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Amalgamated Bank (AMAL 3.18%)
Q3 2018 Earnings Conference Call
Oct. 29, 2018 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good afternoon, ladies and gentlemen, and welcome to the Amalgamated Bank third-quarter 2018 earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Drew LaBenne, chief financial officer.
Please go ahead, sir.
Drew LaBenne -- Chief Financial Officer
Thank you, operator, and good afternoon, everyone. We appreciate your participation today in our third-quarter 2018 earnings call. With me here today is Keith Mestrich, president and chief executive officer. As a reminder, a telephonic replay of this call will be available on the investor section of our website through 11:59 p.m.
Eastern Time on November 5, 2018. 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 information or statements. Investors should refer to our final offering circular dated August 8, 2018, and our other periodic reports that we file from time to time with the FDIC for a list of risk factors that could cause actual results to differ materially from those indicated or implied by such statements.
Additionally, during today's call we will discuss certain non-GAAP measures, which we believe are useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in our earnings release as well as on our website.
At this point, I'll turn the call over to Keith.
Keith Mestrich -- President and Chief Executive Officer
Thank you, Drew, and good afternoon, everyone. Before I get started, I'd like to take a moment to thank all of those people who helped us through our initial public offering, which culminated in our first day of trading on the NASDAQ on August 9. The many months of hard work of our employees and advisors and the loyal support of our customers and partners contributed to the success of our offering. Importantly, our public listing provides Amalgamated with the additional flexibility to take full advantage of the numerous growth opportunities that lie ahead, whether that is expanding our geographic presence into new markets that align with our business strategy, developing new projects for our targeted customer base or taking advantage of growth opportunities in our existing markets of New York City, Washington, D.C.
and San Francisco. I'd like to start by providing a brief overview of Amalgamated and our mission to grow the bank for those investors who are not able to hear our story during the IPO roadshow. I'll then briefly review the highlights of our third quarter performance and then turn the call to Drew for a more detailed discussion of our results. We will then open the call for your questions.
Amalgamated Bank has a strong heritage, having been founded nearly 100 years ago by a union, the Amalgamated Clothing Workers of America in New York City. Since our founding in 1923, we have had a commitment to the greater good, which is to shape our business model and our values. We believe that a financial institution's mission should include using its resources, money and influence to help move its customers, its community and society forward. As a result, thousands of forward-thinking companies, organizations, unions and individuals have chosen to bank with us because we not only share and support their financial goals but because we support their missions and values.
Moreover, we believe that our mission to be America's socially responsible bank allows a company to benefit from an ongoing paradigm shift in the United States, a shift in which consumers, stock holders and workforces are not only prioritizing their financial growth but are also increasingly holding companies to higher levels of social responsibility and requiring companies to focus on contributions to society over and above simply delivering profits and value for shareholders. Importantly, we believe that our business model is uniquely positioned for this paradigm shift as it is designed for growth and tailored to values-based institutions. Our model is supported by a differentiated marketing strategy and unique relationship-based personalized services from our bankers who have deep knowledge of their industry segments. Additionally, our target customer base typically has specific banking needs, which we are well suited to address based on our extensive experience servicing this niche customer segment.
From a competitive perspective, our target customer base has historically been underserved by the traditional banking community, which presents Amalgamated with an opportunity for continued market share gain. We estimate that this market is in excess of $90 billion, and we have only a small sliver, which leaves much room for continued growth. Servicing our target customers and expanding our market share should allow us to generate a stable source of low-cost deposits, as evidenced by the 14% compound annual core deposit growth that we have achieved from 2015 through the end of 2017. For the first nine months of 2018, deposits grew by 25% compared to December 31, 2017.
This strong core deposit growth has yielded what we believe to be a highly competitive cost of funds, 25 basis points in the third quarter, an increase of just one basis point from the second quarter. Our low-cost funding strategy is designed to allow us to be conservative on the asset side of the balance sheet while generating a competitive net interest margin. Amalgamated also boasts a core competency of disciplined credit risk management with a fundamentally low-risk business model. Our comprehensive credit risk management is demonstrated by the strong credit performance of loans originated under our team.
We believe our robust approach to risk management will enable us to grow our loan portfolio without compromising credit quality. One aspect of our focus on relationship banking is that it brings deposits but it doesn't always bring enough lending. As a result, we invest our excess liquidity into conservatively underwritten residential real estate, commercial real estate and multifamily loans. We then look to high-quality securities to further invest excess liquidity.
Importantly, our markets are strategically based on our customers, serving a large and growing population of values-driven and socially responsible businesses and individuals. Today, we operate in New York City, Washington, D.C. and have recently expanded to San Francisco through our acquisition of New Resource Bank, which I'll touch on in a moment. Our core markets present us with the significant runway to continue to drive healthy deposit and loan growth.
As an example, we have organically built a nearly $1 billion deposit base in D.C. since our entry into that market in 2012 and currently see a significantly larger opportunity, given D.C.'s large, nonprofit political and union committee. Beyond our core geographies, we see other densely populated, progressive-oriented markets that are underserved and represent an opportunity for expansion. Markets such as Boston, Chicago, Denver, Los Angeles, Portland and Seattle.
We will evaluate both organic expansion as well as opportunistic M&A and are aware of a number of institutions that share similar missions, values and reputations. Our recently completed acquisition of New Resource is an example of the type of institution that fits our criteria. New Resource had a strong environmental and socially responsible mission and customer base, which aligns very well with Amalgamated's while adding a West Coast footprint. Additionally, New Resource's strength in lending to socially responsible businesses and nonprofits is expected to complement Amalgamated's commercial lending business.
Looking forward, we remain confident in achieving our targeted operational synergies and expect to complete the system and brand conversion in the fourth quarter. As we hope is evident, Amalgamated has a differentiated business model that we believe addresses a historically underserved market. We generate low-cost deposits and reinvest in lower-risk loans and securities to generate peer average profitability and returns. Our model is sustainable, as can be seen in our third-quarter results, where we delivered strong deposit growth while maintaining a stable, low cost of funds.
Our stable cost of funds, combined with our asset sensitivity contributed to the third quarter's net interest margin expansion of nine basis points from the second quarter and strong year-over-year earnings growth. Looking forward, we believe that we have a firm handle on the multiple levers of our business, which support continued growth for our bank and value creation for all stakeholders. This value creation is open ended, giving our large number of potential markets that can support organic growth. The opportunity to expand our reach through online, mobile and digital platforms outside of our brand's footprint, and the potential for accretive acquisitions, all while maintaining a strict focus on cost discipline.
I'd now like to turn the call over to Drew for a more detailed review of our financial results.
Drew LaBenne -- Chief Financial Officer
Thank you, Keith. I will begin by reviewing the highlights of the third-quarter results before turning the line back over to the operator to open for questions. For the third quarter, we delivered net income of $9.4 million or $0.29 per diluted share as compared to $4.6 million or $0.16 per diluted share for the same quarter in 2017. Core earnings for the quarter were $12.1 million or $0.38 per share as compared to $4.9 million or $0.17 per share in the third quarter of 2017.
Core earnings excluded $3.4 million of costs related to our IPO and $148,000 of costs attributable to the integration of New Resource. Given the more one-time nature of these costs, we see core earnings as a better indicator of the success that we achieved in the quarter. As Keith touched on, we believe that our business model is uniquely positioned for growth as we work to service the needs of value-based institutions and strive to live up to our mantra of America's socially responsible bank. In the third quarter, deposits increased $70.4 million or 7.1% annualized to $4.0 billion from the second quarter of 2018.
Importantly, average on noninterest bearing deposits grew 33.1% annualized from the prior quarter and now represent 44.2% of average deposits, which contributed to our stable cost of deposits at 25 basis points. Of note, our deposit beta in the quarter was negligible and demonstrates the value of our deposit franchise. Deposits from politically active customers such as campaigns, packs, and state and national party committees, which we referred to simply as political deposits, decreased $18.5 million from $416.3 million at June 30, 2018, to $397.8 million at September 30, 2018. With the midterm elections fast approaching, we expect political deposits to continue to decrease through the fourth quarter.
If history holds, political deposits would then turn back to growth in 2019 and continue to increase in the run-up to the 2020 presidential election. During the third quarter, we delivered loan growth of $78.8 million or 10.1% annualized compared to the second quarter of 2018 and ended September 30, 2018, at $3.2 billion of total loans. Loan growth was driven primarily by residential and multifamily lending and the purchase of loans, offset by a decline of $41.8 million of indirect C&I loans. As a reminder, we no longer originate indirect C&I loans given our more conservative outlook and are allowing it to run off over time.
This highlights the strong loan growth we experienced in the quarter and was partially a result of the addition of our new West Coast lending team. The yield on average earning assets was 3.93% for the third quarter, an increase of 21 basis points as compared to the same period of 2017, driven by the increase in yields on all asset classes due to the increase of the Fed funds' rate. The yield on our total loans remained constant at 4.33%. Our net interest margin posted a strong increase of nine basis points in the quarter to 3.65% as compared to a linked quarter result of 3.56% and a 35 basis point increase as compared to the same quarter in 2017.
The accretion of the loan mark from the loans acquired to the New Resource Bank acquisition was six basis points on net interest margin in the third quarter compared to three basis points in the second quarter. Net interest income for the third quarter of 2018 was $40.0 million, which compares to $36.7 million in the linked quarter and an $8 million increase compared to $32.0 million in the same quarter of 2017. The increase from the linked quarter was largely the result of higher yields on floating-rate assets, the full quarter's impact of the -- from the New Resource acquisition and lower funding cost due to lower borrowings. Now on to noninterest income and expense.
Noninterest income for the third quarter of 2018 was $7.5 million, an increase of $1.3 million compared to the linked quarter and a $246,000 increase compared to the third quarter of 2017. The linked quarter increase was due to higher service charges on deposit accounts and the absence of losses on the sale of indirect C&I loans in the foreclosed residential real estate. Noninterest expense for the third quarter of 2018 was $34.1 million versus $30.1 million in the second quarter of 2018 and $31.0 million in third quarter of 2017. As previously mentioned, the year-over-year increase was largely due to expenses related to our IPO.
To conclude. Our return on equity was 8.96% during the quarter. And on a core basis, excluding the expense of the IPO, our return on intangible equity was 12.17%. This core return compares to 13.08% for the second quarter of 2018 and 5.71% for the comparable period in 2017.
The decrease in core return on tangible equity in the linked quarter was due to a release of provision in the second quarter of 2018 due to the higher level of indirect C&I runoff in that quarter. Lastly, we remain well-capitalized to support future growth. For the fourth quarter of 2018, we are watching the changes in our political deposits closely. With less than two weeks until the election, we've seen our political deposits decline to $295 million.
Also, we expect to incur expenses of $1.9 million to $2.0 million in the fourth quarter of 2018 related to the integration of NRB, which includes contract breakage fees, core system conversion costs and severance and retention payments to employees. These expenses will all be treated as noncore items. We look forward to updating everyone on the fourth quarter -- on our fourth quarter results beginning in 2019. With that, I'd like to ask the operator to open up the line for any questions.
Operator?
Questions and Answers:
Operator
Thank you. [Operator instructions] Our first question comes from Steven Alexopoulos with JPMorgan. Please proceed with your question.
Steven Alexopoulos -- J.P. Morgan -- Analyst
Hi, everybody.
Keith Mestrich -- President and Chief Executive Officer
Hey, Steve.
Drew LaBenne -- Chief Financial Officer
Hi, Steve.
Steven Alexopoulos -- J.P. Morgan -- Analyst
Hi. I wanted to start on the deposit side. So if we look at the cost of deposits, it was very stable at the quarter. Can you talk about were there any pressures you saw from customers in terms of them either asking for a higher yield or any migration out of noninterest-bearing into the interest-bearing? Particularly, New York City banks have been very aggressive with time deposit promotions here.
Keith Mestrich -- President and Chief Executive Officer
Steve, that's a great question, and obviously, we're quite pleased with where our deposit beta was for the quarter and really, for the year to date, we think it gives us a real competitive advantage. As you may remember from when we were on the roadshow and chatting with folks, a big piece of our business was in competition with the largest financial institutions, the big money center banks like your own and the big regionals. And if you look at our pricing on interest-bearing deposits, we're very much in line with where those larger financial institutions are. From what we're seeing, it's really the community banks that are having to increase their pricing on commercial deposits and so when our customers are looking at their competitive marketplace, they're seeing big money center banks and regional banks who have very similar pricing from an interest-bearing perspective.
Having said that, it's -- there are -- some of our customers are asking, in terms of what the interest rate environment might be looking like on a go-forward basis. We're not feeling significant pressure to increase rates. A little bit to earn some new business. We are seeing a little bit of rate pressure.
And we're seeing a little bit of shifting around from either noninterest-bearing instruments into interest-bearing instruments and a little bit sometimes into some of our trust product that's got a little bit better opportunity for some yield for our customers. But at the end of the day, our differentiated model is much on our mission, our service model of what our bankers are able to offer from an understanding of our clients' business perspectives and that continues to be the reason new customers continue to come for -- come to the bank.
Steven Alexopoulos -- J.P. Morgan -- Analyst
So Keith, would it be reasonable for us to assume only a modest increase in deposit costs again here in the fourth quarter?
Keith Mestrich -- President and Chief Executive Officer
I can't see any significant pressure on rates. Of course, I can't predict the future entirely. And we certainly have been watching what other banks have been reporting and seeing some banks see some unanticipated increases. But based on what I know to date, Steve, I think your proposition is correct.
Steven Alexopoulos -- J.P. Morgan -- Analyst
And then -- thank you. And then just quick on M&A, now that you have a public currency, have the conversations increased with potential targets? And you're still trading at a pretty loan to multiple on tangible book. How do you think about a tolerable range for earn back here? Thanks.
Keith Mestrich -- President and Chief Executive Officer
Yes. We've always emphasized wanting to do our acquisitions as we venture into this area on a sequential basis. And we're still in the full digestion phase of New Resource Bank. We'll do a full integration on New Resource from a core perspective and a brand integration perspective next weekend.
And I think so far, that's going very well. Our focus, in terms of acquisition opportunities has remained the same. We know what cities we'd like to be in. We know -- we have a handful -- a couple dozen banks that we think about on there as we think about what an acquisition pipeline might look like.
We're constantly in the market, talking to potential acquisition targets. They all were very aware of what happened with us going into the public markets and having a liquid currency. And I think they're very inquisitive of trying to want to find out what that might mean from our standpoint of wanting to be an acquirer. There's nothing on the horizon immediately that we would -- that we could talk about.
But we are seeing people wanting to have a chat with us about what our future might look like.
Steven Alexopoulos -- J.P. Morgan -- Analyst
And would you describe seller expectations as rational?
Keith Mestrich -- President and Chief Executive Officer
Everybody plays their cards pretty close to the vest in early conversations, so I think that people have seen the increase in bank valuations, but there's a lot of frothiness in the market as well that I think are -- I think people's expectations are moving around a little bit.
Steven Alexopoulos -- J.P. Morgan -- Analyst
OK. Thanks for taking my questions.
Keith Mestrich -- President and Chief Executive Officer
Sure. Thanks, Steve.
Operator
Thank you. Our next question comes from Matthew Keating with Barclays. Please proceed with your question.
Matthew Keating -- Barclays -- Analyst
Great. Thanks very much. Maybe I start with Drew in terms of quantifying the loan growth in the quarter. I think you called out there was some loan purchases in the quarter.
Just how large were those? And are those going to be a consistent part of the company strategy going forward? Thanks.
Drew LaBenne -- Chief Financial Officer
Yes, yes. So hi, Matthew. Yes, we did two loan purchases in Q3. The first was a $20 million student loan pool purchase in line with the previous purchases we'd done in that space just as we've had some of that portfolio naturally to three, with LIBOR, with spreads at about a little over LIBOR plus three.
So that should bring our total runoff to about $265 million, which leaves about $330 million left in the portfolio, $337 million to be exact. And then in Q4, we are looking at -- I would say at least another $50 million in the -- in planned runoff for that portfolio.
Matthew Keating -- Barclays -- Analyst
OK, great. And you did call out the political deposits that typically run down at -- seasonally at this point with the midterm elections coming up. And I assume then you'll go to FHLB to kind of balance that out in the quarter. And so what sort of NIM impact might that have in Q4, that dynamic? Is it pretty manageable? Maybe you could just speak to that.
Thanks.
Drew LaBenne -- Chief Financial Officer
Yes, absolutely. So as I said -- but before, we had $295 million in political deposits as of last week. We're not sure where we will end. There's less than two weeks left in the election but the spending will probably pick up as well.
We estimate that for $100 million -- and I'm not saying this is the number that it will be, but for a $100 million average decrease in political deposits, it's a four basis point NIM impact on the quarter assuming it's replaced with FHLB.
Matthew Keating -- Barclays -- Analyst
OK, great. And then -- let's see. Oh, the tax rate this quarter. Maybe -- could you talk just a little bit in terms of what you think of the normalized tax rate? It was up a bit versus Q2.
So what do you think is the right number here? Anything unusual in this quarter? I know you had the IPO cost, but maybe you could just talk about what your normalized expectations would be from a tax rate perspective?
Drew LaBenne -- Chief Financial Officer
Yes. It's a little tricky because a lot of it depends on the permanent differences in the DTA and the trip to provision. So I think we were -- we went from $24.7 million in Q1 to $25.3 million and then $26.1 million ETR this quarter. I don't -- I think the answer's probably in between $25 million and $26 million, but it will depend on kind of where income comes out.
Maybe a little north of $26 million like we were this quarter.
Matthew Keating -- Barclays -- Analyst
OK. And finally, also the accretion from New Resource's Bank obviously added a bit more to the NIM this quarter. As you think about just the scheduled accretion component of that, what's that likely to look like over the next few quarters? If you could provide any clarity there. Thanks.
Drew LaBenne -- Chief Financial Officer
It's a little -- I -- so this quarter, is the first quarter we had the full impact of it. Just because it's first quarter we had New Resource fully integrated for the full three months. The accretion is going to depend on what happens to the loan balances that we acquired, so I think staying with six basis points probably not a bad assumption, but it will be dependent on really what happens with the portfolio.
Matthew Keating -- Barclays -- Analyst
Understood. Thanks very much.
Drew LaBenne -- Chief Financial Officer
Thanks, Matt.
Operator
Our next question comes from Alex Twerdahl with Sandler O'Neill. Please proceed with your question.
Alex Twerdahl -- Sandler O'Neill -- Analyst
Hey, good afternoon.
Drew LaBenne -- Chief Financial Officer
Hi, Alex.
Keith Mestrich -- President and Chief Executive Officer
How are you doing, Alex?
Alex Twerdahl -- Sandler O'Neill -- Analyst
So I just wanted to drill a little bit on the DDA account growth that you had sequentially, $135.5 million. Is a lot of that political-driven? Or is there something else working that we should be aware of?
Drew LaBenne -- Chief Financial Officer
That was the -- you're talking about the average deposits, correct? The $133 million? So...
Alex Twerdahl -- Sandler O'Neill -- Analyst
Yes.
Drew LaBenne -- Chief Financial Officer
Actually, no, I don't -- I mean, the balance has decreased from Q2 to Q3. So the average pickup was not really politically driven, it was more the -- sorry, some of that probably was politically driven as well. But it was also, we had pretty good DDA growth outside of political in Q2 as well, which helped drive that average growth.
Keith Mestrich -- President and Chief Executive Officer
Yes. And that growth really came across all three of our regions, both our New York, Washington and our San Francisco region. And just as a reminder, with our emphasis on nonprofit clients and their reliance on operational accounts as often times their only account, our commercial bankers are able to bring in noninterest-bearing deposits by new customer acquisition on a general basis.
Alex Twerdahl -- Sandler O'Neill -- Analyst
OK. And then can you just talk a little bit about the yields? I think you said the runoff on the indirect C&I was LIBOR plus three. Can you talk a little bit about what the yields look like on some of the loans that you're putting on? Either the student loans, the residential loans just so we can kind of compare the two.
Drew LaBenne -- Chief Financial Officer
Yes. So the student loans are coming on a bit over 4%. I think they are about 4.20% or so, that they came on books 4.30%. The purchased solar loans are actually higher.
They're about close to 6% yield in terms of what's going on, and those are purchased at a discount as well. So prepayments, obviously, help with accretion as much as those happen. And then the -- obviously, the investment portfolio growth is coming on at a lower spread but those are floaters -- well, fixed end floaters that we're putting on as well. And then multifamily and residential are coming in, in kind of the -- for residential, it will be kind of 4% to 4.70%.
Multifamily's more like 4.20% to 4.80% for new originations that we've been putting on.
Keith Mestrich -- President and Chief Executive Officer
Yes. This is Keith. I would just add, one of the big questions that we had coming out of the IPO as we executed our runoff of our indirect C&I strategy, what would we be replacing yields with, and I think the loans that we see coming out of the specialty lending business that we got as a result of the New Resource transaction, we are very pleased with. That these are loans coming in at a comparable rate to what we're running C&I loans off at.
And I think what we're just wanting to see is can we get some upsize in the size of those facilities as we take advantage of a bigger balance sheet.
Alex Twerdahl -- Sandler O'Neill -- Analyst
And can you share with us some of the early successes with that effort?
Keith Mestrich -- President and Chief Executive Officer
Yes. I'd give you a couple of examples without going into too many details on names. But one of the nice things that we've seen is in the solar space, in the renewable space in particular, the ability to transform our relationship with some of our lenders. From talking about $1 million and $2 million sequential deals to actually talking about $50 million and $60 million tranches of loans that we could put on with six handles on the front of them, which really like a lot.
With -- well-structured deals with nice offtakers and in some instances, nice government guarantees from the state of California. So there are some nice deals for us to structure out there that we like a lot and that are bigger for us with our more substantial balance sheet.
Alex Twerdahl -- Sandler O'Neill -- Analyst
Great. And then just my final question, you talked a little bit about M&A and sort of the appetite. And I think I heard you correctly that the integration of New Resource will come first, obviously, and that's coming in the next couple of weeks. But -- so what's the time frame in which we could realistically see you get more -- or realistically see you announce another deal?
Keith Mestrich -- President and Chief Executive Officer
Yes. I've always thought that would be on a -- I mean, look, we've got to make sure that the deal economics work for us, right? To Steve's question earlier, we've always had a three-year earn-back period in our mind and sort of the bottom line on what we would do on a well-structured deal that we would look at. But we've always thought that we would do deals sequentially. Our appetite has been on the magnitude of a deal a year, that was something that we could think of doing that.
So we haven't changed our outlook on that. And I think we're starting to survey the potential universe of deals and build that acquisition pipeline. But it takes two to tango, as you know, we've got to make sure that the deal economics work out the right way. We'll be very disciplined in that regard.
Alex Twerdahl -- Sandler O'Neill -- Analyst
Great. Thank you for taking my questions.
Keith Mestrich -- President and Chief Executive Officer
Thanks, Alex.
Drew LaBenne -- Chief Financial Officer
Thanks, Alex.
Operator
[Operator instructions] Our next question comes from Chris O'Connell with KBW. Please proceed with your question.
Chris O'Connell -- KBW -- Analyst
Good evening. So I just wanted to touch on the operating expenses this quarter. I may have missed it, but could you just provide a breakdown of what the one-time merger and IPO costs, what lines those were coming through?
Drew LaBenne -- Chief Financial Officer
Yes. So the vast majority of the IPO costs are going to come through the professional fees line. And you can see that debt went up from $2.4 million in the second quarter to $5.2 million in the third quarter. So that's going to be your legal, your audit, those types of costs that end up in there as well.
A little bit was in the marketing costs as well in terms of kind of the marketing that went around -- advertising and promotion that went around that as well. A little bit in other costs. And then for NRB, for the -- there's two types of costs for NRB. The first is just the integration costs, which is -- yes, that was a pretty small number and it's mixed in to a couple of categories.
And then there's the pickup of run rate NRB go-forward costs and having a full quarter of that in our numbers as well. So that's going to be occupancy, depreciation, some data processing, which will come down after we complete the integration and shut down the other core system. Those are the main categories.
Keith Mestrich -- President and Chief Executive Officer
Salary benefits.
Drew LaBenne -- Chief Financial Officer
Salary benefits, yes, yes.
Chris O'Connell -- KBW -- Analyst
Great. And then just kind of going along with expenses. For the conversion, can you just remind us on the timing of that and what the costs save and kind of a clean run rate afterward might look like?
Drew LaBenne -- Chief Financial Officer
Yes. So a lot of the synergies from NRB have already been achieved because a lot of them were related to senior management and other types of -- even marketing promotional costs, things like that, mostly around the senior management team. So a lot of the synergies have already been in the run rate. You can see that in the approved efficiency ratio, in the improved return that the bank is experiencing.
So as Keith mentioned before, this weekend, we will have the integration, and there -- I'm sorry, next weekend. Yes, sorry. And there will be some -- there will be -- I'm sure there will be a little bit of cleanup around that, but all the -- the $1.9 million to $2 million that we have in the guidance for Q4 is related to determination fee in the core conversion, the cost of actually doing the conversion and that any remaining, really, retention payments for the NRB associates that have stayed around to help with the conversion. And then coming out of that, we'll have the full cost synergies rolled in, it should be in Q1 at the point going forward.
Chris O'Connell -- KBW -- Analyst
Got it. And then finally, just touching back on kind of the noninterest-bearing accounts and political deposits. Could you just maybe provide if not an exact number, just kind of a general ballpark over the end-of-period noninterest bearing deposits for this quarter? Just so it -- understand the political deposits rundown in the fourth quarter, but just to kind of get an idea of where that average balance might be.
Drew LaBenne -- Chief Financial Officer
Are you asking for the end-of-period for Q3?
Chris O'Connell -- KBW -- Analyst
Yes.
Drew LaBenne -- Chief Financial Officer
Oh, I guess we're giving you the total deposit rundown in the press release, not the average. and then we're breaking down the average. So yes, I can give you that. So noninterest-bearing deposits were $1.8 billion, now deposits were $193 million, money markets were $1.2 billion -- $1.238 billion, savings accounts were $332 million and CDs were $455 million.
And then the call report, obviously, gets filed tomorrow, although the classifications are a little different there when they hit the call report, but that will be available in there as well.
Chris O'Connell -- KBW -- Analyst
Great. Thank you. There is my [Inaudible] Thanks.
Drew LaBenne -- Chief Financial Officer
Thanks, Chris.
Operator
Thank you. At this time, I would like to turn the call back over to Keith Mestrich for closing comments.
Keith Mestrich -- President and Chief Executive Officer
Well, we were pretty pleased with our Q3 as our first full quarter out of the box as a public company. It felt like it hit on a lot of the things that we thought it would hit on and feel like we performed pretty well in the quarter. We want to thank all of you for taking a little bit of time to be with us this afternoon, and we look forward to answering any other questions that you have in the days ahead. Thank you, all.
Thanks, operator.
Operator
[Operator signoff]
Duration: 38 minutes
Call Participants:
Drew LaBenne -- Chief Financial Officer
Keith Mestrich -- President and Chief Executive Officer
Steven Alexopoulos -- J.P. Morgan -- Analyst
Matthew Keating -- Barclays -- Analyst
Alex Twerdahl -- Sandler O'Neill -- Analyst
Chris O'Connell -- KBW -- Analyst
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