Earnings Per Share (EPS): $0.63 per diluted share. Net Income: $24.2 million. Return on Tangible Assets: 1.1%. Net Interest Margin: 3.93% fully taxable equivalent. Net Interest Income: $88.6 million fully taxable equivalent. Loan Balances: Decreased by $105 million. Deposit Balances: Increased by $186 million. Cost of Deposits: Improved by 9 basis points to 2.03%. Nonperforming Loan Ratio: 45 basis points of total loans. Net Charge-Offs: 20 basis points for the quarter. Provision Expense: $10.2 million. Allowance to Total Loans Ratio: 1.2%. Noninterest Income: $15.4 million. Noninterest Expense: $62 million. Tangible Book Value Per Share: $25.94, a 2.6% increase. Common Equity Tier 1 Ratio: 13.6%.

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Release Date: April 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

National Bank Holdings Corp (NYSE:NBHC) reported a solid return on average tangible assets of 1.1% despite a significant charge-off due to suspected fraud. The company experienced a 3.4% growth in fully taxable equivalent pre-provision net revenue compared to the first quarter of the previous year. Spot deposit balances grew by $186 million during the quarter, benefiting from seasonal tax inflows and the Cambr platform deposits. The nonperforming loan ratio remains below peer averages, ending the quarter at 45 basis points of total loans. The company maintained strong liquidity levels with a TCE ratio of 10.1%, Tier 1 leverage ratio of 10.9%, and a common equity Tier 1 ratio of 13.6%.

Negative Points

The first quarter earnings were negatively impacted by a $9 million charge-off related to suspected fraudulent activity by a borrower. Loan balances decreased by $105 million due to elevated levels of economic uncertainty, causing clients to delay their funding needs. The fully taxable equivalent net interest margin decreased to 3.93% due to two fewer business days and lower earning asset balances. Noninterest income was lower than expected, with service charges and bank card fees seasonally lower during the first quarter. The company is operating in a risk-off posture due to economic uncertainties, impacting its ability to engage in capital projects or M&A activities.

Q & A Highlights

Q: Can you provide any updates on the fraud investigation and potential recoveries? A: G. Timothy Laney, CEO: We have turned the matter over to the appropriate authorities and are not in a position to comment further. However, I can confirm that it is a one-off incident involving a single client, with no systemic issues.

Story Continues

Q: How did the fraud impact the net interest margin for the quarter? A: Aldis Birkans, President: The fraud had a slight impact, reducing the margin by about 2 basis points due to interest accrual reversals. Additionally, the margin was affected by asset yield mix changes due to investment security purchases.

Q: What are your expectations for charge-off activity moving forward? A: Aldis Birkans, President: We expect charge-offs to revert to more historical levels. The credit environment is improving, with nonperforming assets and past due loans decreasing.

Q: How are you approaching capital management, particularly regarding share buybacks and M&A? A: G. Timothy Laney, CEO: We are giving more attention to share buybacks, especially given current stock valuations. As for M&A, the market is challenging, and our focus is on proving that the recent fraud was an anomaly.

Q: Can you elaborate on your risk-off posture and its implications for growth? A: Aldis Birkans, President: We are maintaining a conservative credit posture, adding rigor to underwriting and focusing on existing client relationships. This approach helps us navigate uncertainties without compromising credit quality.

Q: What factors could influence your ability to meet the mid-single-digit loan growth target for the year? A: Aldis Birkans, President: Our markets typically outperform national averages, providing some tailwind. However, economic uncertainties and client caution could impact growth. We are monitoring these factors closely.

Q: How do you plan to manage expenses, and what are the expected drivers for any increases? A: Nicole Van Denabeele, CFO: We are committed to disciplined expense management. Increases will primarily come from investments in 2UniFi, including amortization, developer costs, and marketing as we go live.

Q: What is your strategy for managing deposit growth and liquidity? A: Aldis Birkans, President: We are leveraging our relationship-based banking model to grow deposits. Recent growth was partly due to seasonal tax inflows and client liquidity, which we expect to sustain alongside loan growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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