Amalgamated Financial Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
April 24, 2025

There are 6 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the Amalgamated Financial First Quarter twenty twenty five Earnings 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. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr.

Operator

Jason Darby, Chief Financial Officer. Please go ahead, sir.

Speaker 1

Thank you, operator, and good morning, everyone. We appreciate your participation in our earnings call. With me today is Priscilla Sims Brown, our President and Chief Executive Officer. Additionally, Sam Brown, our Chief Banking Officer is also here for the Q and A portion of today's call. As a reminder, a telephonic replay of this call will be available in the Investors section of our website for an extended period of time.

Speaker 1

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 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 Slide two of our earnings slide deck as well as twenty twenty four ten ks filed on 03/06/2025, for a list of risk factors that could cause actual results to differ materially from those indicated or implied by such statements. We will also discuss certain non GAAP measures during today's call, which we believe are useful in evaluating our performance.

Speaker 1

A 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.

Speaker 2

Good morning, everyone, and thank you for joining us. Over the quarter, we saw increased turbulence and uncertainty in the markets, a dynamic that rarely brings comfort to the industry or our investors. However, our long standing approach has not been to predict the future, but rather to remain vigilant and adaptable. We closely monitor emerging trends and are prepared to adjust our tactics swiftly in response to changing conditions. This disciplined approach has enabled us to build a resilient institution, one that is well positioned to thrive in challenging and unpredictable environments.

Speaker 2

For the past year or so, I've been talking about the strength of our balance sheet as a key driver of valuation and the strength of our capital position to support growth initiatives. But it's important to remember that these strengths also insulate us from adverse scenarios. As I speak to you today, our balance sheet boasts a low risk asset profile, including low commercial real estate lending concentration, high levels of immediate and two day liquidity, and return metrics at the top of our peer stack. Of course, of this is new, as we have been managing the bank this way for quite some time. And as you would expect, Amalgamated runs multiple risk based scenarios to test our ability to respond.

Speaker 2

Ordinarily, I would not be leading my comments with these observations, but not to do so given the recent macroeconomic and social environment would seem like

Speaker 1

a

Speaker 2

miss. So let's dig in a bit further. To me, the most important aspect of a healthy bank is the quality of its earnings streams. And well, our Q1 results really do speak for themselves. So let me just share a few highlights with you.

Speaker 2

Most notably, all of our key earnings metrics came in strong and as expected, showing again that at Amalgamated, we do what we say we will do. Core earnings per share was $0.88 supported by net interest income of $70,600,000 which was right within the guidance of 70,000,000 to $71,000,000 that we gave during our fourth quarter call. And we reported a strong net interest margin of 3.55%, within one basis point of our guidance. And while our core earnings and revenue declined modestly from the fourth quarter, this was expected as rate cuts from the previous quarter were fully recognized and we remixed the liability side of our balance sheet in the fourth quarter also expected to be the quarter with the most earnings pressure

Speaker 2

for the full year. Based on how we performed, we are confident in our projections for revenue growth and margin expansion throughout the remainder of the year and our full year earnings guidance remains unchanged. The main driver of our confidence starts with deposits. We experienced $446,000,000 of total deposit growth through the first quarter, which were broad based across our customer segments. These inflows allowed us to pay off $245,000,000 of short term borrowings that we utilized in the fourth quarter.

Speaker 2

Our political deposits increased $103,000,000 or 11% to $1,100,000,000 in the quarter, following nicely our historical pattern of rebuilding deposits after an election cycle. While we think our deposit gathering performance was remarkable, it is also encouraging to see our market segments are active. Our confidence continues with our balance sheet structure. As we have carefully managed our balance sheet to a generally neutral position regarding interest rate sensitivity, we continue to see reliable revenue streams. And our quarterly earnings contribute significant organic capital each quarter, allowing our Tier one leverage ratio to soar.

Speaker 2

Even as we have established 9% as our Tier one leverage threshold, this quarter we were delighted to return more capital than ever to our shareholders. We paid our dividend at $0.14 per share, and we repurchased around $3,500,000 worth of stock, bringing our combined payout ratio to over 30% of earnings. While there are several other bright spots for the quarter, the highlights I just mentioned really best illustrate the strength and stability of Amalgamated, strength that has been built over many years. And even though we are quite happy with these results, we nevertheless are taking a conservative approach given the uncertain environment that we're working through. As the federal government reduces funding to organizations across the country, as well as headcount at federal agencies, we expect some of our clients could be impacted.

Speaker 2

That said, we feel very good about our credit profile, and we'll be keeping higher levels of liquidity on balance sheet until we better understand the ultimate impact of these actions. Looking to the balance of the year, we expect C and I loan growth to remain somewhat muted in the second quarter with reacceleration more likely in the back half of the year, consistent with prior years. Importantly, we have many levers that we can utilize as we remain nimble and meet our asset generation goals. One lever is our commercial PACE franchise, where we are working on new flow partnerships, which will deliver lower face value originations, allowing us to better diversify volume. As we consummate new partnerships, we expect our C PACE originations to ramp up to an average of $15,000,000 to $20,000,000 of new originations per quarter in the back half of the year.

Speaker 2

C PACE is an area where we see a large growth potential and are working to expand given the strong credit profile and attractive yield of the product. Before turning it over to Jason, I want to take a moment and mention our recent exciting news of our planned move to a new New York City headquarters location in the mid-twenty twenty six, a long term investment that will position Amalgamated to continue attracting and retaining top tier talent. I am so grateful we've earned the ability to deliver a state of the art facility with best of breed amenities to our employees and our customers. I'll have plenty more updates on our move as the year progresses. As I wrap up my comments, I'm comforted by the knowledge, wisdom, and expertise that we have in both our board and our executive management team to manage through these current times.

Speaker 2

And while we know political challenges exist, you can expect calm and steady to be the key tenants of our ongoing strategy. And with that, let me turn the call back over to Jason.

Speaker 1

Good morning. We had another solid quarter. Starting off on slide three, net income was $25,000,000 or $0.81 per diluted share. Core net income, a non GAAP measure, was $27,100,000 or $0.88 per diluted share, reflecting the power and sustainability of our earnings. Overall, we are quite pleased as our results largely came in as we expected.

Speaker 1

Our net interest income was right in the middle of our guidance range and our margin was strong. Additionally, we delivered healthy deposit growth and core net income nicely built capital once again this quarter, which allows us to be more aggressive returning capital to our shareholders. Continuing to Slide four, we look at some of our key performance metrics during the first quarter. Starting on the left, our tangible book value per share increased zero nine one dollars or 4% to $23.51 And our core revenue per diluted share was $2.57 for the first quarter, a $0.10 decrease from the prior quarter. This decrease was due to an expected $2,500,000 decrease in net interest income resulting from the full effect of interest rate resets from the prior quarter, as well as interest bearing deposits moving back on balance sheet towards the end of the fourth quarter to replace the largely non interest bearing outflow related to the election cycle conclusion.

Speaker 1

Moving across to our returns, core return on average equity was 15.23%, a modest decline that was expected as we've continued to build organic capital through earnings generation. That said, we remain near the top of the pack and are well positioned to continue returning more capital to shareholders. Our core return on average assets held steady at a very strong 1.33%, demonstrating our earnings optimization at our current asset size. Regarding capital, our CET1 ratio remains at an industry leading level having improved 43 basis points to 14.32, demonstrating the strength of our balance sheet and the conservative risk based allocation of our capital while still generating top level earnings. Tier one leverage improved another 22 basis points to 9.22%, keeping momentum as Amalgamated continues to build capital.

Speaker 1

It's notable that we still built capital during the quarter that also saw our largest ever return of capital to shareholders as Priscilla mentioned earlier. Also during the quarter, our Board of Directors authorized a new $40,000,000 share repurchase program in March with which we plan to be aggressive given what we believe is currently very undervalued share price. And as per normal process, our Board authorized $0.14 per common share dividend this week to be paid in May. Going forward, we will continue to target a quarterly payout ratio of at least 20% to 25%, which includes both share repurchases and dividends. However, we may opportunistically choose to exceed that target.

Speaker 1

Our tangible common equity to tangible assets was 8.73%, representing a tenth consecutive quarter of improvement as we have now sold $851,800,000 of underwater securities since March of twenty twenty two. Turning to slide five, total deposits at 03/31/2025 were $7,600,000,000 an increase of $446,000,000 from the linked quarter. On balance sheet deposits increased by two thirty one million dollars or 3.2% to $7,400,000,000 We also moved $215,000,000 of deposits off balance sheet. Importantly, our broad based deposit strength in the first quarter positioned us to pay down all short term borrowings that were utilized to meet political outflows at the end of the election cycle. Political deposits were a significant bright spot, growing by 11%.

Speaker 1

Our non interest bearing deposits decreased to approximately 39% of average and ending deposits. Our average cost deposits increased seven basis points to 159 basis points driven by the remix to interest bearing deposits post election cycle conclusion. Conversely, interest bearing deposit costs dropped by nine basis points to 2.62% as rate cuts from the prior quarter were fully realized. That said, there were also some exception price upward adjustments toward the end of the quarter for some of our long term customer relationships, which pushed our average rate paid on money market deposits up six basis points from the prior quarter. Moving to slide six, we have added a slide this quarter highlighting our not for profit deposit segment to provide some enhanced disclosure for our investor community.

Speaker 1

The goal of the slide is to show our deposit exposure to five zero one(three) entities focused on charitable programs across sectors like climate, healthcare and immigration given the current news cycle. In terms of relative risk, we have identified our not for profit segment as having business characteristics that might be affected by potential executive orders. We do not believe our philanthropic or social advocacy segments share the same characteristics, although some clients in these two segments do maintain five zero one(three) status. At $1,370,000,000 our not for profit segment represents 18.5% of on balance sheet deposits at quarter end. Similar to our political deposits, this share of our deposit base is reflective of Amalgamated's very well diversified deposit franchise.

Speaker 1

We remind investors that our not for profit segment is highly valuable. Deposits have increased from $285,000,000 at year end twenty twenty to $1,400,000,000 at the end of the first quarter of twenty twenty five and has been one of our best growth segments. This segment growth has accelerated over the last four quarters as deposits have increased approximately 29% in the last twelve months. On Slide 10 in the deck, I will also discuss related lending relationships. Turning to Slide nine, net loans receivable at 03/31/2025 were $4,600,000,000 an increase of $7,000,000 or 0.2% compared to the linked quarter.

Speaker 1

Our loan growth in the quarter was primarily driven by a $20,300,000 increase in multifamily loans and a $7,800,000 increase in commercial and industrial loans offset by a $2,400,000 decrease in commercial real estate loans, an $8,900,000 decrease in consumer solar loans and a $9,800,000 decrease in residential loans. These three portfolios showing decreases this quarter are primarily in runoff mode and we did not expect to add any asset growth in the near future. Net loans in growth mode, commercial and industrial, commercial real estate and multifamily increased $25,800,000 or 0.9%. The yield in our total loan portfolio remained steady at 5% during the quarter. Moving to slide 10, we have added another new slide to highlight the benign exposure profile of our not for profit loan portfolio.

Speaker 1

There are $131,000,000 of total not for profit loan balances, which predominantly fall into our Community Empowerment Impact segment with the largest concentration being shelters for the homeless. Overall, these loans make up a very small portion of our total assets and show favorable risk exposure and performance metrics. Underwriting standards for these loans are strict with an emphasis on experienced borrowers with material cash equity and conservative fallback LTVs. Additionally, not for profit customers that hold loans with amalgamated constitutes $58,900,000 of our deposit accounts, a relatively small percentage of our core deposit book. Turning to Slide 11, as has been discussed, we experienced an expected decline in our net interest income to $70,600,000 in the first quarter.

Speaker 1

Overall, this led to the four basis point contraction in our net interest margin. Looking forward, we expect our NIM to increase modestly for the remainder of the year. Turning to slide 12, core non interest income was $9,100,000 compared to $9,500,000 in the linked quarter. A decrease was primarily related to lower commercial banking fees, a natural result of decreased transaction activity from political organizations following the election cycle conclusion. And this was offset by modestly higher income from our Trust business.

Speaker 1

As we have discussed in prior calls, we remain focused on improving our Trust business' performance, which will take time, and we do not expect meaningful improvement until 2026. Core non interest expense was $41,500,000 in the first quarter, an increase of $400,000 from the linked quarter. This was mainly driven by a $2,100,000 increase in professional fees related to expected increases in digital transformation deployment and partnership costs to evaluate growth requirements and provide other advisory services. This increase was partially offset by a $1,400,000 decrease in compensation and employee benefits expense. I'll point out that this quarter illustrates our prudent approach to managing expenditures to ensure we maintain our core efficiency ratio at an outer band of approximately 52%.

Speaker 1

Moving to slide 13, non performing assets totaled 33,900,000 or 0.41% of period end total assets at 03/31/2025, representing an increase of $8,000,000 on a linked quarter basis. The increase was primarily driven by an $11,900,000 increase in commercial and industrial non accrual loans, including one $8,300,000 loan that was placed on non accrual in the quarter. This was offset by the sale of $3,900,000 in non performing residential loans in Our criticized assets decreased $12,000,000 to $83,900,000 on a linked quarter basis. Net charge offs in the quarter were 0.22% of total loans and consisted of $1,700,000 in charge offs on our consumer solar loans and $800,000 in charge offs for small business C and I loans. Our criticized and classified loans declined by $12,000,000 largely due to payoffs of three delinquent commercial and industrial loans totaling $10,100,000 and the upgrade of $11,400,000.0 commercial and industrial loan.

Speaker 1

We did have a downgrade of $14,200,000.0 commercial and industrial loan to special mention and additional downgrade of small business loans totaling $1,100,000 Turning to slide 14, the allowance for credit losses on loans decreased by $2,400,000 to $57,700,000 The ratio of allowance to total loans was 1.23% at the end of the first quarter, a decrease of six basis points from 1.29% in the prior quarter. The decrease is primarily the result of improvements in the macroeconomic forecast used in the CECL model that mainly benefited our consumer solar portfolio. Excluding these consumer portfolios, coverage ratios were either flat or increased. We have also provided an allowance waterfall to bridge the change from the fourth quarter of twenty twenty four to the first quarter of twenty twenty five, as well as our ACL coverage ratio by loan type to provide more granularity and insight to our conservative approach to managing credit. Finishing on Slide 15, we are maintaining our full year 2025 guidance of core pre tax pre provision earnings of $159,000,000 to $163,000,000 and net interest income of $293,000,000 to $297,000,000 which considers the effect of the forward rate curve of 2025.

Speaker 1

Additionally, we estimate an approximate $1,800,000 decrease in annual net interest income for a parallel 25 basis point decrease in interest rates beyond what the forward curve currently suggests. Briefly looking at the second quarter of twenty twenty five, we are reasonably optimistic our net interest margin can expand two to four basis points from our Q1 mark as we anticipate modest balance sheet growth to a target of approximately $8,400,000,000 dependent upon projected deposit balances. As a result, we expect our net interest income to range between 72,000,000 and $74,000,000 in the second quarter. Wrapping up, we're delighted to deliver another solid quarter of results for our shareholders and we thank you for believing in us. We'll see you all again for our second quarter readout in July.

Speaker 1

And now operator, please open up the line for any questions. Operator?

Operator

Thank you. We will now conduct a question and answer session. Our first question comes from Mark Fitzgibbon with Piper Sandler. Please proceed.

Speaker 3

Good morning. First question I had, Jason, any color you could share with us on that $8,300,000 loan that went on nonaccrual this quarter?

Speaker 1

That we've had in our classified and criticized bucket for a while. It's the first time that it's moved into a non accrual position in this quarter, although we've been watching it for quite some time. I think in this space, had a situation where we've got some good news post the quarter close. One being in the form of a payment relative to accrued interest, and there's a little bit of cash that came into the deal. We're keeping a close eye on it.

Speaker 1

But the more important thing that we like to look at is in the evaluation of the credit from a non accrual perspective during the quarter, there is very sufficient collateral value to the credit, which allowed us to maintain no increase in our reserve coverage for that loan. It's something to keep a close eye on as we go forward and we think there is a good opportunity for a safe resolution to the credit but for the time being it's going to remain in non accrual status until we get a little bit more clarity on the final take out of this particular structure.

Speaker 3

So you mentioned it was a C and I credit, but what industry is it in?

Speaker 1

It's going to be in the solar section for now. It's in our solar book, and it's one of the credits that we've had for quite a while now. I'd say it's a good three or four year old credit at this point.

Speaker 3

Okay. And I I heard, Priscilla, your comments earlier about, you know, the challenges out there that exist. And I guess I was curious, are you seeing funding dry up at all for any of the clean energy or climate related projects that you all are involved with?

Speaker 2

No, we're not at all. We continue to have a pipeline there, and we don't see the impact. Sam, I don't know if you have any additional comments to make on that.

Speaker 4

Sure. Hey, Mark. Good morning. It's Sam. Priscilla's exactly right.

Speaker 4

I'll just add that, you know, on the market level, the demand for electricity continues to increase quite dramatically. Report after report continues to come out, we're seeing that capital is flowing into these markets to meet that investment need for that generation. Last thing I'll add is there was a great report that just came out from the National Electrical Manufacturers Association showing a 2% annual increase in energy demand up to 50% by 02/1950. So we are still seeing that investment come in. And Mark, the

Speaker 2

only other thing I'll add to that is that we continue to see that growth occurring across red and blue states. We don't think that this is if you're suggesting that maybe there'd be something that's going on in the political environment that would affect it, we're not seeing that.

Speaker 3

But I mean, Priscilla, I sort of am. I guess as I watch how the administration is dealing with institutions in a lot of different areas that have a different agenda, like for example Harvard, it just begs the question, what can you do or should you do to protect amalgamated from being sort of in the line of fire?

Speaker 2

My response to that would be that we continue to operate as a bank. What you saw today, and as you think about it over the last four years, our growth is really in core businesses that are pretty, have a lot of tailwinds when you think about market forces around them. And so that's our priority, just continue to operate very well as a bank. And then we

Speaker 1

do all the things that

Speaker 2

we talked about today, the idea that you maintain strong capital, strong liquidity, and you prepare yourself in that way for any downside that could occur. It served us well through other markets when the bank failures occurred. And we we think that that's the right approach to take now.

Speaker 1

Okay. And then last question. I'm sorry.

Speaker 2

That that that's fine. Go ahead.

Speaker 3

Was just last question. Jason, I heard your comments about being aggressive with the buyback program. Where are you willing to take the capital ratios down to? And just curious, seemed like the first quarter was an opportune time to buy back a lot of stock, but you didn't really buy that much back. So I guess any comments around that would be great.

Speaker 1

Yeah. Thanks for that comment. I think it's an important observation. Couple of things just on the quarter, I think at 3,500,000.0, we were more aggressive than we've been in quite some time. There's opportunity to do more, but you probably noticed we in the quarter, towards the end of the quarter, made a new authorization for $40,000,000 which we think gives us a lot of runway to be aggressive into Q2, Q3, Q4 and beyond.

Speaker 1

So while we may not have got as much done as we could have or would have liked to in the first quarter, we have a lot of capacity here coming up. And that's why we gave a little bit an indication of what we've been doing for the first twenty odd days or so of April around 70,000 shares at this point in time. To answer your question about where I would like to go with capital ratios, I think it's a really great spot for us to be in. We've actually modeled a fairly aggressive purchase program for this year, and actually it could be done over a shorter period of time. We've yet to decide how we're going to do that.

Speaker 1

But in doing that, we still see capital ratios not really getting below a nine twenty level. So I still am very comfortable with my 9% threshold from a tier one perspective. But at the rate we grow capital, we can be very aggressive with our buyback scenario and still maintain a very strong tier one leverage ratio. And I think you'll see us be opportunistic, especially with where we're trading in the more recent period. And I hope to be able to share more information with you through results when we get out into the second quarter.

Speaker 1

Great, thank you. Welcome.

Operator

Our next question comes from Chris O'Connell with KBW. Please proceed.

Speaker 4

Hey, good morning.

Speaker 5

Morning. So just hoping to get an update on the pipeline and kind of outlook for the political deposit franchise. I know there is a pretty solid start to the year here and there's a little bit of speculation that with losing the election that there could be an accelerated process from democratic side in terms of fundraising into the midterms. Have you seen any of that start to materialize yet in the pipeline? Any update on kind of the outlook there?

Speaker 4

Yes. Hey, Chris, good morning. It's Sam. Look, we are very encouraged about what we saw in deposit performance for the quarter, particularly exactly as you said with that political number being 11% growth, certainly doing what we projected would happen, right? We've always said that the fourth quarter after an election is always kind of the low point.

Speaker 4

And certainly that replenishment period has started. And we expect that we will see that move forward, again, consistent with the trends we've seen before. Also, just mention on pipelines, particularly on the deposit side, that pipeline or I should say that performance from the quarter was very well diversified across all of our sectors, strong double digit growth in all the categories. And so I think that while we're very excited that political is certainly showing 103,000,000 growth quarter over quarter, at both existing customer and new customer growth, both contributing to that four forty six all in number bodes well for us going forward.

Speaker 5

Great. Thanks, Sam. And then just on the overall deposits, it looks like while the growth is really strong in the quarter that you guys have already had another 300,000,000 of growth in the deposits in the first seventeen days of Q2. Just any color around that strength and kind of where that's coming from?

Speaker 4

I think it is certainly a bit consistent with where we were in the first quarter. Some of that is early moves that will move into our trust business. I would kind of stick to the guide we put out for the year on where that will all go and not try to extrapolate a couple of early days of the quarter to mean something different than that guide.

Speaker 5

All right. Thanks, Ed. And just I noticed you guys starting to use a little bit of the off balance sheet strategy again here in the first quarter. Just hoping to get any color around how you guys think that you will be utilizing that strategy between now and I guess the end of twenty twenty six at the midterms. Is there what are the pros and cons to using that near term versus just earning some spread on the balance sheet versus using that kind of later on closer to election peak?

Speaker 1

Yeah, Chris, I'll jump in, Jason. Off balance strategy, I think, is a really good lever for us to enact whenever we think it's appropriate, because there's still a really good market from a pricingfeed perspective for us to access. And as long as that remains in the space that it is, I see that it will for quite some time, then we should be able to use that. But that said, I think we're going to be more prescriptive. And I think we tried to do that for you this quarter in terms of how we're going to manage that relative to the balance sheet size.

Speaker 1

And so we set out our target for the second quarter balance sheet to be about $8,400,000,000 and we expect that to come through funding. So you can think of the first line of defense, the first line of flow for growing our balance sheet to that size from the period end of Q1 by using any excess deposits that we currently have off balance sheet. And that will drive our NII, and that will help us maintain our trajectory towards our target and our guidance. So that's the overriding theme that we're deploying to be able to determine whether we use the off balance sheet or on. Once we reach that $8,400,000,000 level, we're still generating excess deposits to what Sam was just referring to with his pipeline projections, we probably will use the off balance sheet strategy.

Speaker 1

And I think that will be the way you'll see us look towards the mix between balance sheet and off balance sheet, not just for the second quarter, but all the way through till we get to the midterms. And we'll do our best to give you a balance sheet target number like we did this quarter during our quarterly updates.

Speaker 5

Okay, understood. And I know the overall guidance was unchanged. It was the not too much movement really in the expenses in the first quarter. Does that still ramp up to kind of 170 level over the course of the year? And any color around the professional fees came in a bit higher to what looks to be some kind of digital enhancement projects.

Speaker 5

Any color around those projects would be great.

Speaker 1

Absolutely. So on the guidance, we still feel very good. And that's why we left everything unchanged. Now that said, we're probably trending towards the lower end of the range just to make sure that that's clear for you relative to our unchanged position. Now with the expenses, yeah, we did pretty well on the management of the expenses, came in pretty much where we thought we'd be on a budget perspective.

Speaker 1

And yes, we are expecting expenses to continue to ramp throughout the year, and that 170 target is still what we're shooting for, and that is still what is driving our keep on the pre tax pre provision guidance. That said, what you saw in the first quarter, and part of our commentary was the digital transformation implementation. You will see expenses continue to build throughout the year as we projected, because the capitalization of implementation costs relative to our transformation strategy around our CRM platform in particular, they'll start to come online from a deployment perspective and start to depreciate through the p and l. So that's going to be a driver of the ramp up expenses as we get throughout the year. The other will be our hiring plans.

Speaker 1

We still have some deferred hires that we pushed out to the second half of the year, and you'll start to see some of that salary expense come online as well. So all things equal, we like where we ended up with the first quarter. It was tight on our 52% outer band for core efficiency, but we knew that was going to be the case because the NII was going be at its lowest level. And as we see the ramp throughout the year, we're also expecting the NII to grow to be able to be in line with our core efficiency targets. And we'll keep you posted if there's going to be any slippage on expenses.

Speaker 1

Right now, we feel pretty good about where we're at, and that's why we're able to leave guidance as is.

Speaker 5

Great. And I know it's a little bit covered already, but just with the new administration in some of the changes that's been discussed and that's been seen so far. Have you guys seen any tangible impact on either your lending customers or any of your deposit verticals? And do you, I guess, where do you see there being the biggest risks, if any, I guess, of future impact if nothing tangible has been seen yet on either of those segments in any of the various verticals?

Speaker 2

Thanks for that question. And I do recognize that this period of uncertainty creates for people one of these sort of what do you not know kinds of things. We look at every one of our segments very, very carefully. We've looked at the exposure those segments have to proposed executive orders and actual executive orders. And we play those scenarios through.

Speaker 2

And we believe that what you've seen in terms of our financial performance, as well as non financial metrics are important to maintain as our greatest defense against anything like that. In terms of what we've actually seen with customers, there's uncertainty with some of them just as they're reading what you're reading. However, we see what we reported. The deposit strength is great across all segments, limited to political, but we think the political fundraising will continue to be strong. It's also strong in every other segment, including our non core segments where we have good coverage.

Speaker 2

And then on the lending side, as we've said, we have not seen a decline in the pipeline, although we certainly are being prudent in the way we think about that going forward, given really more around the economic uncertainties than the political uncertainties, just making sure that we are adhering to very strict credit standards, even in this environment, not bringing on loans that we don't feel completely good about. And so I would say that on both sides, we're feeling pretty good about the future, although looking very carefully at every potential risk among our clients. Sam, do you have any specific other thoughts on clients?

Speaker 4

Sure, think that's a good overview, Priscilla. And Chris, I would just say a couple of specific things to I think get to what you're asking about. One is obviously on the deposit side, the diversification makes us feel very good about any potential risk there. And then I would just spend two seconds on the loan portfolio and really point out that, as we disclosed in the deck this time, the total not for profit loan portfolio is well managed. The largest names in that portfolio really benefit from very experienced borrowers with material cash equity and conservative fallback LTVs.

Speaker 4

A lot of that in the largest names are in the shelters for the homeless and other hard assets. Our non for profit exposure, we analyzed all of it and really did a deep look at who benefits from grants from different government sources. A minority of our portfolio are reliant on grants. Even within that small minority, a tiny minority engaged with any federal grant. So we feel like it's very well protected and benefits from a lot of the structure that I just mentioned.

Speaker 5

Okay, great. Thanks, Dennis. That's all I had. Appreciate the time.

Speaker 2

Thank you.

Operator

Thank you. At this time, I would like to turn the floor back over to Priscilla Sim Brown for concluding remarks.

Speaker 2

Thank you. I guess I would conclude by saying that the Bank's unique sticky deposit base that you just heard about, the superior profitability and our robust capital and liquidity and high quality credit portfolio, we believe make it a standout among mid sized peers. We're offering both a defensive and a growth strategy here, and we think those attributes make a difference. So, with that, I'd like to thank you for taking the time to listen today and to participate. Also, I'd like to say a special thank you to all of our employees and our board for the intense amount of work that you do each and every day to enable this bank to continue to perform well among peers.

Speaker 2

We're happy to take your calls as always after this and look forward to hearing from you. Thank you.

Operator

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.

Powered by Quartr
Earnings Conference Call
Amalgamated Financial Q1 2025
00:00 / 00:00