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spk09: Good morning, everyone, and welcome to the National Bank Holdings Corporation 2022 Fourth Quarter Earnings Call. My name is Jen, and I will be your conference operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session following the prepared remarks. As a reminder, this conference is being recorded for replay purposes. I would like to remind you that this conference call will contain forward-looking statements, including but not limited to statements regarding the company's strategy, loans, deposits, capital, net interest income, non-interest income, margins, allowance, taxes, and non-interest expense. Actual results could differ materially from those discussed today. These forward-looking statements are subject to risk, uncertainties, and other factors which are disclosed in more detail in the company's most recent filings with the US Securities and Exchange Commission. These statements speak only as of the date of this call and National Bank Holdings Corporation undertakes no obligation to update or revise these statements. In addition, the call today will reference certain non-GAAP measures, which National Bank Holdings Corporation believes provides useful information for investors. Reconciliations of these non-GAAP financial measures to the GAAP measures are provided in the news release posted on the Investor Relations section of www.nationalbankholdings.com. It is now my pleasure to turn the call over and introduce National Bank Holdings Corporations Chairman, President and CEO, Mr. Tim Laney.
spk02: Thank you, Jen. Good morning and welcome to National Bank Holdings' fourth quarter and full year 2022 earnings call. I'm joined by Aldous Berkins, our Chief Financial Officer. Adjusting for one-time acquisition expenses, we delivered pre-provision net revenue of $50 million with adjusted net income totaling $34.5 million or $0.91 per share for the fourth quarter. Further, our adjusted return on tangible common equity was 18.37% for the quarter. Solid loan growth and a very low beta on deposits set us up well to deliver a net interest margin of 4.39%. Our team simultaneously closed and integrated two strategically important banking acquisitions that we believe will meaningfully contribute in 2023 and beyond. Finally, the quality of our loan portfolio remains very strong with excellent performance metrics across the board. I'll thank you and I'll turn the call over to Aldous to cover the quarter and full year in greater detail, as well as share guidance for 2023. Aldous? All right. Well, thank you, Tim, and good morning.
spk07: As Tim mentioned during my comments, I will cover the financial highlights for both the fourth quarter and the full year, as well as share our guidance for 2023. Consistent with our past practice, our guidance does not include any future interest rate policy changes by the Fed, nor does it include any large yield curve changes in general. As we reported in last night's release, we delivered another strong quarter of financial performance while also completing the acquisition of Bank of Jackson Hole and fully converting systems for both recent bank acquisitions. For the fourth quarter, we reported net income of $16.7 million, or $0.44 of earnings per diluted share. During the quarter, we realized $6.8 million of transaction-related expenses, as well as recorded a day-one CECL loan loss provision expense of $16.3 million for the Bank of Jackson Hall's loan portfolio. As Tim shared, excluding these transaction-related items, our adjusted core net income was $34.5 million, so $0.91 per diluted share, which is a 14% increase over the prior quarter's adjusted results. Our pre-tax, pre-provision net revenue, excluding the transaction expenses, grew $8.9 million, so 22% on the link quarter basis. We're very pleased with the strong organic loan growth during 2022, and our teammates continued focus on building robust new client relationships. During the fourth quarter, our loan balances grew $1.5 billion. $1.2 billion was driven by the acquired Bank of Jackson whole loans. In quarter, originated balances grew another $310 million, or 21.5% annualized. On a full-year basis, including the two acquisitions, our loan book increased an impressive $2.7 billion, or 60%. We continue to operate in markets that are outperforming the broad national economic indicators on many fronts. However, our outlook for 2023 cannot ignore the prospects for slowing growth. For this year, we looked to grow loan balances in mid to high single digits. Net interest margin was 4.39% and expanded another 38 basis points this past quarter, and fully taxable net interest income increased $26 million on a linked quarter basis. The margin expansion was led by a 54 basis point increase in our originated loan portfolio yields, as both our variable rate loans and newly originated loans reflect a higher rate environment. The resulting earning asset yield widening was slightly upset by a 37 basis point widening in our total interest bearing liabilities. Our cost of deposits increased just 15 basis points for the full year 2022. Our total deposit data this rate cycle to date has been less than 5%. However, we are starting to see an increased rate competition for deposit balances and looking ahead for 2023, We expect that our cost of funds will close out some of the margin widening we experienced in 2022. As such, we estimate that the margin will return to around 4% by the fourth quarter of 2023. In terms of our asset quality, it remains strong. Our non-accrual ratio improved three basis points to 0.23%. Our non-performing asset ratio improved another four basis points to 0.28%. The fourth quarter's net charge-offs were just four basis points annualized and we finished the full year with net charge-offs of just three basis points. Both criticized and classified loan ratios also improved quarter over quarter. During the quarter, we recorded provision expense of $21.9 million, and as I mentioned earlier, $16.3 million was driven by the establishment of a day-one allowance for accrued losses for the Bank of Jackson whole loan portfolio. Approximately $5.6 million of the provision expense was to support quarter's strong organic loan growth, and to increase the allowance to total loan coverage, which reflects the increased economic uncertainty as indicated by the Moody's forecast scenarios. As a result, our ACL ratio to total loans ended the quarter at 1.24%, up from 1.15% at prior quarter end. Total non-interest income for the fourth quarter was $14.1 million, or a $3.2 million decrease from the prior quarter. The link quarter decrease was primarily driven by the slowdown in the residential banking, which seems to have settled into a lower run rate as of right now. Looking at the core banking service charge and bank card combined revenues, they increased $312,000 on link quarter basis and grew $2.1 million or 6.3% on a full year basis over 2021. For 2023, we project our total non-interest income to be in the range of $70 to $75 million. The projections include our new non-interest income revenue streams, including the trust business income, as well as projected gains on sale of SBA loans. Non-interest expense for the fourth quarter totaled $67.7 million and included approximately $6.8 million of acquisition-related costs. On a year-to-date basis, we have realized approximately $15.1 million of acquisition-related expenses, which was nearly 20% better than our initial estimates. Excluding the acquisition-related expenses, the fourth quarter's core operating expense was $60.9 million, compared to $46.9 million of core expense in the third quarter. The link quarter increase was primarily driven by the addition of a full quarter of both Rock Canyon and Bank of Jackson Hole operating expenses, as well as investments to unify build-out. Most M&A transaction-related items were recognized in 2022, and we do not expect additional costs to materially impact the 2023 expense. Looking ahead for 2023, we do project approximately $10 to $12 million of expense related to unified ecosystem build-out. Inclusive of this strategically important investment, the total non-interest expense is projected to be in the range of $243 to $247 million. When projecting the 2023 effective tax rate, we expect it to increase to the 20% to 21% range. The increase is entirely due to the projected higher taxable income in 2023. The past quarters and last year's effective tax rates benefited from increased deductions due to the M&A-related expenses. As always, this projected rate excludes the FTE adjustment on interest income. In terms of capital management, we ended the quarter with a strong 8.38% TCE ratio and a 9.29% Tier 1 leverage ratio. The tangible bulk value per share ended the year at $20.63 and fully reflects now the two M&A transactions. In terms of the share count, we project the alluded shares outstanding to remain around 38 million shares. And with that, I will turn it back to you.
spk02: Well, thank you, Aldis. We've shared a lot of detail with you, so let me ask the operator to open up the call for any questions that you might have.
spk09: Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll go first to Jeff Rulis with D.A. Davidson.
spk05: Thanks. Good morning. Good morning, Jeff. Let's see.
spk06: On margin, all this, just want to make sure I get the, I guess the guide says 4% at year end. Does that include or does that exclude any accretion in there?
spk07: It's all in, so it includes all the acquired loan accretion increase and expected increase in our cost of funds given the rate environment. But it does exclude any rate changes that Fed may still do here in February or later this year.
spk06: Gotcha. Okay. But is the... I got your message that cost of funds kind of closing out sort of the advantage. Does that still mean on a core basis, do you think you could scratch out some maybe an incremental increase in the first quarter or two? I mean, I guess absent the Fed moves, is there still hope for maybe incremental increase? And then again, as that drifts down towards the end of the year?
spk07: Yeah, I think another way of looking at it is what net income will do, right, in terms of dollars, more importantly, than whether we're going to grow that. And I think our earning asset yield growth has a good chance of overcoming whatever the margin calculated squeeze there is, and we can, at minimum, I think, hold it flat if not adding each quarter.
spk02: Okay. This is Tim. I would add that, you know, as a reminder, we had targeted or expected that margin to drift down closer to four or even over the course of the fourth quarter. So, you know, what we will admit is that, you know, we believe we're taking a conservative view on that glide path. But what we're not doing is giving up on our loan price discipline. I think the fact that over 80% of our deposit base is represented by core relationship accounts, much of that core operating accounts, we think the area where we're going to need to flex on deposit pricing is on that other 20%. So if you think about areas like CDs that we haven't really leaned into, Our inclination would be to lean in to call it that nine-month-plus CD as an area to pick up what we believe are reasonably cost fundings. And again, I guess the main point here is we're targeting to have margin compressed by year-end as low as 4%. that's at year-end, obviously, we're going to be doing everything we can, just as we did in the fourth quarter, to mitigate that and produce as strong a return in that front as we can.
spk06: Yep. No, I hear you, Tim. And I'd say, I guess, to the upside, a pretty big number, so I think relative to expectations. kind of popped on the short end. So maybe just one more on the margin, though, further out, if we can even be that far. But you're putting anything on in terms of, you know, hedges or anything to kind of mitigate asset sensitivity, sort of, again, looking at the end of the year. If it does come back to four, are we thinking about things in 24 that you want to protect it even further as in try to hold that level? Are you putting anything on the balance sheet to try to protect it further out if we do get a shift in rates?
spk07: We are. We selectively are actually adding some derivatives and rate floors to ensure that we can lock in as much as possible the margin that we've enjoyed here. And it is market dependent. rate-dependent and price-dependent, obviously, but we've, throughout 2022, added a few hundred million of rate hedges. Clearly, they are, call it out of money right now, don't add any value, but if rates were to reverse, we have some protection and looking to do some more of that in 2023 as well.
spk06: Okay. Thanks, Aldous. My other question kind of relates to the The credit quality, you know, the net move from NPAs was not significant quarter to quarter. Just want to double check that, you know, adds and deletes within that if there were any additions that were brought on from the acquisition and maybe you had net payoffs, you know, on the legacy portfolio, just trying to see if there was anything under the hood what looks like a pretty modest increase in NPAs?
spk02: Really nothing material.
spk07: Clearly the NPA ratio came down, so we look at overall portfolio basis, so clearly there's some stuff that came across from the acquisitions, but overall portfolio improved on kind of core basis.
spk02: And really across a broad set of credit metrics. we do feel like the portfolio is positioned to perform very well.
spk06: Got it. And then just kind of as a jump off from that, then, Aldous, I think you mentioned, I mean, that's an absent the CECL deal-related provision, you know, I think something approaching $6 million to support growth is that if we read into you know, growth could pull back into the high single-digit. We could expect, barring other changes macro-wise, that that core provision could come in if growth were to slow?
spk07: Yeah, you know, I think the way I look at it is the total losses is 1.24%. And that's the, you know, all those, with the information that we have, that's the level that we would maintain, all those equal. So, if the loan growth were to slow down as we're projecting here into mid to high single digits, then the provision expense would slow down as well accordingly. But, you know, we would still maintain, look to maintain the same loan loss coverage.
spk01: Fair enough. Thank you. Thank you.
spk07: On the ACL going up, again, the credit book couldn't be in a better shape. It really is driven by the CECL and the Moody's outlook deteriorating throughout the quarter, the forecast scenarios to be using, and that's driving some of this increase. Now, having said that, where we sit and starting this year with the uncertainty that exists around the economy, we certainly didn't fight or mind that type of increase. So we like that increased provision or allowances.
spk02: Yeah, I would echo that. I don't have an issue carrying 124 on an allowance for credit losses in an uncertain environment. At the end of the day, obviously, the two drivers that are really going to dictate that level will be the CECL process and, to be more granular, the economic forecasts that are submitted. And to your question, long growth. So I think it'll moderate on the CECL front if we start to see different economic projections, and it will moderate on the long growth front if, in fact, we see the kind of levels of growth that we've projected for 23.
spk06: Okay. And it sort of drew out another question. Sorry about that. You know, 124 is a pretty big number, but all this to you. Do you have like a trued up reserve if you were to include credit marks on deals? Is there a figure that inclusive of that would be a higher coverage level?
spk07: There would be. I mean, we have about $34 million of loan loss reserves that goes up and beyond that, that protects us from future losses as well. So that's another number. which is equal about 45 basis points to total loans or 1.83% on acquired loans. Yeah, it's a good question, and it's a big number.
spk05: Yep. No, thanks. Guys, I'll step back. All right. Thank you.
spk09: We'll take our next question from Kelly Moda with KBW.
spk02: Good morning, Kelly. Hi.
spk08: Good morning. I apologize if you covered this in prepared remarks, if I missed it. You had such strong NII and your margin came in well ahead of what I had. How much of the margin right now is the credible yield and what does your guidance imply for that contribution this upcoming year?
spk07: yeah and so a credible yield is it's that 33 million dollar mark amortizing I'd say it's about 1.5 million per quarter is inclusive included in there approximately thank you thanks all this that's that's really helpful I do want to point out though is you you know, it's kind of good and bad acquiring a loan book in the rate environment that had moved quite substantially from the time those loans were booked. So a good chunk of that accretion is actually a rate mark, right? And we effectively bought a 4% loan in a 5% world and therefore we got to market the discount. It is a good accretion. It protects from both credit perspective, but it's also a true loan yield rate the way we look at it because had we originated that loan, it would have been originated, in my example, 5%, not 4%.
spk08: Got it. That's helpful. And then turning to your fee income guidance, that's a pretty decent step up from where you were in 4Q. I'm just wondering if 4Q included any SBA gains from Rock Canyon or if you're working to build the pipeline and kind of the outlook for that business as we look to 2023 given, I think, secondary market premiums have compressed a bit.
spk07: Right, right. No, it's a great question and a good question. patch there where our guidance is a bit higher than if you were to annualize fourth quarter, really. So breaking it down kind of in, call it three buckets, our service charges, bank cards, kind of core banking service fees that we're looking to grow. We look to grow that along with the rest of the balance sheet, call it mid-single digits. We grew that 6.3% in 2022, so I think that's nice and achievable. Then there is a mortgage, which I'll come back to, and then there is other, right? And we did pick up trust business through Bank of Jackson Hole, so that is expected to grow and is embedded in the other income. There is SBA gains, which we did not have any SBA gains in the fourth quarter. Rock Canyon Bank in the prior several years had generated about, call it $6 to $9 million of SBA gain fee income. We don't, we are not counting on that type of levels. As you mentioned, the SBA margins have come in quite a bit. So, you know, call it approximately half of that is what is embedded in our guidance. And then just, you know, the rest of the kind of the other non-interest income that we typically have had is in that line item. And then coming back to mortgage, you know, clearly the fourth quarter was, seasonally is in first quarter, seasonally are slow months anyway for purchase market. We are projecting that to recover in the coming little bit in the summer months and summer quarters. But our projections embedded there are in line with what NBA is projecting, which still, if you were to look at the year-over-year volumes, still being down 15%, 20% in 2023 over 2022 in purchase market. But nevertheless, clearly the fourth quarter, it feels like, as I mentioned, it prepared the marks a bit of a trough.
spk08: Got it. Thank you. Also, as we look to this year, I know you guys have had your ongoing tech initiatives and to unify initiatives. Just wondering how you prioritize that given I'm sure you're busy having just finished the acquisition of two banks, how that fits into kind of your strategic plan in this year and beyond. That would be helpful as well as a two-parter to that question on expenses and kind of the run rate there, how the cadence of cost saves flows through from the deals.
spk02: Yeah. Thanks, Kelly. We are on track with the build-out of 2Unify. We are benefiting, interestingly enough, from... a lot of the reductions we've seen in the kind of core FinTech tech arena. So the availability of talent at better pricing is something that we're benefiting from. I'm increasingly, and I think, Kelly, you happen to know some of these people, but I'm increasingly comforted by some of our key partners working with us to build to unify, including Mobiquity. And we believe we're going to be in a position to be doing some testing with businesses at the end of this year on certain elements of 2Unify. I'll turn it to Aldis to speak to expense detail. And we say expense detail. Obviously, I view this as an investment. But Aldis, why don't you take Kelly through the numbers?
spk07: Yeah, no. So really stripping out the one-time expense of $6.8 million this last quarter, what we call core operating expense was approximately $60.9 million. Certainly a lot of noise still this quarter, right, given that we just closed Bank of Jackson Hold, integrated two systems. The Bank of Jackson Hold system integration took place in December, so certainly there's still some overlap and synergy still to become and realize. But at the same time, we did step up to unify investment in fourth quarter. It's in our press release yesterday or earnings release yesterday, but for full year, that added up to be about $4.3 million investment. Now, looking ahead for 2023, if you were to take the $60.9 million and annualize it, it'd come out right in the middle of the range what I gave for this year, which means that Not only we will have to figure out how to cover the unified investment of $10 to $12 million, the FDIC insurance increase, which, you know, all of our industry is increasing by two basis points of FDIC, as well as any inflationary pressures that are still coming through. We're going to have to figure out that. And, you know, we've always managed expenses well and it's been strong culture here. But in terms of run rate, basically, we kind of feel like we are at the run rate for next year, including all those investments.
spk08: Great. Thanks, Tim and Aldous, for all the color. I'll step back.
spk05: Thank you, Kelly.
spk09: We'll go next to Andrew Terrell with Stevens.
spk00: Hey, morning, Tim. Morning, Aldous.
spk05: Hey, good morning.
spk02: Good morning.
spk00: Hey, maybe just to follow up on expenses, I hear that kind of color and guidance for, I think it's 243, 247 for 2023. If there are kind of 10 to 12 million of two unified expenses coming through in the coming year, I guess, should we think about those as more transitory, implying that the 2024 expense run rate kind of moderates, or would you build off of this 243 to 247 into 24?
spk02: I think you should look at that possibility for 25 and beyond, and what we haven't talked about that I'll add, given your question, is where we're increasingly optimistic is around taking some of the low-cost new technology that we're putting in place to unify and applying it to our core bank and the ability to lower that operating cost over the next few years. So we're not, you know, we're not in a position at this point to provide guidance on that front. But if you're asking about 24 and thinking about 25, I will tell you our optimism around leveraging, for example, the challenger core that we are leveraging for to unify gets really interesting. We'll remain as hyper-focused on our operating efficiency as we've ever been, and I think we're going to end up being able to make some real interesting trade-offs in terms of historical cost versus a future way of operating the business.
spk00: Okay. I appreciate the added color there. If I could just clarify on the loan growth guidance, mid to high single digits, is that referring specifically to the originated loans, so not excluding what you would expect from the acquired runoff?
spk07: No, that's the net loan book. So that's covering also the acquired loan book runoff.
spk00: Got it. Okay. And then for all this, just going back to the 4% expectation by the end of the year, I was hoping to just get maybe some incremental color on moving pieces there specifically as it related to kind of deposit cost increases you're expecting. And then does that guidance reflect any change in deposit composition, so any incremental kind of non-interest-bearing deposit mix change from here?
spk07: No, I think in terms of deposit composition, I think Tim hit on it because I think – and it does feel like, as we've been reading through some other bank releases, that the at least the consumer is gravitating to highest earning asset for them, liability for banks, which is time deposits. So I do expect that we probably will increase some of the CDE balances here. We are down to 10% of total balances and time deposits historically. We ran closer to 20. So rebuilding some of that forward balance sheet, again, is probably in the cards slowly, of course. In terms of non-interest bearing deposit mix, I don't see that changing much. Again, our go-to-market strategy is always a relationship. We always start with a checking account, and I do not see that changing. So we expect that balance to be core there. Now, having said that, if you look at the flows, we haven't seen anything specific or one large or kind of movements that would be unique. We've seen rate movements. We've seen still people spending down their stimulus checks. So how much that yet to go, who knows? So give or take a couple percentage points around that. But the mix otherwise, I think, will stay unchanged.
spk00: Okay. Very good. And then just to maybe clarify, I think I heard this right in the discussion, but outside of just the NEM fluctuations we should expect, you think you can grow net interest income by every quarter off of this base of 96 million in 4Q. Did I hear that right?
spk07: I think they have a good shot at it, yes.
spk00: Okay. Very good.
spk05: Thank you for taking the questions. Thank you.
spk09: We'll go next to Andrew Leash with Piper Sandler.
spk03: Hey, good morning, guys. Good morning. Just sticking with the balance sheet and the margin here, Do you think that the balance sheet reached the point where any incremental rate hikes aren't going to have any benefit to the margin? Are funding costs going to increase that quickly in the near term, assuming we get some rate hikes this quarter? Or do you think there's still some upward bias from the rate hikes?
spk07: I think there might be still upward bias. The way we calculate it in terms of, again, our modeling, which clearly is modeling and a lot of times far away from reality, but We still reflect a small asset sensitivity in our position, so I do expect that the rate hikes might still be beneficial on that net basis. Again, in my mind, any marginal rate hike just creates that catch-up, so to say, of the cost of funding at some point. And why we say 4% return is really, and I think I mentioned that in prior calls, is When we look at our balance sheet composition, the type of lending that we do, the type of core deposit, that balance sheet that we have, that liquidity that we have through the investment portfolio, in the long run, I think we can maintain, in a normalized yield curve or normalized rate environment, 4% or thereabouts margin. And therefore, for us today, it feels elevated and we're projecting it to normalize it over time.
spk02: I would add, if you take this down to the banker level, Our bankers understand that as the cost of their inventory, which is deposits, increases, it's incumbent that they increase spreads on loans that they're making. We take it one step further in terms of our relationship review with a client. If the client is providing low-cost funding, they're going to see one level of pricing as compared to a client or a prospective client coming in looking to borrow money but not having the core operating accounts and core deposits available. And that's a discipline that we adhere to that we're not going to let up on. And that's why I may be a little more optimistic than even Aldis in terms of our ability to continue to see progress on loan margins.
spk07: And one more data point I'll add is that for fourth quarter, which included October originations that were before the latest rate hike, but our new loan origination rate was just under 7%. So newly originated loans away from rate increases and from variable rate loans are accretive to our margin.
spk02: We're not going to give business away. And we are not into doing business to lose money in relationships. And I think our clients understand that.
spk03: Got it. Yeah, that makes sense. And thanks for that call there. And then just a little detail on the loan growth. Have you seen the pipeline or demand temper at all? Or is it still pretty strong? You just expect growth maybe to slow in the latter part of the year?
spk02: You know, we are... frankly surprised at how strong demand has continued to be. I think, you know, where we'll temper that is with what I was talking about earlier in terms of, you know, being more selective if a new relationship is prospectively coming into the bank and they don't have enough to offer on the treasury or depository management front. they may not be a right fit for us. I'm not worried about demand. We're fortunate. We're in incredibly strong markets that continue to perform well. But, you know, number one, as we've discussed in prior quarterly calls, we have certainly raised our credit underwriting criteria. And number two, the relationship pricing has got to work for us. And, you know, our Our very simple message to clients is it's got to be a win-win. You want us to be here over the long run. We can't do that by participating in relationships where we're not generating adequate returns.
spk05: Got it. That's a really helpful color. Thanks so much. I'll step back. Thank you.
spk09: We'll take our next question from Brett Robinson with a hob group.
spk04: Hey, guys, good morning.
spk02: Jen really butchered your firm's name. Sorry about that.
spk04: Yeah, that's okay. It's Hubdy Group. Yep. I'll see you, everyone. Yeah, I wanted to go back to the deposit question. And just on the margin, so I want to make sure I'm clear, what are you guys assuming for the beta market? as we get into later this year, and then obviously the 5% beta presently. I mean, that's pretty low. There's a little bug in the back of my head that says you'd be a little bit worried about losing maybe some deposits as people, quote, wake up to the rate environment. Any color on those two topics?
spk02: Yeah, before Aldous jumps in with specifics, I'll say again, where we're going to focus is on that, call it 20%. that we've addressed that are really not operating accounts you know if you think of it your core operating account whether you're an individual or a business those accounts tend to be much less sensitive right that's where you're transacting your business that's where in the case if it's a personal account where your payroll where your paychecks being deposited to that's not really the interest sensitive dollars that we're talking about we're talking about that 20% of which 10% have been in CDs, historically up to 20%, we do, as Aldis mentioned, we could see flexing that CD book up meaningfully in order to provide a competitive return on time money. Now, I'll turn it to Aldis. He was hoping I would skip him. I'll turn it to Aldis to try to answer your question. Get out your crystal ball and try to answer the question on the beta.
spk07: I was hoping not to because I don't have the crystal ball and having been reading the beta calculations, it can be certainly on toll deposits, interest-bearing deposits, interest-bearing liabilities and all of that. You know, I'd like to stay away from projecting beta here, really, and just stand by the guidance to be given, the margin. I think we look at that as a whole and embedded there are certain, obviously, assumptions on asset through pricing as well as deposits. But, you know, getting to that 4% over a period of time, I think, is where our goal is.
spk02: And I will say this at a macro level, we certainly expect, given our history, we expect our beta to perform better than the national averages that we've been seeing. There's nothing we're seeing that would suggest that that trend would change. Okay.
spk04: And then I know it's not a huge concern in terms of the fee income, but the whole $10 billion question, you know, there's several things you can unwrap there with the regulators want you to have more staff for a lot of different things. Maybe there's an advantage for staying under 10. Just wanted to get your thoughts, Tim, on how you think about the $10 billion question.
spk02: Yeah, you know, I'll just remind everyone that when we started this company, we had to agree to operate as though we were over a $10 billion institution from day one. So we've put in a lot of that infrastructure and been operating with that cost for some time now. Frankly, it turned out to be a benefit. I'll give the regulators a lot of credit because it put an infrastructure in place place that we've really been able to leverage and lean into. Will there be some incremental cost? I'm sure there will be. Our discussions with our regulators today have not suggested anything dramatic at all or frankly not even anything noteworthy. beyond what we're doing today but then all this can speak to the timing of this because it's not as though you know the moment you cross the 10 billion dollar threshold you're you're held to any changes in the first place yeah no and certainly given our guidance on the loan growth which you know you could certainly apply to how total assets will grow as well and back into
spk07: that there is a good chance that we do cross $10 billion by end of this year. And therefore, again, this year's guidance doesn't include any of that because it wouldn't impact this year. It really starts if it does in 2024. On the expense side, on the Durbin side, again, for us, right now on the run rate basis, call it would be about $10-ish million hit to the interchange, which would for 2024. is only half a year. So, you know, I'm estimating the two, maybe 3% of total net income for 2024. So a very manageable, very manageable impact.
spk04: Okay. There's a little bigger number than I was recalling. All right, great. And then maybe just one last one, you know, just thinking about, you know, Tim, the franchise you have now, you've done two acquisitions, you know, here in The past quarter, so, you know, besides the to unify. Initiative would. You know, would there be other things that you want to accomplish in 23? Would additional M and a kind of. Makes sense if it could happen, obviously, the current environment doesn't suggest that's. Very likely, but just want to make sure I was aware of whatever else you were looking to try and accomplish this year.
spk02: I'm very proud of the team and the fact that we were able to announce a close and fully integrate two institutions in short order in 2022. We certainly continue to have a pipeline of discussions with banks that reside in our core markets. We do like the idea of growing and expanding in the attractive markets where we operate. So when you think about certainly Colorado, but Utah, even Idaho at this point, which may be lost on some folks that we've got an interesting presence in Boise now, and we really like what we're seeing in that market. I think we can do a lot organically there, and I think it's just an interesting market to pay more attention to, at least for us. As we've always been, we're just going to be prudent stewards of capital. If there's a seller interested in doing something with us, they're going to have to be cognizant of the fact that we've, again, got to create a win-win. We're very sincere about that. We'll be patient and we'll be thoughtful. We feel really good about our organic growth prospects, but we certainly have not closed the door on looking at new potential partners to help move MBH ahead. Where we have closed the door, and I've mentioned this in prior meetings, is frankly, we are not spending time talking to community banks in low growth markets, we are not going to fall into that trap of simply acquiring with the idea of taking out 20 or 30 percent, riding that accretion for a few years, and putting ourselves on that treadmill. That's just not something of interest to us.
spk05: Okay, that's great. I appreciate all the color. You bet.
spk09: Thank you and I'm showing we have no further questions at this time. I will now turn the call back to Mr. Laney for his closing remarks.
spk02: Thank you, Jen. I'll simply say thank you for joining us today. We appreciate your confidence in NBH and we'll be working hard to deliver more along the way. Take care. Thank you.
spk09: And this concludes today's conference call. If you'd like to listen to the telephone replay of this call, it will be available in approximately 24 hours and the link will be on the company's website on the Investor Relations page. Thank you very much, and have a great day. You may now disconnect.
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