Q4 2020 Amalgamated Bank Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to the automated bank fourth quarter and full year 2020 earnings call.
Paul.
During todays presentation, all parties will be in a listen only mode.
Following the presentation. The conference will be opened for questions with instructions to follow at that time. As a reminder, this conference call is being recorded I would now like to turn the call over to drew the bed Chief Financial Officer. Please go ahead.
Thank you operator, and good morning, everyone. We appreciate your participation.
Fourth quarter and full year 2020 earnings call.
With me today is Keith <unk>, President and Chief Executive Officer.
As a reminder, a telephonic replay of this call will be available on the investors section of our website for an extended period of time.
Additionally, a slide deck to complement today's discussion is also available on the investors section of our website.
Before we begin let me remind everyone that this call may contain certain statements that constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of $19 95.
We caution investors that actual results may differ from the expectations indicated or implied by any such forward looking information or statements.
Investors should refer to slide two of our earnings slide deck as well as our 2019 10-K filed on March 13th 2020, and our other periodic filings that we filed from time to time with the FDIC for a list of risk factors that could cause actual results to differ materially from those indicated or implied by such statements.
Additionally, during today's call, we will discuss certain non-GAAP measures, which we believe are useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with U S. GAAP.
Reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in our earnings release as well as on our website.
At this point I'll turn the call over to Keith.
Thank you drew and good morning, everyone. We appreciate your time and attention today.
This morning, I will discuss our current operations followed by the high level results for the fourth quarter before turning the call back over to drew to discuss our financial results in more detail.
Today is the last time I'll be speaking with you as the CEO of amalgamated and I'd like to thank our employees customers shareholders and research analysts for all of your support.
This has been an amazing journey and I am so proud of what we've accomplished today. The bank is in a strong position highlighted by a talented management team an exceptional group of employees, who are committed to our customers and the bank our conservative credit culture, which has served us well through the crisis and a well earned reputation as America's socially responsible bank, which continues to differentiate.
Amalgamated and our market positioning the bank for success in the coming years.
These attributes can be seen in our fourth quarter and full year 2020 results and there are five key highlights that I would like to focus on today.
The pandemic created unprecedented challenges for all of us over the past year and our team executed flawlessly to ensure we could transition our employees to work from home environment.
Unless we maintaining our operations.
We executed very well under extremely difficult circumstances, which is a true credit to our entire team who I would like to thank for their tireless efforts.
Second the steps that we've taken to improve the credit profile of our loan portfolio in the years, leading up to the crisis positioned the bank to weather the challenging and uncertain economic environment that we currently face through.
During the fourth quarter, our loan deferrals declined two 1% of our portfolio from 8% in the third quarter.
As we will discuss we took further actions in the quarter, which positions our portfolio in the bank for continued improvement through the year ahead.
Third our deposit franchise continues to be a source of strength and a competitive advantage for the bank. In fact, we expanded our position this election cycle as well as our share in our core markets with significant new account wins, and Boston and D. C. I am very pleased to see the new business momentum net our team has generated.
Loan growth has been challenging given the paydowns that we've experienced in our residential and commercial real estate portfolios that said, we are well positioned in green lending given the investments that we've made which can be seen in the growth of our pace portfolio over the last year. Our balance sheet is also well positioned if the yield curve steepened in the year ahead.
Lastly, we continue to execute on our growth initiatives as we work to grow the franchise value of the amalgamated our long term positioning as a socially responsible company and a solid ESG investment is more relevant today than when I stepped into this position eight years ago.
This reputation in our corporate values are driving our success and our newly opened Boston office and positions. The bank per further geographic expansion as the pandemic has brought under control.
We have also improved our ESG ratings from all the major major rating agencies. This year and it does open the door to new ESG product offerings in our trust business.
You can see we are investing for the future and are excited with the many growth opportunities in front of us.
Turning to the quarter our success in managing this unprecedented environment can be seen in our results as net income increased 10, 5% to $13 8 million compared.
Compared to $12 $5 million in the third quarter.
This equates to earnings of 44 per share in the fourth quarter compared to <unk> 40 per share in the linked quarter.
Our deposit franchise continues to deliver and it is very encouraging to see how far we have come through this most recent election cycle at quarter's end, our political deposit balance was $603 million, which compares to the 2018 election cycle trough of $182 million.
We do expect to see some continued runoff in political deposits in the first quarter of 2021, you can see that our unique deposit franchise is resonating with our clients and further evidence of the competitive brand recognition amalgamated health hubs and the significant market segment aided by the success of our bankers.
Looking ahead to 2021, the team will be focused on building back up our deposits with a strong pipeline of opportunities ahead.
Our focus of the company will be to leverage our boots on the ground in Boston by adding new partnerships in markets, where we historically have not had a price well.
Pandemic has been a headwind our Boston team has had terrific success, winning significant new relationships, which have been outside of the political factor. We've also seen strong non political success out of our DC office, which is very encouraging our teams are winning deposit relationships, which are in the tens of millions of dollars debt further validate amalgamated strong reputation in the.
Market.
Our cost of funds held relatively steady at 13 basis points in the fourth quarter down one basis point from the third quarter of 2020, and down 23 basis points from the year ago quarter.
As I noted in my opening loan growth continues to be challenging as total loans declined by $107 $1 million, primarily due to residential and CRE prepayments. However, I am very pleased with the growth in pace assessments of $53 6 million due to purchases from pace funding group of 58, 1%.
Annualized increase from a balance of $367 $4 million at the end of the third quarter of 2020 and.
Additionally, since quarters end, we have signed an agreement for an additional $150 million and pace assessments, which position positions us well as we look to the year ahead.
Our non interest expense for the quarter was $32 7 million a decrease of $5 2 million from the linked quarter, primarily as a result of a $6 $5 million decrease in occupancy and depreciation expense related to our six New York City branch closures.
This was offset by an increase of $1 $8 million from professional fees related to the bank holding company, our management transition and other projects.
As I've said I believe the bank is in good position to deliver on our growth initiatives, which will evidence than sales in the year ahead.
Spansion of our geographic reach into Boston is an area, where we have made significant progress as a reminder, we announced our expansion into Boston pre pandemic and began building our franchise in the midst of Covid we.
We expected the ramp up could be slow it cannot be more pleased with the progress that our team has made.
<unk> continues to be the banking partner for individuals and companies who share our strong values and mission and our brand has resonated in Boston as we have won significant new deposit relationships through the fourth quarter.
Our Boston office now has over $30 million in deposits across political nonprofit labor and other mission aligned organizations.
Today, we believe there is a $90 billion commercial deposit opportunity in the U S with mission aligned institutions and will look to further expand our geographic reach when the pandemic is brought under control.
Okay.
Another growth initiative that we're excited about is our trust business, where we've been working on a suite of ESG products that we expect to launch in the first quarter. We are optimistic that these products will resonate with our customers and the market as a whole given the focus on sustainability in the country today.
These products not only carry higher fees in our current suite of investment products, but will provide us with a product set that we are confident will resonate with the foundation and dominant in family office communities, allowing us to expand our trust business similar to the way, we expand our commercial banking footprint beyond our historic base with unions and their associated Taft Hartley funds.
Additionally, our shareholders approved the creation of amalgamated Financial Corporation earlier, this month, which is a holding company that will allow us to fully take advantage of our status as a b corp gain access to additional means of raising capital and provide us with an opportunity to expand our offerings to our customers and to non bank financial services.
Turning to capital allocation, we continue to invest in the bank to drive growth, where we have many high return investment opportunities several of which I've just touched on beyond growth. We're also focused on providing a steady stream of capital to our shareholders through our dividend, which our board evaluated on a quarterly basis.
To conclude I cannot be more proud of what we've accomplished the bank is in a strong financial position, having weathered an unprecedented environment and is positioned for success in the years ahead. We have made strong strides growing our franchise built upon our reputation as America's socially responsible bank at a time when this has become more important than ever and have created many.
Writing avenues for growth.
The board is making strong progress in our search for a new CEO and they are very pleased with the quality of candidates they have net.
Importantly, the searches now in its final stages and I am very proud of the institution that the new CEO will be inheriting I will remain as special adviser to the board to ensure a smooth transition and I look forward to working with the team that I am so very proud of in this new role.
I want to thank the board again for the opportunity to lead this great institution.
And so the teams that I've worked with on a daily basis <unk> and.
An enormous sense of accomplishment as showed all of you. Thank you all for your hard work and your companionship and on a personal note I'd like to thank my friend drew from book his partnership and his friendship. The success that we have achieved would not have been possible without you drew thank you very much my friends.
Thank you Keith and thank you for the opportunity to be a part of this incredible journey.
Behalf of the entire bank you are you are going to be missed greatly. Thank you.
Alright, turning to our financial results on slide six as Keith mentioned in the fourth quarter deposits decreased $682 $3 million as expected primarily due to the election cycle $253 billion from the third quarter of 2020, while average deposits for the quarter were five.
$6 billion.
Average non interest bearing deposits decreased $244 $8 million from the prior quarter, primarily due to seasonality related to the election cycle and now represent 53% of average deposits at year end.
Our deposit cost of funds remained relatively stable at 13 basis points for the quarter a day.
<unk>, a one basis point from the third quarter of 2020.
Deposits from politically active customers such as campaigns Pacs and state and National Party committees decreased $609 million from $1 2 billion at September 32020, ending the year at $603 million as outlined on slide seven.
This election cycle greatly exceeded our expectations as we had strong success expanding our market share during this past year.
<unk> continues to be a value partner as we supported the business needs of the majority of Democratic candidates this cycle, which bodes well as we look to 2022.
Yeah.
As seen on slide 10, our year end 2020 total loans held relatively steady at.
$3 4 billion cash.
As compared to December 31, 2019.
As Keith mentioned loan growth in the fourth quarter was impacted by early payoffs of residential and CRE loans as well as our diligent efforts to manage the credit profile the profile of our portfolio.
A bright spot in the fourth quarter was the growth of pace assessments to $421 million.
In addition, we signed another $150 million pace purchase agreement with pace funding group, which will allow us to continue this growth in 2021.
The yield on average, earning assets was three 8% for the fourth quarter, a decrease of 63 basis points as compared to the same period in 2019, driven by lower market rates on loans and securities.
The yield on our total loans was four 4% compared to 397% in the third quarter of 2020.
After adjusting for prepayment penalty fees or loan yield was down three basis points in the fourth quarter as compared to the previous quarter.
Turning to slide 13, our net interest margin was three 6% for the quarter, an increase of 18 basis points from the third quarter and a year over year decrease of 37 basis points.
As expected cash on the balance sheet decreased and helped to increase margin from the previous quarter.
Prepayment penalties also positively impacted margin does they added 13 basis points to our net interest margin in the fourth quarter of 2020 compared to 7% and two basis points in the third quarter of 2020, and the fourth quarter of 2019, respectively.
The accretion of the loan Mark from the loans, we acquired in our New resource Bank acquisition contributed two basis points to our net interest margin in the third and fourth quarters of 2020 compared to five basis points from the fourth quarter of 2019.
Net interest income from the fourth quarter of 2020 was $45 7 million, which compares to $45 $2 million in the linked quarter.
And then approximately $3 $4 million increase as compared to $42 3 million in the same quarter of 2019.
For the year net interest income was $180 million, which compares to $166 6 million in the prior year.
Now onto non interest income.
Noninterest income for the fourth quarter of 2020 was $10 8 million decreasing from $12 $8 million in the third quarter of 2020 and the.
$2 $3 million increase compared with the fourth quarter of 2019.
The sequential quarter decrease was primarily due to a decrease of $2 $5 million in tax credits on equity investments in solar projects.
The quarterly increase as compared to the year ago period was primarily due to $1 $8 million in tax credits on equity investments in solar projects in the fourth quarter of 2020.
Noninterest income for the full year was $46 million, an increase of $11 $4 million compared to 2019.
In 2021, we will see the reversal of those tax equity gains taken in $2025 $6 million is expected to reverse.
This does not include any benefit from future deals that we may book.
In addition, the real estate fund that has been winding down in the trust business stopped charging fees at the end of 2020 and the $400000 per quarter in fees will no longer be occurring in 2021.
For the fourth quarter noninterest expense was $32 $7 million, a decrease of $5 $2 million from the third quarter of 2020, and an $800000 decrease from the year ago period.
The decrease of $5 $2 million from the previous quarter was primarily due to $6 $5 million decrease in occupancy and depreciation expense related to the closing of six branches in New York City.
Partially offset by an increase of $1 8 million in professional fees related to the formation of a bank holding company the transition of our CEO and other strategic initiatives.
For the full year of 2020, our noninterest expense was $133 9 million, an increase of $6 $1 million or four 7% from $127 $8 million for the year ended December 31 2019.
The increase was primarily due to a $5 $3 million increase in occupancy and depreciation expense related to branch closures and a $1 $5 million increase in other expenses due to FDIC insurance rebates in 2019 that ceased in 2020.
Our progress on loan deferrals has been quite positive over the last quarter.
We ended 2020 with $41 million or one 2% of loans on principal and interest deferrals from.
For loans that have exited payment deferrals or have gone past six months of deferrals only $21 million of those loans have failed to resume payments primarily in residential and we have included those loans in our non accrual assets.
The remaining $408 million have been moved into the appropriate credit risk rating based on their situation.
With $179 million being pass rated.
<unk> hundred $63 million being special mentioned at $65 million being sub standard and accruing.
While this we've seen an increase in criticized and classified loans. We view this as a strong showing of credit performance that only $21 million have not resumed payments most of which are not required to pay at this time due to New York State laws passed during the pandemic.
As can be seen on slide 17, our nonperforming assets totaled $82 $2 million per 138% of period end total assets at December 31, 2020.
The increase of $15 5 million compared with $66 7 million or $1 two 5% at December 31 2019.
The increase in non performing assets was primarily driven by the addition of $14 million of non occurring residential first lien mortgages, primarily due to COVID-19 pandemic.
We have seen very few new request for deferrals and are pleased with the trends in credit thus far.
Obviously this crisis is not over and we remain vigilant in managing credit and working with our borrowers to resolve any issues as they may arise.
We recorded a $4 6 million provision for loan losses in the fourth quarter of 2020, which compares to an expense of $83000 in the fourth quarter of 2019.
The provision expense in the fourth quarter of 2020 was primarily driven by an $11 million charge off related to an indirect C&I loans of which $8 3 million was reserved for in previous quarters.
And for specific reserves on multifamily loans of $2 $8 million.
Looking back at 2020 from a credit perspective, the year was clearly challenging that said the steps we took to address the credit profile of our portfolio in the years, leading up to the pandemic.
And bind with a disciplined credit culture that we've instilled positioned the bank to weather what could have been an even more difficult environment.
I am pleased with our ability to manage credit.
And I am optimistic that the actions we have taken through the fourth quarter position us well as we look to the rate.
Skipping to slide 18, our GAAP and core return on tangible average common equity were 10, 3% and 10, 7% respectively for the fourth quarter of 2020.
The core return compares to 13, 4% for the third quarter of 2020, and 10, 7% from the comparable period in 2019.
The modest decrease in core return on tangible common equity in the linked quarter was primarily due to the previously discussed factors lastly.
Lastly, we remain well capitalized to support future growth.
To conclude I'd like to reiterate keith's sentiments towards the fourth quarter and full year results. We are very pleased and proud of all the work from the team has accomplished book pre pandemic setting the company up to navigate unforeseen events and the success has accomplished throughout the pandemic.
Total would be interesting to look back at our performance compared to our original 2020 guidance, which is on slide 20.
Even though we pulled the guidance in the midst of the pandemic. Despite all the obstacles the bank had to overcome we still hit on all the key points of guidance during the year, which is a real testament to the hard work of our colleagues at the bank.
Turning to slide 21, we have outlined our expectations for 2021.
This guidance assumes the year end 2020 yield curve with no change in the fed funds target for 2021.
Core pretax pre provision earnings of $72 million to $88 million, which excludes the impact of solar tax equity reversals.
Targeting 10% balance sheet growth overall for the year.
And core expenses are expected to run higher in the first and second quarters due to strategic initiatives and then lower in the second half of 2021.
Thank you again for your time today, we look forward to updating everyone on our first quarter results in April.
With that I'd like to ask the operator to open up the line for any questions.
Operator, thank you.
If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you relate to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, our first quest.
Jen is from Steven Alexopoulos with Jpmorgan. Please proceed.
Hi, good morning, everyone.
Hey, good morning, Steve I wanted to start.
Keith I know you are still working through the CEO transition, but maybe you can help us when should we learn of the new CEO and are a mix of inside and outside candidates being considered.
Yeah, we gave.
Let me give you a little bit more more color than in my opening remarks.
I'm really impressed with the rigor of the process debt.
The board has gone through and talked to a lot of both internal and external candidates are really in the.
The final stages of making a selection.
Candidate and I've just been.
Myself personally really impressed with the caliber of the candidates both because they.
Have uniquely been aligned with both the mission and the business strategy of the bank and bring really strong credentials.
From financial services world to that to the table.
And it's just been it's been.
Good.
Our luxury of riches in terms of the quality of candidates that have have come forward.
You know I can't pinpoint an exact date, but I would anticipate an announcement in the next couple of weeks would be most likely just you never know what might might hang up might come up but I think that's the trajectory. We're on here and then the only thing I would just comment. We've also spent my last day at the bank is tomorrow.
We spent a lot of time really making sure that the transition here is very very seamless and smooth.
Lynne Fox, our chair will be hopping in as the interim CEO for the few few weeks between my tenure in the new person tenure or whatever that time period is.
Glenn and I have known each other for a very very long time and have a great working relationship and that will that will continue and he has been joining our management committee meetings and really working with the team we've really thought through the transition I really anticipate that this will be quite seamless okay.
That's very helpful color.
My other question probably for drew so if you look at the pace of investments so really kicked up in the fourth quarter. Just some color on what drove so much more flow and I know you said you signed another $150 million deal for.
For 2021, how should we think about full year 2021 opportunity.
Yeah, absolutely so.
It did it did very much pickup and.
Part of that is that during the pandemic I think we've seen this phenomenon across a number of different areas.
The home improvement.
Demand has been has been very strong and so some of that there is a bit of a lag in the process between signing up for a pace assessment and actually closing and funding it onto our balance sheet and so youre seeing a lot of the push from the summer and the fall come through on our balance sheet here at the end of the year, which is great.
As far as the 150 going forward you know this.
The first 150, which we've now achieved.
Happen faster than than I thought it would have been I think faster than funding group had projected it.
I suspect, we'll see a little bit of slowdown in that.
I don't want to use I guess for lack of a better term in the pace of those in 2021.
I didn't really I really didnt mean that pun, but.
It.
It wouldn't surprise me to do the whole $1 50 in 2021, but it also won't surprise me if some of it some smaller portion of it slips into 2022.
Okay. So if you guys were $1 57 for 2020, that's probably a realistic rough target again for 2021 about the same level.
Is that the right way to think about it yes, I think so I think it's a good estimate at this point okay.
And with those investments in securities and loans were pretty flat in 2020 can you talk about the opportunity to drive loan growth in 2021, particularly when you're talking about 10% balance sheet growth.
Absolutely. So the 10% balance sheet growth is definitely more driven by our forecast of deposits than loans at this point. So forecast on loans is low single digits right now, but I think theres a lot of variability in that number going forward.
I think the greatest challenge, we're going to face. This year in 2021 is going to be loan prepayments and loan originations and it's something we're very focused on.
And once the new CEO is on board.
I am sure of that person will be very focused on it as well, but the need to find new origination channels.
Some of our once pre pandemic, particularly multifamily and CRE have have slowed down substantially we're going to need to do more there.
But I think in the next you know just to give a little color on Q1 here.
They are definitely going to be a higher level of prepayments in Q1 as well.
So we're expecting that and we're planning around it.
Okay. That's helpful.
Before I sign off I want to Echo Joe's comments, Keith it's been a real pleasure working with you the transformation of amalgamated it's been remarkable onto your lead best of luck.
Thanks for taking my questions.
Steve I appreciate it.
As a reminder, this star one on your telephone keypad. If you would like to ask a question. Our next question is from Brian Morton with Barclays. Please proceed.
Good morning, everyone.
Good morning, Hi, Brian Alright, I think my first question I'm, just wondering maybe a little bit more color on the non accrual residential mortgage loans.
And kind of like alright.
How are they cash flowing what are the kind of expectations from when they will return to payment.
And.
Kind of where they are marked on a on a loan to value basis.
Sure.
Let's start with debt first on a loan to value basis. So this is going to be current our current outstanding principal to original.
Appraisal.
They are just below 60% LTV across all those non accruals.
And actually that I'm, sorry that also includes the ones that are still in their second deferral and not yet on non accrual, but the day.
The amount will be similar. So these are these are very well protected loans. They are on non accrual because the customer needed more than six months of deferral and that's the point at which we've decided to move loans to non accrual.
When they come back it's going to it's going to be customer by customer by customer but for all these for all these individuals we are verifying that theyre going through hardship and.
There are some people who are struggling right now and it really isn't.
I'll tell you when you look across debt, it's not lower income borrowers versus higher income borrowers. It is kind of across the spectrum as people have been affected in different ways by the pandemic.
I think currently the New York legislation extends out too.
Proximately may in terms of of when we are required to.
To grant customers payment deferrals, it doesn't mean that they won't move to non accrual on our books, but they don't need to pay as per the legislation and then after that we're going to work with these borrowers and figure out.
The best solution and do everything we tend to keep them in their homes.
Alright, thanks, and kind of given the strong loan to values on these probably value has moved up.
What's on selling these loans are exited income portfolio.
No not right now.
It may be later that could become a solution, but we don't at this point, we don't really see any loss content.
The vast majority of these residential loans, they just might be on our books for a while as you know.
Non accruals that were going to need to work through but there is no urgency from our standpoint too.
Go out and dispose of the portfolio, we have some experience from those legacy countrywide portfolios and how to handle the situation.
Situations and so we will.
<unk> that to work through this with a presumably a pretty good outcome.
Okay, Great and then just wanted to move to capital kind of understanding on a 13, 1% on the CET ratio I think more than adequate I'm not sure I mean for the pace loans.
The growth of $150 million I don't know how much.
The risk rating on those loans.
Then beyond that kind of what are your priorities for capital deployment. As you go into 2021, how are you thinking about restarting the share repurchases.
Yes, so capital just to maybe answer those in different orders. The pace assessments are carried at a 50% risk weighting right now same is residential loans.
We originate so.
They are definitely lower and spectrum of utilizing risk capital.
Yes, with the TCE, where it is we obviously have a lot of room.
To convert into.
Liquidity illiquid assets, such as securities and cash into loans and utilize that capital without any concern whatsoever.
Its more just making sure we find and underwrite the rate loans that we want to have on the balance sheet from a mission and a risk standpoint.
Our leverage ratio just about 8% now.
Right about the middle of the range, where we want to be and certainly not a constraint, but we are mindful of where we're at on that right now and we're going to need.
As we said in the guidance, we expect balance sheet to keep growing and keep bringing in deposits.
We are going to want to make sure we have the right amount of capital available to.
Continued growth.
Dividends will continue.
We plan to continue to pay a dividend.
We have our board meeting is usually rate. After these calls so we will discuss our usual topics of dividends and buybacks and see where we go from there but.
No change to our current plans right now beyond beyond that.
Keith anything you want to add.
No I think I think you hit it on the on the headroom I think.
It's an ongoing conversation between senior management and the board all the time and I think when we.
Started down this pandemic situation.
<unk>, we knew that if it is it got towards the end if we're getting towards the end we at least see light at the end of the tunnel.
We said a good opportunity to be well positioned from a capital perspective at the end of it and.
I think where we are and it gives it gives the board new leadership I think ample opportunity to think about about lots of lots of options.
And Brian the one thing just before I turn it back over to you. The one thing I'll add is is that we have no.
We have no debt.
And we have no preferred equity out there right now so those are other levers debt.
We may consider using if there was any type of acquisition opportunity that looked attractive to us going forward. So I think theres a lot of levers in the capital and debt stack available to us.
Besides just common equity if we were to look at doing something from a strategic perspective.
Excellent. Thanks.
No other questions I have and I just wanted to wish you best of luck in your next endeavors. Thank you.
Thanks, Brian.
Our next question is from Chris O'connell with <unk>. Please proceed.
Yeah.
Good morning, gentlemen.
So I guess I just wanted to start off with the balance sheet growth I mean, you guys seem pretty confident.
And the 10% balance sheet growth driven by the deposit side.
But in the past having tier.
T.
Totally positive.
On the political deposits guidance.
So do you have a better read into that right now that's driving the 10%.
Balance sheet growth outlook.
Sure.
You've already seen our well couple of comments on the political deposits and then a few comments about things outside of the political realm.
We were quite pleased with where political deposits talked at the end of the last election at the 2020 election cycle I think if you go back to some of our early projections, we thought that that would originally trough around $300 million and it ended up around $600 million.
So really really a good jump point from.
From that standpoint, going off and we've already seen in.
In the first month really of the 2022 election cycle, we've already seen an increase of political deposits as you can see from the presentation of around $50 million.
So good growth and and I.
One can never predict exactly whats going to happen in a fundraising cycle and you've certainly seen.
Some things, where some corporate tax and others have.
Have been holding off on political contributions that won't last for an entire cycle and with a 50 50.
Net and a competitive house of Representatives I think is highly anticipatory that there'll be a very very vibrant fundraising season from political fundraising season in 2022.
So I think that augers quite well.
Really I think more importantly for the story going forward is yes.
Our growth in deposits was much more than just political growth in deposits, we would focus on that because it's unique to amalgamated but across all of our sectors, whether it's our labor union customers or our social Justice organization customers of our philanthropic customers, we've seen tremendous new opportunities in all four of our geographic.
And the pipeline has remained robust even with our commercial banking teams working remotely and I just don't see that debt that ending we've always talked about one of the values for this franchise being a long runway of potential customers and that just continues particularly on the deposit and Treasury management.
Side and that just continues.
<unk>.
To come to fruition.
Okay.
Got it makes sense.
And then.
For as you guys are looking at the ESG.
That you're starting kind of in the first quarter here and then with the <unk>.
Real estate fund kind of rolling off from the fees there how do you see the trust fees.
Settling out in the first quarter of 2021, and maybe progressing from here.
Okay.
Yeah look we're going to launch of sleeve of new new ESG funds, probably next month certainly this quarter.
That will provide a variety of new options available to people to make some both fixed income and equity.
Options as they think about making ESG investments, which can be a little bit unique in the marketplace.
As you know, though Chris.
The sales cycle for four.
Investment management products.
It's not the quickest kind of thing that there isn't I will take a little time to not only get out on the on the road and sell all these products, but then trust trust committees in investment committees and other things will have to meet to make that ultimate decision. So I think it'll take a little while ramp up some of the new fee income.
Certainly I think youll see some some moving on fees just given what has happened to the markets thus far in 2021.
That will help our fee position, especially if it holds throughout the quarter and then as drew said.
With our ultra construction real estate fund.
Closing, all but closed down really down to its last couple of properties.
Did make the decision to stop charging investors in those funds fees and that should be about $100000 a quarter in terms of.
The last day revenue on a year over year basis.
More importantly, how do you think 400000, Keith 400400 that foreign income.
Yes.
So I'm sorry, just so on the on.
From a year over year basis I guess.
So where do you I guess, just boiling that down, whereas the baseline level coming into the first quarter.
I think we're going to be a little lower from where you see is in Q4 because of the trust fees coming out in a little bit of pickup and in asset size and then if all goes according to plan the invesco.
Benefits should start feathering in over in the later quarters in terms of performance.
And I think the timing on that is obviously in the envoy and kind of the level of that is obviously somewhat uncertain just given that it's new products that we're launching but long term.
Pretty pretty pretty excited about the addition of that strategy.
Got it makes sense and then as far as the loan sale gain line.
<unk>.
Some really good numbers in the back half of this share in 2020.
How do you how do you see that progressing in 2021.
Well I think I think the Q4 number one 3 million that was that was a phenomenal number probably not going to.
Hit that level very often so I wouldn't take that and run it forward, but I think half a million dollars per $1 million is probably about where we're targeting Q1 might be a little light on the lower end of that range just because we did so much in Q4, but kind of as we go forward for the full year. That's a that's.
Our best estimate right now obviously, if you know.
Rates move up substantially things like that that could that could impact the volume coming through the mortgage market, but.
Doesn't seem to be a huge.
Risk at this.
This structure.
Yeah got it makes sense.
And then.
Hey, I appreciate the guidance on the operating expenses with the first half of the year kind of trending higher.
Then getting.
Some progression lower in the second half of the year.
Do you guys have a sense of where.
The first half of the year I guess.
Going to be starting off just given some of the movement you had with <unk>.
The efficiency initiatives in the back half of this year.
Yeah, I mean, there's always some seasonality in Q1 as well right you have the payroll tax issues you have the audit, finishing up and everything that goes with that et cetera et cetera. So.
If we think of kind of our.
I wanted to give you a number Chris but it's probably closer to where we're at this quarter for the next quarter or two and then should come down to where we've been closer to where we've been previously.
In the later half.
Yeah.
Got it that makes sense.
<unk>.
Okay, Great and then.
Finally, I guess just looking at.
The tax rate.
Given from the initiatives that you guys put into place where do you guys see that coming in for going on a go forward basis.
I don't see a lot of change to the effective tax rate right now the solar tax equity.
Is which is a tax strategy, but the the GAAP accounting puts it through noninterest income.
So I'm going to just sort of put that to the side for a second I don't I don't see a lot of change right now, but the big unknown is obviously, what's going to happen with the federal tax rate and what are the state and local municipalities are going to do in new York's talking about attacks.
Tax hike in the city and the state. So we're just going to have to watch that and see where it goes but we've been we've been doing things from a tax strategy standpoint that maybe aren't totally obvious in the effective tax rate from the GAAP there's the.
Solar tax equity, obviously, but we've also added to our bully plans at the end of the year, we've done a little bit in the municipal space, where we've seen very very strong deals, which would benefit with the if there's any type of tax hike, but I think our best estimate for now is what youre seeing in the numbers today.
Okay, Great. That's all I had thank you.
Congratulations Keith on the next steps and.
Great job here at <unk>.
Thanks, Chris.
Yeah.
Thank you. This does conclude our question and answer session I would like to turn the conference back over to Mr. Keith.
Net check two of your final comments.
Thanks, Gerry appreciate it I just want to thank everybody for joining today and for all the investors and really don't want to just sort of say special Bank you know all of the research analysts and Steven Alex and Janet.
The other Alex and quality in.
And Chris and Brian It's it's been a real pleasure getting to know all of you and work with all of you since our IPO in 2018, and I've learned a lot from you and.
When you have got to spend some time together on the non deal Roadshows and other things that we did it was it was that it was enjoy spending time together. So I'd just appreciate really bad debt.
The other sort of time that we have together and I really did I appreciate getting to know all of you. So it's not much and I just wanted to do a final special.
Sought out to our IR team, Jamie Lillis, and Shannon Devine and Peter Caruso, who really has helped to get all of our earnings calls together I'm deeply grateful for all the work that that debt you have done and contributed to.
To our company. So thank you everybody.
Safe and we'll be in touch in the future alright.
This concludes today's conference you may disconnect. Your lines at this time have a wonderful day.
Yes.
Yeah.
Okay.