Amalgamated Financial Corp. Reports Record Fourth Quarter 2022 Financial Results

NEW YORK, Jan. 26, 2023 (GLOBE NEWSWIRE) -- Amalgamated Financial Corp. (the “Company” or “Amalgamated”) (Nasdaq: AMAL), the holding company for Amalgamated Bank (the “Bank”), today announced financial results for the fourth quarter ended December 31, 2022.

Fourth Quarter 2022 Highlights (on a linked quarter basis)

• Net income of $24.8 million, or $0.80 per diluted share, compared to $22.9 million, or $0.74 per diluted share.
• Core net income excluding the impact of solar tax equity investments (non-GAAP)¹ was $27.2 million, or $0.87 per diluted share, as compared to $24.8 million, or $0.80 per diluted share.
• Average cost of deposits of 34 basis points for the quarter, where non-interest-bearing deposits comprised 51% of total deposits.
• Loans receivable, net of allowance and deferred fees and costs, increased $231.8 million, or 6.1%, to $4.1 billion.
• PACE assessments grew $55.2 million to $911.9 million, comprised of a $34.6 million increase in commercial and a $20.6 million increase in residential.
• Net interest income was level at $67.3 million compared to $67.6 million, while net interest margin grew by 6 basis points to 3.56%, compared to 3.50%.

Full Year 2022 Highlights (from year end 2021)

• Net income of $81.5 million, or $2.61 per diluted share, compared to $52.9 million, or $1.68 per diluted share.
• Core net income excluding the impact of solar tax equity investments (non-GAAP)¹ was $87.2 million, or $2.79 per diluted share, as compared to $55.1 million, or $1.75 per diluted share, or an increase of 58.3%.
• Total deposits increased by $238.8 million, or 3.76% to $6.6 billion, with a peak balance of $7.4 billion in August leading up to the congressional elections held in November.
• Loans receivable, net of allowance and deferred fees and costs, increased $784.6 million, or 23.9%, to $4.1 billion.
• Net interest income increased $65.5 million or 37.6%, to $239.8 million compared to $174.3 million.
• Nonaccrual loans decreased to $21.7 million or 0.5% of total loans compared to $28.2 million or 0.9% of total loans.
• Credit quality improved as classified or criticized assets declined by $125.3 million or 54.3% to $105.6 million.
• Regulatory capital remains above bank “well capitalized” standards.

Priscilla Sims Brown, President and Chief Executive Officer, commented, “Our record fourth quarter and full year 2022 results reflect the successful execution of the strategy that we outlined eighteen months ago.   A strategy that was designed to accelerate loan growth, improve our profitability, and drive earnings as we strived to be the most improved bank in the country for financial metrics.   I am proud to say that our full year 2022 results have exceeded our expectations as we grew our loan portfolio 23.9%, improved our return on average assets 24 bps to 1.05% and increased diluted earnings per share 56% to $2.61. With these results and momentum, I am excited to lead our Bank into its next centennial and I am delighted to honor the women and men who have shaped Amalgamated’s 100 year-old history.”

Fourth Quarter Earnings

Net income for the fourth quarter of 2022 was $24.8 million, or $0.80 per diluted share, compared to $22.9 million, or $0.74 per diluted share, for the third quarter of 2022. The $1.9 million increase for the fourth quarter of 2022 was primarily due to an $0.7 million decrease in non-interest expense, a $0.9 million decrease in provision for loan losses, and a $1.3 million decrease in income tax expense related to an elected change in taxable income recognition, offset by a $0.3 million decrease in net interest income, a $0.8 million decrease in non-interest income.

Core net income excluding the impact of solar tax equity investments (non-GAAP)¹ for the fourth quarter of 2022 was $27.2 million, or $0.87 per diluted share, compared to $24.8 million, or $0.80 per diluted share, for the third quarter of 2022. Excluded from core net income for the fourth quarter of 2022 was $1.4 million of pre-tax losses on the sale of securities and $1.7 million of accelerated depreciation from our solar tax equity investments. Excluded from the third quarter of 2022 was $1.8 million of pre-tax losses on the sale of securities, $0.6 million of pre-tax gains on subordinated debt repurchases, and $1.3 million of accelerated depreciation from our solar tax investments.

Presentation excluding the temporary effect of the tax credits and accelerated depreciation of our solar tax equity investments isolates the financial statement volatility associated with these investments.

Net interest income was $67.3 million for the fourth quarter of 2022, compared to $67.6 million for the third quarter of 2022. The $0.3 million decrease from the preceding quarter reflected increased interest expense on deposits of $3.2 million driven by a 40 basis point increase in interest-bearing deposit costs, and $4.8 million in increased interest expense from borrowings, primarily related to interest expense on Federal Home Loan Bank advances. The increase in interest expense was offset by higher interest income on securities of $4.0 million, driven by a 73 basis point increase in securities yield, and loan interest income which increased by $4.2 million, driven by a $283.9 million increase in average loan balance, and a 13 basis point increase in loan yields.

Net interest margin was 3.56% for the fourth quarter of 2022, an increase of six basis points from 3.50% in the third quarter of 2022. Increases in yields on interest-earning assets were offset by increased rates and average balances of interest-bearing liabilities, particularly due to an increase in Federal Home Loan Bank advances. Prepayment penalties earned in loan income contributed one basis point to our net interest margin in the fourth quarter of 2022, compared to four basis points in the third quarter of 2022.

Provision for loan losses totaled an expense of $4.4 million for the fourth quarter of 2022 compared to an expense of $5.4 million in the third quarter of 2022. The decrease in provision expense in the fourth quarter of 2022 was primarily related to $1.6 million in charge-offs related to nonperforming loans that were transferred to held for sale in the previous quarter and subsequently sold in the current quarter. Adjusted, our provision for loan losses in the current quarter increased by $0.6 million related to higher loan balances, increases in certain specific reserves, and elevated charge-offs in consumer solar loans.

Core non-interest income excluding the impact of solar tax equity investments (non-GAAP)¹ was $7.3 million for the fourth quarter of 2022, compared to $7.5 million in the third quarter of 2022. The decrease of $0.2 million was primarily driven by slightly lower Trust Department fees, a $0.2 million loss on the disposition of other real estate owned, and a $0.6 million loss on the sale of nonperforming held for sale loans, mostly offset by increased business banking fees and one-time beneficiary income on bank-owned life insurance.

Core non-interest expense (non-GAAP)¹ for the fourth quarter of 2022 was $35.6 million, a decrease of $0.7 million from the third quarter of 2022. This was primarily driven by a $1.5 million decrease in professional fees, offset by a $0.5 million increase in advertising and promotion expense, and increased other expenses related to recruiting services.

Our provision for income tax expense was $6.8 million for the fourth quarter of 2022, compared to $8.1 million for the third quarter of 2022. Our effective tax rate for the fourth quarter of 2022 was 21.6%, compared to 26.0% for the third quarter of 2022. The decrease in tax expense was related to an elected change in taxable income recognition. Without the change in election, our effective tax rate was 26.1%.

Balance Sheet Quarterly Summary

Total assets were $7.8 billion at December 31, 2022, compared to $7.9 billion at September 30, 2022. Notable changes within individual balance sheet line items include a $96.1 million decrease in investment securities, $231.8 million increase in loans receivable, net, a $167.1 million decrease in resell agreements, a $565.3 million decrease in deposits, and an increase in borrowed funds of $505.0 million.

Total loans receivable, net of allowance and deferred fees and costs, at December 31, 2022 were $4.1 billion, an increase of $231.8 million, or 6.1%, compared to September 30, 2022. The increase in loans is primarily driven by a $120.6 million increase in commercial and industrial loans, an $82.7 million increase in multifamily loans, and a $39.8 million increase in residential loans, offset by a $3.8 million decrease in consumer and other loans, a $1.3 million decrease in construction and land development loans, and a $2.9 million decrease in commercial real estate loans as we continue to reduce that asset class exposure. Our continued focus on credit quality improvement resulted in $12.7 million of payoffs of criticized or classified loans in the quarter.

Deposits at December 31, 2022 were $6.6 billion, a decrease of $565.3 million, or 7.9%, as compared to $7.2 billion as of September 30, 2022. Deposits held by politically active customers, such as campaigns, PACs, advocacy-based organizations, and state and national party committees were $643.6 million as of December 31, 2022, a decrease of $513.7 million compared to $1.2 billion as of September 30, 2022. The decline in political deposits is related to the conclusion of congressional elections in the fourth quarter of 2022 and is in-line with expectations we shared in the previous quarter.

Non-interest-bearing deposits represent 53% of average deposits and 51% of ending deposits for the quarter ended December 31, 2022, contributing to an average cost of deposits of 34 basis points in the fourth quarter of 2022.

Nonperforming assets totaled $34.8 million, or 0.4% of period-end total assets at December 31, 2022, a decrease of $19.5 million, compared with $54.3 million, or 0.7% on a linked quarter basis. The decrease in nonperforming assets was primarily driven by the sale of $10.2 million of restructured loans held for sale, and $12.7 million in payoffs of criticized or classified loans.

The allowance for loan losses increased $2.9 million to $45.0 million at December 31, 2022 from $42.1 million at September 30, 2022, primarily due to higher loan balances. At December 31, 2022, we had $27.8 million of impaired loans for which a specific allowance of $5.7 million was made, compared to $38.2 million of impaired loans at September 30, 2022 for which a specific allowance of $5.2 million was made. The ratio of allowance to total loans was 1.10% at December 31, 2022 and 1.09% at September 30, 2022.

Capital Quarterly Summary

As of December 31, 2022, our Common Equity Tier 1 Capital Ratio was 11.82%, Total Risk-Based Capital Ratio was 14.28%, and Tier-1 Leverage Capital Ratio was 7.52%, compared to 11.91%, 14.43% and 7.16%, respectively, as of September 30, 2022. Stockholders’ equity at December 31, 2022 was $509.0 million, compared to $487.7 million at September 30, 2022. The increase in stockholders’ equity was primarily driven by $24.8 million of net income, partially offset by $3.2 million in dividends. There was no significant change during the quarter to the accumulated other comprehensive loss due to the tax effected mark-to-market on our securities portfolio.

Our tangible book value per share (non-GAAP)¹ was $16.05 as of December 31, 2022 compared to $15.37 as of September 30, 2022, primarily a result of $24.8 million of net income in the quarter. Tangible common equity (non-GAAP)¹ was 6.30% of tangible assets, compared to 6.00% as of September 30, 2022.

Conference Call

As previously announced, Amalgamated Financial Corp. will host a conference call to discuss its fourth quarter results today, January 26, 2023 at 11:00am (Eastern Time). The conference call can be accessed by dialing 1-877-407-9716 (domestic) or 1-201-493-6779 (international) and asking for the Amalgamated Financial Corp. Fourth Quarter 2022 Earnings Call. A telephonic replay will be available approximately two hours after the call and can be accessed by dialing 1-844-512-2921, or for international callers 1-412-317-6671 and providing the access code 13733696. The telephonic replay will be available until February 2, 2023.

Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the investor relations section of our website at http://ir.amalgamatedbank.com/. The online replay will remain available for a limited time beginning immediately following the call.

The presentation materials for the call can be accessed on the investor relations section of our website at https://ir.amalgamatedbank.com/.

About Amalgamated Financial Corp.

Amalgamated Financial Corp. is a Delaware public benefit corporation and a bank holding company engaged in commercial banking and financial services through its wholly-owned subsidiary, Amalgamated Bank. Amalgamated Bank is a New York-based full-service commercial bank and a chartered trust company with a combined network of five branches across New York City, Washington D.C., and San Francisco, and a commercial office in Boston. Amalgamated Bank was formed in 1923 as Amalgamated Bank of New York by the Amalgamated Clothing Workers of America, one of the country’s oldest labor unions. Amalgamated Bank provides commercial banking and trust services nationally and offers a full range of products and services to both commercial and retail customers. Amalgamated Bank is a proud member of the Global Alliance for Banking on Values and is a certified B Corporation®. As of December 31, 2022, our total assets were $7.8 billion, total net loans were $4.1 billion, and total deposits were $6.6 billion. Additionally, as of December 31, 2022, our trust business held $38.1 billion in assets under custody and $13.4 billion in assets under management.

Non-GAAP Financial Measures

This release (and the accompanying financial information and tables) refers to certain non-GAAP financial measures including, without limitation, “Core operating revenue,” “Core non-interest expense,” “Core net income,” “Tangible common equity,” “Average tangible common equity,” “Core return on average assets,” “Core return on average tangible common equity,” and “Core efficiency ratio.”

Our management utilizes this information to compare our operating performance for December 31, 2022 versus certain periods in 2022 and 2021 and to prepare internal projections. We believe these non-GAAP financial measures facilitate making period-to-period comparisons and are meaningful indications of our operating performance. In addition, because intangible assets such as goodwill and other discrete items unrelated to our core business, which are excluded, vary extensively from company to company, we believe that the presentation of this information allows investors to more easily compare our results to those of other companies.

The presentation of non-GAAP financial information, however, is not intended to be considered in isolation or as a substitute for GAAP financial measures. We strongly encourage readers to review the GAAP financial measures included in this release and not to place undue reliance upon any single financial measure. In addition, because non-GAAP financial measures are not standardized, it may not be possible to compare the non-GAAP financial measures presented in this release with other companies’ non-GAAP financial measures having the same or similar names. Reconciliations of non-GAAP financial disclosures to comparable GAAP measures found in this release are set forth in the final pages of this release and also may be viewed on our website, amalgamatedbank.com.

Terminology

Certain terms used in this release are defined as follows:

“Core efficiency ratio” is defined as “Core non-interest expense” divided by “Core operating revenue.” We believe the most directly comparable performance ratio derived from GAAP financial measures is an efficiency ratio calculated by dividing total non-interest expense by the sum of net interest income and total non-interest income.

“Core efficiency ratio excluding solar tax impact” is defined as “Core non-interest expense” divided by “Core operating revenue excluding solar tax impact.” We believe the most directly comparable performance ratio derived from GAAP financial measures is an efficiency ratio calculated by dividing total non-interest expense by the sum of net interest income and total non-interest income.

“Core net income” is defined as net income after tax excluding gains and losses on sales of securities, gains on the sale of owned property, costs related to branch closures, restructuring/severance costs, acquisition costs, and taxes on notable pre-tax items. We believe the most directly comparable GAAP financial measure is net income.

“Core net income excluding solar tax impact” is defined as net income after tax excluding gains and losses on sales of securities, gains on the sale of owned property, costs related to branch closures, restructuring/severance costs, acquisition costs, tax credits and accelerated depreciation on solar equity investments, and taxes on notable pre-tax items. We believe the most directly comparable GAAP financial measure is net income.

“Core non-interest expense” is defined as total non-interest expense excluding costs related to branch closures, restructuring/severance, and acquisitions. We believe the most directly comparable GAAP financial measure is total non-interest expense.

“Core non-interest income excluding the impact of solar tax equity investments” is defined as total non-interest income excluding gains and losses on sales of securities, gains on the sale of owned property, and tax credits and depreciation on solar equity investments. We believe the most directly comparable GAAP financial measure is non-interest income.

“Core operating revenue” is defined as total net interest income plus “core non-interest income”, defined as non-interest income excluding gains and losses on sales of securities and gains on the sale of owned property. We believe the most directly comparable GAAP financial measure is the total of net interest income and non-interest income.

“Core operating revenue excluding solar tax impact” is defined as total net interest income plus non-interest income excluding gains and losses on sales of securities, gains on the sale of owned property, and tax credits and depreciation on solar equity investments. We believe the most directly comparable GAAP financial measure is the total of net interest income and non-interest income.

“Core return on average assets” is defined as “Core net income” divided by average total assets. We believe the most directly comparable performance ratio derived from GAAP financial measures is return on average assets calculated by dividing net income by average total assets.

“Core return on average assets excluding solar tax impact” is defined as “Core net income excluding solar tax impact” divided by average total assets. We believe the most directly comparable performance ratio derived from GAAP financial measures is return on average assets calculated by dividing net income by average total assets.

“Core return on average tangible common equity” is defined as “Core net income” divided by “Average tangible common equity.” We believe the most directly comparable performance ratio derived from GAAP financial measures is return on average equity calculated by dividing net income by average total stockholders’ equity.

“Core return on average tangible common equity excluding solar tax impact” is defined as “Core net income excluding solar tax impact” divided by “Average tangible common equity.” We believe the most directly comparable performance ratio derived from GAAP financial measures is return on average equity calculated by dividing net income by average total stockholders’ equity.

“Tangible assets” are defined as total assets excluding, as applicable, goodwill and core deposit intangibles. We believe the most directly comparable GAAP financial measure is total assets.

“Tangible common equity”, and “Tangible book value” are defined as stockholders’ equity excluding, as applicable, minority interests, preferred stock, goodwill and core deposit intangibles. We believe that the most directly comparable GAAP financial measure is total stockholders’ equity.

Forward-Looking Statements

Statements included in this release that are not historical in nature are intended to be, and are hereby identified as, forward-looking statements within the meaning of the Private Securities Litigation Reform Act, Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally can be identified through the use of forward-looking terminology such as “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “in the future,” “may” and “intend,” as well as other similar words and expressions of the future. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors, any or all of which could cause actual results to differ materially from the results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: (i) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses; (ii) continued fluctuation of the interest rate environment; (iii) our inability to maintain the historical growth rate of the loan portfolio; (iv) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (v) the impact of competition with other financial institutions, including pricing pressures and the resulting impact on our results, including as a result of compression to net interest margin; (vi) greater than anticipated adverse conditions in the national or local economies including in our core markets, which may have an adverse impact on our business, operations and performance, and could have a negative impact on our credit portfolio, share price, and borrowers; (vii) fluctuations or unanticipated changes in interest rates on loans or deposits or that affect the yield curve; (viii) any matter that would cause us to conclude that there was impairment of any asset, including intangible assets; (ix) the results of regulatory examinations; (x) potential deterioration in real estate values; (xi) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action; (xii) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized; (xiii) increased competition for experienced executives in the banking industry; (xiv) a failure in or breach of our operational or security systems or infrastructure, or those of third party vendors or other service providers, including as a result of unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches; and (xv) the outcome of any legal or regulatory proceedings that may be instituted against us; and (xvi) physical and transitional risks related to climate change as they impact our business and the businesses that we finance. Additional factors which could affect the forward-looking statements can be found in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the SEC and available on the SEC's website at https://www.sec.gov/. We disclaim any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events or otherwise, except as required by law.

Investor Contact:
Jamie Lillis
Solebury Strategic Communications
shareholderrelations@amalgamatedbank.com
800-895-4172

Consolidated Statements of Income

Consolidated Statements of Financial Condition

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Loan and Held-to-Maturity Securities Portfolio Composition

Net Interest Income Analysis

(1) Includes Federal Home Loan Bank (FHLB) stock in the average balance, and dividend income on FHLB stock in interest income
(2) Amounts are net of deferred origination costs and the allowance for loan losses
(3) Includes prepayment penalty interest income in 4Q2022, 3Q2022, and 4Q2021 of $82, $800, and $353, respectively (in thousands)

Net Interest Income Analysis

(1) Includes Federal Home Loan Bank (FHLB) stock in the average balance, and dividend income on FHLB stock in interest income
(2) Amounts are net of deferred origination costs (fees) and the allowance for loan losses
(3) Includes prepayment penalty interest income in December YTD 2022 and December YTD 2021 of $1.7 million and $1.7 million, respectively

Deposit Portfolio Composition

Asset Quality

Credit Quality

Reconciliation of GAAP to Non-GAAP Financial Measures
The information provided below presents a reconciliation of each of our non-GAAP financial measures to the most directly comparable GAAP financial measure.

(1) Salary and COBRA reimbursement expense for positions eliminated, plus expenses related to the termination of the merger agreement with Amalgamated Bank of Chicago
(2) Calculated using core net income (non-GAAP) and core net income excluding solar tax investments (non-GAAP), respectively, as the numerator.

¹ Reconciliations of non-GAAP financial measures to the most comparable GAAP measure are set forth on the last page of the financial information accompanying this press release and may also be found on our website, www.amalgamatedbank.com.

Source: Amalgamated Financial Corp.