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 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.
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 Corporation's Chairman, President and CEO, Mr. Tim Laney.
Thank you, Jen. Good morning, and welcome to National Bank Holdings' fourth quarter and full year 2022 earnings call. I'm joined by Aldis Birkans, 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 Aldis to cover the quarter and full year in greater detail, as well as share guidance for 2023. Aldis?
All right. Well, thank you, Tim. Good morning. 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 Hole's loan portfolio. As Tim shared, excluding these transaction-related items, our adjusted core net income was $34.5 million or $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 or 22% on a linked quarter basis. We're very pleased with the strong organic loan growth during 2022, and our teammates continue to 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 Hole 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. Our outlook for 2023 cannot ignore the prospects for slowing growth. For this year, we look 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 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 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 just 15 basis points for the full year 2022. Our total deposit beta this rate cycle to date has been less than 5%. 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. 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 3 basis points to 0.23%. Our nonperforming assets ratio improved another 4 basis points to 0.28%.
The fourth quarter's net charge-offs were just 4 basis points annualized, and we finished the full year with net charge-offs of just 3 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 credit losses for the Bank of Jackson Hole 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 linked quarter decrease was primarily driven by the slowdown in 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 linked-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 million-$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 linked 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 into our 2UniFi build out. Most M&A transaction-related items were recognized in 2022. We do not expect additional costs to materially impact the 2023 expense.
Looking ahead for 2023, we do project approximately $10 million-$12 million of expense related to 2UniFi ecosystem build out. Inclusive of this strategically important investment, the total non-interest expense is projected to be in the range of $243 million-$247 million. When projecting the 2023 effective tax rate, we expect it to increase to the 20%-21% range. The increase is entirely due to the projected higher taxable income in 2023. The past years, 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 book 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 diluted shares outstanding to remain around 38 million shares. 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. We'll go first to Jeff Rulis with DA Davidson.
Thanks. Good morning.
Good morning, Jeff.
Let's see. On, on margin, Aldis, just wanna make sure I get, the, this, the, I guess, the guide to 4% at year-end. Does that include or does that exclude any accretion in there?
No, it's all in. It includes all the, our, acquired loan accretion increase and expected increase in our cost of funds given the rate environment. That's. It does exclude any rate changes that Fed may still do here in February or later this year.
Gotcha. Okay. Is the, you know, I got your message that, you know, 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?
I think, another way of looking at it, I think, is what net interest income will do, right? In terms of the dollars, more importantly than whether we can grow that. 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. All right.
Hey, Jeff, This is Tim. I would add that, you know, as a reminder, we had targeted or expected that margin to drift down closer to 4% or even over the course of the fourth quarter. 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, you know, 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%.
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 9+ month CD as an area to pick up what we believe are reasonably, you know, cost fundings. Again, I guess the main point here is, you know, we're targeting to have margin compressed by year-end as low as 4%. That's at year-end. Obviously, we're gonna be doing everything we can, just as we did in the fourth quarter, to mitigate that and and produce a stronger return in that front as we can.
No, I hear you, Tim. I'd say, I guess at the upside, a pretty big number, I mean, relative to expectations, kind of pop on the, on the short end. Maybe just one more on the margin, though, further out if we can even see that far. Are you putting anything on in terms of, you know, hedges or anything to kinda mitigate asset sensitivity, sort of, again, looking at the end of the year, if it, 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, try to hold that level? Are you putting anything on balance 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. It's, you know, it is market dependent, rate dependent and price dependent obviously. We've throughout the 2022 added a few hundred million of rate hedges. Clearly they are, call it out of money right now, don't have any value. If rates were to reverse, we have some protection and looking to do some more of that in 2023 as well.
Okay. Thanks, Aldis. My other question kind of relates to the credit quality. You know, the net move from NPAs was not significant quarter- to- quarter. Just wanna 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.
Really nothing material.
Okay.
Clearly I mean, clearly the NPA ratio came down, so we look at, you know, overall portfolio basis. Clearly there's some stuff that came across from the acquisitions, but our overall portfolio improved on both a kind of core 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. Just kind of as a jump off from that then, Aldis, I think you've mentioned, I mean, that's 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 core provision could come in, if growth were to slow?
Yeah, you know, I think the way I look at it is, loss to the total loss, losses is 1.24%. That's the, you know, all else with the information that we have, that's the level that we would maintain all else equal. 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. You know, we would still look to maintain the same loan loss coverage.
Fair enough. Well, thank you.
On the ACL going up, I mean, 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. That's driving some of this increase. Now, having said that, you know, what we said and starting this year with the uncertainty that exists around the economy, we certainly didn't fight or mind that type of increase. 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 gonna dictate that level will be the CECL process and, to be more granular, the economic forecasts that are submitted and, to your question, loan growth. 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 in fact we see the kind of levels of growth that we've projected for 2023.
Okay. It sort of drew out another question. Sorry about that. You know, 124 is a pretty big number, Aldis, 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, you know, a higher coverage level?
There would be. I mean, we have about $34 million of loan loss reserves that goes up and beyond that protects us from future losses as well. That's another number, which, you know, is equal about 45 basis points to total loans or 1.83% on acquired loans. It's a good question, and it's a big number.
Yep. No. Thanks, guys. I'll step back.
All right. Thank you.
We'll take our next question from Kelly Motta with KBW.
Good morning, Kelly.
Hi. Good morning. I apologize if you covered this in your 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 accretable yield? What does your guidance imply for that contribution this upcoming year?
Yeah. accretable yield is, it's that $33 million mark, amortizing. I'd say it's about, $1.5 million per quarter is included in there approximately.
Okay. Thanks, Aldis. That's, that's really helpful.
I think I do want to point out, though, is, you know, it's kind of good and bad acquiring a loan book in a rate environment that had moved quite substantially from the time those loans were booked. A good chunk of that accretion is actually rate mark, right? We effectively bought a 4% loan in a 5% world, and therefore, we're getting to market to discount. It is a good accretion. It protects from a credit perspective, but it is 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%.
Got it. That's helpful. Turning to your fee income guidance, that's a pretty big, a pretty decent 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 to 2023, given I think secondary market premiums have compressed a bit.
Right . No, it's a great question, and good patch there where our guidance is a bit higher than where if you were to annualize fourth quarter, really. 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, I think that's nice and achievable. There is mortgage, which I'll come back to, there's other, right? We did pick up trust business through Bank of Jackson Hole, that 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. Rock Canyon Bank in the prior several years had generated about $6 million-$9 million of SBA gain fee income. We are not counting on that type of levels. As you mentioned, the SBA margins have come in quite a bit. You know, call it about approximately half of that is what is embedded in our guidance. Just, you know, the rest of the kind of the other non-interest income that we typically have had is in that line item. Coming back to mortgage, you know, clearly the fourth quarter was seasonally is and 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. Our projections embedded there are in line with what MBA is projecting, which, you know, still, if you were look to year-over-year volumes
Still being down 15%, 20% on, in 2023 over 2022 in purchase market. Nevertheless, clearly the fourth quarter was, it feels like, as I mentioned in prepared remarks, 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 and 2UniFi initiatives. Just wondering how you prioritize that given, I'm sure you're busy having just finished the acquisition of two banks, on 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.
Yeah. I, thanks, Kelly. We are on track with the build out of 2UniFi. We are benefiting, interestingly enough, from a lot of the reductions we've seen in the kind of core FinTech tech arena. 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 2UniFi, including Mobiquity. 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 2UniFi. I'll turn it to Aldis to speak to expense detail. We say expense detail, obviously, I view this as an investment.
Aldis, why don't you take Kelly through the numbers?
Yeah. No. 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 Hole, integrated two systems. The Bank of Jackson Hole system integration took place in December. Certainly there's still some overlap and synergy still to be come and realized. At the same time, we did step up the 2UniFi investment in fourth quarter. Just 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.
Looking ahead for 2023, if you were to take the $60.9 million and annualize it, you'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 2UniFi investment of $10 million-$12 million, the FDIC insurance increase, which, you know, all of our industry is increasing by 2 basis points of FDIC, as well as any inflationary pressures that are still coming through. We're gonna 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 for all those investments.
Great. Thanks. Thanks, Tim and Aldis for all the color. I'll step back.
Thank you, Kelly.
We'll go next to Andrew Terrell with Stephens.
Hey, morning, Tim. Morning, Aldis.
Hey, good morning.
Good morning.
Hey, maybe just to follow up on expenses. I hear the kind of color and guidance for, I think it's $243-$247 for 2023. If there are kind of $10 million-$12 million of 2UniFi 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-$247 into 2024?
I think you should look at that possibility for 2025 and beyond. 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 for 2UniFi and applying it to our core bank and the ability to lower that operating cost over the next few years. 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 2024 and thinking about 2025, I will tell you our optimism around leveraging, for example, the challenger core that we are leveraging for 2UniFi gets really interesting. We'll remain as hyper-focused on our operating efficiency as we've ever been.
I think we're gonna end up being able to make some real 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 on the, 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?
No, that's the net loan book.
Now okay.
That's covering also the acquired loan book runoff.
Got it. Okay. Then for Aldis , just going back to the 4% NIM expectation by the end of the year, I was hoping just give maybe some incremental color on moving pieces there, specifically as it related to kind of deposit cost increases you're expecting. Then does that guidance reflect any change in deposit composition? Any incremental kind of non-interest-bearing deposit mix change from here?
I think in terms of deposit composition, I think Tim hit on it because I think. It does feel like as we're 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. I do expect that we probably will increase some of the CD balances here. We are, you know, down to 10% of total balances and time deposits. Historically, we've been closer to 20. 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. Our go-to-market strategy is always a relationship.
We always start with a checking account, and I do not see that changing. We expect that balance to be core there. Now, having said that, you know, 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 rate movements. We've seen still people spending down their stimulus checks, how much that yet to go, who knows? Give or take a couple percentage points around that. The mix otherwise I think will stay unchanged.
Okay, very good. Just to maybe clarify, I think I heard this right in the discussion, outside of just the NIM fluctuations we should expect, 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.
We'll go next to Andrew Liesch with Piper Sandler.
Hey, good morning, guys.
Good morning.
Just sticking with the balance sheet and the margin here, do you think the balance sheet's reached a point where any incremental rate hikes aren't gonna have any benefit to the margin? Are funding costs going to increase that quickly in the near term as assuming we get some rate hikes this quarter? Do you think there's still some upward bias from the rate hikes?
I think there might be still upward bias. The way we calculate it in terms of, again, our modeling, which clearly is a modeling and a lot of times far away from reality. you know, we still reflect small asset sensitivity in our position. I you know, do expect that the rate hikes might still be beneficial on net-net basis. Again, you know, in my mind, any marginal rate hike just creates that, a catch up, so to say, the cost of funding at some point. Why we say 4% return is really that's how...
I think I mentioned I think 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, the 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, you know, thereabouts margin. Therefore for us today, it feels elevated and it, and we're projecting it to normalize it 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'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 gonna see one level of pricing as compared to a client or a prospective client coming in looking for looking to borrow money but not having the core operating accounts and core deposits available. That's a discipline that we adhere to that we're not going to let up on. 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 margin.
One more data point I'll add is that, you know, for fourth quarter, which included October originations that were before the latest rate hike, but our new loan origination rate was just under 7%. Newly originated loans away from rate increases that and from variable rate loans ought accretive to our margin.
We're not going to give business away. We are not into doing business to lose money and relationships. I think our clients understand that.
Got it. Yeah, that makes sense. Thanks for that color there. Just a little detail on the loan growth. Have you seen the pipeline or demand temper at all? Or has it still pretty strong? You'd expect growth maybe to slow in the latter part of the year?
You know, we are frankly surprised at how strong demand has continued to be. I think, you know, where we'll temper that is 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. You know, one, as we've discussed in prior quarterly calls, we have certainly raised our credit underwriting criteria and number t wo, the relationship pricing has got to work for us. You know, 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.
Got it. That's a really helpful color. Thanks so much. I'll step back.
Thank you.
We'll take our next question from Brett Rabatin with Hovde Group.
Hey, guys. Good morning.
I generally butchered your firm's name. Sorry about that.
Yeah. That's okay. It's Hovde Group.
Yep. Hovde everything.
Wanted to go back... Yeah. Wanted to go back to the deposit question. Just on the margin, I wanna make sure I'm clear. What are you guys assuming for the beta as we get into later this year? I mean, obviously the 5% beta presently, I mean, that's pretty low. You know, there's a little bug in the back of my head that says you could be a little bit worried about losing maybe some deposits as people wake up to the rate environment. You know, any color on those two topics?
Before Aldis jumps in with specifics, I'll say again, where we're gonna 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 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 Aldis mentioned, we could see flexing that CD book up, you know, meaningfully in order to provide a competitive return on time money.
Okay.
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 your question on the beta.
That's why I was hoping not to because I don't have a crystal ball. Having been reading the beta calculations, you know, it can be certainly on pool 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 that we gave in the margin. I think we look at that as a whole. In embedded there are certain obviously assumptions on assets repricing as well as deposits. You know, getting to that 4% over a period of time, I think is where our goal is or how it play out.
Okay.
We expect. 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 would that trend would change.
Okay. I know it's not a huge concern in terms of the fee income, but the $10 billion question. You know, there's several things you can unwrap there with, you know, 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're thinking about the $10 billion question?
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. 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 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 to date have not suggested anything dramatic at all or frankly, not even anything noteworthy beyond what we're doing today.
Aldis can speak to the timing of this because it's not as though, you know, the moment you cross the $10 billion threshold, you're held to any changes in the first place.
No. 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 that, there's a good chance that we do cross $10 billion by end of this year. 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 a run rate basis, call it's, would be about $10-ish million hit to the interchange, which would for 2024 is only half a year. You know, I'm estimating be 2%, maybe 3% of total net income for 2024. Very manageable, very manageable impact.
Okay. It is, it is a little bigger number than I was re-recalling. All right, great. Then maybe just last one. You know, just thinking about, you know, Tim, the franchise you have now, and you've done two acquisitions, you know, here in the past quarter or so. You know, besides the 2UniFi initiative, would, you know, would there, would there be other things that you wanna accomplish in 2023? Would additional M&A kind of make sense if it could happen? Obviously, the current environment doesn't suggest that's very likely, but just wanna make sure I was aware of whatever else you were looking to try and accomplish this year.
You know, 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. 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. 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.
And as we've always been, we're just gonna be prudent stewards of capital. You know, if there's a seller interested in doing something with us, they're gonna have to be, you know, cognizant of the fact that we've again got to create a win-win. You know, we're very sincere about that. You know, we'll be patient and, you know, 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 NBHC 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%, riding that accretion for a few years and putting ourselves on that treadmill. That's just not something of interest to us.
Okay. That's great. I appreciate all the color.
You bet.
Thank you. 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.
Thank you, Jen. I'll simply say thank you for joining us today. We appreciate your confidence in NBHC, and we'll be working hard to deliver more along the way. Take care.
Thank you.
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. 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.