Amalgamated Financial Corp. (NASDAQ:AMAL) Q4 2023 Earnings Call Transcript

Janet Lee: Okay, that’s helpful. Thanks for the clarification. And lastly, on pay securities, so nice origination number, but some big offset with the pay downs. It looks like you keep originating at a, I mean, at a stronger pace and what you guide to in terms of quarterly pace securities growth, but if you look at like on a net basis after paydown, normal levels of paydown for 2024, is $35 million to $40 million per quarter is still a good pace to assume? Any reason why you would expect higher versus lower pace on both commercial and residential?

Jason Darby: That’s a really good question. I think the $35 million to $40 million is a comfortable mark for us to communicate for the future quarters. Part of the PACE arrangement really depends on the production flow. And we’re not always able to predict with any certainty how much it’s going to be greater than what we normally guide to. I think the payments in this particular quarter are higher than normal. We saw some prepayments that we were not expecting relative to commercial pace. And we also see the normal seasonality of the year-end tax payments that provide a little bit of a higher netting effect. But in terms of production, I think the R-PACE is relatively stable. And when I usually quote that $35 million or $40 million, I’m thinking mainly of the R-PACE securities, C-PACE is somewhat selective.

And as we find opportunities, we’ll look to book those particular assets. In terms of what we’re thinking about from an opportunity space without thinking about flow, we see roughly $50 million to $100 million of potential C-PACE opportunities throughout this year, Janet. But again, coming back to that $35 million or $40 million, I don’t normally include C-PACE in that thought process. That’s normally my R-PACE flow. And so, on top of that, you could potentially see another $50 million to $100 million in C-PACE throughout the year, albeit I don’t see anything immediately happening in the first quarter, but there is still a possibility something could, but I don’t see anything immediate in the first quarter

Janet Lee: Okay. And sorry I lied. If I can squeeze in just one more question. Sorry if I missed this in your remarks. So basically, all-in, given the repricing — the benefit of the fixed asset repricing and the deposit repricing down that’s expected for 2024, can we assume a steady gradual improvement in NIM? Is that what is baked into the 2024 guide?

Jason Darby: Yes, Janet, that is included in the 2024 guide. I did not specifically comment on our expectation on margin in my opening remarks, but the way that we’ve had planned out, we do think there is a possibility — a good possibility of incremental, steady margin expansion, particularly given the turning over of the balance sheet from a loan perspective. We have about $375 million or so of loans are going to mature and need repricing during the year, about $225 million of those — is related to our commercial lending portfolio. So great opportunity to redeploy into some of the things we talked about earlier with our sustainability, C&I and our impact real estate. And again, as I mentioned, we have a nice funding mix changing that’s going to occur during the first half of the year with about $220 million of term debt or brokered CDs maturing as well.

And with the political deposit balances and other deposit balances that we’re seeing come into the bank, we think there’s a great opportunity to be able to offset any potential increases in the cost of funds on the deposit side with that mix shift down on the wholesale borrowings or wholesale fundings. And so, it’s reasonable to assume that we should have incremental growth on a steady and consistent basis in the margin through 2024. That said, lots of things could occur during the year. And obviously, as we see events unfold and if we see increased pressure on cost of funds or there’s other macroeconomic factors that occur that could change the outlook, that margin expansion may be a bit more muted or even compress. But all things equal and based on the outlook that we see right now, we do think there is an opportunity for expansion.

Janet Lee: Great. Thanks for taking my questions.

Jason Darby: Thanks, Janet.

Operator: [Operator Instructions] Our next question comes from the line of Chris O’Connell with KBW. Please proceed with your question.

Christopher O’Connell: Hey. Good morning.

Priscilla Sims Brown: Good morning.

Jason Darby: Hey, Chris.

Christopher O’Connell: Hey. Just wanted to make sure the off-balance sheet deposits in the fee that you guys are getting off of those, that’s included in the core PPNR guide, right?

Jason Darby: That’s a great question. That is not included in the core pre-tax pre-provision guide. The reason being is that it’s very difficult to predict how that’s going to be able to play out over the course of the year. So we’ve elected to exclude that from the pre-tax pre-provision guide. And we’ll report it as a separate number. So you can clearly see it in upcoming quarters. But we don’t want it to be something that could be baked into forecast, simply because a lot can change with regard to the political election cycle. And it’s really difficult to actually predict how much we’ll have available at any one point in time to continue to push into the off-balance sheet strategy.

Christopher O’Connell: Got it. That’s helpful. And do you have a sense of just if they, let’s say, they were to stick around off-balance sheet for like the entirety of the first quarter, just what that impact would be?

Jason Darby: All things equal and based on the way we have it structured right now, I could see that contributing somewhere between $1 million and $1.5 million of non-interest income for the quarter.

Christopher O’Connell: Great. That’s helpful. And then — so the increase, I think, 22 million of the criticized and classified. I think you guys said in the prepared comments, that 18.7 million was due to one C&I downgrade. Can you just kind of walk through any details around that credit?