National Bank (NBHC) 24 Jul 242024 Q2 Earnings call transcript

Good morning, everyone, and welcome to the National Bank Holdings Corporation 2024 Second Quarter Earnings Call. My name is Matti and I will be your conference operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I will now turn the call over to Emily Gooden, Director of Investor Relations.

Thank you, Matti, and good morning.

call remarks today's question-and-answer by begin session. will with followed prepared a We to this expense. statements you contain would allowance, net remind I like income, noninterest that strategy, deposits, including, margins, not interest income, company's and forward-looking but conference limited the to, noninterest regarding taxes loans, capital, statements, will call

recent U.S. are are risks, uncertainties most and Actual results those from the of to National the obligation the Corporation statements these Exchange materially filings speak only These more with discussed revise no Securities Commission. today. in this statements. factors, subject which and disclosed as could differ These undertakes to in detail forward-looking or statements of Bank other date update company's and call Holdings

today Bank Relations the reference which provided measures useful will measures, in non-GAAP of provides -- GAAP news call Holdings on www.nationalbankholdings.com. believes for measures release non-GAAP National Investor investors. information Reconciliations are section the financial of these certain addition, In the Corporation to the posted

It Mr. and Holdings and introduce President the Corporation's Chairman, is National CEO, call over to my Laney. Bank now Tim turn pleasure

Birkans, Thank results. discuss as joined Chief second National Holdings' thank Well, quarter morning, Officer. our Aldis for we joining Bank by Financial good you, you Emily. us I'm and

quarter of portfolio. of sources earnings and granular credit fee interest of quality a revenue. a margin -- diversified share increased $X.XX X.X% and quarterly having delivered diversified from on having Loans We annualized net in continues increases as diluted per the loan the during our built back to well benefit X.X% as

of third also what seeing the to and with threats, feel investments total light and with good and strong deposits build of hearing very the a about We momentum. we in pipeline and managed, of in making increases XX.X% defenses the we're entered a markets, quarter deposits. solid representing expanding fraud in capabilities XUniFi, our particularly Cambr. We X.X% emerging against well also realized increase deposits in average annualized Expenses we're our were transactional

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

and good right. thank All morning. Tim, you, Well,

I During by our the will for changes XXXX, as does rate interest for policy Fed. this the on future of the touch which well any rest the cover not highlights guidance financial include quarter, call, second as

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

This and highlighted NPAs. quarter and progress reducing NPLs was loan by strong growth significant outstanding in

terms fundings loan growth loan totaled portfolio strong In resulted of growth, million, in an X.X%. $XXX a which annualized the of

growth meet production, quarter pipelines, full year robust combined loan mid-single The digits. us the the second guidance loan trajectory puts a with of to loan on

was geographies $X.X granular quarter's lines commercial loan Second all loan production funding with and of across diversified our of business. an of average million size

drawdown We a in also stabilization annualized our and recovery of a credit. of saw lines smaller

million, prior at the net Fully $XX.X taxable for in quarter. came interest equivalent consistent quarter to the income fairly

outlook of the cost for We mid-X Consistent expect was trends, net by and interest for driven to the in the quarter the rate cycle. projected interest second these half earning XXXX quarterly margin growth. grow the experienced NIM in assets funds of the income lowest with intact of we since the our beginning of loan remains rest and XXXX increase this Net X.XX% sets. second

nonperforming During in loan great quarter, down to level progress bringing the the made our NPA we lowest and ratio

early XXXX. since

and basis, a XX by history basis Annualized were quarter year-to-date the charge-offs for classified decreased are points balances at net order lowest points in or our during either the remaining previously loans. reserved driven credit. quarter, one on levels just Our the company's basis XX the

our by economic to loan growth in The ended loan the acquired a CECL ratio if which allowance was applied loan against continue As we and provision points total equates additional the loss XX X.XX%, basis to quarter $X.X of whole at loan portfolio. underlying in the changes result, models of outlook. unemployment coverage, hold portfolio, expense across March million this specifically driven forecast, to million loan quarter's rate and primarily $XX.X

was million. second $XX Total noninterest income the for quarter

Cambr recorded was quarter, to capital venture force income venture behind gain we nicely related in solid The $X.X down markets, weakness core of investments. fees, banking million SBA growth continued the of this banking valuation from fees with impairment a QX's property, the and capital on sale gains sale. this for driving by resulting mortgage capital impairment grew This Adjusted $XXX,XXX on raises. in ground center adjustment quarter's revenues, one-off banking and noninterest

we XXXX, decreasing of half be increase slightly. the for increased related to million, bank $XXX,XXX of $XX.X a the relative million, linked to expense the Noninterest in core income quarter. to first For totaled $XX the XUniFi project expenses quarter expenses million. our range The the fee for $X.X approximately second million $XX quarter

range the entirely ahead of first Looking be increase the $XXX to The relatively this a to expense during million. the our realized due half rest for XXXX of to million in the $XXX months of expenses. is see million related year XXXX, in step-up second noninterest $XXX expense X to we XUniFi

Tangible and another continue of with which grew our provides ending X.X%, per CETX with points, excess ratio capital percentage we various terms at at X the quarter to value a X share ratio Tier ending the book at strategic leverage grow of quarter us of In TCE alternatives. capital, ratio XX.X% XX.X%, $XX.XX.

turn I'll back you. that, it with And to

Thanks for all this.

resulted XUniFi. in XUniFi, acceptance this friends and quarter will moving $XX.XX beta Aldis $X.XX controlled our of equity to build-out in project environment I'm enter just common the NBH testing into strength per continue to are substantial and the testing that that respect sheet provides with production earnings of to user the during tangible broad with a With we year. optionality, including fourth increasing balance we solid to shared, The investment in family share. As report pleased of

stop I'll and up ask the open there Matti questions. to for lines

live. Jeff Instructions] Rulis, [Operator is you're line

me? hear Can you

you. Thank Very well.

couldn't pause. I big a hear It's anything. Okay.

can Jeff. we. we Any you could I'm questions answer? hear, Nor glad do? we What can

into -- the like like just And June then bit. you feels you're down margin And first, cash Yes. of to your I could balances guess, well, Or the continue all want maybe looks just question, average do It poking I get little the to it a kind for come Maybe that's have down. comfort sustainable? level level I margin relative is guess second average? that come at the any a this of further? to quarterly

Right.

levels cash, a balance seeing plenty I sheet cash terms quarter going you're on go-forward to around provides that So, where think be we us here, the ended in liquidity. on the of that the basis is

through that, build the cash we on will just said having run, the last are. up running be going to over event, cash I Now say we CrowdStrike safe. weekend But be going long where that the

right June June, at terms quarter the In for exactly X.XX%. where of is margin the was

it. Got

Okay.

those so settle on is expect And in cash here, of if in half sort guide? earning to that part the kind asset back the NII of of of is second that grow growth and for balances expectation sort

That's correct. .

on Okay. credit And side. maybe the

kind to of a second, type there the wanting what timing of related with balances lifting? color XX-day up any was those in And bit. and then occurred nonaccrual know maybe First, if bucket was was to anything the declines? XX And

discussed where was nonperformers in previously reserved. reduction largely been previously we've had related credit it The questions. good Very and to that one Yes.

So that the on driver loans. was nonperforming

With I'm nature. it was that, than administrative embarrassed to respect in say, to the of past dues. half More

thing and happen record don't of let to kind track again. of than that have dues not half those And We happen, I intend past of been already letting resolved. more it have

number trend. a embarrassed of cases, So think just negative to say was I a in on credit don't of I'm it's sloppy work an part. indication it our

Got it.

in decline the nonaccrual, charge-offs to net back it's decline nonaccrual both Tim, the loan that, in the that and same the quarter? So the in the drove

You're exactly right.

restricted to absence in in the it M&A, talked for have book nice just capital about an I degree. think on or use you, a one M&A seen while a check valuation buyback option. the last on Clearly, buyback stock a back the of appetite? you last Tim, maybe open Maybe I Okay. we've as I and you, quarter, and lift of either is

have an be you're right with exactly market mean a where once our we've it's would in again, seen area you're target buyback. engaging right and on Well, now. price price, what we -- not stock we I with the

on M&A, of size we've I partner transaction, be than discussions discussed of we interested been terms the M&A history would that the I've targets in say in. question the previously in simply your To of with and am I'll busier in company.

-- but market, summary Okay. of of And again, fee candidate, of of ideal broad Tim? a kind that income brush those kind here, those it's and/or contributors kind in

national average in Yes. Look, attractive existing we believed our market a that would to time, to growing key said that markets build contingent we've ideally are be candidate our found always part investing the the markets and than of faster that out We've for success. us. is some

in those going drawn here always be to we're the U.S.. to So markets stronger

important, And about again, market incredibly attitude to or contingent terms either probably management. is right in already risk not there's toward culture we the ensuring talked enough of credit markets, in think

all continue on transactions back, under at than metric seen years. In expecting certainly a to a and in last to together. years look from X our management X attitude toward do and we've method, fact, we much and work We the certainly earn the way risk to transactions return right it few crossover better come

ourselves holding there. high we're standard to So a

you don't anything Aldis, I And else know, would add?

you think well. summarized I No,

Ashley Kate from question next our take We'll with KBW.

Yes. on Kate for is This Motta. Kelly

are pipelines demand I up pulling was really holding from? where good growth seeing borrowers? you're loan how back your and any wondering from was system So And still areas you're strong. just

very Thanks we're with clients. pipeline, conversations and all we're the entered tone the encouraged question. in I marketplaces strong very We think the from by Yes. our a of for hearing quarter third

So as small arenas. and activity market business it in our we're relates the increasingly middle optimistic to

demand there that in number very we handle. dam, tied really could to guidance. and activity. is see with feels a But to if high banking handle interesting talking for be point to some the break rate. that a getting like rates and seems I'll drop upside about represent have to our demand that a pent-up also loans included X it we could in to say interest a a our haven't the there in mortgage X markets, well where really that happens, We believe that we're And of

I With and but transportation about X.X% don't respect to of only trucking from, industry, it most and areas exposure say think our back loan I represents pulling in be concerning the would anyone it major would under our values we're of would hear collateral the of be space. on some be dropping to pressure expense surprised incredible that, industry continues result as pressure, that in pressure, a this rate bankruptcies line vehicles, oversupply to portfolio

weakness. we're So those the weren't that by here, as stronger that interesting, more X the the classic clients during capital that, way, cities. stronger, with seem tale prudent It it's -- and period of our seeing would what getting and it's are are COVID experiencing their

what a about -- than any and we related think to credits closely we some watching that do. we talking -- are we we're of So we're do, we I have work really some where have point concern. But can't less to to have that make loan think industries we work handful other may where where

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a hearing I'm speakers and time having you, clear. you in sorry, speak hard coming up line? loud check Matti, other Can we your are are or

Can better? Yes. I me hear you apologize.

We can.

We Terrell have Andrew with line. the Stephens on

you you the what to just incremental kind of briefly can extent. might talked about Cambr and in there of color investing the capabilities increasing start, future the type of mentioned benefits prepared expect. you're the maybe on to you then that Tim, remarks, that making of provide kind investments just Any

a to Aldis are income we're that ultimately ask this, network at increases to pricing expand. to level, all that fee will NBH. there, you but and income very capabilities the know Yes. I share may sensitive -- or want to of result out more expanding building in high And talking detail. But with some again, our elements about in I'll we spread

and exploring addition collapse in building widely insured of on also the of of as and product we're well. expansion a direct since of in kind such working to out that's capabilities capabilities, network, Andrew, -- sort was in SVB's putting out FDIC capabilities we are used as became some some quite that to -- instead something deposit capabilities of reciprocal, network Yes. distribution mind comes that something

to Just you give an example.

see immediately, But increases expansion, around investment has that. to and the more to network been network income expect do optionality, related fee we

Understood.

income income I just year? assume the also fee softer or that guide. stable here? contemplated in maybe in from mortgage implies slight the fee half banking Is then it Okay. moderation the second on the fee Or half driving sneak fee run I like back back of rate what's guidance? income mainly the the half in looks would It that's if not could in guidance your guidance,

Yes.

kind the market, Tim pulling opening feel you quarter. bit in careful of in of on a point a like of second being mortgage is we It's in up, income it. guiding touched terms fee of what terms all mortgage So in that the the are sudden back pivot in half, little where we of got that second terms is realized we

In really that term, not terms through of XXXX but kind Cambr question, XXXX part coming of to back it's a no, that in I in it's embedded the to first that yet do start near expect guidance. of opportunity. it's

Yes.

you mortgage Okay. Very the Or think in kind just me question right And come terms up and rates the just Can to But on rates I then help the is come will, mortgage know activity more structured of gone dam good. changes should in. point framing ask. you banking? mortgage in staffing mortgage obviously the just the made any the break, is to down don't how on if of about -- division productions while broadly or significantly. any on have more pickup you've if upside

participation Just that? as about think time, like mortgage kind to of the in industry increasing any over for production change your we

important proud an grow down tell it's flex to or leadership. They've the demonstrated question. residential markets of mortgage you, as our markets ability I'm decline. and as Yes, active I up incredibly personnel on would

and credit record we to a market now have that certainly increase adjustments a now in see at with like back track being scenario we're on should the focus start all. always make us area, prepared so underwriting metrics, able to to to respect we to in come And are and of those in no changes increased talent

of If around we around loan-to-value FICO loans average the continue of average ], first and [ to our operate with an is mortgage XX%, right average of $XXX,XXX. $XX.X million right

years, and in our no tightened granular anything, them changes the we've standards. of If high quality, X to again, we're portfolio So making somewhat. underwriting last

market we're that what our that's that some from been bankers So, contemplated speaking be belief the upside. currently could to projections. we're something to hearing just, in hit handle X we our in if point already a not psychologically, is And is really again, with the what this made and there

it. Got Yes.

cuts on I just sneak margin Okay. this inclusive half more that might And I the could exclusive rate it. appreciate is if one any guidance, year in. back that the of or All of today, then And the fluctuation, of be kind a broadly, really rates in start the would much more position expect down? you with to curve? do if of the forward just of balance sheet come

Right.

Having remarks, As will to But like curve I rate that our does the the we it -- upward movements. end of rate that, day, contemplate over welcome an accretive said sheet will said not changes. would fairly yield in to Fed at be and do balance more the time. I banks, neutral sloping opening we model most any be

later beneficial margin. but early XXXX, be too our our guidance would solving yield curve while certainly So to start provide the to we'll projecting upward

Sandler. Andrew question next our from take Leisch will We with Piper

a for gain stick out will mortgage a this or for sale? question portfolio But growth the probably still. Sorry bit for because be ways to with on

Both.

it. Got

Both of the... sides

like clarification It that Got me, Did just you. of hear so rate quarter? mean, Aldis, I maybe I far line I And just then of your correct you the is here. how this correctly? point did, if utilization And trending credit, increase. sounded

slightly, increase stabilized. did it Yes,

where coming points say quarter are increase, call that And X I on still our percentage the percentage down. consecutive quarter we was typically, of utilization below the I'd first what of We I average, about to think, increase. small X we have, is. quarters the X point line second stabilization,

of line credit. say, of drawing down terms is and going our quite their in of there let's utilizing clients So ways still,

And one so July, it, it way call in or gone another. hasn't, far

trend I So talked either what I direction see don't just from any about.

We from take Rulis Davidson. will Jeff our D.A. next with question

how try this Just one quick any of the one our going but to for visibility keep a from impairments these -- Any do be one. The monitor BC perspective, lumpy this on on any tough be in we thing that be may to to other get challenged. -- kind an of the to segments they're understanding may any forward-looking to just nature? a maybe eye or that sense kind than answer,

Yes.

of as right, portfolio certainly well I a probably think as have downside, terms down. and upside but This you're we mixed lumpy there. was in

funds there exposed banks are Fintech one reason you As know, many to for are or that another.

I could know, I And see think downward suspect see still in there's you mean make Aldis, anything it a raises else upside, I they're to valuations there's raise, it? add turn. starting more would to sell building a bag. seeing be we pressure downside. I from we what there until don't granular at and capital Again, start if level, when mixed And we're companies capital will to and the is a

still So if very it's it as interim, life lumpy. we the good about portfolio, a bit look we it. it, think the over of the at In feel Aldis? described I you

part if certainly, company cycle here second triggered sort quarter last few the needed in of see and our we portfolio feel life we of we're We the on that as -- where about And Yes, raise valuations the today. did -- sit look it is. the valuation depends that of in exactly forward capital a our good adjustments. to

comes about I up with But it's or And our when general. dictates, double feel next do then the down. again, good whether portfolio Tim, agree round in we

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

us for you As always, today. joining thank

a We questions, If you out us. have do day. reach any you hope additional have to to not good hesitate

call. today's And this concludes conference

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

disconnect. may You now