National Bank Holdings Corporation (NBHC) Q1 2019 Earnings Call Transcript

NBHC earnings call for the period ending March 31, 2019.

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National Bank Holdings Corporation  (NYSE:NBHC)
Q1 2019 Earnings Call
April 24, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and welcome to the National Bank Holdings Corporation 2019 First Quarter Earnings Call. My name is Mariama, and I will be your conference operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session following the presentation. As a reminder, this conference is being recorded for replay purposes.

I would like to remind you that this conference call will contain forward-looking statements, including statements regarding the company's loans and loan growth, deposits, strategic capital, potential income streams, gross margin 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.

It is now my pleasure to turn the call over and introduce National Bank Holdings Corporation's Chairman, President and CEO, Mr. Tim Laney.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Thanks, Mariama. Good morning, and thank you for joining National Bank Holdings' first quarter 2019 earnings call. I have with me our Chief Financial Officer, Aldis Birkans; and Rick Newfield, our Chief Risk Management Officer.

I'll begin by thanking my team mates for their continued focus on building full relationships with our clients. We genuinely believe in creating win-win solutions for our clients and our bank, and the results are positive. We're off to a solid start with record quarterly earnings of $0.60 per share. Our focus on providing fair and simple solutions while offering uniquely personal service fueled annualized loan growth of 16.3%.

Equally important, the loan growth continued to be very diverse and granular in nature. This has translated into solid credit metrics with annualized net-charge offs of just 2 basis points. With the growth of full client relationships, we realized spot transaction deposit growth during the quarter of 20.9%. Notably, we saw our non-interest bearing demand deposit to total deposit mix actually improved during the quarter.

Now, if there was a negative for the quarter, it was the delayed closing of some of the previously acquired OREO. We actually absorbed the bulk of the related OREO expense during the first quarter, but now do not expect to realize those gains until the second or possibly the third quarter of this year.

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

Aldis Birkans -- Chief Financial Officer & Treasurer

All right. Thank you, Tim, and good morning.

As Tim mentioned, we are very pleased with our record earnings of $18.9 million for the first quarter of 2019 and the record earnings per diluted share of $0.60. Our earnings results were driven by expanding net interest margin, strong loan and deposit growth, which resulted in a net -- in a solid net interest income increase along with low credit costs and continued focus on expense management.

After the first quarter's results, we are happy to reaffirm our full year 2019 guidance that we provided on the last call. And as always our guidance does not include any future interest rate policy changes by the Fed. During the first quarter, we outpaced our planned loan growth by growing originated and acquired loan balances at a solid 16.3% annualized rate. The growth during the quarter is a continuation of the strong momentum built during the latter part of 2018 and continues to be well-balanced across various asset classes, geographies and industry sectors.

The first quarter's loan fundings were $311 million or 49.3% higher than the same quarter last year. The newly originated loan fully taxable equivalent rate was 5.4%. This year is off to a great start and our loan pipelines look strong. As a reminder, our full year loan growth guidance was 8% to 10%. And after the first quarter's strong performance, we feel comfortable guiding toward the upper end of this range. Of course, we are mindful of the broader shift in the economy and the flat yield curve. But at this point, our markets continue to perform better than the national averages, involve our clients remain cautious, the client activity is strong.

Turning to deposits. Our first quarter's total average transaction deposits were essentially flat on a linked-quarter basis. We are happy with the progress we are making with our commercial, small business and retail clients to grow our relationships as measured by the non-interest bearing checking account balance growth, which increased 1.4% on a linked quarter basis and 4.8% over the same quarter last year. We are seeing good momentum in our deposit strategy, and the transaction deposit balance growth has picked up throughout the quarter, as evidenced by the spot transaction deposit increase of $178.3 million or 20.9% annualized on a linked quarter basis.

I'm also pleased to report that our loan to deposit ratio remained flat to the prior quarter at 90%. The first quarter's transaction deposit cost was just 35 basis points, and as we had guided before, increased 4 basis points on a linked quarter basis. At the 2018, the rate hikes continue to work their way through the deposit base. The total deposit cost was 58 basis points.

For the rest of 2019, we are reaffirming our full-year guidance for transaction deposit growth in the mid single digits, with time deposits staying relatively flat, resulting in full-year total deposit growth in the low single digits.

The fully taxable equivalent net interest income totaled $52.4 million, and increased on a linked quarter basis, despite two fewer days in the quarter. This is a result of strong fourth and first quarter loan growth as well as an expanding net interest margin. During the quarter, our fully taxable equivalent net interest margin widened 6 basis points to 4.05%.

Looking ahead, similar to last year, we expect the residential mortgage held for sale portfolio to increase during the summer months, thus putting downward pressure to the second and third quarter net interest margin calculations. As such, we are reaffirming our prior guidance for fully taxable equivalent net interest margin to remain slightly above 4% for the rest of 2019. And we project no change to our targeted year-end earning asset levels of $5.3 billion to $5.4 billion.

We are also off to a strong start relative to loan quality. Provision for loan loss expense was $1.5 million for the first quarter, driven by the strong originated loan growth. Net charge-offs for the quarter were just 2 basis points annualized and the outlook for asset quality remains favorable driven by our disciplined adherence to our self-imposed concentration limits in our credit underwriting standards.

For the next three quarters of 2019, we are guiding our provision expense to be in the range of $9 million to $10 million, as we expect to cover both, the future originated loan balance growth at 1.1% to 1.2% coverage and net charge-offs for the remaining three quarters at about 15 basis points annualized.

The first quarter's non-interest income of $17.1 million was $1.7 million higher than in the fourth quarter of 2018. The linked quarter increase in non-interest income was primarily driven by the residential mortgage gains on loans sold. And with increasing seasonal residential mortgage activity during the summer months, this puts us on a path to achieve the full year non-interest income guidance of $70 million to $72 million.

Regarding expenses, our first quarter's non-interest expense totaled $44.4 million and increased $1.5 million from the prior quarter. The linked quarter increase was primarily driven by a $0.9 million seasonal increase in salaries and benefits due to higher commissions and payroll taxes, as well as $0.5 million higher problem asset workout and OREO expense. However, as we have mentioned previously, we expect OREO gains later this year to offset the problem loan and OREO expenses realized for the full year.

Reiterating our non-interest expense guidance, we still expect our full year expenses to be within the previously guided $182 million to $185 million range. The Utah expansion initiative, annual merit increases, as well as the seasonal increase in mortgage activity will lead to higher compensation expense in coming quarters. As always we continue to focus on improving our efficiency, and we will aim to come in at the lower end of this range.

The effective tax rate for the quarter was 15.1% and included $0.8 million benefit related to stock compensation activity. Excluding this, the effective tax rate for the quarter was 18.5%. For the rest of 2019, we expect the effective tax rate to be in the previously guided 18.5% to 19.5% range. As it relates to capital, we finished the quarter with a 10.6% Tier 1 leverage capital ratio, and the tangible book value per share increased to $19.31, driven by record earnings.

Tim, that concludes my comments.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Thank, Aldis. Aldis has covered in detail what I believe was a strong quarter. So, I'll go ahead and open up the call for questions, and Mariama ask you to open up the lines.

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from Jeff Rulis with D.A. Davidson. Your line is open.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Good morning, Jeff.

Jeffrey Rulis -- D.A. Davidson -- Analyst

Thanks. Good morning, Tim. Yes. I was hoping, Tim, just to get an update on the Colorado M&A, seeing that you had lots of activity in 2018, and I guess, have been quiet of late. Just want to check in with you on discussions of late or kind of within the market, what you're hearing?

G. Timothy Laney -- Chairman, President & Chief Executive Officer

We're going to continue to focus on being intelligent stewards of capital. I will say, if you look at our entire footprint, we are seeing opportunities. We're primarily focused on privately held institutions. We enjoy working with what we consider to be savvy sellers who appreciate the opportunity to strike an intelligent deal that upon announcement will be well-received by the marketplace recognizing that if they're taking our shares, and were announcing the smart deal, then they're going to see those shares trade up day 1. So, day 1 premium is not as important necessarily as the shares they're going to hold long-term.

Working with private owners of banks that have the flexibility and the foresight to work that way has paid off for prior partners we've worked with and we think it will pay off for future partners. So, I can't say much more than that, but we will continue to confine ourselves to the kind of returns and earn back standards that we've held ourselves to in the past.

Jeffrey Rulis -- D.A. Davidson -- Analyst

Okay. And maybe just a related. Trying to get a pulse on -- your feel on kind of out of market entrants. And then kind of the second part of that question is, are you seeing any shakeout from deals? I'd focused more on Colorado, but even in New Mexico and Kansas City call it, where there has been some deal activity. You're seeing some shakeout, and again, what do you think the appetite as it slowed from out of market entrants from your perspective? Thanks.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Well, as Aldis mentioned in his comments, we continue to benefit from operating and some of the better performing markets economically in the United States, and so there continues to be a great deal of interest from outside parties in these markets. I think that's -- for obvious reasons, I think, that's smart on their part.

As it relates to the first part of your question in the shakeout, frankly, we continue to benefit most from the opportunities we see from the larger institutions. And I'm talking about the larger three or four institutions, and that shouldn't really surprise folks. If you look at their historical market share that kind of change [00:31:46] that tends to go on in those institutions, we should be taking market share there and we are. So that's our opportunity, and that's what we're working to take advantage of.

Jeffrey Rulis -- D.A. Davidson -- Analyst

Okay. Maybe last one. Just on capital, then you're seeing some of the highest profit levels in about a year and a half year, and we've seen the dividend hiked up a bit in the last few quarters. Just wanted to kind of get your capital deployment, maybe waterfall or priorities, I guess, funding organic growth, but then you're looking at the dividend, anything else you're looking for as far as deploying capital, just anything there?

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Well, I think, you nailed it with the first two points. Certainly, first and foremost funding organic growth; second, continuing to support ideally a semiannual dividend increase; third, being opportunistic with M&A; fourth, recognizing that we are long in this cycle, and we believe that if we are fortified going into some kind of downturn. When and if that happens that that will bode well as it relates to opportunities in a downturn.

On a related note, I'll -- if no one asks, I'll ask Rick to talk about the way we view our loan book and the way we stress test our loan book, and view it in a severe stress scenario. I think a strong capital base coupled with the balance sheet we built, or more specifically the loan book we've built, I think, positions us well to take advantage of a downturn. So, that's how I would break it down.

Jeffrey Rulis -- D.A. Davidson -- Analyst

Okay. Thank you.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

You bet. Thanks for the questions.

Operator

Your next question comes from Tim O'Brien with Sandler O'Neill Partners. Your line is open.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Good morning, Tim.

Tim O'Brien -- Sandler O'Neill Partners -- Analyst

Good morning, Tim. Good morning, guys. Just to follow up on the comments you made about the bulk of expense hitting on the OREO disposition and the benefits coming in, in the second or third quarter. Could you give a little more -- can you share some detail on that, Tim, kind of what -- that's a curious set of circumstances there. I'd love to hear a little bit more about that, and I guess, what it might mean as far as operating expense or where the gains are going to book? What line that's going to show up in and get a little more detail there?

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Yes. Rick, do you want to take that.

Richard U. Newfield -- Chief Risk Officer

Sure. Hey, Tim. Good morning. It's Rick. Look, overall, we've said this for some time and evidenced that in past years OREO remains a profit center for our company. We've actually had several OREO properties under contract for some time with very nice gains. As Aldis said, we expect those gains to do no less than cover the full year's OREO and problem loan expenses. As we've said before, they're lumpy, and as Aldis indicated and Tim alluded to, we would see those gains second, third quarter here. And again that's probably the most detail I can share other than their significant gains that we would realize.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

And, of course, Rick and Aldis are approaching that conservatively as I've asked them to Tim. You know this Tim, and those that have followed us for some time know this, but for those that may be newer to the name, I'd just want to remind everyone that what we're talking about here is OREO that came out of acquired problem institutions. So, when Rick talks about it as a profit center, these were deeply discounted loans and OREO. And net-net, the economic returns on these assets have been tremendous.

And when I look at the landscape over the course of 2019, I see a nicely accretive position to capital. Again, we're not talking about core earnings, just to be clear, but when I think about it in terms of just a contribution to capital building on the prior discussion, I see a nice contribution over the second and third quarter. What we're talking about to be very specific is the resolution, the final resolution of some fairly meaningful pieces of property being sold that have been held for sometime.

Tim O'Brien -- Sandler O'Neill Partners -- Analyst

And the booked value of that property as you're carrying it now, is at -- that's $9 million?

Aldis Birkans -- Chief Financial Officer & Treasurer

Our total OREO is just over $9 million. We're talking about a subset of those properties that are under contract and are positioned for very nice gains.

Tim O'Brien -- Sandler O'Neill Partners -- Analyst

Got it. And then just changing gear, one last question. Trailing four quarters before this quarter growth in non-interest bearing DDA was much less substantial than this quarter's growth. That was kind of in my view, a highlight of -- one of the highlights of several obviously of the quarter. Could you give a little bit of color on what was behind that? And if that's indicative of prospects you are going forward in that area?

G. Timothy Laney -- Chairman, President & Chief Executive Officer

I'll ask Aldis is to fill in with a little more detail, but I will remind folks that I talked about a number of relationships closing in the fourth quarter, and there tends to be as those relationships close a trailing period for all of the treasury management and operating accounts to come on line. So part of what you saw in the first quarter was the benefit from fourth quarter activity as well as a stronger-than-expected first quarter. Having said that Aldis, any additional color you would add?

Aldis Birkans -- Chief Financial Officer & Treasurer

No, that's exactly right. It's relationships that we've been mentioning about and working on for several quarters now. Obviously, we continue working on new ones and growing that part of the deposit book on a go forward basis as well. But there was -- this was -- this quarter was a combination of relationships to be closed and started funding in from the quarters before as well as new people and new accounts being brought on.

It just gives me the opportunity, Tim, to thank my team mates again for their focus on really serving the full relationship of our clients. And, I think, one thing that we're doing uniquely well with our incentive systems that really reward our bankers for growth and direct contribution which is a proxy for net income which is the way we all reward ourselves as shareholders is they're recognizing that they can grow that direct contribution just as strongly, and at times, even more robustly with the growth of treasury management and deposit business than they can with loan business, certainly on a risk adjusted basis.

So, having that kind of alignment of incentives with the growth of full relationships continues to be a strong force for us. But again, I'll just thank my bankers for their focus on serving the full relationships of our clients.

Tim O'Brien -- Sandler O'Neill Partners -- Analyst

Well, thanks for the updates on guidance and appreciate you answering my questions.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

You bet. Thank you, Tim.

Operator

Your next question comes from Chris McGratty with KBW. Your line is open.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Hi, Chris.

Kelly Motta -- KBW -- Analyst

Hi. This is actually Kelly Motta on for Chris. How are you, guys?

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Much better. (Multiple Speakers) Thank you, Kelly.

Kelly Motta -- KBW -- Analyst

Hi. I want to tell him that. Well...

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Yes, please do it.

Kelly Motta -- KBW -- Analyst

Just a point of clarification, your fee guidance for the year, is that inclusive of the expected OREO gains you anticipate realizing later this year?

Aldis Birkans -- Chief Financial Officer & Treasurer

It is not. So, the fee guidance -- the OREO gains actually go with a counter expense in the expense line item. So these fees are excluding the OREO.

Kelly Motta -- KBW -- Analyst

Okay.

Aldis Birkans -- Chief Financial Officer & Treasurer

Yes.

Kelly Motta -- KBW -- Analyst

Okay. All right. Thanks on that. And then I was hoping to get an update on the Utah expansion, maybe some more color out there on how that's progressing?

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Right. Thanks for asking. We were actually stunned with the momentum there. We -- I'm pleased to report that Utah contributed to our first quarter earnings, off to a very solid early start, and could not be more proud of the leadership there, and we just couldn't be happier. I will say, consider this kind of a public service announcement, if there was an opportunity to make the right acquisition in that market, if they're interested sellers, we are interested in creating the right partnership there. We would love to help invest in the growth of the state of Utah.

Kelly Motta -- KBW -- Analyst

Very well. That's good to hear. Maybe -- excuse me, a last question. Maybe a last question on your margin outlook. It hasn't changed because I believe you didn't have rates in your prior outlook. Just wondering with the proportion of loans you have that are variable, if you've taken any steps to mitigate downside risk with the possibility with the Fed not moving or cutting rates later this year?

G. Timothy Laney -- Chairman, President & Chief Executive Officer

This is all -- this is a great question. We've been actually working on that for over a year now, and mixing loan. Marginal loans coming on at more of a fixed rate than variable rate. And what I'm talking about is more about three to five year fixed rate loans as opposed to anything longer than that. And we've been bringing down our asset sensitivity in the light of -- the rate hike environment coming to an end, or in a year, we'll continue working on that this year as well.

Kelly Motta -- KBW -- Analyst

Great. Thank you.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Thank you, Kelly.

Operator

Your next question comes from Nathan Race with Piper Jaffray. Your line is open.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Good morning, Nathan.

Bob Shone -- Piper Jaffray -- Analyst

Good morning. It's actually Bob Shone on for Nate.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Bob.

Bob Shone -- Piper Jaffray -- Analyst

First question is, can you maybe talk a little about what were the primary contributors to the mortgage banking pickup this quarter, and maybe anything you see in the marketplace going forward?

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Yes. We just simply saw a higher level of locks better activity in the quarter early on than we expected. I mean, keep in mind, the way we think about residential banking is we expect our challenge to the team is to break even or better in the fourth and first quarters, and to really make our money to deliver our profits for the year in the second and the third quarters. But Aldis, you might want to speak in more details as to not only what we saw in the first, but the early activity we've seen as we've entered the spring.

Aldis Birkans -- Chief Financial Officer & Treasurer

Yes. And to that point in the first quarter, we're actually happy to report that mortgage was -- mortgage business was accretive to our earnings this quarter as well. So they are better than breaking even though they added to the value of the company. And you know I'll be starting off in April here on a strong note. I think the lower rate environment is obviously helping on the mortgages. But you know as a remainder, again we are in very good markets, especially, here in Colorado for purchase mortgages. So, it is -- you know it's always easier to swim with the tide than against it.

Bob Shone -- Piper Jaffray -- Analyst

Thanks. That's great color. And then maybe can you talk a little about the loan pipeline as we head into 2Q, especially after a strong first quarter, is [00:45:23] there maybe any areas that you see a stronger or weaker?

Aldis Birkans -- Chief Financial Officer & Treasurer

Look, the good news is we feel good about our pipeline and activity as we roll right into the second quarter. And Bob I'll -- since I think it came up in your report, I'll actually make one point of clarification as it relates to the diversity of the book. I think you guys may have pointed to kind of a heavier concentration in CRE. I would point out, and Rick, you can jump in here. As a practical matter, a bulk of what we were talking about in terms of growth in that CRE book and the first quarter was actually owner occupied. Furthermore to put it in perspective, year-over-year we actually saw our non-owner occupied CRE decline. I think what Rick around 8%.

Richard U. Newfield -- Chief Risk Officer

8%.

Aldis Birkans -- Chief Financial Officer & Treasurer

8%. Furthermore, I think, this brings it home at first quarter and our commercial real estate to total cap is right around 100%. What is it? 101%?

Richard U. Newfield -- Chief Risk Officer

101%.

Aldis Birkans -- Chief Financial Officer & Treasurer

101% versus a regulatory guideline, of course, of course of 300%. So I just want to -- I want to stress that we continue to be very focused on building a diverse granular book. With that Rick, anything you would add in terms of the dimensions around what you're seeing in the pipeline today or what you saw in the first quarter?

Yes, I mean, I think, yes, there are important point on non-owner occupied commercial real estate. We continue to build strength as you know Tim in business banking. And really granular small business loans and expect based on pipelines to have an even stronger second quarter in that area. In the past, I've talked about overall granularity. We've generally been around $1 million per funded commercial loan. Actually we're more granular in the first quarter at about $700,000. So again, I just would echo the comments you made.

Our criticized and classified loans continued to trend down during the first quarter. And I mentioned earlier the stress testing maybe at a high level you could explain we're now into our third year, while not required by the regulators. We run with a third-party the equivalent of the regulatory required stress testing. You may want to talk about preliminary results we're seeing from our third year of stress testing?

Richard U. Newfield -- Chief Risk Officer

Sure, Tim. And as you said we're not required to do this. We actually do one internally to our credit review team, and then use a variable. We can serve very conservative and tough third-party to come in and do an annual test. They look at a significant portion of our commercial and business banking portfolio. It's a bottoms up approach, and for the second consecutive year, they've actually seen a de-risking, a decrease of overall loss rates ranging from a base case all the way to a very severe case. And at a high level, we do that again to understand our optionality and the strength of our balance sheet if we go into that very severe case which from their assumptions would be at or more severe than what we saw in the great recession.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Yes. Thank you, Rick. Bob, I hope and maybe giving you more than you asked for, but wanted to get that in?

Bob Shone -- Piper Jaffray -- Analyst

No. That's great. Thank you very much, and thanks for taking my questions.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

You bet.

Operator

Thank you. That is all the time we have for questions. I will now turn the call back to Mr. Laney for his closing remarks.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Well, I certainly don't want to limit any questions. So Mariama, I'll just check and make sure there are no other questions in the queue.

Operator

Yes. We have a question from Jeff Rulis with D.A. Davidson. Your line is open.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Yes. Let's take it.

Jeffrey Rulis -- D.A. Davidson -- Analyst

Tim, thank you. You're reading my mind. Yes. On the -- I just wanted to clarify a couple items. Aldis, you mentioned whether the average earning assets that you said was $5.3 billion to $5.4 billion?

Aldis Birkans -- Chief Financial Officer & Treasurer

Period end $5.3 billion to $5.4 billion. So by year end, our earning assets will be $5.3 billion to $5.4 billion.

Jeffrey Rulis -- D.A. Davidson -- Analyst

Okay. Got it. That's helpful.

Aldis Birkans -- Chief Financial Officer & Treasurer

And the reason I give that guidance, just to be very clear again, the mortgage held for sale portfolio tends to increase during the summer months. Right. And I don't want anybody to take that as a continuation as we will build that book here in second and third quarter, so it will come back down and that's why -- I'm giving such precise guidance toward the end of the year.

Jeffrey Rulis -- D.A. Davidson -- Analyst

No, that's very helpful. Appreciate it. And then just to clarify on the -- I guess, on the non-interest expense, just the -- again the problem workout expense you expect for the full year to be fully offset by OREO gains and both factors would be included in your $182 million to $185 million non-interest expense guidance?

Aldis Birkans -- Chief Financial Officer & Treasurer

That's correct.

Jeffrey Rulis -- D.A. Davidson -- Analyst

Okay. That was all...

Aldis Birkans -- Chief Financial Officer & Treasurer

Those two line items netting to zero, at least to zero if not being negative or positive to the reducing expense.

Jeffrey Rulis -- D.A. Davidson -- Analyst

Gains exceeding the workout cost.

Aldis Birkans -- Chief Financial Officer & Treasurer

Yes.

Jeffrey Rulis -- D.A. Davidson -- Analyst

Okay. All right. Thank you. Appreciate it.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

And Jeff I would just add that while I have no intent to over promise, I think, you can look at our track record on doing better than planned against expenses, and I certainly have high expectations of ourselves here in 2019.

Jeffrey Rulis -- D.A. Davidson -- Analyst

Got you. You're in the hole by 80,000 or so. So, I guess, it's going to be a more positive picture in the closing quarter. So, thank you.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

You bet. Mariama, any other questions in the queue?

Operator

I am showing, we have no further questions at this time.

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Okay, great. Then I'll just simply thank everyone for joining us this morning, and we'll be back to you with second quarter results shortly. Thank you very much. Good day.

Operator

And this concludes today's conference call. If you would like to listen to the telephone replay of this call, it will be available beginning in approximately two hours, and will run through May 8, 2019 by dialing (855) 859-2056 or (404) 537-3406, and referencing the Conference ID of 8699564. The earnings release and an on-line replay of this call will also be available on the company's website on the Investor Relations page. Thank you very much and have a great day. You may now disconnect.

Duration: 36 minutes

Call participants:

G. Timothy Laney -- Chairman, President & Chief Executive Officer

Aldis Birkans -- Chief Financial Officer & Treasurer

Jeffrey Rulis -- D.A. Davidson -- Analyst

Tim O'Brien -- Sandler O'Neill Partners -- Analyst

Richard U. Newfield -- Chief Risk Officer

Kelly Motta -- KBW -- Analyst

Bob Shone -- Piper Jaffray -- Analyst

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