National Bank Holdings Corporation (NYSE:NBHC) Q2 2023 Earnings Call Transcript

Andrew Liesch: Okay. And then on the expense side, the guidance implies kind of a step-up here is — I’m just curious what would be driving that. More 2UniFi investments? What’s the — what’s starting that uptick?

Aldis Birkans: Yes. No, I think you hit it on the head, 2UniFi continued investment and expansion, 2UniFi is — it is what’s driving that little bit of increase in our expense guidance. As I mentioned, once you back out and normalize that $2.5 million retention credit to be realized in the first quarter. Auto expenses were more or less flat on a linked quarter basis. That is — I’d say that is our current run rate, even though there’s quite a bit of a nuance between processing fees being better in these onetime Cambr-type related items. But we do continue to expect to continue to increase our investment in 2UniFi and that is in the guidance for second half.

Andrew Liesch: Got you. And then can you just remind us, how is the balance sheet position right now for any additional changes in rates that the Fed might undertake?

Aldis Birkans: Yes. We’ve — as time has progressed, we’ve been closing down our asset sensitivity. So while we will benefit slightly here, if the Fed moves next week, not materially anymore because, then again, as we are nearing the top of the range of at least what the futures start indicating of the Fed rate cycle, we certainly want to be able to protect our margin on the rates way down-type of environment as well. So most of the asset sensitivity has played out as far as how we model.

Operator: We’ll now take a question from Brett Rabatin with Hovde Group.

Brett Rabatin: Wanted to start with any additional color that you could provide on the venture capital write-downs, if that was a function of — and just the businesses that you had to take a bit of a mark on.

Tim Laney: Yes. Let me say broadly, we expect our investments to do well over time and frankly, contribute to the build-out 2UniFi. I think most know that tech valuations are very challenging in the current market. And then the absence of fresh capital raises, it’s pretty difficult to nail down those valuations. Candidly, I’ll probably get in trouble for saying this, but it feels like at this point in the cycle, it’s as much art as it is science. But we’re going to continue to take a conservative approach to the way we think about the business and work hard to validate that. We’re not going to address, obviously, any specific names in that portfolio. But Aldis you may want to just talk broadly to our total exposure there. And that might help answer Brett’s question.

Aldis Birkans: Yes. In terms of our total exposure to whether the direct equity-type investment or venture fund that many other banks may be part of, we have approximately $50 million, a little shy of $50 million in terms of investments and exposure.

Brett Rabatin: Okay. That’s helpful. And then wanted to talk about like the balance sheet and the funding going forward. Obviously, you used Cambr and were a little more aggressive with deposits to lower the FHLB advances this quarter. Do you have a goal of getting those off the balance sheet completely as you try and remix a little bit? Or can you give us some thoughts on your funding sources from here and how you manage that?