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National Bank Holdings (NBHC) in Greenwood Village, Colo., has received regulatory approval for its bank to pay a $313 million dividend to the holding company.
November 12 -
National Bank Holdings Corp. (NBHC) in Greenwood Village, Colo., has bought back about $100 million worth of shares from an institutional investor.
November 4 -
National Bank Holdings (NBHC) in Greenwood Village, Colo., cut expenses to compensate for lower revenue in the third quarter.
October 24 -
National Bank Holdings (NBHC) in Greenwood Village, Colo., has formed a division to specialize in government and nonprofit clients.
October 22 -
Private-equity groups are looking to cash out their bank holdings given the bullish stock market and bearish outlook for banking. But few will double their money like Warburg Pincus did with its investment in Webster Financial.
May 22
For National Bank Holdings (NBHC), recent stock buybacks are more like a buy-in to the future.
The company, created in 2009 with nearly $1 billion in equity, recently
The move allows the Greenwood, Colo., company to take back some of its shares at a small discount to their trading value and better position it to make an acquisition involving stock.
"The thinking here is buy back stock now at $20 a share and then issue stock at a higher price in an acquisition," says Chris McGratty, an analyst at Keefe, Bruyette & Woods. "It is an arbitrage."
National Bank's shares closed at $20.52 on Wednesday.
That some investors wanted to cash out is a sign of the times. Between 2008 and 2010, several companies like National Bank were created to capitalize on a banking system on the brink.
They expected a long and steady stream of failed banks and other distressed bargains. What they got was a much shorter list of failures, and competition from existing banks that were able to heal themselves and raise their own capital. Meanwhile, open-bank M&A has been maddeningly slow.
The net result? A sector that was once clamoring for capital is
The deals that are happening now overwhelmingly involve stock because it gives buyers more flexibility and sellers more upside. That market reality puts companies like National Bank at a disadvantage. They were designed to make cash deals. Converting that cash to stock is the best way it can evolve, analysts say.
It already built its company to be $10 billion in assets, it just needs take a different route to get there than originally planned.
"What the company is doing is adjusting to this new reality of equity deals," says Tim O'Brien, an analyst at Sandler O'Neill. "They are acting on the things that they can control."
National Bank has bought three failed banks and one open bank. When it went public last year, the company signaled that it would begin to focus more on open-bank transactions while still keeping an eye out for failed-bank deals. Neither type of deal materialized in the year since the
However, it has fostered organic growth: it
The company tried hard to make deals, says Brian Lilly, its chief financial officer. There just hasn't been much activity in its market area of Colorado, Kansas and Missouri, he says.
"Frustration would be too strong of a word," Lilly says. "Experience gets you perspective, and we are very pleased with the four deals we did. We can't force something to happen, and we aren't going to do something that isn't smart. We're very pleased with opportunities that we have in front of us, but we are not going to wait forever."
National Bank is looking for deals where it can earn back the dilution in its tangible book value within three to five years, Lilly says. That is one of the key metrics that investors are following closely. In general, markets have immediately endorsed deals with that kind of earn-back potential by
It would be easier for National Bank to do those kinds of deals with a pricier stock. Buybacks often do the trick, increasing earnings per share by decreasing the share count.
Currently National Bank's stock trades around 110% of its tangible book value. Buyers that are able to promise a three- to five-year earn-back in their deal are trading significantly higher.
"It all comes down to structure, but the math works a lot better when you are trading at a higher multiple," McGratty says. "Otherwise, you're looking at some level of book-value dilution."