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spk01: Good morning everyone and welcome to the Tri-State Capital Holdings conference call to discuss financial results for the three months ended December 31st, 2020. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. To withdraw from the question queue, please press star then two. We ask that you limit yourself to one question and one follow-up. If you have additional questions, you may re-enter the question queue. Please note this event is being recorded. Before turning the call over to management, I would like to remind everyone that today's call may contain forward-looking statements related to Tri-State Capital that reflect Tri-State Capital's current views with respect to, among other things, future events and the company's financial performance, as well as the company's future plans, objectives, or goals. Such forward-looking statements are subject to risks, assumptions, and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Security Litigation Reform Act of 1995. You should keep in mind that any forward-looking statements made by TraceBank Capital speak only as of the date on which they were made. New risks and uncertainties come up from time to time and management cannot predict these events or how they may affect the company. Tri-State Capital has no duty to and does not intend to update or revise forward-looking statements after the date on which they are made. For further information about the factors that could affect Tri-State Capital's future results, please see the company's most recent annual and quarterly reports filed with the Securities and Exchange Commission. Please note that annualized information referenced in this presentation is not predictive of future performance which may differ materially from annualized information. To the extent non-GAAP financial measures are discussed in this call, they will be presented with their most comparable GAAP measures and reconciliations of the non-GAAP measures can be found in Tri-State Capital's earnings release, which is available on its website at tristatecapitalbank.com. Representing Tri-State Capital Holdings today are Jim Goetz, Chairman and Chief Executive Officer, and Brian Federoff, President and CEO of Tri-State Capital Bank. They will be joined for the question and answer session by David Demas, Chief Financial Officer. At this time, I would like to turn the conference over to Mr. Goetz.
spk03: Good morning, and thank you for joining us. 2020 was a defining year for Tri-State Capital. Total revenue, net interest income, and non-interest income reached their highest annual levels in the company's history. We grew total loans and deposits by double-digit rates for the seventh consecutive year as both our private banking and commercial banking businesses responded in exceptional ways to meet our clients' needs. Our Chartwell Investment Partners asset manager delivered strong performance during the year and leveraged its excellent distribution capability to grow assets under management and dramatically improve its profitability in 2020. I'm very proud of how our three businesses and each member of this company worked together during an extraordinary year to deliver for our clients and shareholders. The results of their efforts proved what we have long said, that this company is designed to outperform in any environment. And while 2020 created challenges never seen before, it also significantly accelerated the growth and progress of many significant parts of our business. Bolstered by the additional capital we secured in 2020, we are well positioned for meaningful success in 2021. Chartwell continues to be the largest contributor of our non-interest income revenue. It delivered very strong investment performance in 2020 and leveraged its exceptional distribution capabilities. Assets under management now exceeds $10 billion, expanding organically by 6% from the end of 2019 and 34% from the market's trough on March 23rd, 2020. By comparison, publicly traded asset managers as a group saw declining AUM through the third quarter of last year. Positive net flows of $152 million across our institutional and retail businesses in 2020 compared to net outflows of $771 million in 2019. Chartwell's run rate revenue as of year-end was nearly $36 million, up 6% during the fourth quarter. And the success of our strategic efforts to sustainably enhance Chartwell profitability is paying off. Chartwell in 2020 grew annual net income by 15%, and fourth quarter earnings by 89% over the year prior. As we begin 2021, Chartwell's institutional new business pipeline stands at $115 million in unfunded commitments. We have high expectations for Chartwell and its ability to contribute the overall company's top and bottom lines in 2021. Our marketing and distribution support for its investment strategies continues unabated. As just one example, we're focusing significant marketing efforts around Chartwell's short-duration, high-yield product. This strategy is uniquely positioned to perform in this environment and attract both institutional and retail clients. And with nearly $2.8 billion in assets under management, this short-duration BB discipline combines critical mass with solid long and short-term track records, making the strategy very attractive for our business. Christ State Capital Bank also continued to outperform in 2020, delivering robust annual total loan and deposit growth of 25% and 28% respectively. We achieved this meaningful growth through deep and expanding relationships with our private banking and commercial bank businesses. Private banking loans grew by 1.1 billion or 30% during the year to 4.8 billion at year end. These loans, which are primarily collateralized by marketable securities, make up more than 58% of total loans and we see ample runway to continue growing this business and dominating our position in this market. Private banking loan applications in 2020 were up 60% year over year, almost twice the rate of growth in 2019, and we expanded our referral network to 249 financial intermediary firms. This business contributes meaningfully to our company's exceptional asset quality metrics and low credit costs. Commercial loans grew 19% during the year and an annualized 29% during the quarter through broad-based growth in many of our strategies. Commercial and industrial growth during the quarter outpaced our real estate lending with continued strength in established and enhanced products, including equipment finance and our offerings for financial service companies. Commercial real estate lending continued to grow meaningfully as we supported our existing and new clients. Turning to credit, the quality and depth of our commercial lending relationships and our fundamental underrating are also important factors in our sound credit quality. Our commercial and industrial and commercial real estate portfolios remain well diversified by product as well as by geography. We historically have had limited exposure to some of the businesses that have been more negatively impacted by COVID-19, like hotels and shopping centers. Additionally, we are pleased that the overwhelming majority of our clients we work with to provide COVID-19 deferral agreements were able to exit these arrangements prior to year end. We have 13 remaining deferrals as of December 31, totaling $84.5 million for 1% of total loans. As planned and previously communicated, we adopted CECL as of December 31, 2020, and reported an allowance for loan losses of just under $35 million. Representing 101 basis points of commercial loans, our reserves reflect our differentiated and high-quality loan portfolio. Our loan growth was matched by strong deposit growth reflecting continued progress in the strengthening and broadening of our overall client base and channels. We achieved record annual deposit growth in 2020 and delivered annualized quarterly deposit growth of more than 14% for the three months ended December 31st. Treasury management deposits grew nearly 36% during the year, and an annualized 32.5% for the fourth quarter. Our strong loan growth and deposit costs and volume management contributed to our expanding net interest margin in the fourth quarter, and more importantly, supported record net interest income of nearly $138 million in 2020, up 9% from 2019. Quarterly net interest income grew more than 30% annualized from the linked third quarter, and our margin expanded by seven basis points during the fourth quarter. This strong net interest income growth, along with performance of Chartwell, continued swap fee activity, and fees from our growth in treasury management services led to 7% annual total revenue expansion to the company's highest level yet. For 2020, in the rear view, our confidence in our unique business model has been reinforced. It was tested and proven, and we're eager and optimistic about the significant opportunities ahead. Having raised more than $200 million in capital in 2020 alone, we're well positioned to accelerate Tri-State Capital's growth in 2021. More specifically, we're focused on the following financial performance goals in 2021. Growing total revenue at 15 to 20 percent rate over 2020. Managing expense growth to a double-digit rate over 2020. Continuing to generate positive net asset inflows at Chartwell. Continuing to expand Chartwell's segment profit margins. continuing to grow net interest income dollars through volume and net interest margin expansion. Organic loan growth of 15 to 20 percent while maintaining superior asset quality and organic deposit growth of some 15 to 20 percent. Before turning to Q&A, I'd like to introduce Tri-State Capital Bank President and CEO Brian Federoff. who will be touching on technology initiatives underway, which we anticipate will have a significant impact on our success in 2020 and beyond. Ryan.
spk09: Thanks, Jim. Good morning, everyone. As Jim mentioned, we wanted to share with you a deeper dive into our bank technology strategy and investment approach, including what we have planned for 21. These are all also included in the financial goals that Jim shared this morning. As a quick backdrop to investment decision process, we always start with addressing why, what, and how, or as our favorite phrase from Jim would be, what needs to exist to make it happen. I reordered these a bit here for this presentation, though. So to start off, why do we invest in technology? It's important to note that our clients and financial intermediary network are at the heart of every decision that we make. We are constantly driven to meet and exceed their needs and expectations, and to find every feasible way to accomplish this. So we prioritize our investments that provide clients with the user experience and level of personal interaction that they prefer, help them to more effectively manage their business and financial lives, and make it increasingly easier for them to do business with us, refer business to us, and engage more meaningfully with us. Our high-performing team and culture are major differentiators for us to achieve these standards of client experiences. We're always looking for ways to improve our ability to personally engage with our clients on meaningful needs and through continuous process improvement. We accomplish this guided by our continuous goal for best-in-class scalable operating and risk management platforms to not only protect and benefit our own business, but also those of our clients and relationships as well. So how do we invest in tech? Well, our agile tech strategy is a major tool we use to meet these goals and help each of these stakeholders. We believe our technology investments have a strong return because we target them to directly maximize our competitive advantages, help us address our more complex and value add target markets, target niche user experiences, and empower our branchless business model. Also, we approach our tech development strategy using a design model which maximizes our internal expertise and provides us access to best in class external expertise. We work with the perspective of our premier clients. We overlay our industry expertise in our niche markets that we've developed over the life of our company. And we apply our exceptional product design and project management capabilities to create the most impactful solutions. We ultimately outsource the actual tech and software development phase by partnering with top firms to deliver on our design vision. So we believe that our approach is the most cost-effective framework to deliver the best customized solutions, future scalability, maximum optionality, and minimum legacy constraints for the future. And Jim's talked a lot about dealing with those in the past. What have we done so far? As we've shared with investors before, our proprietary Paris technology empowers us to deliver premier risk and compliance management through daily monitoring of the securities that collateralize our private bank loans. This was a game-changing investment early on in the life cycle of Tri-State Capital that dramatically contributed to our ability to dominate this business in the independent channel, growing loan balances by 277% just over the last five years and growing even more significantly the number of clients, intermediaries, and loans booked at that time. Our investment in our treasury management tech platform has positioned us to compete with the services and experiences provided by the best-in-class large banks while maintaining our focus on high touch with our clients. Since we initiated our specialized focus on growing this business in 2016, we have delivered the scale and customization for clients with operating balances ranging from $1 million to over $200 million. In addition to our 36% TM deposit growth in 2020 alone, we've grown the number of TM clients by over 400%, Sorry, TM accounts by 400% and TM clients by over 100% just since 2016 alone. So we've also talked about the release of our digital lending platform for our private bank lending. We designed this to position the financial intermediaries and our clients for better liability management in parallel with their investable asset management. We designed the DLP to provide the independent broker-dealer advisory and trust company channels with a securities-based lending experience that exceeds what they might have or actually may have had for those transitioning advisors at a wire house or bank-owned securities firm. The DLP has been totally embraced, and private bank applications increased by a record 60% last year compared to 2019. The DLP was also integral to how we were able to communicate and help these advisors work with their clients to manage the market volatility in 2020 with perfect maintenance execution. We're continuously improving each of these platforms, but clearly they've been established as powerful for the future and establish our ability to be agile and effective investors in technology. So what are we going to do next and what are we going to invest in? Well, we couldn't be more excited as we look forward to 2021 and beyond. As Jim mentioned, 2020 accelerated many aspects of our business. And this acceleration has confirmed the business and use cases supporting our rapid and impactful investment in tech solutions. Some of the highlights for our 21 initiatives include our Paris 2.0, which is our 2020 to 2022 initiative primarily, that reinforces its state-of-the-art functionality and performance, but also enhances and scales our analysis, monitoring, and loan origination capabilities for the huge opportunities we see ahead of us. Our expansion of our front-end technology is continuing with particular focus on self-service, self-analysis, and communication capabilities for the private bank lending through the DLP and our treasury management and high net worth deposit clients through online banking. Through an initiative we introduced in 2020, we are growing the robotic process automation in our middle and back office and our risk and compliance management environments with the goal of being entirely digital. We are enhancing our commercial loan system by partnering on development with Fiserv to facilitate our growing commercial and private bank loan portfolios, support our growth in more specialized products such as equipment finance and fund finance that Jim mentioned, and more efficiently service our growing opportunities to agent lending transactions for our larger clients. And finally, through an initiative introduced in 2020, we are building out our data management and analytics capabilities through enhanced modern and scalable technology platforms as we look to help our clients, and partners, as well as us, to capture revenue opportunities. This is really powerful now, especially as we've reached critical mass in the numbers of clients, transactions, and engagement in our business. These technology plans, as mentioned, are incorporated into the 21 financial goals that Jim shared this morning, and they're a significant contributor to the positive operating leverage that we see in 21, and they're a significant contributor to the development and growth of our business on the top line. We have a great team of innovative people working on delivering this. We are pleased with our success so far. We're never satisfied with where we are, but we are more excited than ever by the potential we have. With that, Jim, I'll turn it back to you.
spk03: Thank you, Brian. We are well positioned to deliver even stronger performance moving forward as we sustain our investments in the proprietary technology and superior talent that distinguish us from peers and the industry. Tri-state capital was built to endure, and we firmly believe that this company's best years lie ahead. I'd now ask the operator to open up the lines for questions and answers. Operator?
spk01: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw from the question queue, please press star, then 2. Please limit yourself to one question and one follow-up. If you have additional questions, you may re-enter the question queue. The first question comes from Matt Olney of Stevens. Please go ahead.
spk05: Great. Thanks. Good morning, guys. Good morning. So to start with, I guess with the adoption of CECL, we'd love to hear more about expectations for provision expense in 21, and obviously it's going to be a function of loan growth, but just I want to understand other key factors that could impact this, especially with the unique loan portfolio that Tri-State has with the private banking loans.
spk04: Thanks. Matt, we're pleased with how our investment in the talent and our unique culture in terms of our approach to credit pays dividends in terms of the strong credit quality we have. Because of that discipline and the investments we make, we expect our annual credit costs will remain well below peers. Our allowance, as Jim had indicated, stood just below $35 million at year end. We've not seen any notable defaults or losses emerge to date. And as Jim indicated, our clients continue to navigate the current mixed economy quite well. And so while we remain comfortable with our credit book and are proud of the history of only $34 million of charge-offs in the past 10 years, We want to continue to make sure that we're well positioned to handle any potential issue with respect to the economy and things that may emerge. We provided guidance in 2020 with respect to provisions, primarily because of the CISO implementation and our election to defer that implementation. I don't think we're going to provide concrete guidance this year. I would tell you that we would expect credit costs to be significantly lower in 21 versus 20, and the primary factors that we focus on in driving that determination are anticipated improvements in unemployment and anticipated improvements in GDP.
spk03: Matt, this is Jim. I would also indicate to you that as one of our financial performance goals, we noted that we foresee the loan portfolio growing 15 to 20%, and we fully believe that the private banking portfolio will make up about 60% of this portfolio at the end of the year.
spk05: Okay. That's helpful. Thank you for that. And then I guess shifting over to other financials, it looked like the tangible book value per share was higher than my expectations, and I think the consensus as well Any more color you can give us as far as the tangible Kuiper share as of 12-31, and is there any more incremental dilution or impact from the capital raise in 1Q, or are these fully captured in the 4Q number?
spk04: No, it should be fully captured in the 4Q number, Matt. What will change between Q4 and Q1 is the number of average shares outstanding, which will impact some of those calculations. The average shares outstanding will probably move up near 32 million shares outstanding for the first quarter versus what was probably closer to 29 million in Q4.
spk05: Okay. Thank you very much.
spk01: The next question is from Daniel Tomeo of Raymond James. Please go ahead.
spk02: Good morning, guys. Thanks for taking my question. Thank you. Just wanted to talk about the margin, the interest margin. You saw some nice expansion in the fourth quarter with deposit costs coming down and loan yields hanging in there, as you mentioned that they would. Can you talk about what you expect to see from here, kind of assuming a similar rate environment? Do you still expect to be able to get back to the 170% range by the end of the year?
spk04: Daniel, we do. As you saw, we were able to deliver on what we shared with you last quarter, which was margin expansion in the fourth quarter. I think Jim mentioned that margin expanded seven basis points. Even in this flat environment, we do see expansion in 21, primarily driven by deposit cost reduction. So we were at about 67 basis points in deposit costs in the fourth quarter. We see that dropping to low 50s by year end. and anticipate the average for the year will be somewhere around 55 basis points. On NIM specifically, we see a NIM of approximately 170 basis points by year end for the bank, and probably in the mid-160s for the holding company.
spk09: Yeah, and I would just add to that, you know, obviously NIM's a function of, you know, asset size as well as, you know, deposit size as well as the rate, right? So obviously I think... What we've demonstrated in 2020 was our ability to raise liquidity when we wanted it, and then also to manage those levels of liquidity by working really highly engaged with our clients. So our goal in 21 is to continue to match liquidity with our ability to put it to work, but yet really meaningfully grow our deposit franchise we have. I think there are two levers there that we demonstrated in the fourth quarter that we'll continue to be really good at in 2021.
spk02: That's terrific. This is more of a modeling question, but the other non-interest expense line ticked up a little bit more than I expected in the quarter. What was the driver of that increase?
spk04: Daniel, if you'd allow me to step back and just put expenses in context for the year, then I'd be happy to answer your question. It's important to start with the mandate we set out for ourselves at the beginning of the year, which was the chief expense growth under 10%. We were able to do that. We achieved the lowest expense rate growth in our company's history since 2013. We were able to do that while making investments to build and grow our company, invest in people, and technology focused on regulatory compliance and delivering a distinctive client experience. Revenue was a big challenge in 2020, which led to some higher efficiency ratios. But with the growth in revenue that we anticipate and our focus to drive operating leverage in 21, we expect to grow expenses by about 10 to 12% and naturally drive a lot of operating leverage, which will improve the efficiency ratio and the ratio of non-interest expenses to average assets. With respect to other expenses specifically, there are a couple of things in there. The provision for unfunded credit costs, given the CECL implementation, drove some of that increase. Expenses associated with the tax credits, as you highlighted in your piece last night, drove some of those increases. COVID-19 related expenses drove some of those increases. And then to a much smaller extent, Fees associated with running a larger investment portfolio and volume-driven loan expenses drove some of that increase as well.
spk03: Dan, this is Jim. What you want to keep in mind is that we're still building this company for the future stone by stone. You'll notice on our income statement, and it's the reason why Brian just went over what he did with you, we highlight ongoing technology. And for our business to continue to grow dramatically, we really have to... gear up the technology that we need to put in place along with the people. And that's where we're investing at this time. You'll see the expense on compensation having gone up. We've hired about 39 new people this year alone, but we're also investing in the robotics that Brian indicated that we can complete a lot of the mundane tasks that the people have been completing in the past. When we put this company together and started doing this private banking business, it was a paper-driven business. Now it's a technology-driven business, thanks to the investments that we've made. And you take a look at our growth that we're experiencing on the commercial side. We've linked up with the right partner in Fiserv And we're actually partially underwriting their investment in the development of a new system for our commercial lending area. And, you know, all that's contained within the technology number that you see in front of you there.
spk02: That's all really helpful. I appreciate it.
spk01: The next question is from Michael Pareto of KBW. Please go ahead.
spk06: Hey, good morning, guys. Happy New Year. I appreciate all the colors so far. You know, I think it's an interesting discussion, right, the technology investments, but, you know, the future scalability of it all. And, you know, I know, David, you know, you mentioned that you guys expect to improve the efficiency ratio, and I think that makes sense when you kind of look at everything you laid out. But that also doesn't seem like the maybe the best metric to kind of look at the company relative to peers, right, because of the AUM business, which I know runs a little higher. So I'm just curious if you could maybe spend a second telling us a little bit more about how you think some of the scalability that you guys expect to experience in 2021 should impact some other, you know, return metrics like ROA and ROE and how we should think about the improvement in this year.
spk04: So, Mike, as we think about ROA and ROE, we'll likely see ROE increase before ROA. We believe that yields on interest-bearing assets will be range bound for a period of time here, particularly as we grow investments at a similar rate as loans. Earnings will grow from sort of what we describe as our responsible growth strategy and will generate a return on the capital that we were able to raise in 2020 and deploy that capital. Jim mentioned that we are a growing company, and you need to keep in mind that the lag of return, there's a lag in the return on that growth. So if you think about the contributions of sort of a solid loan book, it takes time for that revenue to materialize. Obviously, the increases over time pay for the cost of client acquisition, capital provisioning for CECL, as well as the cost of growing liquidity to fund all of this. This will all increase over time. The The sub-debt expense is also a component of interest expense, and it takes time to deploy that. So we've got the economics of a growing bank, as Jim pointed out a minute ago, and some of the expense structure that we've put in place in 2020 will pay dividends in 2021. So ROE improvement before ROA. And, you know, I think if we'd just – I'd take you back to Jim's goals for the year in terms of revenue growth, expense growth, and what we plan to do in terms of the balance sheet.
spk06: Fair. Understood. And then just a clarification question on the 10% to 12% expense growth for the year. Are you guys assuming that off of kind of like $123 million-ish jump rate here on 2020, or are there any other adjustments we should be mindful of?
spk04: No, I think if he just took our annual expenses for 2020 and grew that by low double digits, as Jim indicated, that's what we'd expect for the year. Got it. Great. Thank you, guys.
spk06: Thanks, Lee.
spk01: Again, if you have a question, please press star, then 1. The next question comes from Steve Moss of B. Reilly Securities. Please go ahead.
spk07: Good morning, guys.
spk03: Morning, Steve. Nice to see you.
spk07: Just on the loan growth guidance here, you know, 15% to 20%, a little bit below kind of what you've done the last couple of years. And, you know, even relative to this past quarter, just kind of curious to give some colors to, you know, how to think about that. I heard you, Jim, when you said the private loan should get to 60%. But just kind of curious as to how you think about the pipeline and growth over the course of the year.
spk09: Yeah, I think, Brian, you know, I think that, you know, 15 to 20% is probably, you know, a very safe baseline number, but we would expect to probably, you know, push that more in the 22, 25% range. But I think, you know, another way to think about 15 to 20% is probably on an average, you know, low growth basis. So as we look at that more on an, you know, growing that across the year, but we We believe that we have probably the best loan growth opportunities that we've ever had as we approach the next year or so. So we would expect to be over that 20% number. Again, I think if we look at 15% to 20% revenue, we'll certainly get part of that from the margin expansion we talked about. Obviously, we'll put some additional money to work on the investment side. And then growing the loans over 20% support that revenue growth.
spk07: Okay, that's helpful. And then in terms of just maybe following up on the reserve ratio and credit costs here, I hear you guys on economy improving to help drive the provision expense down. How do we think about maybe that reserve ratio heading back towards what we saw pre-COVID in terms of maybe how long it'll take to get back towards those levels?
spk09: I think we're looking at a very sort of flat economy. I mean, from a reserve perspective, I think in 22 or 21, as David mentioned, right? So that's going to be a multi-year process from our perspective. We're not necessarily in a rush to do any of this. But again, the loans we put on in 21, again, and probably to revert back to your answer from last time, that Private bank loans, we will continue to look to grow 25% to 30%. So out of that number that we gave to you, that 15% to 25% loan growth, significant part of that will be on the private bank side. And then on the commercial side, the loans that we put on this year, we think will be favorable under CECL treatment. So we would expect that this is going to be a pretty modest year from a contribution. So we'll start, obviously, reducing the percent loans, you know, provision to loans a bit through our growth, because that'll probably come on a bit slower. And then, but in terms of actual releases, I think we're looking at a longer period. I don't know, Dave, if you wanted to add to that.
spk04: No, I agree. If you're targeting your comment to releases, I don't think you'll see us release reserves for a while.
spk09: Yeah, but from an average annual credit cost, we would expect to continue to, you know, outperform relative to peers for sure.
spk03: Yeah, you want to keep in mind what our historical track record has been with regard to credit, Steve. We haven't had a single net charge off in the past three years. And in the past five years, it's been $2.6 million. And then if you look back to the recession, it was $37 million. So We have a pretty credible track record in that regard that the underwriting system that we put in place is really delivered to us, and we continue to have confidence in that.
spk07: Right. Well, thank you very much. I appreciate all the color.
spk05: Thank you.
spk01: The next question is from Russell Gunther of DA Davidson. Please go ahead.
spk08: Good morning, guys. Morning. Hey, Russell. Hey, guys. So on Chartwell, nice finish to the year. I was just wondering if you could share your revenue expectations for 2021 for that C vertical and what the drivers would be.
spk03: Yeah, what you're going to see there clearly is the fact that their distribution network continues to perform. They have credible investment performance. Most of the flows that we reflected to you in the presentation came into our short-duration, high-yield product and also the value products that we have in place at the company. So we anticipate a very robust year there based on... performance, the quality of the distribution network, and the client base that we've been able to establish both on the retail and the institutional side. If you look at the retail side of the business, it's now over 20% of the assets, and it was immaterial when we acquired the company in 2014. And you look at the institutional side of the business, and it continues to grow pretty handily. $115 million that I mentioned should be converted over in the next 60 days and come into this quarter.
spk04: Russell, just to put some numbers behind the themes that Jim shared with you, Chartwell was able to reduce their expenses by 12% in 2020. And at the same time, their net income in 2020 was up 15% year over year. their run rate revenue right now is on pace to be about $36 million for 2021. So they had a great 2020, and they're set up for a great 21.
spk08: Jim, David, thank you both for that. And then just for my final question, hoping you could talk a little bit about trends within your commercial portfolios, both CNI and CRE, and what drivers of growth for 2021 would be there. Thank you.
spk09: Yeah, thanks, Russell. You know, I think if we look at what we were able to do in 20 and to roll that forward in 21, we'd be pretty happy, you know, particularly the second half of that. So on the CNI side, we would probably continue to see a significant portion of the growth driven by equipment finance and fund finance. And these are where, you know, agile products, growing industry, growing demand, where we can engage pretty quickly and use our expertise and networks to engage with clients. Certainly, we want to be there to continue to grow our fundamental CNI business as well. I think it's really going to be around finding when people want to focus on making a transition and when they're comfortable to do that. But in terms of our clients, by the way, I mean, again, I think Jim mentioned it in his script. I mean, we've been inspired and just really impressed with how our commercial clients have managed their businesses as well as their real estate development. So, you know, I think that there are certainly significant opportunities with our existing portfolio to grow along with our clients as well as we come out of this. So we're excited by those three. So those are probably the three primary drivers on the commercial real estate side. We're still very excited about the opportunities that our key clients have in the geographies and the markets. And again, that includes sort of all of Ohio, Pennsylvania, New Jersey, New York, and some contiguous states. So as we work with our known clients and our known prospects, so it's a pretty exclusive group of people that we work with, certainly sponsor-driven, they are liquid and they are finding significant opportunities in this environment so you know asset classes or loan types property types probably similar to what you're going to see other places you know we continue to focus on industrial flex you know multi-family and we might see some you know opportunistic investments for for our clients and other places but we're fundamentally engaged with them on Fundamentally, new business. I mean, the other good part is we're really committed to keeping the loans that we have from a refinance perspective and continue to keep that in the portfolio. So the activity we need to generate in 21, even though we are seeing it being a more competitive environment than 20, we're still optimistic that we can minimize our payoffs and where more growth falls to the net side. So I think that's where we're going to you'll be able to have strong growth in 2021.
spk01: This concludes our question and answer session. I would like to turn the conference back over to Mr. Goetz for closing remarks.
spk03: Thank you very much for your continued interest in Tri-State Capital and your participation today. We look forward to updating you on our first quarter results in April. Have a great day.
spk01: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
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