National Bank Holdings Corporation (NYSE:NBHC) reported its fourth-quarter 2024 earnings, surpassing analysts' expectations with an adjusted earnings per share (EPS) of $0.86 against a forecast of $0.77. Despite the earnings beat, the company's revenue fell short of expectations, coming in at $101.25 million versus a forecasted $107.09 million. Following the announcement, shares of NBHC dropped 1.38% in after-hours trading, reflecting investor concerns over revenue shortfalls.
Key Takeaways
- NBHC's adjusted EPS of $0.86 exceeded forecasts by 11.7%.
- Revenue of $101.25 million missed expectations by 5.5%.
- Stock declined 1.38% in after-hours trading despite EPS beat.
- 2Unifi marketplace set to generate revenue in the second half of 2025.
- Loan growth in 2025 projected in mid-single digits.
Company Performance
National Bank Holdings demonstrated strong financial performance in the fourth quarter of 2024, with a net income of $28.2 million, translating to $0.73 per diluted share. The adjusted net income stood at $33.2 million or $0.86 per diluted share, showcasing the company's ability to outperform EPS expectations. For the full year, the company reported a net income of $118.8 million, or $3.08 per diluted share, with an adjusted figure of $123.9 million, or $3.22 per diluted share. The bank maintained a healthy return on tangible common equity at 14.4% and achieved an 11% growth in tangible book value throughout 2024.
Financial Highlights
- Revenue: $101.25 million, down from expectations of $107.09 million.
- Earnings per share: $0.86, exceeding the forecast of $0.77.
- Full year 2024 net income: $118.8 million, $3.08 per diluted share.
- Adjusted full year net income: $123.9 million, $3.22 per diluted share.
- Return on tangible common equity: 14.4% (adjusted).
Earnings vs. Forecast
National Bank Holdings' reported adjusted EPS of $0.86 surpassed the consensus estimate of $0.77 by approximately 11.7%. However, the company's revenue fell short, reaching $101.25 million compared to the anticipated $107.09 million, a miss of 5.5%. This mixed performance highlights a strong EPS outcome overshadowed by revenue challenges.
Market Reaction
Despite the EPS beat, NBHC's stock experienced a decline of 1.38% in after-hours trading, closing at $43.56. This movement reflects investor apprehension about the revenue miss and its potential implications for future growth. The stock's performance falls within its 52-week range of $32.13 to $51.76, indicating ongoing volatility.
Outlook & Guidance
Looking ahead, NBHC projects loan growth in the mid-single digits for 2025, with an aim to exceed $10 billion in total assets. The net interest margin is expected to remain around 3.9%, while non-interest income is projected between $72 million and $77 million. The company plans to invest $27-29 million in its 2Unifi banking marketplace, expected to generate revenue in the latter half of 2025.
Executive Commentary
CEO Tim Laney expressed confidence in the company's position, stating, "We entered 2025 on solid footings." President Aldis Percons emphasized the importance of credit discipline, noting, "Our disciplined approach to credit remains at the heart of our strategy." Laney also highlighted the company's ongoing M&A discussions, describing them as "very constructive."
Q&A
During the earnings call, analysts inquired about the impact of the Durbin Amendment, to which management responded that the company avoided approximately $10 million in charges. Other questions focused on the company's deposit strategy and competitive landscape, as well as its infrastructure readiness for crossing the $10 billion asset threshold.
Risks and Challenges
- Potential revenue growth challenges if market conditions shift.
- Competition in the banking sector could pressure margins.
- Regulatory changes impacting fee structures and operations.
- Economic downturns affecting loan performance and credit quality.
- Execution risks related to the 2Unifi marketplace launch and investment.
Full transcript - National Bank Holdings Corporation (NBHC) Q4 2024:
Anna, Conference Operator: Good morning, everyone, and welcome to the National Bank Holdings Corporation 2024 Fourth Quarter Earnings Call. My name is Anna, and I will be your conference operator for today. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded for replay purposes. I will now turn the call over to Emily Gooden, Chief Accounting Officer and Director of Investor Relations.
Emily Gooden, Chief Accounting Officer and Director of Investor Relations, National Bank Holdings Corporation: Thank you, Anna, and good morning. We will begin today's call with prepared remarks followed by a question and answer session. I would like to remind you that this conference call will contain forward looking statements, including, but not limited to statements regarding the company's strategy, loans, deposits, capital, net interest income, non interest income, margins, allowance, 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. In addition, the call today will reference certain non GAAP measures, which National Bank Holdings Corporation believes provides useful information for investors. Reconciliations of these non GAAP financial measures to the GAAP measures are provided in the news release posted on the Investor Relations section of www.nationalbankholdings.com.
It is now my pleasure to turn the call over and introduce National Bank Holdings Corporation's Chairman and CEO, Mr. Tim Laney.
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: Thank you, Emily. Good morning and thanks for joining us as we discuss National Bank Holdings' 4th quarter and full year 2024 results. I'm pleased to be joined by NBH President, Aldis Percons as well as our Chief Financial Officer, Nicole Vandeneveld. We delivered solid earnings of $0.86 per diluted share during the quarter and a 14.4% return on tangible common equity when adjusted for the impact of the security sales. We delivered 11.3% annualized net interest income growth during the quarter with a strong net interest margin of 3.99%.
Before handing off the call to Nicole, I will point out that tangible book value grew 11% during 2024, and we exited the year with common equity Tier 1 capital ratio of 13.2%. Nicole?
Nicole Vandeneveld, Chief Financial Officer, National Bank Holdings Corporation: Thank you, Tim.
Anna, Conference Operator: And to our telephone audience, please stand by. It looks like we lost the connection for our presenters.
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: Well, we apologize. I'm not sure what happened on the line, but I was just introducing Nicole. And Nicole, I'll ask you to take it from here.
Nicole Vandeneveld, Chief Financial Officer, National Bank Holdings Corporation: Thank you, Tim. Good morning. During today's call, I will cover the financial highlights for the Q4 and full year 2024 and share our guidance for 2025. Consistent with our prior practice, our guidance does not include any future interest rate policy decisions by the Fed. For the Q4, we reported net income of $28,200,000 or $0.73 of earnings per diluted share.
During the Q4, we announced a strategic sale of investment securities of approximately $130,000,000 which resulted in an after tax loss of $5,000,000 The proceeds from the securities sale will be reinvested in higher yielding securities during the Q1 of 2025. As a result of our strategic balance sheet management, our total assets ended the year at $9,800,000,000 As Tim shared with you, adjusting for the one time security sale loss, our net income increased to $33,200,000 or $0.86 of earnings per diluted share. This resulted in an adjusted return on average tangible assets of 1.4% and an adjusted return on average tangible common equity of 14.4%. On a linked quarter basis, we grew our fully taxable equivalent pre provision net revenue by 13.5% annualized, again after adjusting for the one time impact of the security sale. For the full year 2024, our net income totaled $118,800,000 or $3.08 of earnings per diluted share.
Adjusting for the impact of the security sales, net income was $123,900,000 or $3.22 of earnings per diluted share. During 2024, we maintained a strong net interest margin, generated average deposit growth of 4.7 percent and grew our tangible book value per share by 11%. We continue to be pleased with our bankers' commitment to growing client relationships and we entered the New Year with solid loan pipeline. We anticipate higher levels of loan demand in 2025 and are projecting 2025 loan growth to be in the mid single digits. Fully taxable equivalent net interest margin expanded 12 basis points during the quarter to a strong 3.99%.
Our bankers disciplined efforts in repricing deposits resulted in a 22 basis point reduction in our cost of deposits, which more than offset the 7 basis point decline in earning asset yields during the quarter. As a result, fully taxable equivalent net interest income As a result, fully taxable equivalent net interest income grew 11.3 percent annualized during the quarter to $92,000,000 As I mentioned earlier, we do not incorporate future interest rate changes in our projections. And with that in mind, for 2025, we project fully taxable equivalent net interest margin to remain in the 3.9%. Turning to credit quality, our non performing loan ratio remains below peer averages at 46 basis points of total loans outstanding. We charged down 1 previously reserved credit during the quarter, resulting in 11 basis points of annualized net charge offs for the quarter or just 13 basis points for the year.
The quarter's provision expense of $2,000,000 was primarily driven by the quarter's loan growth and an increase in reserve requirements as a result of our CECL modeling approach. The allowance to total loans ratio ended the quarter at 1.22% consistent with the prior quarter. We continue to hold $23,000,000 of marks against our acquired loan portfolio, which adds an additional 29 basis points of loan loss coverage if applied across the entire loan portfolio. Total (EPA:TTEF) non interest income for the Q4 was $11,100,000 and included $6,600,000 of pre tax losses on the investment security sales. For 2025, we project our total non interest income to be in the range of $72,000,000 to $77,000,000 Non interest expense for the Q4 totaled $64,500,000 and included $1,200,000 of impairment from the consolidation of 3 banking centers.
Excluding the impairment, non interest expense decreased $900,000 on a linked quarter basis. 2024's full year non interest expenses were well managed and totaled $254,000,000 and included $13,000,000 of 2 UNIFI related expenses. Non interest expense for 2025 is projected to be in the range of $272,000,000 to $278,000,000 and includes approximately $27,000,000 to $29,000,000 of investment in 2Unify. In an effort to provide additional visibility, in my future remarks, we'll break out the investment in 2Unify from the core bank's expense run rate. The year over year increase in 2Unify expense includes the onboarding of additional developers and the amortization of the capitalized assets.
Excluding the increase 2 UNIFI related expenses, core bank non interest expense is projected to increase 3% in 2025. The full year effective tax rate for 2024, excluding excess tax benefits, was 18.5% and benefited from research and development tax credits related to the 2 unified build outs. We project 2025 effective tax rate to be around 19%. In terms of capital management, we continue to grow our excess capital and ended the quarter with a strong TCE ratio of 10.2%, Tier 1 leverage ratio of 10.7% and a common equity Tier 1 ratio of 13.2 percent. We project our share count to remain around 38,600,000 in diluted shares outstanding during 2025.
With that, I will turn it over to Alden.
Aldis Percons, President, National Bank Holdings Corporation: Well, thanks Nicole and good morning. Our strong results this quarter were driven by our focus on funding the loan growth with low cost deposits, proactively managing credits, diversifying our fee income and creating positive operating leverage through disciplined expense management. As Nicole already mentioned, our strong liquidity and capital levels allowed us to utilize Camber deposits to reposition our investment portfolio and keep the total balance sheet below $10,000,000,000 mark, thus postponing the Durbin impact by another year. Having said that, our goal for 2025 is to grow beyond $10,000,000,000 in total assets, is to grow beyond $10,000,000,000 in total assets, driven by both solid loan and investment portfolio increases. Nicole already provided guidance for the loan growth.
And I'll just add that we project the combined cash and investment security balances to settle around 15% of the total balance sheet in 2025. In terms of the 4th quarter's recap, loan fundings during the quarter totaled a strong $480,000,000 which was among the highest loan production course in the Company's history. However, we also experienced elevated levels of payoffs and paydowns, which I think reflects the vibrant economy excuse me, vibrant economic activity in our footprint markets and is a good time for 2025. Our line utilizations increased during the quarter and are showing signs of returning to their historical averages. New loan production during the quarter had abated average rate of 7.9%, which combined with a decrease in total cost of deposits of 22 basis points drove the net margin expansion to 3.99 percent for the quarter.
We are highly confident in the proactive execution of our deposit strategy. The 4th quarter's total deposit data was 44% as measured against the Fed target rate decrease, which is in line with the deposit data when the rates were increasing. Overall, as we look ahead to 2025, we remain confident in our ability to deliver strong results, driven by robust loan growth and the continued expansion of our core deposit franchise. Our disciplined approach to credit remains at the heart of our strategy, ensuring we balance growth with solid risk management. We believe our focus on the relationship banking continues to differentiate us and allows us to deepen our client engagement and creates long term value for our shareholders.
And with that, I'll turn it back to you.
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: Thank you, Aldis. Well, as Nicole and Aldis have shared, we entered 2025 on solid footings. We're pleased with the level of business activity we're seeing in our markets and we believe we're set up to have a nice year. Our 2 UNIFI team continues to build the banking marketplace of the future and the team is progressing on time and operating within budget. We began user testing in the Q4 and we like what we're seeing.
Finally, we continue to place a premium on maintaining optionality. We remain focused on M and A and strategic markets and with a solid base of capital, we believe we're well positioned to take advantage of a range of shareholder friendly actions should they come to fruition. And on that note, I'll ask our operator to open up the line for questions.
Anna, Conference Operator: We'll now take a question from Ryan Kane with D. A. Davidson.
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: Hello, Ryan.
Ryan Kane/Ryan Payne, Analyst, D.A. Davidson: Ryan Payne on for Jeff Rulis today. On the loan front, are you seeing any changes in the competitive environment there? And any particular areas you're targeting this year?
Aldis Percons, President, National Bank Holdings Corporation: No, I think the competitive environment has been competitive going into late 2024 already. So, we're not seeing necessarily or projecting any changes in going into next year. We do see quite a bit of activity, as I mentioned, in terms of pay downs, payouts are quite active. So we do feel like there's a good economic economic environment that is allowing for credit generation and people looking to do business.
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: Yes. Phil, if I were to add anything, I would say from a competitor standpoint, we are seeing what we deem as even more we pride ourselves on putting ourselves in markets with pretty rational competitors. And I would just say, given the stress and uncertainty of the last 18 months, we've seen the market become even more rational around credit. So I think that's what we've got for you, Ryan.
Ryan Kane/Ryan Payne, Analyst, D.A. Davidson: And on the credit front, was there a certain relationship that caused the rise in NPAs there or segment? Well,
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: maybe the way to I think I follow your question. The way to address it is if I think about industry segments and exposures, we've previously noted, we continue to see weakness in the transportation space in particular. That's been if I were to point to one area that's represented a source of concern, it would be that. Now I'll also point out that having said that, transportation exposure represents less than 2% of our total outstandings. And then I would tell you that the other activity we've seen in that space as of recent is actually small dollar exposure that was originated in one of our previous acquisitions.
And frankly, we're working to clean that up.
Ryan Kane/Ryan Payne, Analyst, D.A. Davidson: Got it. Okay. And last thing for me, On the plan to unify expenses for this year, did I hear it was $27,000,000 Was that right?
Nicole Vandeneveld, Chief Financial Officer, National Bank Holdings Corporation: Yes, that's correct. I gave a range of $27,000,000 to $29,000,000
Ryan Kane/Ryan Payne, Analyst, D.A. Davidson: Got it. Okay. Thank you. I'll step back.
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: Thank you, Ryan.
Anna, Conference Operator: And we'll now take our next question from Charlie Driscoll with KBW.
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: Good morning.
Charlie Driscoll, Analyst, KBW: Good morning. This is Charlie on for Kelly Motta. On the funding side, deposits saw some nice relief. Any update on how you're thinking about deposit competition and those betas as we look through 2025?
Aldis Percons, President, National Bank Holdings Corporation: Yes, I'll just mention on deposits. Again, we have the luxury on having the Camber and move that balance on balance sheet component on and off. And we proactively took down our Camber deposits in an effort to accommodate the investment portfolio sale pay down for the quarter for the year end. If we were to exclude on average basis, our actually core deposits grew about $40,000,000 and you can see the $20,000,000 of that was or half was in DDA. So we feel good about our core deposit activity and growth there.
And that continues going here in 2025.
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: Yes. Charlie, I would add, we feel very good about our level of treasury management activity with our business clients. And I'm proud of our team in terms of the deposit pricing discipline and the courage it took to act on that deposit pricing discipline over the last quarter or so. It obviously is making a difference.
Charlie Driscoll, Analyst, KBW: And then you said your plan for 2025 was to grow through 10,000,000,000 dollars Can you remind us of what the expense impact is from Durbin? And then any other considerations around the $10,000,000,000 threshold? And maybe what size you guys think you could be at to absorb the drag as well?
Aldis Percons, President, National Bank Holdings Corporation: Look,
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: we've avoided roughly a $10,000,000 charge over the course of 2 years, 5 this year, 5 next year, as a result of simply pushing it into 25. We frankly managed our way through that process and we would expect to quickly move beyond $10,000,000,000 in assets. I've talked about the $5,000,000 a year impact. Ultimately, the Durbin expense is we're fortunate in that we do not have high consumer exposure in the Durbin area. And so we're frankly just managing through that impact with organic growth.
Charlie Driscoll, Analyst, KBW: Awesome. Thank you. And then maybe my last question. I know you mentioned organic growth, but an acquisition could be a fast way to get scale on one possible strategy to absorb the Durbin hit. I was just wondering if you could provide any update on pace of conversations there and how you're approaching your capital priorities?
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: Yes, Charlie, your question is important because I think one thing we would point out is that obviously we can't provide details, but we've been examined as a regional bank now as though we were over $10,000,000,000 for the last 2 years. When we received our initial charter, when we started the company, our initial regulator, the OCC, required us to begin building out processes as though we were $10,000,000,000 in assets day 1. While that was a pain, that legacy was painful. As we've approached $10,000,000,000 it's actually made that crossover very manageable. And we don't expect there's no indication that we should expect any other major expenses related to that crossover given that we've got that infrastructure in place.
Could an acquisition help dilute the Durbin impact? Yes, but it's so insignificant. I mean, we wouldn't let that drive M and A activity. We're still focused on strategic partners that share similar cultures and views toward relationship banking and we are having very constructive conversations on that front.
Charlie Driscoll, Analyst, KBW: Awesome. Thank you, guys. I'll step back. Thank you, Charlie.
Anna, Conference Operator: We'll now take our next question from Andrew Liesch with Piper Sandler.
Charlie Driscoll, Analyst, KBW: Good morning, everyone.
Ryan Kane/Ryan Payne, Analyst, D.A. Davidson: Good morning. Thanks for taking the questions here. Nicole, the margin guide, I missed it, just say near in the 3.90s, is that correct?
Nicole Vandeneveld, Chief Financial Officer, National Bank Holdings Corporation: Yes, that is correct, Andrew.
Ryan Kane/Ryan Payne, Analyst, D.A. Davidson: Got it. I guess, we had some nice improvements on funding costs there. Why wouldn't the full quarter effect of the last 25 5th rate hikes and even the one in November help push the margin a little bit higher here in the Q1?
Aldis Percons, President, National Bank Holdings Corporation: Yes. I'll take that. This is all, this is Andrew. That's a good question and that's kind of the natural tendency here in terms of thinking. Remember, the other component that we are repositioning and adding back the investment portfolio, which certainly comes on at the lower yield in relation to the funding cost than a typical loan would.
And so that denominator increase while we are adding numerator in terms of earning more money, the denominator increase is it and keeping kind of overall balance sheet or sort of the overall NIM in that, call it, 39s.
Ryan Kane/Ryan Payne, Analyst, D.A. Davidson: Got it. Okay. That makes sense. Even so, if we do get any more rate cuts from the Fed, I mean, how do you expect the margin would react? It would be a slight benefit at first before there's some maybe some asset catching up?
I guess, how is the balance sheet positioned right now for rate
Nicole Vandeneveld, Chief Financial Officer, National Bank Holdings Corporation: changes? Yes. So adjusting for the impact of our securities sale, we feel our balance sheet to be we're very close to asset neutral. And we believe that any future interest rate movements up or down should not impact our margin.
Ryan Kane/Ryan Payne, Analyst, D.A. Davidson: Got it. Okay. That's very helpful. And let's see, the is that oh, just on the expense growth, did you say it was at 3% excluding Camber for this year?
Nicole Vandeneveld, Chief Financial Officer, National Bank Holdings Corporation: Yes. The 2025 guidance I provided for non interest income, if you strip out the 2 UNIFI impact, we're holding the core bank expense increase to 3%.
Ryan Kane/Ryan Payne, Analyst, D.A. Davidson: Got you. Okay. And then, I know you had the friends and family launch here recently. How did that progress? And when do you think we can start seeing some revenue falls to the bottom line?
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: Yes. Look, user testing is going well. A key focus has been on the quality of the integrations, and I'm pleased to report that we encountered really only one partner issue, and the team and the partner believe that that issue can be resolved by month end. We expect to be adding additional users here by the end of this month, and we're entering Phase 3 with Apple (NASDAQ:AAPL) and Android for all of our application certifications. We are still not forecasting revenue for the year.
I mean, I should suggest we expect revenue, but we're not publicly forecasting revenue for the year, which would begin to occur in the second half of this year. Andrew, before you go, we're all dog lovers here. Why don't you introduce yourself?
Ryan Kane/Ryan Payne, Analyst, D.A. Davidson: He's joined your conference call a few times over the years. All right. Thank you.
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: Thank you.
Anna, Conference Operator: Thank you. And I'm showing we have no further questions at this time. I will now turn the call back to Mr. Laney for his closing remarks.
Tim Laney, Chairman and CEO, National Bank Holdings Corporation: Well, thank you. I wouldn't do this if he was actually on the line because I wouldn't want to flatter him that much. But since he's not, I will point out as it relates to 2 Unify, Jeff Rulis of D. A. Davidson provided what I believe was a very solid 2 Unify update that was published on January 3 and believe it's worth a read.
So I'll call that out. And with that, say thank you, everyone, for joining today. Have a good day.
Anna, Conference 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 in approximately 24 hours and the link will be on the company's website on the Investor Relations page. Thank you very much and have a great day. You may now disconnect.
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