National Bank (NBHC) - 2025 Q1 - Quarterly Report

Part I. Financial Information Financial Statements (Unaudited) These unaudited statements show total assets grew to $10.1 billion while net income decreased to $24.2 million due to a significant credit loss provision Consolidated Statements of Financial Condition Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $10,098,870 | $9,807,693 | | Cash and cash equivalents | $246,298 | $127,848 | | Investment securities (AFS & HTM) | $1,341,288 | $1,060,655 | | Loans, net | $7,556,104 | $7,656,688 | | Goodwill | $306,043 | $306,043 | | Total Liabilities | $8,769,562 | $8,502,618 | | Total deposits | $8,424,207 | $8,237,893 | | Total Shareholders' Equity | $1,329,308 | $1,305,075 | Consolidated Statements of Operations Consolidated Income Statement Highlights (in thousands, except per share data) | Account | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net interest income | $86,691 | $84,030 | | Provision for credit loss expense | $10,200 | $0 | | Non-interest income | $15,376 | $17,694 | | Non-interest expense | $62,017 | $62,834 | | Net income | $24,231 | $31,391 | | Earnings per share—diluted | $0.63 | $0.82 | | Common stock dividend | $0.29 | $0.27 | Consolidated Statements of Comprehensive Income - Comprehensive income for Q1 2025 was $34.2 million, an increase from $27.6 million in Q1 2024, driven by a positive change in other comprehensive income of $10.0 million from net unrealized gains on available-for-sale securities[21] Consolidated Statements of Changes in Shareholders' Equity - Shareholders' equity increased to $1,329.3 million at March 31, 2025, driven by $24.2 million in net income and $10.0 million in other comprehensive income, partially offset by $11.2 million in cash dividends[23] Consolidated Statements of Cash Flows Cash Flow Summary (in thousands) | Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $39,625 | $29,957 | | Net cash (used in) provided by investing activities | ($127,484) | $93,619 | | Net cash provided by (used in) financing activities | $206,309 | ($22,971) | | Increase in cash and cash equivalents | $118,450 | $100,605 | Notes to Consolidated Financial Statements - The investment securities portfolio totaled $1.3 billion at March 31, 2025, comprised of $0.6 billion in available-for-sale (AFS) and $0.7 billion in held-to-maturity (HTM) securities[35] - Total loans were $7.65 billion as of March 31, 2025, with commercial loans making up the largest portion of the portfolio at 60.2%[54] - The Allowance for Credit Losses (ACL) decreased to $90.2 million, with a provision expense of $10.9 million recorded for the quarter to cover a charge-off on a single credit suspected of fraudulent activity[69][71] - The company and its subsidiary banks met all regulatory capital requirements and were considered 'well-capitalized' as of March 31, 2025, with a consolidated Tier 1 leverage ratio of 10.9%[92] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the net income decrease to a $10.2 million credit loss provision, while noting growth in pre-provision net revenue and a strong capital position Overview Q1 2025 Key Performance Metrics | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $24.2M | $31.4M | | Diluted EPS | $0.63 | $0.82 | | Return on Average Tangible Assets | 1.09% | 1.39% | | FTE Net Interest Margin | 3.93% | 3.78% | | Provision for Credit Losses | $10.2M | $0M | - The decrease in net income was largely driven by a $10.2 million provision for credit losses recorded primarily to cover a charge-off on one credit due to suspected fraudulent activity[167] - The company continues to invest in its digital financial ecosystem, 2UniFi, incurring $3.4 million in related expenses during Q1 2025[167] Financial Condition - Total assets increased by $291.2 million (3.0%) to $10.1 billion at March 31, 2025, driven by increases in cash and investment securities[193] - The loan portfolio is well-diversified with low exposure to non-owner occupied CRE retail (2.0% of total loans) and office properties (1.3% of total loans)[214] - Total deposits increased by $186.3 million to $8.4 billion in Q1 2025, with approximately 78% of total deposits FDIC insured[193][242] Results of Operations Net Interest Income Analysis (FTE Basis) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income (FTE) | $88.6M | $85.7M | | Net Interest Margin (FTE) | 3.93% | 3.78% | | Yield on Earning Assets (FTE) | 5.85% | 5.88% | | Cost of Funds | 2.07% | 2.25% | - A provision for credit losses of $10.2 million was recorded in Q1 2025, primarily to cover a charge-off on one credit driven by suspected fraudulent activity[268] - Non-interest income decreased by $2.3 million YoY to $15.4 million, mainly due to the timing of SBA loan sales and swap fees[269] - Non-interest expense decreased by $0.8 million YoY to $62.0 million, as a $2.2 million reduction in salaries and benefits was partially offset by a $1.2 million increase in technology costs[270] Liquidity and Capital Resources Liquidity Position (in thousands) | Source | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | On-Balance Sheet Liquidity | | | | Cash and due from banks | $246,298 | $127,848 | | Unencumbered investment securities | $556,176 | $319,949 | | Total On-Balance Sheet | $802,474 | $447,797 | | Off-Balance Sheet Availability | | | | Available FHLB borrowing capacity | $1,652,991 | $1,697,259 | | Federal Reserve Bank discount window | $808,616 | $880,892 | | Total Off-Balance Sheet | $2,461,607 | $2,578,151 | - The company and its subsidiary banks exceeded all 'well-capitalized' regulatory thresholds as of March 31, 2025[281] - The Board of Directors declared a quarterly dividend of $0.30 per share, payable on June 13, 2025[285] Asset/Liability Management and Interest Rate Risk Interest Rate Sensitivity Analysis (% change in projected NII) | Hypothetical Rate Shift (bps) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | +200 | 2.27% | 1.72% | | +100 | 1.17% | 0.87% | | -100 | (1.48)% | (1.05)% | | -200 | (2.93)% | (2.11)% | - The company's interest rate risk model indicated a fairly neutral position in terms of interest rate sensitivity at March 31, 2025[290] Quantitative and Qualitative Disclosures About Market Risk This section incorporates the MD&A's discussion on market risk exposure and management strategies - Information regarding market risk is provided under the caption 'Asset/Liability Management and Interest Rate Risk' in Item 2 of this report and is incorporated herein by reference[298] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - Based on an evaluation as of March 31, 2025, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[299] - There were no changes in the company's internal control over financial reporting during the first quarter of 2025 that have materially affected, or are reasonably likely to materially affect, these controls[300] Part II. Other Information Legal Proceedings The company is not party to any litigation expected to have a material adverse effect on its financial condition - The company is not presently party to any legal proceedings that are expected to have a material adverse effect on its business, financial condition, or results of operations[302] Risk Factors No material changes were made to the risk factors disclosed in the 2024 Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[303] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase shares under its public plan, leaving the full $50 million authorization available - As of March 31, 2025, the company had $50.0 million remaining under its stock repurchase program authorized on May 9, 2023[305] - During February and March 2025, the company purchased a total of 21,791 shares at a weighted average price of $41.90 per share to satisfy employee tax withholdings[304] Other Information No information was required to be disclosed under this item for the quarter - None[306] Exhibits This section lists all exhibits filed with the report, including certifications and XBRL data files - The exhibits filed with the report include CEO and CFO certifications (31.1, 31.2, 32) and the XBRL Interactive Data File (101 and 104)[309]