Amalgamated Financial (US:AMAL)2024-01-27 11:53Financial Data and Key Metrics Changes - Net income for Q4 2023 was $22.7 million, or $0.74 per diluted share, with core net income at $22.1 million or $0.72 per diluted share [16] - Deposits increased by $21.1 million from the previous quarter, totaling $7 billion, with on-balance sheet deposits (excluding brokered CDs) rising by $170.9 million or 2.6% to $6.8 billion [19] - Net interest margin (NIM) expanded by 15 basis points to 3.44%, driven by increased yields and average balances of interest-earning assets [23] Business Line Data and Key Metrics Changes - Political deposits grew by $236 million to approximately $1.2 billion, with further inflows of $32.3 million through January 17, 2024 [20] - Net loans receivable increased by $48.7 million or 1.1%, primarily due to growth in multi-family loans, commercial real estate, and residential loans [22] - Core non-interest income rose to $8.5 million from $7.8 million in the previous quarter, attributed to fees from treasury bill investments and off-balance sheet reciprocal deposits [24] Market Data and Key Metrics Changes - The allowance for credit losses on loans decreased by $2.1 million to $65.7 million, with the ratio of allowance to total loans at 1.49%, down 16 basis points from the previous quarter [25] - Non-performing assets totaled $34.2 million or 0.4% of total assets, with criticized assets increasing by $22 million [25] Company Strategy and Development Direction - The company aims to maintain a neutral balance sheet strategy while focusing on sustainable profitability and returns, particularly in the impact lending space [10][14] - The management is optimistic about the growth potential in the non-profit and union segments, as well as in climate risk-related investments [13][14] - The company is targeting a Tier 1 leverage ratio of approximately 8.5% by the second quarter of 2024 [26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in 2023 but expressed confidence in the company's ability to emerge stronger, emphasizing the importance of patience in 2024 [15][29] - The company expects to see continued deposit inflows as the presidential election cycle progresses, which will support its growth strategy [19][71] - Management highlighted the significant investment needed in climate risk and sustainable projects, positioning the company to capitalize on these opportunities [13][71] Other Important Information - The company has initiated full-year 2024 guidance for core pre-tax pre-provision earnings between $143 million and $148 million, and net interest income of $268 million to $272 million [27] - The company has sold $550 million in total securities since Q2 2022, benefiting from a strategic repositioning of its portfolio [11] Q&A Session Summary Question: Expectations for loan portfolio growth in the first half of the year - Management expressed optimism about the lending pipeline, particularly in community solar and industrial real estate, supporting a neutral balance sheet strategy [32] Question: Rate sensitivity of various business lines - Management indicated that while some deals are sensitive to rates, they maintain the ability to be selective in pricing and credit quality [34] Question: Strategy behind moving $303 million off balance sheet - The off-balance sheet deposits are primarily political deposits and transitional trust business deposits, aimed at maintaining capital and managing funding extinguishment [36][38] Question: Loan growth target for 2024 - Management confirmed a target of 2% to 3% sequential loan growth, driven by impact lending and sustainability initiatives [42] Question: NII sensitivity to rate changes - Management provided a conservative estimate of a $1.6 million annualized decline in NII for a 25 basis point decrease in rates, reflecting a cautious approach to customer rate adjustments [47] Question: Impact of off-balance sheet deposits on income - Management estimated that off-balance sheet deposits could contribute between $1 million and $1.5 million of non-interest income for the quarter [57]