National Bank Holdings Corporation Class A Stock

Good morning, everyone, and welcome to the National Bank Holdings Corporation 2026 Third Quarter Earnings Call. My name is Jess, and I will be your conference operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to Emily Gooden, Chief Accounting Officer and Director of Investor Relations.

Thank you, Jess, 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 Financials 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.

Thank you, Emily. Good morning and thank you for joining us as we discuss National Bank Holdings' third quarter 2026 financial performance. I'm joined by our President, Aldis Birkans; and our Chief Financial Officer, Nicole Van Denabeele. We made progress this quarter on important priorities, serving clients, building durable relationships, and advancing the Vista integrations. We also faced significant credit challenges in a small number of commercial loan relationships, primarily in the franchise and the healthcare industries. We want to be direct about those events and their impact.

We've taken a measured hands-on approach, completing our collateral assessment, recognizing the credit impact, and applying what we learned. These events are serious, but they are concentrated in specific relationships. Our broader focus remains on serving clients well, growing with discipline, and maintaining the strength and flexibility of the company. We enter the next phase with a committed team, strong client relationships, and clear priorities. We'll discuss the quarter's results, credit performance, and outlook in more detail today, and I want to thank you for your continued interest in National Bank Holdings.

With that, I'll turn the call to Nicole to walk us through the financial results. Nicole?

Thank you, Tim, and good morning. For the third quarter, we reported a net loss of $8.8 million or $0.20 per diluted share. On an adjusted basis, removing the impact of acquisition and restructuring expenses in the quarter, we reported net income of $2.9 million or $0.06 of earnings per diluted share. As we shared earlier this month, the third quarter's results were impacted by elevated provision expense related to a handful of specifically identified credits addressed during the quarter as well as an impairment on one third-party fintech investment.

Core banking activities remained strong with an increase in year-to-date pre-provision net revenue of 8% annualized. During the quarter, loan production was solid, and we grew average deposits by 3.7% annualized while maintaining a top quartile net interest margin. Also we successfully completed our Vista Bank core systems integration during the quarter and executed the remaining expense reduction actions.

Turning to the balance sheet. Client activity was strong during the quarter. Our teams generated quarterly loan originations of $819 million, driving year-to-date annualized loan growth of 8.1%. Pipelines remain strong, and we expect to achieve full year loan portfolio growth of 10%. Fully taxable equivalent net interest income increased 13% annualized for the quarter to $115.2 million. Net interest margin during the third quarter was a strong 4%. We expect a net interest margin near 4% for the remainder of the year, which does not include any future interest rate policy changes by the Fed.

We continue to fund our loan growth with core deposits. Average total deposits grew $96 million or 3.7% annualized during the quarter, and average transaction deposits grew $103 million or 4.6% annualized. We remain disciplined in managing deposit costs with only 1 basis point of deposit cost increase for the quarter and ended September with a low cost of deposits of 1.96%. Total cost of funds increased 2 basis points to 2.03% for the quarter. The loan-to-deposit ratio ended the quarter at 93.8%.

Turning to asset quality. We recorded $40.6 million of provision expense to cover the quarter's elevated net charge-offs. As previously disclosed, third quarter net charge-offs totaled $46.3 million, reflecting actions taken on specific commercial loans following adverse credit events during the quarter. These credits also resulted in non-performing assets increasing by 15 basis points or $15 million. Additionally, we hold $14.3 million of marks against our acquired loan portfolio, which provides an additional 15 basis points of loan loss coverage if applied across the entire loan book.

Turning to fee income. Non-interest income totaled $13.5 million, and as previously disclosed, was impacted by a $4 million impairment on one third-party fintech investment. Aldis will share more on fee income momentarily. We expect fourth quarter fee income to be in the range of $17 million to $18 million. Non-interest expense totaled $97.8 million for the quarter and included $15.2 million of acquisition and restructuring expenses. Excluding these onetime items, non-interest expense was $82.6 million, a decrease of $1.1 million from the prior quarter. The third quarter included 1 additional payroll day compared to the second quarter and included elevated problem loan expense of $1.4 million for the quarter.

We have fully executed on our cost saving strategies. And as a result of our strong execution, we expect a clean expense run rate in the fourth quarter with core non-interest expense in the range of $75 million to $77 million. Our capital levels remain well in excess of well-capitalized regulatory thresholds. Common equity Tier 1 ratio ended the quarter at 11.7%, and our total capital ratio was 14.7%. The tangible common equity ratio ended the quarter at 9.2%. Tangible book value per share was $25.37, reflecting the quarterly dividend payout and $12 million of share repurchases during the quarter. Importantly, we continue to target quarterly earnings in excess of $1 per share in the fourth quarter.

With that, I will turn the call over to Aldis.

Thank you, Nicole. Let me begin with credit. As Tim shared, this was a disappointing quarter for us, and we recognize the importance of addressing both the immediate issues and their underlying causes. This quarter's loan losses were concentrated in the franchise and healthcare verticals within our specialty banking group. So over the past 12 months, we have top-graded our specialty banking team leadership. And during the third quarter, we conducted additional in-depth reviews and implemented further enhancements across our credit risk governance. These steps are intended to strengthen accountability and improve consistency on how risk is identified, escalated, and managed.

Throughout the year, we also have diversified these portfolios, and our current exposure is limited to approximately 5% of total loans in franchise and approximately 3% in healthcare finance. During the quarter, we also executed on a new model for serving small business clients. Under the new model, we will lean more heavily into our banking center network with an increased focus on deposit gathering. The objective is to create a more consistent client experience and align resources more closely with the needs and economics of this segment. We expect these targeted organizational changes to reduce our operating expenses by approximately $4 million annually.

Turning to the loan book. On an annualized basis, loans grew 5% during the quarter, bringing year-to-date growth to 8.1%. Early in the quarter, our team successfully completed the Vista core system integration, an important milestone that positions us to operate on a unified platform and fully -- and focus fully -- excuse me, focused fully on serving clients. This was an -- with this achievement behind us, our teams are focused on growth and our pipelines continue to build heading into the fourth quarter.

We remain on track to deliver 10% loan growth for full year 2026. Achieving that level of growth would take our total loans outstanding to above $10.1 billion by year-end. Average deposits grew a solid 3.7% annualized during the quarter, led by 4.6% annualized growth in average transaction deposits, reflecting continued strength in our core deposit franchise and our focus on growing high-quality relationship-based funding. This favorable deposit mix, combined with disciplined balance sheet management contributed to a strong 4% net interest margin for the quarter.

And finally, turning to the fee income. The underlying performance of our core banking business remains solid. During the quarter, combined service charges and bank card fees grew at an annualized rate of 12%, reflecting continued momentum from these recurring revenue streams. Additionally, we continue to see solid contributions from our Cambr and Trust & Wealth teams.

On the strength of our core franchise, improving operating discipline and growing client pipelines, we entered the fourth quarter with confidence in our ability to build on this momentum.

Tim, with that, I will turn it back to you.

Thanks, Aldis. Well, we've covered a lot of detail in our opening comments. So why don't I go ahead and open up the call for questions.

[Operator Instructions] And we'll go first to Jeff Rulis with D.A. Davidson.

Just, I guess, the first bit on credit. Just to kind of, if you could, could you itemize the size of those credits, both in the franchise and healthcare, the resolution path ahead? And then lastly, expectation for net charge-off levels going forward? Or is this sort of in the rearview?

You go ahead.

Yes, Jeff, good morning, this is Nicole. So related to your charge-off question on the credits that we addressed in the third quarter, we addressed the principal balance credits totaling about $65 million, and we took net charge-offs on those credits of about $47 million. That leaves a remaining balance of $18 million on our books related to those credits, and those are supported by collateral and personal guarantees of the borrowers.

Just the makeup of the $65 million in credits, what was franchise and what was healthcare? Or what's left?

Yes. Jeff, I'll start with high level and then perhaps Aldis can fill in with a bit more detail. But when you size this up and we talk about a handful of credits, the reality is this was an event primarily centered in 2 credits: One franchise, one healthcare. The franchise, of course, was this QDOBA Dave's Hot Chicken franchise that we have dealt with that where the first issues, frankly, came to light in July. By August, we were in a process of seeing some retrading on really the sale of the collateral involved to cover our loan exposure and found ourselves with a deficit and, quite frankly, found ourselves in that situation in a position where we believe it was merited to file suspicious activity reports and address what we believe is client fraud.

In the other situation, it was a healthcare-related event that we had dealt with in the fourth quarter of last year, had conducted a full restructure with the client, brought in a third-party consultant, believed management was in a position to move the company forward with one of its other divisions. And frankly, that the process ran out of steam and left us in a position of working with the borrower to take the company into bankruptcy. So those are the 2 big drivers. I don't know if you want to discuss the breakdown as it relates to the rest of the franchise.

And by the way, we do not view these as some indication of systemic problems. As a practical matter, when we review our credit policies and practices, our risk management policies and practices over the life of our company, they've served us well. These were cases where, frankly, the bankers involved did not execute on our policies and practices, and those bankers are no longer with us.

Yes. Jeff, of that $65 million that Nicole mentioned, approximately 45% is healthcare, 45% is franchise.

And the net charge-off question was, going forward, we guided in the release what you charged off. But the expectation for just the overall bank ahead and the charge-off expectations, is there any further cleanup or we revert to sort of historical levels Q4 and beyond?

Yes. Our expectation is that we've addressed what needed to be addressed this quarter such that we expect normalized levels going forward.

And then Aldis, if I could hop to the margin, or Nicole, sorry. Was there any impact on the margin in terms of loans placed on non-accrual in terms of lost interest or -- and then on the outlook, it sounds like around 4%. If you could outline, should we have another rate hike, what the impact of that would be?

Yes. Yes, I'll take that one, Jeff. So yes, you're hitting on a few good points. Consistently, there will be puts and takes to our margin. We did have some interest reversals in margin for the quarter. We also had some pickup from accelerated accretion. I will say those 2 kind of washed in the quarter. We exited September with a 4% margin. And our expectation is that we'll be able to hold that for Q4.

Regarding your question of what do we expect the impact to margin will be with future rate changes. I will take us back to the last time that we were in a rates up environment. We were very -- we were successful at maintaining our deposit costs. And through that rates up cycle, we held a deposit beta of under 40%. So we believe we'll continue to be able to be disciplined on our deposit pricing.

If I could squeeze one more in there. On the merger costs, any chance you can map those in terms of did a lot of that come in the comp or other? Just trying to back that out of the current quarter.

Yes. I'll say, it's largely been concentrated within the compensation and benefits line. There are really impacts hitting in all lines, occupancy and equipment, processing fees and professional fees, but the bulk of what hit the third quarter, and frankly, for the year has been in personnel expense.

We will go next to Kelly Motta with KBW.

On your core expense side of $75 million to $77 million for Q4, you also noted there was about $4 million annual benefit from some of the changes you've made in the business. I know you have the benefit of the post-conversion expense run rate. Just wondering what of the $4 million benefit might be already baked into that Q4 number?

It is, Kelly. So that $4 million that I talked about in terms of the reorganization and how we go to market for business banking or small business is embedded. And along to what Nicole was saying, it will show up mostly in the benefits and salaries line.

And then with the credit, it was obviously a disappointing quarter. You've noted you've made some changes, some changes in personnel and exposure is fairly limited at this point. Just wondering if as part of the identified issues and changes, if you've done a third-party review of these books or if there's -- what gives you comfort that this is now behind you?

No. As I mentioned in my prepared remarks, we delved in quite closely to the full portfolio with a very much closer eye to the portfolio originated by the bankers that Tim mentioned. Our loan review team, our SAG team, our credit officers have gone through it, and we feel very comfortable where we are today with our portfolio looking forward. I will say also that throughout the year, we've worked very hard on turning that book away from either brands or operators that have -- that we didn't like to put it bluntly. And $150 million of the franchise book has been turned over year-to-date.

And I think that's an important point, Kelly, is we haven't -- this isn't a process that just began in the third quarter. We've been working this franchise exposure since the fourth quarter of last year and, again, have methodically exited over $150 million of exposure that we felt was not originated against the standards that we're comfortable with.

And then your release noted the expected sale of the Palm Beach location. Just wondering, I think you gave the loans and I believe the deposits associated with this action expected to take place next year, but wondering overall financial impact, if there's maybe some additional expenses that come out.

Yes, I'll take that. There -- it will end up having minimal impact to our earnings per share. There will be some expenses that come out. I think it should be right around $0.5 million -- no, it's $2 million.

It's $2 million. $0.5 million, you think in terms of because of the timing of this. But on an annualized basis, about $2 million of operating expense that comes out the books, again, on an annualized basis. As we mentioned in the release, about a few hundred million dollars of loans and deposits, you apply 4% margin, you can see what the revenue is given up. So to Nicole's point, once you net that out, it's really nominal EPS impact.

And I would just add, strategically, look, it's a fine operation, a solid smaller team. And what we believe is we can generate greater returns focusing on our core markets and continuing to build those core markets. And so we were able to really create a win-win transaction here with the team that has run that bank, and we think we've ended up in a very transaction for both parties. So that's where I would leave that.

I guess last question for me. It looks like the fee guidance is a bit lighter than maybe what was implied for the full year. I imagine maybe some weakness in mortgage, obviously, has something to do with that. Just wondering if you could kind of break down the changes in the outlook here today versus what you may have been expecting a quarter or 2 ago.

Kelly, this is Aldis. You picked up on the main driver in the change and that one is the mortgage is residential mortgage business, certainly has been impacted by the steeper and higher rate environment, conventional mortgages being about 7%. The gain on sale is -- or secondary market is quite tough. Having said that, we have seen a more volume growth on the portfolio. You can see that in our loan tables. We had a nice portfolio growth in residential mortgage. But in terms of gain on sale, it is tougher going -- especially going in the fourth quarter, the seasonally low quarter.

We will go next to Matthew Clark with Piper Sandler.

Just on the -- you mentioned turning over -- churning about $150 million on the franchise side. How much did you churn or derisk within the healthcare portfolio? I guess that's my first question.

Yes, Matthew, actually, a similar dollar amount, $150 million exit in healthcare throughout the year. The portfolio is down on healthcare $100 million year-to-date. So back to getting 10% loan growth. That's something that we consciously have been working behind the scenes to derisk the portfolio in general, but continue to meet our loan growth targets.

And then just around the series of personnel changes. Did that include a new chief credit officer? And if so, has he had a kind of had a look at the overall portfolio and blessed it? Or is that process still underway?

We have brought in a new chief credit officer over the last 1.5 years, and he is certainly engaged unlike ever before in all of the detailed reviews that have been conducted. We did exit a number of senior credit officers that were involved and, frankly, the oversight of the bankers that have also moved on. And obviously, those are painful actions, but actions we felt necessary to ensure that our policies and practices when it comes to risk management are respected and well executed.

And then just criticized loans or assets, where they stood at the end of September? I think they were, according to the cue, $298 million or 3.05% at the end of June?

Yes. Criticized assets at the end of September were 3.4%, so a slight uptick. But classified, I'll say, we're about flat to prior quarter at 1.38%.

And then just the purchase accounting accretion impact to dollars this quarter?

Yes. Good morning, Matthew, I'll touch on that one. So as I mentioned previously, we did have some puts and takes to margin this quarter. We had some impact of accelerated loan accretion that impacted the quarter, but that was largely offset by some non-accrual interest reversals. So the NIM that you're seeing is the core NIM.

Right. But in terms of dollars, so we can model the yield and the accretion. So interest reversals, how much was that in dollars and how much in accretion in dollars even though they offset?

We haven't historically provided that. And the reason is it's never been really material to our margin or loan yields. So we'd like to keep it that way until -- unless we do an acquisition that it's so material that it makes a difference. We certainly will disclose at that time, but historically, it has not been, and we'll keep it that way.

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

Well, again, thank you for your continued interest in National Bank Holdings, and I wish you all a good day.

Thank you, sir. 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 Events & Presentations page. Thank you very much, and have a great day. You may now disconnect.

Good morning, everyone, and welcome to the National Bank Holdings Corporation [ 2025 ] Fourth Quarter Earnings Call. My name is Marco, and I'll be your conference operator today. [Operator Instructions] 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, Margo, 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. Good morning, and thank you for joining us as we discuss National Bank Holdings Second Quarter 2026 financial performance. I'm joined by our President, Aldis Birkans; our Chief Financial Officer, Nicole Ben Denebill; and John Steinmetz, our Executive Vice Chair and Executive Managing Director of Strategic Initiatives. Our team delivered solid second quarter results with record loan production and 10% year-to-date loan growth. Strong credit metrics reflect our intense focus on prudent growth. .

Our commitment to developing full banking relationships with our clients continues to translate into operating with a low cost and diversified deposit franchise. Expenses continue to be well managed, and we expect to meet or exceed savings resulting from the Vista integration. Before I turn the call over to Nicole, I want to share how pleased I am with the revenue lift we're seeing from the Vista acquisition. Our bankers are excelling at delivering quality results for our shareholders.

I also want to recognize our countless teammates that have positioned our company to seamlessly integrate the Vista acquisition with all conversions targeted to be complete by quarter end. Now on that note, I'll turn the call over to Nicole.

Nicole?

Thank you, Tim, and good morning. This morning, I'll walk through a second quarter that demonstrated strong operating momentum across the bank, and I'll provide our outlook for the second half of the year. As a reminder, our guidance does not include any future interest rate policy changes by the Fed. For the second quarter, on an adjusted basis, we reported net income of $35.3 million or $0.78 of earnings per diluted share. Annualized, this is 33% higher than the prior quarter.

The second quarter's adjusted return on average tangible assets increased 6 basis points to 1.3%, and the adjusted return on average tangible equity increased 92 basis points to 12.7%. Year-to-date, we grew our fully taxable equivalent pre-provision net revenue by 23% over the same period last year, generated a record level of loan production and maintained a top quartile net interest margin.

Turning to the balance sheet. Client activity was strong during the quarter, and our pipelines continue to build as we move into the back half of the year. Our teams generated record quarterly loan originations of $927 million, driving year-to-date annualized loan growth of 10%. With that momentum carrying into the third quarter, we expect full year loan portfolio growth of 10%. Fully taxable equivalent net interest income for the quarter totaled $111.5 million, an increase of 25% compared to the second quarter of last year. Net interest margin during the second quarter was a strong 3.94% and remains in the top quartile of our peers.

For the remainder of the year, we expect a net interest margin near 4%. We demonstrated success in gaining full client relationships, which drove average deposit balance growth of 2.3% annualized. Deposit costs improved 1 basis point during the quarter and remained a low 1.93%, with a total cost of funds of 2.01%. The loan-to-deposit ratio ended the quarter at 94.1%. Turning to asset quality. Credit quality remains strong. We recorded $1.5 million of provision expense, primarily to support the loan growth during the quarter. Second quarter net charge-offs were 27 basis points annualized. Nonperforming assets remained a low 35 basis points, and the allowance coverage ratio totaled 1.13%.

Our allowance coverage on nonperforming loans improved from 2x to 3x of coverage over the past year, underscoring our positive credit quality trends. Additionally, we hold $19.6 million of marks against our acquired loan portfolio, which provides an additional 20 basis points of loan loss coverage if applied across the entire loan book. Fee income was another area of positive momentum this quarter, increasing 40% annualized over the linked quarter. Noninterest income totaled $19.8 million and all this will provide more detail on that shortly.

We expect full year fee income to be within our previously guided range of $75 million to $80 million. Noninterest expense totaled $95 million for the quarter including $11.2 million of acquisition and restructuring expenses. Excluding these onetime items, noninterest expense was $83.7 million, up from the linked quarter due to merit increases and one additional day in the second quarter. As expected, the majority of expense synergies from the Vista acquisition will come online following system integration in the third quarter.

As previously guided, we continue to project total noninterest expense for the full year to be in the range of $320 million to $330 million. Our capital levels remain well in excess of well-capitalized regulatory thresholds. Common Equity Tier 1 ratio ended the quarter at 12.3%, and our total capital ratio was 15.4%. Tangible book value per share grew to $26.23 and with earnings more than covering the quarterly dividend and $11 million of share repurchases during the quarter. Importantly, we believe 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. I'll start with the highlights of the quarter, loan production. As Nicole mentioned, we funded a record $927 million during the quarter. To put that in perspective, year-to-date production now stands at $1.7 billion. which already exceeds our total fundings for all of 2025. That's a meaningful marker of how much of the growth engine has accelerated and includes us nicely on track to hit our full year 10% loan growth guidance. .

What I'm most encouraged by is how broad-based is production was. It was not a one team or one region story. We saw contributions across most asset classes and most of our geographies. The granularity matters of the whole franchise is pulling in the same direction. Several of our teams are truly just gaining momentum, and we are heading into the back half of the year with healthy pipelines across the board. It's also worth highlighting that our line utilizations continue to move up towards historical averages as our clients are becoming increasingly comfortable with the economic outlook.

Turning to credit. We continue to see overall credit trends improved with both classified and criticized loans being down on the link quarter and on a year-over-year basis. Our past due loans also were down. both NPAs and NPLs remained at low levels. Simply both credit remains in a very good shape. Fee income is another strong point. Noninterest income grew 10% on a linked quarter basis or 40% annualized. The fee income increase was driven by strong growth in service charges, card income and treasury management activity.

In addition, we continue to benefit from a more diversified fee base with solid contributions from Trust and belt amber and swap income, all adding to the RobusGro. Finally, turning to the operational side of the Vista Bank acquisition integration. We remain firmly on plan. And John will give us more perspective on that. John?

Thank you, Aldis, and good morning, everyone. When we spoke last quarter, this quarter was about bringing 2 strong seasoned companies together. This quarter, the story is about what we are accomplishing now that we are 1 team. Much of the heavy integration work that defined our first few months together is now behind us and our core conversion is on track to occur in the third quarter. That means our teams are now spending more time doing what they love taking care of our clients and originating record loan production.

The people-first culture we described at close is no longer something we are building towards. It's simply how we operate. The culture has become the pinnacle of our recruiting success. Since January 7, when the merger closed, we've added numerous seasoned banking professionals throughout our entire franchise. Bankers are developing new client relationships, broadening the reach and increasing market share within the communities that we have the privilege to serve.

I've always said and truly believe the best bankers bank the best clients, and we are watching that unfold. Looking to the back half of the year, our focus shifts from integrating to compounding shareholder value, introducing clients to products and services such as treasury management, trust and wealth, residential mortgage and other sophisticated products leverages the strength of National Bank Holdings Corporation. Each of these lets us go deeper with the clients, and that is where durable, profitable and long-term growth comes from.

We will keep running this company for the long run, disciplined on credit, thoughtful on capital and relentless on service. In conclusion, I would like to take a moment to thank our most important asset, our people. you, they are the reason I'm confident about the ability to exceed our client and shareholders' expectations. We thank you for your trust as the powerful combination we thought was possible becomes a reality and as demonstrated by the quarter's performance, and that is why I know the best is yet to come.

With that, Tim, I'll turn it back to you.

Thank you, John. Well, as you've heard, we're experiencing strong momentum across our core banking franchise. We expect this momentum to build in our favor. And as Nicole shared, we believe we're on track to realize $1 plus of EPS in the fourth quarter of this year. On other fronts, while 2 unifi revenue growth has been slow and coming, investments in the business remain well managed and partnership potential is very solid.

We continue to grow our tangible capital and ended the quarter with a common equity Tier 1 ratio of 12.3%. Our balance sheet supports meaningful optionality. We will continue to invest in talent. We will opportunistically buy back shares, and we'll reconsider M&A once we complete the Vista integration. Make no mistake, we are in great markets, and our team is well positioned to deliver meaningful value for our shareholders. And on that note, let's open up this call for questions.

[Operator Instructions]

We'll take our first question from Jeffrey Rulis with D.A. Davidson. .

Wanted to get into the loan growth, the funding side is pretty impressive. Just wanted to ask about the net level and what maybe is kind of a headwind to that as we're assuming some payoffs or just if you could describe kind of the undertone of why the net remains at maybe 10% admittedly strong fundings.

Yes, Jeff, this is Aldis. I'll take that. As you said, the loan growth or the loan originations were extremely strong. We're very proud of that, what teams accomplished this school. What the little bit of headwind that came through was a little higher acquired loan churn, so to say, again, that's not unusual. If you look in the first quarter, it was a little bit lower. So on average year-to-date basis. It actually is where we were expecting and therefore, year-to-date loan growth is 10% where we had been guiding.

So I do think that that's going to even out here going in the second half of the year. But again, $1.7 billion loan production for the first half of the year is very impressive, very happy with that.

Jeff, I would add the reality is when you see some of the longer-term debt that's coming in for renewal, you are seeing competition against those higher-yielding loans we have discipline around total client profitability, and there's a point where we are willing to let business go elsewhere if we don't believe it's going to achieve our desired levels of profitability. That clearly also that dynamic is putting -- has put a little interim pressure on the margin. But on the whole, we still have confidence when we look at where margin is going to hold for the year. given what we understand about what's renewing in our loan portfolio and what that looks like the remainder of the year, we still feel very confident about a very strong March and holding in. .

Yes. Yes, it sounds like -- well, I guess, just to understand that fully. It sounds like maybe Civista attrition is what is against some of the record fundings -- am I hearing that right?

Well, it's a common mention -- so Vista was a contributor. But again, if I look at the first half of the year, for first 6 months, it's exactly where we expect it to be. But I think it's not to be lost the point that Tim is making that we did see and that kind of goes down back to kind of the NIM discussion on the loan yields. If you see the loan yields came in a little bit, that is due to the higher loans churning and that's both on NBH and business side.

But I want to be clear. Our bankers have done a phenomenal job of retaining clients through the Vista acquisition. So that isn't some unique driver of this. I'm going to bring you back to what I said before, where you see attrition of business. I would say, frankly, it's more in this current environment, price sensitivity than anything else. And we've had discipline through the years around relationship pricing. We don't look at just the credit. We can be more flexible where we have, for example, robust depository treasury management relationships. But what we're not going to do is pursue business that's either too high in risk are not generating adequate profitability.

So I can't say enough about the job our bankers have done to retain relationships through this integration and not only that, but focus on growing beyond it.

If I could just hop over to the expense side. I got that full year guide. I guess maybe could we, I guess, a normalized quarterly expense run rate, maybe in the second half, it sounds like the conversion and maybe even a better question is, is the Q4 run rate of where you exit the year as we try to pull out those merger expenses and see where you land. .

Yes. Jeff, this is Nicole. I'll be happy to give some color there. So I will say Q2's expenses came in, in line with our expectation. As I mentioned in Q1, we have made some investments in new banker talent. Q2, we also have merit increases coming online, one additional day in the quarter. We are on track to meet our full year expense guide of $320 million to $330 million. we will, to your point, we will see the benefit of the expense synergies from the acquisition. Those will come fully online in the fourth quarter. That will be our first kind of clean quarter. And I do think it is reasonable to expect in the fourth quarter that expenses would be below $80 million.

Got it. That's helpful. And maybe while have. The margin average in June, do you have that figure?

Yes, I do. I do. And I'll be happy, Jeff, to give you more color on margin broadly. I'll start by saying we're proud of maintaining a top quartile margin. June's margin, we exited the month with a June month end margin of right at 4%. And that gives us confidence guiding forward to a year 4% margin. Breaking down Q2's margin in a little bit in some of its pieces. I will say, positive for Q2 margin, our cost of deposits improved 1 basis point. We did have a 3 basis point increase in our cost of funds, and that was entirely driven by the Fed debt issuance that we did at the end of the first quarter. So that said, that issuance came fully online in the second quarter, if you strip out that impact, Q2 cost of funds was flat with the first quarter, which we are proud of, given the funding pressures in the industry that we were able to hold our cost of funds flat.

Additionally, average earning asset balances increased 9% over the first quarter. Average loan balances increased 15% over the first quarter where we did experience margin compression was in our loan yields for the second quarter, which Tim and all this have both mentioned. A couple of impacts there. So we are impacted by some churn of loans on the existing book where you have loans in the high 6s. -- renewing. We did have new loan origination yields for Q2 right about 6.4%, 6.5%. At those levels, new loan originations are still accretive to margin.

So while that -- while those loan yields came in a little bit, we are maintaining our spreads and still picking up margin accretion from new loan activity -- and in the second quarter, loan yields were also impacted by some volatility in purchase accounting accretion volume, and that will vary quarter-to-quarter, give or take a few basis points.

And next, we'll go to Kelly Motta with KBW. .

To appreciate the -- I think you reiterated both your fee and expense guidance -- just wondering if you could provide an update on the contribution of Unifi. I think previously, you said that was about $22 million of expenses and $2 million to $4 million in the fee run rate, if that's still embedded in that outlook? And any updated thoughts on kind of where progress on that stand?

Yes. Kelly, thanks for the question. Look, our revenue performance on to Unifi has been underwhelming to date. There is good news there. we've seen in the second quarter applications, full applications growing dramatically, applications of 800% over the first quarter. but conversions are not dialed in yet. And that's where you get the revenue. And as a practical matter, what we're seeing is applications that are not still hitting our credit risk profile. And we're not going to compromise on that.

It speaks to our need to do more targeted marketing to think more about attracting the right kind of applications because at this point, we're seeing dramatic increase in applications coming in from pure startup businesses, which as a commercial bank, we're not equipped to bank. And frankly, the other is just straight up credit quality issues. And so it speaks to the need, again, to continue to refine our application, target marketing, and we're doing just that. There is some positive news while the dollars are small, we're seeing deposit growth in the business. The beauty of that is these are granular small business deposit accounts. We love the granularity. It's just building on a very small base and to see that grow.

So Nicole, if you want to speak to how we're adjusting and thinking about filling gaps driven by -- we didn't attribute a lot of revenue to unify this year. Our intention is to fill those gaps, and you may want to speak to how we're going to address that.

Yes. So Kelly, your numbers are right on with what we had previously guided. So $2 million to $4 million of revenue from Unify. We do feel confident in our overall fee income guide regardless of where the 2 UniFi revenue comes in, we're seeing some nice lift in other areas of our diversified fee revenue. And then on the expense side, your number is accurate, right, $20 million to $22 million of unifi expenses, which is flat to last year even with bringing on a full year of amortization of the capitalized asset.

I will say from a 2 unified expense standpoint, expenses are well managed, and we are on track to meet that guide.

Okay. All right. Got it. That's helpful. Then I'd like to pivot just overall to funding. I think loan growth has been super strong at NBH and definitely a highlight. It looks like deposit balances at least on a spot basis were down slightly and utilized some greater amount of borrowings, just Wondering how you guys are thinking about the loan-to-deposit ratio and the funding of that kind of 10% loan growth going forward?

Yes, Gale, this is Aldis. I'll take that. In terms of -- again, we usually look at the average deposit balances to -- because that kind of measures the overall strength of the balance sheet and takes out the day-to-day volatility at the quarter ends. For example, the tax seasonality in the first quarter, we were benefiting some from that. So adjusting for that really actually transaction deposits were flat even on spot basis and grew $115 million on the average basis. So there is plenty of momentum. It is, as always, for us, focus on relationship banking our bankers know that it is full balance sheet approach to how we go to market and we expect to be able to support our growth with core deposits.

Yes. I would add, we also historically have gone through cycles where when you see a slight step-up in more commercial real estate production, you tend to see less deposit growth. That's why we are hyper focused over time on growing commercial banking relationships in the C&I space. That's where you really pick up the full treasury management depository relationships that have made this company so strong over the years. And we certainly make no apologies for the granularity and the breadth of our deposit base.

And I think the fact that we actually saw cost on that deposit book come down a basis point speaks to the strength of those relationship deposits. And make no mistake, if we had wanted to grow deposits more and play the pricing game, we could have certainly done that.

Got it. That's helpful. Maybe last piece for Nicole, probably just to understand the dynamics of the margin. It seems like some of the variance between Q2 and Q1 was just some higher loan fees in Q1 maybe accretion. Do you have those numbers handy just so we can get a better sense of underlying trends because clearly at a 3.94 margin, still 1 of the better ones in the industry, but I think some of us were looking for flattish because of those dynamics. .

Yes, Kelly, thanks for the question. I would say, as I mentioned, we will continue to see some volatility just related to the pattern of how that mark accretion comes in just driven by payoffs, pay downs and the volume of those and the timing that they hit. I wouldn't expect that to be more than a couple of basis points of margin volatility over time.

And I think that's the piece that you're seeing from Q1 to Q2.

And we'll next go to Matthew Clark with Piper Sandler.

Nicole, can you just along those lines of that last question. Can you just give us the accretion that was part of net interest income this quarter. I think it was $1.4 million last quarter.

Yes. It was $1.4 million last quarter and it was about $1 million this quarter. Related I guess I should clarify, related to the Vista acquisition, we do still have accretion, some accretion impacts from prior acquisitions that can drive some of over time as well. .

Okay. And then on loan yields, I understand why they were down this quarter, but what's your outlook on loan yields going forward? .

Yes. We think that loan yields have roughly normalized. So we believe that they've settled in where there are going to be -- like I mentioned, new loan origination yields in Q2, right about 6.4%, 6.5%. And we feel like that, that's at a normalized level.

I think it's such an important question because we do spend a lot of time looking at our book remaining renewals throughout the year, and that's where you become somewhat vulnerable, and we feel like at this point, renewals are going to be well managed, and that's what gives us the confidence that we believe we can hold our position here through the remainder of the year. .

Okay. And then just on the overall margin, it sounds like there was some nice lift at the end of the quarter. I guess what drove that margin up to 4% at the end of the quarter relative to the 2Q average?

Yes. No, as Nicole mentioned, that around 4% June margin was what we would call actually clean. So the volatility of that mark impact that we talked about was realized earlier in the quarter, previous months, so to say. So June actually felt very clean. That's why we were very comfortable sharing it. .

Okay. But it's not like deposit costs are down further in June. I don't know if you have the spot rate at the end of June. .

I mean I think all to answer the question, it was really about where we absorbed that impact, and it was early in the quarter. .

Okay. Got it. Sounds good. And then the -- on the buyback, just do you have the weighted average price that you bought back shares this quarter?

No, that we've shared that have...

We typically don't disclose that. But again, as Tim mentioned, we're opportunistic as market moves around. And I think it's reasonable to say that it was down -- price is lower than where we trade today or yesterday. .

Okay. And then just on criticized. It sounds like criticized was down. Can you give us the dollars or percentages from 1Q to 2Q?

Resize was just at 3%. That was, by the way, that was the lowest level of criticized for the company since 2022. .

And how that compares to 1Q? Sorry, I don't have it at my fingertips.

It was down from about 10 basis and 11 basis points. .

Got it. Okay. Sounds good. And I guess last 1 for me, just on the income from partnerships and other fees. I think they were up $1.4 million this quarter. If you could provide maybe with the contribution in dollars was this quarter versus last? And what you view as kind of a normalized level, if you were to kind of smooth it out, just so we can help forecast it.

That 1 is a tough 1 because, as you know, they can be lumpy and infrequent, so to say. So I don't think we have a good guidance here. I do want to reiterate, even if you back that out, our Repatrust and Bolt grew 10% on a linked-quarter basis, 30% on year-over-year. Camber fees are up near 10% growth on the linked-quarter basis, 40% year-over-year. We did have nice swap fee income. Again, that can be lumpy, but we did have $0.5 million in derivative the type of swap product sold income. So there is more than just the income from partnerships. But that 1 is lumpy, as you know, and that's just -- we don't plan on it. So to be clear, in our guidance and the plan. We don't plan on it because, again, it's all hard to estimate.

We'll return to Kelly Motta with KBW.

Thanks for having me jump back. I think importantly, you reiterated that dollar run rate in 4Q '26. Just wanted to confirm that, that didn't include the impact of any strategic optimization such as at Unifi cell? .

It does not include anything related anything related to a unified sales to get to the...

We'll also return to Jeff Rulis with D.A. Davidson.

Yes. Maybe to that and the partnership potential to share some of the costs. Maybe any update, Tim, on that progress or maybe no progress ?

Jeff, the conversations and the work is active. The volatility in the fintech market is high. and that makes it difficult to give any kind of a defined time line for getting something like that completed. And I'm not I'm not going to mislead anyone. It's -- the word volatility has come up quite a bit. If we think it's the commercial banking market is volatile -- there's been some time in this fintech market. It's very volatile right now. .

Okay. And 1 other question I had on the kind of the net charge-off levels, just trying to get a sense, it sounds like you feel pretty comfortable on the credit side, but still somewhat elevated, that continues to come down. Trying to -- and it sounds like the provision this quarter was largely for growth. Any update on maybe the outlook of future net charge-off levels and/or provisioning range, either specific or just broad trends would be helpful.

I mean there's probably no better indication of where we think charge-offs are going then to look at criticized classified levels and the fact that they've come down to historical levels. I think that's probably the best indication we can give Keep in mind, we -- or not unlike any other financial institution, we put the portfolio through an extensive testing process to come up with allowance provision and the quantitative and qualitative metrics lead us to where we're at today.

So I guess the short of it is we feel quite good, very good about the portfolio and where it stands. And we don't see, for example, a pig in the python. We don't see issues that are haunting us that could be issues quarter, 2 quarters, 3 quarters from now.

And Tim, if I could, I'd like to just say the fact that we've been able to drive record loan production 2 quarters in a row, and bring the 2 organizations together and experience the type of $927 million in growth is simply remarkable. And classified assets down 47% year-over-year, I think is it really speaks to the future of the company.

Thank you, John. I agree. I hope folks appreciate that we've done what we said we would do in terms of addressing any prospective concerns in the portfolio. And to John's point, we've done that while growing the company nicely and we believe in prudent growth. And we're not going to -- we're not going to hide from issues. We never have. We're not going to. And right now, there are no issues to talk about.

I guess more specifically than that charge-off level, if you could break out what -- where that came from within segment? And was that shared Vista or HCI know it's a combined company now, but -- and then maybe if you could speak to is 30 basis points annualized net charge-off to average loans a go rate that we should assume? Or is it -- is this winding down...

Yes. We actually -- we fully expect it to continue to wind down to work its way down. And look, these are -- these have historically both been very well-run organizations. Both have had minor issues, but no major outliers. I mean to the extent -- if I had to look back and question activities on the NBH side, I would say perhaps we were overly aggressive in attacking what we thought could be concerning issues, and we were willing to do whatever you had to move that risk out of the balance sheet. -- it cost us some money in that period of time, but it sets us up beautifully as we look ahead. So the answer to your question is we do fully expect that 30 basis points to come down. .

And the makeup of the charge-offs this quarter?

Yes. I'll just say that on the charge-offs for this quarter. which is why we did not had the need to reserve for it, right? They were fully reserved for and spoken for from periods before. So that tells you that these credits or credits that we've been working on for a while. -- known and it's just cleaning it out. .

Aldis, do you have the loan type and is it a legacy NBHC or is it Visa credits?

Yes. I think there was -- it's a difference between a half and half is between legacy is evian was covered through purchase accounting. So there's no provision expense impact there, but and then half is legacy NBH. And in terms of asset class I don't have a ton of my...

I can tell you. I mean we saw exposure in the franchise space. that had to be cleaned up. We had dealt with some historical transportation. And as we've reported before, the exposure in that transportation space is down, what, 1.5 book, if that, not even that less than that -- now I'm being shown less than 1% -- I'm sorry, I should have known that. But again, we've been active where we felt like there was risk either on the horizon or embedded in something that we had exposed ourselves to. And again, we make no apologies for being aggressive in taking that risk off our balance sheet. .

Maybe last 1 is just the broad reserve to loans levels. I know that you mentioned, I think, about a 20 basis points if you include the marks, but the consolidated figure as that continues to trend lower. Is there a level that you feel -- you feel like the reserve release may continue going forward?

Yes. I think our belief, and again, a lot of this is driven by the model and the third-party modeling. But I believe we're at a point where it would be reasonable to expect it to be somewhat flat. And I'll defer to you, Nicole, anything you would add? .

Yes, I'll agree with that. And I think to reiterate what Aldis was saying to put a finer point on it, the reason that reserve level came down is because some of the specific reserves that we had set aside to cover the loans through the workout process. as they've been worked out, those specific reserves come off and bring that level down for it. .

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

Thank you very much. And I do genuinely appreciate the coverage and the questions we received this morning. the interest in our company for our teammates that are listening in this morning. I'll end by saying thank you again for what was a remarkable quarter and for helping us build for an exciting second half of the year. And on that note, I wish everybody a good day and rest of the week. Thank you. .

And this concludes today's conference call. If you would like to listen to the telephone replay of this call, it will be available 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.

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.

Good morning, everyone, and welcome to the National Bank Holdings Corporation 2025 Fourth Quarter Earnings Call. My name is Rachel, and I will be your conference operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

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

Thank you, Rachel, 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. Good morning, and thank you for joining us as we discuss National Bank Holdings' Fourth Quarter and Full Year 2025 financial performance. I'm joined by John Steinmetz, our Executive Vice Chair and Executive Managing Director of Strategic Initiatives; our President, Aldis Birkans; [ John Finn ], our Chief Enterprise Technology Officer; and of course, our Chief Financial Officer, Nicole Van Denabeele. I'll begin this morning by extending a very warm welcome to our new Vista teammates who joined the NBH family earlier this month.

Turning to the fourth quarter and full year 2025. While the fourth quarter was noisy, we ended the year having grown tangible book per share by 10%, and we grew our CET1 capital ratio to 14.89%. I'm pleased with our swift closure of the Vista Bank acquisition and believe our combined organization will produce powerful results, results that Nicole will guide us through when she presents.

It was a noisy fourth quarter with onetime acquisition costs, the strategic sale of securities and a move to put any lingering problem loans behind us. Our goal was to enter 2026 with a clean slate and with a focus on profitable growth. I'll touch on 2UniFi later in the call, but share for now that we're pleased to have completed late Phase 1 of the 2UniFi build. And we're joined by [ John Finn ], who co-leads 2UniFi, and he'll cover our progress in detail in just a bit.

Before I hand off to Nicole, I also want to complement our bankers on their deposit and loan pricing discipline, which led us to close out the year with a net interest income margin of 3.97%. I believe we are set up for a beautiful 2026. Nicole?

Thank you, Tim, and good morning. Today, I'll review the fourth quarter and full year 2025 financial highlights and provide guidance for 2026. Our guidance reflects the combined organization, and consistent with past practice, excludes the impact of any future Fed rate decisions.

In 2025, we executed on key strategic priorities. We announced and have now closed the Vista acquisition within 4 months, grew tangible book value by 10% and delivered a full year net interest margin of 3.94%. Fourth quarter's results were impacted by elevated provision expense and onetime items, including $4.1 million in after-tax acquisition costs and a $2.6 million after-tax loss on the strategic sale of investment securities to remain below $10 billion in assets at year-end. As a reminder, this action will preserve approximately $10 million in interchange income for 1 more year. Excluding onetime items, fourth quarter net income totaled $22.7 million or $0.60 of earnings per diluted share.

As Tim shared, we addressed the specific set of problem loans during the quarter. This resulted in $9.1 million of provision expense related to charge-offs and specific reserves. For the full year 2025 on an adjusted basis, net income totaled $117.6 million or $3.06 of earnings per diluted share. Return on tangible assets was 1.3%, and return on tangible common equity was 12.2%. During 2025, we maintained a top quartile full year net interest margin of 3.94%, generated $1.6 billion of new loan originations, executed share buybacks and added to our robust capital base.

We are pleased to have added a number of experienced bankers to our team through the Vista acquisition. We kick off the year with a combined loan portfolio of approximately $9.4 billion and are projecting 2026 loan growth to be approximately 10%. At acquisition closing, we added approximately $2.4 billion of earning assets from Vista to our balance sheet. As we optimize the total cash and investment portfolio mix, we project the combined bank to generate earning asset growth of 7% to 10% during 2026. Our goal is to hold approximately 15% of total assets in cash and investments and maintain a loan-to-deposit ratio of approximately 90%.

Fully taxable equivalent net interest margin for the fourth quarter was 3.89% and was impacted by variable rate loans repricing well ahead of Fed rate cuts. However, we cut deposit rates in tandem with the Fed, creating a lag effect in our cost of deposits. Most of this has now worked its way through our balance sheet, and December's margin returned to a strong 3.97%. Similarly, Vista's December margin was 4%. As a result, we project 2026 fully taxable equivalent net interest margin to remain right around 4%, excluding the impact of future rate moves.

Turning to credit. Our nonperforming asset ratio improved 11 basis points during 2025 to end the year at a low 36 basis points of total loans. The criticized loan ratio improved 73 basis points during the year. Net charge-offs were 34 basis points of loans for the year, and the allowance to total loans ratio ended the year at 1.18%, consistent with the prior quarter. We continue to hold $16.8 million of marks against our acquired loan portfolio as of December 31, providing an additional 23 basis points of loan loss coverage if applied across the NBH legacy loan book. We will be adding marks from Vista's loans during the first quarter of this year. We project the provision expense in 2026 to cover net charge-offs and new loan growth at a rate consistent with the current 1.2% allowance to total loans ratio.

Fourth quarter noninterest income was $14.4 million and included $3.3 million in pretax securities losses. For 2026, we project total noninterest income to be in the range of $75 million to $80 million. Fourth quarter noninterest expense totaled $72.4 million, including $5.4 million of acquisition costs. Also included in the fourth quarter's expense were investments made in bankers in our resort markets.

Full year noninterest expense was $265 million, including $7.2 million in acquisition costs and $22 million related to 2UniFi. For 2026, we project noninterest expense of $320 million to $330 million, reflecting a full year of Vista expenses. We project expenses during the first half of the year in the range of $165 million to $170 million. This means lower expenses in the back half of the year, reflecting cost savings from operational efficiencies generated by the combined organization following the completion of system integration.

During 2026, we expect to incur onetime expenses associated with the acquisition and rebranding. In addition, we may recognize CECL day 1 provision expense depending on our final purchase accounting approach. As Tim shared, we are pleased to have completed the initial phase of 2UniFi in 2025 with the launch of our fully automated SBA loan offering last quarter. With the core technology infrastructure now in place, we expect a substantial reduction in capital expenditures for 2UniFi in 2026. This shift positions us to begin realizing operating leverage from the platform. For 2026, we expect $2 million to $4 million in 2UniFi revenue contribution, which is included in my fee income guidance.

Importantly, we expect to maintain flat year-over-year 2UniFi expense, even with 2026 reflecting a full year of capitalized asset depreciation, which is approximately half of 2UniFi's 2026 expense. This means significantly lower cash spend in 2026.

Turning to income taxes. The 2025 effective tax rate was 18%. With the integration of Vista and the resulting shift in the mix of taxable versus nontaxable income, we expect our effective tax rate to be approximately 20% for 2026. Capital levels remain strong, and we continue to grow our excess capital. We ended the year with a TCE ratio of 11%, Tier 1 leverage ratio of 11.6% and a strong common equity Tier 1 ratio of 14.9%. We project a 2026 share count of 45.8 million shares, reflecting the Vista related share issuance.

On a final note, bringing this all together, we believe we are well positioned to deliver earnings in excess of $1 per share in the fourth quarter of 2026, which sets the stage for full year earnings exceeding $4 per share in 2027. With that, I'll turn the call over to John Steinmetz.

Thank you, Nicole, and good morning. On behalf of the Vista team, our state and our NBH family, I am pleased to have successfully merged our organization with National Bank Holdings Corporation and honored to be joining you on today's call. As the newest member of National Bank Holdings, I am fired up about the future of our combined companies. We have partnered with a dynamic, high-performing team and platform, and I believe there is a tremendous potential for our combined organization.

It hasn't taken long to have my instincts confirmed that our companies are ideal partners for our shareholders and team members alike. With its strong leadership, consistent discipline around credit, and a vision to create one of the most respected and profitable financial institutions in the country, NBH has built a platform that is uniquely positions our company for strong continued organic and strategic growth. As a part of the NBH family, we are excited to have the opportunity to offer expanded services, such as wealth management and trust services and enhanced treasury management offering, added mortgage products, and a bigger balance sheet to support the growth of our valued clients. This broader product set will strengthen our relationships, deepen wallet share and enable our exceptional bankers company-wide to better serve our clients through their financial life cycle.

We are also honored that Tim and the Board made the decision to adopt the Vista name as the go-forward brand in our diversified markets. It provides our combined teams a unified front and is a name that works well in both English and Spanish, further enforcing our commitment to taking the long view of better serving our clients in the future.

With $2.7 trillion GDP, Texas is one of the fastest-growing economies, larger than most countries and consistently outperforming national averages. Texas' diversified high-growth economy provides unlimited opportunities for our combined organizations. That said, I'm also equally excited about the growth opportunities in the various resort markets we serve currently, such as Jackson Hole, Aspen, [ Vail, Telluride ], and Palm Beach, Florida.

Since the transaction, we have already added 3 presidents with over 45 years combined experience at their previous banks prior to joining NBH. These communities, once seen as primarily secondary home destinations, are now primary residents for wealthy baby boomers. This shift presents an opportunity to offer our white glove [ concierge ] private client and wealth management services, further setting our bank apart in a very crowded industry.

Additionally, I am pleased to share with you that we are already seeing early momentum in our combined pipeline, fueled by the energy of our seasoned team members and enhanced capabilities, creating a clear path to value creation through relationship-driven profits. Equally significant is the cultural fit between our two organizations. Over the past several months, the Vista Bank and NBH teams have united around a shared velocity, putting people first, a focus on the value of teamwork and meritocracy, all while delivering exceptional results and building long-term relationships. These value drive results and further increase shareholder value.

The legacy Vista team has been together for nearly 2 decades, and I -- and my commitment remains unwavering: To finance the American dream for those entrepreneurs brave enough to pursue it. We invest in our communities, and we compete to win and while striving to create the best place for our associates to call work. Having deep respect for Tim, Aldis and the entire NBH team have built, we couldn't be prouder to join the NBH family. I truly believe the best is yet to come.

All that said, we are confident that our contributions will enhance NBH's growth profile, strengthen its market presence and further expand shareholder value. I'll close my remarks by thanking you for your trust and support.

And now I'll hand off the call to my friend, Aldis.

All right. Thanks, John, and good morning. I'll begin by highlighting what was a strong loan production quarter. We originated $591 million in total loans, the second highest loan production quarter in our company's history. I believe that performance is a direct reflection of our franchise strength and capability of our bankers.

What I'm most proud of is the composition of that production. $429 million of that came from commercial loan originations, a new record for us. This drove our commercial loan portfolio growth to nearly 8% annualized. This is high-quality, relationship-driven business that proves we are winning in our core markets.

During the fourth quarter, we continue to see pressure on our commercial real estate loan balances. This decline was mostly driven by accelerated payoffs as clients move toward alternative funding like private credit, REITs and life insurance companies. As a result, we improved our nonowner-occupied CRE to capital ratio to a low 127%. And when we factor in the Vista balance sheet, we are starting the year comfortably below the 200% threshold, which gives us meaningful runway for growth moving forward.

From a credit perspective, Tim and Nicole have already walked you through the actions we took during the fourth quarter, so I'll just simply add this. My expectation is that our asset quality metrics will continue their positive trends, returning to top quartile performance in 2026. I'm also very pleased to be working alongside John Steinmetz as we expand our footprint in Texas and key resort markets. And together, we expect to deliver our 2026 targets, driven by profitable and prudent growth.

When you combine the Vista merger with our planned organic growth across all markets and recognize that we have reached our turning point for 2UniFi, the stage is set for a very compelling 2026. With that, I will turn it back to Tim.

Thank you, Aldis. I'll share a few thoughts on 2UniFi before handing off to [ John Finn ]. First, I want to congratulate the 2UniFi team on completing the Phase 1 build. Second, make no mistake. During 2026, there will be an intense focus on new client activation and growing revenue. And finally, our goal is before year-end to have entered into a partnership that will meaningfully reduce NBH's 2UniFi investment run rate.

With that said, I'll turn the call over to [ John Finn ]. [ John ]?

Thank you, Tim. Today, I'm pleased to share more about the journey of 2UniFi as we unlock the future of small business banking. Last quarter, we reached a significant milestone with the launch of our SBA working capital loan, integrated seamlessly into our platform alongside our innovative business suite deposit account. This achievement is a key moment in Phase 1 of our multiyear strategy. Imagine a world where a small business owner can log in once and see their entire financial landscape, accounts, cash balances and lending options, all in 1 unified view.

We are revolutionizing the client experience well beyond traditional online banking, creating a seamless platform that helps a small business owner manage financial products and services across multiple banks and fintechs. With our integrated digital passport, we have transformed the application and onboarding process. Clients can provide their information once and eliminate the need to reenter it for additional products, whether opening an interest-bearing account or applying for a loan. Our innovative passport will ultimately enable business owners to effectively shop for financial services across a broad set of financial service providers.

Now that our foundational infrastructure is in place, we are shifting gears from constructing systems to activating services. We're launching with 2 essential capabilities that small business owners need, beginning with a convenient access to SBA working capital loans, as well as an automated nightly suite that earns interest on excess deposits, which is functionality typically reserved for larger mid-market clients. Our custom middleware and microservices architectures enables us to deliver advanced features like real-time event notifications and tailored communications. Clients receive faster decisions with clear and concise updates, saving time and reducing stress for business owners.

Our vision has always been clear: To build an integrated and seamless technology platform, not just another digital bank. Operating with a full-service banking charter, our scalable and secure architecture is supported by industry leaders like [ Finzac, Savannah ], Visa and [ Marketo ]. This ensures we have the best tools at our disposal to serve our clients effectively. Leveraging our technology with Snowflake and Microsoft Azure positions us to enable enterprise-grade data insights in upcoming releases. Our data architecture will support AI-driven, customizable data sets, enabling 2UniFi to provide valuable cash flow insights and proactive product recommendations based on clients' activity. This architecture also creates opportunities to develop new insight-based products and analytics-enabled services based on aggregated, anonymized data alongside deeper client analytics.

As Tim has shared, we are optimistic about the formation of a partnership in 2026 that will accelerate our distribution and scale. Our full-service banking charter provides the partner with access to a tech forward platform, including the ability to offer FDIC and shared deposit solutions nationwide. As we move forward beyond Phase 1, our investment in 2UniFi will become more targeted with a step down in our capital expenditure run rate as the build phase gives way to more efficient operating profile.

Importantly, we're scaling 2UniFi deliberately. We will onboard clients responsibly and optimize our controls, which we believe will translate into quality conversions and more durable relationships over time. We are prioritizing a high-quality onboarding experience with robust fraud mitigation because, as you know, building trust is foundational to long-term value creation. With a more efficient cost profile and a growing set of capabilities, we remain committed to building 2UniFi into a marketplace that we believe will compound value for small business owners and our shareholders alike.

I appreciate the opportunity to provide this update on 2UniFi. I will now turn it back to Tim.

All right. Well, thank you, John. We've covered a lot of ground this morning. So Rachel, I'll go ahead and ask you to open up the call for questions.

[Operator Instructions] Our first question comes from Jeff Rulis with D.A. Davidson.

Nicole, that was a whirlwind of updates. If I could just rattle through a couple just to confirm, you said 10% loan growth in '26 [ off ] the combined $9.4 billion balance, a margin for the full year of near 4%, earnings over $1 in the fourth quarter and over $4 in '27. Is that right?

That is correct.

Okay. And on the 2UniFi front, I think you said $2 million to $4 million in revenue this year. What was the cost again for '26?

Yes. So that's correct, $2 million to $4 million 2UniFi revenue projection for 2026, and we will be holding 2UniFi expense flat in 2026, consistent with 2025, which was $22 million.

Got it. And then it sounds like the partnership developing to sort of reduce those investment costs. I guess the leverage of the model into '27 is a little bit TBD, but I guess the focus is as you scale it up, that's more of a breakeven type climate in '27. Just -- I know that were -- all this is developing, but trying to get a sense for what the '27 economics look like?

Look, I think what we should share with you is that right now, we are incredibly focused on Phase 1 product activation with clients and driving revenue and really testing the market with those services. Number two, as I shared, we are very focused on working to establish a partnership that have the effect, amongst other options, of moving this off the NBH financials altogether, where we would remain a meaningful investor as shareholders, but it would be treated in a very different fashion financially. But I'll come back to the first point, which is our focus today is on client activation and scaling this business, and we'll come back to you. It's just too early to come back to you with any kind of definitive targets on '27.

Yes. No, that's helpful, Tim. Just the range of options, including moving the -- off the financials of the bank entirely, we'll stay tuned. Maybe the -- just to pivot on to the credit side, the 3 loans that made up the bulk of the net charge-offs. Could you kind of identify the sort of category and why that group? Any systemic -- it sounds as if you expect credit metrics to further improve in '26. Just trying to get a sense for what was charged off.

If you'll recall, at the beginning of '25, we literally were dealing with less than a handful of relationships that had emerged as problems. We really were in the belief that over the course of '25, they would work their way through the judicial process, and we would have them resolved, and that simply wasn't the case. The decision -- we believe a prudent decision was to address these as aggressively as we could in '25 and have a clean runway for '26. We're just not believers in letting problems like this linger. And the Board and I felt like this was the correct and prudent action to take, even though it obviously was painful to take here in the fourth quarter of last year, but it feels good -- very good to put it behind us.

And we will take our next question from Kelly Motta with KBW.

Maybe to kick it off with growth. I know we talked about 2025 year being -- working through some credits and impacted by some payoffs and refinancings, but it sounds like the outlook for '26 is really strong in part with your Vista partnership that you just brought on. As you look to, I think it was 10% loan growth, can you speak to the drivers of that growth, if that's significantly Texas and other markets where you're seeing opportunities just given the acceleration from what we've seen in the past several quarters?

Yes, this is Aldis. I'll kick off, and then I'll have John chime in. But yes, it's a combination of all the markets and certainly the continuation of the strong production we saw in the fourth quarter. As I mentioned, it was our second highest loan production quarter for NBH stand-alone basis. In our company's history, we did really well on originating commercial loans, if you look at the C&I in the table, that grew north of 10% annualized.

So we do see a very good momentum going into this year. And certainly, adding markets like Texas and the expertise and teammates that we are adding through this acquisition is great. And John, maybe you can add on that front as well as touch on the resort markets.

Sure. Thanks, Aldis. And yes, Kelly, we're really excited about the future growth potential, not only in Texas, but the resort markets, in all the markets, candidly. I'm looking forward to getting to know the team members throughout all of the NBH markets. And we believe in Texas that this platform that was built at NBH provides us not only the balance sheet that we need to continue to grow with our valued clients, but support our exceptional bankers.

And to Aldis' point, we also have always believed that NBH has an incredible opportunity in the resort markets. Resort markets that, again, were once seen as second homes, but are now becoming primary residents in places where people want to have their local bank. And I hope, at this time next quarter, you'll see some performance-driven metrics and increase shareholder value around that.

But the platform that we have at NBH as a team is going to provide -- not only allow us to support the continued 20-plus percent CAGR on deposits and loan growth that we've historically had, but it's also going to allow us to overcome a lot of the lack of fee income, which Vista Bank has historically struggled with.

Got it. That's really helpful. Maybe bouncing to a question on the margin. It was down this quarter a bit more than I had expected. With the loan yields, were there any interest reversals given what you had with credit? And I appreciate the guide in the mid-3.90s too is ex rate cuts, but just if you could refresh us on -- clearly, I think there was some initial asset sensitivity, so how we should be thinking through that?

Yes. Kelly, this is Nicole. Yes, I'll just reiterate. So our December margin did come in at a strong 3.97%. We have managed, in our view, very well through 75 basis points of rate cuts in 2025. We experienced -- we drove 9 basis points of margin expansion even with those rate cuts this year. There wasn't any interest reversals in the fourth quarter, and the loans that we worked through were already on nonaccrual.

But I will just -- just to reiterate, we've done a nice job with our deposit pricing for prior rate cuts. We cut deposit price -- we cut our deposit rates ahead of the Fed. This time, we held and we waited until we knew exactly what the Fed was going to do. And so that did cause that lag and drag effect, but we have overcome that and finished the year with a strong margin of 3.97%.

Great. Last one, if I could slip in just one more. On the 2UniFi guide, the expense guide that -- flat at $22 million. I just wanted to confirm because you alluded to a potential partnership that could change the economics here, that, that didn't bake in any potential impacts of maybe offloading some of those expenses, one? And then two, with the flat, I imagine getting -- increasing the user base is an important part of driving those revenues higher. And so I'm surprised it's flat. So I guess if you could kind of speak to how you guys are thinking about that line item, given that we're not really seeing a change from last year?

Yes. I appreciate you asking that question. I think it's important to note, we see 2026 as a turning point for 2UniFi. And as I shared, we are seeing operating leverage from 2025 from 2UniFi in 2026. So the revenue guide is an increase from last year. So $2 million to $4 million revenue guide, positive impact from 2025.

And then holding expenses flat, it's actually very significant that we're holding expenses flat because we will have a full year of capitalized asset depreciation in 2026. And so that expense flat includes that uptick in depreciation, which is half of the 2026 expenses. And then to your point on the partnership. So no potential -- the partnership really from a financial perspective is all upside, and none of that has been included in our guidance for 2026.

And we will take our next question from Andrew Terrell with Stephens.

First one, just to clarify, Nicole. On the margin, was the 3.97% -- was that spot at the end of the year or 3.97% for the full month of December?

3.97% was for the full month of December.

Okay. And then do you have the -- it sounds like there was a lag here where assets reprice quite a bit quicker than deposits. Do you have where deposits -- either spot or interest-bearing -- I mean either total or interest-bearing were either in the month of December or on a spot basis at the end of the quarter?

Yes. This is Aldis. It was 182 is the spot deposit cost at the end of December for NBH. But I recall now starting in Q1 or starting now, obviously, we're incorporating all of the Vista deposit base as well. So it will change into Q2. But I think what you're getting at is how spot margin is around 4% if you incorporate all of the benefit from deposit bleed through in December.

Yes. Yes. Got it. Okay. If I could ask just around the 2UniFi, specifically the partnership. If I go back to October, Tim, when we talked about on the call, it sounded like you were maybe pretty close on announcing something from a partnership standpoint. It sounds like now, that's still likely but maybe delayed a bit. I guess I'm curious what's kind of causing a delay here or if there is a delay in your mind?

I may have made a mistake in sharing as much as I did at that point candidly. It perhaps even reflected too much optimism, and I could kick myself for that. I believe we were further along in consummating a partnership there. But frankly, when you're involving 2 parties, you can have different needs, expectations on either side that may not come together in the time frame that you expected. So what you need to hear from me today is that we are intensely focused on bringing the right partnership together and moving 2UniFi ahead.

And frankly, we are proud to be targeting a $4 run rate in our earnings in '27. But imagine what that looks like if we're pulling those expenses of 2UniFi in all or in part off of our income statement. So we're highly motivated to see something happen there.

Yes. Got it. And last for me, was there any -- I appreciate that 2UniFi guide, but was there any revenue in the fourth quarter realized? And then just on the buyback that you guys announced, maybe Tim, if you could speak to kind of the appetite there?

Yes. I can touch on the 2UniFi revenue question. So we did have some revenue related to 2UniFi in the fourth quarter, but it wasn't meaningful. And then the second part was the appetite for share buyback.

We have a strong interest in share buybacks. I believe, you know, we literally just announced $100 million buyback authorization. And we have a -- frankly, we would consider it a priority at this point.

And we will take our next question from Brett Rabatin with Hovde Group.

Wanted to -- I joined a little bit late, Tim, but I wanted just to go back to -- you guys have had really strong loan originations, particularly here lately. But again, obviously, the net growth has been limited due to payoffs. Can you talk maybe a little bit about what you've experienced -- or what you experienced during 4Q in terms of payoff activity and how that played out? And then just your confidence for '26, if I heard correct, 10% loan growth. Is there a net and gross assumption there? Or any thoughts on confidence on payoffs diminishing relative to what you experienced the past few quarters in particular?

Aldis did touch on what we were seeing with insurance competition in the private debt market. But let's be candid. All banks -- or most banks would be facing that competition. I'll tell you, there were just a number of situations where the kind of structures that were being put together and the pricing related to those deals just simply did not fit within our risk management framework. And so we're more than willing to let that business move along.

But I think the broader context is the whole year, where we entered 2025 with, frankly, a risk-off mindset, having concerns about tariffs, having concerns about where the economy would land. And I would tell you that, that risk off position that we took was somewhat pervasive throughout the year to a point where when it was time to really turn things back on, I'm proud of the team's production, but I would tell you it was being done in a very, very conservative atmosphere.

We come into '26 really with the combined forces of form a Vista and NBH. And as we lay out these growth plans that we shared for you, Aldis and John have expressed nothing but very high confidence that we will meet, if not beat them. So with that, I'll open it up first. Maybe you, Aldis, just for more detail on the fourth quarter. But then in terms of growth here in '26, John, Aldis, feel free to jump in on that as well.

Yes. Brett, what I would add is, looking ahead in 2026, one thing that is a bit different in addition to what Tim was mentioning in terms of, again, like transportation or trucking is a segment we definitely exited, and that was a headwind. We are where we want to be. So that's not going to be a headwind in 2026.

The other thing I'll say is, and again, this is on NBH's legacy book side, but we have approximately $0.25 billion to almost $300 million of less scheduled maturities this year than it was last year. So that's less of a, call it, headwind return that we have to overcome to again, grow even with the same production results. So John, anything that you'd add on from legacy Vista side?

Sure. Well, Brett, thanks for the question. And let me say, I'm optimistic and very excited about '26. We have consistently put up a [ 23 ] CAGR in loan growth without the balance sheet that NBH provides us. And so we think that this was the perfect partnership. We see tremendous opportunities in these resort markets. But I am very confident and have always believed that the reason people first matters is because the best clients follow the best bankers, and we are committed to continuing to not only augment and support our exceptional team members at Vista and the entire NBH family, but also recruit and retain through the disruption that we see not only today, but throughout Texas.

This was a merger of 2 incredible teams, and I'm incredibly optimistic and expect to win. And with respect to a question that was asked earlier, I believe, by Jeff with D.A. Davidson, I want you all to know that we take great pride in our credit quality. And for, I hope, our credit team that is listening today at Vista -- legacy Vista, I'm still getting used to this -- they know how much pride we take in pricing with credit quality second to none, and I have an extraordinary amount of confidence in [ Rick, Danny ] and the credit team at NBH.

We did our reverse diligence and examined NBH's because I assure you, they did theirs on us, much like a proctology exam. And I am very proud to be partnering with this excellent credit quality minded organization because I don't think they kick the can down the road, and I'm fired up about '26.

That's really helpful. I'm sorry?

I was just saying as a shareholder and team member.

Yes. Okay. That's all really helpful. And I think most investors are going to give you guys credit for the credit situation as being truly one-off. So I don't think anybody is concerned about that.

The other question I wanted to ask you, John, was just I think you're kind of known as a recruiter and you got this deal with NBH, but there's been significant disruption in a lot of the markets of the core operating pro forma company. Just wanted to hear if you had offers out or if there was a hiring effort pro forma, or if it's too early, and you're just still trying to combine everything before you maybe go too much on offense with market share opportunities related to disruption? And just any thoughts on how you see that playing out?

And Brett, I appreciate that question. And I'll tell you, this is my first public earnings call, and Tim told me not to make promises I can't keep, but I'll tell you this. We are actively recruiting, but I'll tell you, we are actively retaining. Like I said, most of our team members have been together for 20 years, and I take so much joy in knowing that we have the best bankers providing these. The opportunities and the inbound calls that we're receiving, not from recruiters, but from bankers at the organizations in Texas and beyond to be a part of a culture that puts their people first is something like I've never seen. And I'm excited for my friends in Texas that announced the deal today, but I can assure you, I am recruiting. And I think we all should be in this incredibly crowded industry, where we all eat out of each other's dog bowl.

So I think that '26 could be a really good year if we're willing to dig in. And I'm excited about digging in with the team that we've had in the past. And more importantly, getting out and getting to know the NBH team that I have had a deep level of respect. This merger took place over 5 years of getting to know Tim, all this in the entire NBH team. And for -- if you would, Brett, just allow me to thank the team at Vista for their patience as we explore various opportunities. But we think this is a perfect partnership because of the way that they manage credit, much like we do.

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.

I'll just simply say thank you for your time today. And if you have any follow-up questions, do not hesitate to reach out directly. Have a good day.

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.

Good morning, everyone, and welcome to the National Bank Holdings Corporation 2025 Third Quarter Earnings Call. My name is Shelly, 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 Goodin, Chief Accounting Officer and Director of Investor Relations. Please go ahead.

Thank you, Shelly, 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.

Thank you, Emily. That's one of the more enthusiastic readouts of disclaimers I've heard in a while. That was great. So thank you. Good morning, all, and thanks for joining us as we discuss National Bank Holdings third quarter earnings results. I'm joined by our President, Aldis Birkans, as well as our Chief Financial Officer, Nicole Van Denabeele. We're pleased to have delivered $0.96 of earnings per diluted share and a return on tangible common equity of 14.72%. And it should be noted that this return was achieved while maintaining a high level of capital. We were able to deliver these results despite continued headwinds related to a heavy volume of payoffs coming primarily out of our CRE portfolio.

Now having said this, I'm proud of our team's new loan production during the quarter and the quality of the new relationships is very strong. We're pleased to announce our merger with Vista Bancshares or to have announced our merger with Vista Bancshares during the quarter. I'll have to say the more we learn about the quality of our new teammates, the more excited we become about future possibilities. And we believe we're set up for a nice fourth quarter. New relationship activity is strong. Credit quality trends continue to be positive. We have additional productivity initiatives in the work, and we believe we have some very positive possibilities for 2Unifi.

So on that note, I'll turn the call over to Nicole to cover the quarter in greater detail. Nicole?

Thank you, Tim and good morning. During today's call, I will cover the financial results for the third quarter as well as touch on our guidance for the remainder of the year, which does not include any future interest rate policy changes by the Fed. For the third quarter, we reported net income of $35.3 million or $0.92 of earnings per diluted share. We recently announced our planned merger with Vista Bank, and we remain on track to close in the first quarter. In conjunction with the acquisition work, we incurred approximately $1.7 million in deal-related expenses during the quarter. Excluding the acquisition expenses, adjusted net income increased 30% annualized over the prior quarter to $36.6 million or $0.96 of earnings per diluted share. This resulted in a strong adjusted return on average tangible assets of 1.6% and an adjusted return on average tangible common equity of 14.7% on an elevated equity base.

During the third quarter, we grew our fully taxable equivalent adjusted pre-provision net revenue by 17.5% annualized over the prior quarter, maintained a top quartile net interest margin and built additional excess capital. Also during the quarter, our teams generated $421 million of loan fundings, bringing total year-to-date loan fundings to $1 billion. Quarterly loan fundings have increased each quarter of 2025, and our bankers continue to build loan pipeline. Aldis will touch on the loan paydown headwinds we've been experiencing in his comments. Our disciplined approach to loan and deposit pricing over the last 12 months has resulted in solid margin expansion. Fully taxable equivalent net interest margin expanded 3 basis points during the third quarter to 3.98%, which is 11 basis points of margin expansion over the same quarter last year. For the remainder of 2025, we project fully taxable equivalent net interest margin to remain in the mid-39s.

And as I mentioned earlier, this does not incorporate any future interest rate decisions by the Fed. Credit quality improved during the quarter with a 20% reduction in nonperforming loans, which now stand at just $27 million. Our nonperforming loan ratio improved 9 basis points during the quarter to 36 basis points, which is 10 basis points lower than year-end levels. As a result of proactive efforts to resolve problem loans, we realized net recoveries of 5 basis points annualized during the quarter. The allowance to total loans ratio remained consistent at 1.2%. Additionally, we continue to hold $18 million of marks against our acquired loan portfolio, which adds an additional 24 basis points of loan loss coverage if applied across the entire loan portfolio. Turning to deposits. Total deposits ended the quarter $202 million higher than the prior quarter end and average deposits held steady at $8.2 billion. Cost of deposits totaled 2.08%, and our total cost of funds was 2.1%. Noninterest income for the third quarter totaled $20.7 million, 21% higher than the second quarter and 13% higher than the third quarter of last year.

The quarter benefited from $3.5 million of unrealized gains on partnership investments as well as higher service charges and mortgage banking income over the prior quarter. For the remainder of 2025, we project our total noninterest income to be in the range of $15 million to $17 million. We are pleased to have launched Unify during the quarter, and we plan to provide 2Unifi revenue guidance during our next quarterly earnings call. Noninterest expense totaled $67.2 million and included $1.7 million of acquisition expenses and $6.2 million of 2Unifi expense. Now that we are live with Unifi, our linked quarter 2Unifi expense increased as expected with the amortization of the associated capitalized development assets. When adjusting for the acquisition expenses and increased Unifi expense impacting the quarter, we remain on track to deliver the results expected from the expense reduction actions taken during the second quarter.

As a result, we project core noninterest expense for the remainder of the year to be in the range of $64 million to $66 million before the impact of acquisition-related expenses. We maintained strong levels of liquidity and continue to build excess capital. We ended the quarter with a strong TCE ratio of 10.6%, Tier 1 leverage ratio of 11.5% and a common equity Tier 1 ratio of 14.7%. We repurchased 240,000 shares during the quarter, totaling $8.9 million, bringing total shares repurchased year-to-date to 359,000 shares. During the third quarter, our tangible book value per share grew 12% annualized to $27.45. With that, I will turn the call over to Aldis.

Thank you, Nicole and good morning.

Let me start by saying that our preparations for Vista merger are progressing well and remain on track. Vista reported strong financial results for third quarter, which further validate the strategic value of this transaction, and we continue to be very excited about what this partnership will bring to our combined organization. For NBH this quarter, we saw loan production return to more normalized levels with total loan fundings of $421 million. Fundings were led by commercial banking, particularly in our C&I portfolio, which expanded at an annualized rate of 8.7%.

This reflects a healthy rebound in client activity and continued progress in building our relationship-driven commercial franchise. While we are encouraged by this growth, overall loan portfolio outstandings were tempered by continued loan paydowns, particularly in certain CIB categories where stabilized properties have moved to permanent financing. At quarter end, our total nonowner occupied CRE to total risk-based capital ratio stood at a low 132%, reflecting a well-balanced risk profile. On a pro forma basis, incorporating the pending this transaction, we expect to remain comfortably below the 200% level.

Credit metrics continue to demonstrate a stable loan portfolio with improving trends. Both classified and criticized assets declined during the third quarter. Nonperforming assets decreased by another $6.3 million. with the NPA ratio improving by 8 basis points from the prior quarter and by 10 basis points on a year-to-date basis.

Overall, we are pleased with the return to normalized loan production, the strength in our C&I portfolio and the disciplined management of our CRE exposure, all of which position us well for sustainable, high-quality growth going forward. A good example of our relationship banking success this quarter was in core deposits, which grew approximately $200 million from the linked quarter to balance basis, with nearly half of that growth coming from noninterest-bearing transaction deposits. Regarding deposit costs, we expect to see a decrease in the fourth quarter as a result of actions taken in late September following the most recent Fed rate cut. We are also -- we also prepared to take additional measures should the Fed continue on its rate cutting path. One final note on deposits. In the fourth quarter, we plan to use the flexibility provided by our Camber deposits to manage our balance sheet and remain below the $10 billion threshold. Lastly, I'd like to highlight the strong performance from our long-standing fintech partnership investments, which delivered $3.5 million in gains included in this quarter's financials. While these results from these initiatives may not always move in a straight line, we continue to expect positive financial and strategic outcomes over the long term.

Tim, I'll turn it back to you.

Thanks, Aldis. Well, we had an active third quarter. We generated $421 million in loan fundings. We had solid deposit growth. We maintained pricing discipline, resulting in a net interest margin of 3.98%. We experienced a decline in classified and criticized assets accompanied by a nice decrease in nonperforming assets. We grew our tangible book value per share 12% annualized during the quarter and we announced the meaningful acquisition of Vista bank shares.

And on that note, Shelly, I would ask you to open up the call for questions.

[Operator Instructions] And we'll now take your first question coming from the line of Jeff Rulis with D.A. Davidson.

Wanted to dig into the margin in a little more detail. The mid-90 guide talking about entering the quarter with some lower deposit costs. just kind of engage with that a little bit more on what looks like rate cuts that are a near certainty, the impact of which and maybe the push and pull of why at $3.98, you're kind of pulling it back down, I suppose, absent cuts, But maybe you could touch on the expected impact there.

Yes. Jeff, this is Nicole. I'll mention that the third quarter's margin, it was positively impacted by about $0.5 million of interest and fees recovered on the large recovery that we had in the quarter. That was about 2 basis points of margin impact. So we still feel good and solid mid-39% margin for the quarter. Looking ahead to the potential for rate cuts in Q4, the very likely outcome of a rate cut next week. Our teams have started teeing up action to take down deposit rates in line with the Fed. We have a history of being very disciplined, both on rates up and rates down cycle of managing our our rates on both sides of the balance sheet, and we are prepared to take those actions next week. And we do believe for that rate cut that deposit actions that we have planned will offset the impact of the repricing on our variable loan portfolio.

Okay. Really helpful. I appreciate it. And then on the expense side, the 2UniFi step-up, is that -- can we view that as kind of will now be in the run rate? Do you see a leg up higher again in coming quarters? Or just trying to get a little more color on the expense build, if any, regarding that piece before we get kind of the revenue potential visibility in the fourth quarter call. .

Yes, on the topic of 2U expenses, that step-up this quarter was expected in line with launching 2UniFi. We were expecting a step-up in depreciation expense of that capitalized development asset, we will continue to invest in marketing for 2UniFi. And then as we onboard 2UniFi clients, there's a component of some variable expense that will come online as well.

I guess if Nicole, if we were to zoom out a little bit and think about '26 overall expenses, I don't want to front run as you pull budgets. But trying to think about overall with 2UniFi included, I know you've had some actions to reduce costs as well. I don't know if you could speak to overall growth of expenses expected in '26 or just maybe frame up the push and pull of what, from a jump-off point of what you kind of framed up of, call it, $65 million core in fourth quarter?

Jeff, this is Tim. We're in the middle of some pretty interesting partnership discussions as it relates to 2UniFi right now. And we're really not in a position to speak in more detail to what might happen there in '26. We will maintain our commitment, As Nicole mentioned earlier to address to 2UniFi one way or the other in our fourth quarter earnings call. I would tell you even with the step-up in -- if everything was status quo, even with the step-up in amortization, depreciation next year on to Unify, we will work to keep those expenses relatively flat. But that's assuming status quo and at this point, we just can't speak to any more detail on to you.

Yes. I appreciate -- going to take a little time to kind of pull that together.

Your next question is coming from the line of Kelly Motta with KBW.

Maybe turning back to loan growth. It was nice to see. I think you called out a step up in production. I see balances were down. Can you speak to if any of the paydowns here. I know in prior quarters, you had been managing the book for credit. Was there any kind of puts and pulls related to that? And if you could provide an outlook for given what sounds like strength in the pipeline, what the expectations are ahead? Do you expect to reverse this trend now in Q4?

Thanks, Kelly. This is Tim. I'll begin and then turn it to Aldis. I would tell you that the third quarter reduction volume was not driven by directive paydowns. We really think we've moved through addressing any risk in the portfolio that we felt we needed to address given the macroeconomic environment. What we've seen in the third quarter was largely heavy volume of payoffs as as temporary or construction funding was going to perm with very attractive per financing by alternative lenders. And quite frankly, we have seen private credit continue to step into the market lending money on credit terms and at pricing that I've done this, so call it, 4 decades, and I just don't understand what they're doing because we've just simply seen price and credit term competition from private credit that we're not going to compete with. So I'll turn it to Aldis to talk about how we believe we're positioned to overcome that. because we are feeling very good about our pipeline and where we now stand with our, in particular, CRE portfolio. .

Yes. Thanks, Tim. I'll just add that on the Page 10 of the investor deck on the loan summary table that actually kind of is visible. If you look at our commercial real estate production itself was pretty healthy this quarter. But embedded, we kind of have, I'll call it, between $100 million, $150 million headwind from those paydowns that Tim was mentioning and those are on the table above that you can see on -- between our originated and acquired books. Looking at the fourth quarter, our pipelines just like entering this quarter look very healthy, very good. We are optimistic that we return to growth, subject to this behavior that bias discussed. But other than that, I'm very optimistic about the fourth quarter.

Got it. Got it. That's helpful. And then just on the expenses, you announced the cost save plan last July. Wondering, did we get the full benefit of that this quarter? And one? And then two, I apologize if I missed it, but how much 2UniFi expenses were in Q3 as well as what's baked into that 64% to 66% for Q4?

Yes. Yes. Kelly, I'll take that one. We've been closely monitoring our progress on the expense reduction actions that we announced last quarter, and we are delivering on those commitments. You're right, Q3 was a little noisy. It was impacted by $1.7 million of acquisition expenses. $6.2 million of 2Unifi expenses. The third quarter, it was impacted by higher mortgage commissions. We view that as a positive because it was driven by higher mortgage revenues. And then there was a couple of other timing impacts in the third quarter. We had about a $700,000 fair value adjustment on our deferred comp liability and then we were impacted by the timing of certain occupancy and equipment expenses.

Got it. I think the last thing was how much 2UniFi in the Q4 run rate.

Yes. We -- in the Q4 run rate, we're expecting 2UniFi expenses somewhere in the range of $7 million to $9 million. And that does account for some step-up in marketing spend and variable costs associated with user increases.

Got it. That's helpful. Last question for me. You guys announced a really exciting acquisition last month and it's on track to close next quarter. Wondering if you found the pace of discussions, clearly, you're in the market given your announcement. So wondering if you could provide us, Tim, with kind of if you've seen any flurry of inbound on the back of that announcement.

Kelly, I think I've slept in my own bed 4 nights over the last 3 weeks. There have been a lot of discussions and we remain focused across our existing footprint. We would love to do more in Texas and build on what John and his team at Vista have built. And we're seeing other interesting opportunities that we think could create meaningful market share step-ups in markets that we already do business with. So the short answer to your question is, yes, we're very active.

Next question is coming from the line of Andrew Terrell with Stephens.

Tim, I wanted to ask a question around just 2UniFi and also don't want to front run any conversation we'll have in January. And I get maybe not too much to share here. But I guess I'm just curious, from a big picture standpoint, you guys have been pretty clear on some of the expense recently associated with that. And it sounds like marketing spend could ramp and then there's also maybe a variable component as you begin onboarding clients from an expense standpoint. I'm just curious, when you look near to medium term, how long do you think it takes to generate positive operating leverage? And do you feel like you have near-term visibility to positive operating leverage in that business?

I applaud you asked for asking the question, and I'll simply say again, we'll be providing all of that detail on our fourth quarter earnings call. I think I would also -- and I mentioned this earlier, repeat that we're in the -- we're literally in the middle of a very important partnership discussion that we believe could have a powerful impact on the way to unify moves forward, and it's just inappropriate to be talking about 2UniFi anymore this morning. .

Understood. I appreciate it. Yes, I had to give it a shot there. and I apply I was also interested just on your discussion around private credit and the competition you guys are experiencing there. And I'm curious if you could share any more specifically around where you're seeing that either geographically from product type? Just any more color on where you're seeing private credit be most competitive.

I mean, really primarily in the commercial real estate sectors. And I would tell you that the vast majority of the action we're seeing there.

Yes. Okay. And then last 1 for me, just I saw you guys bought back a little bit of stock this quarter, your capital is still built very nicely. You'll close Vista, but still have a pretty strong capital position. And I know it sounds like interested in future M&A, but any interest in further capital deployment and the buyback.

Yes, Andrew, this is Aldis. So as I mentioned, we did buy $8 million or so in capital. We still have $35 million, $36 million authorization left. We'll be opportunistic with it along the -- sort of in light of the discussions that we're having with potential M&A targets as well, but also to be remiss if I didn't mention the 12% tangible book value growth this quarter that we built on top of that $8 million buyback. So we feel very good about our capital build over the last 12 months, sitting on very strong excess capital levels, and we are looking at potential strategic options there.

And your next question will be coming from the line of Brett Rabatin with Hovde Group.

I won't ask about 2UniFi. I wanted to go back just to the payoffs I know we've kind of beat that to death here a little bit, too. But just wanted to make sure -- it sounds like you're expecting better trends in the fourth quarter. private credit aside, does the shape of the curve in the longer end coming in here, how does that impact maybe the commercial real estate portfolio? And do you have any line of sight into the CRE books stain? Or what's -- any -- just any thoughts on the yield curve from here relative to that portfolio?

Not at this moment. I don't think we've seen -- I'll say, I have not heard from our bankers to we've seen a pay down of prepay, so to say, based on the refinancing opportunities and lower yields. Now that's not to say that, that doesn't come through at some time. But to date, shape of the yield curve has not impacted our paydown activity.

Okay. And then the other question I had was just around the Vista deal and Tim, it sounds like you've been on the road quite a bit. Just was hoping to hear -- I know one of the aspects of the transaction that you're excited about is treasury management, wealth and trusts. Any thoughts relative to the deal call on fee income and those things specifically?

We lost you at the end. You said any thoughts related to what>

I'm sorry. Any thoughts related to wealth, treasury management, trusts, those opportunities for the pro forma franchise?

Well, look, first and foremost, what I'm excited about is the caliber of leadership and the quality of the new teammates coming in from Vista Bancshares I think they've done a remarkable job taking market share in an important market like Dallas, Texas. And I don't have any reason to expect that to do anything but other than grow I think the combination of these teams is going to make us incredibly strong, and we're going to be leveraging key talent out of Vista across our entire organization. We remain committed to taking best practices, whether they come from NBH or Vista and running with those best practices. And we are going to be delivering frankly, a much broader suite of treasury management capabilities into Texas, into Vista with NBH's arsenal of treasury capabilities. We're super excited about what we can do in the trust and the management arena. As a practical matter. Vista had been outsourcing that to a third party.

Given what we're able to do with our Wyoming-based trust business, in particular, in bringing those opportunities to clients in the state of Texas just as we're doing around the rest of the franchise, I think can be monumental. I mean I am genuinely that excited about it. I continue to say that what we're able to do in Wyoming for clients who are really concerned about privacy that are concerned about in their trust, et cetera, is unfortunately one of the better kept secrets. But as we work to get that message out, I think we're going to continue to see exceptional growth there. Was there 1 other? I hit treasury, I hit trust, rights management. And really, I'll say with Vista, they've had -- they've built a solid private banking business and again, have been outsourcing that trust and wealth management piece. And so for the opportunity to bring that in-house is is exciting. And all of a sudden -- I'd ask you to...

Just say that we're not waiting until first quarter when we come together to start working on these partnerships. John and I have weekly calls, and we bring our teams together and to the extent that they already are handing off those opportunities some place else. We'd rather be there in the fourth quarter already picking up those opportunities. So that work is underway and those synergies should be hopefully start showing their benefits here in the fourth quarter.

Next question is coming from the line of Kelly Motta with KBW.

I think you're kind of while we have you, NBH has been great at managing credit. You did have that 180 idiosyncratic clone. I think it 1Q but otherwise, it's been really strong. Tim, all this, I'm just wondering, given the focus on lending doesn't look like MBH has much exposure here. Wondering if you have some high-level thoughts as to potential risk? And anything else that you might be direct analysts to more carefully watch.

Yes. We really don't have any felt because we really don't have much of that. It's well below 1%. So we -- of total loans. So we...

Maybe that's indicative of our thoughts.

Yes, but that's the answer.

But in terms of other sectors that I just think we have to continue to be watching closely in the ag space, it's commodity row crops and the vulnerability there. And it's, again, a space we have limited exposure to. But I mean, operations are probably at some of the best performance levels in history. On the other hand, commodity exposure, that would be a tough place to be exposed to. We've talked about it before, but another space that continues to just face tragic headwinds is transportation, and we worked aggressively to reduce the exposure that we were concerned about there and think that that's a -- forgive the pun, but a long road back for those truckers. So those would be a couple of areas that I guess if we were on the investor side, we would be keeping an eye on. .

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

Thank you, Shelly. I'll be brief. Just thank you so much for your time and attention this morning. please feel free to reach out to us if you have any additional questions, and we will respond promptly. Have a great day.

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.