National Bank (NBHC) 25 Oct 232023 Q3 Earnings call transcript

Good morning, everyone, and welcome to the National Bank Holdings Corporation 2023 Third Quarter Earnings Call. My name is Margery, and I'll be your conference operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would like to remind you that this conference call will contain forward-looking statements, including, but not limited to statements regarding the company's strategy, loans, deposits, capital, net interest income, noninterest income, margins, allowance, tax and noninterest expense.

Actual results could differ materially from those discussed today. subject in uncertainties company's more filings the are which other most statements with disclosed are detail U.S. forward-looking to and risks, factors, recent These in the Commission. Exchange and Securities

date speak of Holdings as undertakes to these obligation or no statements These of Corporation this and National only call, Bank revise statements. update the

call reference Corporation certain the useful information provides believes for measures, which addition, In non-GAAP today will investors. Holdings National Bank

posted the in on financial non-GAAP to GAAP the measures and of news Please Tim provided It Bank pleasure release and CEO, Investor Reconciliations now of these Laney. President National go www.nationalbankholdings.com. the measures the Corporation's section call Relations my are sir. Chairman, ahead, introduce Mr. Holdings is to over turn

discuss I'm Third XXXX Good morning, and by thank joined you Chief we Bank Financial Quarter National for Financial Results. Birkans, as joining our Aldis Officer. Holdings' us

for XX.X% revenues during a in growing increase while delivered the doubling XX.X% pre-provision We quarter income net earnings with year-over-year period. same the

build quarter XX.XX% return to ending healthy common equity. continue the tangible a CETX with ratio XX.XX% delivering on capital, We of and a

be quarter, that a reduction the with expect the of continue during reduce we first quarter. to the charge-offs just pleased point experienced add I'll with Further, our asset for during nonaccruals X weeks to having X basis already we fourth quality of the nice fourth quarter.

Aldis. that on to the I'll note, over And call turn

you, this thank good for morning. and Well, Tim, quarter. call right. our All Thank earnings you joining

common on XX.XX%. or assets of performance this per X.XX% quarter Overall, average earnings third diluted we For the return on a million in return of strong another of XXXX, $X.XX tangible a tangible and resulted with of equity delivered of $XX.X quarter financial share.

the as strong revenue million. balance XX% grew $XX.X year, acquisitions by year-to-date and a prior well million by sheet our on discipline we in or our always, acquisition for pre-provision basis, expenses. a On expenses net pre-provision growth, increased by incurred executed quarter revenue $X net basis, adjusting driven And on linked organic

to be with loan pleased growth have the our continue teams We generated.

$XXX.X New million funded in a yield balance loan year-to-date annualized. our X.X%. of $X.X were And rate have we originations average X.X% bringing loans to weighted a loan quarter total new at during growth the on billion third basis,

Several into with combined fourth for the quarter, we loan loan achieve year the guidance. fourth expect fundings pushed and loan the remaining to our full quarter, growth pipeline

$XX core million basis on spot on $XXX deposit annualized and X.X% grew balances million a Our average balance or basis.

to the low continued Deposit has reflect quite Yet paid total industry. our at pricing XX%. rates banking cycle-to-date remains higher by deposit beta the

deposit interest was in third continue of the to over $XX.X cost do was for net higher. million year's and X.XX%, result X.XX%, The that the taxable slight be second the an a The total X.XX% and increase project for fourth came quarter we quarter. the decrease net to expect million, the quarter third of at to the XXXX. income Fully NIM range X.X% we in quarter quarter's for equivalent to and last quarter margin $XX.X to interest drift in

to continues loan X nicely asset perform point the terms of net in only portfolio annualized In quality, our basis charge-offs with quarter.

during overall loss expense coverage on allowance This and well at overall growth. the behaved basis provision remain trends our quarter's well on behaved primarily total loan new The to quarter. driven by portfolio was an -- and loan remained basis, X.XX% consequently,

card growth in million of charges classified the quarter XX.X% performance, showed noninterest did and million, was NPA quarter bank in quarter ratio. prior strong service basis. improved The on third banking our for combined. increase loan income $X.X as strong an over core linked a ratios Both fees NPL and $XX.X Total resulting annualized the

businesses solid performance such $X.X servicing as loan, rights fee Other and generation management, Cambr. this trust of sale a our on gain banking and million wealth and mortgage from quarter sale income diversified SBA benefited gains from

million, fourth noninterest to income the XXXX, for $XX the be around quarter project quarter income. in ahead, decrease, we linked seasonal mostly a slowdown Looking mortgage-related of driven by

quarter $X.X Expenses continue fund the $XX.X to million million, third allow Noninterest controlled, prior us efficiencies we expense technologies. quarter. the of decrease a other from well and XU in find that totaled to for investment our continue to be and

million, expenses to the $XX The the million were in XU quarter's them to of guidance. fourth the be million quarter's to range will in low end to million, quarter. the XXXX expenses expenses to noninterest full grow year expect The below third be $X bring $X are approximately projected and close to fourth of $XX which we total our

continue increasing to Finally, Tier ratio capital TCE increasing leverage ratio our build and X.XX%. with X we X.X% to to

Our tangible AOCI X.X% increases due than paid grew to offsetting any more share long-term annualized $XX.XX, and loss higher book value dividends per interest to in rates.

back will with you. it Tim, turn I to that,

you, Thank to Aldis. we're up year. Well, the finish for believe set a we solid

as business positive, And covered, new attractive asset trends capital. we an building we and deliver as of previously to approach been while building continue has Our pipeline are year-end. return quality

and lines note, So for go the let's ahead open on up questions. that

Jeff take Davidson. Instructions] from [Operator We'll our first Rulis question from D.A.

quarter? on FHLB-advanced check sort of of reductions. to kind the timing Was over pace gradual largely the over the of of Wanted that the

to relative with kind the were the to pop was we continue much of quarter, quarter. down we chunk throughout balances a given of grew so average but at spot, the of pay it able bigger a It to end the

guess, you to pending do strategy-wise, further expectation that? that reduce success I would How deposit on be liquidity? feel And Okay.

a our undrawn on-balance that we the Bank of in very liquidity, Loan we good. we Cambr portfolio, investment sheet of the cash have the we we Home stress sources we through With Federal sorry, liquidity feel that do unencumbered Well, various unfunded -- mean, have lines liquidity, terms well. sheet feel test hold, and balance that as I of addition source

and In to it growth throughout loan deposit end the will will here largely the the FHLB how balances by driven growth. terms of remaining of be evolve year,

deposits. related is note And Jeff, operate X on broker with it noteworthy, a we that

the the that's case So and been through -- case historically the in cycle. certainly fact,

And missed on loan growth, Aldis, may the have... year I full guide I

I high and quite to the loans we of look couple single with -- are, full X%. here is we guidance year-to-date, strong a looking mid- quarter The digits, in Yes. as mentioned, fourth pushing above be year and the certainly has X.X% to but fourth, been

Got did to it. And net you it X.XX% whole the compares September the quarter? have average margin as a for interest

September September The X.XX% deposits. Yes. was margin sorry, X.XX%. our of I'm was that's sorry, -- cost margin

X.XX%.

it. Got Okay.

brought minute. reductions on fourth got quarter. some a quarter? some in second the Just there progress sounds jumping like imagine, in were the nonaccruals can for to some the coming is of credit Tim, It you've nice I forward that

exactly That's right. right. exactly That's

In Or point, just we'll at kind that? and of of at size leave it any this wins, you expecting that. some

fourth from about, into we each. areas than of exposure at very office believe report exposure for look book credit ahead Again, Yes. like it's probably quality I feel frankly, wait no and as on both would our of trends. in the to to in of next on retail. we we mistake, having and quarter, loan where we best given And total all 'XX less But is a probably the make going cases, we're say X% good earnings that we're the little call. benefit that those

bucket? modified meaningful there sequential in in million. a the the was Was noticed drop pretty a $XX there payoff accruing -- I that a in of quarter, loans Yes. down kind

was. There

go We'll Motta KBW. to next Kelly with

some owner-occupied growth very there like nice looks It on was CRE.

seeing kind in it's sort the there's in wondering of what's any or markets Just if like seeing, you're of opportunities if on your across kind if any going you're of you're market, -- the trends. broad-based all

banking Well, of Kelly, that to -- relationship a full bank and our strive the financing business clients as oftentimes, certainly matter, involve that the full facilities practical relationship, does operate in. we they the

have you're picking approach that any up is of service including the the of real debt, estate global cash traditional that debt. a keen into flow earn the insight goes the facilities where with of that depository beauty to business depository our not unlike business and The that business to all ability all commercial is business and

like guess, to expect some down to that out liquidity to It And of be borrowers as if helpful. migration costs that operating deposit of item -- And see migration noninterest-bearing That's wondering bottoming continued you lines, line just Okay. funding was their of side. of that any some cost some the to outflow out? sources. percentage well just switching use when should looks as there see line of sort how you deposits? as where do I the a as of guidance higher total terms in pay

for core decline glide that down. most ratio commercial growing opportunity a deposits really think we've I where with little out And seen with book have out grow that success the back of relationships. to the on the side through to interestingly having We business. more consumer discussion a earlier to operating of And our the enough, pressure color, in the come coming reduction point of that relationships, noninterest-bearing begin that's consumer seen we're

So we in at particular the major point, don't, any business. that this expect of part changes

a capital prepared on I in Maybe the it. me. anything for last was Got hear I hoping didn't question -- remarks.

look wondering levels Just here. pretty healthy

year, you again of active the you M&A conversation priorities any buyback, were -- and if but of know capital through walk any very I in if last are, wondering could Just your in interest pace pace a conversation. what in wondering stages there's

certainly targeted in Thanks buybacks. price which to Number a for asking. would engage one, engage. we at with great question. operate we Yes, an we authorization And have

be capital opportunistic committed position to That and perhaps be our we've we stand integration to stand rebuild more unfolding on when we to a front, to year, committed, complete last acquisitions reengage in nicely. made had in down M&A really, and put to ensure even ourselves down 'XX, say again, and decision the the opportunistic a the expectation this would basis. On that's to ourselves I of is

to we'll Andrew Next, go from Stephens. Terrell

like disclose a had or range to high kind originations up on of margin. Can the yield it new the quarter. shaping right sounds is pretty think I it originations in few fourth quarter. at be was what's last X% One, of the growth loan for maybe kind now? you questions least I solid

quarter last for September say X.X%. I'll was the Yes. was month, X.X%, Last month example.

are advances lines, typically which includes that and -- So levels. existing lower some on

got new rate X-plus So at funded bonds actually fixed percent.

it. And feels to X.XX% the deposit cost the then portfolio. market relative this time just that Got impressive mean, Okay. the appreciate quarter was low. I on it. pretty really that I It's

and today a market. at new how wanted where pricing that sense to get CDs the Just to compares you're of

a and There's There roll time that rates to pay frankly, mixed are come have a over been more that much in. Yes. -- for you just are decades new and deposits client certainly where is that bag. advantageous certain for years

focus a So also brokered [indiscernible] that the I deposits been making on around always deposit type of we've on duration new rate and all I'll X.X% average But those gotten unlike will have the percent. had deposits deposits. back, time maybe to that being X.X% weighted give time sure say we has say and

So helping there long terms a in certainly is here as tail is pricing that of well.

I have currently, part not meaningful in And marketing historically And 'XX. and our of campaign. expect to deposits wouldn't begin a doing time so been

important upon. So area an but obviously, it's not part the that rely it's balance an heavily of we sheet,

Understood. Yes.

then together just margin. And netting Okay. maybe the on

Sounds where in you came like not off quarterly -- quarter of the for the close guidance fourth far in September, month at the September. I to is the late pretty mean, average, relative

and it And maybe type kind that like kind moving pressure, new it in of band feel this in and wait kind deposit at some forward? of of originations coming Or with more like hold that you of is X.XX% does feels can this clip margin see? it on lingering

outside implying guidance are is Where in XX-something here that before, showing a XX the pace it feel last guidance, XXXX, a terms quarter, be slowdown to wait until quarter good and Well, pretty of points and right, our that call. in we certainly of again. XX from provide in our we'll slowdown, basis January to certainly fourth about for last -- to going decreases we quarter

Understood. Yes.

MSR do Okay. do last on anticipate have sale? the you more Aldis, forward? pricing MSR you And have quarter. one, the moving any sales And you then was then what sale Do that this -- on

second not are given manage our Starting one. it's We with purposes. foresee is that we sale I in since -- really do X as is term mortgage asset -- term. risk, not fast operational latter another We last right these in near rebuilding it's here. in we don't gain, certainly now, years. near we risk the do sell-downs. And for X the what And the necessarily the Nothing business this -- building

to another -- portfolio think portfolio go-forward on provide a pricing, half component of And us haven't going terms disclosed. just will say In were servicing those how sold which it's opportunities be that we that of smartly basis. our here down I supporting here, to we were that say of can assets is will allocated something resources and that we that our half approximately I

next to We'll go Piper Sandler. Liesch with Andrew

mentioned to much think I looking $X a covered you Is expenses, $X at good nearly XUniFi million those next cost I this into we you've rate? going be million should costs everything. run the On quarter. stepping guess, up year? how

well, terms I'll that will year, in of like for it million and terms $X we say rate, provide -- is will look I'll of Again, I'll run January, rate. in be full XXXX quarterly what That's today's were in September. guidance October in where in where that's run

I'll that. at So it just leave

earnings? see when revenue think concerned, Got from it. is I some to could bottom do falls line XUniFi far I mean, as business guess start as that you to we the

road positioned of we'll be we're in be of to I in, 'XX. the to going We a doing 'XX it wouldn't half It's to second family and the with friends expect Yes. -- we're the and begin work and on focus really of to that take coming some XUniFi revenue more demonstrate meaningful beyond. doing believe 'XX. be in

no we have questions this I at further am And showing time.

to turn remarks. for I'll closing Mr. any call now the So back Laney

again. feel Have questions. you And joining if just would other good for I to day. up and you follow today, thank everyone Thank us have a free

conference today's this call. And concludes

much, If the a Thank you XX be and replay listen telephone this would hours, available day. page. in you like the website to company's have will and link on on very the Relations call, the great of will be Investor it to approximately

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