National Bank Holdings Corporation (NBHC), a regional bank primarily operating in the western United States, delivered a solid first quarter for 2024. The numbers were good – earnings of $0.82 per diluted share, a return on tangible common equity of 15.14%, and strong credit quality. The market seemed satisfied. But amidst the generally positive narrative, a subtle shift in strategy went largely unnoticed. A shift that, if executed correctly, could signal explosive growth for NBHC in the years to come.

That shift lies not within the core banking operations, but in CEO Tim Laney's increasingly bold pronouncements about 2UniFi, the bank's ambitious foray into a cutting-edge digital banking platform aimed at revolutionizing how small and medium-sized businesses (SMBs) access financial services. Laney is no longer simply describing 2UniFi as a new product or a fee income generator. He's talking about it as a separate entity, a "completely new business, a new way of banking," with the potential to "move out and live its own life."

This is a significant departure from previous rhetoric. It signals a recognition within NBHC that 2UniFi has the potential to become a disruptor, a force that could outgrow the confines of a traditional regional banking structure. While Laney emphasizes that NBHC will preserve the optionality to maintain both entities, the subtext is clear: 2UniFi could be spun off into a separate, publicly traded company. And this is where the real story lies.

Why is this potential spin-off so intriguing? Because it could unlock significant value for NBHC shareholders.

Consider this: the market is currently valuing NBHC based on its traditional banking operations. The potential of 2UniFi, which is still in development and generating no revenue, is essentially baked into the existing share price. A spin-off would allow investors to directly invest in 2UniFi, potentially valuing it as a high-growth tech company rather than a slow-growing bank. This, in turn, could drive significant share price appreciation for both NBHC and the newly independent 2UniFi.

Further bolstering this hypothesis is Laney's enthusiasm for 2UniFi's technology. He points to its "API-first architecture," "robust data lakes," and advanced security features, all elements highly valued in the fintech space. He even suggests that 2UniFi's technology could have implications for the broader banking industry, highlighting the "interesting technical crossover that is benefiting and will benefit the bank in terms of better client experience, saving us money."

Of course, this is all contingent on 2UniFi delivering on its promise. The platform is still in development and faces stiff competition from established fintech players. But the potential upside is enormous. The SMB market is vast and underserved by traditional banks. A user-friendly, tech-enabled platform that caters specifically to their needs could rapidly capture market share.

The numbers speak for themselves. According to the Small Business Administration, there are over 33 million small businesses in the United States. Even capturing a small percentage of this market would translate into massive growth for 2UniFi.

Hypothetical 2UniFi Revenue Growth

The following chart illustrates a hypothetical scenario for 2UniFi's potential revenue growth, assuming a capture of just 1% of the SMB market.

Here's a hypothetical scenario: assuming 2UniFi manages to acquire 1% of the SMB market, and assuming an average revenue per SMB of $1,000 per year, that translates into $330 million in annual revenue. Applying a price-to-sales multiple of 5 (common for high-growth tech companies), 2UniFi could be valued at over $1.6 billion. This, remember, is just 1% market share.

The potential for explosive growth is undeniable.

So, while the market fixates on NBHC's core banking performance, a discerning investor might look beyond the headlines. In Laney's words about 2UniFi lies a hidden clue, a glimpse into a future where NBHC might not just be a solid regional bank, but the parent company of a revolutionary force in the world of fintech. A force that could drive significant value for shareholders in the years to come.

"Fun Fact: NBHC is headquartered in Greenwood Village, Colorado, a city known for its strong economy and high quality of life. Perhaps this thriving environment, with its mix of established businesses and innovative startups, has fostered the kind of forward-thinking approach that led to the creation of 2UniFi."