National Bank (NBHC) 28 Oct 222022 Q3 Earnings call transcript

Good morning, everyone. And welcome to the National Bank Holdings Corporation 2022 Third 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.

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

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

morning. Good joining us. you for Keith. And thank Thanks

National Bank discuss our financial quarter Financial third by Aldis we As Birkans, results. I’m Chief Officer. XXXX joined Holdings

I’ll in remain of turn note, all to metrics conservativeness have asset strong, that economy. our organic earnings and increased out annualized. Birkans. pleased CFO the quality the Aldis of quarterly are deliver a over call On increase questions We of experienced that important of light that point nominal to-date standards $X.XX noteworthy deposits. also Aldis? increased in our Its cost growth and the to core the to share. per recorded prudently average around We total XX.X% It’s underwriting loan that we XX.X% of deposits we have

while Tim. And acquisition completing the also Rock performance quarter delivered Thanks, financial Canyon strong good Bank. of Alright, of another We morning.

and later Bank we bank and system of completed the in closed Jackson up-to-date Canyon bring also far Hole Rock build successfully of growth, each of will systems and always the quarter, presents. integration results the net driven October, to to carefully loan exceptional year Bank Just acquisition interest next opportunities scheduled Hole strong Overall, the during margin, positioned you our Jackson to us as have this by for bank expanding integration. so enter quarter managed allow well The on expenses. the were on is

XXXX, we $XX.X quarter third million share. net diluted the of per For or earnings reported $X.XX

part Canyon transaction as During the loss quarter provision of we CECL our the for the reserve of Rock well as one increased approximately realized related as expense loan million $X day million $X.X expenses, portfolio. by loan

transaction related these is adjusted results. items, or was Excluding over which a income coordinate increase share, $X.XX the million prior XX% our per diluted quarters $XX.X adjusted

as only pre-tax quarter XX% And of financial included transaction performance. $XX.X net month Our million or basis. expenses reminder, pre-provision quarter Canyon on Rock one this excluding grew revenue the a banks and

capitalizing economic resilience markets are geographies. the all to on gain and market We across continue share of our

and was addition loan after the the quarter total million. Canyon loan The $XXX.X quarter, the funded grew another of loan $XXX which quarterly during adjusting million bank originations, During we in portfolio $XXX book, third million record. out Rock

XX.X% deposits XX.X% total two second assets quarter X.X% in loan and pricing. grew interest investment the basis increased increased And the rate main the quarter income quarter, held basis XX were The taxable loans just increased million, in the XX.X% during portfolio expanded loan for QX. growth We of cost betas X.X% annualized net fully driver interest to net grew strong basis. the managing and the from million interest total $XX.X the deposit successful average for points. in was average earning net Our for while during portfolio annualized points margin or income on a $XXX annualized or quarter

the for quarter interest this ahead margin around we at At fourth X%. NBHs project to time, XXXX. remain net Looking

and the our both asset ratios. it decreases politicized with of terms strong in remains quality, In loan classified

The assets offs third basis and quarters net ratio charge non-performing ratio both were low. remained NPL the and just point one annualized the

we And earlier, as million. bank was uncertainty a quarter, by model credit $X.X the recorded Moodys establishment million Approximately strong already was Rock expense driven provision forecast the of by day million the one the $X.X was of During the for $XX.X the mentioned losses scenarios. CECL allowance increase. of organic economic loan driven the That for portfolio. the loan expense remainder I as provision indicated to and growth reflects support increased Canyon

upon the ratio, quarters our at slow Total $XXX,XXX quarter continued ACL second The increase method quarter. investments. quarterly well a or business X.XX%. the income a was offset was banking As than by down the $XX.X charge and equity a total record gains revenues, strong million, service loans as unrealized bankcard core mortgage more from third ended nice result income as our non-interest from

both a be of we acquisition quarter total to million to our time $XX.X at model And well the approximately fourth approximately the are costs. in this of transactions. basis, realized expenses. year-to-date million income we total Non-interest have acquisition On projecting total our to are we below projecting related related of transaction Looking costs $XX $X.X come XXXX million and included fee $X for in expense $XX range. ahead, million for

control. rate non-interest run remains under Our expense

was acquisition million by quarter Building driven the expense of quarters increase Canyon was to core of $XX one second banking of related third these Excluding quarter. the addition Rock in expense primarily core to $XX.X expenses. expenses month the compared million,

as been the acquisitions. two continue quarter well the into the full through expense and fourth run a $X million transaction related range from realized, to be be will projection cost both For $X the acquisitions from gradually, the as quarter is of of an rate XXXX million of of fourth million expenses yet in non-interest saving we million. projecting to estimated and this to are $XX Included have realized XXXX. bank quarter to efficiencies $XX expense of in Most

XXXX call. earnings Januarys As such, projections full I on with will the provide more year guidance

remain tier ratios common XX.X% equity ratio. X.X and strong tangible capital equity at common one ratio Our

reflects Our We Jackson tangible and as X, Rock October acquisition book full share closed be purchase reflected results. QX and transaction of Hole the XX on of in acquisition. the it impact was accounting September Bank the the the impact this will bank value per $XX.XX Canyon of of

Our XX. by effective tax income than rate for September was the quarter higher and projected through the increased XX.X% demand pre-tax

XX million XX% We incorporating the quarters it And I’ll For XX% the to Bank fourth the that, outstanding. with average Hole range. with of after we around rate shares fourth outstanding. And to diluted share shares to turn Tim. issuance quarter we acquisition, the Jackson return projected to tax projected ended XX.X quarter to million back for be

Jackson pleased Again, questions. two acquisitions pleased for Hole. line with that to the the I Aldis. And our very of Thanks banks We our Bank meaningfully couldn’t Bank exceed of sell teammates. Rock our and be note potential expectations. acquisitions intend the cannot acquisitions enterprise. more with markets believe be to attractive each the learnings in caliber these we initial the strategically in across open two lets operate these and Both recent important remainder new of deliver up have that I our more Canyon services of Keith on

D.A. Please Jeff first Rulis Thank ahead. from you. with [Operator go Well Instructions] question Davidson. take our

what rather beta deposit the you cycle were us nominal costs. assumptions in Could on Tim beta mentioned you deposit increase for are? share again, with

be the could post that the start Yes, sheet cycle well, all gathered and how we let saying me pleased the we by to environment. liquidity not through pandemic balance be positioned the more through excess through

be in helped it cash, of you but and we huge on gather prudent only to has which here maintained impact recall, and most expansion AOCI As betas, us not as certainly well. deposit allowed margin

the ahead, not looking have price So leaders we into on been rates.

about before How here we our strive able our quite the relationship you we’ve primary and going it’s manage to look go markets So for accounts. certainly, bank, as will type And adjust. to it respond betas to-date nicely. we’ve talked if we have at transaction from markets to been of

price to However, be the leader. going not were

improve time guess, again, upon similar you’re So should cycle better expect a potentially that? Do prior you beta, we positioned think I this to around?

on think bearing Well, interest it deposits, similar. probably I the be

to mix. to you our sheet at cycle, smaller interest composition, If balance bearing look balance DDA total had we non deposit total balance prior or

So today, overall you’re deposit back looking if mix bit going have a based be interest at again, bearing that non we better XX% little beta to model. should the relationship

better, any be I no to that would slightly we think be than different once but be might overall, reason over So think cycle is before. that

quarter? increase I or it of the And I I in And of given going asset earning guess, the to Does surprises increase, funding guess out sort X%. X%? discussion the number the that pretty just see me costs does is of to include accretion liability link the I here, pace leading the a that guess rapid then, that assume you guess. flatten that around margin

Yes.

looking will You now, sheet That that has to full yet. beta somewhat impact items pointed in balance forecast it Hole that that balance coming there’s for Rock take least will a to makes bank our out be. on margin quarter where place kind Suddenly, tricky the that of fourth the have we of few Jackson quarter next balance costs the and suddenly on rate multiple at for original month impact. accounting purchase one Fed at The certainly sheet. deposit like And market impact, be had bank done seem your week. doesn’t question sheet creation another then hike do. Canyon

feel does it it’s point will I So to want best in again, like we But to, so be all next providing for year it don’t going moving for more that, guidance just XXXX at that full many year. X%. pieces that this incorporating be

economic check the in where you the think, bank XX like a unique early I guess guidance upcoming growth some And, picture I your from with net in is pretty organic think about coming. organic picture know that growth and Tim, basis on guess on than is I big just you do But to how historical. times. wanted environment seat the see your outlook smaller for just XX? was pandemic, I But given was more in XX big cautious, lending sounds you

of on were come question. flow toward digit sheet, hope while We’ve Again But Were double the case, we we’ve were understand not cash conservative rates we and a strong borrowing would rates very that markets. as marketplace. Jackson we’ve any on certainly for those more include if said, moved ever. begins with benefit I early could on as banking to client for days deposits commercial pleased It business actually using debt not cover bias a at gathering our fruition basis the hope. Jeff, bringing are serviceability small be low balance in our And, doesn’t around to doesn’t In fruition. board to of and interest in Canyon global hope could quarter in seen before, Bank more to Hole dynamics this healthy I’ve kinds arenas clients core come any great our prepared underwriting. the need interesting where additional in debt from fourth that to market. underwriting be. with and pretty to of the continue scenarios. using Rock as now some cost Pipeline solid in what operating

no genuinely And clients as while feel or capital we operating eye I I timeframe, about respects, these growing and times one face strength acquisitions ball point uncertain terms two their at were good very markets in to of feel business. of care position profitably to certainly all our have very are the close bring So many on about a taking teams in. like economy. teammates in the near hard the the cylinders. off worked taken has in I a of running such of feel so very short my the operating good the with

be there, is uncertainty. despite you So of should what bit hearing a optimism quite Jeff, the

are my I believe in talking to these have the think I realize word well-positioned any use I’m acquisitions two scenarios. of mentioned and stronger had we acquisition that believe already we really I in than to but I returns modeled from points our that

of out Hole. that I confident. we that business entire We of that can our So now are leverage we keep a have trust Bank mind enterprise across Jackson coming in

goals. you’re SBA their have based those state by small us should and Its Hole been one businesses and production talking that Rock with Jackson weight, about place familiar for sized number If secondarily, number stands to the to in for noteworthy are on Wyoming remain of one the in bank. Canyon medium state Bank in And above your the lending. call impressed Wyoming they of law, this accomplish not we providing with brought of then Utah, to SBA everyone ready that loans processes Trust Utah bank of help and absolutely trust Bank you punching

and Jeff, you So if you’re bit not don’t little from optimism, hearing a listening. you’re the what of detect

KBW. ahead. from Motta our next Please with question Well Kelly take go

color you to recently. congrats an thank And if you chunky because your to I’m you basis composition relatively so book wanted question. the on loan in provide what added. wondering deals loan the Hi, the I could strong. growth on or anything incredibly about so strong? unusual closing side, to tends on that much but was on for more both was that was there granular organic Tim, if I circle back granularity of any know be because just it I’m wondering

is our production teams, We’ve No, oriented my all our earning the when I full on to these do clients. of say And focused strong. particular of full back teams industries, this for all relationship seen across cylinders. are been or solid have I reference bankers relationship that mean, firing capturing rewarded that the to specialty and our of geographies emphasize really business all relationship want on I

granular. deposits these as can or in you for of face back and also invested I transaction Kelly, are will of it’s you new true But end in for So of And us from into just the to over get keeping inroads to that deposit to in, of I to that see think, down. for lot got seems early Day to any institutions of management a capturing relationship, a terms earn front expect number markets to really relationship, time dividends. banking. office the beginning growth expect the that cost day, when in a At and treasury getting just, say, as relationships out we’ve face. reasons. other making obviously of you’re accounts our to willing be you’ve working to get important pretty And were will But tell paying not remains Labor different it be those I XXXX, services. certainly to bringing and nice I a important were see clients of

You’ve time willing Day of I’m makes And the Labor been to my be together it they’ve bankers, strategize got XXXX in what of proud because sense. to to doing put since

That’s these have know Any should really what flows X. second one, about of like super terms on thinking going on kind be and helpful. -- full strong Maybe I maybe size you quarter still that impact color cash and the about of a flexibility. the of the October of the first balance looks the But forward? going funding, the you been how plenty balance in managing a to we of is of close with have kind of there’s of the balance size deal, sheet. on growth it sheet lot just just sheet support production book, off Aldis engine there? loan securities Wondering clearly

deposit focus. core funding finance continues a our be with be primary to and So to certainly loan would love and growth, will foremost, and first any that

necessarily mentioned, a get scorecard Tim deposits, combined and going for on is together. as balance of we the bringing they relationship mentioned to go pay sides not on As both but paid up sheet our for I it bankers,

So deposits number one.

mind. terms built investment it in portfolio of as we with flow that In cash know, a that have historically you continues,

for that the So next so. $XX a that million, or million $XX months projected says month cash is flow about XX

be didn’t Threes as And little know, that certainly liquidity So nice left source excess more to growth you so if as funding. a deploy need we have then that. well. bit we loan no from

of term. kind three near the main are those So in sources

Got it.

think, deposit up that historically ratio, still says It XX. loan we’ve bumped I to XX%

when to fully go out balance to the probably where build we we that think sheet. leveraged feel comfortable I

have to So but too. loan certainly don’t ratio there, XXX% look we the deposit room breach still some move to

that. I from deals through is Maybe last guidance on the sensitivity. me, to for has question of around coming appreciate XQ. quarter asset There both the do with margin really full some the impacts

from what kind basis asset going a kind deals sensitive should to wondering of be it’s thinking setup forward would just rates I assume you’d neutral steady your on high Just still next would based on level go of help be more But forward rising about thinking or you on more great. kind keeping be is any quarter. and maybe that we of a the

as No, Sure. a not to much were or continue sensitive, we as ago. two we be asset quarter

of Some right. the the low the big out was in sitting asset chunk assets as which sensitivity sensitivity cash, come cash a of

rate say two now. invested more a but sensitive, extent we very good that little been the I’d us. has fixed business banks sensitive of been to off SBA. both the a So the given of nature was taken in on, of Rock yields asset that less the cash Hole locked between than so asset still Bank Jackson their table loan Canyon in

of on say basis, basis think net less say are years probably from where out on two half we as quarter a I’d on So sensitive they asset we forward us if compliment not I But ago. kind let’s were. here were we go on

next Well Please go take Andrew ahead. Stephens with from question Inc. our Terrell

Thanks beat horse. don’t I a dead want today. time to for the

So the of in maybe just you to Aldis have the margin start NIM the month on was the what September? margin. do

X%. was slightly It about

you can margin that dilutive Bank Hole was accretive forma? to remind was Jackson how just then, the just or the of pro us And

the So books Bank until didn’t of Jackson Hole October on come X.

net So approximately out bank line, The neither, and $X income it it million. was million was the in not. $X.X Canyon interest Rock to

positioning remind forward? I still there and shift can whether you way from capital guess solid you’re any point, pretty buyback here. of guess us not you I position. on any thinking can acquisitions is or if there’s update to place, moving this maybe your with have appetite kind capital. Tim capital us you I’ll gears a And the both So in about in at just over of just how out then maybe

We generating us with we unify. that the move will also team are an market I as that strong stock strategic focused it going describe and them some on be again, as certainly around partnerships would earnings opportunity acquisitions. happen other buy the shares. on work price XX, that to we support on focused And and have And very against haven’t the front. move mentioned couldn’t maintain meaningful should that. to remain optionality were today, buying be or in more while we around well we to and believe Ill and in a to pleased But progress And very is making our pursue I just

So I be we’ve it were talk and become, not white I helpful to might what inclined black about think, to do. guess point. very on this as And

not are less acquirer We that of growth be than banks going billion to operating it the markets. not $X in call are

not a banks markets because bank be Any that savings. trap the both of will some years can that them acquire underwriting good simply strategic, focused will a to to over would other realize And outside couple be bank and of approach culture price acquiring will expense We in businesses acquisitions we unify. will specialty of core result credit. a benefit as accretion earnings fit will our our of specialties, fall and on be growth to at

for. know were much But more that as So provided than probably little about I that looking I while. detail as a Andrew, in a you

I Tim. That appreciate great it, No. was really a color.

that ask overall? commercial you growth then of level any did pre-pandemic sits I for this the in a just outlook and utilization? line compares and one where loan strong to more play utilization if growth line can that in quarter, on -- see of your then much How Did role Okay, the then and just utilization? improvement

page Yes, XX. so on

five that can quarters you table, that see. long line see a the in last we footnote of draws On details

bit this a elevated was see can quarter. You

but are just many that than We say commitments. as historically, we higher I’ll both

So is lines utilization on we the historically for XX%. that of sitting commercial, the we measure at all average. And right line itself, where way our commercial been been

Please Andrew go take question Liesch Piper ahead. Well with next Sandler. our from

third there’d million the quarter? also couple in in unify I’m quarter. that the a of ago and quarter expenses you realized Did mentioned be fourth thinking dollars quarter third to per will

more million call. to in guidance my of was I’ll is unified as projection it XXXX, that related stuff growth. the and in embedded on quarter, million then, Januarys the about $X And that earnings be expenses related Third unified detailed slide $X.X we continuation entered

does Got it. the XX fee million include at to then guide, both income And XX that on million? acquisitions

it does, terms In does. of guidance, it

down. of So slow seeing continue the in certainly mortgage terms to be

So third a the had gain it we quarter, reflects unrealized that method pickup investments. in in the equity

see there, not and And down So of bit a include all not repeating. counting a necessarily that it can you does why but step banks. little

sense. it. Got Make

all covered questions. other Thanks, guys. my You’ve

with Jeff next take Davidson. Please Rulis our D.A. go Well from question ahead.

Thanks.

follow of couple referenced don’t if I a Just ups. you’ve know this.

the stay fair the of Just assume? year like looks you’d as Is you wanted thought end, close XX to certainly that billion. confirm below to

we forma betas in company stay optionality basis, think as Plus which apply the deposit to that million, prudent at day flexibility Well, and I as we to On to right bank make were cautious on the earnings this that us we back we we billion one, grow back are a pro all identified the that on assets so below allows being say I $X.X release. make will $XXX the calls. sure XX. why and point to

around fee income. billion terms I’ll impact XX any on over timing crossing remind And of threshold just of in everyone the the

and So end this this really the for end cross of the look do doesn’t it both again, at when once, we year. seem of for likely

from So it’s to which of income impacting XX today’s run revenues. in million be X% is basis, rate suddenly But Durban, really $X out. million interchanging $X it like months about October us

So very manageable amount.

Yes.

or is real that the point standings, made an in impact core regulatory of around That our think months terms bank would years about out XX investment ago. processes. talking be standards I was that you’re

Aldis good with fact very of consumer institution. plug, a infrastructure smaller that the And the good our regulators piece front heavily a on focused were benefit terms that from bank. Hence, of mentioned. not place impact position on and the that do in in were the So we

million XX again, merger that expense. of to million on And couple to expense, XX includes just guides. the clarify Aldis, further the a

in. the to of all is core closer XX kind So

Of closer XX. to course

to got it. it up, build So you

does still incur quarter. the fourth it first of yes, to all, So in what transaction expenses that yet here include we

up, If you to XX. just take those clarity. that And for out the build quarters closer to

As high NBH components the that than have mortgage lower a quarterly basis and gone, by that about been rate commissions it’s running quarters gone, gone somewhat know, we down million when higher we run standalone upset components, pre-acquisitions. unify we on They XX running the which XX had million $XX it so with it been call million They’ve million, call or so of dollars trend. the or banks. even XX-ish been a XX implies between two pre-purchase have about running million to now maybe

So about certainly savings not incorporating XX% yet in that there. quarter to here already we fourth XX% and cost done

So helps. hopefully

guidance. No. can’t year-to-date of bargained hikes just kind And Fed That appreciate are guide it. still for. the in that fourth margin. you was on more margin consensus quarter of view than then including Aldis I the assumption also come remember still I I of

Yes. It’s all inclusive.

just an went current Jackson and this were cost Let’s for still deposits. side, into between both up. if that combine XX, their like forecasting for perspective, fourth it’s in Bank to funds cost moving look just we quarter itself points Hole will the example, our again, us for of certainly, Because Rock deposits, too to projecting deposit and deposit put came beta But to it Canyon terms of clarity impact without of for they on XX of have incorporating in XX way. basis just I mean, and which

to coming. auctions that whatever be of in was and incorporate X% here may attempt the guidance, that, including all my So

a and enterprise. around Jackson last that just just as drive see Canyon and for on relationship banks our Hole, from And into expect really opportunity as about focus of Rock treasury deposit banks. point the we those rest capturing talked full scale on the we those I our management bank into capabilities, certain Jeff, markets capabilities Bank gathering nice cost with We low of the those

down will is from cost they markets a come those the on had historically. expectation basis relative of in deposits full from where that my So we operated actually see

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

of Well, I I’ll to for folks. my you. results again brilliant what just come more I and simply want just do all say is thank thank view delivering to teammates

Have our a about future. day. excited good We’re

this this page. available earnings website And of replay have concludes conference very be on the will the an Thank release much company’s call you a today’s online link on Investor great call. and day. The and Relations

may You now disconnect.