National Bank Holdings Grows Loans as Margin Narrows
Quarterly loan fundings reached a record $926.9 million as net interest margin fell 12 bps.
National Bank Holdings (NBHC), the Denver-based regional bank, expanded its loan book in the second quarter, though weaker earning-asset yields narrowed its fully taxable-equivalent net interest margin by 12 bps QoQ to 3.94%. FTE net interest income edged up $0.5 million to $111.5 million as $254.0 million of average earning-asset growth and an additional day offset the margin pressure.
The margin decline reversed a 17-bps expansion in the first quarter. The earning-asset yield fell 9 bps to 5.81%, partly because the prior quarter included higher loan-fee income, while the cost of interest-bearing liabilities rose 4 bps to 2.65%. Deposit cost improved 1 bp to 1.93%.
Underlying originated loans increased 7.4% QoQ to $7.11 billion, led by growth in non-owner-occupied commercial real estate, commercial and industrial lending, and residential real estate. Acquired loans declined 10.85% to $2.67 billion as the Vista portfolio ran off. Total period-end loans rose 1.7% QoQ to $9.77 billion and were 30.5% above a year earlier, substantially reflecting $1.9 billion of loans added through the Vista acquisition in January.
Loan production accelerated alongside that balance-sheet shift. Quarterly fundings reached a record $926.9 million, up from $805.5 million in the first quarter, as commercial fundings rose to $452.5 million and non-owner-occupied CRE fundings reached $352.6 million. Average transaction deposits increased $115.7 million to $8.91 billion, though period-end deposits declined to $10.39 billion and the loan-to-deposit ratio rose to 94.1% from 91.9%.
Fee revenue provided a second source of growth. Noninterest income increased 9.9% QoQ to $19.8 million, led by partnership-investment income, service charges and bank-card fees, while mortgage-banking income declined to $2.4 million. Reported expenses fell as acquisition and restructuring charges receded, though adjusted expenses rose to $83.7 million on talent investments, merit increases and an additional day. The adjusted efficiency ratio worsened 50 bps to 61.8%.
Credit costs moderated as provision expense declined to $1.5 million from $4.0 million, with most of the remaining provision tied to loan growth. Annualized net charge-offs improved 7 bps QoQ to 0.27% of average loans, and nonperforming loans held at 0.31%. The allowance declined 5 bps to 1.13% of loans, reducing reserve coverage as the balance sheet expanded.
Capital ratios moved lower during the quarter, with CET1 declining 22 bps to 12.29% and the tier-one leverage ratio falling 15 bps to 10.30%. The bank repurchased $11.1 million of shares and maintained its quarterly dividend at $0.32 a share, up from $0.30 a year earlier. Record fundings left loan growth running ahead of period-end deposits, sharpening the focus on funding costs and margin preservation in the coming quarters.