National Bank Holdings Corporation Q2 FY2026 earnings call

• Overall Financial Performance

  • Delivered solid Q2 2026 results with record quarterly loan production and 10% year-to-date loan growth.
  • Adjusted net income reached $35.3 million, or $0.78 diluted earnings per share, 33% higher annualized than the prior quarter.
  • Adjusted return on average tangible assets rose 6 basis points to 1.3%, and adjusted return on average tangible equity increased 92 basis points to 12.7%.
  • Credit quality remained strong with low non-performing assets at 35 basis points and a 3x allowance coverage ratio on non-performing loans, up from 2x one year prior.

• VISTA Acquisition Integration

  • Core system conversion is on track to complete by the end of Q3 2026, with all VISTA integration conversions targeted to finish by quarter end.
  • The company is on track to meet or exceed expected expense synergies from the acquisition, with most synergies coming online after Q3 2026 integration.
  • Retention of VISTA clients has been strong, and the revenue lift from the acquisition is meeting expectations.
  • Numerous seasoned banking professionals have been added across the franchise post-close to expand market reach.

• Balance Sheet and Credit

  • Record Q2 loan originations hit $927 million, bringing year-to-date production to $1.7 billion, which already exceeds full-year 2025 total fundings.
  • Loan growth was broad-based across most asset classes and geographies, with line utilizations rising toward historical averages as client economic confidence improves.
  • Classified, criticized, and past due loans all declined quarter-over-quarter and year-over-year, with criticized loans falling to 3%, the lowest level since 2022.
  • Average deposit balances grew 2.3% annualized, with deposit costs falling 1 basis point to a low 1.93% and total cost of funds at 2.01%, ending the quarter with a 94.1% loan-to-deposit ratio.
  • Capital levels are well above regulatory well-capitalized thresholds, with a Common Equity Tier 1 Ratio of 12.3% and total capital ratio of 15.4%.

• Unify Fintech Initiative

  • Revenue growth has been slower than expected, driven by a high volume of unqualified applications from startup businesses and low credit quality applicants that do not fit the bank's risk profile.
  • The company is refining its targeted marketing to attract more qualified applicants, and has seen small but positive granular small business deposit growth from the business.

As a diversified commercial bank holding company, National Bank Holdings Corporation reports consolidated results with the following core performance segments:

1. Net Interest Income Segment: Generated $111.5 million in fully taxable equivalent net interest income for Q2 2026, representing a 25% year-over-year increase. This segment contributed 85% of total quarterly revenue (net interest income plus non-interest income), with a Q2 2026 net interest margin of 3.94%.
2. Non-Interest Income Segment: Totaled $19.8 million for Q2 2026, growing 10% quarter-over-quarter (40% annualized). This segment contributed 15% of total quarterly revenue, with growth driven by service charges, trust and wealth management fees, and swap income.
3. No separate breakouts are provided for the VISTA acquisition or Unify fintech segment in this call.

• Full-year 2026 loan portfolio growth is expected to reach 10%, in line with prior guidance.
• Net interest margin is projected to stay near 4% for the remainder of 2026, with management confident of holding strong margin through year end.
• Full-year 2026 fee income is expected to remain in the previously guided range of $75 million to $80 million, with growth in other fee segments offsetting any underperformance from Unify.
• Full-year 2026 total non-interest expense is projected to stay in the range of $320 million to $330 million, matching prior guidance, with VISTA acquisition expense synergies fully coming online in Q4 2026. Excluding one-time acquisition costs, Q4 2026 normalized non-interest expense is expected to be below $80 million.
• Management reaffirmed that the company is on track to deliver adjusted earnings per share in excess of $1.00 in Q4 2026, and this target does not include any potential impact from a sale of Unify.
• Full-year 2026 Unify expenses are expected to remain at $20 million to $22 million, flat with 2025, and Unify revenue is projected at $2 million to $4 million, matching prior guidance.

• Pricing competition for renewing higher-yielding loans has increased, leading to some loan attrition when the bank declines unprofitable pricing, creating modest interim pressure on net interest margin.
• The fintech market (for potential partnership or transaction involving Unify) is currently highly volatile, creating uncertainty around the timeline for any potential transaction.
• Slight deposit balance weakness quarter-over-quarter led to increased borrowing usage to fund 10% loan growth, though management notes this is typical for periods of higher commercial real estate production.
• Purchase accounting accretion from prior acquisitions can create small (up to a few basis points) quarterly volatility in net interest margin.
• Non-interest income from partnership activities and swap fees is lumpy and difficult to forecast accurately.

Q: Given record quarterly loan originations, why is net full-year loan growth guided to only 10%? What factors are holding back higher net growth? / A: Higher quarterly loan turnover created a modest headwind to net growth in Q2, and year-to-date growth is exactly on track with prior guidance. Higher attrition is driven primarily by increased price competition for renewing loans; management maintains discipline around relationship profitability and is willing to let unprofitable business go rather than compromising on returns. VISTA client attrition is not a meaningful driver, as retention of VISTA clients has been strong. Management expects net growth to even out in the second half of the year.

Q: What is the normalized Q4 2026 non-interest expense run rate after VISTA acquisition synergies come online? / A: The company remains on track to meet the full-year non-interest expense guidance of $320 to $330 million. VISTA acquisition expense synergies will be fully online in Q4 2026, which will be the first clean quarter of normalized expenses. Management expects normalized non-interest expense in Q4 2026 to be below $80 million.

Q: What is the current outlook for the Unify fintech initiative, and are its expected revenue and expense contributions still in line with prior guidance? / A: Unify's revenue has been slower to develop because most incoming applications are from unqualified startup businesses or low credit quality borrowers that do not fit the bank's risk profile. The company is refining its marketing to attract more qualified applicants, and has seen small but positive low-cost deposit growth from the segment. Prior guidance of $2 to $4 million in annual revenue and $20 to $22 million in annual expenses remains in place, and overall full-year fee guidance is unchanged even if Unify underperforms, due to strength in other fee segments.

Q: What is the outlook for net charge-offs and loan loss reserves going forward, after Q2 2026 net charge-offs came in at 27 basis points annualized? / A: The decline in criticized and classified classified assets to multi-year lows indicates credit risk is improving. Q2 net charge-offs were for legacy problem credits that had already been fully reserved in prior periods, with half from legacy NBH and half from legacy VISTA, and no new unexpected losses. Management expects net charge-off levels to continue declining from current levels, and expects overall allowance for loan losses to be relatively stable going forward, with no major expected reserve releases.