Good morning, everyone and welcome to the National Bank Holdings Corporation 2014 Second Quarter Earnings Call. My name is Steve 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 presentation. 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 statements regarding the company’s loans and loan growth, deposits, strategic capital, potential income streams, gross margin, taxes, and non-interest expense. Actual results could differ materially from those discussed today. These forward-looking statements are subject to risks, uncertainties, and other factors which are disclosed in more detail in the company’s most recent filings with the U.S. Securities and Exchange Commission. These statements speak only as of the date of this call and National Bank Holdings Corporation undertakes no obligation to update or revise these statements. It’s now my pleasure to turn the call over and introduce National Bank Holdings Corp’s President and CEO, Mr. Tim Laney.

Thank you, Steve. Good morning and thank you for joining National Bank Holdings 2014 second quarter earnings call. I have with me our Chief Financial Officer, Brian Lilly; and Rick Newfield, our Chief Risk Management Officer. On this call, we’ll share our observations on the second quarter. We will share some thoughts on our outlook as we did during last quarter’s call and we will again take a deeper dive into the credit quality of both our originated loan portfolio as well as review the strong performance of the acquired non-strategic portfolio. During the quarter, my teammates across the company work to deliver another record level of loan production. We surpassed our goal of $250 million in quarterly originations, with $260 million of production during the second quarter representing a 58.1% increase in year-over-year loan originations. Equally important, the team accomplished these results, while maintaining an intense focus on credit quality. As Rick will share with you in detail, the originated loan polio continues to perform extremely well. A focus on building and expanding relationships with our clients led to a 14.9% annualized growth in demand deposits and banking fee income increased 8.3% from the prior quarter. Direct operating expenses were essentially flat during the period, but we believe we are well-positioned to realize reductions in our operating expense run rate over the next several quarters. With respect to our acquired loan pools during the quarter, we realized $12.2 million in accretable yield pickup contributing to a life-to-date net pickup of $160 million. As a reminder, this pickup in cash flow is realized over the life of the loan pools. And on that note, I will turn the call over to Rick Newfield and he will update you in more detail on both our acquired and originated loan portfolios. Rick?

Thank you, Tim and good morning. I will first cover our originated portfolio with respect to our second quarter fundings and then share some facts regarding the loan portfolio’s excellent credit quality. I will also discuss our continued success in reducing non-strategic loans at a rapid pace, while delivering outcomes better than our original marks. Our originated loan portfolio totaled $1.5 billion at June 30, 2014, an increase of 60% over March 31, 2014, which is an annualized growth rate of 64%. We have delivered these impressive results while remaining disciplined in our underwriting and credit structuring. Furthermore, we continued to build our loan portfolio with a granular mix of consumer and commercial loan types. Combined commercial and industrial, agriculture, and owner-occupied commercial real estate make up 57% of our originated portfolio. Consumer mortgage and home equity loans make up 30%, non-owner-occupied commercial real estate 12%, and other consumer loans the remaining 1%. As Tim said our second quarter fundings of $267 million represents a new high for NBH and are 58% higher than second quarter 2013. Commercial originations of $219 million were granular maintaining trends from prior periods with average fundings of $1.1 million. 79% of these commercial originations were in commercial and industrial owner occupied real estate and agriculture. The remaining commercial loan originations were composed of conservatively underwritten, non-owner occupied commercial real estate in our local markets. In addition to our disciplined approach to underwriting each loan, we have in place industry sector and credit type limits to ensure that our loan portfolio remains diversified. For example, no individual industry sector can have a greater concentration than 15% of our total loan commitments and less favored industry sectors such as construction, land and acquisition development will be 5% or less. Consumer loan originations of $48 million were…

Thank you, Rick and good morning everyone. There is a lot to like in the results of the second quarter. Tim and Rick highlighted the record loan originations that led to strong loan growth, the managing down of the non-strategic assets for strong returns and the continued excellent credit quality. We also grew banking fee income and delivered expenses better than our expense targets. Net interest income decreased slightly in the quarterly comparison given the decreases in the high yielding purchase loans, but it is nice to have most of the impact offset by new loan originations. As you can see, we are moving the financial leverage in a positive direction. As we discussed last quarter, one analysis that we used to evaluate the progress of our building efforts and to get more insight into the financial results that are expected to emerge over time is to exclude the impact of the FDIC indemnification asset amortization, FDIC loss share income, and the large expense related to OREO and problem loan workouts, which can be seen in our non-GAAP reconciliation in the earnings release. These items negatively impacted the second quarter by a net $0.09 per share. Driven by the expiration of the FDIC loss sharing agreements over the next couple of years and the decreasing problem asset workout expenses, the negative impact will fluctuate on a quarterly basis, but will generally decrease over time. The net $0.09 per share had a 35 basis point negative impact on our reported return on tangible assets. The adjusted $0.14 per share and 60 basis points return on tangible assets provides better clarity to our progress towards reaching our goal of 1% return on tangible assets. Further, it is rewarding to see that once the adjusted return on tangible assets improve on a year-over-year…

Thanks Brian. Before closing I will share some thoughts on our current stock price, M&A and capital management. There is no question that the resolution and reduction of the acquired loan pools mask our core progress. It’s also challenging at times to appreciate how the successful resolution of these loan pools negatively impacts the income statement in the short-term, but as you know if you exclude the impact of the non-cash expenses associated with the FDIC amortization and normalized loss share and workout expenses, one can see that we are making solid progress toward our goal of achieving a 1% return on tangible assets. We believe our positive earnings trajectory will become increasingly clear as we could execute our organic plan and prior acquisition-related expenses diminish. We believe that current and recent stock prices undervalue our earnings trajectory and represent a unique opportunity to buy our shares at favorable valuations. To that end, we have now repurchased 19% of our outstanding shares at a weighted average price of $19.70. We have recently announced as Brian mentioned, another $50 million authorization for additional repurchases and will continue to opportunistically buy in shares. We will do this while managing our capital position within the context of organic growth, acquisition opportunities and of course regulatory requirements. Finally, we continue to be disciplined around acquisition opportunities and we will only execute a transaction that is financially sound and that it enhances our long-term shareholder value. And on that note, we are ready to open up the lines for Q&A.

(Operator Instructions) Your first question comes from Paul Miller with FBR Capital Markets. Your line is open.

Yes, thank you very much. Can you talk a little bit about the – the loan growth I thought was very impressive this quarter? Can you talk a little bit about on what geographically and what industries that you guys had the most success with?

Sure. Paul, this is Rick Newfield. So, well here is the really good news as we put ourselves in very good markets. We feel we continue to have for the most part rational competition. We are seeing opportunities broad-based across the Midwest, across Colorado and in Texas. Specialized is contributing really at the rate you would expect, given the investments we have made in those areas, so, again, very granular and very broad-based.

So, I mean, is there anyone in – I know like energy in the Midwest has done very well, is it focused on energy, is it energy-related, or is it just across the board just….

Really across the board, absolutely. I will remind you, Paul, we have very specific, very stringent sector targets in place that are actually quite granular. So, while we see a lot of the energy and related opportunity you are referring to, we are not going to allow ourselves to overweight in any one particular sector. The good news as Rick has said, we are seeing nice sound opportunity across both our geographic markets. And again, we would much rather swim with the tide than against it. So, it’s nice to be in healthy markets. And we feel like the business we are seeing across the specialty businesses that we have now lifted out and built are performing as good as our better than expected.

And then going to the M&A front, you are starting to see some deals, not big deals, but some deals start to get done. And you made some comments about that, but I mean, is people’s pricing coming down at all? Is it still the sellers are just not really willing to sell anything below like two times book or something like that?

Yes. I think Paul as we have talked about on the call there wasn’t any data points in our marketplace. And we have been having a lot of conversation, but there has been in the second quarter a couple of data points that traded above that two times. Certainly, very interesting properties from our standpoint, but that’s – those would be a stretch for us. And unless we can figure out a way to make a lot more money out of a two times tangible book value, it’s not going to hit our return criteria, so that the pricing isn’t coming down. If anything is felt like it’s gotten to a little bit of a higher point, but you have been in this business for long time and the one thing that things come your way that you just don’t expect. So, we are out there. We are talking. We have good conversations going on. Some of the boards, you can feel the management teams have been riding these last couple of years of a very good economy. And the timing is coming up. You can feel it.

And are you – I mean, I know, couple of years ago, you were talking about like extending up into Iowa and Midwest, what areas have you been really looking currently? Are you trying to just stay in the Denver Kansas City or are you moving other states?

Look, we really believe that the best long-term – the best path to creating long-term value is going to be building now in our existing markets or we would say truly contiguous markets, but this idea of jumping into Ohio, or jumping multiple states away is just not part of our strategy. We really like the idea of either building through acquisition lift out organically greater market share in the markets we chosen to do business.

Okay. Hey, guys, thank you very much.

Thank you, Paul.

Your next question comes from Chris McGratty with KBW. Your line is open.

Hey, guys. This is actually Mike Pareto stepping on for Chris.

Good morning, Mike.

Good morning. I thought – appreciate the NIM guidance for the next couple quarters, I was wondering just kind of a follow-up to that, if you guys are expecting to see NII inflect in the back half of the year and if so, do you think that it can remain kind of a consistent trend given your loan growth traction you guys have seen over the past few quarters?

Yes, Mike, the NII at that $42 million is something that we’ve been bouncing right around that inflection point here and as we look to the next couple of quarters that really is the purchase portfolio that’s going to move. The investment portfolio and our loan origination machine is really performing as we expected. We did have a little bit quicker than pay down and again that irony that I mentioned, let’s get out of the non-strategic assets, but they are yielding very strongly can have an influence quarter-to-quarter. So, running assets at near where we are today closed to is something that we would expect, but it will be influenced by the purchase. I wouldn’t be surprised if it drops just a little bit from there, but as we go forward into the ‘15 and ‘16 that’s where you really model it out and you can cleaned out a lot of the non-strategic assets in that, that numbers starts to track better with earning assets.

Okay. So just to make sure I heard you correct, still some volatility in the next – in the near-term here that could send it plus or minus a little bit. But, year-over-year, in ‘15 and ‘16, you’re expecting NII dollars to grow.

Yes, as we go forward. But sitting here in ’14, we’re in that inflection year.

Mike, and you know this, but just something to watch is just the size of the remaining non-strategic portfolio, obviously coming down rapidly. We want to come down rapidly and we really do believe to Brian’s point, we’re just a few quarters away from seeing the vast majority of that portfolio having moved away from us so, from an income standpoint, it will be nice because there will be a point here where we’re no longer dealing with the negative impact of the amortization, the reduction of that FDIC receivable, right, so, that’s another component to what you’re asking about that I think is very important.

Okay, thanks. And then, just one more question kind on the moving pieces of the balance sheet. The deposits you guys are remixing and the non-interest bearing growth was nice and obviously the loan originations have been strong. Over the last few quarters, it’s probably been about an $80 million to $100 million decrease on a quarterly basis in the securities portfolio. Do you guys, just trying to match the size of the balance sheet here. Do you guys expect that trend to generally continue or as you guys go in the back half of the year here?

No. The investment portfolio has been delivering as we guided about that $400 million annual cash flow for this year and as we look at over the next four quarters, given the rate environment, there is some volatility that happens with that, but it was built to supply funding for loan growth on the origination side. So it’s performing as expected. From a total asset standpoint, we were bouncing around that $4.9 billion, and we’ll stay close to that as we expand the earnings assets just slightly this year, but then you really start to see it traction with the originated portfolio growth as we go forward.

So on a dollar basis then, are you guys comfortable with the current size of your investment portfolio or do you think there is still additional room for that to moderate further?

The guidance that I have given, Mike is that we are not adding anything to the investment portfolio. So it’s all run off, if that answers your question.

Yes, yes.

Yes. We are replacing that with the strong originations each quarter. We are using – we are strengthening the earning asset mix by reducing the investment portfolio and the non-strategic assets and we are replacing those with our originated portfolio. So the earning assets are running in place here for a while. But certainly the sustainability of the income that’s resulting from that is much more powerful and valuable.

Right, yes. I am just trying to get a sense because the loan growth is about $1 billion of originations, so you are going to grow the balance – the loan book rather pretty quickly, I was just trying to get a sense of I guess what looking out maybe over the next six quarters, how you feel about your liquidity position with that securities book if like the current – I guess that’s more of what I was going after?

Yes. No, I now feel very good about that portfolio and also the non-strategic run-off. And then adding the $1 billion production, we would expect the earning assets to grow and the funding side has been delivering as we expected too. So knock on wood everything is working very well.

Alright. Great. Thanks guys. Thanks for taking my questions.

You bet, Mike.

Our next question comes from Tim O’Brien with Sandler O’Neill. Your line is open. Tim O’Brien - Sandler O’Neill: Good morning.

Good morning Tim. Tim O’Brien - Sandler O’Neill: So first question, so you hit your goal, $250 million in originations, you topped that goal, Tim does that mean that you reset and set a new goal higher, or does that mean you sustain their and price higher or kind of where are you – can you give us a strategic take now?

We realized we must be one of the more boring earnings calls out there, because we are a bit of a broken record. But we have talked pretty consistently about ultimately looking for our complement of 58 commercial bankers to on average hit that $15 million on annual production. We have talked about the goal of on average seeing our banking centers through a consumer and small business originations ramp up to $4 million a year in average production. And again, keep in mind roughly 100 banking centers. If you do that math, it will tell you that our true expectation is that, as this company matures, as our bankers – our experienced bankers’ season with us that we truly expect to exceed that $1 billion in annual production. And now that would be my answer, Tim. Tim O’Brien - Sandler O’Neill: That’s great.

Tim, this is Rick. I might add, if you look at the steady methodical climb we have had in our originations you will also note that we will not and have not sacrificed credit quality for growth. Tim O’Brien - Sandler O’Neill: I am aware of that. And you guys have articulated that consistently for the past several quarters, or since I have been covering. So really since the IPO, so you have talked a lot about credit, but one question that I have for Brian is you mentioned weighted average yield on production this quarter was – did you say 380 basis points?

Yes. 3.8%. Tim O’Brien - Sandler O’Neill: Do you happen have the number from last quarter, remind me, I am sure you gave it last quarter, I just don’t have it in front of me?

Okay, good. That’s asked at the last couple quarters. But we had about 4% in each of the fourth quarter and the first quarter and a little bit lower here in the second quarter. Nice strong heavy weighting to the variable at the 3.8%. I am actually – we are all very excited about having the heavy variable rate component and still delivering 3.8%. So that feels very good. Tim O’Brien - Sandler O’Neill: So really, what you are saying is that the sequential decline related to kind of the mix of fundings that took place?

Yes. No, it’s I looked at the books very similarly. And a lot of it’s influence by the amount of variable and affects of terms you have – and that’s been a focus for us. Tim O’Brien - Sandler O’Neill: And conversely, no, changes really or accommodations or relaxing in pricing incrementally this quarter relative to last quarter?

I will let Rick talk to the terms, but from a pricing standpoint, we feel very consistent in our thinking. And our markets, as we have shared with you, have been more promotional than maybe some of it’s experienced in the East Coast and other places of the past. But it feels very good here in the Midwest. And Rick?

Sure Brian. And Tim I will just reiterate and again we are fortunate to be in markets that not only are strong, but where the competition for the most part remains rationale and therefore, we are able to maintain those standards, no doubt, there would be some opportunities we miss by holding those standards, but we’re comfortable with that. Tim O’Brien - Sandler O’Neill: Good. And then, I guess my last question is, are you – and this would be for you, Rick – have you guys hit or are you approaching any of those, kind of caps that you talked about that were, I guess related to any specific sector or such and are you guys going to top out here, given the growth that you’ve put on or r do you still got plenty of capacity? And those are – obviously, those are going to move as the overall portfolio grows, but – will you be constrained there at all?

No, there is not. And, Tim, actually, it almost points back to the question, Paul opened up with in terms of where we are seeing your originations in any concentration. And absolutely no concentration and we have plenty of room really across the spectrum of opportunities that we see.

You always ask such great questions that it prompts probably another comment that we’re being asked more, more frequently and that’s – what’s our position on snicks, what out – should we be more aggressive with national purchase loans and what we’ve seen – while we certainly strategically allocated a certain amount of capital for the potential growth of snicks, we’re just not seeing the opportunities that really meet our credit criteria while achieving the pricing hurdle so, really national snick type business has been the minimums for us where – we’ll tend to be more involved in that businesses where we’re talking about a local relationship where we need to layoff some exposure and that exceeds our in house limits. But that’s just another example we believe of being able at be conservative to hold ourselves to certain pricing hurdles and still grow the business. Tim O’Brien - Sandler O’Neill: Thanks, Tim, for the color on that. And, it’s kind of nice not to feel like you’d want to even look at snicks right now unless they were very, very compelling given how strong the organic business is. One last question, then I’ll end it. And that is, looking at the $15 million interest contribution from ASC 310-30 loans this quarter, on average just under $400 million in balances. Does that contribution go up kind of based on as we get to the tail end of the expected life of that book? Do we see kind of a ramp-up in interest captured there, even as the book shrinks on an absolute dollar basis here or is that going to taper off?

Tim, the way to look at it is as you were any other interest bearing security as we look at each quarter when we measure, we reset the amount of accretion comes in the interest. So, if you look at the interest yield of just under 16% on the balances. As the balances go down, that 16% would carry forward so, a relative similar amount, but on an absolute basis, a lower contribution. But I would mention as we’ve talked about a number of times here that there is a long life to those pools. They’re longer life to assets and that’s one of the challenges that we’re having, is that – we pick up $12 million in accretable yield this quarter and it has almost the zero impact to 2014 as those assets, cash flows are being benefiting future periods, but we’re picking up additional FDIC indemnification asset amortization, because we won’t be billing the FDIC because a large component of those 310-30s are covered assets. And so, we’ve got this mismatch in our income statement that works its way out of the time, but it’s certainly live today. Tim O’Brien - Sandler O’Neill: Thanks for answering all my questions, guys, and enjoy the rest of your summer.

Thank you, Tim.

Your next question comes from Matt Olney with Stephens Inc. Your line is open.

Hi, thanks, good morning guys.

Good morning, Matt.

Hey, you talked a lot about growth initiatives on the loan side, and it sounds like you’re getting some good traction there. On the fee income side, are there any initiatives that you’re working on there in terms of new products, or is it still kind of status quo?

No, it’s a range of continuing to simply improve our performance on core products. Again keep in mind, these acquired banks had limited to no practices of providing fee-based products to their clients. And so part of our opportunity just represents getting to the industry normal fee income. And we certainly are looking at – well, we are probably not inclined for competitive reasons to talk about additional products. We are certainly in process, in fact of considering the expansion of our current fee product base.

Okay. And then in prepared remarks, I believe there was a discussion that we should expect a slight build on the reserve ratio, reserve to loans, did I hear that correctly?

Yes, it will happen pretty much on its own as you think about the mix of purchased assets and originated. And the originated has more of the normal accounting, where you are going to have an allowance that makes some sense. And certainly, when you buy purchased assets, they are zero coming across, right. So, as that balance comes down, we will have increased allowance coverage, but we are also looking to keep pace with the growth of that portfolio in our allowance calculations.

Hey, Matt, this is Rick. Just one other point, I think Brian alluded to, but within that purchased, we also have and this is separate from the 310-30 pools approximately $9 million of un-accreted mark, that’s really held against that purchase book. So, I think as Brian said, as that diminishes and we are more focused on the originated you will see that percentage coverage naturally increase.

Yes, that makes sense. Okay, that’s all for me guys. Thank you.

Matt, thanks.

Thank you. And this concludes the Q&A session. I will now turn the call back over to Mr. Laney for his closing remarks.

Thank you for joining us today. For those of you that ask questions, thank you for your thoughtful questions and have a good day.