Q4 2021 Amalgamated Bank Earnings Call
[music].
Greetings, ladies and gentlemen, and welcome to the amalgamated Financial Corporation fourth quarter and full year 2021 earnings conference call. During today's 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 I.
Is there a reminder, this conference call is being recorded I would now like to turn the call over to Mr. Jason Barbie Chief Financial Officer.
Please go ahead Sir.
Thank you operator, and good morning, everyone. We appreciate your participation in our fourth quarter 2021 earnings call.
With me today is Chris Olefins, Brown, 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 1095.
Caution investors that actual results may differ from the expectations indicated or implied by any such forward looking statements or information.
Investors should refer to slide two of earnings slide deck as well as our 2020 10-K filed on March 15, 2021 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.
Presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with U S. GAAP.
A 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 let.
Let me now turn the call over to Priscilla.
Thank you Jason and good morning, everyone. We appreciate your time and interest today.
I will take a few highlights of our fourth quarter 2021 results as well as provide an update on our strategic plan designed to deliver sustained and profitable organic growth.
Early signs of which can be seen in our results this quarter.
Jason will then provide an update on our pending acquisition of amalgamated bank of Chicago and conclude with a more in depth review of our fourth quarter financial results.
To start our early results clearly highlight the potential that exists within amalgamated as we execute on our strategic plan.
Along these lines there are four key points that I would like you to take away from this mornings call.
First we delivered a six 2% net loan growth not including pace assessments.
Compared to the linked quarter as our early focus on driving loan growth during the second half of 'twenty. One has started to take hold.
Second we recruited a talented and experienced leader for our commercial real estate business to manage our team and lending platform.
Our existing book of business improved credit quality and gained new share.
Third we grew deposits, 2% from the linked quarter.
Political deposit franchise held steady at $1 billion, which exceeded our expectations given the natural contraction that we typically experience.
Boeing and election.
Our cost of deposits also held steady at nine basis points.
Fourth we took important and necessary steps to begin as early as in the second half of 2021 to further improve the credit quality of our loan portfolio. As a result during the quarter. We saw our non accrual loans declined by $17 $3 million to $28 $2 million.
Or 85 basis points of total loans, and we saw classified or criticized assets improved by $79 $9 million.
Well I am pleased with our results I know that there is much more work left to accomplish.
As outlined in our third quarter call. We've established a four pillar strategy, which is designed to accelerate growth expanding profitability and improve our returns.
This strategy is focused on.
First building our business through our mission.
Second focusing on customer segment that share our values and where we can take market share.
Third developing and expanding our product offerings to grow our lending platform and our trust business.
And fourth improving the management of our data and technology to drive better efficiencies and effectiveness.
On today's call I would like to focus on our third pillar and specifically our efforts to grow our lending platform as we strive to enhance the franchise value of amalgamated and fund future development projects through profitability.
A clear opportunity is to service our customers from a lending perspective and connection as we demonstrate continued success and growth in our baseline lending platform I also see more opportunities to expand sections of our lending platform into our markets, where we have traditionally only focused on deposit gathering.
Boston is a terrific example, as we originally entered this market with a main focus gathering deposits, but we believe we can build a commercial real estate lending platform and drive loan volume there.
Be successful, we need to attract bankers and underwriters with proven acumen and results in the CRE market and to that end I'm very pleased to report that we have recruited a seasoned producer and a leader for our commercial real estate and multifamily banking team. Additionally.
Additionally, this leader was also able to bring over a key team member greatly improving the ability to make an immediate impact.
As the largest asset class on our balance sheet at year end. This is a key focus for us and one that we intend to return to pre pandemic origination levels in the year ahead.
We've also repositioned our existing lending talent in order for them to use their valuable expertise across our New York City, Boston D C San Francisco and soon to be Chicago footprint.
We see commercial and consumer solar sustainability project finance and commercial pace segments. We are expertly knowledgeable at highly competitive in and we plan to aggressively add to our talent base in these segments during 2022.
Additional segments, where we are building expertise isn't CDF I not for profit and social advocacy.
We are becoming increasingly confident in the strides, we're making to expand our lending platform and see high single digit loan growth not including the impact of apoc as achievable in the year ahead.
Importantly, our growth is increasingly focused on entering new sustainable markets and taking share which presents an open ended growth opportunity that is less subject to economic or cyclical decline.
As we redeploy our liquidity into organic loans, we will continue to see margins improve in earnings power accelerate.
We're also continuing with connecting our consumer and trust business and our commercial banking business to better serve our customers across offerings.
We are acutely focused on addressing the revenue and profitability of our express business over the next year as we ramp our ESG oriented responsive fund products and address the fee structure in our core pension fund business.
To conclude we ended the year strongly and we are well positioned to accelerate growth and profitability into the year ahead, we have shown meaningful organic loan growth for the first time since the second quarter of 2020 and are optimistic that growth will continue in 2022.
I am very pleased that we were able to attract talented lending team to amalgamate it which demonstrates the unique opportunity we offer in the market.
We have a brand and our reach and our socially responsible markets, which rivals the big banks within an institution, where people can lead and make a real impact. This is very appealing and we establish amalgamated as an employer of choice in the major markets, where we do business.
Our immediate focus in 'twenty two is to add experienced bankers and underwriters, who can help us grow our platform and accelerate growth in our focused markets and segments.
Lastly, our acquisition of the amalgamated bankruptcy, Chicago will provide market expansion into the Midwest, while offering significant revenue and cost synergies when the deal closes in the next few months.
We expect the transaction to close early in the second quarter, which is a bit later than our earlier aspiration.
That said, we have been working closely with the <unk> to prepare for the integration once the deal closes and we're very pleased with the receptivity from <unk> employees to the potential for a combined bank once we emerge.
Let me now turn the call over to Jason.
Thank you Priscilla.
We are pleased with <unk> financial performance, which has been in line with our expectations for the year. We are also seeing <unk> loan growth through the fourth quarter, which validates our expectations from the acquisition.
But we already have found is that <unk> has deep relationships with their customers and a larger balance sheet will provide immediate lending opportunities that are very attractive longer term, we see an opportunity to export our lending expertise and sustainability and other mission driven segment to the Ibs C client base, Andrea graphic market, which we expect will expand <unk> lending reach and help to accelerate.
Loan growth as we look to the second half of 2022.
Turning to our fourth quarter results net income was $15 9 million or <unk> 50 per diluted share compared to $14 4 million or <unk> 46 per diluted share for the third quarter of 2021, representing an eight 7% increase in earnings per share.
The $1 $5 million increase was primarily due to a $3 $7 million increase in net interest income and a $5 $7 million increase in noninterest income.
These increases were partially offset by a $2 million increase in non interest expense of which <unk> 9 million was related to the pending <unk> acquisition.
As well as a $3 $6 million provision expense compared to a $2 $3 million provision recovery in the preceding quarter.
Starting on slide seven deposits at December 31, 2021 were $6 4 billion.
An increase of $131 8 million from the third quarter of 2021, and an increase of $1 1 billion.
Compared to December 31, 2020.
Noninterest bearing deposits represented 52% of deposits for the quarter ended December 31, 2021, contributing to an average cost of deposits of nine basis points in the fourth quarter of 2021 unchanged from the previous quarter.
Deposits held at politically active customers such as campaigns Pacs advocacy based organizations and state and National Party committees were $989 6 million as of December 31, 2021, an increase of $386 8 million as compared to $602 8 million as of December 31, 2020.
Okay.
Turning to slide 10, our total net loans at December 31, 2021 were $3 3 billion, an increase of $189 9 million as compared to the linked quarter. The increase in loans was primarily driven by advances in commercial sustainability lending consumer solar lending and CRA eligible residential lending.
The yield on our total loans was 4.01% compared to 384% in the third quarter of 2021.
Adjusting for prepayment penalties, our loan yield was up 15 basis points in the fourth quarter as compared to the previous quarter.
During the quarter, we received 1.0 million and accrued but unpaid interest on a reinstated loan adjusted for this our yield on total loans was $3 eight 9%.
On slide 12, our net interest margin was 277% for the fourth quarter of 2021, an increase of seven basis points from 270% in the third quarter of 2021, and a decrease of 29 basis points from three 6% in the fourth quarter of 2020.
Adjusted for the reinstated loan noted above our net interest margin was 271%.
We estimate that our excess liquidity this quarter from balance sheet growth has suppressed our NIM by 20 basis points.
Turning to noninterest income it was $12 4 million for the fourth quarter of 2021 compared to $6 $7 million in the linked quarter and $10 million for the fourth quarter in 2020, the sequential increase of $5 7 million.
Primarily due to $5 $3 million of equity method investment income related to a new investment in a solar initiative.
The increase of $2 4 million as compared to the same quarter last year and was primarily due to the solar investment income.
Offset by decreases in gains on sale of loans in the corresponding quarter in 2020.
As can be seen on slide 13 for our first solar investments made in 2020, we have recognized the benefit of the tax credits in 2020 and also the related accelerated depreciation impacts in the current year during.
During 2022, we expect to recognize gains related cash distributions from our solar equity method investments as well as over the remaining life of the investments through 2025.
These impacts did not include any benefits from the new solar equity investment made in the fourth quarter.
Noninterest expense for the fourth quarter of 2021 was $35 8 million.
The increase of 2 million from the third quarter of 2021, and an increase of $2 $3 million from the fourth quarter of 2020.
The increase of $2 million in depreciating quarter includes <unk> $9 million of <unk> related costs as well as a $7 million increase in data processing expenses related to the modernization of the Trust Department.
The increase of $2 $3 million from the fourth quarter of 2020 is due to the <unk> related costs as well as an increase of data processing expenses related to the modernization of the Trust Department.
Kris transaction processing costs post COVID-19, and other technology upgrades.
As I mentioned during the previous quarter call. Our nonperforming asset metrics are a key focus turning to slide 16, nonperforming assets totaled $54 6 million or <unk>, 77% of period end total assets at December 31, 2021, a decrease of $27 6 million.
Compared with $82 $2 million or $1, 38% of period end total assets at December 31, 2020.
The decrease in nonperforming was primarily driven by the pay off of $11 $2 million of non occurring construction loans $3 $5 million of multifamily loans and $2 $6 million of C&I loans as well as the sale of a $4 $5 million of nonperforming residential loans and a partial charge off and transfer of a $3 two.
Multifamily loans to held for sale importantly, nonaccrual loans decreased by $17 3 million or 38% to $28 2 million.
The allowance for loan losses decreased $5 7 million to $35 9 million at December 31, 2021 from $41 6 million at December 31, 2020, primarily due to improvements in credit quality.
At December 31, 2021, we had $53 $2 million of impaired loans for which a specific allowance of $5 1 million was made compared to $85 million of impaired loans at December 31, 2020 for which a specific allowance of $6 2 million was made.
Ratio of allowance to total loans was one 8% at December 31, 2021, and $1 one 9% at December 31 2020.
Provision for loan losses totaled an expense of $33 6 million for the fourth quarter of 2021 compared to a recovery of $2 3 million in the third quarter of 2021.
The expense in the fourth quarter of 2021 was primarily driven by an increase in loan balances as well as a $1 $9 million net charge off on a multifamily loan partially offset by improved credit quality and qualitative factors.
Moving along to slide 17, our GAAP and core return on tangible average common equity was 11, 2% and 12, 2% respectively for the fourth quarter of 2021.
Importantly, we remain well capitalized to support our future growth initiatives.
Looking ahead in anticipation of rising rates in 2022, we are well positioned to benefit from our asset sensitivity generally speaking a parallel 25 basis point increase in rates will result in an approximately $6 million increase in annual net interest income.
Turning to slide 19, we are initiating full year 2020 guidance, which includes core pretax pre provision earnings of $75 million to $85 million, which excludes the tax credit related impact of solar tax equity income and losses.
And net interest income of $184 million to $192 million, which includes prepayment penalty income.
This guidance does not include any contribution from our pending <unk> acquisition from which we anticipate additional accretion.
And with that I'd like to ask the operator to open up the line for any questions operator.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
The press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star Q1 moment. Please while we poll for questions.
Yeah.
Thank you. Our first question comes from Alex portal with Piper Sandler. Please proceed with your question.
Good morning.
Good morning.
So first off wanted to ask a Brazil in your prepared remarks, you talked about the immediate focus for 2022 and adding lenders I was just wondering how many lenders do you have in mind to add and <unk>.
Help us contextualize, a little bit sort of what how.
How that would compare to the existing number of lenders on that.
The company.
Sure.
Well first of all I think I would.
I characterize it as also just.
<unk> the community that we currently have so.
Thank you.
Do you have handy, Jason the number of lenders that we.
The actual number of lenders that we have.
I don't have any of the actual number of lenders, but what I can comment on.
Sure.
On a run rate basis, we already did net add in the core in the fourth quarter of six six.
And they're not just necessary lender Dallas, we're looking to add producers, but we're also looking to add support folks.
In the.
Portfolio management.
I think our key hires right now.
We talked about in the third quarter was really progressing that CRE and multifamily.
The family space, and we were able to hire a leader for that area and also an additional banker that came in.
When we talk about when we talk about going forward at Cypress or are you trying to jump in I just wanted to add I just wanted to put a finer point on the specific number of lenders I think were up.
Plus seven in the plan.
So we would intend to add a net.
Seven.
Yes.
Awesome and I presume that'll be over the course of the year and I'm just wondering.
Certainly, adding the lenders and support staff is certainly going to come with some expense what kind of expense guide is incorporated in that.
And that guidance that you gave for 2022.
So Jason I'll make a quick comment and then turn it over to you.
As you know.
Talk a lot and monitor the expense ratio as the efficiency ratio and we are committed to keeping that at 65.
And so expenses third quarter at 34 five.
With revenue offset will enable us to achieve better efficiency ratio.
Do you have anything to add to that.
Yes, I think that's well said I mean, we have a guardrail.
Alex for for no higher than 65% core efficiency ratio much of our staffing strategies tethered to the gross and the net interest income.
More specifically growth pick up.
Related to the lending areas.
No investments were going to make are going to be kind of managed along the productivity and the profitability that is being derived from that business.
When I think about potential investment.
I would expect our salaries line is going to is going to increase and we've held fairly steady at about $17 $5 million.
We see at least $500000 of incremental per quarter, when we start to think about.
<unk> overall, but certainly lending is going to make up a significant portion of that.
Yeah.
Great and then just wanted to drill in.
On the rate guidance that you gave Jason I think it's a 25 basis points. So it's a $6 million of NII can you help us just get to the components of that and just remind us how much of the loan portfolio is variable that should reprice with hikes and then my assumption is that you would keep the deposit data in those.
And that guidance pretty close to zero and that's it.
Yes, I mean the guy.
I guess, the first thing that the guidance assumes that it's a parallel rate shift and that everything everything shifts all reached shipped at the same time. So I didn't really go through and the guidance you gave a blended.
Variable and our fixed rate if that if that helps us trying to get a little bit more general in my in my terms, there and the $6 million really kind of would be assuming that that would the rate would adjust over the course of an entire year, so depending on when rates actually adjusts and win.
When we start to realize the incremental $6 million would be realized over time.
And I don't have a I don't have any more specifics to offer on that other than that sort of how we did.
We estimate.
Sure.
Okay. Thanks for taking my questions.
Thank you. Our next question comes from Janet Lee with Jpmorgan. Please proceed with your question.
Hello.
I just wanted to follow up on NII guidance, and I want to make sure that I understand your underlying assumptions correctly. So when you say.
No change in fed rate target, but you also say a parallel shift are you are you assuming zero rate hikes through the end of 2020.
I am I am I doing.
Well maybe.
Guidance, yes, sorry, sorry, if its confusing the guidance is assuming no rate hikes rate, so based on our growth assumptions and our balance sheet mix.
No change in rates, we'd come in between 184 and 182, depending on how we hit our targets with the parallel with the parallel shift rates or the shock that I was just referring to those numbers would move incrementally higher and I think I didn't answer the question properly.
Yes.
Alex, but our deposit beta we're assuming that as relatively.
Unchanged.
Think about the apparel right chip.
Right got it so it would be baked in the current forward curve that assumes about four rate hikes really at the 2022.
We roughly think that that would add 6 million annualized time like four or is that does that.
Yes, so thats the basic math with you about it obviously those.
All happen on day, one of <unk>, but on a net basis, if they all virtue thats the way we would generally think about it yes.
Got it.
And.
On loan growth guidance.
Basically.
Sort of raised your loan growth target for 2022, I believe last quarter, you said mid to high single digits.
Gross now high single digit.
What is true.
Quarter that made you to become more optimistic about your loan growth and can you just walk us through where you expect most growth to come from.
Certainly.
First of all if you want to take the front end of that question on the <unk>, Yeah, Yeah, I'd be happy to and it's a little bit of what we've talked about Janet thanks for the question.
So.
I am personally very happy with our sales leadership and our sales team.
We've already begun to execute well on the strategy.
You heard us talk about the new higher hires.
But I like the way we're organizing the team.
We think we'll get that high single digit loan growth.
Because of the strength of the pipeline that we see and the and the talent we brought on and we'll see it in CRE, we will see it in multifamily.
See it in sustainability and the other impact areas. So we see nice <unk>.
Pipeline in all of these areas.
Yes.
I'll add to that.
The growth we saw this quarter, we're really happy about it.
Some of it's timing and we'd love to have a little bit of that pull through in the third quarter, but.
It did come through in the fourth quarter for us and so that was really nice I.
I don't think we're going to grow it at a 6% per quarter basis, but Brazil is point the pipeline looks looks really stable right. I mean, we spent a lot of time in the second half of the year kind of reinvigorating sales process, making sure. We have failed to close cycle, what our bankers are doing what they are focused on from a productivity point of view and we are <unk>.
We're going to see that in a longer pipeline that we can start to count on and forecast a little bit better I think that's the first thing the other thing Jamie I think maybe your question is we're seeing growth across kind of multiple areas. It's not all concentrated in Brazil, it touched on it a bit but even in the quarter alone.
Our consumer side consumer solar was up about $45 million or <unk>.
80%.
<unk> got some new flow arrangements.
With existing providers are capacity there. So we have some good optimism on growth going forward with that in the C&I space, mainly our sustainability you can see we had a key driver we were able to close.
$36 million solar tax deal, which we're real happy about and then you've got some increases going on now in our sustainability <unk> type lending.
So again those are different segments within that C&I C&I impact lending that we feel are but real.
<unk> going forward and then I think again, what first of all I talked about.
Sorry, starting to move and then also on the multifamily side, that's been an area, where it's been Enbrel decline.
And we're already actually starting to see things in the pipeline and the new folks that we brought in so that gives us the call dropped and we're trying to keep it measured right. We don't want to get ahead of ourselves, but we do think that we're in a spot where we can to keep building on this momentum.
Okay, that's really helpful.
And just to follow up on your NII guidance of I believe $1 84 to 190, <unk> Q4 2020 Q.
Obviously decrease your cap quite a bit.
And the fourth quarter, what level of cash are you assuming for your guidance and how should we think about it.
Factoring of NIM over the course of 2022.
Yes, so cash it's bit of a mix right. Our overall balance sheet growth is only about 5%, but then when you think about kind of the loan growth targets exceeding the balance sheet growth be obvious function as the decrease in cash so we're targeting a $100 million of cash.
Speaker 1: targets exceeding the balance sheet growth, the obvious function is the decrease in cash. So we're targeting $100 million of cash in terms of kind of a year-end balance.
In terms of kind of a year end balance.
Speaker 1: We'll manage to do that over the course of the year, but that's sort of where we're trying to go. There's a little bit of overall balance sheet growth that's baked into our model, but also a little bit of mix shifting to be able to deploy out of that cash and into loan development for the NII drivers.
We'll manage to that over the course of the year, but that's sort of where we're trying to go so there's a little bit of overall balance sheet growth thats baked into our model, but also a little bit of mix shifting to be able to.
Kind of deploy out of that cash into.
Into loan loan development for for the NII drivers.
Speaker 2: I'm sorry, did I answer the whole question? I might have missed a piece you asked in there. It's the trajectory of NIMS, is it? Oh, yes. At the bottom.
Im sorry to ask answer the whole question of matters Mr. Pete.
Mr trajectory.
Is it is it Oh, yes.
And again.
Speaker 1: Yeah, I think, again, I think the trajectory, I focus a little bit more on growing the NII, just mainly because that sort of drops right into the revenue line. But on the margin side, I do think we're at the...
Yes, I think again, I think the trajectory and I focus a little bit more on growing the on growing the NII.
Just mainly because thats sort of drops right into the revenue line, but on the margin side I do think we're at the we're at.
Speaker 3: We're at a plateau level, you know, and again, I'm not really thinking even as much as, you know, what would happen to our margin on our rates, more just on the shift from, you know, from low-interest-earning cash and sort of short-term low-interest-earning securities into more, you know, meaningful yields within the loan portfolio, so I do see, you know, or I do hope that we'll have a rising NIM that's complemented by the increase in the NII to go along with that.
Kind of plateau level.
And again I'm, not really thinking even as much as what would happen to our margin on that basis.
It's more just the shifts from from low interest, earning cash ins and sort of short term low interest earning securities into more.
Meaningful.
Yields within alone.
Within the loan portfolio, so I do see.
Do hope that we'll have a rising NIM that's complemented by by the increase in the NII to go along with that.
Great. Thanks for taking my questions.
Speaker 4: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate that your line is in the question.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
Our next question comes from Chris O'connell with <unk>. Please proceed with your question.
Speaker 4: Our next question comes from Chris O'Connell with KBW. Please proceed with your question.
Good morning.
Good morning, Chris.
<unk>.
Speaker 5: I just wanted to start off on the growth this quarter, obviously, you know, really strong across the board here. Just wondering, was there any, you know, purchases or, you know, SNCC or participations kind of involved in the long growth this quarter, or would you kind of characterize it as all organic?
Just wanted to start off on the growth this quarter obviously.
Really strong across the board here.
I'm just wondering was there any.
Purchases or.
Nick.
Or participations kind of involved in the loan growth this quarter or would you kind of characterize it is all organic.
Speaker 1: There's a fair amount of purchase, you know, but what I'm more happy about is there's actually a fair amount of organic as well. So, you know, I think if I were to roughly break it out, it'd probably be about...
There is a fair amount of purchase.
I'm more happy about it is it's actually a fair amount of organic well so.
If I were to roughly break it out probably be about.
Speaker 1: 60% of that would be organic and 40% would be in a purchase type of capacity.
60%, 60% of that would be organic and 40% would be in a purchase type of capacity.
Speaker 1: You know, again, some of this is historical. It's not like we went out and bought, you know, new packages just to kind of settle on loan growth, it's been more development of existing relationships. Like this consumer flow that I talked about before, you know, we've been able to increase that capacity in Metro with that $45 million of growth this quarter. We did have a multi, I'm sorry, a warehouse participation.
Again some of this is historical it's not like we went out and bought.
New packages just to kind of settle on loan growth has been more development of existing relationships like this consumer flow that I talked about before we've been able to increase that capacity and that drove that $45 million growth. This quarter, we did have a.
A multiyear I'm sorry, a warehouse participation that we that we did this quarter as well, which added a little bit of growth.
Speaker 1: that we did this quarter as well, which added a little bit of growth that's not what I would guess call organic. But outside of that, I think we've had a decent mix of kind of the way we've tried to manage liquidity through the purchasing and also a jumpstart or kind of a continuance really of our impact organic lending.
Thats not what I would just call organic but outside of that and I think we've had.
Mexico kind of the way we've tried to manage liquidity through the purchasing and also a jumpstart and or kind of a consumer and failure of our impact.
Organic lending.
Great.
Speaker 5: Great. That's helpful. And then appreciate the slide and the guidance on the tax credit investments going forward here for 2022. Just wondering where do you guys see the tax rate shaking out for the year?
That's helpful and then.
I appreciate the slide in the guidance on the.
Tax.
Credit investments going forward here for 2022.
I was wondering where do you guys see the tax rate.
Shaking out for the year.
Speaker 1: uh on a on an effective text are you talking about yeah
On a on an effective tax and you're talking about.
Yes.
Speaker 1: Yeah, I think we've got it marked right now at about 2545, 2545.
Yes.
Got it Mark right now is about $25 45.
Four five.
Speaker 3: That's what we're projecting for ATR and I think.
That's what we're projecting for ACR and.
Last year, we were pretty close to that we had a little bit of a return to provision adjustment that flowed through in the fourth quarter that was related to some of the early solar tax initiatives that we think that we can.
Speaker 1: Last year, we were pretty close to that. We had a little bit of a return provision adjustment that flowed through in the fourth quarter that was related to some of the early solar tax initiatives that we first got into in 2020. But I think now that we have a full understanding of how to manage those investments, I think our tax rates should remain very consistent throughout 2022.
First got into in 2020, but I think now that we have kind of.
Full understanding of how to manage those.
Investments I think our tax rate should remain very consistent throughout 2022.
Great.
Speaker 5: Great. And then as you guys are kind of, you know, looking at the asset growth for 2022, it sounds like, you know, loan growth should be strong and cash coming down. How are you thinking about the overall securities book kind of filling the gap there and then, you know, the split between kind of pace versus more normal securities?
And then as you guys are kind of looking at.
Asset growth for 2022, and it sounds like loan growth should be strong and cash coming down how are you thinking about the overall securities book kind of filling the gap there and then the split between kind of pace versus more normal securities.
Yes.
Speaker 5: So, we'll continue to use the securities portfolio to deploy excess liquidity. We also have some resale agreements out there in the short run while we develop and continue to book loans. But I think when we think about the rest of the year, we actually are hopeful that the AFS portion of our...
So we'll continue to use the securities portfolio to deploy excess liquidity. We also have some some resale agreements out there.
In the short run while we while we while we develop and continue to.
To book loans, but I think when we think about the the rest of the year. We actually are hopeful that the <unk> portion of our strategic portfolio come down a bit.
Speaker 1: portfolio come down a bit. If all of our projections sort of worked out the way we want, we'll be able to trade out a little bit of some of the shorter-term securities that we've been in to try to pick some yield, and that wouldn't necessarily be a bad thing.
All of our projections sort of worked out the way we want we will be able to trade out a little bit of some of the shorter term securities that we have been in to try to take some yield.
And that wouldn't necessarily be a bad thing.
Speaker 1: Obviously, trading into higher yielding loan rates, but then on the flip side, we do see another $160, $170 million of net growth in the PACE world, and that's a combination of our C-PACE and our PACE.
Obviously, it's trading too into higher yielding loan rates, but then on the flip side, we do see another 160 $170 million of net growth in the base case world and Thats, a combination of our C pace and our pace. So I think overall securities would be up.
Speaker 1: I think overall, securities would be up, you know, slightly about $75 million, but the mix would be, you know, a rundown on the AFS and a ramp-up of the HTM, which contains the PACE securities.
On slide.
<unk> $75 million, but the mix would be.
Rundown on the RFS and the ramp up of the HTM, which contained the pace securities.
Yeah.
Speaker 5: Okay, great. That's helpful. And then...
Okay, Great that's helpful.
And then.
How are you guys looking at or where do you kind of expecting.
Speaker 3: How are you guys looking at or what are you kind of expecting for political deposit growth going forward? Bounces are more or less flat this quarter and it seemed to be up a little bit to start off the year.
For political deposit growth going forward.
Balances are more or less flat this quarter.
It seemed to be up a little bit to start off the year.
Speaker 1: Yeah, so political deposits this year, obviously, we're going to be coming into a congressional election year. We're actually predicting somewhere in the range of.
Yeah, so political deposits. This year, obviously, we're going to be coming into a congressional election year.
We are actually predicting somewhere in the range of.
Speaker 3: $500 million of additional deposits that we're going to be generating out of the political business.
$500 million of additional deposits that we're going to be generating out of the political business.
Speaker 3: you know, between this, you know, really this quarter and the end of the third quarter. And then we expect a subsequent runoff of that in fourth quarter of about $600 million. So, you know, we think we're going to end up, you know, probably around $900 million on a baseline basis kind of going forward with political deposits, which, you know, continues to sort of grow that fundamental core of the political deposits. But there will be some.
Between between this really this quarter and the end of the third quarter.
And then we expect a subsequent run off of that in the fourth quarter of about $600 million. So we think we're going to end up probably around $900 million.
On a baseline basis kind of going forward with political deposits, which continues to sort of grow that fundamental core of the political deposits, but there will be some some lumpiness in our deposit growth during the first few quarters of this year.
Speaker 1: some lumpiness in our deposit growth during the first few quarters of this year as the election cycle ramps up.
<unk> cycle ramps up.
Yeah.
Speaker 5: Okay, that's helpful. Thank you.
Okay. Thanks.
That's helpful.
Thank you.
And then.
Speaker 4: Last question for me is just how are you guys thinking about, you know, the trend of the reserve to loans going forward?
Last question for me is just how are you guys thinking about the trend of the reserve to loans going forward.
In terms of the overall coverage ratio.
Yes exactly.
Yes, okay.
Speaker 3: Yeah, okay. So, right now, I actually think we're in a good spot. I think we finished at 108, you know, somewhere in that 110 to 115 range is probably, you know, good guidance, you know. I think 115 would probably be more where we would end up. You know, again, just a reminder, we're not a CECL adopter yet, so there's, you know...
So right now I actually think we're in a good spot.
I think we finished at 108.
We're in that 110 to $1 15 range is probably.
Good guidance I would take 115, we'd probably be more where we would where we would end up.
Again, just a reminder, we're not a seasonal adopter yet so there is.
Speaker 3: There's potential for us to have a bit of a reserve build throughout this year as we start to model out what the CECL impact would be for us. But in general, kind of where we are right now from a coverage ratio, I like where we're at. I love the new ratios relative to our coverage on non-performers and non-accrual loans.
There is potential for us to have a bit of a reserve build throughout this year.
Start to model out what the seasonal impact would be for us, but in general kind of where we are right now.
The coverage ratio.
I like where we're at I love, the kind of the new ratios relative to our coverage on non performers and non accrual loans.
Speaker 3: So, you know, I think we'll we'll manage to that number.
So I think we will manage to that number.
The best we can.
Speaker 1: the best we can, and particularly, you know, it's functional to loan growth, right? So if we have loan growth, then, you know, we are seeing incremental increases in the allowance. But from a coverage point of view, I think ranging it between 110 and 115 is probably a good estimate.
And particularly.
It's functional to loan growth right. So if we have loan growth.
We ought to see incremental increases in the allowance, but from a coverage point of view I think ranging between 110 115 is probably a good a good estimate.
Okay, Great. That's all I had thank you.
Speaker 5: Okay, great. That's all I had. Thank you. You're welcome.
Speaker 4: Thank you. There are no further questions at this time. I'd like to turn the floor back over to management for any closing.
Thank you there are no further questions at this time I'd like to turn the floor back over to management for any closing remarks.
Great. Thank you, operator, and Janet Alan Chris.
Speaker 6: Great. Thank you, Operator and Janet, Alan.
Speaker 6: for your questions and the questions that I'm sure will come throughout the day. We do appreciate your time and we appreciate your continued...
For your questions and the questions that I'm sure will come throughout the day.
We do appreciate your time and we appreciate your continued interest.
Speaker 6: We think that we have the opportunity.
We think that we have the opportunity to really build continue to build momentum from here.
Speaker 6: to really build, continue to build momentum from here. I've been speaking with many of our customers about emerging strategies for our loan and trust business and about the acquisition of ABOC. And I've seen that that's been met with a lot of enthusiasm and genuine interest on their part as well.
I've been speaking with many of our customers about emerging strategies for a loan and trust business and about the acquisition of <unk> and <unk>.
Stephen it's been met with a lot of enthusiasm and genuine interest on their part as well. So when we talk about doing good for more customers and developing new customer relationships that we can.
Speaker 6: So, when we talk about doing good for more customers and developing new customer relationships that we can offer those same mission-driven services to, we think it's pretty exciting.
After those same mission driven services too.
Think it's pretty exciting.
Speaker 6: There's also just a real energy around where we're headed from here, and I trust you'll continue to follow us and join us on the journey.
Also just a real energy around where we're headed from here and I Trust you will continue to follow us and join us on the journey.
Speaker 6: I look forward to coming back to you next quarter and talking to you about the early results of implementing our new strategies, more details on incorporating ABOC into the amalgamated family, and about the other initiatives that we look forward to share with you at that time. So thank you again for your time, and we look forward to continuing the dialogue.
I look forward to coming back to you next quarter and talking to you about the early results of implementing our new strategy.
More details on incorporating <unk> into the amalgamated family and about the other initiatives that we look forward to share with you at that time.
You again for your time, and we look forward to continuing the dialogue.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Speaker 4: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Yeah.
[music].
Yes.