 $ 258 Impaired Loans June 30, 2012 With no related allowance recorded: Commercial $ 20,623 $ 10,420 $ — $ 12,607 $ 91 Commercial real estate Construction — — — — — Acquisition/development 14,449 13,820 — 13,818 166 Multifamily 198 191 — 191 — Owner-occupied 5,336 5,042 — 5,111 37 Non owner-occupied 10,273 9,387 — 9,748 16 Total commercial real estate 30,256 28,440 — 28,868 219 Agriculture 43 40 — 42 — Residential real estate Senior lien 3,393 3,081 — 3,143 4 Junior lien 285 259 — 267 — Total residential real estate 3,678 3,340 — 3,410 4 Consumer 16 16 — 16 — Total impaired loans with no related allowance recorded 54,616 42,256 — 44,943 314 With a related allowance recorded: Commercial 2,013 2,011 1,165 2,052 10 Commercial real estate Construction — — — — — Acquisition/development — — — — — Multifamily — — — — — Owner-occupied 372 358 137 358 — Non owner-occupied 3,818 3,678 181 3,702 6 Total commercial real estate 4,190 4,036 318 4,060 6 Agriculture — — — — — Residential real estate Senior lien 1,574 1,557 410 1,580 29 Junior lien — — — — — Total residential real estate 1,574 1,557 410 1,580 29 Consumer — — — — — Total impaired loans with a related allowance recorded 7,777 7,604 1,893 7,692 45 Total impaired loans $ 62,393 $ 49,860 $ 1,893 $ 52,635 $ 359 NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013March 31,$18.6$14.9 million and $17.7$17.7 million, respectively, of accruing TDR’s that had been restructured from the original terms in order to facilitate repayment. Of these, $5.9$7.1 million and $5.0$5.0 million, respectively, were covered by FDIC loss sharing agreements. Accruing TDR’s in the commercial loan segment at March 31, 2013 were primarily comprised of nine loans with a recorded investment of $6.5 million that were not covered by FDIC loss sharing agreements and two loans with a recorded investment of $4.0 million that were covered by the FDIC loss sharing agreements. The commercial real estate TDR’s were comprised of six non-covered loans with a recorded investment of $3.5 million and two covered TDR’s with a recorded investment of $1.9 million. TDR’s in the residential real estate segment included 41 loans not covered by loss sharing agreements with a recorded investment of $2.5 million. The remaining accruing TDR’s were primarily made up of five loans from the consumer segment, with a recorded investment of $0.2 million, none of which were covered by the FDIC loss sharing agreements.March 31,June 30, 2013 and December 31, 2012 totaled $10.8$8.2 million and $12.9$12.9 million, respectively. Of these, $2.5$1.7 million were covered by the FDIC loss sharing agreements as of March 31,June 30, 2013 and $3.6$3.6 million were covered by the FDIC loss sharing agreements as of December 31, 2012. At March 31, 2013 the non-accruing commercial real estate segment was primarily comprised of five loans not covered by the FDIC loss sharing agreements with a recorded investment of $6.8 million and two loans covered by the FDIC loss sharing agreements with a recorded investment of $0.3 million. The residential real estate segment held five non-accruing TDR’s not covered by the FDIC loss sharing agreements with a recorded investment of $0.6 million and two non-accruing TDR’s covered by the FDIC loss sharing agreements with a recorded investment of $1.5 million. The commercial loan segment held non-accruing TDR’s, which included two loans covered by the FDIC loss sharing agreements with a recorded investment of $0.8 million and four loans not covered by the FDIC loss sharing agreements with a recorded investment of $0.6 million. The remaining non-accruing TDR balance was primarily from the consumer segment, which included one loan not covered by the FDIC loss sharing agreements with a recorded investment of $0.3 million.threesix months ended March 31,June 30, 2013, the Company restructured eighttwenty-three loans with a recorded investment of $2.5$4.3 million to facilitate repayment. Substantially all of the loan modifications were an extension of term and rate modifications. Loan modifications to loans accounted for under ASC Topic 310-30 are not considered troubled debt restructurings. The table below provides additional information related to accruing TDR’s at March 31,June 30, 2013 and December 31, 2012 (in thousands): Accruing TDR’s
March 31, 2013 Recorded
investment Average
year-to-
date
recorded
investment Unpaid
principal
balance Unfunded
commitments
to fund
TDR’s $ 10,496 $ 11,246 $ 15,855 $ 3,938 5,425 5,451 529 1,426 — — — — 2,514 2,517 2,523 21 199 201 199 — $ 18,634 $ 19,415 $ 19,106 $ 5,385 Accruing TDR’s
December 31, 2012 Recorded
investment Average
year-to-
date
recorded
investment Unpaid
principal
balance Unfunded
commitments
to fund
TDR’s $ 11,474 $ 13,171 $ 11,794 $ 6,908 3,597 3,708 3,734 — — — — — 2,458 2,469 2,460 35 191 195 191 — $ 17,720 $ 19,543 $ 18,179 $ 6,943 Accruing TDR’s June 30, 2013 Commercial $ 11,484 $ 11,848 $ 11,752 $ 165 Commercial real estate 436 437 442 1,426 Agriculture — — — — Residential real estate 2,903 2,930 2,913 21 Consumer 47 49 47 — Total $ 14,870 $ 15,264 $ 15,154 $ 1,612 Accruing TDR’s December 31, 2012 Commercial $ 11,474 $ 13,171 $ 11,794 $ 6,908 Commercial real estate 3,597 3,708 3,734 — Agriculture — — — — Residential real estate 2,458 2,469 2,460 35 Consumer 191 195 191 — Total $ 17,720 $ 19,543 $ 18,179 $ 6,943 March 31,March 31,June 30, 2013 and December 31, 2012 (in thousands): Non - Accruing TDR’s March 31, 2013 December 31, 2012 Covered Non-covered Covered Non-covered $ 769 $ 561 $ 1,736 $ 1,215 298 6,762 313 6,823 — 21 — 21 1,478 633 1,514 958 — 269 — 291 $ 2,545 $ 8,246 $ 3,563 $ 9,308 Non - Accruing TDR’s June 30, 2013 December 31, 2012 Covered Non-covered Covered Non-covered Commercial $ 104 $ 643 $ 1,736 $ 1,215 Commercial real estate 186 4,953 313 6,823 Agriculture — — — 21 Residential real estate 1,434 619 1,514 958 Consumer — 256 — 291 Total $ 1,724 $ 6,471 $ 3,563 $ 9,308 three TDR’sone TDR that had been modified within the past 12 months that defaulted on their restructured terms during the threesix months ended March 31, 2013.June 30, 2013. For purposes of this disclosure, the Company considers “default” to mean 90 days or more past due on principal or interest. The defaulted TDRs were comprised of a commercial loan,TDR was a commercial real estate loan and a single family residential loan totaling $2.8 million.$39 thousand.Topic 310-30 resulted in the following changes in the carrying amount of accretable yield during the threesix months ended March 31,June 30, 2013 and 2012 (in thousands): March 31,
2013 March 31,
2012 $ 133,585 $ 186,494 16,134 10,653 (1,202 ) (4,130 ) (21,302 ) (26,549 ) $ 127,215 $ 166,468 June 30,
2013 June 30,
2012Accretable yield beginning balance $ 133,585 $ 186,494 Reclassification from non-accretable difference 37,725 29,483 Reclassification to non-accretable difference (2,755 ) (5,651 ) Accretion (40,013 ) (52,244 ) Accretable yield ending balance $ 128,542 $ 158,082 Topic 310-30 at March 31,June 30, 2013 and December 31, 2012 (in thousands): March 31,
2013 December 31,
2012 $ 1,331,205 $ 1,444,279 (473,741 ) (488,673 ) (127,215 ) (133,585 ) $ 730,249 $ 822,021 June 30,
2013 December 31,
2012Contractual cash flows $ 1,199,710 $ 1,444,279 Non-accretable difference (453,703 ) (488,673 ) Accretable yield (128,542 ) (133,585 ) Loans accounted for under ASC 310-30 $ 617,465 $ 822,021 March 31,March 31,June 30, 2013 and 2012 (in thousands): Three months ended March 31, 2013 Commercial Commercial
real estate Agriculture Residential
real estate Consumer Total $ 2,798 $ 7,396 $ 592 $ 4,011 $ 583 $ 15,380 2,798 3,056 323 4,011 540 10,728 (629 ) (259 ) — (75 ) (233 ) (1,196 ) 9 — — 14 77 100 697 (305 ) 201 406 109 1,108 2,875 2,492 524 4,356 493 10,740 — 4,340 269 — 43 4,652 — (2,812 ) — — — (2,812 ) — — — — — — 411 (1,045 ) — 986 (43 ) 309 411 483 269 �� 986 0 2,149 $ 3,286 $ 2,975 $ 793 $ 5,342 $ 493 $ 12,889 $ 1,125 $ 371 $ 1 $ 721 $ 13 $ 2,231 1,750 2,121 523 3,635 480 8,509 411 483 269 986 — 2,149 $ 3,286 $ 2,975 $ 793 $ 5,342 $ 493 $ 12,889 $ 13,381 $ 14,314 $ 227 $ 8,214 $ 469 $ 36,605 172,421 241,818 117,930 437,971 28,456 998,596 78,928 490,608 46,580 101,386 12,747 730,249 $ 264,730 $ 746,740 $ 164,737 $ 547,571 $ 41,672 $ 1,765,450 Three months ended June 30, 2013 Commercial Agriculture Consumer Total Beginning balance $ 3,286 $ 2,975 $ 793 $ 5,342 $ 493 $ 12,889 Non 310-30 beginning balance 2,875 2,492 524 4,356 493 10,740 Charge-offs (624 ) (684 ) — (549 ) (208 ) (2,065 ) Recoveries 86 112 13 27 72 310 Provision (97 ) 193 (42 ) 499 114 667 Non 310-30 ending balance 2,240 2,113 495 4,333 471 9,652 310-30 beginning balance 411 483 269 986 — 2,149 Charge-offs (407 ) 16 — (566 ) — (957 ) Recoveries — — — — — — Provision 42 (193 ) — 1,154 — 1,003 310-30 ending balance 46 306 269 1,574 — 2,195 Ending balance $ 2,286 $ 2,419 $ 764 $ 5,907 $ 471 $ 11,847 March 31, Three months ended March 31, 2012 Commercial Commercial
real estate Agriculture Residential
real estate Consumer Total $ 2,959 $ 3,389 $ 282 $ 4,121 $ 776 $ 11,527 1,597 3,389 154 3,423 776 9,339 (2,632 ) (2,172 ) — (34 ) (392 ) (5,230 ) — 118 — 24 273 415 2,924 1,775 12 (50 ) (104 ) 4,557 1,889 3,110 166 3,363 553 9,081 1,362 — 128 698 — 2,188 (39 ) (1,530 ) — (416 ) — (1,985 ) (155 ) — — — — (155 ) 1,314 2,061 (128 ) — 32 3,279 2,482 531 — 282 32 3,327 $ 4,371 $ 3,641 $ 166 $ 3,645 $ 585 $ 12,408 $ 277 $ 81 $ — $ 426 $ — $ 784 1,612 3,029 166 2,937 553 8,297 2,482 531 — 282 32 3,327 $ 4,371 $ 3,641 $ 166 $ 3,645 $ 585 $ 12,408 $ 12,136 $ 19,497 $ — $ 1,941 $ — $ 33,574 178,939 240,753 63,868 355,414 27,769 866,743 127,674 808,639 66,828 159,651 38,373 1,201,165 $ 318,749 $ 1,068,889 $ 130,696 $ 517,006 $ 66,142 $ 2,101,482 During the three months ended March 31, Six months ended June 30, 2013 Commercial Agriculture Consumer Total Beginning balance $ 2,798 $ 7,396 $ 592 $ 4,011 $ 583 $ 15,380 Non 310-30 beginning balance 2,798 3,056 323 4,011 540 10,728 Charge-offs (1,253 ) (943 ) — (624 ) (441 ) (3,261 ) Recoveries 95 112 13 41 149 410 Provision 600 (112 ) 159 905 223 1,775 Non 310-30 ending balance 2,240 2,113 495 4,333 471 9,652 310-30 beginning balance — 4,340 269 — 43 4,652 Charge-offs (407 ) (2,796 ) — (566 ) — (3,769 ) Recoveries — — — — — — Provision 453 (1,238 ) — 2,140 (43 ) 1,312 310-30 ending balance 46 306 269 1,574 — 2,195 Ending balance $ 2,286 $ 2,419 $ 764 $ 5,907 $ 471 $ 11,847 Ending allowance balance attributable to: Non 310-30 loans individually evaluated for impairment $ 296 $ 49 $ 1 $ 627 $ 8 $ 981 Non 310-30 loans collectively evaluated for impairment 1,944 2,064 494 3,706 463 8,671 310-30 loans 46 306 269 1,574 — 2,195 Total ending allowance balance $ 2,286 $ 2,419 $ 764 $ 5,907 $ 471 $ 11,847 Loans: Non 310-30 individually evaluated for impairment $ 9,283 $ 10,710 $ 206 $ 9,198 $ 307 $ 29,704 Non 310-30 collectively evaluated for impairment 194,606 256,945 113,222 483,156 28,189 1,076,118 310-30 loans 73,326 409,361 42,121 81,779 10,878 617,465 Total loans $ 277,215 $ 677,016 $ 155,549 $ 574,133 $ 39,374 $ 1,723,287 Three months ended June 30, 2012 Commercial Agriculture Consumer Total Beginning balance $ 4,371 $ 3,641 $ 166 $ 3,645 $ 585 $ 12,408 Non 310-30 beginning balance 1,889 3,110 166 3,363 553 9,081 Charge-offs (127 ) (241 ) (8 ) (430 ) (203 ) (1,009 ) Recoveries — 101 — 72 20 193 Provision (37 ) 608 126 808 265 1,770 Non 310-30 ending balance 1,725 3,578 284 3,813 635 10,035 310-30 beginning balance 2,482 531 — 282 32 3,327 Charge-offs (176 ) (6,613 ) — (144 ) (19 ) (6,952 ) Recoveries 155 273 — — — 428 Provision (868 ) 10,028 376 921 (1 ) 10,456 310-30 ending balance 1,593 4,219 376 1,059 12 7,259 Ending balance $ 3,318 $ 7,797 $ 660 $ 4,872 $ 647 $ 17,294 the Company re-estimated the expected cash flows of the loan pools accounted for under ASC Topic 310-30 utilizing the same cash flow methodology used at the time of acquisition. The re-measurement resulted in an impairment of $0.3 million, which was primarily driven by impairments of $1.0 million in the residential real estate segment, impairments of $0.4 million in the commercial segment. As a result of gross cash flow improvements, the re-measurement resulted in a reversal of $1.0 million of impairment expense in the commercial real estate segment, primarily due to reversals of impairment expense. Six months ended June 30, 2012 Commercial Agriculture Consumer Total Beginning balance $ 2,959 $ 3,389 $ 282 $ 4,121 $ 776 $ 11,527 Non 310-30 beginning balance 1,597 3,389 154 3,423 776 9,339 Charge-offs (2,759 ) (2,413 ) (8 ) (464 ) (595 ) (6,239 ) Recoveries — 219 — 96 293 608 Provision 2,887 2,383 138 758 161 6,327 Non 310-30 ending balance 1,725 3,578 284 3,813 635 10,035 310-30 beginning balance 1,362 — 128 698 — 2,188 Charge-offs (215 ) (8,143 ) — (560 ) (19 ) (8,937 ) Recoveries — 273 — — — 273 Provision 446 12,089 248 921 31 13,735 310-30 ending balance 1,593 4,219 376 1,059 12 7,259 Ending balance $ 3,318 $ 7,797 $ 660 $ 4,872 $ 647 $ 17,294 Ending allowance balance attributable to: Non 310-30 loans individually evaluated for impairment $ 1,165 $ 318 $ — $ 410 $ — $ 1,893 Non 310-30 loans collectively evaluated for impairment 560 3,260 284 3,403 635 8,142 310-30 loans 1,593 4,219 376 1,059 12 7,259 Total ending allowance balance $ 3,318 $ 7,797 $ 660 $ 4,872 $ 647 $ 17,294 Loans: Non 310-30 individually evaluated for impairment $ 12,431 $ 32,476 $ 40 $ 4,897 $ 16 $ 49,860 Non 310-30 collectively evaluated for impairment 153,622 226,768 87,864 371,139 28,318 867,711 310-30 loans 117,711 706,672 59,139 143,432 33,478 1,060,432 Total loans $ 283,764 $ 965,916 $ 147,043 $ 519,468 $ 61,812 $ 1,978,003 March 31, 2013,June 30, 2012, the Company's re-measurement of expected future cash flows of ASC 310-30 loans resulted in impairments of $10.5 million and $13.7 million, respectively. The commercial real estate pool was the primary contributor to the total impairment with impairments of $10.0 million and $12.1 million for the three and six months ended June 30, 2012, respectively. The residential real estate pool recorded impairments of $0.9 million for the three and six months ended June 30, 2012. During the three and six months ended June 30, 2012, the Company recorded $1.1$1.8 million and $6.3 million, respectively, of provision for loan losses for loans not accounted for under ASC Topic 310-30 primarily to provide for changes in credit risk inherent in the portfolio.$1.1$5.6 million, net of recoveries, of non-ASC Topicnon ASC 310-30 loans during the threesix months ended March 31, 2013. Commercial charge offs, netJune 30, 2012, $2.4 million of recoveries, totaled $0.6 million, at the three months ended March 31, 2013, which was the result of a large commercial and industrial loan that was not considered indicative of future charge-offs in the commercial and industrial loan category. The Company also charged off $2.4 million of commercial real estate loans, primarily the result of charge offs of $0.4 million and $0.2 million on two loans under the same relationship and the commercial real estate segment experienced $0.2 millionloans outside of charge offs, net of recoveries, which was primarily due to one loan with an impairment of $0.1 million and four loansour core market areas totaling an additional impairment of $0.1$2.1 million. Net charge-offs on consumer loans totaled $0.2 million, which was primarily related to overdrafts.NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013threesix months ended March 31,June 30, 2013 and 2012 (in thousands): For the three month ended March 31,
2013 March 31,
2012 $ 86,923 $ 223,402 (4,669 ) (3,687 ) 2,576 (218 ) (9,132 ) (32,361 ) $ 75,698 $ 187,136 For the six months ended June 30,
2013 June 30,
2012Balance at beginning of period $ 86,923 $ 223,402 Accretion (7,635 ) (6,333 ) FDIC portion of charge-offs exceeding fair value marks 1,644 5,533 Reduction for claims filed (21,049 ) (74,075 ) Balance at end of period $ 59,883 $ 148,527 threesix months ended March 31,June 30, 2013, the Company recognized $4.7$7.6 million of negative accretion on the FDIC indemnification asset, and reduced the carrying value of the FDIC indemnification asset by $9.1$21.0 million as a result of claims filed with the FDIC as discussed below.FDIC. The negative accretion resulted from an overall increase in actual and expected cash flows on the underlying covered assets, resulting in lower expected reimbursements from the FDIC. The increase in overall expected cash flows from these underlying assets is reflected in increased accretion rates on covered loans and is being recognized over the expected remaining lives of the underlying covered loans as an adjustment to yield. During the three months ended March 31, 2013, the Company submitted $9.1 million of loss share claims to the FDIC for the reimbursable portion of losses related to the Hillcrest Bank and Community Banks of Colorado covered assets incurred during the fourth quarter of 2012. The loss claims filed are subject to review and approval, including extensive audits, by the FDIC or its assigned agents for compliance with the terms in the loss sharing agreements. During the threesix months ended March 31,June 30, 2013 we, the Company received $57.9$67.6 million in payments from the FDIC. Of these payments, $51.0 million were related to Community Banks of Colorado for losses incurred duringsecond and third quarters ofsix months ended June 30, 2012 and $6.9 million were related to Hillcrest Bank for losses that were incurred during the third and fourth quarters of 2012. Subsequent to March 31, 2013, the Company received $9.8recognized $6.3 million related to of negative accretion on the FDIC indemnification asset, and reduced the carrying value of the FDIC indemnification asset by $68.5 million as a result of claims filed duringwith the fourth quarter of 2012 for losses incurred duringFDIC. During the threesix months ended December 31,June 30, 2012 related, the Company submitted $74.1 million of loss-share claims to Community Banks of Colorado. The Company also filed loss share claims with the FDIC for $7.5 million and $8.1 millionthe reimbursable portion of losses related to first quarter losses forthe Hillcrest Bank and Community Banks of Colorado respectively.covered assets.threesix months ended March 31,June 30, 2013 and 2012 is as follows (in thousands): For the three months ended March 31, 2013 2012 $ 94,808 $ 120,636 17,043 40,899 (4,600 ) (5,089 ) (25,726 ) (12,676 ) 1,805 849 $ 83,330 $ 144,619 For the three months ended For the six months ended June 30, 2013 2012 Beginning balance $ 94,808 $ 120,636 Transfers from loan portfolio, at fair value 25,379 56,100 Impairments (7,148 ) (7,213 ) Sales (37,672 ) (35,851 ) Gain on sale of OREO, net 3,932 4,040 Ending balance $ 79,299 $ 137,712 balance of $83.3 million at March 31, 2013 includesbalances include the interests of several outside participating banks totaling $4.9$4.0 million at June 30, 2013, $5.3 million at December 31, 2012, and $17.9 million at June 30, 2012, for which an offsetting liability is recorded in other liabilitiesliabilities. It excludes $10.7 million, $10.6 million and excludes $10.6$12.2 million, for the same respective periods, of the Company’s minority interests in OREO which are held by outside banks where the Company was not the lead bank and does not have a controlling interest, for which the Company maintains a receivable in other assets.$83.3$79.3 million of OREO at March 31,June 30, 2013 $45.9, $45.5 million, or 55.0%57.4%, was covered by loss sharing agreements with the FDIC. Any losses on these assets are substantially offset by a corresponding change in the FDIC indemnification asset. During the threesix months ended March 31,June 30, 2013, the Company sold $25.7$37.7 million of OREO and realized net gains on these sales of $1.8$3.9 million and during.three$137.7 million of OREO at June 30, 2012, $77.5 million, or 56.3%, was covered by the loss sharing agreements with the FDIC. Any losses on these assets are substantially offset by a corresponding change in the FDIC indemnification asset. During the six months ended March 31,June 30, 2012, the Company sold $12.7$35.9 million of OREO and realized net gains on these sales of $849 thousand.NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013March 31,June 30, 2013 and December 31, 2012, deposits totaled $4.1$4.0 billion and $4.2$4.2 billion, respectively. Time deposits decreased slightly from $1.8$1.8 billion at December 31, 2012 to $1.7$1.6 billion at March 31, 2013.June 30, 2013. The following table summarizessummarizes the Company’s time deposits, based upon contractual maturity, at March 31,June 30, 2013 and December 31, 2012, by remaining maturity (in thousands): March 31, 2013 December 31, 2012 Balance Weighted
Average
Rate Balance Weighted
Average
Rate $ 266,529 0.67 % $ 356,446 0.78 % 320,963 0.65 % 259,097 0.68 % 615,791 0.63 % 583,209 0.67 % 274,977 0.90 % 373,283 0.88 % 116,044 1.66 % 111,599 1.77 % 39,758 1.69 % 43,967 1.83 % 17,249 1.44 % 19,278 1.44 % 5,183 2.03 % 5,839 2.32 % $ 1,656,494 0.79 % $ 1,752,718 0.85 % June 30, 2013 December 31, 2012 Balance Balance Three months or less $ 329,163 0.65 % $ 356,446 0.78 % Over 3 months through 6 months 339,916 0.59 % 259,097 0.68 % Over 6 months through 12 months 514,388 0.60 % 583,209 0.67 % Over 12 months through 24 months 248,386 0.92 % 373,283 0.88 % Over 24 months through 36 months 102,572 1.60 % 111,599 1.77 % Over 36 months through 48 months 39,018 1.67 % 43,967 1.83 % Over 48 months through 60 months 18,538 1.35 % 19,278 1.44 % Thereafter 4,985 1.82 % 5,839 2.32 % Total time deposits $ 1,596,966 0.76 % $ 1,752,718 0.85 % March 31,June 30, 2013 and December 31, 2012, the Company had approximately $132.9$111.9 million and $164.3$164.3 million, respectively, of time deposits that were subject to penalty-free withdrawals. For the three months ended
March 31, 2013 2012 $ 199 $ 427 835 1,092 60 85 3,417 7,999 $ 4,511 $ 9,603 For the three months ended For the six months ended June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012 Interest bearing demand deposits $ 180 $ 308 $ 379 $ 735 Money market accounts 827 980 1,662 2,072 Savings accounts 54 76 114 161 Time deposits 3,110 6,536 6,527 14,535 Total $ 4,171 $ 7,900 $ 8,682 $ 17,503 March 31,June 30, 2013 and December 31, 2012, as applicable, NBH Bank, N.A. and the consolidated holding company exceeded all capital ratio requirements under prompt corrective action or other regulatory requirements, as is detailed in the table below (dollars in thousands): March 31, 2013 Actual Required to be
considered well
capitalized (1) Required to be
considered
adequately
capitalized Ratio Amount Ratio Amount Ratio Amount 18.7 % $ 964,748 N/A N/A 4 % $ 206,884 16.9 % 855,781 10 % $ 506,372 4 % 202,549 52.3 % $ 964,748 6 % $ 110,782 4 % $ 73,855 47.1 % 855,781 11 % 199,712 4 % 72,623 53.0 % $ 978,013 10 % $ 184,637 8 % $ 147,710 47.9 % 869,046 12 % 217,868 8 % 145,245 June 30, 2013 Actual Ratio Amount Ratio Amount Ratio Amount Tier 1 leverage ratio Consolidated 18.7 % $ 950,460 N/A N/A 4 % $ 203,435 NBH Bank, N.A. 17.3 % 861,541 10 % $ 498,299 4 % 199,320 Consolidated 50.1 % $ 950,460 6 % $ 113,753 4 % $ 75,836 NBH Bank, N.A. 46.1 % 861,541 11 % 205,389 4 % 74,687 Consolidated 50.8 % $ 963,108 10 % $ 189,589 8 % $ 151,671 NBH Bank, N.A. 46.8 % 874,189 12 % 224,061 8 % 149,374 March 31, December 31, 2012 Actual Ratio Amount Ratio Amount Ratio Amount Tier 1 leverage ratio Consolidated 18.2 % $ 962,779 N/A N/A 4 % $ 211,439 NBH Bank, N.A. 16.4 % 851,365 10 % $ 518,244 4 % 207,298 Consolidated 51.9 % $ 962,779 6 % $ 111,396 4 % $ 74,264 NBH Bank, N.A. 46.6 % 851,365 11 % 201,147 4 % 73,144 Consolidated 52.7 % $ 978,535 10 % $ 185,659 8 % $ 148,527 NBH Bank, N.A. 47.4 % 867,121 12 % 219,433 8 % 146,289 (1) These ratio requirements are reflective of the agreements the Company has made with its various regulators in connection with the approval of the de novo charter for NBH Bank, N.A., as described above. (2) inwith regard to the Hillcrest Bank and Community Banks of Colorado transactions, the Company recognizes the actual reimbursement of costs of resolution of covered assets from the FDIC through the statements of operations. The table below provides additional details of the Company’s FDIC loss sharing income during the three and six months ended March 31,June 30, 2013 and 2012 (in thousands): For the three months ended
March 31, 2013 2012 $ (313 ) $ (354 ) 573 (10 ) (860 ) 597 (15 ) (1 ) 3,891 3,467 $ 3,276 $ 3,699 For the three months ended For the six months ended June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012 Clawback liability amortization $ (310 ) $ (357 ) $ (623 ) $ (711 ) Clawback liability remeasurement 76 1,077 649 1,067 Reimbursement (to) from FDIC for (gain) loss on sale of and income from covered OREO (1,241 ) (163 ) (2,101 ) 434 Reimbursement to FDIC for recoveries (7 ) — (22 ) (1 ) FDIC reimbursement of costs of resolution of covered assets 2,675 3,519 6,566 6,986 Total $ 1,193 $ 4,076 $ 4,469 $ 7,775 threesix months ended March 31, 2013.June 30, 2013. These option awards vest on a graded basis over 1-31-4 years of continuous service and have 10-year10-year contractual terms. The expense associated with the awarded stock options was measured at fair value using a Black-Scholes option-pricing model using the following weighted average assumptions: Black-Scholes 1.071.02% 38.6131.85% 6.70 5.71.091.11% NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013179 comparable companies that were publicly traded companies for a period commensurate with the expected term of the options. The risk-free rate for the expected term of the options was based on the U.S. Treasury yield curve at the date of grant and based on the expected term. The expected term was estimated to be the average of the contractual vesting term and time to expiration. The dividend yield was assumed to be $0.05$0.05 per share per quarter. Options granted during the threesix months ended March 31,June 30, 2013 had weighted average grant date fair values of $5.61.$5.30 per share.threesix months ended March 31, 2013: Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term in
Years Aggregate
Intrinsic
Value 3,471,665 $ 19.98 6.94 $ 22,800.00 7,000 20.00 — — — — 3,478,665 $ 19.98 6.85 $ 2,100.00 2,488,582 $ 20.00 6.88 $ — 936,938 $ 19.95 6.81 $ 1,995.00 Options Outstanding at December 31, 2012 3,471,665 $ 19.98 6.94 $ 22,800.00 Granted during the six months ended June 30, 2013 148,350 18.28 Forfeited (27,990 ) 19.80 Exercised — — Outstanding at June 30, 2013 3,592,025 $ 19.91 6.40 $ 254,961.70 Options fully vested and exercisable at June 30, 2013 2,588,832 $ 20.00 6.46 $ — Options expected to vest 974,140 $ 19.71 6.61 $ 231,670.53 $0.7$0.6 million and $0.9$1.1 million for the three months ended March 31,June 30, 2013 and 2012, respectively, and $1.3 million and $2.0 million of the six months ended June 30, 2013 and 2012, respectively. At March 31,June 30, 2013, there was $2.1$2.2 million of total unrecognized compensation cost related to non-vested stock options granted under the Plan. The cost is expected to be recognized over a weighted average period of 0.7 years.The Company did not have any activity inMarch 31, 2013. Expense related to restricted stock totaled $0.7June 30, 2013 and 2012, respectively, and $1.4 million and $1.3$2.3 million during the threesix months ended March 31,June 30, 2013 and 2012, respectively, and is included in salaries and employee benefits in the Company’s consolidated statements of operations. As of March 31,June 30, 2013, there was $1.6$3.1 million of total unrecognized compensation cost related to non-vested restricted shares granted under the Plan, which is expected to be recognized over a weighted average period of 0.71.0 years. Total Restricted Shares Weighted Average Grant-Date Fair Value Unvested at December 31, 2012 951,668 $ 14.79 Granted 136,768 18.09 Forfeited (1,992 ) 18.09 Unvested at June 30, 2013 1,086,444 $ 15.20 46,355,72045,409,579 shares of Class A common stock and 5,959,1895,967,619 shares of Class B common stock outstanding as of March 31,June 30, 2013 and 46,368,483 shares of Class A common stock and 5,959,189 shares of Class B common stock outstanding as of December 31, 2012.2012. Additionally, as of March 31,June 30, 2013 and December 31, 2012, the Company had 1,086,444 and 951,668 shares, respectively, of restricted Class A common stock issued but not yet vested under the NBH Holdings Corp. 2009 Equity Incentive Plan. Class A common stock possesses all of the voting power for all matters requiring action by holders of common stock, with certain limited exceptions. The Company’s certificate of incorporation provides that, except with respect to voting rights and conversion rights, the Class A common stock and Class B non-voting common stock are treated equally and identically.52,314,90951,377,198 and 52,191,23852,191,239 shares outstanding (inclusive of Class A and B) as of March 31,June 30, 2013 and 2012, respectively. Certain stock options, non-vested restricted shares and warrants are potentially dilutive securities, but are not included in the calculation of diluted earnings per share because to do so would have been anti-dilutive for three and six months ended March 31,June 30, 2013 and 2012, respectively.NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013March 31,June 30, 2013 and 2012 (in thousands, except share and earnings per share)share information): For the three months ended,
March 31, 2013 2012 $ 2,082 $ 1,643 52,321 52,177 $ 0.04 $ 0.03 $ 2,082 $ 1,643 52,321 52,177 26 127 52,347 52,304 $ 0.04 $ 0.03 For the three months ended For the six months ended June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012 Distributed earnings $ 2,649 $ — $ 5,312 $ — Undistributed earnings (distributions in excess of earnings) 249 2,702 (332 ) 4,345 Net income 2,898 2,702 4,980 4,345 Less: earnings allocated to participating securities (7 ) — (7 ) — Earnings allocated to common stockholders $ 2,891 $ 2,702 $ 4,973 $ 4,345 Weighted average shares outstanding for basic earnings per common share 52,055,434 52,191,239 52,187,295 52,184,051 Dilutive effect of equity awards 25,892 127,931 25,898 127,297 Weighted average shares outstanding for diluted earnings per common share 52,081,326 52,319,170 52,213,193 52,311,348 Basic earnings per share $ 0.06 $ 0.05 $ 0.10 $ 0.10 Diluted earnings per share $ 0.06 $ 0.05 $ 0.10 $ 0.10 3,478,6653,592,025 and 3,453,8323,473,332 outstanding stock options to purchase common stock at weighted average exercise prices of $19.98$19.91 and $20.00$20.00 per share at March 31,June 30, 2013 and 2012, respectively, which were not included in the computations of diluted income per share because the options’ exercise price was greater than the average market price of the common shares during those periods. Additionally, the Company had 830,750 outstanding warrants to purchase the Company’s common stock as of March 31,June 30, 2013 and 2012.2012. The warrants have an exercise price of $20.00,$20.00, which was out-of-the-money for purposes of dilution calculations during both periods. The Company had 951,6681,086,444 and 1,174,7931,174,792 unvested restricted shares outstanding as of March 31,June 30, 2013 and 2012, respectively, which have performance, market and time-vesting criteria, and as such, any dilution is derived only for the timeframe in which the vesting criteria had been met and where the inclusion of those restricted shares is dilutive.NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013threesix months ended March 31,June 30, 2013 and 2012, there were no transfers of financial instruments between the hierarchy levels.March 31,June 30, 2013 the Company did not hold U.S. Treasury securities. WhenWhen quoted market prices in active markets for identical assets or liabilities are not available, quoted prices of securities with similar characteristics, discounted cash flows or other pricing characteristics are used to estimate fair values and the securities are then classified as level 2. At March 31,June 30, 2013 and December 31, 2012, the Company’s level 2 securities included asset backed securities, mortgage-backed securities comprised of residential mortgage pass-through securities, and other residential mortgage-backed securities. All other investment securities are classified as level 3. There were no transfers between levels 1, 2 or 3 during the threethe six months ended March 31,June 30, 2013 or 2012.179 comparable companies with publicly traded shares, and is deemed a significant unobservable input to the valuation model.March 31,June 30, 2013 and December 31, 2012 on the consolidated statements of financial condition utilizing the hierarchy structure described above (in thousands): March 31, 2013 Level 1 Level 2 Level 3 Total $ — $ 68,329 $ — $ 68,329 — 619,610 — 619,610 — 1,418,524 — 1,418,524 — — 419 419 $ — $ 2,106,463 $ 419 $ 2,106,882 $ — $ — $ 4,834 $ 4,834 — — 31,011 31,011 $ — $ — $ 35,845 $ 35,845 June 30, 2013 Level 1 Level 2 Level 3 Total Assets: Investment securities available-for-sale: Asset backed securities $ — $ 43,578 $ — $ 43,578 Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises — 560,135 — 560,135 Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises — 1,442,404 — 1,442,404 Other securities — — 419 419 Total assets at fair value $ — $ 2,046,117 $ 419 $ 2,046,536 Liabilities: Warrant liability $ — $ — $ 5,158 $ 5,158 Clawback liability — — 31,245 31,245 Total liabilities at fair value $ — $ — $ 36,403 $ 36,403 March 31, December 31, 2012 Level 1 Level 2 Level 3 Total Assets: Investment securities available-for-sale: U.S. Treasury securities $ 300 $ — $ — $ 300 Asset backed securities — 90,003 — 90,003 Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises — 678,017 — 678,017 Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises — 949,289 — 949,289 Other securities — — 419 419 Total assets at fair value $ 300 $ 1,717,309 $ 419 $ 1,718,028 Liabilities: Warrant liability $ — $ — $ 5,461 $ 5,461 Clawback liability — — 31,271 31,271 Total liabilities at fair value $ — $ — $ 36,732 $ 36,732 threesix months ended March 31,June 30, 2013 (in thousands): Warrant
liability Clawback
liability $ 5,461 $ 31,271 (627 ) (573 ) — 313 — — (627 ) (260 ) $ 4,834 $ 31,011 Balance at December 31, 2012 $ 5,461 $ 31,271 Change in value (303 ) (649 ) Accretion — 623 Settlement — — Net change in Level 3 (303 ) (26 ) Balance at June 30, 2013 $ 5,158 $ 31,245 threesix months ended March 31,June 30, 2013, the Company measured 2526 loans not accounted for under ASC Topic 310-30 at fair value on a non-recurring basis. These loans carried specific reserves totaling $2.2$0.9 million at March 31, 2013.June 30, 2013. During the threesix months ended March 31,June 30, 2013, the Company added specific reserves of $0.5$0.5 million for sixten loans with carrying balances of $3.3$7.9 million at March 31, 2013.June 30, 2013. The Company also eliminated specific reserves of $0.2$1.6 million for eightthirteen loans during the threesix months ended March 31,June 30, 2013, primarily due to paydowns on these loans. $4.6$7.1 million of OREO impairments in its consolidated statements of financial condition during the threesix months ended March 31,June 30, 2013, of which $3.1$5.2 million, or 67.5%72.9%, were on OREO that was covered by loss sharing agreements with the FDIC. The fair values of OREO are derived from third party price opinions or appraisals that generally use an income approach or a market value approach. If reasonable comparable appraisals are not available, then the Company may use internally developed models to determine fair values. The inputs used to determine the fair values of OREO are considered level 3 inputs in the fair value hierarchy.threesix months ended March 31,June 30, 2013 (in thousands): March 31, 2013 Level 1 Level 2 Level 3 Total Losses
From
Fair
Value
Changes $ — $ — $ 83,330 $ 83,330 $ 4,526 $ — $ — $ 36,605 $ 36,605 $ 4,911 NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013 June 30, 2013 Level 1 Level 2 Level 3 Total Other real estate owned $ — $ — $ 79,299 $ 79,299 $ 7,055 Impaired loans $ — $ — $ 29,704 $ 29,704 $ 5,445 threesix months ended March 31, 2013.June 30, 2013.March 31, 2013.June 30, 2013. The table below excludes non-recurring fair value measurements of collateral value used for impairment measures for OREO. These valuations utilize third party appraisal or broker price opinions, and are classified as level 3 due to the significant judgment involved. (dollars in thousands): Fair Value at
March 31,
2013 Quantitative
Measures $ 419 Cash investment in private equity fund Cash investment 36,605 Appraised value Appraised values Discount rate 0-25% 31,011 Contractually defined discounted cash flows Intrinsic loss estimates $323.3 million -
$405 million Expected credit losses —
$182.7 million Discount rate 4% Discount period 33-43 months 4,834 Black-Scholes Volatility 27%-67% Valuation Technique Unobservable Input Other securities $ 419 Cash investment in private equity fund Cash investment Impaired loans 29,704 Appraised value Appraised values Discount rate 0-25% Clawback liability 31,245 Contractually defined discounted cash flows Intrinsic loss estimates $323.3 million -
$405 million Expected credit losses —
Asset purchase premium $98 million-$182.7 million Discount rate 4% Discount period 28-40 months Warrant liability 5,158 Black-Scholes Volatility 15%-48% March 31,June 30, 2013 and December 31, 2012, including methods and assumptions utilized for determining fair value of financial instruments, are set forth below (in thousands): March 31, 2013 December 31, 2012 Level in Fair
Value
Measurement
Hierarchy Carrying
Amount Estimated
Fair Value Carrying
Amount Estimated
Fair Value Level 1 $ 419,193 $ 419,193 $ 769,180 $ 769,180 Level 1 — — 300 300 Level 2 68,329 68,329 90,003 90,003 Level 2 619,610 619,610 678,017 678,017 Level 2 1,418,524 1,418,524 949,289 949,289 Level 3 419 419 419 419 Level 2 517,017 522,867 577,486 584,551 Level 2 7,927 7,927 7,976 7,976 Level 2 25,020 25,020 25,020 25,020 Level 3 1,752,561 1,765,360 1,817,322 1,829,987 Level 2 7,034 7,034 5,368 �� 5,368 Level 2 12,677 12,677 12,673 12,673 Level 2 2,404,307 2,404,307 2,448,001 2,448,001 Level 2 1,656,494 1,662,943 1,752,718 1,759,886 Level 2 53,110 53,110 53,685 53,686 Level 3 31,011 31,011 31,271 31,271 Level 3 4,834 4,834 5,461 5,461 Level 2 3,862 3,862 4,239 4,239 June 30, 2013 December 31, 2012 ASSETS: Cash and cash equivalents Level 1 $ 302,756 $ 302,756 $ 769,180 $ 769,180 Securities purchased under agreements to resell Level 2 100,000 100,004 — — U.S. Treasury securities available-for-sale Level 1 — — 300 300 Asset backed securities available-for-sale Level 2 43,578 43,578 90,003 90,003 Mortgage-backed securities—residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises available-for-sale Level 2 560,135 560,135 678,017 678,017 Mortgage-backed securities—other residential mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored enterprises available-for-sale Level 2 1,442,404 1,442,404 949,289 949,289 Other securities Level 3 419 419 419 419 Mortgage-backed securities—residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises held-to-maturity Level 2 509,690 506,162 577,486 584,551 Mortgage-backed securities—other residential mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored enterprises held-to-maturity Level 2 82,971 80,668 — — Capital stock of FHLB Level 2 6,755 6,755 7,976 7,976 Capital stock of FRB Level 2 25,020 25,020 25,020 25,020 Loans receivable, net Level 3 1,711,440 1,717,300 1,817,322 1,829,987 Loans held-for-sale Level 2 6,288 6,288 5,368 5,368 Accrued interest receivable Level 2 11,596 11,596 12,673 12,673 LIABILITIES: Deposit transaction accounts Level 2 2,390,761 2,390,761 2,448,001 2,448,001 Time deposits Level 2 1,596,966 1,601,250 1,752,718 1,759,886 Securities sold under agreements to repurchase Level 2 122,879 122,795 53,685 53,686 Due to FDIC Level 3 31,245 31,245 31,271 31,271 Warrant liability Level 3 5,158 5,158 5,461 5,461 Accrued interest payable Level 2 3,718 3,718 4,239 4,239 March 31,NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2013March 31,June 30, 2013 and 2012, and with our annual report on Form 10-K (file number 001-35654), which includes our audited consolidated financial statements and related notes as of and for the years ended December 31, 2012, 2011, and 2010. Additional information, such as statements of assets acquired and liabilities assumed for each of our acquisitions and other financial and statistical data is also available in our prospectus included in Form S-1 filed with the Securities and Exchange Commission on September 19, 2012 (file number 333-177971). This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that may cause actual results to differ materially from management’smanagement's expectations. Factors that could cause such differences are discussed in the sectionssection entitled “Cautionary Note Regarding Forward-Looking Statements” located elsewhere in this quarterly report and “Riskin Item 1A“Risk Factors” in the annual report on Form 10-K, referenced above, and should be read herewith.ismay be limited. Prior to the completion of the Hillcrest Bank acquisition on October 22, 2010, we had no banking operations and our activities were limited to corporate organization matters and due diligence. Following our Hillcrest Bank acquisition, we completed three additional acquisitions: Bank Midwest on December 10, 2010, Bank of Choice on July 22, 2011 and Community Banks of Colorado on October 21, 2011. As a result, our operating results are limited to the periods since these acquisitions, and the comparability of periods is compromised due to the timing of these acquisitions. Additionally, the comparability of data related to our acquisitions prior to the respective dates of acquisition is limited because, in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, the assets acquired and liabilities assumed were recorded at fair value at their respective dates of acquisition and do not have a significant resemblance to the assets and liabilities of thepredecessor banking franchises. The comparability of pre-acquisition data is compromised not only by the fair value accounting applied, but also by the FDIC loss sharing agreements in place that cover a portion of losses incurred on certain assets acquired in the Hillcrest Bank and the Community Banks of Colorado acquisitions. In the Bank Midwest acquisition, only specific, performing loans were chosen for acquisition. Additionally, we acquired the assets of Bank of Choice at a substantial discount from the FDIC. We received a considerable amount of cash during the settlement of these acquisitions, we paid off certain borrowings, and we contributed significant capital to each banking franchise we acquired. All of these actions materially changed the balance sheet composition, liquidity, and capital structure of the acquired banking franchises.March 31,June 30, 2013, we had $5.3$5.2 billion in assets, $4.1$4.0 billion in deposits and $1.1$1.0 billion in equity. We currently operate a network of 101 full-service banking centers, with the majority of those banking centers located in the greater Kansas City region and Colorado. We believe that our established presence positions us well for growth opportunities in our current and complementary markets.threesix months ended March 31,June 30, 2013:March 31,June 30, 2013, we have 68.1% of total assets in cash, securities (low-risk, high-quality agency residential MBS and CMO’s), and covered loansAs of March 31, 2013, 73.2%58.7%, or $1.3$1.0 billion, of our total loans (by dollar amount) were acquired loans and all of those loans were recorded at their estimated fair value at the time of acquisition.March 31,June 30, 2013, 30.4%26.3%, or $537.1$453.8 million, of our total loans (by dollar amount) were covered by loss sharing agreements with the FDIC.March 31,June 30, 2013, 55.0%57.4%, or $45.9$45.5 million, of our total other real estate owned (by dollar amount) was covered by loss sharing agreements with the FDIC.March 31,June 30, 2013, we have $1.2 billion of loans outstanding that are associated with a “strategic” client relationship - an 11.4%18.8% annualized growth duringfor the quarter.$109$278.1 million for the six months ended June 30, 2013, representing a 32.7%66.9% increase from the first quartersame period of 2012.$67$109.4 million decrease in total loans was led by a $99$214.3 million decrease in our non-strategic loans during the quartersix months ended June 30, 2013 as we successfully worked out non-strategic loans acquired in our FDIC-assisted transactions.41.4%35.8% of the loan portfolio is accounted for under ASC 310-30 (loan pools).Credit quality continued to improve, with non-performingStrategic loans to total loans improving to 2.08% at March 31, 2013 from 2.23% at December 31, 2012.◦ Loans associated with our strategic client relationships had strong credit quality with only 0.80% in non-performing loans as of June 30, 2013. Net charge-offs on nonNon 310-30 loans were 0.44% annualized.◦ Credit quality of the non 310-30 loan portfolio continued to improve with non-performing non 310-30 loans to total non 310-30 loans improving to 2.63% at June 30, 2013 from 4.04% at December 31, 2012. ◦ Net charge-offs on non 310-30 loans were 0.56% annualized. Loans associated with our strategic client relationships had strong credit quality with only 0.6% in non-performing loans as of March 31, 2013.Accretable yield for the acquired loans accounted for under ASC 310-30 increased $14.9 million. This was partially offset by $0.3 million in impairments.◦ Accretable yield for the acquired loans accounted for under ASC 310-30 increased $35.0 million during the six months ended June 30, 2013. This was partially offset by $1.3 million in impairments during the same period. ◦ One commercial and industrial loan pool accounted for under ASC 310-30, totaling $18.7 million and covered by a loss-sharing agreement, was put on non-accrual status during the six months ended June 30, 2013. While the collectability of the carrying value of this loan pool is still considered probable, management determined that the cash flows and the timing of those cash flows were no longer estimable. As a result, this pool is now considered a non-performing asset. March 31,June 30, 2013, total deposits and client repurchase agreements made up 98.6%98.4% of our total liabilities.59.2%60.0% of total deposits as of March 31,June 30, 2013 from 58.3% of total deposits at December 31, 2012.4.8%5.1% annualized.March 31,June 30, 2013, we did not have any brokered deposits.8.14% during8.05% for the first quartersix months ended June 30, 2013.331 basis points duringto 0.43% for the first quarter ofsix months ended June 30, 2013 from 0.74% for the six months ended June 30, 2012 due to the continued emphasis on our commercial and consumer relationship banking strategy and lower cost transaction accounts.3.88%3.82% during the first quarter,six months ended June 30, 2013, driven by the attractive yields on loansaccounted for under ASC 310-30 loan pools and lower cost of deposits.were flat fordeclined $2.1 million during the third consecutive quarter,six months ended June 30, 2013 compared to the same period in 2012, adjusting for third quarter IPO expenses.$7.1$10.4 million for the six months ended June 30, 2013, decreasing $3.3$2.7 million from the first quarter ofsame period in 2012.March 31,June 30, 2013, our consolidated tier 1 leverage ratio was 18.7% and our consolidated tier 1 risk-based capital ratio was 52.3%50.1%.March 31,June 30, 2013 we had approximately $400 million of capital available to deploy while maintaining a 10% tier 1 leverage ratio, and we had approximately $475 million of available capital to deploy at an 8% tier 1 leverage ratio.$0.52$0.68 per share to our tangible book value per share as of March 31,June 30, 2013.$19.13$18.68 before consideration of the excess accretable yield value of $0.52$0.68 per share. somewhat from their lows, and we continue to consider this with guarded optimism. Commercial real estate values however, remain under pressurehave been recovering slightly slower than residential real estate, and it is difficult to determine when that trendhow strong this recovery is and how long it will change, or if it already has.last. Any deterioration in credit quality or elevated levels of non-performing assets, would ultimately have a negative impact on the quality of our loan portfolio. While the economic data has been mixed, any advancement in the broad economy has not yet directly translated into a substantial increase in loan demand, as many clients are relying on their cash balances for near-term investments, rather than borrowings.quartersix months of 2013 was the result of active resolution of problem and non-strategic loans acquired in our FDIC-assisted transactions outpacing organic loan growth. Additionally, the historically low interest rate environment limitsand loan competition have been limiting the yields we are able to obtain on interest earning assets, including both new assets acquired as we grow and assets that replace existing, higher yielding assets as they are paid down or mature. For example, our acquired loans generally have produced higher yields than our originated loans due to the recognition of accretion of fair value adjustments and accretable yield. As a result, we expect the yields on our loans to decline as our acquired loan portfolio pays down or matures and we expect downward pressure on our interest income to the extent that the runoff on our acquired loan portfolio is not replaced with comparable high-yielding loans.—- We monitor our loan portfolio to evaluate loan originations, payoffs, and profitability. We forecast loan originations and payoffs within the overall loan portfolio, and we work to resolve problem loans and OREO in an expeditious manner. We track the runoff of our covered assets as well as the loan relationships that we have identified as “non-strategic” and put particular emphasis on the buildup of “strategic” relationships.—- We monitor the asset quality of our loans and OREO through a variety of metrics, and we work to resolve problem assets in an efficient manner. Specifically, we monitor the resolution of problem loans through payoffs, pay downs and foreclosure activity. We marked all of our acquired assets to fair value at the date of their respective acquisitions, taking into account our estimation of credit quality. As of March 31, 2013, 30.4% of our total loans and 55.0% of our OREO was covered by loss sharing agreements with the FDIC.have historically been and currently are accounted for under ASC Topic 310-30,Loans and Debt Securities Acquired with Deteriorated Credit Quality.As of March 31, 2013 and December 31, 2012, 41.4% and 44.9% of our loans were accounted for under thisThis guidance which is described more fully below under “—Application“-Application of Critical Accounting Policies” and in note 2 in our consolidated financial statements.statements in our 2012 Annual Report on Form 10-K.the loss sharing agreements. All of these factors limit the comparability of our credit quality and ALL levels to peers or other financial institutions.—- We monitor our deposit levels by type, market and rate. Our loans are funded through our deposit base, and we seek to optimize our deposit mix in order to provide reliable, low-cost funding sources.—- We monitor liquidity based on policy limits and through projections of sources and uses of cash. In order to test the adequacy of our liquidity, we routinely perform various liquidity stress test scenarios that incorporate wholesale funding maturities, if any, certain deposit run-off rates and committed line of credit draws. We manage our liquidity primarily through our balance sheet mix, including our cash and our investment security portfolio, and the interest rates that we offer on our loan and deposit products, coupled with contingency funding plans as necessary.—- We monitor our capital levels, including evaluating the effects of potential acquisitions, to ensure continued compliance with regulatory requirements and with the OCC Operating Agreement and FDIC Order that we entered into with our regulators in connection with our Bank Midwest acquisition, which is described under “Supervision and Regulation” in our 2012 Annual Report on Form 10-K. We review our tier 1 leverage capital ratios, our tier 1 risk-based capital ratios and our total risk-based capital ratios on a quarterly basis.—- Net interest income represents the amount by which interest income on interest earning assets exceeds interest expense incurred on interest bearing liabilities. We generate interest income through interest and dividends on investment securities, interest bearing bank deposits and loans. Our acquired loans have generally produced higher yields than our originated loans due to the recognition of accretion of fair value adjustments and accretable yield and, as a result, we expect downward pressure on our interest income to the extent that the runoff of our acquired loan portfolio is not replaced with comparable high-yielding loans. We incur interest expense on our interest bearing deposits and repurchase agreements and would also incur interest expense on any future borrowings, including any debt assumed in acquisitions. We strive to maximize our interest income by acquiring and originating loans and investing excess cash in investment securities. Furthermore, we seek to minimize our interest expense through low-cost funding sources, thereby maximizing our net interest income.—- The provision for loan losses includes the amount of expense that is required to maintain the ALL at an adequate level to absorb probable losses inherent in the loan portfolio at the balance sheet date. Additionally, we incur a provision for loan losses on loans accounted for under ASC 310-30 as a result of a decrease in the net present value of the expected future cash flows during the periodic remeasurement of the cash flows associated with these pools of loans. The determination of the amount of the provision for loan losses and the related ALL is complex and involves a high degree of judgment and subjectivity to maintain a level of ALL that is considered by management to be appropriate under GAAP.—- Non-interest income consists primarily of service charges, bank card fees, gains on sales of investment securities, and other non-interest income. Also included in non-interest income is FDIC indemnification asset accretion and other FDIC loss sharing income, which consists of reimbursement of costs related to the resolution of covered assets, and amortization of our clawback liability. For additional information, see “—Application“-Application of Critical Accounting Policies—AcquisitionPolicies-Acquisition Accounting Application and the Valuation of Assets Acquired and Liabilities Assumed” in our 2012 Annual Report on Form 10-K and note 2 in our audited consolidated financial statements. Due to fluctuations in the accretion rates on the FDIC indemnification asset and the amortization of clawback liability and due to varying levels of expenses related to the resolution of covered assets, the FDIC loss sharing income is not consistent on a period-to-period basis and, absent additional acquisitions with FDIC loss sharing agreements, is expected to decline over time as covered assets are resolved.—- The primary components of our non-interest expense are salaries and employee benefits, occupancy and equipment, professional fees and data processing and telecommunications. Any expenses related to the resolution of covered assets are also included in non-interest expense. These expenses are dependent on individual resolution circumstances and, as a result, are not consistent from period to period. We seek to manage our non-interest expense in order to maximize efficiencies.—- We utilize traditional industry return ratios such as return on average assets, return on average equity and return on risk-weighted assets to measure and assess our returns in relation to our balance sheet profile. As of and for the three months ended March 31, December 31, March 31, 2013 2012 2012 0.16 % 0.22 % 0.11 % 0.23 % 0.28 % 0.16 % 0.78 % 1.10 % 0.60 % 1.17 % 1.51 % 0.99 % 0.46 % 0.64 % 0.32 % 137.52 % 134.44 % 128.62 % 43.65 % 43.76 % 44.14 % 16.11 % 16.14 % 13.35 % 3.88 % 4.09 % 3.91 % 3.74 % 3.94 % 3.72 % 4.27 % 4.51 % 4.62 % 0.53 % 0.57 % 0.90 % 0.45 % 0.48 % 0.79 % 3.67 % 3.77 % 3.45 % 88.29 % 85.43 % 81.28 % 2.08 % 2.23 % 1.77 % 27.27 % 27.14 % 19.85 % 2.31 % 2.53 % 3.06 % 46.45 % 41.70 % 49.41 % 0.73 % 0.84 % 0.59 % 1.05 % 1.26 % 1.00 % 35.05 % 37.64 % 33.42 % 0.88 % 1.00 % 1.28 % As of and for the three months ended As of and for the six months ended December 31,
2012 June 30,
2012 June 30,
2013 June 30,
2012 Return on average assets 0.22 % 0.22 % 0.18 % 0.19 % 0.14 % 0.29 % 0.28 % 0.25 % 0.26 % 0.20 % Return on average equity 1.08 % 1.10 % 0.99 % 0.93 % 0.80 % 1.50 % 1.51 % 1.42 % 1.34 % 1.20 % Return on risk weighted assets 0.61 % 0.64 % 0.55 % 0.53 % 0.44 % 137.95 % 134.44 % 130.30 % 137.95 % 130.30 % Loans to deposits ratio (end of period) 43.37 % 43.76 % 43.80 % 43.37 % 43.80 % Average equity to average assets 20.72 % 20.09 % 18.52 % 20.63 % 18.10 % Non-interest bearing deposits to total deposits (end of period) 16.75 % 16.14 % 14.00 % 16.75 % 14.00 % 3.77 % 4.09 % 4.00 % 3.82 % 3.96 % 3.64 % 3.94 % 3.83 % 3.69 % 3.78 % 4.13 % 4.51 % 4.61 % 4.20 % 4.62 % 0.49 % 0.57 % 0.78 % 0.51 % 0.84 % Cost of deposits 0.42 % 0.48 % 0.69 % 0.43 % 0.74 % Non-interest expense to average assets 3.49 % 3.77 % 3.09 % 3.58 % 3.27 % 85.05 % 85.43 % 70.96 % 86.69 % 76.19 % Dividend payout ratio 83.33 % 83.33 % 0.00 % 100.00 % 0.00 % Non-performing loans to total loans 2.77 % 2.23 % 2.51 % 2.77 % 2.51 % Covered non-performing loans to total non-performing loans 59.65 % 27.14 % 15.59 % 59.65 % 15.59 % Non-performing assets to total assets 2.46 % 2.53 % 3.26 % 2.46 % 3.26 % Covered non-performing assets to total non-performing assets 58.12 % 41.70 % 45.41 % 58.12 % 45.41 % Allowance for loan losses to total loans 0.69 % 0.84 % 0.87 % 0.69 % 0.87 % Allowance for loan losses to total non-covered loans 0.93 % 1.26 % 1.42 % 0.93 % 1.42 % Allowance for loan losses to non-performing loans 24.81 % 37.64 % 34.69 % 24.81 % 34.69 % Net charge-offs to average loans 0.63 % 1.00 % 1.45 % 0.76 % 1.36 % (1) Ratios are annualized. (2) Ratio represents non-GAAP financial measure. (3) Interest earning assets include assets that earn interest/accretion or dividends, except for the FDIC indemnification asset that may earn accretion but is not part of interest earning assets. Any market value adjustments on investment securities are excluded from interest-earning assets. Interest bearing liabilities include liabilities that must be paid interest. (4) Net interest margin represents net interest income, including accretion income on interest earning assets, as a percentage of average interest earning assets. (5) Interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average cost of interest bearing liabilities. (6) The efficiency ratio represents non-interest expense, less intangible asset amortization, as a percentage of net interest income plus non-interest income. (7) Non-performing loans consist of non-accruing loans, loans 90 days or more past due and still accruing interest and restructured loans, but exclude any loans accounted for under ASC 310-30 in which the pool is still performing. These ratios may, therefore, not be comparable to similar ratios of our peers. (8) Non-performing assets include non-performing loans, other real estate owned and other repossessed assets. (9) Total loans are net of unearned discounts and fees. accounting principlesU.S. generally accepted in the United States,accounting principles, or “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.We believe that theseprovide usefulare presented for supplemental informational purposes only and should not be considered a substitute for financial information to management and investors that is supplementary to our financial condition, results of operations and cash flows computedpresented in accordance with GAAP; however we acknowledge that ourGAAP. The non-GAAP financial measures have a number of limitations relative to GAAPwe present may differ from non-GAAP financial measures. Themeasures used by our peers or other companies. In particular, the items that we exclude in our adjustments are not necessarily consistent with the items that our peers may exclude from their results of operations and key financial measures and therefore may limit the comparability of similarly named financial measures and ratios. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance. As of and for the three months ended March 31, 2013 December 31, 2012 March 31, 2012 $ 1,086,743 $ 1,090,559 $ 1,091,389 (59,630 ) (59,630 ) (59,630 ) (26,239 ) (27,575 ) (31,587 ) $ 1,000,874 $ 1,003,354 $ 1,000,172 $ 5,257,543 $ 5,410,775 $ 6,074,807 (59,630 ) (59,630 ) (59,630 ) (26,239 ) (27,575 ) (31,587 ) $ 5,171,674 $ 5,323,570 $ 5,983,590 20.67 % 20.16 % 17.97 % -1.32 % -1.31 % -1.25 % 19.35 % 18.85 % 16.72 % 0.16 % 0.22 % 0.11 % 0.00 % 0.00 % 0.00 % 0.07 % 0.06 % 0.05 % 0.23 % 0.28 % 0.16 % 0.78 % 1.10 % 0.60 % 0.07 % 0.09 % 0.06 % 0.32 % 0.32 % 0.33 % 1.17 % 1.51 % 0.99 % $ 1,086,743 $ 1,090,559 $ 1,091,389 52,314,909 52,327,672 52,191,238 $ 20.77 $ 20.84 $ 20.91 $ 1,000,874 $ 1,003,354 $ 1,000,172 52,314,909 52,327,672 52,191,238 $ 19.13 $ 19.17 $ 19.16 As of and for the three months ended June 30, 2013 December 31, 2012 June 30, 2012 Total stockholders’ equity $ 1,044,243 $ 1,090,559 $ 1,096,741 Less: goodwill (59,630 ) (59,630 ) (59,630 ) Less: intangible assets, net (24,902 ) (27,575 ) (30,255 ) Tangible common equity $ 959,711 $ 1,003,354 $ 1,006,856 Total assets $ 5,220,688 $ 5,410,775 $ 5,789,075 Less: goodwill (59,630 ) (59,630 ) (59,630 ) Less: intangible assets, net (24,902 ) (27,575 ) (30,255 ) Tangible assets $ 5,136,156 $ 5,323,570 $ 5,699,190 Total stockholders’ equity to total assets 20.00 % 20.16 % 18.95 % Less: impact of goodwill and intangible assets, net -1.31 % -1.31 % -1.28 % Tangible common equity to tangible assets 18.69 % 18.85 % 17.67 % Common book value per share calculations: Total stockholders' equity $ 1,044,243 $ 1,090,559 $ 1,096,741 Divided by: ending shares outstanding 51,377,198 52,327,672 52,191,239 Common book value per share $ 20.33 $ 20.84 $ 21.01 Tangible common book value per share calculations: Tangible common equity $ 959,711 $ 1,003,354 $ 1,006,856 Divided by: ending shares outstanding 51,377,198 52,327,672 52,191,239 Tangible common book value per share $ 18.68 $ 19.17 $ 19.29 As of and for the three months ended As of and for the six months ended June 30, 2013 December 31, 2012 June 30, 2012 June 30, 2013 June 30, 2012 Return on average assets 0.22 % 0.22 % 0.18 % 0.19 % 0.14 % Add: impact of goodwill and intangible assets, net 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Add: impact of core deposit intangible expense, after tax 0.07 % 0.06 % 0.07 % 0.07 % 0.06 % Return on average tangible assets 0.29 % 0.28 % 0.25 % 0.26 % 0.20 % Return on average equity 1.08 % 1.10 % 0.99 % 0.93 % 0.80 % Add: impact of goodwill and intangible assets, net 0.09 % 0.09 % 0.10 % 0.07 % 0.07 % Add: impact of core deposit intangible expense, after tax 0.33 % 0.32 % 0.33 % 0.34 % 0.33 % Return on average tangible common equity 1.50 % 1.51 % 1.42 % 1.34 % 1.20 % Management’sManagement's Discussion and Analysis in our 2012 Annual Report on Form 10-K, and are further analyzed with other significant accounting policies in note 2, “Summary of Significant Accounting Policies” in the notes to our consolidated financial statements for the year ended 2012.March 31,June 30, 2013 were $5.3$5.2 billion compared to $5.4 billion at December 31, 2012, a decrease of $0.1$0.2 billion. The decrease in total assets was largely driven by a decrease in non-strategic loan balances of $98.7$214.3 million, which was a reflection of our workout progress on troubled loans (many of which were covered) that we acquired with our various acquisitions. We also originated $109.4$278.1 million of loans during the threesix months ended March 31,June 30, 2013, which offset normal client payments and grew the loan balances in our strategic portfolio at an annualized rate of 11.4%18.8%. We coupled the total loan balance decrease of $109.4 million with an $139.9a $213.0 million decrease in total deposits, as we sought to retain only those depositors who were interested in time deposits at market rate and developing a banking relationship and continued our focus on migrating toward a client-based deposit mix with higher concentrations of lower cost demand, savings and money market (“transaction”) deposits. We also utilized available cash and purchased $554.4$821.8 million of investment securities during the threesix months ended March 31,June 30, 2013. Our FDIC indemnification asset decreased $11.2$27.0 million during the threesix months ended March 31,June 30, 2013 as a result of $9.1$21.0 million of payments from and claims submitted to the FDIC for reimbursement on continued workout progress on our covered loans and OREO, coupled with an increase in actual and expected cash flows on our covered assets. These increases in cash flows also contributed to a net reclassification of $14.9$35.0 million of non-accretable difference to accretable yield during the period, which is being accreted to income over the remaining life of the loans.Available-for-sale$2.1$2.0 billion at March 31,June 30, 2013, compared to $1.7 billion at December 31, 2012, an increase of $0.4$0.3 billion, or 22.6%19.1%. During the threesix months ended March 31,June 30, 2013, we purchased $554.4$694.0 million of available-for-sale mortgage backed securities, which was partially offset by $158.5$315.0 million of maturities and paydowns. The purchases included mortgage backed securities. Our available-for-sale investment securities portfolio is summarized as follows for the periods indicated (in thousands): March 31, 2013 December 31, 2012 Amortized
Cost Fair
Value Percent of
Portfolio Weighted
Average
Yield Amortized
Cost Fair
Value Percent of
Portfolio Weighted
Average
Yield $ — $ — 0.00 % 0.00 % $ 300 $ 300 0.02 % 0.13 % — — 0.00 % 0.00 % — — 0.00 % 0.00 % 68,253 68,329 3.24 % 0.61 % 89,881 90,003 5.24 % 0.61 % 602,092 619,610 29.41 % 2.00 % 658,169 678,017 39.46 % 2.03 % 1,403,209 1,418,524 67.33 % 1.82 % 931,979 949,289 55.26 % 2.13 % 419 419 0.02 % 0.00 % 419 419 0.02 % 0.00 % $ 2,073,973 $ 2,106,882 100.00 % 1.83 % $ 1,680,748 $ 1,718,028 100.00 % 2.01 % June 30, 2013 December 31, 2012 U.S. Treasury securities $ — $ — 0.00 % 0.00 % $ 300 $ 300 0.02 % 0.13 % Asset backed securities 43,568 43,578 2.13 % 0.61 % 89,881 90,003 5.24 % 0.61 % Mortgage-backed securities (“MBS”): Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises 553,871 560,135 27.37 % 2.02 % 658,169 678,017 39.46 % 2.03 % Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises 1,456,908 1,442,404 70.48 % 1.75 % 931,979 949,289 55.26 % 2.13 % Other securities 419 419 0.02 % 0.00 % 419 419 0.02 % 0.00 % Total investment securities available-for-sale $ 2,054,766 $ 2,046,536 100 % 1.80 % $ 1,680,748 $ 1,718,028 100.00 % 2.01 % March 31,June 30, 2013, approximately 96.7%97.9% of the available-for-sale investment portfolio iswas backed by mortgages. The residential mortgage pass-through securities portfolio is comprised of both fixed rate and adjustable rate Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Government National Mortgage Association (“GNMA”) securities. The other mortgage-backed securities are comprised of securities backed by FHLMC, FNMA and GNMA securities.March 31,June 30, 2013, adjustable rate securities comprised 8.5%7.9% of the available-for-sale MBS portfolio and the remainder of the portfolio was comprised of fixed rate securities with 10 to 30 year maturities, with a weighted average coupon of 2.3% per annum.During the three months ended March 31, 2013, we did not sell any securities.$32.9$8.2 million of net unrealized losses and $37.3 million of net unrealized gains, at June 30, 2013 and December 31, 2012, respectively, inclusive of $1.7$21.1 million of unrealized gains and $321 thousand of unrealized losses, at March 31, 2013 and December 31, 2012, respectively. We do not believe that any of the securities with unrealized losses were other-than-temporarily-impaired.March 31,June 30, 2013 (in thousands): Due in one
year or less Due after
one year
through
five years Due after
five years
through
ten years Due after
ten years Other
securities Total Carrying
Value Weighted
Average
Yield Carrying
Value Weighted
Average
Yield Carrying
Value Weighted
Average
Yield Carrying
Value Weighted
Average
Yield Carrying
Value Weighted
Average
Yield Carrying
Value Weighted
Average
Yield $ — 0.00 % $ — 0.00 % $ — 0.00 % $ — 0.00 % $ — 0.00 % $ — 0.00 % — 0.00 % 68,329 0.61 % — 0.00 % — 0.00 % — 0.00 % 68,329 0.61 %
securities (“MBS”):
pass-through
securities issued
or guaranteed by
U.S. Government
agencies or
sponsored
enterprises — 0.00 % 4 2.54 % 229,332 1.23 % 390,274 2.46 % — 0.00 % 619,610 2.00 %
issued or
guaranteed by
U.S. Government
agencies or
sponsored
enterprises — 0.00 % — 0.00 % 13,076 2.37 % 1,405,448 1.81 % — 0.00 % 1,418,524 1.82 % — — — — 419 419 — $ 0 0.00 % $ 68,333 0.61 % $ 242,408 1.29 % $ 1,795,722 1.95 % $ 419 0.00 % $ 2,106,882 1.83 % Due after one year through five years Due after five years through ten years Due after ten years Other securities Total Asset backed securities $ — 0.00 % $ 43,578 0.61 % $ — 0.00 % $ — 0.00 % $ — 0.00 % $ 43,578 0.61 % — 0.00 % 8 1.84 % 207,424 1.13 % 352,703 2.56 % — 0.00 % 560,135 2.02 % — 0.00 % — 0.00 % 12,465 2.13 % 1,429,939 1.75 % — 0.00 % 1,442,404 1.75 % Other securities — 0.00 % — 0.00 % — 0.00 % — 0.00 % 419 0.00 % 419 0.00 % Total investment securities available-for-sale $ — 0.00 % $ 43,586 0.61 % $ 219,889 1.19 % $ 1,782,642 1.91 % $ 419 0.00 % $ 2,046,536 1.80 % March 31,June 30, 2013 and December 31, 2012 was 3.63.8 years and 3.4 years.years, respectively, the extension of which was largely due to slower expected prepayment speeds in response to the higher interest rate environment at June 30, 2013 compared to December 31, 2012. This estimate is based on various assumptions, including repayment characteristics, and actual results may differ. As of March 31,June 30, 2013, the duration of the total available-for-sale investment portfolio was 3.33.5 years and the asset-backed securities portfolio within the available-for-sale investment portfolio had a duration of 0.40.3 year.March 31,June 30, 2013, and December 31, 2012, we held $517.0 and $577.5$592.7 million of held-to-maturity investment securities, respectively.compared to $577.5 million at December 31, 2012, an increase of $15.2 million or 2.6%. During the first quarter of 2012 the Company transferred securities with a fair value of $754.1six months ended June 30, 2013 we purchased $127.8 million from an available-for-sale classification to the held-to-maturity classification. During the three month ended March 31, 2013 the Company has not purchased or sold any held-to-maturity securities. Held-to-maturity investment securities are summarized as follows as of the dates indicated (in thousands): March 31, 2013 Amortized
Cost Fair
Value Percent of
Portfolio Weighted
Average Yield $ 517,017 $ 522,867 100.00 % 3.59 % $ 517,017 $ 522,867 100.00 % 3.59 % December 31, 2012 Amortized
Cost Fair
Value Percent of
Portfolio Weighted
Average Yield $ 577,486 $ 584,551 100.00 % 3.60 % $ 577,486 $ 584,551 100.00 % 3.60 % June 30, 2013 Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises $ 509,690 $ 506,162 86.25 % 3.25 % Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises 82,971 80,668 13.75 % 1.46 % Total investment securities held-to-maturity $ 592,661 $ 586,830 100.00 % 3.23 % portfolio isportfolios are comprised of fixed rate FNMA and GNMA securities.March 31,June 30, 2013 and December 31, 2012, the fair value of the held-to-maturity investment portfolio was $522.9$586.8 million and $584.6 million, with $5.9inclusive of $5.8 million of unrealized losses and $7.1 million of unrealized gains, respectively. The table below summarizes the contractual maturities, as of the last scheduled repayment date, of our held-to-maturity investment portfolio as of March 31,June 30, 2013 (in thousands): Amortized
Cost Weighted
Average
Yield $ — — — — — — 517,017 3.59 % — — $ 517,017 3.59 % Due in one year or less $ — 0.00 % Due after one year through five year — 0.00 % Due after five years through ten years — 0.00 % Due after ten years 592,661 3.23 % Other securities — 0.00 % Total $ 592,661 3.23 % MarchJune 30, 2013 and December 31, 20132012 was 4.0 years and 3.8 years.years, respectively. As of March 31,June 30, 2013, the duration of the total held-to-maturity investment portfolio was 3.53.7 years and the duration of the entire investment securities portfolio was 3.43.5 years.March 31,June 30, 2013 and December 31, 2012, we held $25.0 million of Federal Reserve Bank stock and at March 31,June 30, 2013 and December 31, 2012 we also held $7.9$6.8 million and $8.0 million of FHLB stock, respectively. We hold these securities in accordance with debt and regulatory requirements. These are restricted securities which lack a market and are therefore carried at cost.March 31,June 30, 2013 was comprised of loans that were acquired in connection with our four acquisitions to date, in addition to new loans that we have originated. The majority of the loans acquired in the Hillcrest Bank and Community Banks of Colorado transaction are covered by loss sharing agreements with the FDIC.Topic 310-30, with the exception of loans with revolving privileges which were outside the scope of ASC Topic 310-30. In our Bank Midwest transaction, weTopic 310-30.banking.banking clients. We have developed a management tool to evaluate the progress of working out the troubled loans acquired in our FDIC-assisted acquisitions and the progress of organic loan growth, whereby we have designated loans as “strategic” or “non-strategic.” Criteria utilized in the designation of a loan as “strategic” include (a) geography, (b) total relationship with borrower and (c) credit metrics commensurate with our current underwriting standards. At March 31,June 30, 2013, strategic loans totaled $1.2 billion and had strong credit quality as represented by a non-performing loans ratio of 0.6%0.80%. We believe this presentation of our loan portfolio provides a meaningful basis to understand the underlying drivers of changes in our loan portfolio balances.threefour primary presentations to analyze our loan portfolio, depending on the purpose of the analysis. Those are: Loan growth and production efforts Strategic balances and loan originations Workout efforts of our purchased non-strategic portfolio Non-strategic balances and accretable yield Risk mitigants of our non-performing loans FDIC loss-share coverage and fair value marks Interest income ASC 310-30 and non 310-30 yields and accretable yield March 31,June 30, 2013 and December 31, 2012. Covered2012 (dollars in thousands): June 30, 2013 Total Loans Commercial $ 73,326 $ 203,889 $ 277,215 16.1 % Commercial real estate 409,361 267,655 677,016 39.3 % Agriculture 42,121 113,428 155,549 9.0 % Residential real estate 81,779 492,354 574,133 33.3 % Consumer 10,878 28,496 39,374 2.3 % Total $ 617,465 $ 1,105,822 $ 1,723,287 100.0 % Covered $ 389,484 $ 64,321 $ 453,805 26.3 % Non-covered 227,981 1,041,501 1,269,482 73.7 % Total $ 617,465 $ 1,105,822 $ 1,723,287 100.0 % December 31, 2012 Total Loans Commercial $ 83,169 $ 187,419 $ 270,588 14.8 % Commercial real estate 566,035 238,964 804,999 43.9 % Agriculture 47,733 125,674 173,407 9.5 % Residential real estate 106,100 427,277 533,377 29.1 % Consumer 18,984 31,347 50,331 2.7 % Total $ 822,021 $ 1,010,681 $ 1,832,702 100.0 % Covered $ 527,948 $ 80,274 $ 608,222 33.2 % Non-covered 294,073 930,407 1,224,480 66.8 % Total $ 822,021 $ 1,010,681 $ 1,832,702 100.0 % 30.4%71.2% of the total loan portfolio at March 31, 2013, compared to 33.2% at December 31, 2012 (dollars in thousands): March 31, 2013 ASC 310-30 Loans Non ASC 310-30
Loans Total Loans % of
Total $ 78,928 $ 185,802 $ 264,730 15.0 % 490,608 256,132 746,740 42.3 % 46,580 118,157 164,737 9.3 % 101,386 446,185 547,571 31.0 % 12,747 28,925 41,672 2.4 % $ 730,249 $ 1,035,201 $ 1,765,450 100.0 % $ 466,677 $ 70,419 $ 537,096 30.4 % 263,572 964,782 1,228,354 69.6 % $ 730,249 $ 1,035,201 $ 1,765,450 100.0 % December 31, 2012 ASC 310-30 Loans Non ASC 310-30
Loans Total Loans % of
Total $ 83,169 $ 187,419 $ 270,588 14.8 % 566,035 238,964 804,999 43.9 % 47,733 125,674 173,407 9.5 % 106,100 427,277 533,377 29.1 % 18,984 31,347 50,331 2.7 % $ 822,021 $ 1,010,681 $ 1,832,702 100.0 % $ 527,948 $ 80,274 $ 608,222 33.2 % 294,073 930,407 1,224,480 66.8 % $ 822,021 $ 1,010,681 $ 1,832,702 100.0 % Strategic loans comprised 65.3% of the total loan portfolio at March 31,June 30, 2013, compared to 61.2% at December 31, 2012. The table below shows the loan portfolio composition categorized between strategic and non-strategic at the respective dates (dollars in thousands): March 31, 2013 December 31, 2012 Strategic Non-Strategic Total Strategic Non-Strategic Total $ 171,128 $ 93,602 $ 264,730 $ 163,193 $ 107,395 $ 270,588 299,853 446,887 746,740 278,907 526,092 804,999 152,619 12,118 164,737 160,963 12,444 173,407 492,767 54,804 547,571 474,769 58,608 533,377 37,143 4,529 41,672 44,266 6,065 50,331 $ 1,153,510 $ 611,940 $ 1,765,450 $ 1,122,098 $ 710,604 $ 1,832,702 June 30, 2013 December 31, 2012 Strategic Non-Strategic Total Strategic Non-Strategic Total Commercial $ 192,415 $ 84,800 $ 277,215 $ 163,193 $ 107,395 $ 270,588 Commercial real estate 318,666 358,350 677,016 278,907 526,092 804,999 Agriculture 144,356 11,193 155,549 160,963 12,444 173,407 Residential real estate 535,690 38,443 574,133 474,769 58,608 533,377 Consumer 35,818 3,556 39,374 44,266 6,065 50,331 Total $ 1,226,945 $ 496,342 $ 1,723,287 $ 1,122,098 $ 710,604 $ 1,832,702 $67.3$109.4 million from December 31, 2012, ending at $1.8$1.7 billion at March 31,June 30, 2013. The 6.0% decrease in total loans was primarily driven by a $98.7$214.3 million decrease in our non-strategic loan portfolio as our enterprise-level, dedicated special asset resolution team successfully worked out non-strategic loans acquired in our FDIC-assisted transactions, coupled with the repayment of certainnon-strategic loans that do not conform to our business model of in-market, relationship-oriented loans with credit metrics commensurate with our current underwriting standards. Strategic loans increased $31.4$104.8 million, or 11.4%18.8% annualized, at March 31,June 30, 2013 compared to December 31, 2012, driven by originations of $109.4 million.strong originations. We successfully increased our balances in our strategic commercial, commercial real estate and residential real estate portfolios as we continued to generate new relationships with individuals and small to mid-sized businesses.$109.4$278.1 million were down slightlyup $111.5 million, or 66.9% from the same period of the prior quarter, largely due to seasonality, but have increased 32.7% from the first quarter of 2012year as a result of the deployment of bankers and the development of our market presence has increased.presence. The following table represents new loan originations for the last five quarters (in thousands): First quarter
2013 Fourth quarter
2012 Third quarter
2012 Second quarter
2012 First quarter
2012 $ 15,150 $ 30,988 $ 25,640 $ 10,799 $ 20,102 36,749 20,993 11,135 6,816 18,546 9,446 28,978 24,328 22,444 7,570 45,808 52,778 60,320 40,123 33,016 2,211 6,025 6,505 4,057 3,155 $ 109,364 $ 139,762 $ 127,928 $ 84,239 $ 82,389 Second quarter First quarter Fourth quarter Third quarter Second quarter 2013 2013 2012 2012 2012 Commercial $ 24,982 $ 15,150 $ 30,988 $ 25,640 $ 10,799 Commercial real estate 31,553 36,749 20,993 11,135 6,816 Agriculture 22,901 9,446 28,978 24,328 22,444 Residential real estate 86,161 45,808 52,778 60,320 40,123 Consumer 3,157 2,211 6,025 6,505 4,057 Total $ 168,754 $ 109,364 $ 139,762 $ 127,928 $ 84,239 March 31, 2013 Due within
1 Year Due after 1 but
within 5 Years Due after
5 Years Total $ 86,557 $ 136,640 $ 41,533 $ 264,730 336,991 271,098 138,651 746,740 33,858 75,581 55,298 164,737 57,073 70,741 419,757 547,571 17,094 16,074 8,504 41,672 $ 531,573 $ 570,134 $ 663,743 $ 1,765,450 294,089 185,840 57,167 537,096 237,484 384,294 606,576 1,228,354 $ 531,573 $ 570,134 $ 663,743 $ 1,765,450 December 31, 2012 Due within
1 Year Due after 1 but
within 5 Years Due after
5 Years Total $ 83,093 $ 147,356 $ 40,139 $ 270,588 403,179 277,625 124,195 804,999 41,205 77,683 54,519 173,407 62,712 73,941 396,724 533,377 23,842 17,668 8,821 50,331 $ 614,031 $ 594,273 $ 624,398 $ 1,832,702 350,339 198,373 59,510 608,222 263,692 395,900 564,888 1,224,480 $ 614,031 $ 594,273 $ 624,398 $ 1,832,702 June 30, 2013 Total Commercial $ 97,152 $ 153,742 $ 26,321 $ 277,215 Commercial real estate 241,778 295,593 139,645 677,016 Agriculture 41,457 64,625 49,467 155,549 Residential real estate 44,144 65,210 464,779 574,133 Consumer 15,390 15,638 8,346 39,374 Total loans $ 439,921 $ 594,808 $ 688,558 $ 1,723,287 Covered $ 235,043 $ 168,825 $ 49,937 $ 453,805 Non-covered 204,878 425,983 638,621 1,269,482 Total loans $ 439,921 $ 594,808 $ 688,558 $ 1,723,287 December 31, 2012 Total Commercial $ 83,093 $ 147,356 $ 40,139 $ 270,588 Commercial real estate 403,179 277,625 124,195 804,999 Agriculture 41,205 77,683 54,519 173,407 Residential real estate 62,712 73,941 396,724 533,377 Consumer 23,842 17,668 8,821 50,331 Total loans $ 614,031 $ 594,273 $ 624,398 $ 1,832,702 Covered $ 350,339 $ 198,373 $ 59,510 608,222 Non-covered 263,692 395,900 564,888 1,224,480 Total loans $ 614,031 $ 594,273 $ 624,398 $ 1,832,702 March 31, 2013 Fixed Variable Total $ 56,820 $ 121,353 $ 178,173 174,770 234,979 409,749 61,647 69,232 130,879 263,237 227,261 490,498 13,537 11,041 24,578 $ 570,011 $ 663,866 $ 1,233,877 $ 73,886 $ 169,121 $ 243,007 496,125 494,745 990,870 $ 570,011 $ 663,866 $ 1,233,877 December 31, 2012 Fixed Variable Total $ 51,171 $ 136,324 $ 187,495 161,200 240,620 401,820 60,194 72,008 132,202 247,321 223,344 470,665 15,295 11,194 26,489 $ 535,181 $ 683,490 $ 1,218,671 $ 73,925 $ 183,958 $ 257,883 461,256 499,532 960,788 $ 535,181 $ 683,490 $ 1,218,671 June 30, 2013 Fixed Variable Total Commercial $ 54,840 $ 125,223 $ 180,063 Commercial real estate 189,870 245,368 435,238 Agriculture 59,006 55,086 114,092 Residential real estate 304,149 225,840 529,989 Consumer 13,071 10,913 23,984 Total loans with > 1 year maturity $ 620,936 $ 662,430 $ 1,283,366 Covered $ 65,139 $ 153,623 $ 218,762 Non-covered 555,797 508,807 1,064,604 Total loans with > 1 year maturity $ 620,936 $ 662,430 $ 1,283,366 December 31, 2012 Fixed Variable Total Commercial $ 51,171 $ 136,324 $ 187,495 Commercial real estate 161,200 240,620 401,820 Agriculture 60,194 72,008 132,202 Residential real estate 247,321 223,344 470,665 Consumer 15,295 11,194 26,489 Total loans with > 1 year maturity $ 535,181 $ 683,490 $ 1,218,671 Covered $ 73,925 $ 183,958 $ 257,883 Non-covered 461,256 499,532 960,788 Total loans with > 1 year maturity $ 535,181 $ 683,490 $ 1,218,671 Topic 310-30 include both accretable yield and a non-accretable difference that are based on expected cash flows from the loans. Accretable yield is the excess of a pool’spool's cash flows expected to be collected over the recorded balance of the related pool of loans. The non-accretable difference represents the expected shortfall in future cash flows from the contractual amount due in respect of each pool of such loans. Similar to the entire fair value adjustment for loans outside the scope of ASC Topic 310-30, the accretable yield is accreted into income over the estimated remaining life of the loans in the applicable pool.Topic 310-30 at March 31,June 30, 2013 and December 31, 2012 (in thousands): March 31, 2013 December 31, 2012 $ 1,331,205 $ 1,444,279 (473,741 ) (488,673 ) (127,215 ) (133,585 ) $ 730,249 $ 822,021 June 30, 2013 December 31, 2012 Contractual cash flows $ 1,199,710 $ 1,444,279 Non-accretable difference (453,703 ) (488,673 ) Accretable yield (128,542 ) (133,585 ) $ 617,465 $ 822,021 threesix months ended March 31,June 30, 2013 and 2012 (in thousands): March 31,
2013 March 31,
2012 $ 133,585 $ 186,494 16,134 10,653 (1,202 ) (4,130 ) (21,302 ) (26,549 ) $ 127,215 $ 166,468 June 30, 2013 June 30, 2012 Accretable yield beginning balance $ 133,585 $ 186,494 Reclassification from non-accretable difference 37,725 29,483 Reclassification to non-accretable difference (2,755 ) (5,651 ) Accretion (40,013 ) (52,244 ) Accretable yield ending balance $ 128,542 $ 158,082 3029 of the accruing loan pools accounted for under ASC 310-30 utilizing the same cash flow methodology used at the time of acquisition. Increases in expected cash flows are reflected as an increase in the accretion rates as well as an increased amount of accretable yield that will be recognized over the expected remaining lives of the underlying loan pools. During the threesix months ended March 31,June 30, 2013 and 2012, we reclassified $14.9$35.0 million, and $6.5$23.8 million, net, from non-accretable difference to accretable yield, respectively. The re-measurements also resulted in $0.3$1.3 million and $3.3$13.7 million of net impairment during the same respective periods. The impairments during the threesix months ended March 31,June 30, 2013 were primarily driven by our commercial and residential real estate pools. These impairments are reflected in provision for loan loss in the consolidated statement of operations. Topic 310-30, the fair value adjustments on loans outside the scope of 310-30 are also accreted to interest income over the life of the loans. At March 31,June 30, 2013 and 2012, our total remaining accretable yield and fair value mark was as follows (in thousands): March 31, 2013 March 31, 2012 $ 127,215 $ 166,468 16,269 32,057 $ 143,484 $ 198,525 June 30, 2013 June 30, 2012 Remaining accretable yield on loans accounted for under ASC 310-30 $ 128,542 $ 158,082 Remaining accretable fair value mark on loans not accounted for under ASC 310-30 14,011 28,259 Total remaining accretable yield and fair value mark $ 142,553 $ 186,341 The Company hasManagement’sManagement's Discussion and Analysis in our 2012 Annual Report on Form 10-K.Commercial Single family Tranche Loss Threshold Tranche Loss Threshold 1 Up to $295,592 60% 1 Up to $4,618 60% 2 $295,593-405,293 0% 2 $4,618-8,191 30% 3 >$405,293 80% 3 >$8,191 80% Tranche Loss Threshold Loss-Coverage Percentage 1 Up to $204,194 80% 2 $204,195-308,020 30% 3 >$308,020 80% FDIC’sFDIC's book value does not necessarily correlate with our book value of the same assets. This difference is primarily because we recorded the loans at fair value at the date of acquisition in accordance with applicable accounting guidance.March 31,June 30, 2013, we had incurred $208.8$205.0 million of losses on our Hillcrest Bank covered assets since the beginning of the loss sharing agreement as measured by the FDIC’sFDIC's book value, substantially all of which was related to the commercial assets. Additionally, as of March 31,June 30, 2013, we had incurred approximately $153.8$140.2 million of losses related to our Community Banks of Colorado loss sharing agreement.Subsequent to March 31, 2013, we received $9.8 million related to claims filed during the fourth quarter of 2012 for losses incurred during the three months ended December 31, 2012 related to Community Banks of Colorado and Hillcrest Bank. We also filed loss share claims with the FDIC for $7.5 million and $8.1 million related to first quarter losses for Hillcrest Bank and Community Banks of Colorado, respectively. The loss claims filed are subject to review and approval, including extensive audits, by the FDIC or its assigned agents for compliance with the terms in the loss sharing agreements.46.5%58.1% of our non-performing assets (by dollar amount) at March 31,June 30, 2013 arewere covered by loss sharing agreements with the FDIC.borrower’sborrower's financial condition, liquidity and ability to meet contractual debt service requirements. Loans that are perceived to have acceptable risk are categorized as “pass” loans. “Special mention” loans represent loans that have potential credit weaknesses that deserve close attention. Special mention loans include borrowers that have potential weaknesses or unwarranted risks that, unless corrected, may threaten the borrower’sborrower's ability to meet debt service requirements. However, these borrowers are still believed to have the ability to respond to and resolve the financial issues that threaten their financial situation. Loans classified as “substandard” have a well-defined credit weakness and are inadequately protected by the current paying capacity of the obligor or of the collateral pledged, if any. Although these loans are identified as potential problem loans, they may never become non-performing. Substandard loans have a distinct possibility of loss if the deficiencies are not corrected. “Doubtful” loans are loans that management believes that collection of payments in accordance with the terms of the loan agreement are highly questionable and improbable. Doubtful loans that are not covered by loss sharing agreements are deemed impaired and put on non-accrual status.Topic 310-40Troubled Debt Restructurings by Creditors. Under this guidance, modifications to loans that fall within the scope of ASC Topic 310-30 are not considered troubled debt restructurings, regardless of otherwise meeting the definition of a troubled debt restructuring. Assets that have been foreclosed on or acquired through deed-in-lieu of foreclosure are classified as OREO until sold, and are carried at the lower of the related loan balance or the fair value of the collateral less estimated costs to sell, with any initial valuation adjustments charged to the ALL and any subsequent declines in carrying value charged to impairments on OREO.(55.0% of which was covered by FDIC loss sharing agreements at March 31, 2013) and other repossessed assets. However, loans and troubled debt restructurings accounted for under ASC Topic 310-30, as described below, aremay be excluded from our non-performing assets.assets to the extent that the cash flows of the loan pools are still estimable. Our non-performing assets include $10.0included $28.5 million and $11.1 million of covered loans not accounted for under ASC Topic 310-30at June 30, 2013 and $45.9 millionDecember 31, 2012, respectively, and $45.5 million of covered OREO at March 31,both June 30, 2013 and December 31, 2012, respectively. In addition to being covered by loss sharing agreements, these assets were marked to fair value at the time of acquisition, mitigating much of our loss potential on these non-performing assets. As a result, the levels of our non-performing assets are not fully comparable to those of our peers or to industry benchmarks.March 31,June 30, 2013 and December 31, 2012, 63.9%63.1% and 64.2%, respectively, of loans accounted for under ASC Topic 310-30 were covered by the FDIC loss sharing agreements. Loans accounted for under ASC Topic 310-30 were recorded at fair value based on cash flow projections that considered the deteriorated credit quality and expected losses. These loans are accounted for on a pool basis and any non-payment of contractual principal or interest is considered in our periodic re-estimation of the expected future cash flows. To the extent that we decrease our cash flow projections, we record an immediate impairment expense through the provision for loan losses. We recognize any increases to our cash flow projections on a prospective basis through an increase to the pool’spool's yield over its remaining life once any previously recorded impairment expense has been recouped. As a result of this accounting treatment, these pools may be considered to be performing, even though some or all of the individual loans within the pools may be contractually past due. LoansTopic310-30 with a balance of $18.7 million at June 30, 2013, for which the cash flows were no longer reasonably estimable. In accordance with the guidance in ASC 310-30, this pool was put on non-accrual status. As a result, we have ceased recognition of accretable yield to interest income on this loan pool. Income will now be recognized on this pool only after full recovery of the carrying value of the pool. This pool is now considered a non-performing asset and drove the increase in non-performing loans to 2.77% of total assets at June 30, 2013 from 2.23% at December 31, 2012.March 31,June 30, 2013 and December 31, 2012, as the carrying values of the respective loan or pool of loans cash flows were considered estimatable and probable of collection. Therefore, interest income, through accretion of the difference between the carrying value of the loans in the pool and the pool’spool's expected future cash flows, is being recognized on all other acquired loans accounted for under ASC Topic 310-30. March 31, 2013 December 31, 2012 Non-Covered Covered Total Non-Covered Covered Total $ 784 $ 2,103 $ 2,887 $ 1,466 $ 3,034 $ 4,500 8,427 463 8,890 10,216 1,453 11,669 189 38 227 207 44 251 4,214 1,478 5,692 4,894 1,514 6,408 269 — 269 291 — 291 13,883 4,082 17,965 17,074 6,045 23,119 — — — — — — 131 — 131 — — — — — — — — — 42 — 42 22 — 22 3 — 3 3 — 3 176 — 176 25 — 25 12,687 5,947 18,634 12,673 5,047 17,720 26,746 10,029 36,775 29,772 11,092 40,864 37,478 45,852 83,330 49,297 45,511 94,808 800 523 1,323 800 531 1,331 $ 65,024 $ 56,404 $ 121,428 $ 79,869 $ 57,134 $ 137,003 $ 12,889 $ 15,380 2.18 % 1.87 % 2.08 % 2.43 % 1.82 % 2.23 % 2.31 % 2.53 % 35.05 % 37.64 % June 30, 2013 December 31, 2012 Non-Covered Covered Total Non-Covered Covered Total Non-accrual loans: Commercial $ 792 $ 19,583 $ 20,375 $ 1,466 $ 3,034 $ 4,500 Commercial real estate 6,013 344 6,357 10,216 1,453 11,669 Agriculture 158 47 205 207 44 251 Residential real estate 4,238 1,434 5,672 4,894 1,514 6,408 Consumer 256 — 256 291 — 291 Total non-accrual loans 11,457 21,408 32,865 17,074 6,045 23,119 Loans past due 90 days or more and still accruing interest: Commercial 20 — 20 — — — Commercial real estate — — — — — — Agriculture — — — — — — Residential real estate — — — 22 — 22 Consumer 5 — 5 3 — 3 Total accruing loans 90 days past due 25 — 25 25 — 25 7,788 7,082 14,870 12,673 5,047 17,720 Total non-performing loans 19,270 28,490 47,760 29,772 11,092 40,864 OREO 33,757 45,542 79,299 49,297 45,511 94,808 Other repossessed assets 696 514 1,210 800 531 1,331 Total non-performing assets $ 53,723 $ 74,546 $ 128,269 $ 79,869 $ 57,134 $ 137,003 Allowance for loan losses $ 11,847 $ 15,380 Total non-performing loans to total non-covered, total covered, and total loans, respectively 1.52 % 6.28 % 2.77 % 2.43 % 1.82 % 2.23 % Total non-performing assets to total assets 2.46 % 2.53 % Allowance for loan losses to non-performing loans 24.81 % 37.64 % (1) Includes restructured loans less than 90 days past due and still accruing. $83.3$79.3 million at March 31,June 30, 2013 includes $4.9$4.0 million of participant interests in OREO in connection with our repossession of collateral on loans for which we were the lead bank and we have a controlling interest. We have recorded a corresponding payable to those participant banks in other liabilities. The $83.3$79.3 million of OREO at March 31,June 30, 2013 excludes $10.6$10.7 million of minority interest in participated OREO in connection with the repossession of collateral on loans for which we were not the lead bank and we do not have a controlling interest. These properties have been repossessed by the lead banks and we have recorded our receivable due from the lead banks in other assets as minority interest in participated OREO.threesix months ended March 31,June 30, 2013, $17.0$25.4 million of OREO was foreclosed on or otherwise repossessed and $23.9$33.7 million of OREO was sold, including $0.3$1.4 million of non-covered gains and $1.5$2.6 million of covered gains that are subject to reimbursement to the FDIC at the applicable loss shareloss-share coverage percentage. OREO write-downs of $4.6$7.1 million were recorded during the threesix months ended March 31,June 30, 2013, of which $3.1$5.2 million, or 67.5%72.9%, were covered by FDIC loss sharingloss-sharing agreements. OREO balances decreased $11.5$15.5 million during the first quarter ofsix months ended June 2013 to $83.3$79.3 million, 55.0%57.4% of which was covered by FDIC loss sharingloss-sharing agreements, compared to OREO balances of $94.8 million at December 31, 2012, $45.5 million, or 48.0 %, of which was covered by the FDIC loss sharing agreement.Topic 310-30 are put on non-accrual status unless the loan is well secured and in the process of collection. Pooled loans accounted for under ASC Topic 310-30 that are 90 days or more past due and still accreting are included in loans 90 days or more past due and still accruing interest and are generally considered to be performing as is further described above under “Non-Performing Assets.” The one covered loan pool accounted for under ASC 310-30 that was put on non-accrual during the six months ended June 30, 2013 is included in non-accrual loans. The table below shows the past due status of coveredloans accounted for under ASC 310-30 and non-covered loans not accounted for under ASC 310-30, based on contractual terms of the loans as of March 31,June 30, 2013 and December 31, 2012 (in thousands): March 31, 2013 December 31, 2012 ASC
310-30
loans Non ASC 310-
30 loans Total
loans ASC
310-30
loans Non ASC
310-30 loans Total loans $ 28,199 $ 4,559 $ 32,758 $ 18,412 $ 4,581 $ 22,993 112,475 176 112,651 146,761 25 146,786 — 17,965 17,965 — 23,119 23,119 $ 140,674 $ 22,700 $ 163,374 $ 165,173 $ 27,725 $ 192,898 $ 107,408 $ 4,583 $ 111,991 $ 130,350 $ 6,172 $ 136,522 19.26 % 2.19 % 9.25 % 20.09 % 2.74 % 10.53 % 100.00 % 54.80 % 93.72 % 100.00 % 57.78 % 93.93 % 76.35 % 20.19 % 68.55 % 78.92 % 22.26 % 70.77 % June 30, 2013 December 31, 2012 Loans 30-89 days past due and still accruing interest $ 17,107 $ 3,314 $ 20,421 $ 18,412 $ 4,581 $ 22,993 Loans 90 days past due and still accruing interest 93,144 25 93,169 146,761 25 146,786 Non-accrual loans 18,661 14,204 32,865 — 23,119 23,119 Total past due and non-accrual loans $ 128,912 $ 17,543 $ 146,455 $ 165,173 $ 27,725 $ 192,898 Total covered loans $ 103,101 $ 2,987 $ 106,088 $ 130,350 $ 6,172 $ 136,522 Total past due and non-accrual loans to total 310-30 loans, total non 310-30 loans and total loans, respectively 20.88 % 1.59 % 8.50 % 20.09 % 2.74 % 10.53 % % of total past due and non-accrual loans that carry fair value adjustments 100.00 % 38.13 % 92.59 % 100.00 % 57.78 % 93.93 % % of total past due and non-accrual loans that are covered by FDIC loss sharing agreements 79.98 % 17.03 % 72.44 % 78.92 % 22.26 % 70.77 % 9.3%8.50% of total loans as of March 31,June 30, 2013 compared to 10.5%10.53% at December 31, 2012. Loans 30-89 days past due and still accruing interest decreased $9.8$2.6 million at March 31,June 30, 2013 compared to December 31, 2012. Loans 90 days or more past due and still accruing interest decreased $34.1$53.6 million at March 31,June 30, 2013 compared to December 31, 2012. The decrease in past due loans is reflective of improved credit quality in the broader loan portfolio and the successful workout strategies employed by our special assets division during the period. Non-accrual loans increased $9.7 million from December 31, 2012 to June 30, 2013 primarily due to the addition of the covered commercial and industrial loan pool accounted for under ASC 310-30, totaling $18.7 million, to non-accrual status during the period. Non-accrual loans not covered under ASC 310-30 decreased $5.2$8.9 million during the period primarily due to resolution of certain assets and foreclosures during the period. The covered and non-covered non-accrual loans are primarily secured by real estate both in and outside of our market areas. Topic 310-30 have been grouped into pools based on the predominant risk characteristics of purpose and/or type of loan. The timing and receipt of expected principal, interest and any other cash flows of these loans are periodically re-estimated and the expected future cash flows of the collective pools are compared to the carrying value of the pools. To the extent that the expected future cash flows of each pool is less than the book value of the pool, an allowance for loan losses will be established through a charge to the provision for loan losses and, for loans covered by loss sharing agreements with the FDIC, a related adjustment to the FDIC indemnification asset for the portion of the loss that is covered by the loss sharing agreements. If the re-estimated expected future cash flows are greater than the book value of the pools, then the improvement in the expected future cash flows will beis accreted into interest income over the remaining expected life of the loan pool. During the threesix months ended March 31,June 30, 2013 and 2012, these re-estimations resulted in overall increases in expected cash flows in certain loan pools, which, absent previous valuation allowances within the same pool, is reflected in increased accretion as well as an increased amount of accretable yield and is recognized over the expected remaining lives of the underlying loans as an adjustment to yield.borrower’sborrower's resources, ability, and willingness to repay in accordance with the terms of the loan agreement;borrower’sborrower's financial condition and liquidity or the value of the collateral. Total commercial Construction Total agriculture Sr.Senior lien Total consumer Acquisition and development Jr.Junior lien Multi-family Owner-occupied Non-owner occupied four-quarter historical loss rates since the beginning of 2012, but we also utilize peer historical loss data based on a 12-quarter historical average net charge-off ratio on each loan type, relying on the Uniform Bank Performance Reports compiled by the Federal Financial Institutions Examinations Council (“FFIEC”). While we use our own loss history and peer loss history for both purchased and originated loans, we assign a higher portion of our own loss history to our purchased loans, because those loans are more seasoned and more of the actual losses in the portfolio have historically been in the purchased portfolio. For originated loans, we assign a higher portion of the peer loss history, as we believe that this is likely more indicative of losses inherent in the portfolio.March 31,June 30, 2013, two loan pools accounted for under ASC 310-30 had previous valuation allowances of $1.4$193 thousand and $1.3 million, respectively, that were reversed as a result of an increase in expected cash flows. Two loan pools had net impairments as a result of decreases in expected cash flows, resulting in a net provision of $0.3$1.0 million and $1.3 million for the three and six months ended June 30, 2013, respectively, for loans accounted for under ASC 310-30. Within the commercial real estate segment $2.8 million of 310-30 loans were charged-off during the threesix months ended March 31,June 30, 2013. This resulted in an ending ALL for 310-30 loans of $2.1$2.2 million at March 31,June 30, 2013, compared to $4.7 million at December 31, 2012.In addition to$0.3 million of provision for loan losses on our loans accounted for under ASC 310-30,three and six months ended June 30, 2013, we recorded $1.1$0.7 million and $1.8 million of provision for loan losses for loans not accounted for under ASC 310-30, respectively, as we provided for $1.1$1.8 million and $2.9 million of net loan charge-offs and credit risks inherent in the March 31, 2013 non ASC 310-30 balances. During the threesix months ended March 31,June 30, 2013, $0.6$1.3 million and $0.9 million of the $1.1$2.9 million of net charge-offs were from the commercial segment.and commercial real estate segments, respectively. At March 31,June 30, 2013, there were 12nine loans that carried specific reserves totaling $2.2$0.9 million compared to ten impaired loans that carried specific reserves totaling $1.9 million at December 31, 2012.March 31,June 30, 2012, we recorded a provisionprovisions for loan losses of $3.3$10.5 million and $13.7 million, respectively, as a result of net decreases in expected cash flow on loans accounted for under ASC 310-30. Additionally, we charged off $2.1$8.7 million, net of recoveries, of loans accounted for under ASC Topic 310-30 during the threesix months ended March 31,June 30, 2012, $1.5$7.9 million of which was from the commercial real estate segment. This resulted in an ending ALL for 310-30 loans of $3.3$7.3 million at March 31, 2012, compared to $2.2 million at December 31, 2011.March 31,June 30, 2012, we recorded $4.6$1.8 million and $6.3 million, respectively, of provision for loan losses for loans not accounted for under ASC 310-30 as we provided for net loan charge-offs and risks inherent in the March 31,June 30, 2012 non ASC 310-30 balances. Of the $4.8$5.6 million of net charge-offs during the threesix months ended March 31,June 30, 2012, $2.6$2.8 million was in the commercial segment and $2.1$2.2 million was in the commercial real estate segment.$12.9$11.8 million and $12.4$15.4 million was adequate to cover probable losses inherent in the loan portfolio at March 31,June 30, 2013 and December 31, 2012, respectively. However, it is likely that future adjustments to the ALL will be necessary and any changes to the assumptions, circumstances or estimates used in determining the ALL could adversely affect the Company’sCompany's results of operations, liquidity or financial condition.March 31,June 30, 2013 and 2012 (in thousands): March 31, 2013 March 31, 2012 310-30 Non 310-30 Total 310-30 Non 310-30 Total $ 4,652 $ 10,728 $ 15,380 $ 2,188 $ 9,339 $ 11,527 — (629 ) (629 ) (39 ) (2,632 ) (2,671 ) (2,812 ) (259 ) (3,071 ) (1,530 ) (2,172 ) (3,702 ) — — — — — — — (75 ) (75 ) (416 ) (34 ) (450 ) — (233 ) (233 ) — (392 ) (392 ) (2,812 ) (1,196 ) (4,008 ) (1,985 ) (5,230 ) (7,215 ) — 100 100 (155 ) 415 260 (2,812 ) (1,096 ) (3,908 ) (2,140 ) (4,815 ) (6,955 ) 309 1,108 1,417 3,279 4,557 7,836 $ 2,149 $ 10,740 $ 12,889 $ 3,327 $ 9,081 $ 12,408 1.45 % 0.44 % 0.88 % 0.69 % 2.04 % 1.28 % 0.29 % 1.04 % 0.73 % 0.28 % 1.01 % 0.59 % — — 1.05 % — — 1.00 % — 29.20 % — — 24.46 % — — 40.16 % — — 30.52 % — $ 730,249 $ 1,035,201 $ 1,765,450 $ 1,201,165 $ 900,317 $ 2,101,482 $ 785,103 $ 1,011,137 $ 1,796,240 $ 1,242,596 $ 947,824 $ 2,190,420 $ 263,572 $ 964,782 $ 1,228,354 $ 437,092 $ 802,754 $ 1,239,846 $ — $ 36,775 $ 36,775 $ — $ 37,126 $ 37,126 $ — $ 10,029 $ 10,029 $ — $ 7,368 $ 7,368 June 30, 2013 June 30, 2012 ASC 310-30 Total ASC 310-30 Non ASC 310-30 Total Beginning allowance for loan losses $ 2,149 $ 10,740 $ 12,889 $ 3,327 $ 9,081 $ 12,408 Charge-offs: Commercial (407 ) (624 ) (1,031 ) (176 ) (127 ) (303 ) Commercial real estate 16 (684 ) (668 ) (6,613 ) (241 ) (6,854 ) Agriculture — — — — (8 ) (8 ) Residential real estate (566 ) (549 ) (1,115 ) (144 ) (430 ) (574 ) Consumer — (208 ) (208 ) (19 ) (203 ) (222 ) Total charge-offs (957 ) (2,065 ) (3,022 ) (6,952 ) (1,009 ) (7,961 ) Recoveries — 310 310 428 193 621 Net charge-offs (957 ) (1,755 ) (2,712 ) (6,524 ) (816 ) (7,340 ) Provision for loan loss 1,003 667 1,670 10,456 1,770 12,226 Ending allowance for loan losses $ 2,195 $ 9,652 $ 11,847 $ 7,259 $ 10,035 $ 17,294 June 30, 2013 June 30, 2012 ASC 310-30 Total ASC 310-30 Total Beginning allowance for loan losses $ 4,652 $ 10,728 $ 15,380 $ 2,188 $ 9,339 $ 11,527 Charge-offs: Commercial (407 ) (1,253 ) (1,660 ) (215 ) (2,759 ) (2,974 ) Commercial real estate (2,796 ) (943 ) (3,739 ) (8,143 ) (2,413 ) (10,556 ) Agriculture — — — — (8 ) (8 ) Residential real estate (566 ) (624 ) (1,190 ) (560 ) (464 ) (1,024 ) Consumer — (441 ) (441 ) (19 ) (595 ) (614 ) Total charge-offs (3,769 ) (3,261 ) (7,030 ) (8,937 ) (6,239 ) (15,176 ) Recoveries — 410 410 273 608 881 Net charge-offs (3,769 ) (2,851 ) (6,620 ) (8,664 ) (5,631 ) (14,295 ) Provision for loan loss 1,312 1,775 3,087 13,735 6,327 20,062 Ending allowance for loan losses $ 2,195 $ 9,652 $ 11,847 $ 7,259 $ 10,035 $ 17,294 Ratio of net charge-offs during the period (annualized) to average total loans during the period, respectively 1.04 % 0.56 % 0.76 % 1.48 % 1.22 % 1.36 % Ratio of allowance for loan losses to total loans outstanding at period end, respectively 0.36 % 0.87 % 0.69 % 0.68 % 1.09 % 0.87 % Ratio of allowance for loan losses to non-covered loans outstanding at period end 0.96 % 0.93 % 0.93 % 1.87 % 1.22 % 1.42 % Ratio of allowance for loan losses to total non-performing loans at period end, respectively 11.76 % 33.17 % 24.81 % 0.00 % 20.13 % 34.69 % Ratio of allowance for loan losses to non-performing, non-covered loans at period end, respectively 0.00 % 50.09 % 61.48 % 0.00 % 23.85 % 41.10 % Total loans $ 617,465 $ 1,105,822 $ 1,723,287 $ 1,060,432 $ 917,571 $ 1,978,003 Average total loans outstanding during the period $ 728,011 $ 1,030,058 $ 1,758,069 $ 1,175,459 $ 931,369 $ 2,106,828 Non-covered loans $ 227,981 $ 1,041,501 $ 1,269,482 $ 388,848 $ 821,472 $ 1,210,320 Total non-performing loans $ 18,661 $ 29,099 $ 47,760 $ — $ 49,846 $ 49,846 Non-performing, covered loans $ 18,661 $ 9,829 $ 28,490 $ — $ 7,769 $ 7,769 presented: March 31, 2013 Total loans % of total
loans Related
ALL % of ALL $ 264,730 15 % $ 3,286 26 % 746,740 42 % 2,975 23 % 164,737 9 % 793 6 % 547,571 31 % 5,342 41 % 41,672 3 % 493 4 % $ 1,765,450 100 % $ 12,889 100 % December 31, 2012 Total loans % of total
loans Related
ALL % of ALL $ 270,588 15 % $ 2,798 18 % 804,999 44 % 7,396 48 % 173,407 9 % 592 4 % 533,377 29 % 4,011 26 % 50,331 3 % 583 4 % $ 1,832,702 100 % $ 15,380 100 % June 30, 2013 Total Loans % of ALL Commercial $ 277,215 16.1 % $ 2,286 19.3 % Commercial real estate 677,016 39.3 % 2,419 20.4 % Agriculture 155,549 9.0 % 764 6.4 % Residential real estate 574,133 33.3 % 5,907 49.9 % Consumer and overdrafts 39,374 2.3 % 471 4.0 % Total $ 1,723,287 100.0 % $ 11,847 100.0 % December 31, 2012 Total Loans % of ALL Commercial $ 270,588 14.8 % $ 2,798 18.2 % Commercial real estate 804,999 43.9 % 7,396 48.1 % Agriculture 173,407 9.5 % 592 3.8 % Residential real estate 533,377 29.1 % 4,011 26.1 % Consumer and overdrafts 50,331 2.7 % 583 3.8 % Total $ 1,832,702 100.0 % $ 15,380 100.0 % threesix months ended March 31,June 30, 2013, the ALL allocated to commercial real estate declined from 48%48.1% to 23%20.4% largely due to $2.8 million in charge-offs in our commercial real estate loans accounted for under ASC 310-30, loans, coupled with a $1.0$1.2 million provision reversal related to our commercial real estate ASC 310-30 loans as previously recorded impairments were recaptured in connection with an improvement in estimated cash flows. The ALL allocated to the residential real estate segment increased to 41%49.9% from 26%26.1% during the threesix months ended March 31,June 30, 2013, which was largely the result of a $1.0$2.1 million impairment in the residential real estate loans accounted for under ASC 310-30.March 31,June 30, 2013, we recognized $4.7$3.0 million and $7.6 million, respectively, of negative accretion on the FDIC indemnification asset as the performance of our covered assets has improved and reduced the carrying value of the FDIC indemnification asset by $9.1 million as a result of claims filed with the FDIC as discussed below.improved. The negative accretion resulted from an increase in actual and expected cash flows on the underlying covered assets, resulting in lower expected reimbursements from the FDIC. The increase in expected cash flows from these underlying assets is reflected in increased accretion rates on covered loans as well as an increased amount of accretable yield on our covered loans accounted for under ASC Topic 310-30 and is being recognized over the expected lives of the underlying covered loans as an adjustment to yield. The carrying value of the FDIC indemnification asset was further reduced by $21.0 million during the six months ended June 30, 2013 as a result of claims filed with the FDIC. During the threesix months ended March 31, 2013, we submitted $9.1 million of loss share claims to the FDIC for the reimbursable portion of losses related to the Hillcrest Bank and Community Banks of Colorado covered assets incurred during the fourth quarter of 2012. During the three months ended March 31,June 30, 2013, we received $57.9$67.6 million in loss-share payments from the FDIC. Of these payments, $51.0 million were related to Community Banks of Colorado for losses incurred during the second and third quarters of 2012 and $6.9 million were related to Hillcrest Bank for losses that were incurred during the third and fourth quarters of 2012.Subsequent to March 31, 2013, we received $9.8 million related to claims filed during the fourth quarter of 2012 for losses incurred during the three months ended December 31, 2012 related to Community Banks of Colorado and Hillcrest Bank. The loss claims filed are subject to review and approval, including extensive audits, by the FDIC or its assigned agents for compliance with the terms in the loss sharing agreements.March 31,June 30, 2012, we recognized $3.7$2.6 million and $6.3 million, respectively, of negative accretion related to the FDIC indemnification asset as a result of improved performance of our covered assets andassets. We also reduced$6.6$33.1 million in payments from the FDIC which was related to losses that were incurred during the thirdfourth quarter of 2011.Company’sCompany's losses on covered assets do not reach the second tranche in each related loss sharing agreement, based on the initial discount received less cumulative servicing amounts for the covered assets acquired. At March 31,June 30, 2013 and December 31, 2012, this clawback liability was carried at $31.0$31.2 million and $31.3 million, respectively, and is included in Due to FDIC in our consolidated statements of financial condition.The OREO balance of $83.3 million at March 31, 2013 includes the interests of several outside participating banks totaling $4.9$4.0 million at June 30, 2013, $5.3 million at December 31, 2012, and $17.9 million at June 30, 2012, for which an offsetting liability is recorded in other liabilitiesliabilities. It excludes $10.7 million, $10.6 million and excludes $10.6$12.2 million, for the same respective periods, of the Company’s minority interests in OREO which are held by outside banks where we werethe Company was not the lead bank and dodoes not have a controlling interest, for which the Company maintains a receivable is included in other assets.$83.3$79.3 million of OREO at March 31,June 30, 2013, $45.9$45.5 million, or 55.0%57.4%, was covered by the loss sharing agreements with the FDIC. Any losses on these assets are substantially offset by a corresponding change in the FDIC indemnification asset. WeDuring the three and six months ended June 30, 2013, we sold $25.7$11.9 million and $12.7$37.7 million of OREO during the three months ended March 31, 2013 and 2012, respectively, and realized net gains on sales of $1.8$2.1 million and $0.8$3.9 million, forrespectively. We sold $23.2 million and $35.9 million OREO and realized net gains of $3.2 million and $4.0 million, respectively, during the three and six months ended March 31, 2013 and 2012, respectively.June 30, 2012. Changes in OREO during the threesix months ended March 31,June 30, 2013 and 2012 were as follows (in thousands): For the three months ended
March 31, 2013 2012 $ 94,808 $ 120,636 17,043 40,899 (4,600 ) (5,089 ) (25,726 ) (12,676 ) 1,805 849 $ 83,330 $ 144,619 For the six months ended June 30, 2013 2012 Beginning balance $ 94,808 $ 120,636 Transfers from loan portfolio 25,379 56,100 Impairments (7,148 ) (7,213 ) Sales (37,673 ) (35,851 ) Gain on sale of OREO, net 3,933 4,040 Ending Balance $ 79,299 $ 137,712 March 31,
2013 December 31,
2012 $ 10,560 $ 59,291 10,627 10,627 6,065 5,585 6,612 7,088 12,394 7,274 9,672 10,158 $ 55,930 $ 100,023 June 30,
2013 December 31,
2012FDIC indemnification-claimed $ 15,644 $ 59,291 Minority interest in participated other real estate owned 10,697 10,627 Accrued interest on interest bearing bank deposits and investment securities 5,610 5,585 Accrued interest on loans 5,986 7,088 Accrued income taxes receivable and deferred tax asset 37,866 7,274 Other assets 8,969 10,158 Total other assets $ 84,772 $ 100,023 $44.1$15.3 million, or 15.2%, during the threesix months ended March 31, 2013,June 30, 2013. The decrease was largely because theattributable to a $43.6 million decline in FDIC indemnification-claimed, decreased $48.7 million, as payments were received on outstanding loss shareloss-share claims submitted to the FDIC. March 31,
2013 December 31,
2012 $ 4,942 $ 5,321 — 4,972 3,862 4,239 11,263 12,263 4,834 5,461 977 2,285 $ 25,878 $ 34,541 June 30,
2013 December 31,
2012Participant interest in other real estate owned $ 4,173 $ 5,321 Accrued income taxes payable 9,146 4,972 Accrued interest payable 3,718 4,239 Accrued expenses 10,769 12,263 Warrant liability 5,158 5,461 Other liabilities 1,630 2,285 Total other liabilities $ 34,594 $ 34,541 $8.7$0.1 million during the threesix months ended March 31, 2013, largely due to a $5.0 million decrease in accrued and deferredJune 30, 2013. Accrued income taxes payable increased by $4.2 million, primarily due to the current recognition of taxable income from the purchase discount related to loans acquired in our bank acquisitions that was a result ofhad previously been deferred for income tax payments paid during the period. purposes, as described above.threesix months ended March 31,June 30, 2013, we continued to lower the interest rates paid on our deposits, coupled with the shift from higher-cost time deposits to lower cost transaction accounts. The lower cost mix of deposits resulted in a decrease in accrued interest payable of $0.4$0.5 million during the period. Additionally, participant interests in other real estate owned, which represents participant banks’banks' interests in properties that we have repossessed, decreased $0.4$1.1 million. These participant interests are also reflected in our other real estate owned balances.$0.6$0.3 million during the threesix months ended March 31,June 30, 2013 to $4.8$5.2 million. The value of the warrant liability, and the expense that results from an increase to this liability, has a direct correlationis correlated to our stock price. Accordingly, anyan increase in our stock price would resultresults in an increase in the warrant liability and the associated expense. More information on the accounting and measurement of the warrant liability can be found in notes 2 and 19 in our audited consolidated financial statements.March 31,June 30, 2013 and December 31, 2012 (in thousands): March 31, 2013 December 31, 2012 $ 654,002 16 % $ 677,985 16 % 487,222 12 % 529,996 13 % 198,872 5 % 187,339 4 % 1,064,211 26 % 1,052,681 25 % 2,404,307 59 % 2,448,001 58 % 1,071,717 26 % 1,121,757 27 % 584,777 15 % 630,961 15 % 1,656,494 41 % 1,752,718 42 % $ 4,060,801 100 % $ 4,200,719 100 % June 30, 2013 December 31, 2012 Non-interest bearing demand deposits $ 667,786 16.7 % $ 677,985 16.1 % Interest bearing demand deposits 476,215 11.9 % 529,996 12.6 % Savings accounts 193,080 4.8 % 187,339 4.5 % Money market accounts 1,053,680 26.4 % 1,052,681 25.1 % Total transaction deposits 2,390,761 60.0 % 2,448,001 58.3 % Time deposits < $100,000 1,038,380 26.0 % 1,121,757 26.7 % 558,586 14.0 % 630,961 15.0 % Total time deposits 1,596,966 40.0 % 1,752,718 41.7 % Total deposits $ 3,987,727 100.0 % $ 4,200,719 100.0 % threesix months ended March 31,June 30, 2013, our total deposits decreased $139.9$213.0 million. WeSince the acquisition of the four problem banks, we have actively workedcontinued to restructurefocus our deposit base by retaining only those acquired time depositon clients who wereare interested in time deposits at market rate deposits and developing a banking relationship, and asrather than the highly rate-sensitive time deposit clients of the predecessor banks. As a result, our time deposits decreased $96.2$155.8 million, or 8.9%, during the threesix months ended March 31,June 30, 2013. At March 31,June 30, 2013, the mix of transaction deposits to total deposits improved to 59.2%60.0% from 58.3% at the end of the prior period.December 31, 2012. At March 31,June 30, 2013 and December 31, 2012, we had $1.2 billion of time deposits that were scheduled to mature within 12 months. Of the $1.2 billion in time deposits scheduled to mature in within 12 months, $0.4 billion of which were in denominations of $100,000 or more, and $0.8 billion of which were in denominations less than $100,000. Note 8 to the unaudited consolidated interim financial statements provides a maturity schedule and weighted average rates of time deposits outstanding at March 31,June 30, 2013 and December 31, 2012.March 31,June 30, 2013 and December 31, 2012, the Company had approximately $132.9$111.9 million and $164.3 million, respectively, of time deposits that were subject to the penalty-free withdrawals.$2.1$2.9 million and $5.0 million during the three and six months ended March 31,June 30, 2013, respectively, compared to $1.6$2.7 million and $4.3 million during the three and six months ended March 31, 2012.June 30, 2012, respectively. Net interest income declined $7.7$7.6 million and $15.3 million from the three and six months ended March 31,June 30, 2012 to the three and six months ended March 31,June 30, 2013, respectively, which resulted from the lower loan balances of 310-30 loans as non-strategic loans were successfully moved to resolution, coupled with lower yields earned on the investment portfolio and on the non 310-30 loan portfolio. We grew average balances of transaction accounts $68.5 million during the three months ended March 31, 2013 compared to the three months ended March 31, 2012, while average balances of total interest bearing liabilities declined $815.4 million during the same timeframe, driven by an $881.3 million decline in average time deposits as we focused our deposit base on clients who were interested in market rate time deposits and developing a banking relationship.$1.4$1.7 million and $3.1 million during the three and six months ended March 31,June 30, 2013, respectively, compared to $7.8$12.2 million and $20.1 million during the three and six months ended March 31,June 30, 2012, a decrease of $6.4 million. respectively.The decrease in provision was due to lower impairment charges on the ASC 310-30 loan pools coupled with reduced net charge-offsimproved credit quality metrics in the non 310-30 portfolio when comparing the three months ended March 31, 2013 to the same period of 2012.portfolio. Non-interest income was $7.2$7.3 million inand $14.5 million during the three and six months ended March 31,June 30, 2013, respectively, compared to $10.3$10.0 million and $20.3 million during the same periodperiods in 2012, a decline2012. The declines of $3.1$2.7 million whichand $5.8 million during the three and six months ended June 30, 2013 compared to the same periods in 2012 was largely due to a $1.4$3.2 million declineand $4.6 million declines in FDIC-related income, coupled with a $1.1 million decline in gain on previously charged-off acquired loans.$47.9$45.2 million in the three months ended March 31, 2013 compared to $53.0and $93.1 million during the three and six months ended March 31,June 30, 2013, respectively, compared to $45.3 million and $98.3 million during the three and six months ended June 30, 2012, a decline of $5.1 million.respectively. The decline in non-interest expense during the three months June 30, 2013 to the three months ended June 30, 2012 was primarily due to lower OREO expenses of $3.9 million, coupled with a $1.3 million decrease in professional fees, a $1.4problem loan expense, and marketing and business development expenses of $2.4 million, valuation decrease in the warrant liability$1.8 million, and $0.9 million, respectively, largely offset by a $1.4increases of $2.4 million, $1.1 million, and $1.1 million in other real estate owned expenses, salaries and employee benefits, and occupancy and equipment, respectively. Theacquisitions.deposit mix and the cost of deposits; (ii) our loan mix and the yield on loans; (iii)(ii) the investment portfolio and the related yields; (iii) our deposit mix and the cost of deposits; and (iv) net interest income simulations for various forecast periods.timeframestime frames prior to their cash settlement, as are the market value adjustments on the investment securities available-for-sale. Non-accrual and restructured loan balances are included in the average loan balances; however, the forgone interest on non-accrual and restructured loans is not included in the dollar amounts of interest earned. All amounts presented are on a pre-tax basis.March 31,June 30, 2013 and 2012 (in thousands): For the three months ended March 31, 2013 For the three months ended March 31, 2012 Average
Balance Interest Average
Rate Average
Balance Interest Average
Rate $ 785,103 $ 21,302 10.85 % $ 1,242,596 $ 26,549 8.59 % 1,015,260 14,833 5.93 % 953,345 20,042 8.46 % 1,845,383 8,471 1.86 % 1,961,349 14,895 3.05 % 552,832 4,777 3.50 % 23,291 211 3.64 % 32,996 394 4.84 % 29,112 381 5.26 % 531,945 321 0.24 % 1,263,164 812 0.26 % $ 4,763,519 $ 50,098 4.27 % $ 5,472,857 $ 62,890 4.62 % 62,616 73,450 481,154 637,102 (14,297 ) (6,334 ) $ 5,292,992 $ 6,177,075 $ 1,738,410 $ 1,094 0.26 % $ 1,669,889 $ 1,604 0.39 % 1,698,801 3,417 0.82 % 2,580,053 7,999 1.25 % 46,784 18 0.16 % 49,403 29 0.23 % $ 3,483,995 $ 4,529 0.53 % $ 4,299,345 $ 9,632 0.90 % 645,904 645,972 75,556 139,131 4,205,455 5,084,448 1,087,537 1,092,627 $ 5,292,992 $ 6,177,075 $ 45,569 $ 53,258 3.74 % 3.72 % $ 1,279,524 $ 1,173,512 3.88 % 3.91 % 136.73 % 127.30 % For the three months ended June 30, 2013 For the three months ended June 30, 2012 Interest Interest Interest earning assets: 310-30 loans $ 671,546 $ 18,710 11.14 % $ 1,108,322 $ 25,694 9.32 % 1,057,144 15,610 5.92 % 927,688 16,900 7.33 % Investment securities available-for-sale 2,110,138 9,252 1.75 % 1,759,623 10,124 2.31 % Investment securities held-to-maturity 532,552 4,344 3.26 % 738,196 6,330 3.45 % Other securities 32,110 388 4.83 % 31,943 384 4.84 % Interest earning deposits and securities purchased under agreements to resell 308,280 174 0.23 % 650,759 413 0.26 % Total interest earning assets $ 4,711,770 $ 48,478 4.13 % $ 5,216,531 $ 59,845 4.61 % Cash and due from banks 59,726 70,805 Other assets 439,328 623,648 Allowance for loan losses (12,855 ) (11,375 ) Total assets $ 5,197,969 $ 5,899,609 Interest bearing liabilities: Interest bearing demand, savings and money market deposits $ 1,727,760 $ 1,061 0.25 % $ 1,705,916 $ 1,364 0.32 % Time deposits 1,628,332 3,110 0.77 % 2,298,782 6,536 1.14 % Securities sold under agreements to repurchase 60,924 20 0.13 % 62,124 32 0.21 % Total interest bearing liabilities $ 3,417,016 $ 4,191 0.49 % $ 4,066,822 $ 7,932 0.78 % Demand deposits 649,323 622,936 Other liabilities 54,480 115,032 Total liabilities 4,120,819 4,804,790 Stockholders’ equity 1,077,150 1,094,819 Total liabilities and stockholders’ equity $ 5,197,969 $ 5,899,609 Net interest income $ 44,287 $ 51,913 Interest rate spread 3.64 % 3.83 % Net interest earning assets $ 1,294,754 $ 1,149,709 Net interest margin 3.77 % 4.00 % Ratio of average interest earning assets to average interest bearing liabilities 137.89 % 128.27 % (1) Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan. (2)Non 310-30 loans include loans held-for-sale.$45.6 million and $53.3$44.3 million for the three months ended March 31,June 30, 2013 and 2012, respectively.declined $7.6 million from $51.9 million during the same period in 2012. The net interest margin narrowed 323 basis points from the same period a year ago to 3.88%3.77% and the interest rate spread widened 2narrowed 19 basis points to 3.74% during the three months ended March 31, 2013.3.64%. The year-over-year narrowing of the net interest margin was primarily driven by a 13.0%9.7% decrease in average interest earning assets which was largely attributable to a $457.5$436.8 million decrease in average balances on loans accounted for under ASC 310-30 as we continued to actively exit the non-strategic loan portfolio.$1.8$1.7 billion, or 37.8%36.7% of total average interest earning assets during the three months ended March 31,June 30, 2013, compared to $2.2$2.0 billion, or 40.1%39.0%, of total average interest earning assets during the three months ended March 31,June 30, 2012.Loan balances at the beginning of 2012 were reflective of our failed bank acquisitions in the latter-half of 2011 and the decline in average balances isofwith respect to the non-strategic loans. The yield on the ASC 310-30 loan portfolio was 10.85%11.14% during the three months ended March 31,June 30, 2013, compared to 8.59%9.32% during the same period the prior year. This 2.26%1.82% increase was attributable to the effects of the favorable life-to-date transfers of non-accretable difference to accretable yield that are being accreted to interest income over the remaining life of these loans.50.3%56.1% of total interest earning assets at March 31,during the three months ended June 30, 2013 compared to 36.3% at March 31,47.9% during the three months ended June 30, 2012, as we have steadily reinvested the excess cash into our investment securities portfolio. The continued low interest rate environment and lower re-investment yields have resulted in an 82a 58 basis point decline in yields earned on the total investment portfolio during the three months ended March 31,June 30, 2013 compared to the same period of the prior year.$815.4$649.8 million forfrom the three months ended March 31,June 30, 2012 to the three months ended June 30, 2013, driven by an $881.3a $670.5 million decline in average time deposits asdeposits. Since the acquisition of our four problem banks, we focusedhave continued to focus our deposit base on clients who wereare interested in market rate time deposits and developing a banking relationship.relationship, rather than the highly rate-sensitive time deposit clients of the predecessor banks. The net interest margin benefited from a 0.37%0.29% decrease in the cost of interest bearing liabilities as we continued our strategy of transitioning high-priced time deposits to lower-cost transaction accounts. During the three months ended March 31,June 30, 2013, total interest expense related to interest bearing liabilities was $4.5$4.2 million compared to $9.6$7.9 million during the three months ended March 31,June 30, 2012, or an average cost of 0.53%0.49% and 0.90%0.78% during the respective periods. The largest component of interest expense in each period was related to time deposits, which carried an average rate of 0.82%0.77% and 1.25%1.14% during the three months ended March 31,June 30, 2013 and 2012, respectively. For the six months ended June 30, 2013 For the six months ended June 30, 2012 Interest Interest Interest earning assets: 310-30 loans $ 728,011 $ 40,012 10.99 % $ 1,175,459 $ 52,243 8.94 % 1,036,318 30,443 5.92 % 936,973 36,942 7.93 % Investment securities available-for-sale 1,978,492 17,723 1.79 % 1,860,497 25,019 2.70 % Investment securities held-to-maturity 542,636 9,121 3.36 % 380,743 6,541 3.45 % Other securities 32,550 782 4.80 % 30,527 765 5.04 % Interest earning deposits and securities purchased under agreements to resell 419,494 495 0.24 % 956,942 1,225 0.26 % Total interest earning assets $ 4,737,501 $ 98,576 4.20 % $ 5,341,141 $ 122,735 4.62 % Cash and due from banks 61,163 72,149 Other assets 460,135 637,537 Allowance for loan losses (13,572 ) (8,853 ) Total assets $ 5,245,227 $ 6,041,974 Interest bearing liabilities: Interest bearing demand, savings and money market deposits $ 1,733,055 $ 2,155 0.25 % $ 1,687,876 $ 2,968 0.35 % Time deposits 1,663,372 6,527 0.79 % 2,439,417 14,535 1.20 % Securities sold under agreements to repurchase 53,893 38 0.14 % 55,763 61 0.22 % Total interest bearing liabilities $ 3,450,320 $ 8,720 0.51 % $ 4,183,056 $ 17,564 0.84 % Demand deposits 647,623 634,482 Other liabilities 64,969 130,723 Total liabilities 4,162,912 4,948,261 Stockholders’ equity 1,082,315 1,093,713 Total liabilities and stockholders’ equity $ 5,245,227 $ 6,041,974 Net interest income $ 89,856 $ 105,171 Interest rate spread 3.69 % 3.78 % Net interest earning assets $ 1,287,181 $ 1,158,085 Net interest margin 3.82 % 3.96 % Ratio of average interest earning assets to average interest bearing liabilities 137.31 % 127.69 % (1) Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan. March 31,June 30, 2013 compared to the three and six months ended March 31,June 30, 2012 (in thousands): Three months ended March 31, 2013
Compared To
Three months ended March 31, 2012 Increase (decrease) due to Volume Rate (3) Net $ (12,413 ) $ 7,166 $ (5,247 ) 905 (6,114 ) (5,209 ) (532 ) (5,892 ) (6,424 ) 4,576 (10 ) 4,566 46 (33 ) 13 (441 ) (50 ) (491 ) $ (7,859 ) $ (4,933 ) $ (12,792 ) $ 43 $ (553 ) $ (510 ) (1,773 ) (2,809 ) (4,582 ) (1 ) (10 ) (11 ) (1,731 ) (3,372 ) (5,103 ) $ (6,128 ) $ (1,561 ) $ (7,689 ) Increase (decrease) due to Increase (decrease) due to Volume Rate (3) Net Volume Rate (3) Net Interest income: 310-30 loans $ (12,169 ) $ 5,185 $ (6,984 ) $ (24,592 ) $ 12,361 $ (12,231 ) 1,912 (3,202 ) (1,290 ) 2,918 (9,417 ) (6,499 ) Investment securities available-for-sale 1,537 (2,409 ) (872 ) 1,057 (8,353 ) (7,296 ) Investment securities held-to-maturity (1,677 ) (309 ) (1,986 ) 2,721 (141 ) 2,580 Other securities 2 2 4 49 (32 ) 17 Interest earning deposits and securities purchased under agreements to resell (193 ) (46 ) (239 ) (634 ) (96 ) (730 ) Total interest income $ (10,588 ) $ (779 ) $ (11,367 ) $ (18,481 ) $ (5,678 ) $ (24,159 ) Interest expense: Interest bearing demand, savings and money market deposits $ 13 $ (316 ) $ (303 ) $ 56 $ (869 ) $ (813 ) Time deposits (1,281 ) (2,145 ) (3,426 ) (3,045 ) (4,963 ) (8,008 ) Securities sold under agreements to repurchase — (12 ) (12 ) (1 ) (22 ) (23 ) Total interest expense (1,268 ) (2,473 ) (3,741 ) (2,990 ) (5,854 ) (8,844 ) Net change in net interest income $ (9,320 ) $ 1,694 $ (7,626 ) $ (15,491 ) $ 176 $ (15,315 ) (1) Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan. (2) Non 310-30 loans include loans held-for-sale. (3) Includes changes for difference in number of days due to the leap year in 2012. For the three months ended March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012 March 31, 2012 Average
Balance Average
Rate
Paid Average
Balance Average
Rate
Paid Average
Balance Average
Rate
Paid Average
Balance Average
Rate
Paid Average
Balance Average
Rate
Paid $ 645,904 0.00 % $ 662,763 0.00 % $ 636,277 0.00 % $ 622,936 0.00 % $ 645,972 0.00 % 486,015 0.17 % 484,178 0.18 % 500,240 0.22 % 523,202 0.24 % 532,574 0.32 % 1,057,847 0.32 % 1,033,350 0.34 % 1,014,793 0.39 % 995,668 0.40 % 955,983 0.46 % 194,548 0.13 % 176,209 0.13 % 181,939 0.14 % 187,046 0.16 % 181,332 0.19 % 1,698,801 0.82 % 1,832,790 0.85 % 2,063,622 1.00 % 2,298,782 1.14 % 2,580,053 1.25 % $ 4,083,115 0.45 % $ 4,189,290 0.48 % $ 4,396,871 0.59 % $ 4,627,634 0.69 % $ 4,895,914 0.79 % For the three months ended: June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012 Non-interest bearing demand $ 649,323 0.00 % $ 645,904 0.00 % $ 662,763 0.00 % $ 636,277 0.00 % $ 622,936 0.00 % Interest bearing demand 478,922 0.15 % 486,015 0.17 % 484,178 0.18 % 500,240 0.22 % 523,202 0.24 % Money market accounts 1,052,590 0.32 % 1,057,847 0.32 % 1,033,350 0.34 % 1,014,793 0.39 % 995,668 0.40 % Savings accounts 196,248 0.11 % 194,548 0.13 % 176,209 0.13 % 181,939 0.14 % 187,046 0.16 % Time deposits 1,628,332 0.77 % 1,698,801 0.82 % 1,832,790 0.85 % 2,063,622 1.00 % 2,298,782 1.14 % Total average deposits $ 4,005,415 0.42 % $ 4,083,115 0.45 % $ 4,189,290 0.48 % $ 4,396,871 0.59 % $ 4,627,634 0.69 % areis subjective and involveinvolves significant estimates and assumptions. For the three months ended, March 31,2013 March 31,2012 $ 309 $ 3,279 1,108 4,557 $ 1,417 $ 7,836 For the three months For the six months ended June 30, ended June 30, 2013 2012 2013 2012 Provision for impairment on loans accounted for under ASC 310-30 $ 1,003 $ 10,456 $ 1,312 $ 13,735 Provision for loan losses 667 1,770 1,775 6,327 Total provision for loan losses $ 1,670 $ 12,226 $ 3,087 $ 20,062 $0.3$1.0 million and $3.3$10.5 million of provision for loans accounted for under ASC 310-30 during the three months ended March 31,June 30, 2013 and 2012, respectively. For the six months ended June 30, 2013 and 2012, we recorded $1.3 million and $13.7 million, respectively, of provision for loans accounted for under ASC 310-30. The net provisions on the loans accounted for under ASC 310-30 reflect $1.1$0.2 million and $1.3 million of provision recoupments as a result of increased cash flows across seven pools.several pools for the three and six months ended June 30, 2013, respectively. These provision reversals, when coupled with decreased expected future cash flows primarily driven by our commercial commercial real estate and residential real estate pools, resulted in the net provision of $0.3 million for the three and six months ended March 31, 2013.June 30, 2013, respectively. The decreases in expected future cash flows are reflected immediately in our financial statements. Increases in expected future cash flows are reflected through an increase in accretable yield that is accreted to income in future periods.At March 31, 2013, $101 thousand of the $309 thousand of impairments related to loans accounted for under ASC Topic 310-30 was covered by loss sharing agreements with the FDIC and $249 thousand of the $1.1 million of provision for loan losses for loans not accounted for under ASC Topic 310-30 was covered by loss sharing agreements with the FDIC. At March 31, 2012, $3.0 million of the $3.3 million of impairments related to loans accounted for under ASC Topic 310-30 was covered by loss sharing agreements with the FDIC and $0.4 million of the $4.6 million of provision for loan losses for loans not accounted for under ASC Topic 310-30 was covered by loss sharing agreements with the FDIC. The provision for impairment expense on covered assets has an offsetting increase in non-interest income as a result of the loss sharing agreements with the FDIC. The provisions for loan losses charged to non-covered loans were related to a combination of providing an ALL for new loans, changes in the market conditions and qualitative factors used in analyzing the ALL and specific impairments on non-covered loans.March 31,June 30, 2013 and 2012, respectively (in thousands): For the three months ended March 31, 2013 2012 $ (4,669 ) $ (3,687 ) 3,276 3,699 3,687 4,376 2,469 2,301 306 309 — 674 443 1,533 1,639 1,065 $ 7,151 $ 10,270 Three months ended Six months ended June 30, June 30, 2013 2012 2013 2012 FDIC indemnification asset accretion $ (2,966 ) $ (2,646 ) $ (7,635 ) $ (6,333 ) FDIC loss sharing income 1,193 4,076 4,469 7,775 Service charges 3,923 4,328 7,610 8,704 Bank card fees 2,558 2,383 5,027 4,684 Gain on sale of mortgages, net 474 294 780 603 Gain on sale of securities, net — — — 674 Gain on previously charged-off acquired loans 451 257 894 1,790 Other non-interest income 1,691 1,357 3,330 2,422 Total non-interest income $ 7,324 $ 10,049 $ 14,475 $ 20,319 March 31,June 30, 2013 totaled $7.2$7.3 million and $14.5 million, respectively,compared to $10.3$10.0 million and $20.3 million during the three and six months ended March 31,June 30, 2012. We recognized negative accretion of $4.7$3.0 million and $3.7$7.6 million during the first quarter ofthree and six months ended June 30, 2013, and 2012, respectively, related to the FDIC indemnification asset. The negative accretion resulted from an increase in actual and expected cash flows on the underlying covered assets, resulting in lower expected reimbursements from the FDIC. The increase in expected cash flows from these underlying assets is reflected in increased accretion rates on covered loans and is being recognized over the remaining expected lives of the underlying covered loans as an adjustment to yield.Service charges of $3.7 million represented the largest component of non-interest income during the three months ended March 31, 2013 at 51.6% compared to $4.4 million during the three months ended March 31, 2012. Service charges represent various fees charged to clients for banking services, including fees such as non-sufficient funds (“NSF”) charges and service charges on deposit accounts. Service charges decreased $0.7 million during the three months ended March 31, 2013 compared to the three months ended March 31, 2012, primarily due to declines in NSF charges.Bank card fees are comprised primarily of interchange fees on the debit cards that we have issued to our clients. These transactional charges totaled $2.5 million and $2.3 million during the three months ended March 31, 2013 and 2012, respectively.Gain on recoveries of previously charged-off acquired loans represents recoveries on loans that were previously charged-off by the predecessor bank prior to takeover by the FDIC. During the three months ended March 31, 2013, these gains were $0.4 million compared to $1.5 million during the same period in the prior year.FDIC loss sharing incomeActivity inMarch 31,June 30, 2013 and 2012 was as follows (in thousands): For the three months ended March 31, 2013 2012 (313 ) (354 ) 573 (10 ) (860 ) 597 (15 ) (1 ) 3,891 3,467 $ 3,276 $ 3,699 For the three months ended For the six months ended June 30, June 30, 2013 2012 2013 2012 Clawback liability amortization $ (310 ) $ (357 ) $ (623 ) $ (711 ) Clawback liability remeasurement 76 1,077 649 1,067 Reimbursement (to) from FDIC for (gain) loss on sale of and income from covered OREO (1,241 ) (163 ) (2,101 ) 434 Reimbursement to FDIC for recoveries (7 ) — (22 ) (1 ) FDIC reimbursement of costs of resolution of covered assets 2,675 3,519 6,566 6,986 Total $ 1,193 $ 4,076 $ 4,469 $ 7,775 (expense) during the three months ended March 31, 2013in our statement of operations was primarily comprised of FDIC reimbursements of costs of resolution of covered assets of $3.9$2.7 million and $6.6 million, during the three and six months ended June 30, 2013, respectively, offset with reimbursements to the FDIC for gains on sales of and income from covered OREO of $1.2 million and $2.1 million, respectively. The activity in the FDIC loss sharing income line fluctuates based on specific loan and OREO workout circumstances and may not be consistent from period to period.million.Ourof the Community Banks of Colorado and Bank of Choice acquisitions to our new data processing platform in May 2012 and July 2012, respectively. The table below details non-interest expense for the periods presented (in thousands): For the three months ended March 31, 2013 2012 $ 22,956 $ 22,413 5,965 4,537 1,396 2,671 3,469 3,731 1,379 918 356 379 4,719 8,621 2,331 1,711 1,336 1,336 1,047 1,351 1,005 775 — 321 — 855 (627 ) 726 2,552 2,628 $ 47,884 $ 52,973 For the three months ended For the six months ended June 30, June 30, 2013 2012 2013 2012 Salaries and employee benefits $ 23,768 $ 22,631 $ 46,724 $ 45,044 Occupancy and equipment 5,870 4,738 11,835 9,275 Professional fees 858 3,272 2,254 5,943 Telecommunications and data processing 3,286 3,488 6,755 7,219 Marketing and business development 732 1,612 2,111 2,530 Supplies and printing 498 828 854 1,207 Other real estate owned expenses 2,497 63 7,216 8,684 Problem loan expenses 896 2,726 3,227 4,437 Intangible asset amortization 1,337 1,331 2,673 2,667 FDIC deposit insurance 1,006 1,161 2,053 2,512 ATM/debit card expenses 1,107 1,223 2,112 1,998 Initial public offering related expenses — 87 — 408 Acquisition related costs — 15 — 870 Loss (gain) from change in fair value of warrant liability 324 (589 ) (303 ) 137 Other non-interest expense 3,051 2,715 5,603 5,343 Total non-interest expense $ 45,230 $ 45,301 $ 93,114 $ 98,274 $23.0$23.8 million and $22.4$46.7 million for the three and six months ended March 31,June 30, 2013, respectively, compared to $22.6 million and $45.0 million for the three and six months ended June 30, 2012, respectively, an increase of $0.6 million.respectively. The increase reflects staffing changes as part of the further build out of sales teams and corporate and operating functions, coupled with annual salary adjustments, offset by a $0.7$0.9 million and $1.6 million decrease in stock-based compensation during the three and six months ended March 31,June 30, 2013 compared to the same periodperiods in 2012.$6.0$5.9 million and $11.8 million for the three and six months ended March 31,June 30, 2013, respectively, an increase of $1.4$1.1 million and $2.6 million over the three and six months ended March 31, 2012.June 30, 2012, respectively. The increase was driven by an increase in depreciation expense as a result of the purchase and subsequent depreciation onof thepremises and equipment purchased from the FDIC in the first half of 2012 related to our Bank of Choice and Community Banks of Colorado acquisitions.$1.4$0.9 million and $2.3 million during the three monthsand six month ended March 31,June 30, 2013 and decreased $1.3$2.4 million and $3.7 million from the three and six months ended March 31, 2012.June 30, 2012, respectively. Professional fees were elevated during the three and six months ended March 31,June 30, 2012 primarily due to professional fees incurred in conjunction with our acquisitions of Bank of Choice in the third quarter of 2011 and Community Banks of Colorado during the fourth quarter of 2012.2011. Additionally, we have outsourced fewer professional functions as we have built out our internal management functions.$1.4$0.7 million and $2.1 million for the three and six months ended March 31,June 30, 2013, respectively, compared to $0.9$1.6 million and $2.5 million during the three and six months ended March 31,June 30, 2012, an increase of $0.5 million.respectively. These increasesdecreases were primarily due to an increasedecreases in print, outdoor, radioconsulting and television advertising followingexpenses, which were elevated during the conversionsthree and six months ended June 30, 2012 after the acquisitions of our Bank of Choice during the third quarter of 2011 and Community Banks of Colorado acquisitions.March 31,June 30, 2013, we incurred $4.7$2.5 million and $7.2 million, respectively, of OREO related expenses and $2.3$0.9 million and $3.2 million, respectively, of problem loan expenses. Of the $7.0$3.4 million and $10.4 million in collective OREO and problemMarch 31,June 30, 2013, $4.6$2.0 million wasand $6.7 million, respectively, were covered by loss sharing agreements with the FDIC. The losses on covered assets that are reimbursable from the FDIC are based on the book value of the related covered assets as determined by the FDIC at the date of acquisition, and the FDIC’sFDIC's book value does not necessarily correlate with our book value of the same assets. This difference is primarily because we recorded the OREO at fair value at the date of acquisition in accordance with applicable accounting guidance. Any losses recorded after the acquisition date are recorded at the full-loss value in other non-interest expense, and any related reimbursement from the FDIC is recorded in non-interest income as FDIC loss sharing income.$1.3$1.8 million for the three months ended March 31,June 30, 2013, as compared with $1.1$1.7 million for the three months ended March 31,June 30, 2012. These amounts equate to effective tax expense rates of 39.1%38.5% and 39.6%39.1% for the respective periods.March 31,June 30, 2013, as compared to the three and six months ended March 31,June 30, 2012, was primarily attributable to changes in our state tax liabilities as our state tax presence continues to evolve. Additional information regarding income taxes can be found in note 22 of our audited consolidated financial statements.March 31,June 30, 2013 and December 31, 2012 (in thousands): March 31, 2013 December 31, 2012 $ 57,446 $ 90,505 266,290 579,267 95,457 99,408 2,406,404 2,084,046 $ 2,825,597 $ 2,853,226 June 30, 2013 December 31, 2012 Cash and due from banks $ 62,095 $ 90,505 Due from Federal Reserve Bank of Kansas City 190,072 579,267 Interest bearing bank deposits 50,589 99,408 Securities purchased under agreements to resell 100,000 — Pledgeable investment securities, at fair value 2,319,001 2,084,046 Total $ 2,721,757 $ 2,853,226 $27.6$131.5 million from December 31, 2012 to March 31,June 30, 2013. The decrease was largely due to a decrease in balances at the Federal Reserve Bank, offset by purchases of mortgage-backed securities.March 31,June 30, 2013, pledgeable investment securities represented our largest source of liquidity. Our available-for-sale investment securities are carried at fair value and our held-to-maturity securities are carried at amortized cost. Our collective investment securities portfolio totaled $2.6 billion at March 31,June 30, 2013, inclusive of pre-tax net unrealized gainslosses of $32.9$8.2 million on the available-for-sale securities portfolio. Additionally, our held-to-maturity securities portfolio had $5.8 million of unrealized losses at June 30, 2013. The gross unrealized gains and losses are detailed in note 53 of our consolidated financial statements for the threesix months ended March 31,June 30, 2013. As of March 31, June 30,$132.9$111.9 million of time deposits assumed in the Hillcrest Bank, Bank of Choice and Community Banks of Colorado acquisitions that have not yet accepted new terms, represent a potential use of funds, as these depositors have the option to move the funds without penalty. As of March 31,June 30, 2013, $1.2 billion of time deposits were scheduled to mature within 12 months. Based on the current interest rate environment, market conditions, and our consumer banking strategy focusing on both lower cost transaction accounts and term deposits, we expect to replace a significant portion of those maturing time deposits with transaction deposits and market-rate time deposits with transaction deposits and market-rate time deposits.company’scompany's current sources of funds are limited to cash and cash equivalents on hand, which totaled $96.1$75.8 million at March 31,June 30, 2013. The holding company may seek to borrow funds and raise capital in the future, the success and terms of which will be subject to market conditions and other factors.stockholders’stockholders' equity is impacted by the retention of earnings, (losses), changes in unrealized gains on securities, net of tax, share repurchases and the payment of dividends. We have agreed to maintain capital levels of at least 10% tier 1 leverage ratio, 11% tier 1 risk-based capital ratio and 12% total risk-based capital ratio at NBH Bank until at least the fourth quarter of 2013. At March 31,June 30, 2013 and December 31, 2012, NBH Bank and the consolidated holding company exceeded all capital requirements to which they were subject.threesix months ended March 31,June 30, 2013, we repurchased 12,763950,474 shares of our common stock under the $25 million share repurchase previously authorized by our board of directors. To date, we have repurchased 13,003950,714 shares under this authorization at a weighted average price of $18.21 per share, and all shares have been retired. Subsequent to March 31, 2013 and through May 10, 2013, we have repurchased an additional 48,411 shares through this repurchase authorization. On February 19, 2013, we declared a quarterly dividend of $0.05 per share, which was paid on March 15, 2013, to holders of record on February 28, 2013. Additionally, on May 1,August 8, 2013, our board of directors declared a quarterly dividend of $0.05 per share, payable on June 14,September 13, 2013 to shareholders of record on May 31,August 30, 2013.Company’sCompany's asset and liability management function is to evaluate the interest rate risk within the balance sheet and pursue a controlled assumption of interest rate risk while maximizing earnings and preserving adequate levels of liquidity and capital. The asset and liability management function is under the guidance of the Asset Liability Committee from direction of the board of directors. The Asset Liability Committee meets monthly to review, among other things, the sensitivity of the Company’sCompany's assets and liabilities to interest rate changes, local and national market conditions and rates. The Asset Liability Committee also reviews the liquidity, capital, deposit mix, loan mix and investment positions of the Company.March 31,June 30, 2013.During the threesix months ended March 31,June 30, 2013, we decreased our asset sensitivity as a result of the declines in cash balances relative to the size of the balance sheet. The table below illustrates the impact of an immediate and sustained 200 and 100 basis point increase and a 50 basis point decrease in interest rates on net interest income based on the interest rate risk model at March 31,June 30, 2013 and December 31, 2012:Hypothetical Shift in Interest 8.53% 12.84% 5.22% 7.43% -2.10% -2.88% Hypothetical Shift in Interest % Change in Projected Net Interest Income Rates (in bps) June 30, 2013 December 31, 2012 200 6.61% 12.84% 100 4.11% 7.43% -50 -1.63% -2.88% 59.2%60.0% of total deposits at March 31,June 30, 2013 compared to 58.3% at December 31, 2012. We currently have no brokered time deposits and intend to continue to focus on our strategy of increasing non-interest or low interest bearing non-maturing deposit accounts and accordingly, we have no current plans to use brokered deposits in the near future.March 31,June 30, 2013 and December 31, 2012, the Company had loan commitments totaling $239.6$260.7 million and $305.9 million, respectively, and standby letters of credit that totaled $8.3$8.5 million and $10.7 million, respectively. Unused commitments do not necessarily represent future credit exposure or cash requirements, as commitments often expire without being drawn upon. We do not anticipate any material losses arising from commitments or contingent liabilities and we do not believe that there are any material commitments to extend credit that represent risks of an unusual nature.2—Management’s2-Management's Discussion and Analysis of Financial Condition and Results of Operations and is incorporated herein by reference.Company’sCompany's management, including its principal executive officer and principal financial officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon this evaluation, the principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, the Company’sCompany's disclosure controls and procedures were effective.Company’sCompany's internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’sCompany's internal control over financial reporting.quartersix months of 2013: (a) Total Number
of Shares (or
Units) Purchased (b) Average
Price Paid Per
Share (or Unit) (c) Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs (d) Maximum Number
(or Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs — $ — — $ 24,995,685 12,763 17.97 12,763 24,766,281 — — — 24,766,281 12,763 $ 17.97 12,763 $ 24,766,281 Period January 1 - January 31, 2013 — $ — — $ 24,995,685 February 1 - February 28, 2013 12,763 17.97 12,763 24,766,281 March 1 - March 31, 2013 — — — 24,766,281 April 1 - April 30, 2013 — — — 24,766,281 May 1 - May 31, 2013 418,411 18.19 418,411 17,153,958 June 1 - June 30, 2013 519,300 18.23 519,300 7,685,817 Total 950,474 $ 18.21 950,474 $ 7,685,817 3.1 Second Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to our Form S-1 Registration Statement (Registration No. 333-177971), filed August 22, 2012) 3.2 Amended and Restated By-Laws (incorporated herein by reference to Exhibit 3.2 to our Form S-1 Registration Statement (Registration No. 333-177971), filed August 22, 2012) 10.1 Form of NBH Holdings Corp. 2009 Equity Incentive Plan Restricted Stock Award Agreement (For Non-Employee Directors) (incorporated herein by reference to Exhibit 3.2 to our Form 10-Q, filed May 14, 2013) 10.2 Form of NBH Holdings Corp. 2009 Equity Incentive Plan Restricted Stock Award Agreement (For Management) (incorporated herein by reference to Exhibit 3.2 to our Form 10-Q, filed May 14, 2013) 10.3 Form of NBH Holdings Corp. 2009 Equity Incentive Plan Nonqualified Stock Option Agreement (For Management) (incorporated herein by reference to Exhibit 3.2 to our Form 10-Q, filed May 14, 2013) 31.1 Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certifications of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operation, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail* † Schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant will furnish supplementally a copy of any omitted schedules or similar attachment to the SEC upon request. * This information is deemed furnished, not filed. NATIONAL BANK HOLDINGS CORPORATION Brian F. Lilly Chief Financial Officer (Authorized Officer and Principal Financial Officer) May 14,August 13, 201368