National Bank Holdings Corporation (NBHC) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance, with increased loan fundings, deposits, and noninterest income. Despite higher expenses related to 2UniFi, the company projects continued growth and plans to manage costs effectively. The Q&A section reveals optimism about maintaining margins, resuming loan growth, and leveraging acquisitions. Share repurchases and a healthy pipeline further support a positive outlook. While some uncertainties exist regarding future expenses, the overall sentiment is positive, suggesting a potential stock price increase of 2% to 8% over the next two weeks.
Key Financial Performance
Earnings per diluted share $0.96, with a return on tangible common equity of 14.72%. This return was achieved while maintaining a high level of capital despite headwinds from a heavy volume of payoffs in the CRE portfolio.
Net income $35.3 million or $0.92 of earnings per diluted share. Adjusted net income increased 30% annualized over the prior quarter to $36.6 million or $0.96 of earnings per diluted share, excluding $1.7 million in deal-related expenses.
Adjusted pre-provision net revenue Grew by 17.5% annualized over the prior quarter, supported by strong loan fundings and disciplined pricing.
Net interest margin Expanded 3 basis points during the quarter to 3.98%, which is 11 basis points higher than the same quarter last year, due to disciplined loan and deposit pricing.
Nonperforming loans Reduced by 20% during the quarter to $27 million. The nonperforming loan ratio improved by 9 basis points to 36 basis points, which is 10 basis points lower than year-end levels, due to proactive efforts to resolve problem loans.
Loan fundings $421 million during the quarter, bringing total year-to-date loan fundings to $1 billion. Quarterly loan fundings have increased each quarter of 2025.
Deposits Total deposits increased by $202 million compared to the prior quarter, with average deposits steady at $8.2 billion. Cost of deposits was 2.08%, and total cost of funds was 2.1%.
Noninterest income $20.7 million, 21% higher than the second quarter and 13% higher than the third quarter of last year, driven by $3.5 million of unrealized gains on partnership investments and higher service charges and mortgage banking income.
Noninterest expense $67.2 million, including $1.7 million of acquisition expenses and $6.2 million of 2UniFi expense. Core noninterest expense is projected to be in the range of $64 million to $66 million for the remainder of the year, excluding acquisition-related expenses.
Tangible book value per share Grew 12% annualized during the quarter to $27.45, supported by strong financial performance and share repurchases.
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Operating Highlights
2UniFi launch: The company launched 2UniFi during the quarter and plans to provide revenue guidance for it in the next earnings call.
Merger with Vista Bancshares: The company announced a merger with Vista Bancshares, which is expected to close in the first quarter of 2025. Vista reported strong financial results for the third quarter, validating the strategic value of the transaction.
Loan fundings: The company generated $421 million in loan fundings during the quarter, bringing the year-to-date total to $1 billion. Loan production returned to normalized levels, with commercial banking leading the growth.
Deposit growth: Total deposits increased by $202 million during the quarter, with nearly half of the growth coming from noninterest-bearing transaction deposits.
Credit quality: Nonperforming loans decreased by 20%, with the nonperforming loan ratio improving by 9 basis points to 36 basis points. Classified and criticized assets also declined.
Pricing discipline: The company maintained pricing discipline, resulting in a net interest margin of 3.98%, which is an 11 basis point increase over the same quarter last year.
Capital and liquidity: The company maintained strong levels of liquidity and built excess capital, ending the quarter with a TCE ratio of 10.6% and a common equity Tier 1 ratio of 14.7%.
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Risk or Challenges
Loan Paydowns: Continued headwinds from loan paydowns, particularly in the CRE portfolio, which could temper overall loan portfolio growth.
Acquisition Costs: Incurred $1.7 million in deal-related expenses for the Vista Bancshares merger, which could impact short-term financial performance.
Interest Rate Sensitivity: Guidance for the remainder of 2025 does not include potential future interest rate policy changes by the Federal Reserve, introducing uncertainty in financial projections.
CRE Exposure: Stabilized properties in certain CRE categories moving to permanent financing, which could limit growth in this segment.
Deposit Costs: High deposit costs at 2.08%, though measures are being taken to address this.
Regulatory Thresholds: Efforts to remain below the $10 billion asset threshold to avoid additional regulatory scrutiny, which could limit growth opportunities.
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Guidance & Outlook
Net Interest Margin: For the remainder of 2025, the company projects fully taxable equivalent net interest margin to remain in the mid-3.9% range, excluding any future interest rate decisions by the Fed.
Noninterest Income: The company projects total noninterest income to be in the range of $15 million to $17 million for the remainder of 2025.
Noninterest Expense: Core noninterest expense for the remainder of the year is projected to be in the range of $64 million to $66 million, excluding acquisition-related expenses.
Vista Bancshares Merger: The merger with Vista Bancshares is on track to close in the first quarter of 2026. The company expects the merger to bring strategic value and enhance the combined organization.
Loan Portfolio: Loan production is expected to normalize, with a focus on commercial and industrial (C&I) portfolio growth. The company anticipates sustainable, high-quality growth in its loan portfolio.
Deposit Costs: Deposit costs are expected to decrease in the fourth quarter due to actions taken in late September following the most recent Fed rate cut. Additional measures may be implemented if the Fed continues rate cuts.
2UniFi Revenue Guidance: The company plans to provide revenue guidance for its 2UniFi initiative during the next quarterly earnings call.
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Shareholder Return Plan
Share Repurchase: We repurchased 240,000 shares during the quarter, totaling $8.9 million, bringing total shares repurchased year-to-date to 359,000 shares.
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Key Q&A
Q:Can you elaborate on the mid-3.90 margin guide and the impact of rate cuts?
A:The third quarter's margin was positively impacted by $0.5 million of interest and fees recovered, equating to a 2 basis point margin impact. The company expects to maintain a solid mid-3.9s margin for the quarter. For Q4, with a likely rate cut, the company plans to reduce deposit rates in line with the Fed, offsetting the impact of repricing on the variable loan portfolio.
Q:What is the outlook for 2UniFi expenses and their impact on future quarters?
A:The step-up in 2UniFi expenses this quarter was expected due to launching 2UniFi, including increased depreciation and marketing expenses. Variable expenses will also rise as clients are onboarded. For Q4, 2UniFi expenses are expected to range between $7 million and $9 million, including increased marketing and user-related costs.
Q:What is the expected growth of expenses in 2026, including 2UniFi?
A:Management avoided providing specific details about 2026 expenses, citing ongoing partnership discussions related to 2UniFi. They committed to addressing 2UniFi in the Q4 earnings call and aim to keep expenses relatively flat, assuming no major changes.
Q:Can you provide insights into loan growth and paydowns in Q3 and expectations for Q4?
A:Loan balances were down in Q3 due to heavy payoffs, particularly in commercial real estate, as temporary or construction funding transitioned to permanent financing with alternative lenders. The company expects loan growth to resume in Q4, supported by a healthy pipeline.
Q:What is the status of the cost-saving plan announced last July?
A:The company is delivering on its expense reduction commitments. Q3 expenses included $1.7 million in acquisition costs, $6.2 million in 2UniFi expenses, and other timing impacts. The Q4 run rate for 2UniFi expenses is expected to be $7 million to $9 million.
Q:What is the outlook for the recently announced acquisition and its impact on fee income?
A:The acquisition is on track to close next quarter. Management is optimistic about leveraging treasury management, wealth, and trust capabilities in Texas. They are already working on partnerships to capture opportunities in Q4.
Q:What are the competitive pressures from private credit, and how is the company positioned?
A:Private credit competition is primarily in the commercial real estate sector, offering terms and pricing that the company finds unsustainable. Despite this, the company feels optimistic about its pipeline and expects to overcome these challenges.
Q:What is the company's approach to capital deployment, including buybacks?
A:The company repurchased $8 million in stock this quarter and has $35 million to $36 million in remaining authorization. They will be opportunistic with buybacks while considering potential M&A opportunities.
Q:What are the risks and opportunities in the commercial real estate portfolio given the yield curve?
A:The shape of the yield curve has not significantly impacted paydowns or refinancing in the commercial real estate portfolio. Management does not foresee immediate risks but remains vigilant.
Q:What are the company's thoughts on NBFI lending and other sector risks?
A:The company has minimal exposure to NBFI lending, well below 1% of total loans. They are monitoring risks in the agricultural sector, particularly commodity row crops, and the transportation sector, which faces significant challenges.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details about 2026 expenses, citing ongoing partnership discussions related to 2UniFi. They also declined to provide near-term visibility on positive operating leverage for 2UniFi, stating that more details would be shared in the Q4 earnings call.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Accounting Officer
Bancshares merger
Bancshares quality
Bank track
CI portfolio
CRE category
CRE exposure
CRE portfolio
CRE risk
Cambr deposit
Chief Accounting
Commission measure
Credit loan
Credit quality
Director
Fed rate
Tier
Vista Bancshares
acquisition expense
action
deposit balance
expansion
gain
headwind
investment
loan funding
merger Vista
point basis
possibility
ratio basis
reduction
relationship
remainder interest
return equity
return level
share return
transaction
trend
work
NBHC Transcript
National Bank Holdings Corporation (NBHC) Q4 2025 Earnings Call Transcript
Positive1-28
The earnings call highlights strong financial performance with improved asset quality, disciplined credit management, and robust capital ratios. The company projects a 10% loan growth in 2026 and maintains a strong margin. Despite some uncertainties in partnership finalization for 2UniFi, the strategic focus on loan growth, share buybacks, and stable noninterest expenses are positive indicators. The market cap suggests a moderate reaction, thus predicting a positive stock price movement of 2% to 8% over the next two weeks.
National Bank Holdings Corporation (NBHC) Q3 2025 Earnings Call Transcript
Positive10-22
The earnings call highlights strong financial performance, with increased loan fundings, deposits, and noninterest income. Despite higher expenses related to 2UniFi, the company projects continued growth and plans to manage costs effectively. The Q&A section reveals optimism about maintaining margins, resuming loan growth, and leveraging acquisitions. Share repurchases and a healthy pipeline further support a positive outlook. While some uncertainties exist regarding future expenses, the overall sentiment is positive, suggesting a potential stock price increase of 2% to 8% over the next two weeks.
National Bank Holdings Corporation (NBHC) Q2 2025 Earnings Conference Call Transcript
Positive7-23
The earnings call reveals strong financial performance with a 19.9% YoY growth in net income and a 26% increase in loan fundings. Positive guidance on margin expansion and Unifi platform's potential adds to the optimism. Despite some concerns over higher-risk loans, management has addressed most issues. The market strategy, focusing on fee income and partnerships, is promising. The lack of specifics on M&A is a minor concern, but overall, the financial health and strategic direction suggest a positive stock price movement.
Earnings call transcript: National Bank Holdings' Q4 2024 earnings beat estimates
Unknown1-23
The earnings call presents a mixed picture: strong financial performance with increased earnings per share and net income, alongside a robust net interest margin. However, concerns about rising non-interest expenses and competitive pressures in the loan market temper optimism. The lack of detailed shareholder return plans and unclear guidance on loan growth further contribute to uncertainty. The Q&A session highlighted potential weaknesses in the transportation sector and management's vague responses to strategic questions. Given the small market cap, the stock is likely to remain stable, resulting in a neutral prediction.
NBHC Report
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