Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- National Bank Holdings Corp (NBHC, Financial) delivered strong earnings for the third quarter, with earnings of $33.1 million or $0.86 per diluted share.
- The company achieved a return on average tangible assets of 1.4% and a return on average tangible common equity of 14.8%.
- Fully taxable equivalent net interest margin expanded by 11 basis points to 3.87% during the third quarter.
- Deposit balances grew by $120 million on a spot basis, indicating strong deposit growth.
- Noninterest income increased to $18.4 million, driven by growth in treasury management fees and other fee-based businesses.
Negative Points
- Noninterest expense increased to $64.2 million, partly due to continued investments in technology and an additional payroll day.
- The provision expense for the quarter was $2 million, driven by changes in the CECL models, specifically the unemployment rate outlook.
- The allowance to total loans ratio ended the quarter at 1.23%, indicating a cautious approach to potential loan losses.
- The company projects a slight decline in noninterest income for the fourth quarter due to seasonality.
- There are several credits impacting the 30-day past due bucket, requiring close monitoring and management.
Q & A Highlights
Q: Can you provide the September margin average compared to the quarterly average?
A: September's monthly margin was higher than our Q3 margin of 3.8%. This improvement was due to proactive efforts to reduce deposit costs, which positively impacted the margin.
Q: What is the outlook for the margin into 2025, considering potential rate cuts?
A: We are positioned to maintain a margin in the mid-3.8% range. We are asset-neutral, so we don't expect significant changes from rate cuts. More detailed guidance will be provided in the fourth quarter earnings call.
Q: What are the capital priorities moving forward, given the recent dividend increases?
A: We are open to partnering with institutions that align culturally and strategically. We will continue investing in 2UniFi and are not currently considering buybacks at current prices.
Q: What are the best opportunities for loan growth by type and region?
A: Our loan growth opportunities are diversified across our footprint and business lines. Credit quality is a priority, and the pipeline is well-diversified.
Q: How are you managing deposit rates in light of potential future rate cuts?
A: We have been proactive in lowering deposit rates, with minimal pushback from clients. This approach will continue, and our bankers have been disciplined in managing these conversations.
Q: Are there any unique factors affecting the originated loan yields this quarter?
A: The originated loan yields were strong at 8.5%, with no one-off factors impacting them. This reflects disciplined loan pricing.
Q: What are the M&A opportunities and geographic priorities for expansion?
A: We are interested in expanding in Utah and Texas, focusing on markets growing faster than national averages. Cultural and strategic alignment is crucial for any potential M&A.
Q: What is the expected tax rate moving forward?
A: The year-to-date tax rate through September 30 is 18%, and we project a full-year effective tax rate between 18% and 19%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
