National Bank Holdings Corp Q1 FY2025 earnings call

Key Points

• Tim Laney noted earnings of $0.63 per diluted share were negatively affected by a fraud-related charge-off on a Del Taco franchise, which is now with appropriate authorities.
• Nicole Van Denabeele discussed net income, net interest margin (3.93%), deposit growth, credit quality (nonperforming loan ratio at 45 basis points, past due loans at 24 basis points), noninterest income ($15.4 million), and expenses ($62 million with $2 million payroll tax credits). Loan balances decreased due to client caution, but deposits grew. Credit quality remained strong despite the charge-off.
• Aldis Birkans highlighted balance sheet trends, a cautious business environment, improving credit trends, deposit growth, and expense management, emphasizing the company's focus on relationship-based banking and expense control.

National Bank Holdings Corporation reported net income of $24.2 million or $0.63 per diluted share for the first quarter. The results were negatively impacted by a $9 million charge-off related to suspected fraudulent activity on a Colorado-based Del Taco franchise. Despite this, the return on average tangible assets was 1.1%. Fully taxable equivalent net interest margin totaled 3.93% with net interest income at $88.6 million. Spot deposit balances grew $186 million, and the cost of deposits improved 9 basis points to 2.03%. Nonperforming loan ratio ended at 45 basis points, past due loans decreased to 24 basis points. Noninterest income was $15.4 million, and noninterest expense was $62 million, including $2 million in payroll tax credits.

Forward-Looking Statements

• Projected fully taxable equivalent net interest margin to be in the mid 3.9% range for the remainder of 2025.
• Total noninterest income expected to be in the range of $72 million to $77 million for 2025.
• Total expenses aimed to be at the low end of the range $272 million to $278 million for 2025.
• Aim for mid-single-digit loan growth for the year, acknowledging geopolitical and economic factors could impact growth.

Risks

• The fraud charge-off related to a Del Taco franchise, under investigation by authorities, which was a one-off, nonsystemic issue.
• Economic uncertainty, geopolitical factors, and their potential impact on loan growth and credit quality.

Q: Comment on expectations for recoveries on the fraud item?

A: Tim Laney stated it's with appropriate authorities and no comment on recoveries, emphasizing it's a one-off, nonsystemic issue.

Q: Impact on margin from the fraud?

A: Aldis Birkans said the fraud impacted the margin by approximately 2 basis points due to interest accrual reversals.

Q: Tariff exposure and portfolio impact?

A: Tim Laney said uncertainty around tariffs makes it hard to assess, but clients are cautious with capital investments and M&A.

Q: Capital and buyback?

A: Tim Laney mentioned buyback is under more attention than in recent times, but no specific details on timing.

Q: Expenses and 2UniFi?

A: Nicole Van Denabeele said expenses are on track to hit the low end of the guidance, with 2UniFi expenses at $3.4 million in Q1 and ramp-up expected later in the year.

Q: Loan origination pricing and growth?

A: Tim Laney and Aldis Birkans discussed pricing is not the main challenge, focusing on relationships and not following competitive pricing trends that don't align with risk posture.

Q: Securities purchases and yields?

A: Nicole Van Denabeele said the company purchased $240 million of high-quality, short-duration investment securities in January at around a 5% yield, up from the 2.65% yield of the sold securities.