National Bank (NBHC) 19 Apr 222022 Q1 Earnings call transcript

Good morning, everyone and welcome to the National Bank Holdings Corporation 2022, First Quarter earnings call. My name is Keith and I will be your conference operator for today. At this time, all participants are in a listen-only mode.

We will conduct a question-and-answer session following the prepared remarks.

As a reminder, this conference is being recorded for replay purposes. net remind including, this statements non-interest but strategy, deposits, to contain call regarding expense. like income, loans, statements, non-interest forward-looking not capital would you taxes, conference that will company's margins, I allowance, income, and interest limited to Actual materially differ could those discussed results today. from risks, are U.S. most factors recent with and the which in are These forward-looking uncertainties, detail company's statements disclosed the subject to other in more filings Securities and Exchange Commission. date statements speak only this These this of of call. as Corporation no obligation Holdings or will these statements. update Bank revise National And undertake to

nationalbankholdings.com. over now the In measures measures addition, and news investors. Corporation to turn useful certain measures this Reconciliations introduce pleasure and call CEO, It is Corporation's the release will in the Mr. for to of posted which on Chairman, call believes my reference non-GAAP provided information Bank financial Investor National Holdings National are Bank Holdings Relations non-GAAP Laney. GAAP of President these the Timothy www. provides section

I'm Thank last Financial respect you the And we small First results. results. thank financial bank. Officer. joining Keith. Rock quarter, of Quarter XXXX Canyon Bank for and our both Utah-based National discussed, Birkans, Good to U.S. announced on Holdings joined operating and acquisition morning our evening's us to With focus in businesses produce solid Aldis first medium-sized great by continued Chief as markets you

low XX.X%. and in shocks. newer we strong quality Most across very assets whose Our teams that nature. for sheets businesses the delivered with and with the quarter well-positioned the quarter economic record working asset balance important, first and of originations growth record ended end, We're non-performing remain loan read positive trends annualized board. granular To diversified are

about the deposits treasury good Our full attractive we new in and our that clients fees. growth of front. market transaction on in momentum feel gains management I'll and very that our share relationship focus our add resulted earning on

is AOCI avoid income and believe rising net well-positioned to rates, to we benefit that balance more noteworthy major interest broadly, shocks. well-positioned it's Finally, our is from sheet

and and the for that into partnership the establish the States. Rowley over note, On for on Rock new recently the Canyon wealth increased the of one our best-in-class Utah's take Lake capabilities scalable SBA call the Jackson a the capability details. expand Rock unify. SBA last is to scalable to bank to program we announced while to of of Aldis number state Bank This exclusive acquisition of geographic in Family a most for have across adding markets that expect recognize with attractive in some Hole, in thank evenings accelerates originator announcement, want When on great they've that our do strategy loans areas deliver their and to this basis. and of from I'll more an coupled the Turning is and income expanding this built while added We and willingness the move acquisition Canyon bank to also income the the SBA fully Utah. I in impressive Salt moment City to our fee of region, Bank. management the United turn footprint

announced asset and acquisition the announce Rock period previously Canyon We in We're acquisition NBH Bank, another of of the well the update guidance. full-year in Alright. everyone. pleased highly an Rock to good and our first-quarter April Jackson transaction. Lake Salt on Hole $XXX XXXX an stock on XXXX City million prolonged Rock you Canyon will and deal bank additional provide management price that our well-capitalized to time. then the NBHC balances region. $XXX diversified, Bank in of the balance million in business. morning, With Based I of a as regard metrics loan Thank and fast-growing million this cover this is as sheet Bank Timothy in multiple streams XXth, and update million combination and production is deposits. $XXX operate results above short believe of revenue has a $XXX and Bank, Canyon acquisition results They in $XX.XX acquisition, a loan adds million, an SBA through Bank

amount us value cash. X.X-year will tangible the the issue part total book This result and million times pace in for in dilution, represents shareholders, crossover method. As X.X carrying using million the of approximately consideration, of NBHC $XX.X tangible NBH book a and shares X.X a value earn-back fixed throughout

always, and in built with synergies assumptions. And modeling. into appropriately have we As conservative been financial any additional revenue not modeling our we realistic have our

turning to the quarter's results. first Now

NBHC quarter, led net We by or growth $XX.X strong first in share. per earnings loan $X.XX of been book which of the million a commercial For annualized, earned our grew income has XX.X% loan XX.X%. book diluted of, always our

transaction diligent and average maintain X.X% balances to a quarter, decreasing annualized control deposit expense first non-interest $X.X the with expense During basis. by by continue grew our portal on we linked-quarter

the As fundings, loan we second highest company's the our earnings first-quarter loan year last and history. entered we pipelines. during a This production loan strong discussed in record clearly with call, our contributed quarter to of

billion Further, loans have During and $XXX.X strong. we our the past quarters. pipelines the four quarter, loans remain over funded $X.X funded in we in million nearly

economy. geopolitical loan the this for and at the on or high-end see feel year. full multiple even of to deliver beat We enough to inflationary our guidance uncertainties this growth Looking U.S. XX% we point, could range. Furthermore, with weigh the comfortable XX% momentum while prior of ahead,

first-quarter benefit net the the this interest at nominal as and will interest was material short-term XX increases PBP as basis $XX realized income increase all million Timothy rate mentioned, in the net net while fully X.X% March quarters. coming income of already any our further from fee quarter's impact in points NBHC's results, federal rate a last year. impact impact was interest nicely in equivalent and funds interest And was margin first the taxable The equivalent is fully taxable

net the X% we of to positive year. expand to second quarter project this quarters. Going trends interest And following the margin retain to in forward, in

trends asset strong remains across board. our positive with quality of terms In the

$XX.X in was nicely. resulting quarter a service income year-over-year income $XXX,XXX The charge-offs allowance The And first Both remained outlook loans. basis An first-quarter non-performing loans in points. the total at strong on resulted non-accrual another bankcard quality were low along that loans quarter's decreased million. non-interest loan X.XX% points assets at of annualized, asset were this basis. a five quarter. to the loss release up just the credit allowance was The XX points, X.X% basis record four end charges net increased total current with basis Total

during rapid in for quarter to we mortgage basis. first Mortgage Having slow line said that, was clearly mortgage the but by when these than X% during increase year-over-year growth our higher seasonally of volume The on first items, impacted was continue volume is fourth breaking last between experience on the revenues rates. the down lock year. quarter our quarter it's rate, nice that income the notable

the hand, that on a in compression $XXX,XXX margin other resulted decrease a in linked-quarter our the On basis. mortgage revenue

the having income for rates million. adjusting prior the mortgage is million the our revenue. fee decrease outer an to guidance The full mortgage $XX due Looking are of guidance impact year from to we entirely $XX XXXX are higher of ahead

interest We expense income and mitigate control expect net expansion, decline. to this

to Turning non-interest expense. expenses,

rates a reduction quarter payroll quarter. to This quarter. in the the run was $XXX,XXX fewer line clean quarter mainly due -- prior Net from million. $XX.X was of fewer during our the for expense quarter was decrease and compensation This days the

and of to are the lowering non-interest range million is approximately pretax which other full in expense For -- be $XXX million not does projected be related to guidance basis. is year our core to in the M&A XXXX, on two are operations This transaction guidance reminder our million. between include we for deals to $XXX are be costs, for $XX.X

we first the $XXX,XXX approximately quarter costs. During related of XXXX, in transaction incurred

XX.X% optionality. at capital on plenty to ratio, year as that, CETX to XX% with ratios and leverage it On the continue with the M&A will to still leverage will turn announce and ratio providing XX.X% of continue strong transactions, of ratio Our we CETX -- one back basis with And maintain us tier X X% remain I ratio proforma quarter-end. to strong

ask believe expanding uses on focused our deposit you geographic Keith, enhance stop Hole remain operating expectation important clearly growing Jackson will We note, our markets open for new the of the cost capabilities acquisitions to that of platforms. Canyon fast-growing lines attractive I'll we Bank We'll and Aldis. that adding diverse while up excess that also and leveraged be and is while My unify and low you And leverage capital. represent of on basis. questions. attractive strategically and Thank revenue across will Rock and to streams

our your sure Brett. take a ask by allow gentlemen, from to go off please your you'd [Operator Excuse signal question Thank from make Tongue-tied. LLC, turned mute first Instructions], you. to and Rabatin pressing Instructions]. if equipment function We'll Ladies signal reach ahead. Hovde me. question, Group, please to [Operator Brett please is like our

morning. guys. Hey, Good

Good morning.

Morning.

loan deal. opportunity this fee they SBA. trust And of big a other management one looks with income on another it the asset talk And fee so on the a did the placed XX can from which your around Two One Congrats and was your transaction. million like opportunity being obviously, or deal questions income side. obviously it's a the and think or year. last is perspective as -- about or SBA X%, yield, Can you quantify you yielding it you higher footprint maybe operations -- see on then portfolio. is I their portfolio little about

second Yes, I'll take the second, first. part the

rate to yielding So maintain yes, near portfolio able They've are there this low X%. environment. been through it extremely nicely

the it. and one able group learned to about that of we So best maintain is be been to it. average from practices things liked they've There's

as are this so, in As -- uh, yields. tell, as those production quarter, nice levels, last we so the recently as those far the can terms of quarter,

what transition, and production best billion over practices that mentioned already In we terms nice originate last visibility be for which us. But a production in SBA in Timothy our business footprint. would across the they of about four production, to excited call to million loan $X.X as and supplement to it SBA we $XXX the what are do their we see near year, the quarters loan

at defined that we we business that the impressed what tell to on SBA think would around add guidance the ultimately is more Canyon geographically now. Bank for addressing What I they've quality about -- been a underwriting would skill that National around efficient expect State Utah is have to are way X key number SBA ready of we we're strong I of the very focused with very here. it's Holdings transactions. But the complex Bank really works. to And this and so SBA bank unify would again, to say, what reason they administration a small, what and with medium-sized I process are But I is the you it what and the provide [Indiscernible]. at a lender speed Rock needs. impressed business SBA and the we've loan very the in not

So -- opportunities. and of we actually an an alternative will stream it believe standard for alternative kind process business for SBA add

on look the other yield or all portfolio. nothing back, of the going stands on Is X% chunk regulatory big in just the I And are of a there Okay. lean filings, at this the SBA on things mean, that loan out. performance

say parts No. our they have let's It's and yields. have the just are all to grade, the some They CNR, portfolio of board. SBA, high have across CRE, they accretive

of deals, the does added these transaction's include year? the that $XX And expenses this million, guidance, that million for the the guidance $XX or on the does color a closing later exclude there expenses, end Okay. income for you fee about to

That excludes.

deals will likely we can. on quickly regulatory So But expense how -- to we certainly I'll hit year. did applications the more my the as want alone on hit and clarity And guidance NBHC throughout, these look I integrate the year. close this until hold as have contribute we is transaction basis. be that's does to offer to purely will off But provide this costs will much given on

a that make you're XX that employing the would recovers assumption like that relative with mortgage terms throughout to of in revenues, seem year fair the first-quarter? is to the to And XX,

Yes.

and I is, the fourth. for it then way at next in couple the look slowdown projecting would be revenues seasonal first-quarter, quarters, in have the to So mortgage the line be, we with

that about tax in. going Okay. of quarter, a or rate any I'll let quick around else and rate somebody And talk this jump you the Can lower. The last then sustainability tax obviously the one forward? thoughts

will on Yeah. this relative I'll point to came put quarter. the the will as income income. project taxable and year's this But to came are down. given be starting at XX% why tax hitting income prior in, quarter that Just these the first-quarter transaction XX% that [Indiscernible] net transaction to a impact we probably lower full year, I our rate it is reason quarter costs to would costs, is also closer bit which taxable

volume remind would viewed you certainly step-down to revenue. commercial our relates the to I a business. businesses Brett, in mortgage it ramp any year. banking over mortgage-related expect in We've continue And there seeing hedge nice we're interest net the Therefore, And expect as course nice And always we to of some to would grow. offset up commercial. the the to be income

So front, more two operate to businesses but they come how in looked way those complementary a we've on fashion. that the that's and at always

Okay. Thanks. color. Appreciate all the

right. All

man. bet, You

with Companies. question Andrew We'll Piper ahead. from next Liesch take go our Sandler Please

deal [Indiscernible] on Congrats good Hey, guys. here another morning,

Thank you.

much portion was up of all SBA How question what like been the guaranteed Canyon it growth from that retaining of here strong. Just Rock are it's much possibly selling or was get the how pretty forward? could of putting And been to loan PPP? from The franchise on some trying is retaining are from loans? Curious going a that they're sense has be they growth the it? acquired

is PPP cancer of its material. of on-balance growth sheet kind in presence terms all wasn't that above And of their combination

PPP they of example, loans as For the had the of year-end. all gone

historical solid just conservative the sides to balance on per both to how be XX% But we they my it going the took been have double-digit at forward. back we on In terms assumptions. model being looked we more growers NBH of up them conservative that's sheet of not loans And actually deposits. down to and way guided it growth to levels of XX% XXXX yes

It more available liquidity like they it how sensitivity? Got this sensitive. seems okay does even then asset affect NBH asset and that this is to bank have your make

fair asset but sensitivity investment $XXX a is are no and assumption. liquidity, of no lot going portfolio. opportunity of of well. a cash, no is rates us on Cash to provide setting clearly They in higher these It Yes. for [Indiscernible], million lot as

in shape and So that's accretion any way not perform like we that modeled EPS assumptions. something frankly again, in our or

that, some base those very And funding like core? deposit makeup then run it. is some Got CD the under intend that jumbo of do on just deposits. the rest off there's broker Discuss looks and just pretty you of in it given cost to low

Exactly.

they approach them. of not building years planned pertaining from with will anything deposits. of relationship front. is going to. it we've the broker be We'll institute that our and So have deposits. and call on our that inherited as way such wholesale on Bill deposit we're more runoff side to have That a on type clients is I'll very deposits disciplined had core before that

you. Very my Thank it. back. helpful. Convert Got I'll questions. step

Thanks, and Keith Andrew

We'll ahead. & take Rulis our with question Davidson next D. go from A. Please Co. Jeffrey

Good morning Jeffrey.

morning. Good

opportunity, on how both your what fee these on about talked banks So clearly, I deals the with these extend the that there's do think strategically only the not a just common last deals platform. trying well, you've of couple can diversity think on thread income about you And of to legacy I guess the side. to -- retain

this they're And it closed business So the is, maybe extend for but that's the this, revenues these there just to it due kind environment. in normalized fee what early platform, of say but what to short fully are a of in target you to retain later a maybe if income could about in a kind bank year term, you way what talk buy, fee be that as just parts XX% income that revenue you well? But of oversimplifying. that banks what over well, flex simplifying, in early trying mortgage or of call could Is your next would get -- as be. the it you if What Again, sense year? apologize to of or be? then

not to using have contribute a framework particular been to you're are two just a that It's NBH. we where of quickly City our perfect the also talking that for what our attractive will say was we're Jackson banks but in at are we But where should will this we're you, would tell the both bring in franchise. whether very the heads markets, is That as lose going puts believe you're this I always relatively providing where -- are about wastage rest us focus. We're exactly these and a SBA Boise sight we we the market wealth at. Look, question. across this wealth asking fact to incredibly we've the conservative Salt could our no region. capability of not I And great market about growth doubt capabilities, the Lake expansion in be in the guidance. Hole, point of that management would think of the go comfortable outlook

Okay. Appreciate it.

That's be with we'll we're and page a on long saying frame. to guidance an appropriate way of time and the coming back you same

sense. Makes

Okay.

on While of on got be. transaction as what percent this housekeeping the the dilution backing and this book earn do double-count from all tangible tangible back just -- a just both kind impact have the a see into would you book, the so deal,

Yeah.

that dilution as So right tangible one the now X% non-PCB in year. the double-counting, of we And modeled of our what December Jump-off point terms day as equal of to on last of book XXst. double-count mark. are is is assuming

that to touched that maybe on you Things figure that's sheet, hypothetical on you what weighing know in how when right-size that margin fully basis a get you liquidity? past, but And Thanks. X% margin, it do quarter. you point, in margin certain is one, of a underwater that second that is given by think this last If balance to much touched figured ever before liquidity were And I if the broader. this on balanced? all is you've Okay. that we the What the --

Yes.

could there at compression or rightsizing the XX it's from -- increase out Reducing the the way interest basis be you looking income points it, cash. in example, more look -- first-quarter, conservative the is if could could loans around So ways, cash right? You cash. now, to the and it, for reduce but cash take and impact two add call at right

-- points. let's projecting, Next projection quarter, cash X%, XX is that we we that we're report XX, when say, impacts still if around which basis

be will XXX margin So That our quarter liquidity. to in a or helped? core three excess ex-cash

I does. for. that was exactly Yes, Great. That's looking what

you. So thank

asking Jeffrey of dilution, book use or here. you tangible our about book were tangible

As it picking to particularly this it's be we number that interesting as tangible the about versus at this the banks will up result of that a AOCI, XX% use in hit. earn-back, like seeing down of good something pretty here, look be that reporting we're capital when think you of targeting of times as their we're capital on manner reasonably confident book to hits about accretion feel run XX% and about but to an we AOCI deploying something a thinking year X.X feel earnings

Good point. you. Thank

be specific value All that to one be precise at dilution, I'll on to just specific book X.X% tangible -- more

it. Got

We'll take our next question Please & Inc.. go from Kelly Motta with Keefe, Woods, Bruyette ahead.

Timothy deal. on the morning, Aldis. Hey, Good congrats and

[Indiscernible] you Thank

those you in will remainder it plans market Q And at of place to year, maybe of the pending active stock while pending. or do while sticking least ongoing? allow are the that say have you the with deals you fair be to capital to for the are any they buyback for the with out Is

simply not fair I say that to say. will is

Got it.

implementing That's of like and add circling this, believe the at if feel diversification much just timeline the confirm with coming some can market. the that then if revenues to way the they see pending -- you just thoughts your wanted what's don't guidance, back all income going unify you year, mortgage if know deal to I the -- what to nice on to in unify? fee is to in buy change this or you transactions but of differences terms Okay. the lot that a I also by of helpful. had to And is export

capabilities incremental point in closed the nor contribution see we do in those investment two -- to of Certainly to at Finstro likelihood those these would in which over place terms for out time year. the -- we having strategic enough both capability a capabilities transactions in think this will to with within unify, need two partnership of XXXX really were drivers of have not enough time, the capabilities really come a this expect 'XX the and of in We of of convergence of unify. our of be framework seeing But and those acquisitions.

add on ramp projection so hitting that and statement fair other at the lot side beginning it had up the yet of the of bit build-out the whole based as our run I'll does And that on on quarterly the you imply a of two expense expense just guided look either, be unify to on rate we on the haven't a a income a basis of at is expense portion of unify year. I if the

it. Got

rate helped Okay. you that to with the And NIM, just further how you number. any related increases XXX, turning That's sorry to X%, how the the earlier in the question, hope building of with but of are much helpful. XQ right improve had. is in that that -- out just if much we component hike then cash wondering And that

have mean, do expected know our No. that any historically matter, projections. we and not forecaster rate with is information that you hikes deal we cuts rate when done we putting any or I we for or

So true it growth. loan the from is a impact

So I loan will not growth. dismiss the

which have this just Our came in loan last didn't net extremely in solid of and quarter is whole the lot this bit the benefit. in interest at later that little first income, In fall perspective. a a put quarter, quarter's growth quarter

for our balances $XX grew if balances example, only average million. loan For

out, at a jumping their prior of higher quarter. If $XXX our than all you netting the be million at look thing SBA off balances,

rate X, loan certainly quarter about the think income. that points a quarter. maybe in I basis quarter $XXX is about, I'm benefited on increase yield increases in the XXth there again, again, is given basis In there So more involved bit X in then one earning the the second a of X quarter, earning points and originated it second quite from was loan to And up, million yield. first X a estimating late originated pick we interest that day have March asset quite balance

super thanks, Great. And helpful. it. Thanks, Timothy. Appreciate That's Aldis.

Thanks Kelly. Thanks the for questions.

We'll take Andrew question Inc. our next from Stephens go Please Terrell ahead. with

morning. good Hey,

morning. Good

Congrats on the deal.

you, Thank Good morning. Andrew.

Maybe just first of acquisition. kind on quick question

close both with some like growth, of especially kind think that $XX before I billion if these disclose end be and kind pretty the was you the the closed mark XXXX the of I if assets. had the forma on impact you in fold, you you'll it. of seems of of just given hoping of kind it to pro Durbin for could total company,

do. We

In two yet. terms basis we pro on standalone basis. don't just they we decks, forma that a into certainly on mark accretion are put sugar do And do of that numbers deal individual that we billion viewed $XX nor

that, only estimate of delay, So be the pro two terms time revenue on there's basis Durbin forma pro our Having points. in is on said about impact obviously, Durbin percentage going a to is when kicks. impact basis, forma

So total billion. cross once we revenues $XX

Got is to wanted I appreciate clarify. I all And Okay. it. it.

XXX to XXX correctly? but we to Did I year costs of quarter just million it million when those I for related hear guidance a this costs. for build-out expense sounds the discussed that updated unify, the two ago, the $X was included think like to minute guidance, expense last $X exclusive it guidance, of

guidance for build-out the so year in I include to so or did unify you apples-to-apples part this included quarter reduction prior both last it second also both full-year, to and my The costs. those are guided last when guidance

Understand.

sounds the hoping was thinking you side on and you you're deposit I from and how strong. it And about maybe just speak I of very organic the growth on a the sheet balance all within could to book? hear standpoint an Okay. loan then commentary sounds other growth

focused capturing a that model on well is rewarded our I majors medium-sized with are on client a us so serves with and extraordinarily critical the us differentiator. business. a that management full to to relationship huge the capabilities and the been have and bankers It's think compete having small focus treasury allow of

grow. And pointed so transaction with It's something acquisitions we'll relationships like sticky, that about certainly basis, us we talking been reliant to very continue in to the to earlier, attractive funding work. have cost, attractive, to deposit very low put And bank cost do. on with it as we've and to growth cost never wholesale very watch this, Aldis low low a we're low-cost out attractive, deposit just ever for it not delivering our expect liquidity And puts room take nice, funding.

before, are on as we've stimulus leadership I of So think simply kind the trap fall and sheets discussed balance that looking of bank a related teams get that to complacent. the at a into lot balances sitting

of those that When market you capturing the I think relationships for share? clients? measuring what you you taking you do it the future. you really got to do is full positions I be new will relationship think Are activity. Are

That's speak a saw helpful. I the -- I past bond one very just bit built this I quarter. If and to could it. one appreciate was last book little

of sheet I acquisition and and just know that improve announced fair have position. balance announce the liquidity liquidity still excess a both the of that Does excess You to on given of fact deals amount it to lead or you from the future static to we put the kind should think in about Thanks. is book quarters, here? inclined be minor bond more bond some in book work

great question. That's a good Another question.

go is especially you start all going stop it to thinking it stagflation much the thinking, point the are attractive, where -- more starts, it curve of or to rates and going if is, think long certainly slowdown up becoming and depends. the it's it starts the I backing you believing higher. term, yield more And U.S. economy

think will these two we optimistic. be I say, transactions, without less so. I So would

makes these of transactions terms and our one we two sense. as in on a let's say our -- our books will the that that them, of of knowing invest, cash day each coming some and cash our onto then we cash their one, balances that free replacement liquidity of absorbed might sheet if With on receive balance

and That you both makes on Yeah. another taking questions sense. total my deal. guys appreciate I congrats

very much. you Thank

you. have Mr. showing will back call thank I questions at I further this to closing we And remarks. for the his no Laney time. am turn

I Great. Thank today. thank to very much. do want you everyone joined that us

week. We We rest where Wish at new the all incredibly attractive two and we've working are new our clearly Thank announced great to the point with new to good in this good partners, a morning. the be day pleased great teams. questions a teammates. Look of acquisitions, a everyone you. forward year appreciate

And this concludes today's conference.

this the it approximately of will will The of be by If and telephone XXth, beginning listen through available release in and be XXXXXXXXXXX, replay online you would four also to will on XXXXXXX. call and website. an the pass replay referencing available call, company's XXXX, April earnings this run code to dialing like hours

On very the Thank have and much a page. great Relations you Investor day.

disconnect. now may You