Amalgamated Financial (AMAL) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net income for Q3 2024 was $27.9 million, or$0.90 per diluted share, with core net income at $28 million, or$0.91 per diluted share, reflecting improved earnings [13] - Total deposits increased by $145.6 million to$7.6 billion, with on-balance sheet deposits (excluding Brokered CDs) rising by $196.9 million, or 2.7$1.69, or 8.2%, to $22.29, supported by strong earnings [16] Business Line Data and Key Metrics Changes - The deposit franchise saw$311 million in new deposits, with significant growth in social, philanthropy, and sustainable customer segments [6] - Loan growth accelerated to 2.7% in Q3, with a balanced contribution from commercial and industrial, real estate, and sustainable lending [8][20] - Non-performing assets decreased by $7.1 million to$28.6 million, representing 0.34% of total assets [22] Market Data and Key Metrics Changes - Political deposit balances grew by 13% to $2 billion, surpassing previous peaks, with expectations for a trough between$850 million and $875 million by year-end [7][27] - The sustainable lending segment is projected to grow significantly, with an estimated$3 trillion needed for climate finance over the next decade [10] Company Strategy and Development Direction - The company is focused on sustainable banking and plans to enhance its trust business by investing in sales capacity and digital acceleration [26] - A new tagline, "Bank on Impact," reflects the company's commitment to socially responsible banking and aligns with customer values [5] - The company aims to achieve a Tier 1 leverage ratio of 9% by early to mid-2025, prioritizing capital build and regulatory compliance [46][47] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth opportunities, particularly in sustainable lending and the transition to a clean economy [10][12] - The company anticipates continued deposit strength and flexibility in structuring its balance sheet for sustainable profitability [15] - Management acknowledged potential challenges in the political deposit segment but expects a rebuild in the first quarter of 2025 [28][29] Other Important Information - The company has made strategic IT investments and added to its sustainable lending team to support growth initiatives [9][11] - The effective paydowns in the commercial and industrial segment were less than expected, allowing for a steady loan pipeline [8] Q&A Session Summary Question: What strategic changes are being made in the trust business? - The company is enhancing revenue quality in the trust business and plans to invest in sales capacity and digital acceleration [25][26] Question: What is the expected year-end level for political deposits? - Political deposits are expected to trough between $850 million and$875 million by year-end [27] Question: Will there be additional runoff in the first quarter? - It is expected that political deposits will flatten out and begin to rebuild towards the end of the first quarter [28][29] Question: Can you clarify the charge-off in the consumer solar space? - The charge-off was related to a traditional consumer solar portfolio, not PACE loans, with a small reserve coverage [30][31] Question: What is the outlook for expense growth? - Expenses are expected to remain in the range of $40 million to$40.5 million for Q4, with some elevated costs being one-time in nature [33] Question: Can you provide insight into the loan pipeline? - The company is optimistic about the loan pipeline, expecting growth in the range of 1% to 2% for Q4, with strong yields in the commercial and industrial space [35][36] Question: What is the updated read on Tier 1 leverage? - The company aims to reach a 9% Tier 1 leverage ratio by early to mid-2025, with plans for a return of capital strategy to be discussed in Q4 [46][47]