National Bank Holdings Corporation

Good morning, everyone, and welcome to the National Bank Holdings Corporation 2026 First Quarter Earnings Call. My name is Anna, and I'll be your conference operator for today. At this time, all participants are in a listen-only mode. 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, non-interest income, margins, allowance, 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. 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 Chairman and CEO, Mr. Tim Blamey.

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, Aldous Bercans, our chief financial officer, Nicole Van Denneville, and John Steinmetz, 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 and 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 that work 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 72 cents, 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, and 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 teams 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 into the quarter at 91.9%. Turning to asset quality, credit quality remained 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 remains consistent at 1.18%. As of March 31st, 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. Non-interest 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 to $80 million. As a reminder, this outlook includes $2 to $4 million of two-unified revenue, which we expect to be weighted towards the back half of the year. That interest expense totaled $96.8 million for the quarter and included $15.3 million of acquisition and restructuring costs. Excluding these one-time items, non-interest 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 half a million dollars 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 non-interest expense for the full year 2026 to be in the range of $320 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 earned-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 up 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 2026. EPS by the fourth quarter. In terms of the risk 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, 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 four-year loan growth guidance. The portfolio credit trends are positive, and we are proud of our top quartile performance. We entered the quarter with the lowest levels of criticized loans in four 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 as well to drive sustained deposit growth in the future. I'm also pleased to report that our trust in wealth management business has grown to $1.4 billion in assets under management, more than doubling over the past three years since the end of this space. This momentum translates into double-digit fee growth in 2026, reinforcing our non-interest income outlook and highlighting the important role this business plays in our broader non-interest 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, Aldous, 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 believed VISTA and NVH were a strong cultural fit, and that conviction is only strengthened as our teams work side by side. Both organizations share the same foundational values. a disciplined credit culture, an 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 MDH 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 MDH's broader systems and platforms. 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 MDH means the opportunity to pair a strong market presence and the 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, four of whom were sitting presidents at their prior institutions, which is humbling to think. 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 in real time. Additionally, Texas remains one of the most attractive banking markets in the country, with its pro-business environment, diverse economy, continued population growth and business migration, NBH is now perfectly positioned to take advantage of this growth, further emphasizing our goal of maximizing shareholder value. I also remain particularly excited about what we are doing in our resort markets. These communities are creating meaningful opportunities for banks like ours to pair local knowledge with highly personalized service. Texas and the resort markets drove meaningful high-quality asset growth in the first quarter, and with new leadership and robust pipeline, These markets represent a significant long-term opportunity 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. MDH was 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, MDH 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 Canberra and 2Unify businesses. With respect to 2Unify, 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 contracting and getting close to a meaningful breakthrough. So more to come. Now, in the three years that we've operated Canberra, 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 Canberra far more pricing power and funds movement flexibility. Our small but mighty Canberra 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 a track record of doing just that. On that note, let's open up the call for questions.

Yes, sir. Thank you. And if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach your equipment. Once again, that is star one if you would like to ask a question. We'll now take a question from Jeff Rulis with DA Davidson.

Thanks. Good morning.

Hey, Jeff. Good morning.

I wanted to check in on that dollar expectation plus of earnings in the fourth quarter. You know, you kind of made that initial expectation margin was at 389, and you were coming off a net loan runoff year. of fast forward to uh 12 plus organic growth and a 406 margin i guess any potential for you to breach that figure in earlier in the third quarter it seems like um you know certainly your confidence you double down in the release but wanted to check on the possibility of of what needs to take place potentially if that happens in the third quarter

Jeff, we have a track record of under-promising and over-delivering. 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% long growth. We think it may very well be the tip of the iceberg. You know, 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.

Thanks, Tim. And just maybe jumping to Nicole or Aldis, on the margin, do you have a March average for where that was?

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

Okay. And, Nicole, the 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 he is under promise over the liver, but wanted to see if anything one-time in the 406 margin, why that might, you know, lean back towards 4 for the balance.

Yeah. Yeah. Well, Jeff, I'll start by saying that we are very proud of our four-plus percent margin. The first quarter had about five basis points of loan accretion addition from the VISTA acquisition. So even without that loan accretion impact, very strong net interest margin. 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 gets you right at a 4% margin.

Okay. Great. I'll step back.

Thanks. Thank you, Aldis.

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

Hey, good morning. Thanks for the question. Maybe building on that under-promise, over-deliver concept, the 10% loan growth, notably, I mean, you came in stronger out of the gate with the noise of that 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, you know, what would be the factors, I guess, that would get you to potentially close? come in over the top of that 10. Thanks.

Well, Kelly, as a reminder, we provided the guidance on 10% going into the year. We don't typically make changes in year on 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 markets. I think it's noteworthy that we saw very strong diversified growth across our markets. I really, I can't compliment our banking teams enough for focusing on clients, taking market shares, expanding relationships. And, you know, we feel very good about our growth prospects this year.

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

Yeah, it's a great question, Kelly. And first, You know, we've 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, you know, a good example of that is what John has been doing in our resort markets. I mean, 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 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.

Yeah, good morning, 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 to 320. and $30 million. Where possible, we're taking actions 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, you know, as I mentioned, we're continuing to invest in growth. And then a little bit of color as 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, you know, I 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 center fees come online. Got it. That's helpful. Last one, if I can speak to it, just because we are on the topic of expenses, the expenses related to unified apparel, about $22 million for the year here. Yes, yes, that is correct. We recognized about a fourth 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 a 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 is noteworthy. Correct.

Great. Awesome. Thank you so much. I will step back and let others on. Thank you, and congrats on closing the deal.

Yeah, thank you, Kelly.

Our next question will come from Andrew Terrell with Stevens.

Hey, good morning.

Good morning, Andrew. Good morning.

Hey, 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, you know, it seems so much tougher if we just take out of the midpoint of the guides for ease and expenses and if the margin stays, you know, near kind of a 4% level. I guess it kind of feels tough to get to a dollar per share. So I'm trying to figure out where You know, where specifically the guys could be conservative on those few points or, you know, if it's just a difference in provision?

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

You have 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 dollar 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 a meaningful, in fact, any reduction in provision. That's not what this is about. This is on the strength of earning assets and the income, as well as realizing the expense synergies in the VISTA acquisition. And it's, in our mind, pretty straightforward.

Yeah, 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.

Yeah, great point. Okay, I appreciate it. And then on the just 34 basis points of annualized charge off this quarter, this is A couple quarters in a row of a little bit higher charge-offs. Maybe could you speak to what drove the first quarter charge-offs? And I know some of the commentary and the prepared remarks just around criticized, classified, MTAs coming down a little bit this quarter. You know, 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 of it.

Yeah, 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 credit quality. 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. You know, 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 crits and classified, and we're left feeling good about the year.

Got it. Okay. Thank you for taking the questions.

You bet.

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

Hey, good morning.

Hey, good morning.

Just to 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 31st?

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

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

I don't think we disclosed the price at which we purchased, but again, as we see markets pull back, We are optimistic in the market, and I think that's how we operate it. We do have specific products in mind, but, you know, if you see meaningful pullback in our stock, 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? Yeah. Okay. Okay. And then on the organic deposit front, excluding VISTA this quarter, it looked flattish to down modestly. Any color there on whether some of that might have been deliberate or shocking up the seasonality and what's the output?

It's a great question. It's actually a combination of As we pulled the books together, there was some mixing of deposits, and that's what you see in kind of flat. I'll say, you know, this was operating at 2.5% cost deposits. So housekeeping deposit costs all on the link quarter basis almost flat. You can imagine there was a bit of a shuffling around there.

Got it. Okay. And last one for me, just – Any update on the progress you're making to execute a two-unified partnership and whether or not 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.

Okay. Fair enough. Thank you.

Thank you, Matthew.

We'll now take a follow-up from Jeff Willis with DA Davidson.

Thanks. A little more of a housekeeping question. I guess I'm just trying to map the merger costs. You know, 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.

Yeah, Jeff, I'll take that one. I can give you some color. So for Q1, the majority of those acquisition one-times 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.

Yeah, I guess not. I just want to make sure we're clear. The synergies, I am looking at the one-time merger cost of $15 million and the restructuring of $1 million. By line, you're saying a decent portion of the merger one time they're in salaries?

Yes. Think of severance. Think of other exit-related compensation. Got it. Okay. Thank you.

We'll now take a question from Kelly Mott on the PBW.

Hey, thanks for letting me jump in. One of my follow-ups was just taken. I guess the last one for me is on this 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 was low 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 uplifts off this level. Thank you.

This is all the same. That's a great question. So, yeah, you're right. The to unify related fee component really is going to start hitting in the second half, so that's an option. and service charges, those are expected to grow some. And the piece that is always light in first and fourth quarters of the year on mortgage-related gains from sale as we enter in summer season, we do expect or at least plan for something up there as well.

Kelly, we very much like what we're seeing in terms of the 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 call. If it's all for me, I'll step back.

Thank you, Kelly.

Thank you. 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 in the rest of the week. Goodbye.

And that 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.