National Bank (NBHC) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 was $26.1 million ($0.68 per diluted share), supported by a 3.76% net interest margin and 8.1% annualized loan growth, but down from prior periods due to venture capital investment impairment and higher provision expense.

• For the first six months of 2024, net income was $57.5 million ($1.50 per diluted share), down from $72.8 million ($1.91) year-over-year, mainly due to higher funding costs outpacing interest income growth.

• Return on average tangible assets was 1.28% and return on average tangible common equity was 13.77% for the six months ended June 30, 2024, both lower than the prior year.

• Loans totaled $7.7 billion and deposits $8.4 billion as of June 30, 2024, with transactional deposits at 87.8% of total.

• Credit quality improved, with non-performing loans and NPAs at their lowest since early 2023.

Financial highlights

• Net interest income (FTE) for Q2 2024 was $85.3 million, nearly flat sequentially; net interest margin (FTE) was 3.76%, with the lowest cost of funds increase since the rate cycle began.

• Non-interest income for Q2 2024 was $14.0 million, including a $3.9 million impairment on venture capital investments; year-to-date non-interest income rose 11.4% to $31.7 million.

• Non-interest expense was $63.1 million in Q2, up slightly from Q1, mainly due to technology and 2UniFi-related investments; efficiency ratio was 64.6% for Q2 and 60.14% for the first half.

• Allowance for credit losses was $96.5 million (1.25% of loans), with annualized net charge-offs of 22 bps for Q2 and 11 bps year-to-date.

• Tangible book value per share increased to $23.74.

Outlook and guidance

• Management expects continued competition for deposits and macroeconomic pressures, but projects earning assets and net interest income to grow in H2 2024, driven by loan growth and digital initiatives.

• Non-interest expense for H2 2024 projected at $127–$130 million, up from $126 million in H1, due to 2UniFi investments.

• Fee income for H2 2024 projected at $33–$35 million; mortgage fee income guidance remains cautious.

• Margin guidance does not include any Fed rate changes; balance sheet modeled to be rate neutral.

• Future earnings will be influenced by Federal Reserve policy and the ability to originate high-quality loans and manage funding costs.