National Bank Holdings Corporation (NBHC) Q1 2026 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to the National Bank Holdings Corporation 2026 First Quarter Earnings Call. My name is Anna, and I will be your conference operator for today. As a reminder, this conference is being recorded for replay purposes. I will now turn the call over to Emily Gooden, Chief Accounting Officer and Director of Investor Relations.

Thank you, Anna, and good morning. We will begin today's call with prepared remarks followed by a question-and-answer session. 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, taxes and noninterest 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. In addition, the call today will reference certain non-GAAP measures, which National Bank Holdings Corporation believes provides useful information for investors. Reconciliations of these non-GAAP financial measures to the GAAP measures are provided in the news release posted on the Investor Relations section of www.nationalbankholdings.com. It is now my pleasure to turn the call over and introduce National Bank Holdings Corporation's Chairman and CEO, Mr. Tim Laney

Well, thank you, Emily, and good morning, and thank you for joining us as we discuss National Bank Holdings' First Quarter 2026 Financial performance. I'm joined by our President, Aldis Berkonz; our Chief Financial Officer, Nicole Van Denville; and John Steines, our Executive Vice Chair and Executive Managing Director of Strategic Initiatives. The NBH team delivered an outstanding first quarter, and we believe we're well positioned to have a very strong year. In fact, momentum across the organization reinforces our belief in our ability to grow our earnings this year and surpass $1 of earnings per share in the fourth quarter. In the first quarter, we delivered record loan fundings and our net interest margin expanded to 4.06%. We experienced positive trends with all credit metrics, and we believe the NBH team is well positioned to deliver meaningful growth in earnings this year. I want to thank our bankers for their focus on taking market share as well as expanding relationships with existing clients. I also want to thank our teammates who worked diligently behind the scenes to efficiently deliver a great experience for our clients. And on that note, I'll turn the call over to Nicole for greater financial details on the quarter. Nicole?

Thank you, Tim, and good morning. This morning, I'll review our first quarter financial results and provide guidance for the remainder of 2026. As a reminder, our guidance does not include any future interest rate policy changes by the Fed. For the first quarter, on an adjusted basis, we reported net income of $32.6 million or $0.72 of earnings per diluted share, 43% higher than the prior quarter. The first quarter's adjusted return on tangible assets was 1.2% and the adjusted return on tangible equity was 11.8%. During the first quarter, we closed the Vista acquisition, generated record quarterly loan originations of $805 million and delivered annualized loan growth of 12.4%. Fully taxable equivalent pre-provision net revenue increased $8.5 million or 21.7% compared to the prior quarter after adjusting for transaction-related expenses. Loan balances increased by $2.2 billion or 29% during the quarter. Our team generated $285 million of organic loan growth on top of $1.9 billion of loans acquired in the Vista acquisition. We entered the second quarter with robust loan pipelines, and we expect to achieve our full year loan growth guidance of approximately 10%. Fully taxable equivalent net interest income for the quarter totaled $111 million, an increase of 25.7% compared to the prior quarter. The linked quarter increase was primarily driven by $2.1 billion of higher average earning assets and the quarter's strong margin. Net interest margin expanded 17 basis points during the first quarter to 4.06%, driven by a 24 basis point increase in earning asset yields. For the remainder of 2026, we expect net interest margin to remain near 4%. Deposit balances increased by $2.2 billion during the quarter on a spot basis, inclusive of Vista balances added at acquisition close. Deposit costs remained low at 1.94% and our loan-to-deposit ratio ended the quarter at 91.9%. Turning to asset quality. Credit quality remains strong. We recorded $4 million of provision expense, primarily to support the quarter's strong loan growth. Net charge-offs were 8 basis points for the quarter or 34 basis points on an annualized basis, and the allowance coverage ratio remained consistent at 1.18%. As of March 31, we continue to hold $24 million of marks against our acquired loan portfolio, which would provide an additional 25 basis points of loan loss coverage if applied across the entire loan book. Noninterest income increased 16.9% year-over-year and totaled $18 million for the quarter. For the remainder of 2026, we project to achieve our full year fee income guidance of $75 million to $80 million. As a reminder, this outlook includes $2 million to $4 million of Unifi revenue, which we expect to be weighted towards the back half of the year. Net interest expense totaled $96.8 million for the quarter and included $15.3 million of acquisition and restructuring costs. Excluding these onetime items, noninterest expense was $81.5 million. We have begun realizing cost efficiencies from the Vista acquisition. We remain on track to achieve our targeted expense synergies, the majority of which are expected to be realized following the third quarter system integration. In addition, we continue to invest in future growth by adding new bankers across our footprint. We have recently added more than 10 new bankers, resulting in approximately $0.5 million of incremental expense during the first quarter and which will add approximately $4 million in annual run rate expense. As previously guided, we project total noninterest expense for the full year 2026 to be in the range of $320 million to $330 million. Our capital levels remain well in excess of well-capitalized regulatory thresholds, even after deploying capital for our most recent acquisition and for share repurchases during the quarter. Common equity Tier 1 ratio ended the quarter at 12.5%, and the total capital ratio was a strong 15.8%. Tangible book value per share was $26, and we expect to outperform our earn-back expectations for the Vista acquisition. Importantly, we are on track to deliver earnings in excess of $1 per share in the fourth quarter of 2026. With that, I will turn the call over to Aldis.

All right. Well, thank you, Nicole, and good morning. Our first quarter was highly productive, and I want to thank our team for getting us off to a great start in 2026. The first quarter's performance is consistent with our internal expectations. And as Tim shared, we remain confident in our trajectory towards achieving $1 EPS by the fourth quarter. In terms of the Vista acquisition, the onboarding of new associates and clients has gone well, and our integration efforts remain on track. Turning to our financial performance. The strength of our balance sheet was on full display this quarter. We generated record quarterly new loan fundings of $805 million, which drove an annualized 12% loan growth. I will note that this quarter's loan production was not just strong but also well diversified across asset classes and geographies, reflecting the breadth of our platform. Furthermore, as we move into the second quarter, we are encouraged by our robust pipelines. And as Nicole shared, we are on track to deliver our full year loan growth guidance. The portfolio credit trends are positive, and we are proud of our top quartile performance. We ended the quarter with the lowest levels of criticized loans in 4 years while further reducing both NPAs and NPLs this quarter. This quarter's new loan production came in at an average rate of 6.4%, which remains complementary to our overall loan portfolio yield and contributed to a strong net interest margin of 4.06%. Our ability to maintain margin at these high levels highlights the quality of our deposit franchise and our commitment to relationship-based banking. We offer the best-in-class treasury management capabilities that contribute meaningfully today and position us well to drive sustained deposit growth in the future. I'm also pleased to report that our Trust and Wealth Management business has grown to $1.4 billion in assets under management, more than doubling over the past 3 years since we entered the space. This momentum translates into double-digit fee growth in 2026, reinforcing our noninterest income outlook and highlighting the important role this business plays in our broader noninterest income diversification strategy. Finally, reflecting our confidence in the durability and quality of our earnings, we took steps earlier this year to enhance our shareholder returns. We increased our quarterly dividend by 3% to $0.32 per share and took advantage of the market volatility to restart our stock buyback program with $16 million purchased in Q1. With that, I'll turn it over to John.

Thank you, Aldis, and good morning, everyone. We appreciate you making the time to be on the call. It's hard to believe it has only been 105 days since we closed our transaction. In that short window, we've already seen real momentum, retaining key talent, attracting new talent and driving meaningful growth across our markets. From the beginning, we believe Vista and NBH were a strong cultural fit, and that conviction has only strengthened as our teams work side by side. Both organizations share the same foundational values, a disciplined credit culture, and unwavering commitment to client service and a people-first philosophy that drives everything we do. That said, I want to thank our legacy Vista teammates for their continued trust, hard work and grit through the first quarter. I would like to thank our new NBH colleagues for the way that you've welcomed us to the team. Together, we are doing great things. We also have made meaningful progress on the operational side, integrating Vista into NBH's broader systems and platform. Successful combinations are built on shared values. They are executed through discipline, hard work and an unwavering commitment to win, and I could not be more proud of our team. As I mentioned last quarter, joining NBH means the opportunity to pair a strong market presence and client relationships with a broader platform, enhanced offerings and a bigger balance sheet. The momentum from this combination is already visible, both internally and externally across all existing markets and to our clients and teammates alike. Since closing, we've added over 10 exceptional bankers to the organization, 4 of whom were sitting presidents at their prior institutions, which is humbling the bank. I've always believed the best clients follow the best bankers and the best bankers follow the best culture. We are seeing that play out with time. Additionally, Texas remains 1 of the most attractive banking markets in the country, with its pro-business environment, diverse account for our company. To meet that demand, we are delivering a broad set of capabilities, such as enhanced treasury management services, wealth and trust services and an expanded mortgage offering. and is built to meet clients across the full life cycle of their needs from day-to-day operations to generational wealth planning. We are energized by the opportunities in front of us. NBH has the right platform, the right markets and most importantly, the right people. To our shareholders, thank you for your continued trust. We could not be more excited about the road ahead. And with that, Tim, I'll turn it back over to you.

Well, thanks, John. Well, as you now know, we have a lot to feel good about with our first quarter results. We also feel great about our momentum as we dive into the second quarter. We've covered the company's core performance, and I want to also provide you with an update on our Camber and 2 Unified businesses. With respect to Unify, the platform has generated over 1,300 user applications year-to-date with weekly application volume accelerating from about 40 per week to most recently, nearly 400 -- while top of the funnel growth and early engagement metrics are strong, we still have work to do to drive higher deposit account openings and loan fundings. Having said this, I believe the team is gaining traction and getting close to a meaningful breakthrough. So more to come. Now in the 3 years that we've operated Camber, we've grown the program over $700 million to greater than $2 billion. Further, the team has continued to increase and diversify its deposit distribution network giving Camber far more pricing power and funds movement flexibility. Our small but mighty Camber team is making an incredibly positive impact. Turning back to our core business. We continue to build market share in attractive U.S. markets and our demonstrated ability to rapidly grow capital translates into a broad set of opportunities for NBH. Our focus remains on supporting our teammates, serving our clients, our communities and, of course, creating greater shareholder value. And we stand on our track record of doing just that. On that note, let's open up the call for questions.

[Operator Instructions] We'll now take a question from Jeff Rulis with D.A. Davidson.

Wanted to check in on that sort of that dollar expectation plus of earnings in the fourth quarter. You kind of made that initial expectation margin was at 3.89% and you were coming off a net loan runoff here kind of fast forward to 12% plus organic growth and a 406% margin. I guess, any potential for breach that figure earlier in the third quarter. It seems like certainly your confidence, you doubled down in the release, but I wanted to check on the possibility of what needs to take place potentially if that happens in the third quarter?

Jeff, we had a track record of underpromising and overdelivering. I've got to tell you, having said that, we feel very, very good about our momentum. I feel like we're running on all cylinders at this point, which is quite remarkable when -- just to remind everyone, we closed on the Vista acquisition in the first week of January. So if you think about the time required to assemble organized teams, get alignment and then get focused on clients and markets, it's pretty remarkable what we were able to see our teams do, generating that 12%, 12.4% loan growth. We think it's -- it may very well be the tip of the iceberg. And then beyond that, what we're seeing early on in terms of the opportunity to expand treasury management services, wealth management services, residential banking services in markets like Dallas, get us very excited.

And just maybe jump into Nicole or all this on the margin, do you have March average for -- where that was?

Yes. March came in very much in line with the overall quarter's margin.

Okay. And Nicole, I guess as you talk about the outlook for near 4% for the rest of the year, is that suggestive of maybe accretion was a bit higher in the first quarter? It seems a little conservative. I know that Tim just said is under promise over the liver, but I wanted to see if anything 1 timing of 406% margin, why that might lean back towards 4 for the balance?

Yes. Yes. Well, Jeff, I'll start by saying that we are very proud of our 4-plus percent margin. The first quarter had about 5 basis points of loan accretion addition from the Vista acquisition. So even without that loan accretion impact, very strong net interest margin and from a loan yield cost of funding perspective, as Aldis mentioned, Q1 loan origination rate 6.4%, very consistent with where our current loan book is and we expect to fund that loan growth with full relationship core deposits, so maintaining our strong cost of deposits under 2%. That gives you right at a 4% margin.

We'll now take our next question from Kelly Motta with KBW.

Thanks for the question. maybe building on that -- that under promise, over deliver concept of the 10% loan growth. Notably, I mean you came in stronger out of the gate with the noise acquisition with 12% organic loan growth. So 10% seems to imply a slowdown in the remainder of the year. I guess, it does sound like your pipeline and expectations remain quite strong. How are you thinking about the cadence of growth? And what would be the factors, I guess, that would get you to potentially come in over the top of that 10%?

Well, Kelly, as a reminder, we provided the guidance on 10% going into the year. And we don't typically make changes in year-end guidance. And having said that, I think the 12.4% growth in the first quarter, given everything that was going on speaks to the kind of opportunity we're seeing in the market. So I think it's noteworthy that we saw very strong diversified growth across our markets. I really -- I can't complement our banking teams enough for focusing on clients, taking market share, expanding relationships. And we feel very good about our growth prospects this year.

Got it. Got it. That's really helpful. Turning to expenses. I appreciate the color that you added new bankers over time that helps to drive growth, and it's ahead, which is what we want to see. It does seem like there are some moving parts with the cadence of expenses with hires plus the conversion later in the year. And I'm wondering if there's any way to get kind of a Q4 exit expense run rate, given the noise or how much on a dollar basis, you're expecting the cost saves to be post conversion? Just so we can manage the cadence appropriately coming out of the year for -- as we think through next year.

Yes, it's a great question, Kelly. And first, we really been delighted with the quality of bankers that have been coming to us as we've looked at opportunities to expand in certain targeted markets. And a good example of that is what John has been doing in our resort markets, I mean it's -- we think we're going to get very attractive returns on those investments. I would tell you that we are also very diligent in tracking our expense reductions related to the synergies of the Vista acquisition. It's something we've got strong alignment with, with respect to our incentives and something our Board is very focused on. I am convinced we will not only meet but beat the expense synergies that we modeled in the acquisition and shared with -- the Street. And now I'll throw it to Nicole maybe for a little more detail and answer to your question.

Yes. Kelly, you're right. So as we all expected, 2026 is a noisy year on the expense front. I will reiterate that full year guide of $320 million to $330 million. Where possible, we're taking action to realize expense efficiencies ahead of the system conversion, but the bulk of those synergies will come after our systems conversion, which is at the end of July. That, coupled with, as I mentioned, we're continuing to invest in growth. And then a little bit of color, if I think about Q2 on the expense run rate perspective. Q2 does have a couple of additional payroll days. Our merit increases come online. So there wouldn't be surprised if there's an uptick in expense from Q1 to Q2, and then it will trend down throughout the year as those expense synergies come online.

Got it. That's helpful. Last one, if I can sneak it in, just because we are on the topic of expenses, the expenses related to Unifi that's still about $22 million for the year here?

Yes, yes. That is correct. We recognized about 1/4 of that in the first quarter and very much on track to keep at that $22 million, which just as a reminder, is flat compared to where we were last year. The $22 million does have for this year, full year of depreciation expense, which means that we've brought down the cash burn rate meaningfully year-over-year.

To expand on that, if you look at it on a pure cash burn basis, it's about $10 million this year. So that's noteworthy.

Our next question will come from Andrew Terrell with Stephens.

I appreciate all the color. I wanted to ask on the dollar per share in the fourth quarter, the guidance there. What kind of provision are you assuming in that dollar per share? And I ask just because it seems somewhat tough if we just take out of the midpoint of the guide for fees and expenses and if the margin stays near kind of a 4% level. I guess it kind of feels tough to get to $1 per share. So I'm trying to figure out where specifically the guide could be conservative on those few points? Or if it's just a difference in provision.

This is Aldis. I'll try to answer that one. In terms of -- if you look at kind of breaking down by pieces, right, if we deliver on our loan growth and our promise we deliver type of basis we should be sitting at $1 billion-ish, if not more, of earning assets in fourth quarter than where you sit -- what we did in Q1. If you look at the fee guidance that Nicole provided, that has some upside there as we discussed expenses, certainly a significant step down in expense run rate from Q1 to Q4, as Nicole indicated, due to synergies and while we don't provide specific provision expense, there is plenty of room to provide for new loan growth in Q4 as well in order to deliver $1 EPS.

To be very specific on provision, look, our models will drive provisioning. We use those models as we forecast. It's part of what we rely on as we get to that $1 plus of earnings in the fourth quarter. So there's no -- I would say, Andrew, maybe to answer your question this way, there's nothing unusual. There's no assumption around meaningful, in fact, any reduction in provision. That's not what this is about. This is on the strength of earning assets and fee income as well as realizing the expense synergies in the Vista acquisition. And it's, in our mind, pretty straightforward.

Yes. Andrew, it's a good question. One thing to also keep in mind is we did invest in some really high-caliber bankers in this first quarter. And I think you're going to see strong results leading into the second half as they come over and execute on those expenses that we like to see as investments.

Yes, great point. Okay. I appreciate it. And then on the just 34 basis points of annualized charge-offs this quarter. This is a couple of quarters in a row of a little bit higher charge-offs. Just maybe could you speak to what drove the first quarter charge-offs. And I know some of the commentary in the prepared remarks, just around criticized, classified NPAs coming down a little bit this quarter. It seems like it would suggest that you'd expect kind of a normalization lower in charge-offs. So maybe just want to unpack kind of the credit piece a bit.

Yes. Look, you can't see it yet, but we've had a dramatic reduction in our criticized classified loan ratios this quarter. we are feeling very, very good about the credit quality. There -- as it relates to NPAs being flat, I would just tell you that we've had normal ins and outs. We do expect NPAs to trend down over the course of this year. but we're not apologizing for where we stand right now. Our goal is always to operate in that top quartile of performance. You couple that focus with the fact that we are very excited about what we're seeing in terms of the reductions in Cris and classified and we're feeling good about the year.

We'll take our next question from Matthew Clark with Piper Sandler.

Just a follow up on the margin. Was there a special FHLB dividend this quarter? And if so, how much?

There was no special FHLB dividend this quarter.

Okay. Great. And then do you happen to have the spot rate on deposit costs at the end of March 31?

Yes, that's right around where we did for the quarter, low 190s.

Okay. Great. And then on the the buyback, how many shares we repurchased or at what price either one?

I don't think we disclosed the price at which we purchase. But again, as we see markets pull back, we are opportunistic in the market. And I think that's how we operate it on -- we do have a specific price in mind, but if you see a meaningful pullback in our stock, it's -- we jump in opportunistically.

Okay. I didn't see the price per share, I just saw the dollars, sorry. Okay. And then just double checking the baseline you're using for the 10% growth guide for loans is $9.3 billion with Vista.

Yes.

Okay. And then on the organic deposit front, excluding Vista this quarter, it looked flattish to down modestly. Just any color there on whether some of that might have been deliberate or chalking it up to seasonality? And what's the [indiscernible].

It's a great question. It's actually a combination of all above. It was there's some seasonality as we pull the books together, there was some remixing of deposits and that's why you're seeing kind of flat. I'll say, Vista was operating at 2.5% cost deposits -- so us keeping deposit costs all on a linked quarter basis almost flat. You can imagine there is a bit of a shuffling around there.

Got it. Okay. And last 1 for me. Just -- any update on the progress you're making to execute to unifi partnership and whether or not that we should expect something still this year?

Look, it remains a focus, and there's not much more we can say about it at this point.

We'll now take a follow-up from Jeff Rulis with D.A. Davidson.

A little more of a housekeeping question. I guess I'm just trying to map the merger, the costs. I would imagine a lot in other, but were there others sprinkled in the salaries or occupancy or professional fees, just trying to get to where we could remove those going forward.

Yes, Jeff, I'll take that one. I can give you some color. So for Q1, the majority of those acquisition onetime fit in salary and benefits. So as you can expect, as we work through our expense synergies, a lot of those are people-related items.

Yes, I guess not -- I just want to make sure we're clear. The synergies, I get looking at the onetime merger costs of $15 million and the restructuring of $1 million by line item, you're saying a decent portion of the merger, onetime in [indiscernible]?

Yes. Think of severance, I think of other exit-related compensation.

We'll now take a question from Kelly Motta with KBW.

One of my follow-ups was just taken -- in terms -- I guess the last 1 for me is on the fee outlook here. at least Q1 is annualizing below that range. And I believe there's some to unify expectation in the second half of the year, mapping. Is there anything else that would load that's expected to build in order to get you to that range? I'm just trying to think through kind of the moving parts and how much is to unify versus other kind of core banking fee related uplift of this level?

Right. This is Aldis. That's a great question. So yes, you're right, the unified elite fee component really is going to start hitting in the second half. So that's an uplift relatively to what we delivered in the first quarter, you look at the interchange and service charges, those are expected to grow some. And the piece that is always light in first and fourth quarters of the year are mortgage-related gains on sale as we enter in the summer season, we do expect we'll at least plan for some pick up there as well.

Kelly, we very much like what we're seeing in terms of fee income opportunity for this year. We have no hesitation in standing behind our guidance on fee income for '26.

Got it. Thank you so much for the color. It's all for me, I'll step back.

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

Well, thank you, Anna. And really, thank you, everyone, for your participation. I'll thank the analysts for their great questions today, and wish everybody a great day and the rest of the week. Goodbye.

And this concludes today's conference call. If you would like to listen to the telephone replay of this call, it will be available in approximately 24 hours, and the link will be on the company's website on the Investor Relations page. Thank you very much, and have a great day. You may now disconnect.