National Bank Holdings Corp (NBHC) 2022 Q4 法說會逐字稿

Good morning, everyone, and welcome to the National Bank Holdings Corporation 2022 Fourth Quarter Earnings Call. My name is Jen, and I'll 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, but not limited to statements regarding the company's strategy, loans, deposits, capital, net interest income, noninterest income, margins, allowance, taxes and noninterest 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 onetime 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 teams simultaneously closed and integrated 2 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, and 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 in 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 1 CECL loan loss provision expense of $16.3 million for the Bank of Jackson Hole 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 pretax 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 continued focus on building robust new client relationships. During the fourth quarter, our loan balances grew $1.5 billion. $1.2 billion was driven by the acquired Bank of Jackson Hole loans. And (inaudible) balances grew another $310 million or 21.5% annualized.

On a full year basis, including the 2 acquisitions, our loan book increased an impressive $2.7 billion or 60%. We continue to operate in markets that are outperforming the broad national [economic] indicators on many fronts. However, our outlook for 2023 cannot ignore the prospects for slowing growth. For this year, we 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 a linked quarter basis. The margin expansion was led by a 54 basis point increase in our originated loan portfolio yields as both our variable rate loans, annually originated loans reflect the higher rate environment.

The resulting earnings 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%. However, we are starting to see an increased rate competition for deposit balances. And looking ahead for 2023, we expect that our cost of funds will close out some of the margin biding 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 nonaccrual ratio improved 3 basis points to 0.23%. Our nonperforming asset 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 reported provision expense of $21.9 million. And as I mentioned earlier, $16.3 million was driven by the establishment of the day 1 allowance for the 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 noninterest income for the fourth quarter was $14.1 million, or a $3.2 million decrease from the prior quarter. Billing quarter decrease was primarily driven by the slowdown in the residential banking, which seems to have settled into a lower run rate as of right now. Looking at the core banking service charge and bank card combined revenues, they increased $312,000 on a linked quarter basis and grew $2.1 million or 6.3% on a full year basis over 2021.

For 2023, we project our total noninterest income to be in the range of $70 million to $75 million. The projections include our new noninterest income revenue streams, including the trust business income as well as projected gains on sale of SBA loans. Noninterest 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, quarter 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, and we do not expect additional costs to materially impact the 2023 expense. Looking ahead for 2023, we do project approximately $10 million to $12 million of expense related to unified ecosystem build-out. Inclusive of this strategically important investment, the total noninterest expense is projected to be in the range of $243 million to $247 million. When projecting the 2023 effective tax rate, we expect it to increase to the 20% to 21% range. The increase is entirely due to the projected higher taxable income in 2023. The past 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 2.9 -- sorry, 9.29% Tier 1 leverage ratio. The tangible book value per share ended the year at $20.63 and fully reflects now the 2 M&A transactions. In terms of the share count, we project diluted shares outstanding to remain around 38 million shares. Tim, 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.

(Operator Instructions) We'll go first to Jeff Rulis with D.A. Davidson.

See, on margin, all this, I just want to make sure I get the -- I guess the guidance of 4% at year-end, did that include -- does that exclude any accretion in there?

It's all in. So it includes all the acquired loan accretion increase and expected increase in our cost of funds given the rate environment. So that's -- but it does exclude any rate changes that Fed may still do here in February or later this year.

Got you. Okay. But is the -- I got your message that cost of funds kind of closing out sort of the advantage. Does that still mean on a core basis, do you think you could scratch out some maybe an incremental increase in the first quarter or 2? I mean, I guess, absent the Fed moves, is there still hope for maybe incremental increase, and then again, as that drips down towards the end of the year?

Yes. I think another way of looking at it, is what net interest income will do, right, in terms of the dollars, more importantly than whether we're going to grow that. And I think our earning asset yield growth has a good chance of overcoming whatever the margin calculated squeeze there is from. And we can, at minimum, I think, hold it flat, if not adding each quarter.

Jeff, this is Tim. I would add that, as a reminder, we had targeted or expected that margin to drift down closer to 4 even over the course of the fourth quarter. So what we will admit is that we believe we're taking a conservative view on that glide path. But what we're not doing is giving up on our loan price discipline I think the fact that over 80% of our deposit base is represented by core relationship accounts, much of that core operating accounts. We think the area where we're one to need to flex on deposit pricing is on that other 20%.

So if you think about areas like CDs that we haven't really leaned into our inclination would be to lean in, to call it, that 9-month plus CD as an area to pick up what we believe are reasonably cost fundings. And again, I guess the main point here is we're targeting to have margin compressed by year-end as low as 4%. That's at year-end. Obviously, we're going to be doing everything we can, just as we did in the fourth quarter to mitigate that and produce a stronger return on that front as we can.

Yes. No, I hear you, Tim. And I'd say, I guess, the upside, a pretty big number in relative to expectations kind of popped on the short end. So maybe just one more on the margin, though, further out, if we can even be that far. But are you putting anything on in terms of 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 4, are we thinking about things in '24 that you want to protect it even further as in try to hold that level? Are you putting anything on balance sheet to try to protect it further out 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 enjoyed here. So -- and it is market-dependent, a rate dependent and price-dependent, obviously. But we've -- throughout 2022, added a few hundred million of rate hedges. Clearly, they are call it, out money right now, don't have any value. But if rates were to reverse, we have some protection and looking to do some more of that in 2023 as well.

Okay. My other question kind of relates to the credit quality. I -- the net move from NPAs was not significant quarter-to-quarter. Just want to double check that adds and deletes within that, if there were any additions from that were brought on from the acquisition and maybe you had net kind of payoffs 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. Clearly, if you adjust -- I mean, clearly, the NPA ratio came down. So we look at the overall portfolio basis. So clearly, there's some stuff that came across from the acquisitions. But would all the portfolio improved on both 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. And then just kind of as a jump off from that, then all this, I think you mentioned, I mean, that's -- absent the CECL deal-related provision I think something approaching $6 million to support growth. Is that -- if we read into growth could pull back into the mid- to high single-digit, we could expect barring other changes macro-wise that, that core provision could come in if growth were to slow?

Yes. I think the way I look at it is our total losses is 1.24%. And that's the -- all else with the information that we have, that's the level that we would maintain all those equal. So if the loan growth were to slow down as we're projecting here into mid- to high single digits, then the provision expense would slow down as well accordingly. But we would still maintain -- look to maintain the same low loss coverage.

Fair enough.

On the ACL going up, and again, the credit book couldn't be in a better shape. It really is driven by the CECL and the Moody's outlook deteriorating throughout the quarter, the forecast scenarios to be using, and that's driving some of this increase. Now having said that, what we said in starting this year with the uncertainty that exists around the economy, we certainly didn't fight or mine that type of increase. So we like that increased provision for allowance.

Yes. 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 2 drivers that are really going to dictate that level will be the CECL process and to be more granular, the economic forecast that are submitted.

And to your question, loan 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 grade front, if, in fact, we see the kind of levels of growth that we've projected for '23.

Okay. And it sort of drew out another question, sorry about that. 124 is a pretty big number, but all this, do you have like a trued-up reserve if you were to include credit marks on deals? Is there a figure that inclusive of that would be a higher coverage level?

There would be. I mean, we have about $34 million of loan loss reserves that goes happen beyond that -- it protects us from the future losses as well. So that's another number, which is equal about 45 basis points to total loans or 1.83% on acquired loans.

Yes, it's a good question. And that's a big number.

Yes. No, thanks. I'll step back.

We'll take our next question from Kelly Motta with KBW.

I apologize if you covered this in your prepared remarks, if I missed it. How much -- 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?

Yes. So 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.

That's really helpful.

I do want to point out, Kelly, it's got good and bad (inaudible) a loan book in the rate environment that had moved quite substantially from the time those loans are booked. So a good chunk of that accretion is actually rate mark, right? And we effectively bought a 4% loan in a 5% world and, therefore, be getting got to markets of discounts. So it's a good accretion in -- 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 would have been originated in my example, 5%, not 4%.

Got it. That's helpful. And then turning to your fee income guidance, that's a pretty decent step-up from where you were in 4Q. 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. Right. No, it's a good question. And good patch there were -- our guidance is a bit higher than where -- if you were to annualize fourth quarter really. So breaking it down kind of in, call it, 3 buckets, our service charges, bank card kind of core banking service fees that we're looking to grow. We look to grow that along with the rest of the balance sheet, call it, mid-single digits. We grew that 6.3% in 2022. So I think that's nice and achievable. Then there is a mortgage which I'll come back to, and then there is other, right? And we did pick up trust business through Bank of Jackson Hole. So that is expected to grow and is embedded in the other income.

There'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 to $9 million of SBA gain fee income. We don't -- we are not counting on that type of levels. As you mentioned, the SBA margins have come in quite a bit. So call it approximately half of that is what is embedded in our guidance. And then just the rest of the kind of the other noninterest income that we typically have had is in that line item.

And then coming back to mortgage, clearly, the fourth quarter was -- seasonally is. And for the first quarter, seasonally our slow months in a way for purchase market. We are projecting that to cover in the coming a little bit in the summer months and summer quarters. But our projections embedded there are in line with what MBA is projecting, which still, if you were to look to year-over-year volumes still being down 15%, 20% in 2023 over 2022 in purchase market. But nevertheless, clearly, the fourth quarter was -- it feels like, as I mentioned in the prepared remarks a bit of a trough.

Got it. 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 2 banks, how that fits into kind of your strategic plan in this year and beyond? That would be helpful as well as a 2-parter to that question on expenses and kind of the run rate there, how the cadence of cost saves flow through from the deals?

Yes. 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. So the availability of talent at better pricing is something that we're benefiting from, 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. And we believe we're going to be in a position to be doing some testing with businesses at the end of this year on certain elements of 2UniFi.

I'll turn it to Aldis to speak to expense detail. And we say expense detail, obviously, I view this as an investment, but Aldis, why don't you take Kelly through the numbers?

Yes. No. So really stripping out the onetime 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 2 systems. The Bank of Jackson Hole system integration took place in December. So certainly, there's still some overlap and synergies still to become and realized.

But at the same time, we did step up to 2UniFi investment in fourth quarter and just in our press release yesterday or earnings release yesterday, but for full year, that added up to be about $4.3 million investment. Now looking ahead for 2023, if you were to take the $60.9 million and annualize it, it come out right in the middle of the range, what I gave for this year, which means that not only we will have to figure out how to cover the unified investment of $10 million to $12 million. The FDIC insurance increase, which all industry is increasing by 2 basis points of FDIC as well as any inflationary pressures that are still coming through. We're going to have to figure out that -- and we've always managed expense as well and it's been a strong culture here.

So -- 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.

We'll go next to Andrew Terrell with Stephens.

And 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 they are kind of $10 million to $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 '24?

I think you should look at that possibility for '25 and beyond. And what we haven't talked about that I'll add, given your question is where we're increasingly optimistic is around taking some of the low-cost new technology that we're putting in place for 2UniFi and applying it to our core bank and the ability to lower that operating cost over the next few years. So 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 2UniFi gets really interesting. Will remain as hyper focused on our operating efficiency as we've ever been. And I think we're going to end up being able to make some real interesting trade-offs in terms of historical cost versus a future way of operating the business.

Okay. I appreciate the added color there. If I could just clarify on the loan growth guidance, mid- to high single digits. Is that referring specifically to the originated loans, so not excluding what you would expect from the acquired runoff?

No, that's the net loan book. That's covering also the acquired loan book runoff.

Got it. Okay. And then for Aldis, just going back to the 4% NIM expectation by the end of the year. I was hoping to just get maybe some incremental color on moving pieces there, specifically as it related to kind of deposit cost increases you're expecting? And then does that guidance reflect any change in deposit composition, so any incremental kind of noninterest-bearing deposit mix change from here?

I think in terms of deposit composition, I think Tim hit on it because -- and it does feel like as we are reading through some other bank releases that the -- at least the consumers gravitating to highest earning pass it for them, liability for banks, which is 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 around closer to 20. So we're building some of that forward balance sheet, again, is probably in the card slowly, of course.

In terms of noninterest-bearing deposit mix, I don't see that changing much. Again, our go-to-market strategy is always a relationship. We always start with the 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 specific kind of movements that would be unique. We've seen great movements. We've seen still people spending down their stimulus checks. So how much that yet to go, who knows. So give or take a couple of percentage points around that. But the mix otherwise, I think will stay unchanged.

Okay. Very good. And then just to maybe clarify, I think I heard this right in the discussion, but outside of just the NIM fluctuations we should expect, do you think you can grow net interest income every quarter off of this base of [$0.96 million] in 4Q. Did I get that right?

I think we have a good shot at it, yes.

Okay. Thank you.

We'll go next to Andrew Liesch with Piper Sandler.

Just sticking with the balance sheet and the margin here. Do you think the balance sheet reached a point where any incremental rate hikes aren't going to have any benefit to the margin or funding costs could increase that quickly in the near term, assuming we get some rate hike this quarter? Or 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 the reality. But we still reflect small asset sensitivity in our position. So I do expect that the rate hikes might still be beneficial on a net basis.

Again, in my mind, any marginal rate hike just creates that catch up, so to say, the cost of funding at some point. And why we say 4% return is really -- that's how -- and I think I mentioned it in prior calls, is when you 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 thereabouts margin. And therefore, for us today feels elevated, and it can be projecting it to normalize it over time.

I would add if you take this down to the banker level, our bankers understand that is the cost of their inventory, which is deposits increases it's incumbent that they increase spreads on loans that they're making. We take it one step further in terms of our relationship review with a client. If the client is providing low-cost funding, they're going to see one level of pricing as compared to a client or a prospective client coming in, looking 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 this in terms of our ability to continue to see progress on loan margin.

And one more data point I'll add is that for fourth quarter, which included October originations that were before the latest rate hike, but our new loan origination rate was just under 7%. So newly originated loans away from rate increases that from variable rate loans are accretive to our margin.

We're not going to give business away, and we are not into doing business to lose money and relationships. And I think our clients understand that.

Got it. Yes. That makes sense. And then just a little detail on the loan growth. Have you seen the pipeline or demand temper at all? Or is it's still pretty strong, you just expect growth maybe to slow in the latter part of the year?

We are, frankly, surprised at how strong demand has continued to be. I think we're -- we'll temper that is with what I was talking about earlier in terms of being more selective if a new relationship is prospectively coming into the bank and they don't have enough to offer on the treasury or depository management front, they may not be a right fit for us. I'm not worried about demand. We're fortunate we're in incredibly strong markets that continue to perform well.

But number one, as we discussed in prior quarterly calls, we have certainly raised our credit underwriting criteria. And number two, the relationship pricing has got to work for us. And 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 really helpful color.

Thank you.

We'll take our next question from Brett Rabatin with Hovde Group.

Hey guys, good morning.

Jen, you really butchered your firm's name. Sorry about that.

Yes. That's okay (inaudible) I wanted to go back to the deposit question. And just on the margin, what do you -- so I want to make sure I'm clear. What are you guys assuming for the beta as we get into later this year? And then obviously, the 5% beta presently, I mean that's pretty low. There's a little bug in the back of my head that says you'd be a little bit worried about losing maybe from deposits as people wake up to the rate environment. Any color on those 2 topics?

Yes, before Aldis jumps in with specifics. I'll say again where we're going to focus is on that, call it, 20% that we've addressed that are really not operating accounts. 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 or your paychecks being deposited to that's not really the interest-sensitive dollars that we're talking about.

We're talking about that 20% of which 10% have been in CDs historically up to 20%. We do, as Aldis mentioned, we could see flexing that CD book up meaningfully in order to provide a competitive return on time money.

Okay.

And I'll turn to Aldis. He was hoping I would skip and I'll turn it to Aldis to try to answer your question, get out your crystal ball and try to answer the question on the beta.

I was hoping not because I don't have the crystal ball and having been reading the beta calculations, it can be certainly on total deposits, interest-bearing deposits, interest-bearing liabilities and all of that. So I'd like to stay away from projecting beta here really and just stand by the guidance that we gave and the margin, I think we look at that as a whole and embedded there are certain, obviously, assumptions on asset surprising as well as deposits, but getting to that 4% over a period of time, I think, is where our goal is -- how we play out.

And we expect -- and I will say this at a macro level, we certainly expect, given our history, we expect our beta to perform better than the national averages that we've been seeing. There's nothing we're seeing that would suggest that, that would -- that trend would change.

Okay. And then I know it's not a huge concern in terms of the fee income with the whole $10 billion question. There are several things you can unwrap there with the regulators want you to have more staff for a lot of different things. Maybe there's an advantage for stain under 10. Just wanted to get your thoughts, Tim, on how you think about the $10 billion question.

Yes. 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 1. So we've put in a lot of that infrastructure and been operating with that cost for some time now. Frankly, it turned out to be a benefit. I'll give the regulators a lot of credit because it put an infrastructure in place that we've really been able to leverage and lean into.

Will there be some incremental cost? I'm sure there will be our discussions with our regulators today, have not suggested anything dramatic at all or note -- 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 crossed the $10 billion threshold, you're held to any changes in the first place.

Yes. 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 that there is a good chance that we do cross $10 billion by end of this year. And therefore, again, this year's guidance doesn't include any of that because it wouldn't impact this year. It really starts if it does in 2024 on the expense side and on the Durbin side, again, for us, right now, on a run rate basis, call it, it's -- would be about $10-ish million hit to the interchange, which would for 2024 is only half a year, so I'm estimating the 2%, maybe 3% of total net income for 2024. So very manageable impact.

Okay. It's a little bigger number than I was calling. All right. Great. And then maybe just one last one, just thinking about Tim, the franchise you have now and you've done 2 acquisitions here in the past quarter. So besides the 2UniFi initiative, would there be other things that you want to accomplish in '23 would additional M&A kind of makes sense that it could happen. Obviously, the current environment doesn't suggest that's very likely, but just wanted to make sure I was whatever else you were looking to try and accomplish this year?

Yes. I'm very proud of the team and the fact that we were able to announce, close and fully integrate 2 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 attractive markets where we operate. So when you think about certainly Colorado, but Utah even Idaho at this point, which may be lost on some folks that we've got an interesting presence in Boise now, and we really like what we're seeing in that market. I think we can do a lot organically there. And I think it's just an interesting market to pay more attention to, at least for us.

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, again, got to create a win-win, 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 certainly have not closed the door on looking at new potential partners to help move NBH 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.

Thank you. And I am 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 NBH, and we'll be working hard to deliver more along the way. Take care. Thank you.

And this concludes today's conference call. If you'd like to listen to the telephone replay of this call, it will be available in approximately 24 hours, and the link will be on the company's website on the Investor Relations page. Thank you very much, and have a great day. You may now disconnect.