Q4 2022 National Bank Holdings Corp Earnings Call
Speaker 2: .
Speaker 3: Good morning everyone and welcome to the National Bank Holdings Corporation 2022 4th Quarter Earnings Call. My name is Jen and I will be your conference operator for today.
Speaker 4: At this time, all participants are in a listening mode. We will conduct a question and answer session following the prepared remarks.
Speaker 5: As a reminder, this conference is being recorded for replay purposes.
Speaker 6: 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, allowances, taxes, and non-interest expenses.
Speaker 7: Actual results could differ materially from those discussed today.
Speaker 8: These forward-looking statements are subject to risks, uncertainties, and other factors which are disclosed in more detail in the company's most recent filings with the U.S. Securities and Exchange Commission.
Speaker 9: 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.
Speaker 10: In addition, the call today will reference certain non-GAAP measures, which the National Bank Holdings Corporation believes provide useful information for investors.
Speaker 11: 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.
Speaker 12: It is now my pleasure to turn the call over and introduce National Bank Holdings Corporation's Chairman, President and CEO , Mr. Tim Laney.
Speaker 13: Thank you, Jen. Good morning and welcome to National Bank Holdings' 4th quarter and full year 2022 earnings call. I'm joined by Aldus Birkins, our Chief Financial Officer.
Speaker 14: 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.
Speaker 15: Further, our adjusted return on tangible common equity was 18.37% for the quarter.
Speaker 16: Solid long-term growth and a very low beta on deposit set us up well to deliver a net interest margin of 4.39%.
Speaker 17: Our team simultaneously closed and integrated two strategically important banking acquisitions that we believe will meaningfully contribute in 2023 and beyond.
Speaker 18: Finally, the quality of our long portfolio remains very strong, with excellent performance metrics across the board.
Speaker 19: I'll thank you and I'll turn the call over to Aldous to cover the quarter in full year in greater detail as well as share guidance for 2023. Aldous. All right. Well, thank you Tim. Good morning.
Speaker 20: 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.
Speaker 21: 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.
Speaker 22: As we reported in last night's release, we delivered another strong quarter of financial performance while also completing the acquisition of Bank Objects and Hold, and fully converting systems for both recent bank acquisitions.
Speaker 23: For the fourth quarter, we report a net income of $16.7 million, or $0.44 of earnings per diluted share.
Speaker 24: During the quarter, we incurred $6.8 million in transaction-related expenses, as well as recorded a day-one CECL loan loss provision expense of $16.3 million for the Bank of Jackson Hole's loan portfolio.
Speaker 25: Assuming shared, excluding these transaction-related items, our adjusted consolidated income was $34.5 million, or 91 cents per diluted share, which is a 14% increase over the prior quarter's adjusted results.
Speaker 26: Our pre-tax pre-provision net revenue, excluding the transaction expenses, grew by $8.9 million, or 22%, on a year-to-year basis.
Speaker 27: We are very pleased with the strong organic long-term growth during 2022, and our teammates continue to focus on building robust new client relationships.
Speaker 28: During the fourth quarter, our loan balances grew by $1.5 billion.
Speaker 29: $1.2 billion was driven by the acquired Bank of Jackson Hole loans.
Speaker 30: In quarter, originated balances grew another $310 million, or 21.5% annualized.
Speaker 31: Over a four-year period, including the two acquisitions, the loan book increased an impressive $2.7 billion or 60%.
Speaker 32: 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 of slowing growth.
For this year, we look to grow long balances in mid to high single digits.
The net image margin was 4.29% and expanded by another 38 basis points this past quarter. Fully taxable net interest income increased by $26 million on a link-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 the high-rate environment.
The resulting earning asset yield widening was slightly offset by a 37 basis point widening in our total interest-bearing liabilities.
Our cost of deposits increased by just 15 basis points for the full year 2022.
of the positive data this rate cycle to date has been less than 5%.
However, we are starting to see an increased rate of competition for deposit balances. Looking ahead to 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 by three basis points to 0.23%. Our non-performing asset ratio improved by another four basis points to 0.28%.
The four quarters' 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 reported a provision expense of $21.9 million. As I mentioned earlier, $16.3 million was driven by the establishment of a day one allowance for credit losses for the Bank of Jackson's whole loan portfolio.
Approximately $5.6 million of the provision expense was to support Quarters' strong organic loan growth and to increase the allowance for total loan coverage, which reflects the increased economic uncertainty as indicated by Moody's forecast scenarios.
As a result, our ACL ratio to toll loans ended the quarter at 1.24%, up from 1.15% at prior Brodant.
Total non-interesting income for the fourth quarter was $14.1 million or a $3.2 million decrease from the prior quarter.
The decrease in building quarter was primarily driven by the slowdown in residential banking, which seems to have settled into a lower run rate as of right now.
Examining the core banking service charge in Bank Card combined revenues, they increased by $312,000 on a linked-quarter basis and grew by $2.1 million, or 6.3%, on a full-year basis over 2021.
In 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 of business income as well as projected gains on the 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 in acquisition-related expenses, which is 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 in court expenses in the third quarter.
The link order increase was primarily driven by the addition of a full quarter of both Rock Canyon and Back Adjacent Hole operating expenses.
as well as investments into our ToUnify build-out.
Most M&A transaction-related items were recognized in 2022, and we do not expect additional costs to materially impact the 2023 expenses.
Looking ahead for 2023, we do project approximately 10 to $12 million to expand related to unify ecosystem buildout.
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, it is expected to increase to the 20-21% 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 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 2.29% Tier 1 leverage ratio.
Detangleable, book value per share ended the year at $20.63 and now fully reflects the two.
In terms of the share count, we project a diluted share outstanding to remain around 38 million shares.
And with that, I will turn it back to you. 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.
Thank you. If you'd like to ask a question, please signal by pressing star one 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 one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions.
I'll go first to Jeff Rulis with D.A. Davidson.
Thanks, good morning.
Thanks, good morning. Good morning, Jeff.
Let's see, I'm on margin all this.
Thank you.
I just want to make sure I get the
I guess the guide to 4% at year-end, does that exclude any accretion in there?
It's all in, so it includes all the acquired law, the increased law, the increased increase, and the expected increase in our cost of funds given the rate environment.
So that's but it does exclude any Rape changes that Fed may still do here in February or later this year.
Gotcha, okay.
I got your message that cost of funds closing out is 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 an incremental increase, and then again as that drifts down towards the end of the year?
Yeah, I think another way of looking at it that.
Is what net income will do, right, in terms of the dollars, more importantly, than whether we're gonna grow that. And I think our earning asset yield growth has a good chance of overcoming whatever the margin calculated squeeze there is, from, and we can.
At minimum, I think hold it flat, if not adding each quarter. Okay. Hey, Jeff. This is Tim. I would like to add that, you know, as a reminder, we had targeted or expected that margin to drift down closer to four, even over the course of the fourth quarter.
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 into calling that nine-month-plus CD as an area to pick up what we believe are reasonably, you know, cost-bundlings. And again, I guess the main point here is, you know, we're...
Targeting to have the margin compressed by urine as low as 4%. That's that urine. Obviously, we're going to be doing everything we can, just as we did in the fourth quarter, to mitigate that and produce a stronger return on that front as we can.
Yes, no, I hear you, Tim. And I'd say, I guess on the upside, a pretty big number.
I guess that's the upside of a pretty big number.
So, I think, relative to expectations, it kind of popped on the short end. So maybe just one more on the margin, though, further out if we can even see that far. But, are you 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 2024 that you want to protect it even further, as in
Try to hold that level. Are you putting anything on?
Valid sheet to try to protect it further out if we if we do get a shift in rates
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. So, and it's, you know, it is market dependent. And rate dependent and price dependent, obviously. But we've, throughout 2022.
Okay, thank you for all this. My other question is kind of related to the credit quality. The net move from NPAs was not significant quarter to quarter. I just want to double-check that.
you know, ads and deletions within that if there were
Any additions from that were brought on from the acquisition, and maybe you had net and I rip 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 Pear Hautekin at TBHS domestic.
Really, nothing material.
Okay. Clearly, if you adjust, I mean, clearly, the NPA ratio came down. So, we look at an overall portfolio basis. Clearly, there's some stuff that came across from the acquisitions, but the overall portfolio improved on a golf panacore basis.
And really across a broad set of credit metrics. I mean, we do feel like the portfolio is positioned to perform very well.
Got it. And then just kind of jump off from that and all of this, I think you mentioned. I mean, that's a...
absent the sea soul.
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
The high single-digit we could expect, barring other changes.
macro-wise that that core provision could come in if growth were to slow.
Yeah, you know, I think the way I look at it is...
The total losses are 1.24 percent, and that's the, you know, all those with information that we have, that's the level that we would maintain, all else 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.
And the Moody South's outlook deteriorated throughout the quarter; the forecast scenarios we are using are driving some of this increase. Now, having said that, you know, where we sit at the start of this year with the uncertainty that exists around the economy, we certainly didn't mind that type of increase, so we like that increased provision for allowance.
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 loan growth front.
If you were to include credit marks on deals, is there a figure that, inclusive of that, would be a higher coverage level?
There would be. I mean, we have about $34 million in low loss reserves that go above and beyond that, protecting us from future losses as well. So that's another number which, you know, is equal to about.
45 basis points to total loans or 1.83% on acquired loans? Yeah, that's a good question.
That's a big number.
Thanks, guys. I'll step back.
Guys, I'll step back. Thank you.
We'll take our next question from Kelly Mota with KBW.
Good morning, Kelly. Hi. Good morning. I apologize if you covered this in your prepared remarks and 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 accretable yield and what does your guidance imply for that contribution this upcoming year?
Yeah, and so a creatable yield is...
It's that $33 million mark amortizing. I'd say it's about 1.5 million dollars.
5 million per quarter is included in there.
Approximately.
Thank you, thanks, Aldous. That's really helpful. I do want to point out, though, is that...
It's good and bad acquiring.
A loan book in a rate environment that had moved.
Quite substantially from the time those loans are booked so good chunk of that Cretan is actually rate mark
right, then we effectively bought a 4% loan in a 5% world and therefore we're getting got to market to discount. So it is a good accretion, it protects from both credit perspective, but it's also, it's 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% and now 4%.
Got it. That's helpful. And then, turning to your fee income guidance, that's a pretty significant step up from where you were in 4Q. 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 towards 2023, given I think secondary market premiums have compressed a bit.
Right, right, now it's a great question, and in the hmm, hmm, hmm.
Good.
catch their work or guidance as a bit higher than work if you were to analyze port quarter really so, breaking it down kind of, and in call it three buckets of service charges, bank cards, and core banking.
Service fees that we're looking to grow. We look to grow that along, but if the rest of the balance sheet that we 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's other right, and we did pick up.
Trust business through Bank of Jackson Hall so that it is expected to grow and is embedded in the other income.
There's SBA gains, which we did not have any SBA gains in the fourth quarter. Rocky and Bank in the prior several years had generated about six, called a $6 to $9 million of SBA gain fee income.
We are not counting on those types of levels, as you mentioned, the SBA margins have come in quite a bit, so call it.
Approximately half of that is what is embedded in our guidance and then just the rest of the other non-interesting income that we typically have had is in that line item. And then coming back to mortgage, clearly the fourth quarter was, he seasonally is, and first quarter seasonally are slow months anyway for purchase market.
We are projecting that to cover in the coming little bit in the summer months and summer quarters, but our projections embedded there are in line with what MBA is projecting, which, you know, still, if you were looked to be early year volumes still being down 15, 20 percent on...
In 2023, over 2022 and the purchase market. But nevertheless, clearly, the fourth quarter was, it feels like, as I mentioned, it prepared the marks a bit of a trough. Got it, thank you. Also, as we look to this year, I know you guys have had your ongoing tech initiatives.
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 does that fit into your already-existing benefits, so fantastic?
Strategic plan in the near and beyond.
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-aves.
Through from the deals.
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 obiquity.
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 over to all to speak to the expense detail, and we say expense detail, obviously.
I do this as an investment, but all this one, why don't you take Kelly through the numbers? Yeah, no. So really, it's 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 persists given that we just closed Bank Rejects and have integrated the two systems.
The Bank of Jackson Hall system integration took place in December, so certainly, there's still some overlap and synergy yet to be achieved and realized. But at the same time, we did step up to unify investment in the fourth quarter.
It's in our press release yesterday, or earnings release yesterday, but for a full year, that added up to be about a $4.3 million investment. Now, looking ahead for 2023, if you were to take the $60.9 million and annualize it, it would come out right in the middle of the range for what I gave for this year, which means...
Inflationary pressures that are still coming through; we're going to have to figure that out, and we've always managed expenses well as it has been a strong culture here. But in terms of run rate, we essentially feel like we are at the run rate for next year, including all those investments.
Right, thanks. Thanks to Minaldis for all the color. I'll step back.
Thank you Kelly. Well, the next two Andrew Terrell with Stevens.
Hey, morning to morning audits.
Good morning.
And 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 around 10 to 12 million of two UNIFI expenses coming through in the coming year, I guess, should we think about those as more transitory, implying that the 2024 run rate kind of moderates or would you build off of this 243 to 247 into 2024?
I think you should consider that possibility for 25 and beyond, and what we haven't discussed, which I'll add given your question, is that we're increasingly optimistic about utilizing some of the low costs.
New technology.
that we're putting in place for 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 2Unify 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 really interesting trade-offs in terms of historical cost versus a future way of operating the business.
Okay, I appreciate the added color there.
If I could just clarify the loan growth guidance, mid to high single digits, is that referring specifically to the originated loans and not excluding what you would expect from the acquired runoff? Yes, that's correct.
Now that's the Ned Long book.
So that's covering also the acquired logbook run-off.
Got it. Okay. And then...
For all of us, just going back to the 4% NIM expectation by the end of the year.
Well help ING just give may be some incremental color on moving pieces there, specifically as 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 noninterest-bearing deposit mexchange from here?
In terms of deposit composition, I think Tim hit on it. It does feel like, as we're reading through some other bank releases, that the
At least the consumers are advocating for the highest burning acid for them, which is liability for banks, time deposits. So I do expect that we probably will increase some of the CD balances here. We are down to 10% of total balances and time deposits; historically, we are closer to 20.
So rebuilding some of that forward balance sheet again is...
It's probably in the cards, slowly, of course. In terms of non-interest-bearing deposit mix, I don't see that changing much.
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 the movements that would.
Be unique. We've seen great movements, and we've seen still people spending down their stimulus checks, so how much is yet to go, who knows. Give or take a couple of percentage points around that, but next, otherwise, I think will stay unchanged.
Okay, very good. 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, do you think you can grow net interest income every quarter off of this base of about $96 million in 4Q? Did I hear that right? I think we have a good shot at it, yes.
Okay, very good. Thank you for taking the questions.
Thank you for taking the questions. Thank you.
We'll go next to Andrew Leish with Piper Sandler.
Hey, good morning guys. Just sticking with the balance sheet and the margin here. Do you think that the balance sheet has 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 or do we get some rate hikes this quarter? Or do you think there's still some upward bias from the rate hikes?
I think there might be still upper bias. The way we calculate it in terms of, again, on modeling, which clearly is modeling and...
A lot of times.
Far away from reality, we still reflect small asset sensitivity in our position, so I do expect that the rate hikes might still be beneficial on that net basis. In my mind, any marginal rate hike.
This just creates that catch-up, so to say, across the funding at some point. And why we say a 4% return is really because that's how, and I think I mentioned that in prior calls, we look at our balance sheet composition, the type of lending we do, the type of core deposits, and the balance sheet that we have, along with the liquidity that we have.
Over time. 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 is incumbent upon them to increase spreads on the loans they are making. We take it one step further in terms of our relationship review with a client.
is providing low-cost funding, they're going to see one level of pricing as compared to a client or prospective client coming in looking for, 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 all of us in terms of our ability to continue to see progress on low margins.
And one more data point I'll add is that, you know, fourth quarter rates included total 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.
We're not going to give businesses a look.
And we are not into doing business to lose money in relationships, and I think our clients understand that.
Got it. Yeah, that makes sense. Thanks for that color there.
A little detail on the long growth: have you seen the pipeline or demand temper at all or...
It's still pretty strong. You'd suspect growth might be slow in the latter part of the year.
Oh
We are frankly
Surprised at how strong demand has continued to be, I think where we'll temper that is with what I was talking about earlier, in terms of being more selective if a new relationship is...
Respectively coming into the bank, and they don't have enough to offer in terms of Treasury or Depository management; they may not be the 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 to work for us. And, you know, our very simple message to clients is it has to be a win-win.
Thank you.
We'll take our next question from Brett Grabatin with the Hobb Group.
From Brett Rabinton was a Hobb group.
Hey guys, good morning.
Generally, I butchered your firm's name. Sorry about that. Yeah. That's okay. It's up to you. I'll see you, everybody. Goodbye.
Yeah, we wanted to go back to the deposit question, and just on the margin, I want to make sure I'm clear: what are you guys assuming for the beta as we get into later this year? And obviously, the 5% beta presently, I mean that's...
That's pretty low. There's a little bug in the back of my head that says you can be a little bit worried about losing maybe some deposits as people, quote, 'wake up to the rate environment.' You know, any color on those two topics? Yeah, before all this, jumps in with specifics, I'll say, yeah, we're going to focus on that point.
Your business. That's where, in the case if it's a personal account where your payroll, where your paycheck's 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, you know historically, up to 20%.
We do, as Aldous mentioned, we could see flexing that CD book up, you know, 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 let Aldis try to answer your question. Get out your crystal ball and attempt to answer the question on the beta. That's why I was hoping not to, because I don't have a crystal ball and haven't been reading the data.
I'll turn it to Aldis. He was hoping I would skip him. I'll turn to Aldis to try to answer your question. Get out your crystal ball and try to answer the question on the beta. That's why I was hoping not to because I don't have a crystal ball and haven't been reading the beta.
Calculations, you know, can certainly be on toll deposits, interest-bearing deposits, interest-bearing liabilities, and all of that. So, you know, I'd like to stay away from rejecting Bader here, really, and just stand by the guidance given for the margin. I think we should look at that as a whole.
And embedded, there are certain, obviously, assumptions and assets repricing as well as deposits; but getting to that 4% over a period of time, I think, is where our goal is, or how we'll have it play out. And we expect, and I will say this at a macro level.
We certainly expect, given our history, we expect our data 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.
Given our history, we expect our data to perform better than the national averages that we've been seeing. There's nothing we're seeing that would suggest that trend will change. Okay, we should do that.
Then I know it's not a huge concern in terms of the fee income, but the whole $10 billion question, you know, there are several things you can unwrap there with the regulators wanting you to have more staff for a lot of different things. Maybe there's an advantage to staying under.
And just wanted to get your thoughts on his opinion about the $10 billion question.
Yeah, you know, I'll just remind everyone that when we started this company, we had to agree to operate as though we were a $10 billion institution from day one. So, we've put in a lot of that infrastructure and have been operating with that cost for some time now.
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.
The moment you cross the $10 billion threshold, you're held to any changes in the first place. Yeah, no, and certainly, given our guidance on the loan growth, which you could certainly apply to how total assets will grow as well, and back into.
There is a good chance that we may cross 10 billion by the end of this year. Therefore, again, this year's guidance does not include any of that because it would not impact this year. It really starts, if it does, in 2024 on the expense side, and on the Durbin side, again, for us.
Right now on the Ron Ray basis, call it, it would be about 10-ish million dollar hit to the interchange, which would for 2024 is only half a year. So, you know, I'm estimating the 2, maybe 3% of total net income for 2024. So, very manageable.
Very manageable impact. Okay, it is a slightly bigger number than I was recalling.
All right, great. And then maybe just one last one, you know, just thinking about, you know, telling the franchise you have now, you've done two acquisitions, you know, here in the past quarter. So, you know, besides the two Unify Initiative, um,
Would, you know, would do, would there be other things that you want to accomplish in 23? Would additional M&A kind of make sense that they 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 to accomplish this year.
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 it, certainly Colorado, but also Utah.
Even Idaho, at this point, which may be lost on some folks, has an interesting presence in Boise now. We really like what we're seeing in that market and think we can do a lot organically there. I believe it's just an interesting market to pay more attention to, at least for us.
And as we've always been, we're just going to be prudent stewards of capital. So, 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 got to create a win-win, once again. And we're very sincere about that. So...
We'll be patient and we'll be thoughtful. We feel really good about our organic growth prospects, but we've certainly not closed the door on looking at potential new partners to help move NBH ahead. Where we have closed the door, and I've...
Previously mentioned in our meetings, we are frankly 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 our strategy.
Something of interest to us.
Okay. That's great. I appreciate all the color.
I appreciate all the color. You bet.
Thank you, and I am showing that we have no further questions at this time. I will now turn the call back to Mr. Laney for his closing remarks.
Thank you, Jen. I'll simply say thank you for joining us today. We appreciate your competence in NBH, and we'll be working hard to deliver more along the way. Take care.
This concludes today's conference call. If you would like to listen to the telephone replay of this call, it will be available in approximately 24 hours. The link can be found on the company's website under the investor relations page. Thank you very much and have a great day. You may now disconnect.
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