Q3 2022 Amalgamated Bank Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to the amalgamated Financial Corporation third quarter 2022 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.
Under this conference call is being recorded I would now like to turn the call over to Mr. Jason Darby Chief Financial Officer. Please go ahead Sir.
Thank you operator, and good morning, everyone. We appreciate your participation in our third quarter 2022 earnings call with me today is for Silicones, 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.
Okay.
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 1995, we 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 slides two and three of our earnings slide deck as well as our 2020. One 10-K filed on March 11th 2022 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.
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 me now turn the call over to Priscilla.
Thank you Jason and good morning, everyone. We appreciate your time and interest today.
Morning, I will provide an update on the success that we are achieving executing on our growth for good strategic plan highlighted by our second consecutive quarter of record earnings.
Jason will then provide a more in depth review of our third quarter financial result.
Core tenants of our strategy are to accelerate loan growth and improve our profitability, while managing our risk exposure prudently growing our positive impact on society.
Coming into this year I've spoken often navarre desire to be the most improved bank in the country for financial performance metrics I am proud to say that our quarterly results demonstrate that we are firmly on the right path.
In a short few months amalgamated will celebrate its centennial anniversary Ed the U S banking institution and I couldn't be more inspired by the team we have in place to propel this great bank into its next centennial.
Diving into our quarterly results I have four key metrics to emphasize on today's call.
We reported another record quarter of earnings at <unk> 74 per share an increase of 11 cents per share or 17, 5% from the previous quarter.
While core earnings increased by an even greater 17.9% from the linked quarter.
Second we delivered six 1% loan growth as compared to the linked quarter, representing our fourth quarter in a row nearly at or above 5% growth.
Additionally, pace assessments increased $115 million to $857 million as compared to the linked quarter, which when combined with our loan growth represents very strong asset growth in the quarter.
Third our average deposits increased by $191 million to $7 3 billion.
Reflecting a strong quarter for deposit attraction in an increasingly competitive deposit environment.
And fourth our strong loan growth combined with our low cost deposit led to net interest margin expansion of 47 basis points to three 5% in the quarter.
The success, we are achieving as a result of the concerted steps that we took to expand our commercial banking team, adding experienced lenders in segments of the market that fit with our core mission and values, including sustainability workforce housing economic Justice and community financing.
These bankers are augmented by the hiring of portfolio managers and underwriters we.
We have also reorganized our banking teams on a national basis to unlock the substantial lending opportunities that we believe exist today, not only with new customers, but also current customers of the bank.
Importantly, we have been judicious in our hiring to ensure that we are earning an appropriate return and utilizing our improving profit for further reinvestment in other areas of our business.
Well, we're having strong success growing our loan portfolio. We are also in an advantaged competitive position given our low cost deposit gathering franchise.
Deposit base is made up of a wide ranging group of clients from all of our market segment.
Natalie share our views.
We believe we have a durable competitive advantage and are confident we can continue raising deposits. During the current liquidity tightening as a result of the federal reserve continuing to raise its benchmark interest rate to combat inflation.
Through the first 300 basis point that fed rate increases we are seeing benefits from both our decision to maintain our asset sensitivity and our improved loan growth that we have been delivering.
This is driving significant margin expansion as our NIM improved to three 5% in the third quarter quite an improvement from the 275% at the second quarter of 2021, when I joined the bank.
I am, particularly proud of the improvement in our return where our return on average assets has expanded to 115% from six 5% in the 2021 second quarter already exceeding our target of 1% by year end of the year.
While we have accomplished a tremendous amount over a short period of time, we know there's much more to do as we reposition amalgamate it for the next leg of growth.
I have spoken often about amalgamated history being among the first to embrace the concept of banking for good while never wavering from our century long mission of empowering organizations and individuals to advance positive change.
<unk> has earned and lit its reputation as America's socially responsible bank.
Sometimes I ponder the gravity of what being a bank for 100 year mean.
Importing customers and communities through multiple periods of economic highs and lows valley.
Valuing and prioritizing the needs of working people without discrimination.
And surviving and thriving in an ever consolidated U S banking system.
There are very few banks in the country that can say theyre in the 100 year club.
The charting our next centennial should be quite a ride.
This is a nice segue to update you on our digital transformation journey that I introduced in our second quarter call.
We see a tremendous opportunity to tire commercial business into a re imagined consumer business.
And reach through our commercial customers to their members for instance, if we're doing business with a large not for profit we want to attract their members and donors who are naturally aligned with Amalgamated's mission.
While mission alignment is critically important we must also offer products and services that are competitive and meet their needs.
To do this I'm very excited that we were able to recruit a highly capable executive from USAA bank during the second quarter to lead the effort.
We are well into the process of evaluating our product delivery platform with a focus on gathering customers in selling our products digitally.
We recognize that investments will need to be made but it was the case with our lending strategy, we will make disciplined choices funded through profitability with a requirement for timely returns.
We will also increase our investment in our brand in support of issues that are consistent with the social responsibility of the bank and important to our employees our customers and the majority of Americans.
I have consistently said that profitable growth as an outcome for us having a positive impact on issues that matter and I am proud of our accomplishments.
Despite being 100 years old we are still occasionally facing question about what it means to be a values led bank. We understand this and we encourage a sensible dialogue to build a better understanding of views.
The step we took to support law enforcement through better reporting of potentially illegal firearms sale was understandably a sensitive topic. However, we continue to also stand with legal gun owners and fully support legal gun sale right.
While we arent the only company to take common sense position I remind our investors that our customer care deeply about doing business with a bank that invest their deposits in line with these values.
This strong customer intimacy is a true competitive advantage for us and one that is sustainable through various business cycles.
Being a great and socially responsible bank is our number one priority on business fundamentals such as earnings credit quality liquidity and capital management. We believe we now compare favorably to our peers had.
I've been pleased with our stock performance during 2022, and I am delighted for our shareholders, who believe in us as a responsible investment.
While there is economic uncertainty ahead, we remain cautiously optimistic as our bankers continue to expand amalgamated into growing markets such as climate with significant growth potential that we believe are less subject to economic downturn.
I am excited about moving amalgamated into its next Centennial and the next phase of our growth for good strategy. Let me now turn the call over to Jason.
Thank you Priscilla.
Net income for the third quarter of 2022 was a record $22 $9 million or <unk> 74 per diluted share compared to $19 6 million or 63 per diluted share for the second quarter of 2022.
The $3 $3 million increase during the quarter was primarily driven by an $11 $1 million increase in net interest income, partially offset by a $2 $5 million increase in provision for loan losses.
A $2 $2 million decrease in noninterest income.
A $1 $9 million increase in noninterest expense and a $1 $2 million increase in income tax expense related to our increased pre tax income.
Yeah.
Beginning on slide five.
Exclusions related to solar tax equity investments were a $1 $3 million loss on accelerated depreciation for the third quarter of 2022.
Because of the income statement volatility associated with the accounting for these investments we believe metrics, excluding the timing impact of tax credits or accelerated depreciation is a helpful way to evaluate our current and historical performance.
Core net income excluding the impact of solar tax equity investments our non-GAAP measure.
For the third quarter of 2022 was $24 8 million or <unk> 80 per diluted share compared to $20 9 million or <unk> 67 per diluted share for the second quarter of 2022.
Okay.
Turning to slide seven deposits at September 32022 were $7 2 billion, a decrease of $139 million from the second quarter of 2022, However average deposits for the third quarter increased nicely by $191 1 million to $7 3 billion.
The decline in spot balances was primarily related to the timing of our pension and benefit fund clients normal payroll withdrawals as well as the first leg of political deposit run off as the midterm election in early November nears.
Noninterest bearing deposits represent 56% of average deposits and 54% of ending deposits for the quarter ended September 32022, contributing to an average cost of deposits of 14 basis points in the third quarter of 2022 a.
The six basis point increase from the previous quarter due to our decision to reprice in response to the rising interest rate environment.
Deposits held by politically active customers were $1 $2 billion as of September 32022, a decrease of $123 $7 million on a linked quarter basis as noted on our previous call political deposit trends are difficult to predict and we have seen strong spending by candidates earlier in the cycle as reasons tightened across the country.
As a result, we now expect our political deposits to bottom at approximately 0.7 to zero point $8 billion.
In the fourth quarter when the midterm election cycle concludes before starting to rebuild in the first quarter of 2023.
Turning to slide 11, total loans receivable net of allowance and deferred fees and costs at September 30 of 2022 were $3 8 billion.
An increase of $222 million or six 1%.
Third to June 32022.
The increase in loans was primarily driven by a $95 $9 million increase in residential loans.
$61 $7 million increase in commercial and industrial loans of $41 $4 million increase in our consumer and other loans due to solar loan originations.
And a $31 $3 million increase in multifamily loans offset by a $4 $3 million decrease in construction and land loans and a $3 million decrease in the commercial real estate portfolio as we selectively derisk our exposure in metropolitan areas.
Our continued focus on credit quality improvement in the commercial portfolio resulted in $16 $9 million of payoffs of criticized or classified loans the yield on our total loans was 4.11% compared to 386% in the second quarter of 2022.
On slide 12, net interest margin was three 5% for the third quarter of 2022, an increase of 47 basis points from three 3% in the second quarter of 2022.
The margin increase compared to depreciate in quarter was driven by large increases on floating rate yields from interest, earning assets, partially offset by increases in cost on interest bearing liabilities.
Repayment penalties earned in loan income contributed four basis points to our net interest margin in the third quarter of 2022 compared to two basis points in the second quarter of 2022.
Core noninterest income.
Excluding the impact of solar tax equity investments and non-GAAP measure was $7 $5 million for the third quarter of 2022 compared to $8 $7 million in the second quarter of 2022, a decrease of $1 2 million was primarily related to losses on sale of nonperforming loans.
Core noninterest expense another non-GAAP measure for the third quarter of 2022 was $36 3 million, an increase of $2 $3 million from the second quarter of 2022.
This was primarily driven by a $1 $5 million expected increase in compensation and employee benefits as we continue to invest in our long term growth strategy and a <unk> $4 million increase in professional fees.
Looking forward, we expect our noninterest expense to modestly rise as we make investments in our brand to grow our digital consumer business is Brazil had touched on.
Moving to slide 16, nonperforming assets totaled $54 3 million or six 9% of period end total assets at September 32022, a decrease of $11 million compared with $65 3 million or.
Or eight 2% on a linked quarter basis. The decrease in nonperforming assets was primarily driven by a $5 $7 million pay down on one commercial and industrial loan as well as $3 9 million in residential loans that were sold.
As we continue to prioritize and implement actions to improve the overall credit quality of our loan portfolio. We also improved our criticized assets, which declined $22 8 million or 16, 8% to $113 million on a linked quarter basis.
The allowance for loan losses increased $2 6 million to $42 1 million at September 30 of 2022 from $39 5 million at June 30 of 2022.
Primarily due to increases in loan balances and an increase in qualitative factors.
At September 32022, we had $38 $2 million of impaired loans for which there was a specific reserve allowance of $5 2 million compared to $61 million of impaired loans at June 32022 for which there was a specific allowance of $6 $1 million.
The ratio of allowance to total loans was 1.19% at September 32022, and one 8% at June 32022, the ratio of allowance to nonaccrual loans improved to $212 five 1% at September 32022.
Provision for loan losses totaled $5 4 million for the third quarter of 2022 compared to $2 9 million in the second quarter of 2022.
The increase in the provision expense on a linked quarter basis, primarily driven by higher loan balances and increase in qualitative factors and $1 $6 million in charge offs related to nonperforming loans that were transferred to held for sale.
Yeah.
Moving along to slide 17, and 18, our core return on average equity and core return on average tangible common equity excluding the impact of solar tax equity were 19, 2% and 19, 9% respectively for the third quarter of 2022.
We repurchased <unk>.
$7 million of common stock under our $40 million share repurchase program and declared a quarterly dividend of <unk> 10 per share importantly, our capital position remains solid to support our ongoing growth initiatives.
Slide 19 shows a reconciliation of the change in tangible common equity and related tangible book value as expected during the quarter. The Federal Reserve Board continued cycles interest rate increases with a 75 basis point increase at each of the July and September meetings to fed is also a message further rate increases to occur in the fourth quarter of 2022 and in the <unk>.
First quarter of 2023.
Despite the considerable volatility during the quarter due to the rising interest rate environment, we proactively managed our securities portfolio to prevent outsized pressure on our tangible book value per share.
As a result, we saw a modest decline in tangible book value to $15 37.
As of September 32022, as compared to $15 69 as of June 30 of 2022, primarily driven by a tax affected mark to market adjustment to the fair value of our available for sale securities portfolio, and largely offset by quarterly earnings and capital management.
We're also pleased with our average tangible common equity of 6% for the quarter in comparison to six 7% from the previous quarter, indicating a stable capital position during another quarter of high volatility.
We believe the tangible common equity ratio is important to determine the likelihood of unrealized securities losses to potentially become realized and have established a general target of 6%.
As a reminder, during the previous quarter, we judiciously reduced our exposure to interest rate volatility in order to protect our book value with a significant transfer of $277 $3 million of available for sale securities to held to maturity.
While we were focused on driving loan growth to accelerate the earnings power of the bank. We are equally as focused on maintaining our strict underwriting standards to ensure the credit quality of our loan portfolio.
During the third quarter, our loan growth exceeded our expectations as our recently hired bankers have successfully built their pipeline and have started to close new loan originations that said, we anticipate loan growth to moderate in the fourth quarter to approximately 2% to 3% sequential growth led mainly by our commercial portfolios.
We remain confident in our current liquidity position.
Access to capital and borrowing capacity and our market, leading low cost deposit base supporting a resilient capital level as we triangulate to avoid incurring realized losses.
Importantly, fluctuations from Mark to market changes have no impact on our tier one capital position.
Looking to the remainder of the year. The forward curve suggests substantial rate increases through the remainder of 2022 and early in 2023.
<unk> economic uncertainty in the near term we are confident that we will exceed the high end of our previously provided ranges of core pretax pre provision earnings of $120 million and net interest income of $230 million by approximately $8 million to $10 million across both ranges.
As the fed continues to raise interest rates generally speaking the benefit to our net interest income from our asset sensitivity reduces so far we've experienced significant benefit to our net interest income following the first 300 basis points of rate increases going forward, we estimate an approximately $2 million increase in annual net interest income for each 25 base.
At this point increase in short term forward curve rates for the near term.
We remind investors that we expect approximately $400 million to $500 million of runoff in political deposits during the fourth quarter, which we expect to have a muting effect on interest income from rate increases during the fourth quarter.
As <unk> noted we were pleased with the bank's record results again this quarter as they firmly demonstrates the successful execution of our strategic plan to grow the bank, while improving profitability and returns.
Overall, our balance sheet remains positioned to benefit from the rising rate cycle, while our total deposit beta has been very low through the first 300 basis points of increases that has been increasing as the pace of rate increases is notably accelerated and we naturally expect our deposit beta to further increase as the rate cycle progresses.
That said, we believe our deposit beta will remain low compared to peers to deliver sustainable net interest margin and continued earnings growth.
With that I'd like to ask the operator to open up the lines for any questions operator.
Thank you we will now be conducting a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad and confirmation tone will indicate your line is in the question queue you.
You May 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 keys, one moment, please while we poll for questions.
Thank you. Our first question is from Alex <unk> with Piper Sandler. Please proceed with your question.
Hi, good morning.
Good morning, good morning.
Yeah.
First off I was just hoping Jason you can kind of just walk us through the moving parts in the balance sheet, we are expecting the political deposits to flow out in the fourth quarter. As you said is the expectation to replace that with borrowings temporarily or.
Do you have enough cash flow from the securities portfolio to offset at least some of that that outflow.
Yeah. Thanks, Alex for that question and great to talk to you again.
So, yes, I think there'll be some level of usage of short term borrowings, we still have a fair amount of cash too.
To deploy we've timed our resale agreements there was roughly $200 million of that at the end of the quarter or two.
To mature.
During the during the first half of the fourth quarter and so we'll be using that to match off against the political deposit outflow.
And then the.
The spreads on the securities portfolio that they have certainly gotten wider which has made it a little bit tougher to sell at a place where we think is appropriate from a from a loss taking point of view. So likely we will look to short term borrowings to fill the gap, while the political deposits exit the bank and then.
If things go as we are hoping and expecting as deposits beginning to rebuild in the first quarter on the on the on the next political cycle. We will look to move the short term borrowings off the balance sheet, so thats pretty much.
Kind of the direction on how we see the balance sheet working for the fourth quarter and what we think will be doing heading into the first quarter.
That's great.
Alright.
Well I just wanted to add to that Alex I think you know I know you know this.
But political deposits continue to represent less than 17% declined slightly in the quarter.
And in fact as you look at net new deposits.
Net nonpolitical depart deposits, we saw that across all of our customer segments, but primarily in the sustainability area.
We do think there are also ways to offset that across other customer segment.
That's great are you able to.
With some of the lenders that you brought on and presumably talking to new customers is there a deposit opportunity presented.
Three of them as well.
Okay.
Yes, yes.
Yes, yes.
The relationship bankers are exactly that the idea really is not to transact as you know we're looking for for key banking relationships.
And ordinarily.
We're looking for deposits to come along with lending with lending opportunities.
And also just a reminder, we still have a.
Fully built out deposit gathering franchise that focuses mainly on deposit based customers as well so the mix between the lenders and gathering deposit relationships as well as our existing franchise should be in a really good spot to continue to drive deposits that are outside the political base uplift episodes, referring too.
That's great.
And then historically your deposit betas have been pretty low and I know you alluded to that possibly going higher as we're expecting from everybody I'm just curious if youre seeing anything or hearing anything different from your customers. This cycle relative to the last cycle, just given how quickly rates have increased and and maybe they are a little bit more visible this time around.
Yes.
So it <unk> take.
Sorry go head Brazil.
Go ahead, Jason sorry, we're not in Illinois.
We can see each other well maybe I'll just start out bye bye.
Mentioning that DDA makes up about 56% of our deposits. So we still have a lot.
Low sensitivity to rate rises relative to industry peers in the market.
And as you know Alex back into 2017 28 team period.
And the rate rises there our deposit beta was only 3% compared to the market at around 20%.
We don't see a reason currently why our beta should behave differently from past right right right right cycles because of our customer mix is essentially about the same.
Yes, and then I'll I'll add to that.
We poll.
Our sales.
Sales leadership.
<unk> pulls the customer facing bankers on a regular basis, our executive leadership is.
Virtually daily now in touch with with sales leadership.
Regarding our customer feedback and.
And kind of sensitivity to rates and so far it's still been relatively.
Benign there hasnt been an incredible calling out for FERC.
For rising rates now that's sort of at the center on the margins are definitely have been some exception pricing that we have.
And thinking about in order to satisfy certain customers, but in general we've tried to be proactive so as rates have risen. We've we've done some repricing in each of the first and second quarters, and we think that that's been.
A nice offensive defensive move to to make sure that customers don't feel like Theyre missing an opportunity elsewhere and as rates continue to rise, we're anticipating being a little bit more aggressive in repricing strategies to continue to kind of follow the rates up and make sure our customers feel are appropriately compensated for there.
Apologize.
Great. That's excellent color and then just my last question is just I think you alluded to in the press release and we've talked in the past about how some of the commercial real estate success that you've had has been offset by allowing some loans that maybe.
We're not fully to your liking to run off the balance sheet and I'm. Just curious if that is the loans that are.
Maybe one day you didn't want to pursue a refinancing if we're to the point, where we're maybe that piece of the pie is done.
We're getting we're getting much closer to that being done and I think I'll, maybe I'll point out that we had another pretty decent size quarter of what I call, a treadmill effect, where we had.
Increasingly they take the multifamily portfolio for example, we've had an increase in the net portfolio balances.
But the reality of it is we had about $91 million of originations in the portfolio during the quarter offset by about $57 $58 million of payoffs or runoff that we're allowing on on select credits. So all of that you should be seeing in the and the corresponding criticized assets.
Movement, and we're down to the.
The Delta that we're measuring we're down to about $70 million between what's left in our classified and criticized versus our total non accruals in the commercial space and within that there still is an opportunity for continued improvement although that margin is shrinking so as we get a little bit further probably out past the fourth quarter I would expect that.
We'd be in a spot where originations would really be balance sheet opportunities for us.
And one thing to also notice that.
Because of the amount of opportunities were generating in the pipeline right now.
We definitely have the opportunity here to be a little bit more choosy than we've been in the past and so.
Credit quality on an ongoing basis is extremely important to us and we'll be we'll be managing our opportunities relative to the to the credit worthiness of the deal.
And maybe maybe being a little bit closer than than historical.
The liquidity market continues to tighten up a little bit.
Awesome, Thanks for taking my questions.
Thank you.
Have a great day.
Thank you. Our next question is from Chris O'connell with <unk>. Please proceed with your question.
Hi, Chris.
Hey, Chris Hey, good morning, Jason.
Yes.
Yes, I wanted to start off.
On.
On the margin here given the political.
Yeah.
Customer moves this quarter and the expectations for next quarter.
Obviously very strong.
NIM improvement.
<unk>.
And good outlook on the overall kind of the NII guide.
But just given how large the flows are in some of the earlier questions. I was hoping you could provide a little bit of color around how you see the margin moving.
We're the <unk> into the <unk> environment.
Yes.
I'm happy to take that facility if that's okay.
Yes sure.
Sure. Okay. So so in terms of margin I think there's still room for four expansion I don't see margin expanding.
In a dramatic fashion like we had in this quarter, probably nowhere near that heading into Q4, mainly I think youll see topline.
Improvement in the margin as we continue to benefit from the rate rises we're modeling and another 125 basis points between the November and December fed meetings.
And so I think with our asset composition mix, we will still see some margin improvement on the top side, but we are expecting.
Some corresponding increase on the interest bearing side simply because of what I was referring to earlier with with Alex that will.
We will probably end up looking a little bit more at our short term borrowings to fund.
Some of the some of the loan growth of some of the deposit outflows that will happen in the fourth quarter and so I think generally speaking the impact will be fairly neutral to the margin maybe a slight improvement overall and I think NII would follow very similarly in the fourth quarter as well.
Moving into Q1 and forward and we'll give more guidance for what 2023 looks like when we do.
Our fourth quarter call when we normally give guidance, but looking at Q1 and forward.
Again thinking a little bit about the political cycle historically theres been a nice rebuild of deposits that have started the first quarter. After a significant election, and obviously mid terms would qualify as one of those.
And therefore.
If we're able to move some of the new liquidity against the borrowings we should be able to see some margin expansion again in the first quarter of 2023, and then beyond that I'll reserve until we until we update you on full year guidance in 2023.
Got it and.
As far as the.
The increasing.
Data is.
In general on the deposit side.
Is 25% I think was maybe what youre using for the full cycle before is that still.
Similar to what Youre thinking about now and just can you just remind us that.
Total deposit or interest bearing data.
So the there was interest bearing data.
And generally speaking with the.
With a greater than 50, 50, DDA to be a mix or a nymex we.
Typically on total cost of funds just as a rule of thumb say about half of that is our total cost beta, but 25 was on Iga I think.
The rates have certainly risen very very rapidly maybe even more rapidly than we were thinking back when we gave our past guidance. So we're now looking at on a model basis about 33% data.
Going forward for for the next at least 125.
Basis points of rate increases.
Great now again.
That's a number obviously it'll it'll blend its way out theres CD repricing and other things that need to occur, but that's that's sort of a topline number four for beta as we're thinking about it.
Got it.
<unk>.
And then on the.
On the loan portfolio was the was there any residential mortgage purchases this quarter.
Yes, there were thanks for asking that we we had a decent amount of growth again in the resi portfolio, but the majority of that about $65 million were purchased pools.
That has specific CRA credit qualification.
And specifically in markets that are outside of New York, where where the bank can use additional CRA credit so which.
Sort of Opportunistically found pulls we had been working on them in the second quarter and we felt there was an appropriate time to to make those.
Make those asset purchases I do not see us, making any further purchases in the fourth quarter and we'll we'll re look at what we're doing in the purchase side of our resi portfolio for 2023 and update you on that next quarter.
Got it.
<unk>.
And then switching.
Gears too.
To the credit side.
Can you just talk a little bit about what youre seeing.
The solar.
Lending portfolio.
And what kind of yields you're getting there.
Just the overall outlook.
That you have in terms of credit quality and kind of risk adjusted returns.
Given.
This portion of the cycle and just remind us like.
If thats.
Floating rate and maybe what the spread is there.
Yeah.
Absolutely so.
We're now up to around and this and this is specifically in the consumer solar we're up to about $420 million of consumer solar book balances.
I think we're pretty close to where we want to be.
And that portfolio right now I would expect to see that.
The decline in terms of growth certainly heading into Q4 generally speaking the.
The consumer solar flow, we do that through through now three different arrangements.
Two of those arrangements, we have completed our our quota we pulled through.
As much as we could earlier on in the cycles that we werent.
Going into the fourth quarter and then we still have some remainder with an additional provider that will be probably far less than what you've seen in terms of the volume that we put on throughout the first three quarters of the year.
As they've been coming on right now there are about 675 to $6 50 somewhere in there.
I think it was a little bit lower as we brought them on during the quarter, but the more recent purchases have been <unk> 75, and we closely look at the charge off rates.
On those portfolios and.
Generally speaking, it's been between 75 basis points and 1% on the AR on the charge offs and we think that the risk adjusted return.
As appropriate for those for those assets.
The majority of the purchases or in a fixed rate position.
So as we buy them, they're obviously, they're locked in but.
I think in general again, we're in a good spot relative to our consumer solar appetite right now the charge off trend has been pretty steady if we look at it through the through the <unk>, it's been a very very stable number.
Over the past four quarters, and we think we're adequately covered from an allowance point of view should anything else tick up on us.
Okay great.
And then.
On the on the expense moves this quarter.
I guess like a little a little higher than I.
I had anticipated.
I'm wondering if you could go through any drivers there.
B any any offsets into the fourth quarter here and just in general how are you guys thinking about expense growth and I know you have a number of initiatives.
And kind of growth build outs coming on.
Over the next few quarters.
Yes happy to take that.
I think categorically, we were pretty tight quarter over quarter on most expense lines. The obvious drivers this quarter were really in our comp and benefits and in our professional fees. So I'll take a quick run through on the on the comp and benefits side, and then I'll touch on professional but.
Complement.
There was an expected increase at least through arlene's coming in the second and third quarter as we've rounded out our executive hires.
We did a bunch of hiring towards the end of the second quarter and on through the early part of the third quarter as well as filling out the remainder of our staffing plan for 2022, which largely included.
The rest of the sales bankers. So we started to see the first full quarter of true salary expense flowing through.
There are other elements that have gone through that I consider more transitory in nature.
Some commission expense was a little bit higher as a trail on some of the mortgage production.
The annual bonus accrual increased a little bit as well.
They're also as part of our hiring processes we've been.
As the markets kind of required we've had some sign on and some retention bonuses that have flowed through in the quarter.
And so I think those those two items, meaning like the compensation or the incentive compensation and the and the sign of the recruiting bonuses. Those to me are transitory I don't see those kind of following us through so the number that we're sort of at right now I think thats a good number to look at for the fourth quarter.
As we kind of fill out any last remnants of our hiring practices into the fourth quarter and then on professional fees I think theres two things here number one we've used some outsource firms to help us.
Finish up on some compliance and audit related requirements.
As we get towards the end of the year and Additionally, we've stopped taking.
<unk> expenses as noncore given this far away from from that particular transaction, there was a little bit of a tail tailwind or unnecessary tailwind, but the tail expenses that pulled through that we've just gotten a normal run rate that I wouldn't expect to see.
Coming forward as well.
Okay great.
And then lastly.
<unk> mentioned in the opening comments, but was there any share repurchases this quarter and can you just update us on how youre thinking about.
Utilization going forward.
Yes.
There was a very small amount of share repurchases this quarter, we deployed about $700000.
In repurchase activity.
We still have our share repurchase program and availability.
Open there is still about $28 million on that however, I think as we look out to.
To the economic forecast.
You can also look at some of the and continued volatility that's happened.
And the and the interest rate market.
Being.
Being a little bit prudent on capital deployment, and making sure we have a balanced approach towards towards.
Towards our tangible common equity I think has become a more important decision point for us so not saying that we're backing away from share repurchases at all or that we think our stock is expensive that's not the case, but again looking at it volatility and being unable to predict that and also knowing that we have <unk>.
So upcoming we've been a little bit more cautious or maybe I'll use the word prudent on on capital in the quarter to make sure that we're keeping ourselves in our in our target ranges of about 6% TCE.
And having appropriate capital available for for seasonal build if.
If market conditions worsen, then we need to deploy more and more.
More capital against that when we adopt in 2023.
Okay.
Got it.
That's all I had thanks for taking my questions.
Youre welcome.
Thank you there are no further questions at this time I would like to turn the floor back over to Priscilla for any closing comments.
Thank you operator.
Most of all thank you all on the line for your time today and for your continued interest in the bank.
We really do appreciate your questions. We know that we'll be following up with some of you over the coming days.
We are excited because we like talking about our optimism for the future of amalgamated.
We're also thrilled to see the tangible results of our strategy translate to another quarter of record results.
Fortunately, we are not standing still and we remain excited with the many opportunities that lie ahead of us as we work to grow amalgamated through $10 billion in assets. Thank.
Thank 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.
Yeah.