National Bank Holdings Corp (NBHC) 2014 Q3 法說會逐字稿

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  • Operator

  • Good morning, everyone, and welcome to the National Bank Holdings Corporation 2014 third-quarter earnings call. My name is Shelley, and I will be your conference operator for today.

  • (Operator Instructions)

  • 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 statements regarding the Company's loans and loan growth, deposits, strategic capital, potential income streams, gross margin, 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 must recent filings with US Securities and Exchange Commission. These statements speak only as of the date of this call and National Bank Holding Corporation undertakes no obligation to update or revise these statements.

  • It is now my pleasure to turn the call over to and introduce National Bank Holdings Corporation's President and CEO, Mr. Tim Laney.

  • - President and CEO

  • Thank you, Shelley. Good morning, and thank you for joining National Bank Holdings' third-quarter earnings call. I have with me our Chief Financial Officer, Brian Lilly and Rick Newfield, our Chief Risk Management Officer.

  • On this call, we will share observations on our third-quarter performance, as well as share some pretty detailed observations on the solid credit quality of our originated loan portfolio. And we'll also review the outstanding performance of our acquired non-strategic portfolio.

  • During the quarter, loan production exceeded $200 million, with total annualized loan growth of 15.9%. Average demand deposits grew 13.4%, as we continue to focus on the expansion of relationships with new clients. Bank fee income grew 4.5% during the quarter, and we know we can and will do better in this area. Finally, operating expenses were basically in line with expectations, and we believe we remain very well-positioned to continue to reduce operating expenses in the company.

  • I'll now turn the call over to Rick Newfield to update you on both our acquired and originated loan portfolios. Rick?

  • - Chief Risk Management Officer

  • Thank you, Tim, and good morning to all. I'll first cover our originated portfolio with respect to third-quarter fundings, and then share some facts regarding our loan portfolio's excellent credit quality. I'll also discuss our continued success in reducing non-strategic loans at a rapid pace, while delivering outcomes significantly better than our original marks.

  • Our originated loan portfolio totaled $1.6 billion at September 30, 2014, an increase of 10% over the prior quarter, and annualized growth rate of 38.6%. We delivered these results are remaining disciplined in our underwriting and credit structuring. Furthermore, we continue to build our loan portfolio with a granular mix of consumer and commercial loan types.

  • Combined commercial and industrial, agriculture and owner-occupied commercial real estate make up 60% of our originated portfolio. Residential mortgage loans make up 27%, non-owner-occupied commercial real estate 12%, and other consumer loans at 1%. Our third-quarter fundings of $203 million were 6% higher than third quarter 2013.

  • Commercial originations of $161 million were granular, maintaining trends from prior periods, with average fundings of $1.2 million per relationship. 81% of these commercial originations were a combination of commercial and industrial owner-occupied real estate, and agricultural loans. The remaining commercial loan originations were composed of conservatively underwritten non-owner-occupied commercial real estate in our local markets.

  • Consumer loan originations of $42 million were primarily composed of high-quality residential mortgage loans. While the mix of purchased and refinanced purpose continues to shift towards purchase, our third-quarter residential originations had an average loan-to-value of 64%. We continue to underwrite to high quality standards, with average FICO scores of 763. The average funding per residential loan was $111,000 during the quarter. All of these metrics have remained consistent over the last two years.

  • Turning to credit quality, I'm very pleased with the performance of our non-310-30 loans, which totaled $1.85 billion at September 30, 2014. Net charge-offs in this portfolio were $496,000 in the quarter, or 11 basis points annualized. Through the first nine months of 2014, net charge-offs were just $836,000, or 7 basis points annualized.

  • 90 day past dues remained immaterial. Non-performing loans, comprised of nonaccrual loans and restructured loans on non-accrual, decreased from 1.18% percentage at June 30 to 1.02% of total non-310-30 loans at September 30, 2014. Overall our loan portfolio quality remains steady and strong, with adversely rated loans decreasing in both absolute terms and as a percent of our total loans.

  • As I've previously stated, we continue to invest in commercial underwriting talent to support our origination activity, and we have maintained consistent underwriting standards. Given our approach to doing business, and the solid performance of our loan portfolio, I remain confident in our excellent credit quality. During the third quarter, we had continued success in reducing non-strategic loans, while delivering excellent economic outcomes. As a reminder, these distressed loans, acquired through our purchase of failed banks were deeply discounted at purchase, and many of these loans continue to carry the additional protection of coverage under FDIC loss share agreements.

  • Our special assets team continues to focus on resolving the most troubled assets within our portfolio, and the pace of resolution in our strategic loans accelerated during the quarter to 51% annualized rate. We ended the quarter with just $251 million in non-strategic loans. OREO bounces were reduced to $45 million at quarter end, down an impressive 35% from year-end 2013. I'm pleased with the strength of our pipeline of loan collections and OREO sales through the end of this year and into 2015.

  • Turning to the 310-30 loan pulls, these are composed entirely of loans acquired through our three failed bank purchases. Our quarterly re-measurement of the expected cash flows from these loans resulted in $11.4 million in accretable yield pickup. It's important to note that these loan pulls had original book balances of nearly $1.7 billion, and as of September 30, these balances have been reduced more than 81% to $321 million. The cumulative life-to-date accretable yield pick-up $196 million against impairments of only $25 million, resulting in net economic gain of $171 million.

  • I believe this supports the conservative nature of our day one acquisition marks, and demonstrates the excellent results of our problem loan workout efforts. To summarize, we continue to deliver strong organic loan growth while adhering to our disciplined underwriting standards. I'm confident in maintaining our credit quality, and our pace of problem asset resolution remains strong, with results substantially better than our original credit marks.

  • I will now turn the call over to Brian Lilly, our Chief Financial Officer.

  • - CFO

  • Thank you Rick, and good morning, everyone. As you heard from Tim and Rick, we continue to be very pleased with delivering the key organic business results that will lead to our future goal of a 1% return on tangible assets for our $5 billion bank. In this quarter, we opportunistically bought in 6.5% of our shares, as we worked towards delivering on our future goal of double-digit returns on tangible equity.

  • We are very proud to be delivering consistent quarters with loan originations leading to strong loan growth, and managing down of the non-strategic assets for attractive returns, and the continued excellent credit quality. We also grew banking fee income and delivered expenses better than our targets. Net interest income decreased slightly in the quarterly comparison given the decreases in the high yielding purchased loans, but it's nice to have substantially all of the impact offset by new loan originations.

  • One analysis that we have discussed many times is our progress to our goal of 1% return on tangible assets. We see the achievement of these profitability levels, coupled with prudent capital management actions as key to delivering attractive shareholder returns. Our reported return on tangible assets for the third quarter was 0.34% versus an adjusted 0.65%, sometimes referred to as our emerging profitability. The adjustments are well spelled out in the earnings release, and our focus on the items that are expected to work out of our financials over time.

  • The largest impact is from the non-cash write down of the FDIC loss share receivable, otherwise known as the FDIC indemnification asset. This write down impacted the third quarter by $0.09 per share, but the good news is that this has a fixed life, and will end with the expiration of the FDIC loss share coverage in late 2015 and 2016. Importantly, we do not see these costs on the critical path to our return on tangible assets goal of 1%.

  • One question that we get asked is why we do not adjust out to higher yields on the covered loans, which is directly related to the FDIC indemnification asset write-downs. Well, unlike the adjustments we do make for the large OREO and problem loan items and the FDIC write-downs, which are all working down over time, the higher yields on the covered loans are being replaced by our strong loan originations, thereby providing increasing stability to interest income, and the resulting net interest income.

  • Given that our goal in the analysis of the emerging profitability is to understand our profitability excluding the items that will be gone in the future, and given our expectation that the interest income on the higher-yielding covered loans will be replaced by our loan originations, we believe that the 0.65% return on tangible assets provides the clearest picture of the progress we have made, and the work yet to be done.

  • Turning to loans, quarterly loan fundings exceeded $200 million for the fourth consecutive quarter, leading to total loan growth of $83.5 million, or 15.9% annualized. The originated loan portfolio now comprises 74% of total loans, thereby strengthening the sustainable income from client relationships. We have remained disciplined on the loan pricing, with the weighted yield on new loan originations of 3.7%, while a healthy 57% were variable, supporting our asset-sensitive position.

  • Our pipelines are strong, and we look forward to a good fourth quarter. Our goal continues to be $1 billion in annual fundings, and it appears that we will be just short of that for the full year of 2014, but we continue to be excited about the progress we have made in just a few years. Over the last three years, we delivered loan fundings of $234 million in 2012, $714 million in 2013, and we're on pace for between the low $900 million and $1 billion in 2014.

  • In terms of deposits, new client additions led to get another impressive quarter of growth in our average demand deposits of 13.4% annualized, and linked quarter growth and average transaction deposits. Average total deposits and client repurchase agreements decreased just $10.8 million from the second quarter, on a $3.9 billion total deposit base.

  • In the fourth quarter, we look for transaction deposits to continue their growth, time deposits to decrease slightly, with total average of deposits and customer repurchase agreements to be flat to slightly down. We are very pleased with the stability of total client funding, and to have transaction deposits of 63% of total deposits at September 30.

  • Net interest income totaled $41.9 million in the third quarter, and decreased 1.2%, or $528,000. As we have discussed, there are many moving pieces in re-mixing the earning assets and their associated yields. Loan originations and investment portfolio are tracking within expectations, but the payments and payoff pace of the higher-yielding purchased loans has been a little faster than expected, which caused a slight decrease in the interest income this quarter.

  • The irony is that we worked very hard to get many of the purchased loans to pay off, but their decrease has an outsized impact on the interest income, due to the large yields. In addition, the re-measurement of the 310-30 loans added $11 million of accretable yield during the quarter; however, the interest income benefit will substantially be realized in later years, as the timing of the increased cash flow estimates lengthened. These factors caused the net interest income to decrease slightly, with a net interest margin following.

  • For the fourth quarter, driven by decreases in the high-yielding purchased loans, we expect net interest income to be down slightly, similar for the most recent quarters. Rick addressed the excellent credit quality, and I would only add that we expect these trends and costs to continue for the remainder of 2014. We delivered within our prior net charge-off guidance of 10 basis points to 15 basis points, and see no reason to change for the fourth quarter.

  • Turning to non-interest income, the traditional banking-related fees totaled $7.9 million, an increase to a nice 4.5%. This increase was broad-based across most fee income sources, driven by increased client activity. The FDIC loss share related income accounts totaled a negative $7.2 million.

  • The FDIC indemnification asset amortization expense was $6.3 million, and was slightly higher than our prior quarterly guidance, due to the favorable ASC 310-30 re-measurement results in the third quarter, as the client cash flow projections increased. As a result of the third-quarter re-measurement, the fourth-quarter FDIC indemnification asset amortization expense is expected to increase to $7.1 million. The fourth-quarter impact of this $7.1 million non-cash write-down of the FDIC receivable would represent a $0.10 impact to the fourth-quarter earnings per share.

  • One interesting analysis that I would like to share is the incremental impact resulting from the last two re-measurements of the ASC 310-30 loans. In the last two quarters, we added a net $23.6 million in accretable yield. Related to this is the increase in the expected write-downs of the FDIC indemnification assets, totaling $15.2 million.

  • In the fourth quarter, we expect to record increased interest income of just $600,000 from these last two quarterly re-measurements. Whereas the expected incremental increase in the FDIC indemnification asset amortization in the fourth quarter is $4.9 million. The significantly higher fourth-quarter amortization expense is entirely due to the shorter remaining life of the FDIC loss share agreements, when compared to the longer remaining lives of the covered loan. Future increases in the accretable yield are expected to have similar impacts.

  • From an economic perspective, in just the last two quarters, we added $23.6 million against the $15.2 million FDIC receivable write-down, for a net positive of $8.4 million, which is clearly creating value, but in the short run, the accounting is very negative. The other FDIC loss sharing income was a negative $943,000, as we accounted for the share unit of gains on covered assets, increased the FDIC clawback liability for the better cash flow projections, and build the expense sharing on the covered assets.

  • Total expenses were $38 million, and included operating expenses of $37.4 million, OREO and problem loan expenses of $1.9 million, and a $1.3 million benefit from the decrease in the warrant reliability. We were very pleased to deliver operating expenses better than our guidance of $38 million, as well as OREO and problem loan expenses that were better than the quarterly target of $2.5 million.

  • For the fourth quarter, we look for operating expenses to be slightly higher than the third, coming in around our $38 million quarterly guidance, primarily driven by the timing of certain expenses. We reaffirmed our prior guidance for OREO and problem loan expenses of approximately $2.5 million, but would add that these expenses could vary significantly quarter-to-quarter. And just to be clear, we would not expect a continued benefit from lowering the warrant liability, which benefited the third-quarter results by $0.02 per share.

  • Capital ratios remain strong. Tangible book value per share, excluding accumulated other comprehensive income ended the quarter at $18.44, increasing $0.03 from the end of the second quarter. Our calculation of the excess accretable yield adds $0.85 to the tangible book value, resulting in $19.29 per share.

  • Earlier this week, we announced an additional $50 million share repurchase authorization. With the completion of this new $50 million buyback program, our excess capital is projected to be approximately $170 million at a 10% leverage capital ratio. We continue to pursue all capital deployment strategies, including supporting organic growth, mergers and acquisitions, and share repurchases.

  • To sum up our guidance for the fourth quarter, we look to deliver the adjusted emerging profitability return on tangible assets, consistent with recent quarters, in the low 60 basis points. This will close out a good year, as we make progress towards our goal of a 1% return on tangible assets. Tim, that concludes my comments.

  • - President and CEO

  • Thank you, Brian. Before closing, I will comment on both M&A and capital management.

  • While we continue to be more active in the M&A process than you might suspect, our diligence has not led us, obviously, to execute on a transaction. As I have said before, we remain very disciplined around realizing reasonable earn back of tangible book dilution on any acquisition. Equally important, we will not pursue an acquisition that subjects us to unreasonable levels of credit, compliance, or other operating risk.

  • With respect to capital management, we believe our stock is undervalued, and we have been and will continue to be opportunistic in the purchase of our shares. To that end, through the third quarter, we repurchased 23.9% of our outstanding shares, at a weighted average price of $19.73, and we'll continue to opportunistically by in shares while managing our capital position within the context of organic growth, acquisition opportunities, and regulatory requirements.

  • And on that note, Shelley we are ready to open up the lines for Q&A.

  • Operator

  • (Operator Instructions)

  • Paul Miller, FBR Capital Markets.

  • - Analyst

  • I have to ask one M&A question, before we move on to something else. Have you still looking, mainly in the Denver and Kansas City areas? I know a while ago you were looking in some other places in the Midwest, like Iowa and whatnot. Is that still a probability? Are you still just focusing on the two markets that you're in right now?

  • - President and CEO

  • We have said that 90% of our efforts, if not higher, are focused on expanding the markets we already operate in. In the right situation, we would look at some of those adjacent markets. A good example, you mentioned Iowa. We could actually cover a market like Des Moines very easily from our Kansas City market. It's a relatively short drive between the two markets on an Interstate. But I think I will come back to where I started, in saying that the vast majority of our focus is on markets where we already operate.

  • - Analyst

  • Okay. On the loan originations, the second quarter was really strong, and looks like the third quarter was a little bit weaker. Is that just more seasonality in your markets, or are you seeing some people step away from the market because of the volatility?

  • - President and CEO

  • It's very seasonal in nature. It still represented a nice increase of our third-quarter of last year. But we've seen a slight pullback in those late summer months, it seems, as people vacation and have their minds on other things.

  • - Analyst

  • Okay. Thank you very much.

  • Operator

  • Chris McGratty, Keefe, Bruyette & Woods.

  • - Analyst

  • Tim or Brian, on the pace of the buybacks in the quarter, the $50 million -- was there any larger transactions that were similar to what you did at the end of last year? Or is this a fair run rate if your stock stays where it is, that you could complete if you wanted to on a quarterly basis?

  • - President and CEO

  • Chris, we did have a very nice block opportunity during the quarter.

  • - CFO

  • And those don't come as predictable, but as you looked at $247 million I think we been able to buy in the last really, almost 12 months, we've been opportunistic, and those opportunities presented themselves.

  • - Analyst

  • Okay. And Brian, on the expense guide, just to make sure I'm clear, is the guidance for modest growth off the $38 million? Or is it $38 million plus the $2.5 million?

  • - CFO

  • We break up the two pieces, so you need to add them together for a total non-interest expense.

  • - Analyst

  • So somewhere around $40 million?

  • - CFO

  • Yes.

  • - Analyst

  • Okay. And in the last question I had was on the new origination yields. You said it was 3.7% in the quarter. I'm interested where that was maybe last quarter, and where you see, given all your pieces on the balance sheet, where you see the margin converge and inflect?

  • - CFO

  • We continue to be pleased with the yields we're getting. And particularly with close to 60% in variable. As you look back over the last number of quarters, the 3.7% is in the middle of what we've disclosed. We've been 3.6% to 4% on a quarterly basis, with a real strong variable floating component. When we talk variable, we're talking less than a year. So we're getting real movement in that rate. And that's a good yield for us to get to the goals that we want.

  • As you talk to the margin, we're really focused on, of course, the net interest income, and getting that to that full inflection point. We're very close now, $500,000 on a $41 million number. But call rounding, but as our originations continue to come in and that high-yielding book works down, you'll see that point of inflection. From a net interest income, we're focused there. There will be some movement in the net interest margin as the earning asset base changes slightly. But in concert with that, I would say that as the margin will be in a similar direction for the fourth quarter, to flat to maybe just slightly down would be where we would goal that.

  • - Analyst

  • Okay. Last on the tax rate, Brian, what should we be using?

  • - CFO

  • That's been driving us crazy, too.

  • - President and CEO

  • It's funny, Chris, he's laughing because I'm asking him that question on a regular basis.

  • - CFO

  • In the long run, of course, we're going to have significant levels of 35% taxable income. But in the short run, when you get $0.02 coming from that warrant liability, that really impacted the third quarter's rate. As we model out really for the full year, I'm looking at the middle of 20%s for the full-year. So the impact to the fourth quarter, you can back into that. And then as we go forward, of course, that will move up. But we have been putting tax strategies in place to benefit us here in the future. So we're excited about that.

  • - President and CEO

  • I would add, Brian is being humble. We're a new company, and we have not been as tax-efficient as we could be; and under Brian's leadership, we have been executing on a number of smart tax strategies that will pay off for us, both now and down the road.

  • - Analyst

  • All right, thank you.

  • Operator

  • Matt Olney, Stephens Inc.

  • - Analyst

  • Brian, the amortization at the FDIC receivable -- can you repeat what you said as far as your expectations for the fourth quarter? And any preliminary thoughts about 2015?

  • - CFO

  • Well, what we have in the release is a $7.1 million, is what we are guiding to. A full $0.10 per share of a non-cash charge, Matt, as you have heard our story on that, which is why would look at our emerging profitability so closely. But that's what we've guided here in the fourth quarter.

  • We even shared in the release that the remainder of that is about $10 million currently, that would have to come through. And most of that will come through in 2015. But as you know, each reyielding that we do, we're on a street now of 12 consecutive quarters where we have picked up accretable yield. It would be hard to imagine that stopping.

  • We have $26 million that we currently expect to bill to the FDIC, and as we would increase the accretable yield, that amount will come down and will need to come through the indemnification asset, also. So as it sits today -- a long way of saying it -- it's about $10 million in 2015 and we put that in the earnings release, but would expect that even to go up as we go forward

  • - Analyst

  • Okay. Great, thanks.

  • Operator

  • Tim O'Brien, Sandler O'Neill & Partners.

  • - Analyst

  • I just have one question for Rick.

  • Rick, it looked like, if I saw this right, there was an uptick in 30- to 89-day past due. Could you talk a little bit about that?

  • - Chief Risk Management Officer

  • Sure, Tim.

  • Really that was driven by one of our problem loans within the acquired book. Actually, we're the process of getting that renewed, and don't see any issues with that.

  • - Analyst

  • Great. That's it for me. Thanks.

  • Operator

  • Peyton Green, Sterne Agee.

  • - Analyst

  • I wondered maybe, Tim, if you could talk about the outlook for loan originations going forward. Certainly this is been a big year in terms of ramping it up versus last year. If we look at the third quarter, I guess the originations were right around $203 million, which is up about 6% year over year. Do you see an upper single digits to low double-digit year-on-year growth rate at originations? Or what's the productive capacity like versus maybe where it was a year ago, when we were expecting a pretty big ramp?

  • - President and CEO

  • Thank you for asking. Brian had whispered to me that I should follow up on Paul's question and talk about pipeline. So thank you for going there, Peyton.

  • We are so consistent in the way we talk about this, I'm sure we're boring. But we have been very focused on ramping and having the bankers and banking centers in place to ramp, to consistently delivering that $250 million or so a quarter. We actually -- our outlook is to do better than the $250 million a quarter. And that's a long answer to your question, as we look to the fourth quarter.

  • But we feel very good about the pipeline as we rolled into the fourth quarter; feel very good about our banking teams. We expect very nice organic growth to continue, and what I'm equally as proud of is the fact that we're doing it on a very granular basis. We're doing it with great diversity. We were talking earlier this morning about another call we had listened to, that related to the Colorado market, and the questions about multi-family exposure and concerns. As a practical matter, we have no multi-family exposure. The real focus of our business is on banking individuals and small- and medium-sized businesses, and we feel momentum growing in those areas, particularly with small and midsized businesses.

  • I can tell you, and Rick could speak to this in even more detail -- we're not growing this on the back of taking a large SNC positions, taking positions and relationships that we don't know and understand. This is really about building relationships with local individuals and local businesses, in the markets where we do business.

  • So Peyton, long answer to your question, but we feel very good about where we stand as we enter the fourth quarter.

  • - Analyst

  • Okay. And then one other question.

  • Thinking about the overall expense base, the non-interest expense to average assets, backing out the loss share and related issues and OREO-related issues, it's come down about 20 basis points year-over-year and about $287 million. I was wondering, over time, growing the earning asset side of it has been -- it's still been in runoff mode. Would you expect that to swing in 2015 to be a contributor? Or should we still expect runoff net of the originations?

  • - CFO

  • I think as you look at the non-strategic portfolio that we've been running down, I think we're down to $250 million approximately, and that's been pacing down at 40% or 50%, so the team has been doing a great job getting that out.

  • Again I have that Jekyll and Hyde feeling of, I like the yield that's on it, but let's resolve those quickly. As that's coming down, the originations are going to continue to click at where we are, and as Tim shared; and we're very optimistic about achieving our goals for that $1 billion a year, and even adding more capabilities to go forward, which then would move the interest-earning assets higher, the earning assets in total higher, and the assets in total higher.

  • We think we've got the expense -- the investments that we have needed, and the teams that we've said, and we just look for more revenue and more production out of them, which will drive that expense efficiency. As we've shared in our goals, getting down to 60%, we're very focused on that internally. It's key to getting to that 1% return on tangible assets.

  • - Analyst

  • Okay. Maybe I did a poor job of asking it, but when do you expect -- from the new strategic loans, when would you expect the payoffs to increase on that component of it? I mean, I know that's been a great source of growth. But at some point that's going to normalize, and you will have pay-off activity from that side of the house.

  • - CFO

  • I think you just run them out as normal life on loans. We're doing a lot of variable pricing, and they have some loans. Maybe, Peyton, we're doing our planning for 2015 now, and we will share in great detail in January, really, the pieces. But as we've shared in the past, we fully expect the interest-earning assets to begin expanding as we get into 2015 and into 2016 and beyond.

  • - Chief Risk Management Officer

  • We have very typical amortizations on the originated book, Peyton, and as we build our plans and focus on the path to the 1% ROA, that's certainly taken into account. And just more specific, because you did touch on it -- we understand there is still a lot of opportunity in the expense arena. Make no mistake about it. We understand that the real key to driving toward that desired efficiency ratio is getting the right kind of revenue growth.

  • But at the same time, we continue to be focused on expenses, and I will give you a few examples. As a new company we're just at a point where we're able to begin renegotiating contracts with all of our major providers and partners, and we're very diligent on that front. We're excited about the leverage we have now, being a -- call it a three- or four-year-old company -- to come back to those partners, and really think more seriously about how much they want to do business with us on a go-forward basis. That's an important initiative that is underway.

  • We've also got a group actually looking at the further optimization of our banking center network, which isn't necessarily code for simply peeling off and selling certain banking centers. It could also involve the redeployment of talent in those centers, the redesignation of some of those centers to become much more focused on small business. Think of them as almost small business hubs. And you will see and hear more on that front over the course of next year.

  • Maybe, Peyton, more than you were asking for, but hopefully you found that interesting.

  • - Analyst

  • Great color.

  • And last one for Brian, the tax rate -- how should we think about that going forward? You said mid-20%s for the full-year of 2014. Do you think it stays in the mid-20%s for 2015? Or does it move back up towards 30% as taxable income grows? What's the right way to think about that?

  • - CFO

  • Again I will give more detail in January, but our incremental -- think about it this way -- our incremental tax rate is 38%, state, and the Fed together. But the tax strategies we put in place are not going to take us there. Plus we do, do tax-exempt lending.

  • And so in the long run, to get into the low 30%s makes sense, but that will be more of a factor of the pace of growing that fully taxable income. So Peyton, that's all I can really share with you right now. Let us complete our work here and our own profit plan, and I'll give you more specific guidance on 2015 in our January call.

  • - Analyst

  • Thank you very much. The color is very helpful.

  • Operator

  • Tim O'Brien, Sandler O'Neill & Partners.

  • - Analyst

  • I had a follow-up, but Brian read my mind, I guess, because I was going to ask about strategic planning with the Board and when you are going to give details, but you got that base covered. So, thanks.

  • Operator

  • That is all the time we have for questions. I will now turn the call back over to Mr. Laney for closing remarks

  • - President and CEO

  • Shelley, we actually have more time for questions, if there are questions, but I am taking it there are none.

  • Operator

  • There are no questions at this time.

  • - President and CEO

  • Okay, to be clear.

  • All right. Well, thanks to everyone for your time today. Take care.

  • Operator

  • This concludes today's conference call. If you would like to listen to the telephone replay of this call, it will be available beginning in approximately two hours, and it will run through November 7, 2014, by dialing 855-859-2056, or 404-537-3406, and referencing the conference ID of 3618811. The earnings release and online replay of this call will also be available on the Company's website on the Investor Relations page. Thank you very much. Have a great day, and you may now disconnect.