Good morning, ladies and gentlemen, and welcome to the Amalgamated Financial Corporation Second Quarter 2021 Earnings Conference Call. As a reminder 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 second quarter 2021 earnings call. With me today is Priscilla Sims 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, the slide deck to complement today’s discussion is also available on the investors section of our website.

Thank you, Jason, and good morning, everyone. We appreciate your time and interest. I would first like to thank Jason and his experienced team who have been invaluable in bringing me up to speed since I joined Amalgamated in early June. My initial excitement in joining the company has only been heightened by witnessing the team’s dedication to our mission and our commitment to excellence. I’d also like to take a moment to acknowledge the terrific foundational work performed by Keith and the previous management team in assembling a strong and deep senior leadership team improving the credit profile of the loan portfolio, reducing the expense structure, broadening our deposit gathering capabilities, and expanding into mission-aligned products which continue to be an important growth driver for the company; an example would be residential and now Commercial PACE Assessments. This strong foundation can be seen in our second quarter results where our deposit franchise grew 13% annualized to $5.9 billion on a linked quarter basis, while maintaining one of the industry’s lower cost of funds at 10 basis points. Our political franchise remains strong and stable and experienced steady growth following last year’s election rising almost $100 million to $791.3 million as compared to the first quarter. Our underwriting and credit management has positioned the company to not only weather the recent dislocation from the pandemic but also to position us to explore a range of mission-aligned options. As we focus on organic growth, which I will touch a bit more on in a moment.

Thank you, Priscilla. Net income for the second quarter of 2021 was $10.4 million or $0.33 per diluted share, compared to $12.2 million or $0.39 per diluted share for the first quarter of 2021, and $10.4 million or $0.33 per diluted share for the second quarter of 2020. The $1.8 million decrease for the second quarter of 2021 compared to the previous quarter was primarily due to a $1.7 million provision for loan loss expense, compared to a $3.3 million release of provision for loan losses in the preceding quarter, partially offset by a $1.4 million decrease in non-interest expense and a $1.3 million increase in non-interest income. Coordinate income, a non-GAAP measure for the second quarter of 2021 was $10.2 million, or $0.32 per diluted share. Coordinate income for the second quarter of 2021 excluded $300,000 of non-interest income gains on the sale of securities. Turning to Slide 7 deposits at June 30, 2021 were $5.9 billion, an increase of $190 million or 13.3% annualized as compared to $5.7 billion as of March 31, 2021. Non-interest bearing deposits represent 51% of average deposits and 50% of ending deposits for the quarter ended June 30, 2021, contributing to an average cost of deposits of 10 basis points in the second quarter of 2021, a one basis point decrease from the previous quarter. As can be seen on Slide 8 deposits held by politically active customers, such as campaigns, PACs, advocacy-based organizations, and state and national party committees were $791.3 million as of June 30, 2021, an increase of $99.6 million as compared to $691.7 million as of March 31, 2021. Turning to Slide 10, our total loans at June 30, 2021 were $3.1 billion, a decrease of $85.4 million as compared to March 31, 2021. The decline in loans was primarily driven by a $52.1 million decrease in residential loans, and a $46.2 million decrease in commercial real estate and multifamily loans due to refinancing activity by our existing customers.

Our first question is from Alex Twerdahl with Piper Sandler. Please proceed with your question.

Hey, good morning, everybody.

Good morning, Alex.

Good morning.

Nice to talk to you guys. First off, Priscilla, I wanted to – I recognize you’re not going to roll out your strategy for Amalgamated bank until I think you said the third quarter earnings call which is fair to give you a little bit of time to kind of get everything in line, but you talked a little bit about optimizing sustainable and profitable growth, and I wanted to hone in a little bit on the profitable piece of that. I was hoping maybe you could kind of discuss a little bit in your eyes how important the profitability piece is in the Amalgamated story?

That’s a great question, and I’m going to actually make an assumption here, so stop me if it’s wrong, but I think part of your question is profitability of greater interest as compared to sort of the social responsibility or ESG focus that you have, and I don’t know if that’s where you were really going, but we do get that question a bit. So, I want to just say that we actually think that it’s really nice to have a model that allows for both. In fact, we don’t think one does well without the other. So, in other words, we are uniquely qualified, we think in the six segments that we participate in to talk about growing through this socially responsible model, and if you’re not growing, then the model doesn’t work, and if you are competing on a different basis in other areas, if you’re not focused then you don’t get the profitability. So, yes, profitability is key. We’re highly, highly focused on the next year and what that looks like from a growth perspective. We think there are lots of untapped potential within the six segments we currently participate in and within the product suite that we currently have, and we also think there’s really good opportunity to expand our client base, and also to look at additional products where we’re uniquely qualified to assess the risk.

Thank you for that. And then just switching gears a little bit to the guidance that you guys are giving, as I look at the guidance for NII, it seems like for the next for, I guess, for the back half of the year it implies that NII should be flat or actually maybe even a little bit higher than the second quarter. Can you talk a little bit about what’s driving that NII growth for the remainder of the year?

So, I think the NII growth is modest at best, but the pipeline, for us, we’re fairly encouraged. Right. I think there’s a couple of things Alex. Number one, kind of being without a CEO or in transition for the past six months prior to Priscilla’s arrival caused a little bit of stalling momentum. But it’s been refreshing since Priscilla’s arrived to sort of see the reinvigoration of the business, and some of the things that we’ve been able to see starting to flow through our lending approval process right. So, in terms of growth, and what’s going to drive that, it’s a volume game. We like the prospects of our pipeline, we feel like there is reasonable opportunity during the second half of the year to feel optimistic that we’re going to be on a little bit of an upward trajectory in terms of loan growth. Then I think, kind of going forward with C-PACE and other areas of our business that we feel like we’re experts in and leading in starting to really get an understanding of how to perform in that market, there’s a great deal of opportunity to put on assets that have coupons that will generate for us there probably be in excess of maybe some of the more traditional style lending that the bank had previously been engaged in.

That’s great. Can you just remind us under the flow agreements on the pay stuff, what’s left for this year?

Yes, so we have on the PFG – sorry on the flow sorry, for R-PACE I was thinking of, we have about $60 million left to go. We put on another $36 million gross for this quarter in R-PACE from our flow arrangement. That netted down a little bit because we had the semi-annual payments from the tax assessments that came through during the quarter. But we feel pretty comfortable with our flow and being able to hit our $150 million target. We’re working with our partner to actually provide additional expansion of that agreement and additional capacity, although there’s not much more to report at the moment, but feel very good about maintaining our $150 million target for the year, at roughly a $30 million to $35 million clip heading into Q3 and Q4. Then to sort of supplement that, and we don’t talk – we haven’t talked too much about this, but the Commercial PACE segment of our business has started to show some real opportunistic signs. We had about $80 million of bookings through our Commercial PACE Program that would be on top of Alex the flow arrangement that we have in R-PACE. So, in that particular area of our business, I think things look pretty bright and comfortable, if you will. As we tend to view the PACE section of our business as complementary, if not a different lending channel. So, we kind of view that as a net positive overall for our lending story as well.

Great. So, let me just clarify to get this straight, there’s about $60 million left on the PFG Flow Agreement, and then separately, there’s a commercial pace piece that’s growing, it’s $80 million so far that’s already on the balance sheet, and that could continue to grow for the remainder of this year into next year?

That’s correct. So, when we think about our pipeline, C-PACE, we call it Commercial PACE is making up more and more interesting chunk of that, and those deals function a lot more like lending sell projects, but that’s absolutely correct, and how to think about your prospects in the PACE environment.

Okay, is the C-PACE, is that through a flow arrangement as well, or is that being originated and underwritten all in house?

Yes, it’s not through a flow arrangement. We do have partners that bring us deal opportunities, so we do work with referral sources, but not under a contractual flow arrangement. The underwriting process is very similar to a credit style underwriting, but at the same time, the nature of the PACE assessment for commercial relative to retail is similar. It’s all based on the property tax, the property tax liens, and the relative business incentive that comes from having energy-efficient upgrades on your commercial project.

Okay, great. Then just final question on that point, the C-PACE, is that held to maturity security, or is that in the loan portfolio?

It’ll be treated the same way as a bonded assessment, so through held to maturity securities.

Fantastic, thanks for taking my questions.

You’re welcome. Thank you, Alex.

Our next question is from Janet Lee with JPMorgan. Please proceed with your question?

Hello everyone. So, first to start off on your guidance. I just want to clarify a few points. So, on the core pre-tax pre-provision income of $66 to $72 million, is the change in your guidance just primarily from the reduced outlook on NII given the excess liquidity, or is there any expense outlook that’s also coming into play? Second, on your net interest income guidance for 2021, what level of cash are you assuming your cash position comes down from your $550 million or any kind of assumptions that you’re making?

Yes. So, to answer the first part of the question, there’s no change to the expense outlook, it’s really a volume game relative to the loan portfolio. The revised guidance, at the low end, is really assuming a flat loan book from this point in time. We do expect to stay within our target range of $30 to $32 million on operating expenses. On that basis, that’s where the low end of the revised guidance would come from. In terms of being at the higher end of the range we’ve built in very modest assumptions for net loan growth, probably calling it in the low to mid-single digits, and we feel that that creates a pretty good target for us for the relative range of $66 to $72 million. To the question on cash volume, it’s tricky right because, the deposits are a pretty strong part of our business proposition and balance sheet thesis, but at the same time, the excess liquidity drag is obviously noticeable. We think that trading out of the cash portfolio into loans, and maybe some of the shorter-term duration securities is probably the best way to go in terms of redeploying the cash. When we model it out, it’s not a substantial drop, I would still expect us to be carrying in excess of $100 million in cash, as we get to the end of the year on an average basis, but that’s really where we were trying to move the repositioning of the funding sources is from the cash base to the obviously the earning portion of loans.

Got it. Just to clarify, also, apologies if you’ve already talked about this, but when you say you’re more cautious about – you’re still cautious about loan growth, despite prepay slowing down from here in the second half of 2021 but then you’re more optimistic about potential loan growth in the back of as well, are you saying on a net basis, you expect to see loan growth in the second half? Or, is that just from like the gross loss excluding the prepay on it?

Yes, I think cautiously - well, let’s just parse the words for a moment. So, the cautious nature of this is, it’s hard to ignore the relative decline that we’ve had in our loan book over the past six months or so relative to the prepayment activity, and maybe the lack of origination, so we don’t want to get further ahead of ourselves than would be prudent just looking at sort of the historical results. But what we are optimistic about is really what our pipeline looks like, and if you pair that up with the sort of general expectation for economic expansion in Q3 and Q4, along with now having our CEO firmly seated and providing guidance and direction on what we want to be able to do, and what our pipeline should be trying to get pulled through, it creates a lot more optimism going forward that we on a net basis could grow a little bit through the loan portfolio. That’s kind of the way we’re thinking about it.

Okay, that’s very helpful. Just on the De Novo Expansion, I know that Priscilla is going to talk about in more detail in the third quarter, but where are we on the Boston De Novo Expansion, and also on the LA? I believe that the LA De Novo Expansion was put on hold, given the pandemic situation? Where are we now and what’s your plan around that?

We’re very optimistic about the business in Boston. We have a team on the ground and everyone’s officially going back into the office in September, but they’ve been very active. In terms of Los Angeles, and actually any other of the several large markets that we have been looking at, we’re really focused on those which will contribute to the lending strategy most of all, and there are several good markets across the country that we’re looking at. LA is just one of them.

Got it. If I can just squeeze in one last question. So, you talked about M&A, is this something that you’re going to be actively looking? Can you talk about maybe some of the M&A earn back tangible book value dilution press threshold that you’re going to be sticking to if you were to pursue one?

Why don’t I just start by saying that yes, we are certainly often looking at and considering opportunities there, and they will be opportunities that fit within the strategy, and so many of the things that we’ve been talking about you heard about before I arrived, and we will be continuing to talk about which is around lending, around building both efficiency and effectiveness and our current strategy places where we have unique expertise and things that we can develop that and certainly geographical expansion like you referenced earlier. Do you want to add to that?

Yes, sure Priscilla, and Janet I’ll add to that, that in the capital and sort of the tangible book value spectrum, we’re certainly going to look for deals that are smartly priced. Obviously, we’re going to look for meaningful levels of accretion, we’ll also look for manageable dilutive impacts with appropriate payback. When I think about dilutive impact, we’re certainly recognizing our stock price is trading a bit lower than tangible book at the moment, but we do have a decent capital position to fund through cash, and we also with the establishment of our holding company earlier in the first quarter has given us some access to public debt markets and other ways to raise capital where we think we could do a smart deal that would have an acceptable dilutive effect with a proper payback period. That’s all part of the analysis that we’re going through as we look at potential candidates, and anybody that fits what Priscilla just talked about, we’re certainly taking a look at and being prudent about it.

Okay, thank you so much for all the color, and I look forward to working with you all. Thanks.

Thanks. Great.

Thanks for the questions, Janet.

Our next question is from Brian Morton with Barclays. Please proceed with your question?

Good morning, and congratulations to both of you.

Thank you.

Thank you.

I just want to start on expenses it seems your core expenses have been relatively well controlled last couple of quarters. But still you kind of saying the efficiency ratio has crept up a bit. Are there any plans for additional expense reductions in the near term? Or alternatively, are there any areas where you see the need for additional investment?

So, maybe I’ll jump in on the core efficiency portion of that, and then Priscilla can take the additional investments. So, our core efficiency ratio, it’s crept up, it’s a little bit of a function of the top-line revenue shrinkage that we’ve had been rolling through our net interest income. So, that’s partially a driver. I think also the solar tax equity deals that we did, the effect of those flow through our core efficiency ratio also. So, in this quarter alone, there was a $1.6 million charge that flows through relative to tax credits that were recognized in the previous year. So, it’s an expected event, but it does create noise within our core efficiency ratio. If you were to back out the impact of the solar tax equity for Q2, you improve your core efficiency ratio by about two percentage points. So, that is a little bit helpful. Outside of that, I think we’re not trying to cut to the bone to be able to manage our business. I think our $30 to $32 million target range on expenses, at least for the next two quarters, as we try to drive our business throughout the remainder of the year is a good target to consider. If we grow the top line, that naturally will shrink our ratio down to a little bit more of a pure acceptable level at this time. Then Priscilla, do you want to chime in a little bit on investing?

We’ve talked a little bit about expansion. We’ve talked a little bit about diving deeper into our core segments. We’ve talked some about branding, and just wanted to say that I think those are activities which we believe can be done within the current expense envelope in the short term. Now, as we further develop the strategy, we’ll have more to say on that, and we’ll see how that looks. But my emphasis would be on trying to grow into those additional expenses to expand in the future, and certainly that would be our hope and priority. But we’ll have more to say on that as we complete the strategic work that’s underway.

Great, thanks. Then you had a good start to the recent $10 million share repurchase authorization. Is this kind of the pace that you would expect to maintain in the near term?

Yes, I think that’s fair that we would look to continue at around this pace to complete the authorization.

Yes, I think we have $7.5 million remaining. We’re being prudent about that, and to Priscilla’s point, I would expect roughly the same quarterly pace absent any significant change that we would make. As of right now, I’m not seeing that, so I would expect a very similar type of pace.

Excellent, and on the loan portfolio, I kind of noticed, it seems that the consumer and other has been gaining some traction, even though it’s off a small base. Are there any particular products or segments that are driving that, and any potential to build on this momentum?

Yes, that’s a great observation. It’s really our consumer solar. As we’ve gotten deeper and deeper into that space, especially as we’ve moved away from balance-sheeting, residential one to four style properties, we’ve definitely moved into deeper arrangements with providers for asset purchases relative to consumer solar. We put on about $20 million of that on a net basis for the quarter, and we’re expecting to do more.

Great, thanks. Then I guess for my last question, I’m just wondering if you could provide a little more color on the increase in the allowance due to the specific reserves within the C&I portfolio? Are you seeing anything that would give you rise to additional concerns?

Yes, that’s a great question. Really, the answer to that is no, in terms of what we see right now, for additional concerns. The specific reserves build-up really is related to two C&I loans that are usual suspects for us, they’re part of our legacy leverage lending portfolio. The reserve build-up is really just based on continued discussions with the borrowers and receiving updated projections. So, in our space, and given kind of our history with these borrowers and also in our leverage lending portfolio, we felt it prudent to build up a little bit more to support any potential losses that might occur with these particular borrowers. We are in contact with them, and it’s a continuous process as we work with them. Also back to the consumer solar part of the build was also to up our provision to relative to potential losses on these consumer solar pools. We want to get a little bit more aggressive; we’re putting those on. Loss rates are becoming a little bit more clear to us as we gain some seasonality in the portfolios. So we built up a little bit at that level as well. But I think it’s also important to remember that the bank, meaning our bank, we have not yet adopted CECL, so we might be coming also from a little bit of a lower point relative to our peers in terms of reserves. I always look at sort of where we are in total allowance to loans ratio, and even with our build, we kind of come in at 1.2 for the quarter, which I think puts us kind of right in the middle of the pack relative to total allowance size.

Okay, well, thank you very much. That’s all the questions I have right now.

Thank you.

Thank you.

Our next question is from William Wallace with Raymond James. Please proceed with your question.

Hi, thanks. Good to meet you both. If I could – I also had some questions on the specific reserve builds. Is this the same two C&I loans that we’ve been talking about off and on for the past six quarters or so?

I believe so, they’re usual suspects. I can’t recall if we talked about specific names, but they are usual suspects, yes.

Can you update us on the outstanding principal balance, and where the specific reserves are on these loans as it stands today?

Yes, so one loan is $8.6 million, the other is $2.3 million, so they total roughly $11 million. We’re reserved now up to one-third on each of those principal values at this time.

And are these both carried in the non-accrual?

They are non-accrual. Yes, absolutely, non-accrual.

Okay. Are they paying?

They are working with us. There is cash flow coming, but it’s not at a point where I feel comfortable even indicating that they’d be moving off of a non-accrual status.

Okay, and to that point, Priscilla, you talked about, I believe the underwriting culture or something as one of the observations that you have, and observed that the NPAs are over 2%, which is well above the industry. Is there any opportunity that you see to maybe be more aggressive in addressing the existing stress on the loan portfolio to kind of right size it before we move forward from a growth focused perspective?

I think I might phrase it slightly differently. I think there’s certainly opportunity to lean more into the areas where we have expertise, and can probably see things that others might not in some of these deals, and that’s why you see C-PACE coming through and solar coming through, and you might see more of that. So, I do you think there’s real opportunity. I think the team would agree with that. I think you’ll start to see more of that as we move forward.

Yes, and Wally if I may add to that, I think we are spending quite a bit of time taking a hard look at some of our non-performers and what we can do in that space. We were able to even in the quarter alone, we were able to move one of our commercial Oreo properties off the books. We had about a $400,000 loss on that that rolled through the non-interest income portion of our income statement this quarter. But we felt it was prudent management to try to move non-performers off the balance sheet and clear as much as we can. We also saw a nice payoff and one of our other construction and lending loans that helped reduce some of that non-performing asset ratio down to I guess closer to a more pure related average. Then there’s opportunity, certainly in our residential and consumer portfolio to move some of the legacy problem assets off our books, and we’re going to take a look at that relative to capital in the coming quarters. I think it’s important to note that as I look at some of the problem assets that remain on our books, a lot of that really either ties back to our legacy lending – leverage lending portfolio that we, we spent a lot of time on earlier in 2017 and 2018 selling out of and these are some of the remainders there, and then we still have some of the remaining problem assets from some of the earlier purchase pools back there on the countrywide origination days that we’re actively trying to look to get rid of. So, that’s to me our big drag in what holds our numbers up high on the NPAs, and we’re certainly cognizant of that and taking a look at trying to improve that ratio.

Okay, thank you. I think it could also be a drag on the valuation. You mentioned that you built up reserves on I think some of the consumer solar loan pools now that you’re getting some better loss experience. What’s the reserve that you’re carrying against those pools now, and what is the average yield on these loans?

Yes, so we’re carrying about a 1% of portfolio reserve on those, and yields are anywhere – they’re different portfolios, but anywhere from 2.75 to 3.50% is kind of the bring on for that.

I know these shorts duration, I mean, they’re appropriately priced for potential 1% loss rates?

They’re short-term duration, which is why there’s a significant amount of churn in those in terms of their payoff, and maintaining the flow is sort of important, but on the pricing side of things, I’d have to get back to you on what the relative return is to the reserve that we’re carrying.

Okay. Then you mentioned the weighing decisions around what to do with credit, with keeping capital in mind, and so it kind of seems like there’s three choices that you have. One is buyback stock, one is M&A, and then one is maybe aggressively address any legacy credit issues. So, at an 8% TCE and an 8% leverage ratio, it doesn’t seem like you have a lot of excess capital. So, I’d love to know the capital constraints that you guys are operating within internally. In other words, what level would you be willing to take capital to if it were to be, say, an M&A opportunity, and then how do you – how are you going to make the choice to dilute tangible book value when you could buy back your stock risk-free with no dilution of tangible book value based on today’s price? I just would love to know kind of how you’re making the matrix of these decisions as you think about strategies moving forward?

So, you want to jump in. Okay. So, I think you hit the entire dartboard of how we’re thinking about capital. I think when we kind of come to the buyback portion of it, I think that $10 million that we put in place already is sort of an indication of our intent and desire to return capital and improve the relative book value or return on the shares. You’re right, in the sense that we’re at eight or slightly below eight right now, which makes options a little bit limited. But we’ve got, call it 7.50% as sort of our green zone, right, and so I don’t think there would be a tremendous amount of consternation to move down the leverage ladder if it meant being able to support an opportunity that would drive predictable returns, right. So, I think that’s the way we try to evaluate it. I wish I had a better answer for you at the moment. But anywhere where we’re going to deploy capital, which would move us off of that 8% ratio and probably keep us within that 7.50% ratio, we’re looking at what the return is in terms of a payback period, how that would move our kind of outward facing metrics regarding tangible common equity or return on average assets, and that’s how we generally evaluate it. The universe is somewhat small when you think of it that way. But we do think that there are smart opportunities, and whether that’s going to be cleaning up non-performing assets on our books or funding an acquisition that would help us in some sort of expansion type of activity, that kind of remains to be seen. These are all things we’re going to be talking about during the second half of this year.

Okay, all right, thank you for that. Then just one last question. Priscilla, this is for you, and it’s big picture. I appreciate the observations that that you gave. The first one is interesting to me, because I agree but I don’t know how to frame it. So, I’m curious if you can maybe frame what you mean when you say that you think there’s an opportunity to better tell the story of Amalgamated. Can you can you expand on that a little bit and just kind of – just expand on what that means to you?

Sure, sure. Yes, thank you for asking. I’ll try to keep this short, but in short, I think there are really kind of two interested groups to think about. One is our current customers. There we not only enjoy, obviously, name awareness, but we have really high favorability, meaning that our current customers are quite committed to Amalgamated and that’s seen in the fact that they’re not as focused so much on returns as they are on being aligned. So, that’s that’s a great group. It includes corporate and commercial customers who are core to us, and they typically live and work in our key cities, and they typically fall into the six commercial segments that you’ve probably heard a lot about, and you see them on our website, plus sort of individual change makers. They care about things like climate and sustainability and rights of immigrants and workers, and all the things that we talk about. So, our first job is to really deepen our relationship with those customers. So, we’re now synthesizing and analyzing customer data and feedback, and we’re fine-tuning just our understanding of their needs and their concerns. They came to us because of these shared interests, so we have the opportunity to really as I say deepen our relationship there and solve more needs for them, including socially responsible lending and asset management. So, you’ve heard us talk a lot about C-PACE. You may be aware that first quarter of next year we’re launching our, what we call responsive funds, which are essentially socially responsible funds. We think there’ll be a great deal of interest. We’re in sort of the pre-launch phase, and we’re seeing that there’s great interest among core customers. Then you’ve got these group of individuals and commercial entities that are not today our customers, don’t know us very well, but still share some of these interests and passions. These are people who are like our customers, and that they could be early adopters and game changers in the space. We also think there’s an emerging group, so more and more people are becoming interested in this space. So, these customers have or prospects have similar characteristics as our base, and we think we again, we’re uniquely qualified and focused on them. What we will be doing there is just leveraging external data where we will identify them and then build and grow our presence, just meeting them where they are, and in fact often where we are, whether that’s in social, whether that’s experiential, or in other ways. What I think is exciting about this is that we’re able to tell our stories to more companies that look like our current customers, and it’s not a monumental lift. So, we don’t think there’s a significant investment to get closer to these customers in the short run. As I said, we’ll evaluate future brand build outs over time as we build out the strategy.

Will, I’m sorry, I just want to – I apologize for giving a little bit of misinformation on the consumer solar. Yields are closer to 4.5% on those portfolios.

Okay, thank you. That sounds better.

As I said, I was like, that’s wrong. Sorry.

Thanks, Wally.

Thank you.

Our next question is from Chris O’Connell with KBW. Please proceed with your question.

Hi.

Good morning Chris.

Morning, hi Priscilla. So, I guess you just want to start with the trust revenues. We knew that was going to come down at some point and just this is kind of a good baseline run rate level for going forward. Then maybe also with regards to the ESG ResponsiFunds that launching next quarter, what – if you can just give a little bit more color on the initiative and what kind of new revenue opportunity it could provide over time?

Yes, absolutely. So, I think that the trust revenue, it’s reaching a baseline rate. We’re optimistic that it’s upward from here. I think it was heavily impacted by the low rate environment, given that a majority of the current funds are placed in bond products, so not incredibly concerned that there’s like to go in terms of revenue dropping. I also think that in that overall business, we spent a lot of time optimizing it for profitability as well. As we’ve shifted the administration to an outsourced model, which paid for that last quarter, and really kind of setting up our customer agreements to be more standardized so that there’s not as much administration that’s required to manage individual relationships. I think more importantly is the point that you just picked up on, is the pivot of that overall business to the new introduction of the ResponsiFunds that Priscilla was talking about, those funds are now up and ready. I think they’re going to be going live in the early first part of 2022. We’ve hired a dedicated sales person to lead the effort in terms of not only generating business flow from external customers, but also in a cross-sell basis from our existing commercial relationships to create opportunities for them to deploy their funds. We’re in for about $45 million of orders right now, and that’s growing as we get further and further out there with the communication of the funds' existence right now. So, more to come really on that one, that’s sort of a TBD, but it’s exciting to see that these funds are now basically ready to go and customers have an ESG opportunity or alternative to invest in with the bank – or I’m sorry, with our trust business that can really align with what they feel is most important to them and their mission and values.

Great, that’s helpful. Then I know that we’ll probably get much more specific detail, kind of the third quarter update. But if you could expand upon it, I think there’s a couple of bullets, and a couple of comments in the opening remarks about expansion into new lending segments, and just maybe, what’s being considered or where you guys are looking at, or where think you can excel there?

So, I think in lending segment side of things, Priscilla mentioned the segments that we were already operating in, and I think there’s an opportunity for us to deepen into particular segments. So, two of them that come to mind right away is really the commercial PACE segment of our business operation, and then also sustainability or energy-efficient lending on a straight commercial basis. We have bankers that are extremely knowledgeable in this space, and part of the goal here is really to get them very focused on pursuing opportunities in those segments, as opposed to maybe kind of pursuing a broader array of opportunities. So, in that sense, I think that’s where we’re going to start to meaningfully shift into segment development, and I think from there there’s a couple of things. Number one, really improving the interactive experience that customers and commercial prospects have with us that sort of platform interaction. It can be account openings, transactions, whatever that’s going to be, basically making investments there, and then I think the other piece of that is introducing them to what else Amalgamated has to offer. In a lot of cases, we see customers that have deposit relationships right now with us that there aren’t either aware or don’t understand the investment alternatives that we have to offer. So, I think those are opportunities to sort of bridge a segment and cross-sell product.

The only thing I would add to that, because it’s well said that we plan to move deeper into segments where we feel we have expertise. The only thing I’d say in addition to that is that we also see an opportunity to improve the customer experience, and we think that that will result in customers being interested in products across the spectrum. Just to remind people of the segments that we’ve been talking about, there are really six of them and I know some of you are familiar with them. But we’ve got this whole sustainability and energy efficiency segment, which has obviously done very well for us. We’ve got political organizations who even despite this being after a major election, political organizations are growing in deposits with us. We think there are opportunities there. There are social enterprises, there are nonprofits, there are labor, and there are philanthropies. In each one of these, there is a sort of a unique story to tell, but each one is a segment where we have right now some growth, we’ve got some real experts in each of these segments, people who are talking to them every day, in some cases come from these segments, and we just think there’s a real opportunity there to just have deeper and more conversations. We also think that the segments are interested given all this going on in the world, the segments are interested in perhaps thinking even where they’re flushed with liquidity, they may be thinking about the opportunity to keep that sort of cash on the books, and then be thinking about how to leverage either real estate or other parts of their portfolio to lend in order to be best prepared and protected during this period.

Got it, thank you. Then if I heard right earlier, it sounded like the goal under ideal circumstances is to get kind of cash down to the $100 million level or so towards the end of the year, at least optimally, or that it will be – it’ll still be above $100 million kind of regardless. There’s pretty wide gap between that and where the cash balances are now at period-end. Assuming that the political deposit growth engine kind of continues to grow on pace for the next couple of quarters, and given the comments around the PACE initiatives, it seems like there’s still going to be a good amount of movement into the securities book, is that fair?

Yes, I think that’s still fair, and you probably see that on our numbers. We’ve been fairly aggressive to pulling as much in excess funding as we can into ensuring assets to the security portfolio or retail agreements, and we think there are some opportunities in some of the repo markets to take a little bit more interest and put some cash to work there. We’ve been a little bit more aggressive in the non-agency space, trying to pick up a little bit more interest there, kind of also making sure that we manage duration, not get overextended in that space. So, to the extent that we’re able to, we reserve a portion of that cash to fund the C-PACE growth, which you can see can be blocking, come in fairly decent chunks, and then obviously, the remainder of that would hopefully fuel some type of net loan growth through our more traditional lending channels. But back to the end piece, our target, when we model out the drag on NIM, our target is $100 million of cash. Do I feel like we’re going to be there by the end of Q4? I mean, that’s why I kind of said, I think it’s in excess. But ultimately, that’s where we’d love to be, and we need to communicate close attention to the deposit flow that comes as a result of our political but also our just general commercial business deposit-generating business.

Got it, and outside of the PACE, as far as the rest of the securities book that you guys are putting on now, what are generally like the blended yields of what you’re putting on?

Yes, so I think when you when you strip out PACE, the portfolio’s probably about a 1.57% yield in total. As we bring on non-agencies, they’re all top of the capital stack assets with floating rates. So, you’re looking at probably 1.0 to 1.20% is where those assets are coming on. We’re moving a little bit more sub-debt onto the books and maybe a touch more on corporate bonds, which has some higher yields, but I think that’s generally the range of impact to the securities portfolio right now, absent pay securities.

Okay, great. That’s all I had. Thank you.

Thank you.

Thank you.

We have reached the end of the question-and-answer session. I’ll now turn the call over to Priscilla Sims Brown for closing remarks.

Thank you, Shomali, and thank you all for your interest today. These are great questions and all really insightful in terms of where we are going and thinking about the business and where you are. So, appreciate that confirmation. Again, I want to thank the Management team. I think a great foundation has been laid over the last couple of years, and in particular, in recent months. I think this team has really kept their head down and really tried to work through what could have been a very difficult time, both externally in the environment, and certainly in the interim without a long-term CEO. Now, I think we just have a wonderful foundation to move forward on. I’m really excited about the people we have on the team. I’m very excited about the opportunities in front of us. I’ve had a lot of conversations with customers in the last few weeks, and I’m hearing enthusiasm and real interest, and when we start to talk about new ideas and expanding relationships with existing customers, the reception we’re getting is just great. So, having now a real commitment to doing more of these kinds of conversations, traveling quite a bit, happy to see people coming back into the office and the ability to talk to people face to face, and it seems that there’s a real energy around where do we go from here. So, I look forward to coming back to you next quarter and talking about the strategy more specifically, and in the interim, happy to take your calls and meet all of you as your time and schedules permit. Thank you again for your time and look forward to continuing the dialogue.

This concludes today’s conference, and you may disconnect your line at this time. Thank you for your participation.