Morning everyone, and welcome to the National Bank Holdings Corporation conference call. I will be your conference operator for today. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded for replay purposes. This conference call will contain forward-looking statements, including statements regarding the transaction being announced today and the transaction's impact on the company's future performance. Actual results could differ materially from those discussed today. These forward-looking statements are subject to risk, uncertainties, and other factors, which are disclosed in more detail in the company's presentation materials prepared in connection with this call and its most recent filings with the U.S. Securities and Exchange Commission. These statements speak only as of the date of this call, and National Bank Holdings Corporation undertakes no obligation to update or revise these statements.
It is now my pleasure to turn the call over and introduce National Bank Holdings Corporation's Founder, Chairman, and CEO, Mr. Tim Laney.
Thank you, Jean. Good morning, and thank you so much for joining today's call. I'm joined by NBH President Aldis Birkans and our Chief Financial Officer, Nicole van den Nibel. Needless to say, we are delighted to be with you this morning to discuss the definitive agreement to merge NBH and Vista Bank Shares. Simply put, this merger is almost perfect. With this action, we continue to build a franchise in a number of the most attractive and high-growth markets in the United States. With Vista, we deepen our bench with impressive talent and a very strong leader. I've gotten to know John Steinmetz over the years, and I love his positive energy and can-do attitude. Our shared strategic focus on helping small and medium-sized commercial businesses succeed is powerful, and we believe there are a multitude of best practices we can share to make ourselves even stronger.
Nicole will walk us through the financials on the transaction, and I believe they represent a win-win for all shareholders involved. Before turning the call over to Nicole, I'll add that we're proud of our track record of doing what we say we will do, and this transaction falls perfectly in place with that standard. Nicole?
Thank you, Tim. Good morning. As Tim mentioned, we are pleased with the future growth opportunities this merger provides for our combined company. In my remarks this morning, I will touch on the key financial terms of the merger. Based on NBH's closing stock price of $38.47 as of the close of market last Friday, this is a $369 million transaction. As part of the total consideration, NBH will issue a fixed amount of approximately 7.4 million shares and pay approximately $85 million in cash to Vista shareholders, including a cash payment to settle outstanding options and warrants. This represents approximately 1.52 times Vista's tangible book value per share and 1.58 times tangible book value inclusive of all cash payment.
Vista operates in high-growth Texas markets, including the Dallas-Fort Worth market, and is a $2.5 billion asset bank with approximately $1.5 billion in loans outstanding, $2.1 billion in deposits, and 11 banking centers. Based on June 30, 2025 financials, the pro forma combined entities will have approximately $12.4 billion in total assets, total loans of $9.3 billion, and an attractive core deposit base totaling $10.4 billion. We believe this is a well-priced transaction with attractive returns for our shareholders. The fully phased-in earnings pickup is projected to be 17% accretive to our future earnings. As always, we have been realistic and appropriately conservative with our modeling assumptions, and on that basis, we project the tangible book value dilution earned back to be approximately three years using the crossover method. We estimate 30% cost savings as a result of identified efficiencies of combining our banks.
With NBH's history of executing on strategic acquisitions, our teams have extensive experience in acquisition due diligence and integrations. The NBH team conducted thorough due diligence with experienced associates from across the bank participating in the effort. As part of this process, our credit review team performed a comprehensive review of Vista's loan book. This included a detailed review of nearly 70% of Vista's loans, including 98% of watch-rated loans and 100% of classified loans. Vista has a history of maintaining strong credit quality, and our teams found their approach to credit underwriting and monitoring to be sound. We have been disciplined in building excess capital to leverage at the appropriate time for strategic growth opportunities. Our merger with Vista represents an excellent use of capital while maintaining a pro forma tier one common equity ratio of 12.5% upon closing. With that, I will hand the call over to Aldis.
Thank you, Nicole, and I'll just second the belief that we are very excited about this opportunity to partner with John Steinmetz and welcome Vista Bank's team to our company. As we constantly evaluate how to allocate our excess capital, deepening our presence in Texas and especially in the Dallas-Fort Worth metroplex, these are one of those obvious opportunities. Vista Bank has differentiated itself by emphasizing trust, local expertise, and long-term client support, while building a relationship banking model that allows the bank to support small and medium-sized business growth, anticipate client needs, and foster financial inclusion. These cornerstones for success clearly align with our core principles. John and his team have built a great reputation and name recognition in Texas and have developed a number of banking practices that we expect to roll out throughout the rest of our organization.
Additionally, we believe that Vista Bank's private banking practices, combined with our high-performing trust and private wealth capabilities, will generate very attractive revenue opportunities for the combined organization. In summary, Vista checks all the boxes we look for in M&A partners. It has a solid cultural fit, has a proven track record of profitability, operates in fast-growing markets, has a sound credit discipline, and most important, Vista has great people. Tim, I'll turn it back to you.
Thank you, Aldis. Needless to say, we believe this merger represents a solid transaction by any measure. As I shared with both Vista's management team and board, my goal is to keep the Vista band together and position it to simply play in bigger arenas. As far as the adoption of the Vista name, I love it. We've been looking for some time to brand our banks under one powerful name, and with the exception of Bank of Jackson Hole, which includes our trust and wealth management business, we will adopt Vista as our name. I love its meaning, and it should not be lost on anyone that the name plays well in both English and Spanish. Finally, I'm really excited to personally welcome John to my leadership team.
In addition to leading our growth in Texas, John will assume responsibility for our Colorado resort markets and, most important, serve as my leader of strategic initiatives for the company. On that note, let's open up the call for questions.
Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll take our first question from Jeff Rulis with D.A. Davidson.
Thanks. Good morning.
Hey, Jeff. Good morning.
Tim, interested in just the sort of the genesis of the conversation with Vista and their folks. You know, kind of when, how long has that been going on? Second is kind of the Vista's approach here. It sounded as if they were considering an IPO track as well, and I guess just trying to figure out the path with NBH. You know, was this negotiated auction? Were they kind of looking dual track? Just a little bit of background would be great. Thanks.
Yeah, you bet, Jeff. We've never participated in a negotiated auction in an auction process of any kind outside of, I guess, our formative days working with the FDIC. As a practical matter, John and I have spent a very meaningful amount of time together over the last number of years, and I believe that ultimately we believe that our cultures represented a perfect fit. Our approach to doing business as leaders is very similar, and at the end of the day, we believe working together we can create something that's greater than what we both have today. You know, we believe that the price that the parties entered into, as Nicole pointed out, a fair price and a win-win for all shareholders, and that's today.
What we're more excited about is the kind of value we can create in this company as we look out the next two to three years.
Thanks, Tim. Maybe just more mechanically looking at the $10 billion mark, a couple of questions related there. This seems to be sort of a pretty good offset in terms of build-up scale to offset any kind of headwinds associated with that. Could you just sort of confirm that maybe an asset size, this indeed does get you over the hump? Maybe just remind us of what that cost or that expense was again. Lastly, just the plans for the remainder of 2025, knowing this is set for a Q1 close, do you try to stay below $10 billion this year to extend that impact out until the second half of 2027? I'm sorry for all the questions.
Jeff, they're great questions. As a reminder to our broader audience, I know you know this, given the history of our company, we've been operating for some time from a regulatory standpoint as though we were a $10 billion-plus institution. As it relates to any of those related costs around people or processes, there's been nothing new relative to approaching or passing the $10 billion mark. In fact, we've been examined as a $10 billion-plus institution for the prior two years, and obviously, you know, we feel like we're in a very, very good place in standing with the regulatory authorities. The one real expense that we'll hit will be the Durbin impact, and in a moment, I'll ask Nicole to remind us what that annualized impact is.
Clearly, and by the way, we're fortunate in that we aren't a huge consumer-focused institution, so those dollars, relatively speaking, are small, but we'll be able to talk about how we believe the revenues from this merger certainly drive us right through that impact. In fact, Nicole, do you want to jump in real quickly and cover that, and then I'll just pick up plans for the remainder of the year?
Sure. The Durbin impact, once we cross the $10 billion mark, will impact our revenues by about $10 million a year. Also, as a reminder, that impact hits six months after we cross at a year-end. Once we cross the year-end, the following year will be impacted by half of that $10 million.
Jeff, to your last insightful question, as it relates to the Durbin Amendment, there could be some motivation to manage the balance sheet to stay under $10 billion this year, just given the very direct cost savings, and we'll see where we land on that point as we approach year-end.
Appreciate it. Thanks. I'll step back.
Thanks, Jeff.
We'll take our next question from Kelly Motta with KBW.
Hey, all. Congrats on the deal. Very exciting stuff.
Thanks, Kelly.
It sounds like some are more familiar with Vista. For those like myself who are not, they've been a tremendous grower here, as you show in your deck over the past several years. Can you remind us what their strategy has been? It sounds like John Steinmetz is not only staying on in Texas, but also helping you in the strategic role. What lessons can you bring to the NBH franchise as a whole? That's a two-parter there.
Thank you, Kelly. You know, we are very similar in that we are very, very focused on building deep relationships with our clients and cross-selling into those clients as deeply as possible. I think one thing that excites John and his team is the ability to deliver, for example, a much broader array of treasury management solutions, and on another front, to deliver the wealth management solutions that we're able to deliver out of our Bank of Jackson Hole wealth and trust business. When I look at what John and his team have done, I would tell you they place a premium on the best of the best talent. I think John is a recruiter extraordinaire and has, as I suggested in my opening, very much a can-do and positive leadership style that translates into the way they approach the market.
I assume it's not, again, lost on anyone that they also happen to be very focused, and they've increased that focus over the last number of years on the Dallas-Fort Worth metroplex. My goodness, all you have to do is spend time in that market to appreciate how great the growth opportunities are. As it relates to John's expanded role in the resort markets, we are very serious about leveraging their approach to private banking and some of their approaches to recruiting, retaining, and rewarding talent. We believe the resort markets are ripe for that opportunity here in Colorado. We also already have very meaningful share in the Jackson Hole market, and we love it. We want to see the same in Aspen, in Telluride, in Vail, and certainly post-COVID, the opportunity in those markets has grown dramatically, and I think John can help us deliver.
Finally, as it relates to strategic initiatives, we are in good standing with regulators. We think it's an interesting time to be looking at a multitude of opportunities as it relates to both growth and new businesses and, quite frankly, additional M&A.
Got it. That's really helpful. I appreciate all the color. You guys, you know, you've shown you have been very successful with getting cost saved in the deals that you've done, done multiple deals at a time. It looks like you're looking for 30% cost saves here. Can you provide additional color as to how you came up with that number and your comfort in the ability to hit that, as well as you mentioned you're rolling out the Vista brand across the platform if the one-timers include any additional associated switching costs with the rebrand here. Thank you.
Good morning, Kelly. I'll touch on the cost saves. You're exactly right. We've built in 30% cost saves. We feel like that's been a pretty good estimate, appropriately conservative, as I mentioned in my remarks. As with most deals, those cost saves come mostly from duplication in shared service functions and duplication in core systems. When we combine our enterprises, that's where we believe we'll find the bulk of the efficiencies.
Okay.
Kelly, what we didn't touch upon, and again, this is where we're working, obviously, with our accountants and otherwise, but certainly our goal would be to address where appropriate any of the one-time sign changes into a one-time transaction charge, and more to come on that front.
Got it. That's helpful. One last housekeeping question, then I'll step back. Goodwill, I'm getting kind of back of the envelope about $110 million. Is that sort of in the ballpark when estimating this one-time charge and the impact here? Sorry, the one-time tangible book value dilution?
Yes, you're in the ballpark, Kelly.
Thank you. I'll step back.
Yeah, thank you, Kelly.
We'll take our next question from Brett Rabatin with Hovde Group.
Hey, good morning, everyone. Wanted to go back, Tim, to the expense savings and just the timing of that, and then the 17% accretion, which that's obviously fully phased in. Is that, I assume that's 2027 and not 2026. Is that correct?
That 17% is fully phased in, which will occur in 2027. We believe we'll close in early 2026 and then convert systems in 2026 as well.
Okay. You're getting a great bank in Texas. The one thing I was looking at was the fee income the past two quarters for them has been somewhat lumpy. They were running about $1.5 million for two years, and then the last two quarters have been close to $16 million, and the last quarter was a little under $1 million. Any thoughts on the fee income outlook for them as a standalone entity, and any explanation for the noise in the past two quarters?
Yeah, the lumpiness there is on they were cleaning up some banking centers that they sold, and they realized some gain. The historical run rate is probably more appropriate that you're looking at, which actually creates a lot of opportunity for our combined organizations. We think rolling out our best practices in SBA, swap derivative fee income, even I think we could do more than Texas in mortgages and residential banking. I think there's opportunity to build that fee income up. None of that is included in our forecast in terms of that 17%, but those are opportunities.
It is more than fair to say that both management teams are very excited about the possibilities with treasury management and trust and wealth management practices. We just could not be more excited about the upside in both of those areas.
Yeah, that's my last quick follow-on, if I could, just around the opportunities. I don't know if you can quantify those opportunities, but maybe a part of this deal was a bigger lending limit and the ability to do a larger loan for Vista Bank in Texas. Was that a part of it? Any thought on the opportunity from maybe a scale perspective with lending or any thoughts on the fee income side with those businesses?
I think your assumption there is exactly right, that it certainly creates more capacity to expand relationships, to expand lending exposure with key relationships. At the same time, we will remain committed to building a very granular and diverse loan portfolio that's served us well over time. We can certainly accomplish the goal of providing more capacity in Texas while at the same time, again, maintaining that diversity and granularity.
Okay. Fair enough. Thanks for all the color.
All right. Thank you.
Thank you. I'm showing we have, I do apologize. We'll go next to Jeff Rulis with DA Davidson.
Just a quick one on the margin. Looks like a very similar margin on a level basis. I guess absent the accretion in the transaction, any update on the impact to rate sensitivity as you fold this in? I guess that's the second question of any planned sale of securities or restructuring anticipated at this point.
Yeah, Jeff. No anticipated material change in out-asset sensitivity or how to position a set of balance sheet. We will, as we typically do, standardize, I'll say, that would be an investment portfolio that they have into how we look at it. There is potential that we sell some of those and repurchase more liquid, not that I shouldn't say liquid, more cash-flowing type of securities as we have done in the past with an eye to liquidity.
Got it. Overall, it seems like a very similar margin perspective. If it doesn't change the sensitivity, it's a pretty quiet, absent accretion. Is that fair to say that it's folded in fairly quietly, Aldis?
It is. One of the attractive parts of Vista Bank's balance sheet and the way that they've run their bank is they have maintained a very strong net interest margin. We believe when we fold that into our balance sheet that we also will maintain our strong net interest margin.
Yeah, differently, we don't have to count on purchase accounting and mark some loans and investment securities to achieve the accretion, right? That's the beautiful thing here. They already are a profitable bank. They'll run balance sheets, as Nicole was mentioning, and margin going forward is sustainable in a way, just adding two organizations together without counting on marks.
Thanks, Aldis and Nicole. Appreciate it.
Thank you, Jeff.
We'll go next to Brett Rabatin with Hovde Group.
Hey, just one additional follow-up. One of the bigger opportunities would seem to be, you know, obviously the two margins are the same, but they've got a higher loan yield and a higher cost of funds, and their CDs, the proportion of CDs is not very meaningful, but they're costing about 4.5% and their money market's close to 4%. Tim, you've done a great job with the brands, you know, as rates move higher, keeping your cost of funds below peers. Is this a big part of the opportunity, or is Texas just more competitive and maybe it's not going to be as easy to lower their cost of funds even if rates are coming down?
We believe with the range of treasury management and deposit capabilities that we'll be adding to the Vista Bank War Chest in Texas, we will absolutely have the opportunity to bring down average cost of deposits for the organization. I would remind you, in fact, I would ask Aldis to speak to it. It's a perfect opportunity to leverage core deposits to address needs of clients and at the same time balance that with our desire to maintain what I always think of as lower cost inventory, Aldis?
Yeah, you summarized it. I do think there's, again, none of this is modeled in, but we do think there's opportunities to deliver the high service and performance product to Vista's existing clients and prospects, and optimize our balance sheet with the help of Canberra and optimize the product set with Canberra's capabilities.
Finally, Brett, I would add that John and his team should be very proud of the kind of loan yields they've recognized. We can say with confidence that that's not been a result of taking undue risk. We're proud of the yields we realize on our portfolio, and we believe we share the same view that financial institutions should get paid for the services it delivers. Vista's done a great job of really differentiating itself on positive and great client service and have done a wonderful job of getting paid for it. We don't expect that to end.
Okay. The bottom line here is the pro forma margin with all of your strategies should result in a higher number on the margin.
You know, what can I say? We love to under-promise and over-deliver, Brett. What are you trying to get us to put on the record here?
Okay. Fair enough. Thanks so much, Tim.
Thanks, man.
Thank you. 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 so much. I really want to thank those that joined in with questions today. Again, we'll just express our excitement over what we view as just a perfect opportunity to bring our two companies together, and there's more to come. Stay tuned. Everybody, have a great day.
This concludes today's conference call. If you'd like to listen to the telephone replay of this call, a link will be available in approximately 24 hours on the company's website on the investor relations page. Thank you very much and have a great day. You may now disconnect.