National Bank (US:NBHC)2023-10-25 18:53Financial Data and Key Metrics Changes - The company reported a 10.8% increase in earnings for Q3 2023, with pre-provision revenues growing 54.6% year-over-year and net income doubling during the same period [7][9] - The return on average tangible assets was 1.58%, and the return on tangible common equity was 18.38% [9][10] - The CET1 ratio ended the quarter at 11.61%, with a tangible common equity ratio of 8.5% and a Tier 1 leverage ratio of 9.56% [7][14] Business Line Data and Key Metrics Changes - New loan originations in Q3 were $324.1 million at a weighted average yield of 8.6%, with year-to-date loan funding reaching $1.1 billion, resulting in a total loan balance growth of 4.8% annualized [11][12] - Core deposit balances grew by $28 million on a spot basis and $116 million or 5.8% annualized on an average balance basis [12] - Total noninterest income for Q3 was $19.4 million, an increase of $5.5 million from the previous quarter, driven by strong performance in core banking fees [20] Market Data and Key Metrics Changes - The total deposit cost for Q3 was 1.64%, with a total deposit beta remaining low at 28% [13] - The net interest margin for the quarter was 3.92%, with projections for Q4 2023 to be in the range of 3.8% to 3.85% [13] Company Strategy and Development Direction - The company aims to achieve full-year loan growth guidance, with a strong pipeline of new business as it approaches year-end [16] - Management expressed confidence in asset quality trends, with expectations to reduce nonaccruals in Q4 [8][16] - The company is focused on maintaining a disciplined approach to expenses while investing in technology [22] Management's Comments on Operating Environment and Future Outlook - Management noted positive credit quality trends and minimal exposure to office and retail sectors, each representing less than 2% of the total loan book [28] - The company plans to reengage in M&A activities in 2024 after ensuring complete integration of previous acquisitions [49] Other Important Information - Noninterest expenses for Q3 totaled $60.6 million, a slight decrease from the prior quarter, with projections for Q4 expenses to be between $60 million and $62 million [22][23] - The company expects to see revenue from its 2U business starting in 2025, with no significant revenue anticipated in 2024 [68] Q&A Session Summary Question: Timing of FHLB-advanced reductions - Management confirmed that reductions were gradual over the quarter [25][26] Question: Progress on nonaccruals - Management expressed optimism about credit quality trends and indicated that updates would be provided in the next earnings call [28] Question: Growth in owner-occupied CRE - Management highlighted the strategy of banking full relationships with business clients, which includes financing their operational facilities [30][32] Question: Capital priorities and buyback interest - Management confirmed authorization for buybacks and indicated a focus on rebuilding capital before pursuing M&A opportunities in 2024 [49][44] Question: Migration of noninterest-bearing deposits - Management acknowledged outflows and indicated that they do not expect major changes in this area [47][48] Question: 2U expenses and revenue expectations - Management stated that $3 million is the current run rate for 2U expenses, with meaningful revenue expected in 2025 [67][68]