Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Amalgamated Financial Corp (AMAL, Financial) reported significant deposit growth with over $759 million in new deposits, led by political, union, and non-profit customer segments.
- The company achieved a net income of $26.8 million or $0.87 per diluted share, with core net income at $26.2 million or $0.85 per diluted share.
- Amalgamated Financial Corp (AMAL) saw a 13 basis point increase in its leverage ratio and a tangible book value per share increase of $0.88 to $20.61.
- The bank's non-political deposit growth has been well ahead of internal plans, reducing the need for significant borrowing through year-end 2024.
- Amalgamated Financial Corp (AMAL) is recognized as an industry leader in climate finance, with promising sustainable lending pipelines and international impact opportunities.
Negative Points
- The company experienced elevated consumer solar charge-offs, with a high net charge-off rate of 23 basis points, leading to an additional $1 million in reserves.
- Loan growth was muted by $87 million of commercial and industrial payoffs and paydowns during the quarter.
- The yield on total loans decreased by eight basis points to 4.68% due to $20 million of government-guaranteed C&I loans being put back to the government.
- Amalgamated Financial Corp (AMAL) anticipates recognizing $1.5 million to $2 million of net deferred loan costs in Q3, which will reduce net interest margin by approximately 10 basis points.
- The company expects political deposits to begin exiting during the third quarter, potentially impacting the balance sheet and deposit mix.
Q & A Highlights
Q: Can you give us an update on how your credit expectation on your rent-regulated portfolio has changed over the past quarter?
A: We feel really good about our real estate portfolio right now. We've had success with renewals on loans susceptible to market rate risk, particularly pre-1974 multifamily loans. We have been proactive with borrowers, ensuring no surprises at renewal. Our reserve ratios remain flat, reflecting a cautious approach.
Q: Should we expect the current net charge-off ratio for consumer solar loans to continue until we see a rate cut?
A: Yes, the current loss rate is a good proxy until we see a substantive rate decline. We are actively driving recoveries, but it's prudent to use the current loss rate for forecasting. We've increased our coverage ratio to 7% to account for potential ongoing higher charge-offs.
Q: Can you give us more details about your expectations on C&I growth and overall loan growth for the second half of 2024 and into 2025?
A: We are targeting about 4% loan growth for the full year, equating to $275 million to $320 million. For the third and fourth quarters, we expect $100 million to $120 million each, with $150 million to $185 million in climate-related loans by year-end.
Q: Can you give us some color on your deposit pricing competition and your NIM outlook for the third and fourth quarters?
A: We haven't seen significant deposit pricing pressure recently. We expect our cost of funds to remain stable in the third quarter. In the fourth quarter, we anticipate some margin pressure due to political deposit outflows but expect minimal impact, setting us up for margin expansion in 2025.
Q: Do you think the late change in the Democratic presidential candidate will affect the flow of political deposits in the third quarter?
A: No, we don't expect a decline. Fundraising has increased, and we are trending about $0.5 billion above our normal peak. The enthusiasm on both sides will likely continue.
Q: What are the average yields on the multifamily and commercial real estate loans set to mature in the back half of this year?
A: The yields are in the low 4% range for both multifamily and CRE loans. We expect to replace some higher-yielding C&I loans, which will slightly mute the overall yield improvement.
Q: Can you share your thoughts on operating expenses for the third and fourth quarters?
A: We are targeting a $157 million annual expense run rate, with quarterly expenses around $39.25 million for Q3 and Q4. If we track towards the higher end of our guidance, we may advance some project work, potentially increasing expenses to $158 million or $159 million.
Q: Can you provide an update on the nonpolitical deposit pipeline into the back half of the year?
A: We continue to see strong growth in nonpolitical deposits, particularly from not-for-profits and climate-related organizations. Our credibility and referral business in these sectors remain strong.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
