UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 28, 2021 (September 30, 2021)
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (212 ) 895-8988
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR § 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR § 240.12b-2).
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On October 28, 2021, Amalgamated Financial Corp. (“Company”) issued a press release announcing financial results for the third quarter ended September 30, 2021. The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Item 7.01 Regulation FD Disclosure.
On October 28, 2021, the Company will hold an earnings conference call and webcast at 11:00 a.m. (Eastern Time) to discuss financial results for the third quarter ended September 30, 2021. The press release contains information about how to access the conference call and webcast. A copy of the slide presentation to be used during the earnings call and webcast is furnished as Exhibit 99.2 to this Current Report on Form 8-K. The slide presentation is also available on our website, www.amalgamatedbank.com, under the “Investor Relations” section.
The information in this Item 7.01, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits The following exhibit index lists the exhibits that are either filed or furnished with this Current Report on Form 8-K:
EXHIBIT INDEX
| Exhibit No. | Description | |||||||||||||
| 99.1 | ||||||||||||||
| 99.2 | ||||||||||||||
| 104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL. | |||||||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| AMALGAMATED FINANCIAL CORP. | |||||||||||
By: | /s/ Priscilla Sims Brown | ||||||||||
Name: | Priscilla Sims Brown | ||||||||||
Title: | President and Chief Executive Officer | ||||||||||
Date: | |||||||||||
2
Amalgamated Financial Corp. Reports Third Quarter 2021 Financial Results
NEW YORK – (Globe Newswire) -- October 28, 2021: Amalgamated Financial Corp. (the “Company” or “Amalgamated”) (Nasdaq: AMAL), the holding company for Amalgamated Bank (the “Bank”), today announced financial results for the third quarter ended September 30, 20211.
Third Quarter 2021 Highlights
•Net income of $14.4 million, or $0.46 per diluted share, compared to $10.4 million, or $0.33 per diluted share, for the second quarter of 2021 and $12.5 million, or $0.40 per diluted share for the third quarter of 2020.
•Deposits increased $314.5 million to $6.2 billion on a linked quarter basis.
•Political deposits remained strong and stable at $1.0 billion as of September 30, 2021, with $223.5 million growth on a linked quarter basis.
•Cost of deposits was 0.09%, down five basis points from the third quarter of 2020.
•PACE assessments grew $81.4 million to $627.2 million on a linked quarter basis, and grew $259.8 million on a year over year basis. Current quarter growth included $69.0 million of Commercial PACE assessments.
•Net loans including PACE assessments grew by $31.4 million, or 0.85%, on a linked quarter basis. Excluding the impact of our residential 1-4 first mortgage portfolio runoff, the growth was $83.7 million, or 3.20%.
•Net interest margin was 2.70%, compared to 2.75% for the second quarter of 2021 and 2.88% for the third quarter of 2020.
•Regulatory capital remains above bank “well capitalized” standards.
•Nonperforming assets improved to $67.8 million or 0.99% of total assets as of September 30, 2021, compared to $71.0 million or 1.08% of total assets on a linked quarter basis.
•Announced plan to acquire Amalgamated Bank of Chicago (ABOC) in an all-cash transaction that will bring Amalgamated’s asset size to greater than $7.6 billion, building on the largest socially responsible, mission-oriented bank in the United States.
Priscilla Sims Brown, President and Chief Executive Officer, commented, “I am pleased with our third quarter results which position us to achieve our revised full year guidance as we delivered strong results across the dimensions of revenue, profitability, credit quality, and foundational growth drivers such as PACE assessments and deposits. I am also encouraged that we can generate sustained and profitable growth as we begin the implementation of our strategic initiatives. During the third quarter, we grew PACE assessments 15% to $627 million as compared to the second quarter of 2021, resulting in net growth in our combined lending and PACE portfolio. Importantly, the headwinds that we have experienced in our loan portfolio continued to diminish through the third quarter positioning the Bank for a return to organic loan growth in the year ahead. Our deposit franchise also continued its growth trajectory, gaining 5.3% from the previous quarter while our cost of deposits declined to 9 basis points, one of the lowest in the industry. Contributing to our low cost of funds was the strong growth in political deposits which increased by almost $250 million to $1 billion on a linked quarter basis.”
Brown added, “We have very recently launched a series of growth initiatives designed to fuel our loan and trust growth while staying true to our mission and solidifying our position as America’s Socially Responsible Bank. Our initiatives are focused on four pillars including the building of our business through our mission, improving our focus on and deepening insights of our core customers, developing and expanding our product expertise to grow our lending platform and trust businesses, and improving our data and technology. Also central to our growth initiatives is a disciplined M&A strategy where our recently announced acquisition of ABOC will allow us to expand into the third largest MSA in the U.S. as we offer larger-scale loans to a client base that has historically proven a need for them, cross-market our services to ABOC’s customer base, and be able to reach new, untapped business in the greater Chicago and Midwestern markets.”
[1] Effective March 1, 2021, the Company acquired all of the outstanding stock of the Bank in a reorganization effected under New York law and in accordance with the terms of a Plan of Acquisition dated September 4, 2020. In this release, unless the context indicates otherwise, references to “we,” “us,” and “our” refer to the Company and the Bank. However, if the discussion relates to a period before the effective date, the terms refer only to the Bank.
1
Results of Operations, Quarter Ended September 30, 2021
Net income for the third quarter of 2021 was $14.4 million, or $0.46 per diluted share, compared to $10.4 million, or $0.33 per diluted share, for the second quarter of 2021 and $12.5 million, or $0.40 per diluted share, for the third quarter of 2020. The $4.0 million increase for the third quarter of 2021 was primarily due to a $2.3 million release of provision for loan losses compared to a $1.7 million provision expense in the preceding quarter, as well as $1.4 million increase in net interest income and a $1.4 million increase in non-interest income. These increases were partially offset by a $1.6 million increase in non-interest expense and a $1.1 million increase in income tax expense.
Core net income (non-GAAP)2 for the third quarter of 2021 was $14.4 million, or $0.46 per diluted share, compared to $10.2 million, or $0.32 per diluted share, for the second quarter of 2021 and $16.8 million, or $0.54 per diluted share, for the third quarter of 2020. Excluded from core net income for the third quarter of 2021 was $0.4 million of non-interest income gains on the sale of securities and $0.4 million of non-interest expenses related to ABOC, and for the second quarter of 2021 was $0.3 million of non-interest income gains on the sale of securities. Excluded from core net income for the third quarter of 2020 was $0.6 million of non-interest income gains on the sale of securities, $6.3 million in branch closure expenses, and other adjustments, including the tax effect of such adjustments.
Net interest income was $43.4 million for the third quarter of 2021, compared to $42.0 million for the second quarter of 2021 and $45.2 million for the third quarter of 2020. The $1.4 million increase from the preceding quarter reflected higher income on securities and lower interest expense on deposits, offset by a decrease in interest income as average loans decreased $75.2 million from the prepayment and paydowns of residential and commercial real estate loans. The $1.8 million decrease from the third quarter of 2020 was primarily attributable to a decrease in average loans of $481.6 million from the prepayment of residential and commercial loans and a 13 basis point decrease in yield due to lower yields on originations, partially offset by higher income on securities and lower interest expense on deposits.
Net interest margin was 2.70% for the third quarter of 2021, a decrease of five basis points from 2.75% in the second quarter of 2021, and a decrease of 18 basis points from 2.88% in the third quarter of 2020. The accretion of the loan mark from the loans acquired in the New Resource Bank acquisition contributed one basis point to our net interest margin in the third quarter of 2021, compared to two basis points in the second quarter of 2021 and third quarter of 2020. Prepayment penalties earned in loan income contributed one basis point to our net interest margin in the third quarter of 2021, compared to three basis points in the second quarter of 2021 and seven basis points in the third quarter of 2020.
Provision for loan losses totaled a recovery of $2.3 million for the third quarter of 2021 compared to an expense of $1.7 million in the second quarter of 2021 and an expense of $3.4 million for the third quarter of 2020, respectively. The recovery in the third quarter of 2021 was primarily driven by a decrease in allowance primarily driven by improvement in loss and qualitative factors,improved credit quality, and lower loan balances.
Non-interest income was $6.7 million for the third quarter of 2021, compared to $5.3 million in the second quarter of 2021 and $12.8 million for the third quarter in 2020. This increase of $1.4 million in the third quarter of 2021, compared to the preceding quarter, was primarily due to the expected decrease in equity method investment losses related to investments in solar initiatives. The decrease of $6.1 million in the third quarter of 2021 compared to the corresponding quarter in 2020 was primarily due to a loss of $0.5 million related to equity investments in solar initiatives in the third quarter of 2021 compared to a $4.3 million gain in the third quarter in 2020. The Company primarily recognized the benefit of the tax credits in 2020, the initial year of the equity investment. We expect minimal losses in equity method investments during the remainder of 2021. These impacts do not include any benefits of new solar equity investments that we may make in the future.
[2] 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.
2
Non-interest expense for the third quarter of 2021 was $33.0 million, an increase of $1.6 million from the second quarter of 2021 and a decrease of $4.9 million from the third quarter of 2020. The increase of $1.6 million from the preceding quarter includes $0.4 million of ABOC related costs. The remaining difference was primarily due to a $1.2 million increase to data processing related to the full impact of our Trust Department outsourced operation, a $0.5 million increase to compensation and employee benefits, and a $0.4 million increase in reserves for unused loan commitments, partially offset by a $1.2 million decrease in professional services expense, net of ABOC related deal costs. The decrease of $4.9 million from the third quarter of 2020 is due to a decrease in occupancy and depreciation expenses related to branch closures in 2020.
Our provision for income tax expense was $4.9 million for the third quarter of 2021, compared to $3.8 million for the second quarter of 2021 and $4.3 million for the third quarter of 2020. Our effective tax rate for the third quarter of 2021 was 25.4%, compared to 26.9% for the second quarter of 2021 and 25.4% for the third quarter of 2020.
Results of Operations, Nine Months Ended September 30, 2021
Net income for the nine months ended September 30, 2021 was $37.0 million, or $1.17 per average diluted share, compared to $32.4 million, or $1.04 per average diluted share, for same period in 2020. The $4.6 million increase was primarily due to a $3.9 million recovery of provision for loan loss compared to a $20.2 million provision for loan loss for the same period in 2020, as well as a $4.0 million decrease in non-interest expense. This recovery of provision was partially offset by a $14.6 million decrease in non-interest income and a $7.2 million decrease in net interest income.
Core net income (non-GAAP) for the nine months ended September 30, 2021 was $37.6 million, or $1.19 per diluted share, compared to $36.5 million or $1.17 per diluted share, for the same period last year. Core net income for the first nine months of 2021 excludes severance costs, non-interest income gains on the sale of securities, and the tax effect of such adjustments.
Net interest income was $127.2 million for the nine months ended September 30, 2021, compared to $134.4 million for the same period in 2020. This decrease of $7.2 million was primarily attributable to a decrease in average loans of $354.2 million and lower yields earned on interest bearing assets. These impacts are partially offset by an increase in average securities of $651.8 million, and a decrease in average rates paid on deposits.
Provision for loan losses totaled a recovery of $3.9 million for the nine months ended September 30, 2021, compared to an expense of $20.2 million for the same period in 2020. The recovery for the nine months ended September 30, 2021 was primarily driven by a release of allowance for loan loss due to improvement in loss rate and other qualitative factors, improved credit quality, and lower loan balances.
Non-interest income was $16.0 million for the nine months ended September 30, 2021, compared to $30.6 million for the same period in 2020, a decrease of $14.6 million. This decrease is primarily due to the tax credits on equity investment projects being in a loss position compared to a gain position in the prior year, as well as a $1.4 million gain on the sale of a branch reported in other non-interest income in the prior year, and a $1.2 million decrease in Trust Department fees primarily attributed to the run-off of the ULTRA real estate fund, which ceased earning revenues in 2020.
Non-interest expense for the nine months ended September 30, 2021 was $97.2 million, a decrease of $4.0 million from $101.2 million for the nine months ended September 30, 2020. The decrease was primarily due to a $9.4 million decrease in occupancy and depreciation expense due to the branch closures in the prior year and lower rent expense in the current year, offset by a $2.0 million increase in professional fees mainly related to our holding company formation and chief executive officer search, a $2.7 million increase in data processing mainly related to the modernization of our Trust Department and increased transaction processing costs post COVID-19, and a $0.9 million increase in other expenses mainly related to insurance costs, reserves for unused loan commitments, and foreclosure recoveries that were recognized in the prior year.
3
We had income tax expense of $12.9 million for the nine months ended September 30, 2021, compared to $11.1 million for the same period in 2020. Our effective tax rate was 25.8% for the nine months ended September 30, 2021, compared to 25.5% for the same period in 2020.
Financial Condition
Total assets were $6.9 billion at September 30, 2021, compared to $6.0 billion at December 31, 2020. The increase of $0.9 billion was driven primarily by a $651.5 million increase in cash and cash equivalents and a $646.3 million increase in investment securities, of which $81.4 million was from PACE assessments, which was partially offset by a $359.8 million decrease in loans receivable, net.
Total loans, net at September 30, 2021 were $3.1 billion, a decrease of $359.8 million, or 14.0% annualized, compared to December 31, 2020. The decline in loans was primarily driven by a $205.8 million decrease in residential loans due to increased refinancing activity by existing customers, a $146.8 million decrease in commercial real estate and multifamily loans due to refinancing activity by existing customers and payoffs, and a $48.8 million decrease in C&I loans due to payoffs. As of September 30, 2021, the Company had $16.7 million in loans remaining on a payment deferral program and still accruing interest, the majority of which represent two performing commercial loans requesting additional deferrals.
Deposits at September 30, 2021 were $6.2 billion, an increase of $885.8 million, or 22.2% annualized, as compared to $5.3 billion as of December 31, 2020. Deposits held by politically active customers, such as campaigns, PACs, advocacy-based organizations, and state and national party committees were $1.0 billion as of September 30, 2021, an increase of $411.9 million compared to $602.8 million as of December 31, 2020. Noninterest-bearing deposits represent 52% of average deposits and 51% of ending deposits for the quarter ended September 30, 2021, contributing to an average cost of deposits of 0.09% in the third quarter of 2021, a one basis point decrease from the preceding quarter.
Nonperforming assets totaled $67.8 million, or 0.99% of period-end total assets at September 30, 2021, a decrease of $14.4 million, compared with $82.2 million, or 1.38% of period-end total assets at December 31, 2020. The decrease in non-performing assets at September 30, 2021 compared to December 31, 2020 was primarily driven by the payoff of $11.2 million of non-accruing construction loans and $3.5 million of multifamily loans, and the decrease of $1.4 million of loans 90 days past due and accruing, partially offset by an increase of $2.1 million of Troubled Debt Restructurings.
The allowance for loan losses decreased $5.7 million to $35.9 million at September 30, 2021 from $41.6 million at December 31, 2020, primarily due to decreases in loan balances. At September 30, 2021, we had $67.5 million of impaired loans for which a specific allowance of $6.5 million was made, compared to $80.5 million of impaired loans at December 31, 2020 for which a specific allowance of $6.2 million was made. The ratio of allowance to total loans was 1.15% at September 30, 2021 and 1.19% at December 31, 2020.
Capital
As of September 30, 2021, our Common Equity Tier 1 Capital Ratio was 13.98%, Total Risk-Based Capital Ratio was 14.99%, and Tier-1 Leverage Capital Ratio was 7.85%, compared to 13.11%, 14.25% and 7.97%, respectively, as of December 31, 2020. Stockholders’ equity at September 30, 2021 was $556.4 million, compared to $535.8 million at December 31, 2020. The increase in stockholders’ equity was driven by $37.0 million of net income, partially offset by a $5.8 million decrease in accumulated other comprehensive income due to the mark to market on our securities portfolio and $3.1 million decrease in additional paid-in capital.
Our tangible book value per share was $17.33 as of September 30, 2021 compared to $16.66 as of December 31, 2020.
4
Conference Call
As previously announced, Amalgamated Financial Corp. will host a conference call to discuss its third quarter 2021 results today, October 28th, 2021 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. Third Quarter 2021 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 13723559. The telephonic replay will be available until November 4, 2021.
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 http://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 six branches in New York City, Washington D.C., San Francisco, and 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 September 30, 2021, our total assets were $6.9 billion, total net loans were $3.1 billion, and total deposits were $6.2 billion. Additionally, as of September 30, 2021, our trust business held $39.5 billion in assets under custody and $16.1 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 September 30, 2021 versus certain periods in 2021 and 2020 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-
5
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 operating revenue” is defined as total net interest income plus 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 non-interest expense” is defined as total non-interest expense excluding costs related to branch closures and restructuring/severance costs. We believe the most directly comparable GAAP financial measure is total non-interest expense.
“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.
“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.
“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 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 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.
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, and in this release include statements about the losses in our equity method investments and our 2021 earnings guidance. 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) continuation of the historically low short-term 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, including, but not limited to, the
6
negative impacts and disruptions resulting from the outbreak of the novel coronavirus, or COVID-19, which may continue to have an adverse impact on our business, operations and performance, and could continue to have a negative impact on our credit portfolio, share price, borrowers, and on the economy as a whole, both domestically and globally; (vii) fluctuations or unanticipated changes in interest rates on loans or deposits or that affect the yield curve; (viii) the results of regulatory examinations; (ix) potential deterioration in real estate values; (x) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action; (xi) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized; (xii) increased competition for experienced executives in the banking industry; and (xiii) risks related to our proposed acquisition of Amalgamated Bank of Chicago, including, among others, that the acquisition does not close when expected or at all because conditions to closing are not satisfied on a timely basis or at all, or that financial projections from the acquisition are not realized. 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 Trout
shareholderrelations@amalgamatedbank.com
800-895-4172
7
Consolidated Statements of Income (unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | ||||||||||||||||||||||||||
| ($ in thousands) | 2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||
| INTEREST AND DIVIDEND INCOME | |||||||||||||||||||||||||||||
| Loans | $ | 29,915 | $ | 30,156 | $ | 35,602 | $ | 91,180 | $ | 106,440 | |||||||||||||||||||
| Securities | 14,612 | 13,094 | 11,473 | 39,876 | 35,772 | ||||||||||||||||||||||||
| Federal Home Loan Bank of New York stock | 43 | 41 | 56 | 132 | 190 | ||||||||||||||||||||||||
| Interest-bearing deposits in banks | 230 | 131 | 152 | 451 | 631 | ||||||||||||||||||||||||
| Total interest and dividend income | 44,800 | 43,422 | 47,283 | 131,639 | 143,033 | ||||||||||||||||||||||||
| INTEREST EXPENSE | |||||||||||||||||||||||||||||
| Deposits | 1,413 | 1,431 | 2,049 | 4,416 | 8,645 | ||||||||||||||||||||||||
| Borrowed funds | — | — | — | — | 27 | ||||||||||||||||||||||||
| Total interest expense | 1,413 | 1,431 | 2,049 | 4,416 | 8,672 | ||||||||||||||||||||||||
| NET INTEREST INCOME | 43,387 | 41,991 | 45,234 | 127,223 | 134,361 | ||||||||||||||||||||||||
| Provision for (recovery of) loan losses | (2,276) | 1,682 | 3,394 | (3,855) | 20,202 | ||||||||||||||||||||||||
| Net interest income after provision for loan losses | 45,663 | 40,309 | 41,840 | 131,078 | 114,159 | ||||||||||||||||||||||||
| NON-INTEREST INCOME | |||||||||||||||||||||||||||||
| Trust Department fees | 3,353 | 3,292 | 3,622 | 10,471 | 11,688 | ||||||||||||||||||||||||
| Service charges on deposit accounts | 2,466 | 2,296 | 2,130 | 6,941 | 6,391 | ||||||||||||||||||||||||
| Bank-owned life insurance | 539 | 531 | 1,227 | 1,858 | 2,722 | ||||||||||||||||||||||||
| Gain (loss) on sale of securities | 413 | 321 | 619 | 755 | 1,605 | ||||||||||||||||||||||||
| Gain (loss) on sale of loans, net | 280 | 720 | 903 | 1,706 | 1,200 | ||||||||||||||||||||||||
| Gain (loss) on other real estate owned, net | — | (407) | (176) | (407) | (482) | ||||||||||||||||||||||||
| Equity method investments | (483) | (1,555) | 4,297 | (5,720) | 5,586 | ||||||||||||||||||||||||
| Other | 134 | 129 | 154 | 424 | 1,855 | ||||||||||||||||||||||||
| Total non-interest income | 6,702 | 5,327 | 12,776 | 16,028 | 30,565 | ||||||||||||||||||||||||
| NON-INTEREST EXPENSE | |||||||||||||||||||||||||||||
| Compensation and employee benefits | 17,482 | 16,964 | 17,547 | 52,485 | 52,338 | ||||||||||||||||||||||||
| Occupancy and depreciation | 3,440 | 3,352 | 9,908 | 10,293 | 19,655 | ||||||||||||||||||||||||
| Professional fees | 2,348 | 3,211 | 2,202 | 9,219 | 7,173 | ||||||||||||||||||||||||
| Data processing | 4,521 | 3,322 | 2,916 | 10,848 | 8,157 | ||||||||||||||||||||||||
| Office maintenance and depreciation | 887 | 820 | 863 | 2,362 | 2,538 | ||||||||||||||||||||||||
| Amortization of intangible assets | 301 | 302 | 342 | 905 | 1,027 | ||||||||||||||||||||||||
| Advertising and promotion | 1,023 | 628 | 1,172 | 2,248 | 2,511 | ||||||||||||||||||||||||
| Other | 3,032 | 2,796 | 2,927 | 8,863 | 7,817 | ||||||||||||||||||||||||
| Total non-interest expense | 33,034 | 31,395 | 37,877 | 97,223 | 101,216 | ||||||||||||||||||||||||
| Income before income taxes | 19,331 | 14,241 | 16,739 | 49,883 | 43,508 | ||||||||||||||||||||||||
| Income tax expense (benefit) | 4,915 | 3,833 | 4,259 | 12,870 | 11,109 | ||||||||||||||||||||||||
| Net income | 14,416 | 10,408 | 12,480 | 37,013 | 32,399 | ||||||||||||||||||||||||
| Net income attributable to Amalgamated Financial Corp. | $ | 14,416 | $ | 10,408 | $ | 12,480 | $ | 37,013 | $ | 32,399 | |||||||||||||||||||
| Earnings per common share - basic | $ | 0.46 | $ | 0.33 | $ | 0.40 | $ | 1.19 | $ | 1.04 | |||||||||||||||||||
| Earnings per common share - diluted | $ | 0.46 | $ | 0.33 | $ | 0.40 | $ | 1.17 | $ | 1.04 | |||||||||||||||||||
8
Consolidated Statements of Financial Condition
| ($ in thousands) | September 30, 2021 | December 31, 2020 | |||||||||
| Assets | (unaudited) | ||||||||||
| Cash and due from banks | $ | 8,488 | $ | 7,736 | |||||||
| Interest-bearing deposits in banks | 681,758 | 31,033 | |||||||||
| Total cash and cash equivalents | 690,246 | 38,769 | |||||||||
| Securities: | |||||||||||
| Available for sale, at fair value (amortized cost of $1,936,830 and $1,513,409, respectively) | 1,955,502 | 1,539,862 | |||||||||
| Held-to-maturity (fair value of $727,161 and $502,425, respectively) | 725,076 | 494,449 | |||||||||
| Loans held for sale | 6,156 | 11,178 | |||||||||
| Loans receivable, net of deferred loan origination costs (fees) | 3,123,329 | 3,488,895 | |||||||||
| Allowance for loan losses | (35,863) | (41,589) | |||||||||
| Loans receivable, net | 3,087,466 | 3,447,306 | |||||||||
| Resell agreements | 130,434 | 154,779 | |||||||||
| Accrued interest and dividends receivable | 23,337 | 23,970 | |||||||||
| Premises and equipment, net | 12,447 | 12,977 | |||||||||
| Bank-owned life insurance | 106,736 | 105,888 | |||||||||
| Right-of-use lease asset | 34,819 | 36,104 | |||||||||
| Deferred tax asset | 24,672 | 36,079 | |||||||||
| Goodwill | 12,936 | 12,936 | |||||||||
| Other intangible assets | 4,453 | 5,359 | |||||||||
| Equity investments | 5,614 | 11,735 | |||||||||
| Other assets | 39,871 | 47,240 | |||||||||
| Total assets | $ | 6,859,765 | $ | 5,978,631 | |||||||
| Liabilities | |||||||||||
| Deposits | $ | 6,224,506 | $ | 5,338,711 | |||||||
| Operating leases | 50,416 | 53,173 | |||||||||
| Other liabilities | 28,453 | 50,926 | |||||||||
| Total liabilities | 6,303,375 | 5,442,810 | |||||||||
| Commitments and contingencies | — | — | |||||||||
| Stockholders’ equity | |||||||||||
| Common stock, par value $.01 per share (70,000,000 shares authorized; 31,096,896 and 31,049,525 shares issued and outstanding, respectively) | 311 | 310 | |||||||||
| Additional paid-in capital | 297,904 | 300,989 | |||||||||
| Retained earnings | 246,665 | 217,213 | |||||||||
| Accumulated other comprehensive income (loss), net of income taxes | 11,377 | 17,176 | |||||||||
| Total Amalgamated Financial Corp. stockholders' equity | 556,257 | 535,688 | |||||||||
| Noncontrolling interests | 133 | 133 | |||||||||
| Total stockholders' equity | 556,390 | 535,821 | |||||||||
| Total liabilities and stockholders’ equity | $ | 6,859,765 | $ | 5,978,631 | |||||||
9
Select Financial Data
| As of and for the | As of and for the | ||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | ||||||||||||||||||||||||||
| (Shares in thousands) | 2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||
| Selected Financial Ratios and Other Data: | |||||||||||||||||||||||||||||
| Earnings | |||||||||||||||||||||||||||||
| Basic | $ | 0.46 | $ | 0.33 | $ | 0.40 | 1.19 | 1.04 | |||||||||||||||||||||
| Diluted | 0.46 | 0.33 | 0.40 | 1.17 | 1.04 | ||||||||||||||||||||||||
| Core net income (non-GAAP) | |||||||||||||||||||||||||||||
| Basic | $ | 0.46 | $ | 0.33 | $ | 0.54 | 1.20 | 1.17 | |||||||||||||||||||||
| Diluted | 0.46 | 0.32 | 0.54 | 1.19 | 1.17 | ||||||||||||||||||||||||
| Book value per common share (excluding minority interest) | 17.89 | 17.64 | 16.82 | 17.89 | 16.82 | ||||||||||||||||||||||||
| Tangible book value per share (non-GAAP) | 17.33 | 17.07 | 16.22 | 17.33 | 16.22 | ||||||||||||||||||||||||
| Common shares outstanding | 31,097 | 31,074 | 31,050 | 31,097 | 31,050 | ||||||||||||||||||||||||
| Weighted average common shares outstanding, basic | 31,094 | 31,136 | 31,050 | 31,216 | 31,161 | ||||||||||||||||||||||||
| Weighted average common shares outstanding, diluted | 31,462 | 31,572 | 31,075 | 31,584 | 31,240 | ||||||||||||||||||||||||
10
Select Financial Data
| As of and for the | As of and for the | ||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | ||||||||||||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||
| Selected Performance Metrics: | |||||||||||||||||||||||||||||
| Return on average assets | 0.86 | % | 0.65 | % | 0.76 | % | 0.77 | % | 0.72 | % | |||||||||||||||||||
| Core return on average assets (non-GAAP) | 0.86 | % | 0.64 | % | 1.03 | % | 0.78 | % | 0.81 | % | |||||||||||||||||||
| Return on average equity | 10.29 | % | 7.62 | % | 9.62 | % | 9.02 | % | 8.62 | % | |||||||||||||||||||
| Core return on average tangible common equity (non-GAAP) | 10.62 | % | 7.70 | % | 13.44 | % | 9.46 | % | 10.11 | % | |||||||||||||||||||
| Average equity to average assets | 8.38 | % | 8.57 | % | 7.95 | % | 8.55 | % | 8.37 | % | |||||||||||||||||||
| Tangible common equity to tangible assets | 7.88 | % | 8.09 | % | 7.61 | % | 7.88 | % | 7.61 | % | |||||||||||||||||||
| Loan yield | 3.84 | % | 3.82 | % | 3.97 | % | 3.83 | % | 4.02 | % | |||||||||||||||||||
| Securities yield | 2.19 | % | 2.15 | % | 2.24 | % | 2.17 | % | 2.66 | % | |||||||||||||||||||
| Deposit cost | 0.09 | % | 0.10 | % | 0.14 | % | 0.10 | % | 0.21 | % | |||||||||||||||||||
| Net interest margin | 2.70 | % | 2.75 | % | 2.88 | % | 2.77 | % | 3.13 | % | |||||||||||||||||||
Efficiency ratio (1) | 65.95 | % | 66.35 | % | 65.29 | % | 67.87 | % | 61.37 | % | |||||||||||||||||||
Core efficiency ratio (non-GAAP) (1) | 65.71 | % | 66.80 | % | 54.84 | % | 67.19 | % | 57.24 | % | |||||||||||||||||||
| Asset Quality Ratios: | |||||||||||||||||||||||||||||
| Nonaccrual loans to total loans | 1.46 | % | 1.64 | % | 1.41 | % | 1.46 | % | 1.41 | % | |||||||||||||||||||
| Nonperforming assets to total assets | 0.99 | % | 1.08 | % | 1.22 | % | 0.99 | % | 1.22 | % | |||||||||||||||||||
| Allowance for loan losses to nonaccrual loans | 78.83 | % | 73.20 | % | 94.59 | % | 78.83 | % | 94.59 | % | |||||||||||||||||||
| Allowance for loan losses to total loans | 1.15 | % | 1.20 | % | 1.34 | % | 1.15 | % | 1.34 | % | |||||||||||||||||||
| Annualized net charge-offs (recoveries) to average loans | -0.02 | % | 0.04 | % | 0.59 | % | 0.08 | % | 0.22 | % | |||||||||||||||||||
| Capital Ratios: | |||||||||||||||||||||||||||||
| Tier 1 leverage capital ratio | 7.85 | % | 7.93 | % | 7.39 | % | 7.85 | % | 7.39 | % | |||||||||||||||||||
| Tier 1 risk-based capital ratio | 13.98 | % | 13.63 | % | 12.76 | % | 13.98 | % | 12.76 | % | |||||||||||||||||||
| Total risk-based capital ratio | 14.99 | % | 14.68 | % | 14.01 | % | 14.99 | % | 14.01 | % | |||||||||||||||||||
| Common equity tier 1 capital ratio | 13.98 | % | 13.63 | % | 12.76 | % | 13.98 | % | 12.76 | % | |||||||||||||||||||
(1) Efficiency ratio is calculated by dividing total non-interest expense by the sum of net interest income and total non-interest income | |||||||||||||||||||||||||||||
11
Loan and Held-to-Maturity Securities Portfolio Composition
| (In thousands) | At September 30, 2021 | At June 30, 2021 | At September 30, 2020 | ||||||||||||||||||||||||||||||||
| Amount | % of total loans | Amount | % of total loans | Amount | % of total loans | ||||||||||||||||||||||||||||||
| Commercial portfolio: | |||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 628,388 | 20.2% | $ | 619,037 | 19.5 | % | $ | 660,914 | 18.4% | |||||||||||||||||||||||||
| Multifamily | 826,143 | 26.5% | 848,651 | 26.8 | % | 974,962 | 27.1% | ||||||||||||||||||||||||||||
| Commercial real estate | 346,996 | 11.1% | 351,707 | 11.1 | % | 388,757 | 10.8% | ||||||||||||||||||||||||||||
| Construction and land development | 34,863 | 1.1% | 42,303 | 1.3 | % | 61,687 | 1.7% | ||||||||||||||||||||||||||||
| Total commercial portfolio | 1,836,390 | 58.9% | 1,861,698 | 58.7 | % | 2,086,320 | 58.0% | ||||||||||||||||||||||||||||
| Retail portfolio: | |||||||||||||||||||||||||||||||||||
| Residential real estate lending | 1,032,947 | 33.1% | 1,085,791 | 34.3 | % | 1,329,021 | 37.0% | ||||||||||||||||||||||||||||
| Consumer and other | 249,050 | 8.0% | 222,265 | 7.0 | % | 179,507 | 5.0% | ||||||||||||||||||||||||||||
| Total retail | 1,281,997 | 41.1% | 1,308,056 | 41.3 | % | 1,508,528 | 42.0% | ||||||||||||||||||||||||||||
| Total loans | 3,118,387 | 100.0% | 3,169,754 | 100.0 | % | 3,594,848 | 100.0% | ||||||||||||||||||||||||||||
| Net deferred loan origination costs (fees) | 4,942 | 5,707 | 7,604 | ||||||||||||||||||||||||||||||||
| Allowance for loan losses | (35,863) | (38,012) | (48,072) | ||||||||||||||||||||||||||||||||
| Total loans, net | $ | 3,087,466 | $ | 3,137,449 | $ | 3,554,380 | |||||||||||||||||||||||||||||
| Held-to-maturity securities portfolio: | |||||||||||||||||||||||||||||||||||
| PACE assessments | 627,195 | 86.5% | 545,795 | 87.4% | 367,393 | 83.3% | |||||||||||||||||||||||||||||
| Other securities | 97,881 | 13.5% | 79,031 | 12.6% | 73,556 | 16.7% | |||||||||||||||||||||||||||||
| Total held-to-maturity securities | $ | 725,076 | 100.0% | $ | 624,826 | 100.0% | $ | 440,949 | 100.0% | ||||||||||||||||||||||||||
12
Net Interest Income Analysis
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2021 | June 30, 2021 | September 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | Average Balance | Income / Expense | Yield / Rate | Average Balance | Income / Expense | Yield / Rate | Average Balance | Income / Expense | Yield / Rate | ||||||||||||||||||||||||||||||||||||||||||||
| Interest earning assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits in banks | $ | 632,526 | $ | 230 | 0.14 | % | $ | 510,473 | $ | 131 | 0.10 | % | $ | 632,268 | $ | 152 | 0.10 | % | |||||||||||||||||||||||||||||||||||
| Securities and FHLB stock | 2,659,803 | 14,655 | 2.19 | % | 2,447,241 | 13,135 | 2.15 | % | 2,045,231 | 11,529 | 2.24 | % | |||||||||||||||||||||||||||||||||||||||||
Total loans, net (1)(2) | 3,087,744 | 29,915 | 3.84 | % | 3,162,896 | 30,156 | 3.82 | % | 3,569,313 | 35,602 | 3.97 | % | |||||||||||||||||||||||||||||||||||||||||
| Total interest earning assets | 6,380,073 | 44,800 | 2.79 | % | 6,120,610 | 43,422 | 2.85 | % | 6,246,812 | 47,283 | 3.01 | % | |||||||||||||||||||||||||||||||||||||||||
| Non-interest earning assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 8,464 | 7,545 | 9,239 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other assets | 243,969 | 266,613 | 234,248 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 6,632,506 | $ | 6,394,768 | $ | 6,490,299 | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings, NOW and money market deposits | $ | 2,641,719 | $ | 1,173 | 0.18 | % | $ | 2,567,396 | $ | 1,174 | 0.18 | % | $ | 2,376,701 | $ | 1,427 | 0.24 | % | |||||||||||||||||||||||||||||||||||
| Time deposits | 241,009 | 240 | 0.40 | % | 258,257 | 257 | 0.40 | % | 321,696 | 622 | 0.77 | % | |||||||||||||||||||||||||||||||||||||||||
| Total interest bearing liabilities | 2,882,728 | 1,413 | 0.19 | % | 2,825,653 | 1,431 | 0.20 | % | 2,698,397 | 2,049 | 0.30 | % | |||||||||||||||||||||||||||||||||||||||||
| Non-interest bearing liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Demand and transaction deposits | 3,077,231 | 2,909,554 | 3,191,858 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other liabilities | 116,790 | 111,795 | 84,138 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities | 6,076,749 | 5,847,002 | 5,974,393 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' equity | 555,757 | 547,766 | 515,906 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 6,632,506 | $ | 6,394,768 | $ | 6,490,299 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income / interest rate spread | $ | 43,387 | 2.60 | % | $ | 41,991 | 2.65 | % | $ | 45,234 | 2.71 | % | |||||||||||||||||||||||||||||||||||||||||
| Net interest earning assets / net interest margin | $ | 3,497,345 | 2.70 | % | $ | 3,294,957 | 2.75 | % | $ | 3,548,415 | 2.88 | % | |||||||||||||||||||||||||||||||||||||||||
| Total Cost of Deposits | 0.09 | % | 0.10 | % | 0.14 | % | |||||||||||||||||||||||||||||||||||||||||||||||
(1) Amounts are net of deferred origination costs (fees) and the allowance for loan losses
(2) Includes prepayment penalty interest income in 3Q2021, 2Q2021, and 3Q2020 of $169, $504, and $1,110 respectively (in thousands)
13
Net Interest Income Analysis
| Nine Months Ended | |||||||||||||||||||||||||||||||||||
| September 30, 2021 | September 30, 2020 | ||||||||||||||||||||||||||||||||||
| (In thousands) | Average Balance | Income / Expense | Yield / Rate | Average Balance | Income / Expense | Yield / Rate | |||||||||||||||||||||||||||||
| Interest earning assets: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits in banks | $ | 508,421 | $ | 451 | 0.12 | % | $ | 395,029 | $ | 631 | 0.21 | % | |||||||||||||||||||||||
| Securities and FHLB stock | 2,460,946 | 40,008 | 2.17 | % | 1,809,188 | 35,962 | 2.66 | % | |||||||||||||||||||||||||||
Total loans, net (1)(2) | 3,180,890 | 91,180 | 3.83 | % | 3,535,096 | 106,440 | 4.02 | % | |||||||||||||||||||||||||||
| Total interest earning assets | 6,150,257 | 131,639 | 2.86 | % | 5,739,313 | 143,033 | 3.33 | % | |||||||||||||||||||||||||||
| Non-interest earning assets: | |||||||||||||||||||||||||||||||||||
| Cash and due from banks | 7,780 | 31,138 | |||||||||||||||||||||||||||||||||
| Other assets | 263,170 | 227,205 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 6,421,207 | $ | 5,997,656 | |||||||||||||||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Savings, NOW and money market deposits | $ | 2,574,463 | $ | 3,568 | 0.19 | % | $ | 2,278,267 | $ | 5,919 | 0.35 | % | |||||||||||||||||||||||
| Time deposits | 259,609 | 848 | 0.44 | % | 357,774 | 2,726 | 1.02 | % | |||||||||||||||||||||||||||
| Total deposits | 2,834,072 | 4,416 | 0.21 | % | 2,636,041 | 8,645 | 0.44 | % | |||||||||||||||||||||||||||
| Federal Home Loan Bank advances | 165 | — | 0.00 | % | 2,117 | 27 | 1.70 | % | |||||||||||||||||||||||||||
| Total interest bearing liabilities | 2,834,237 | 4,416 | 0.21 | % | 2,638,158 | 8,672 | 0.44 | % | |||||||||||||||||||||||||||
| Non-interest bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Demand and transaction deposits | 2,925,516 | 2,748,088 | |||||||||||||||||||||||||||||||||
| Other liabilities | 112,721 | 109,586 | |||||||||||||||||||||||||||||||||
| Total liabilities | 5,872,474 | 5,495,832 | |||||||||||||||||||||||||||||||||
| Stockholders' equity | 548,733 | 501,824 | |||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 6,421,207 | $ | 5,997,656 | |||||||||||||||||||||||||||||||
| Net interest income / interest rate spread | $ | 127,223 | 2.65 | % | $ | 134,361 | 2.89 | % | |||||||||||||||||||||||||||
| Net interest earning assets / net interest margin | $ | 3,316,020 | 2.77 | % | $ | 3,101,155 | 3.13 | % | |||||||||||||||||||||||||||
| Total Cost of Deposits | 0.10 | % | 0.21 | % | |||||||||||||||||||||||||||||||
(1) Amounts are net of deferred origination costs (fees) and the allowance for loan losses
(2) Includes prepayment penalty interest income in September YTD 2021 and September YTD 2020 of $1,316 and $2,111 respectively (in thousands)
14
Deposit Portfolio Composition
| (In thousands) | September 30, 2021 | June 30, 2021 | September 30, 2020 | ||||||||||||||
| Non-interest bearing demand deposit accounts | $ | 3,189,155 | $ | 2,948,718 | $ | 3,357,715 | |||||||||||
| NOW accounts | 206,610 | 200,758 | 192,066 | ||||||||||||||
| Money market deposit accounts | 2,241,914 | 2,136,719 | 1,853,373 | ||||||||||||||
| Savings accounts | 364,568 | 371,047 | 339,516 | ||||||||||||||
| Time deposits | 222,259 | 252,750 | 278,330 | ||||||||||||||
| Total deposits | $ | 6,224,506 | $ | 5,909,992 | $ | 6,021,000 | |||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| September 30, 2021 | June 30, 2021 | September 30, 2020 | |||||||||||||||||||||||||||||||||
| (In thousands) | Average Balance | Average Rate Paid | Average Balance | Average Rate Paid | Average Balance | Average Rate Paid | |||||||||||||||||||||||||||||
| Non-interest bearing demand deposit accounts | $3,077,231 | 0.00 | % | $2,909,554 | 0.00 | % | $3,191,858 | 0.00 | % | ||||||||||||||||||||||||||
| NOW accounts | 205,417 | 0.09 | % | 204,341 | 0.08 | % | 196,422 | 0.09 | % | ||||||||||||||||||||||||||
| Money market deposit accounts | 2,066,830 | 0.20 | % | 1,993,643 | 0.21 | % | 1,839,230 | 0.28 | % | ||||||||||||||||||||||||||
| Savings accounts | 369,472 | 0.10 | % | 369,412 | 0.10 | % | 341,049 | 0.12 | % | ||||||||||||||||||||||||||
| Time deposits | 241,009 | 0.40 | % | 258,257 | 0.40 | % | 321,696 | 0.77 | % | ||||||||||||||||||||||||||
| Total deposits | $ | 5,959,959 | 0.09 | % | $ | 5,735,207 | 0.10 | % | $ | 5,890,255 | 0.14 | % | |||||||||||||||||||||||
15
Asset Quality
| (In thousands) | September 30, 2021 | June 30, 2021 | September 30, 2020 | ||||||||||||||
| Loans 90 days past due and accruing | $ | — | $ | — | $ | 9,522 | |||||||||||
| Nonaccrual loans excluding held for sale loans and restructured loans | 24,960 | 31,437 | 17,515 | ||||||||||||||
| Troubled debt restructured loans - nonaccrual | 20,534 | 20,494 | 33,306 | ||||||||||||||
| Troubled debt restructured loans - accruing | 21,958 | 18,683 | 19,919 | ||||||||||||||
| Other real estate owned | 307 | 307 | 306 | ||||||||||||||
| Impaired securities | 64 | 59 | 44 | ||||||||||||||
| Total nonperforming assets | $ | 67,823 | $ | 70,980 | $ | 80,612 | |||||||||||
| Nonaccrual loans: | |||||||||||||||||
| Commercial and industrial | $ | 13,709 | $ | 14,561 | $ | 25,785 | |||||||||||
| Multifamily | 6,079 | 10,266 | — | ||||||||||||||
| Commercial real estate | 4,023 | 4,066 | 3,500 | ||||||||||||||
| Construction and land development | — | — | 10,688 | ||||||||||||||
| Total commercial portfolio | 23,811 | 28,893 | 39,973 | ||||||||||||||
| Residential real estate lending | 20,797 | 22,320 | 9,750 | ||||||||||||||
| Consumer and other | 886 | 718 | 1,098 | ||||||||||||||
| Total retail portfolio | 21,683 | 23,038 | 10,848 | ||||||||||||||
| Total nonaccrual loans | $ | 45,494 | $ | 51,931 | $ | 50,821 | |||||||||||
| Nonaccrual loans to total loans | 1.46 | % | 1.64 | % | 1.41 | % | |||||||||||
| Nonperforming assets to total assets | 0.99 | % | 1.08 | % | 1.22 | % | |||||||||||
| Allowance for loan losses to nonaccrual loans | 78.83 | % | 73.20 | % | 94.59 | % | |||||||||||
| Allowance for loan losses to total loans | 1.15 | % | 1.20 | % | 1.34 | % | |||||||||||
| Annualized net charge-offs (recoveries) to average loans | -0.02 | % | 0.04 | % | 0.59 | % | |||||||||||
16
Credit Quality
| September 30, 2021 | |||||||||||||||||||||||||||||
| ($ in thousands) | Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||||||||||
| Commercial and industrial | $ | 579,429 | $ | 22,655 | $ | 25,850 | $ | 454 | $ | 628,388 | |||||||||||||||||||
| Multifamily | 696,898 | 83,851 | 42,221 | 3,173 | 826,143 | ||||||||||||||||||||||||
| Commercial real estate | 243,903 | 26,815 | 76,278 | — | 346,996 | ||||||||||||||||||||||||
| Construction and land development | 27,387 | — | 7,476 | — | 34,863 | ||||||||||||||||||||||||
| Residential real estate lending | 1,011,856 | 294 | 20,797 | — | 1,032,947 | ||||||||||||||||||||||||
| Consumer and other | 248,164 | — | 886 | — | 249,050 | ||||||||||||||||||||||||
| Total loans | $ | 2,807,637 | $ | 133,615 | $ | 173,508 | $ | 3,627 | $ | 3,118,387 | |||||||||||||||||||
| June 30, 2021 | |||||||||||||||||||||||||||||
| ($ in thousands) | Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||||||||||
| Commercial and industrial | $ | 568,878 | $ | 17,569 | $ | 32,133 | $ | 457 | $ | 619,037 | |||||||||||||||||||
| Multifamily | 711,551 | 101,579 | 32,348 | 3,173 | 848,651 | ||||||||||||||||||||||||
| Commercial real estate | 234,018 | 45,236 | 72,453 | — | 351,707 | ||||||||||||||||||||||||
| Construction and land development | 34,414 | 535 | 7,354 | — | 42,303 | ||||||||||||||||||||||||
| Residential real estate lending | 1,063,176 | 295 | 22,320 | — | 1,085,791 | ||||||||||||||||||||||||
| Consumer and other | 221,835 | — | 430 | — | 222,265 | ||||||||||||||||||||||||
| Total loans | $ | 2,833,872 | $ | 165,214 | $ | 167,038 | $ | 3,630 | $ | 3,169,754 | |||||||||||||||||||
| September 30, 2020 | |||||||||||||||||||||||||||||
| ($ in thousands) | Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||||||||||
| Commercial and industrial | $ | 608,099 | $ | 17,107 | $ | 35,244 | $ | 464 | $ | 660,914 | |||||||||||||||||||
| Multifamily | 963,834 | 6,022 | 5,106 | — | 974,962 | ||||||||||||||||||||||||
| Commercial real estate | 383,087 | 1,439 | 4,231 | — | 388,757 | ||||||||||||||||||||||||
| Construction and land development | 40,531 | 10,468 | 10,688 | — | 61,687 | ||||||||||||||||||||||||
| Residential real estate lending | 1,319,649 | — | 9,372 | — | 1,329,021 | ||||||||||||||||||||||||
| Consumer and other | 178,409 | — | 1,098 | — | 179,507 | ||||||||||||||||||||||||
| Total loans | $ | 3,493,609 | $ | 35,036 | $ | 65,739 | $ | 464 | $ | 3,594,848 | |||||||||||||||||||
17
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.
| As of and for the | As of and for the | |||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | September 30, 2021 | June 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||||||||||||||||||||||||||||
| Core operating revenue | ||||||||||||||||||||||||||||||||||||||||||||
| Net Interest income | $ | 43,387 | $ | 41,991 | $ | 45,234 | $ | 127,223 | $ | 134,361 | ||||||||||||||||||||||||||||||||||
| Non-interest income | 6,702 | 5,327 | 12,776 | 16,028 | 30,565 | |||||||||||||||||||||||||||||||||||||||
Less: Branch sale (gain) loss (1) | — | — | — | — | (1,394) | |||||||||||||||||||||||||||||||||||||||
| Less: Securities (gain) loss | (413) | (321) | (619) | (755) | (1,605) | |||||||||||||||||||||||||||||||||||||||
| Core operating revenue (non-GAAP) | $ | 49,676 | $ | 46,997 | $ | 57,391 | $ | 142,496 | $ | 161,927 | ||||||||||||||||||||||||||||||||||
| Core non-interest expense | ||||||||||||||||||||||||||||||||||||||||||||
| Non-interest expense | $ | 33,034 | $ | 31,395 | $ | 37,877 | $ | 97,224 | $ | 101,216 | ||||||||||||||||||||||||||||||||||
Less: Branch closure expense (2) | — | — | (6,279) | — | (8,330) | |||||||||||||||||||||||||||||||||||||||
Less: Severance (3) | — | — | (125) | (1,090) | (201) | |||||||||||||||||||||||||||||||||||||||
| Less: ABOC | (392) | — | — | (392) | — | |||||||||||||||||||||||||||||||||||||||
| Core non-interest expense (non-GAAP) | $ | 32,642 | $ | 31,395 | $ | 31,473 | $ | 95,742 | $ | 92,685 | ||||||||||||||||||||||||||||||||||
| Core net income | ||||||||||||||||||||||||||||||||||||||||||||
| Net Income (GAAP) | $ | 14,416 | $ | 10,408 | $ | 12,480 | $ | 37,013 | $ | 32,399 | ||||||||||||||||||||||||||||||||||
Less: Branch sale (gain) loss (1) | — | — | — | — | (1,394) | |||||||||||||||||||||||||||||||||||||||
| Less: Securities (gain) loss | (413) | (321) | (619) | (755) | (1,605) | |||||||||||||||||||||||||||||||||||||||
Add: Branch closure expense (2) | — | — | 6,279 | — | 8,330 | |||||||||||||||||||||||||||||||||||||||
Add: Severance (3) | — | — | 125 | 1,090 | 201 | |||||||||||||||||||||||||||||||||||||||
| Add: ABOC | 392 | — | — | 392 | — | |||||||||||||||||||||||||||||||||||||||
| Less: Tax on notable items | 5 | 86 | (1,472) | (188) | (1,412) | |||||||||||||||||||||||||||||||||||||||
| Core net income (non-GAAP) | 14,400 | 10,173 | 16,793 | 37,552 | 36,519 | |||||||||||||||||||||||||||||||||||||||
| Tangible common equity | ||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity (GAAP) | $ | 556,390 | $ | 548,211 | $ | 522,497 | $ | 556,390 | $ | 522,497 | ||||||||||||||||||||||||||||||||||
| Less: Minority Interest (GAAP) | (133) | (133) | (133) | (133) | (133) | |||||||||||||||||||||||||||||||||||||||
| Less: Goodwill (GAAP) | (12,936) | (12,936) | (12,936) | (12,936) | (12,936) | |||||||||||||||||||||||||||||||||||||||
| Less: Core deposit intangible (GAAP) | (4,453) | (4,755) | (5,701) | (4,453) | (5,701) | |||||||||||||||||||||||||||||||||||||||
| Tangible common equity (non-GAAP) | $ | 538,868 | $ | 530,387 | $ | 503,727 | $ | 538,868 | $ | 503,727 | ||||||||||||||||||||||||||||||||||
| Average tangible common equity | ||||||||||||||||||||||||||||||||||||||||||||
| Average Stockholders' Equity (GAAP) | $ | 555,757 | $ | 547,766 | $ | 515,906 | $ | 548,733 | $ | 501,824 | ||||||||||||||||||||||||||||||||||
| Less: Minority Interest (GAAP) | (133) | (133) | (134) | (133) | (134) | |||||||||||||||||||||||||||||||||||||||
| Less: Goodwill (GAAP) | (12,936) | (12,936) | (12,936) | (12,936) | (12,936) | |||||||||||||||||||||||||||||||||||||||
| Less: Core deposit intangible (GAAP) | (4,602) | (4,903) | (5,868) | (4,900) | (6,209) | |||||||||||||||||||||||||||||||||||||||
| Average tangible common equity (non-GAAP) | $ | 538,086 | $ | 529,794 | $ | 496,968 | $ | 530,764 | $ | 482,545 | ||||||||||||||||||||||||||||||||||
| Core return on average assets | ||||||||||||||||||||||||||||||||||||||||||||
| Core net income (numerator) (non-GAAP) | $ | 14,400 | $ | 10,173 | $ | 16,793 | $ | 37,552 | $ | 36,519 | ||||||||||||||||||||||||||||||||||
| Divided: Total average assets (denominator) (GAAP) | 6,632,506 | 6,394,768 | 6,490,299 | 6,421,208 | 5,997,656 | |||||||||||||||||||||||||||||||||||||||
| Core return on average assets (non-GAAP) | 0.86% | 0.64% | 1.03% | 0.78% | 0.81% | |||||||||||||||||||||||||||||||||||||||
| Core return on average tangible common equity | ||||||||||||||||||||||||||||||||||||||||||||
| Core net income (numerator) (non-GAAP) | $ | 14,400 | $ | 10,173 | $ | 16,793 | $ | 37,552 | $ | 36,519 | ||||||||||||||||||||||||||||||||||
| Divided: Average tangible common equity (denominator) (GAAP) | 538,086 | 529,794 | 496,968 | 530,764 | 482,545 | |||||||||||||||||||||||||||||||||||||||
| Core return on average tangible common equity (non-GAAP) | 10.62% | 7.70% | 13.44% | 9.46% | 10.11% | |||||||||||||||||||||||||||||||||||||||
| Core efficiency ratio | ||||||||||||||||||||||||||||||||||||||||||||
| Core non-interest expense (numerator) (non-GAAP) | $ | 32,642 | $ | 31,395 | $ | 31,473 | $ | 95,742 | $ | 92,685 | ||||||||||||||||||||||||||||||||||
| Core operating revenue (denominator) (non-GAAP) | 49,676 | 46,997 | 57,391 | 142,496 | 161,927 | |||||||||||||||||||||||||||||||||||||||
| Core efficiency ratio (non-GAAP) | 65.71% | 66.80% | 54.84% | 67.19% | 57.24% | |||||||||||||||||||||||||||||||||||||||
(1) Fixed Asset branch sale in March 2020
(2) Occupancy and other expense related to closure of branches during our branch rationalization
(3) Salary and COBRA reimbursement expense for positions eliminated
18
amalgamatedbank.com Member FDIC Amalgamated Financial Corp. Third Quarter 2021 Earnings Presentation October 28, 2021
2 Safe Harbor Statements INTRODUCTION On March 1, 2021 (the “Effective Date”), Amalgamated Financial Corp. (the “Company”) completed its holding company reorganization and acquired all of the outstanding stock of Amalgamated Bank (the “Bank”). In this presentation, unless the context indicates otherwise, references to “we,” “us,” and “our” refer to the Company and the Bank. However, if the discussion relates to a period before the Effective Date, the terms refer only to the Bank. FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act, Section 21E of the Securities Exchange Act of 1934, as amended. any statement that does not describe historical or current facts is a forward-looking statement. These statements generally can be identified by forward-looking terminology, such as “plan,” “seek to,” “outlook,” “guidance,” “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “forecast,” “expect,” “estimate,” “continue,” “initiatives,” and “intend,” as well as other similar words and expressions of the future. These forward-looking statements include, but are not limited to, our 2021 Guidance and, statements related to future loss/income (included projected non-interest income) of solar tax equity investments. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors, many of which are beyond our control and 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: • negative economic and political conditions that adversely affect the general economy, housing prices, the real estate market, the job market, consumer confidence, the financial condition of our borrowers and consumer spending habits, which may affect, among other things, the level of non-performing assets, charge-offs and provision expense; • the rate of growth (or lack thereof) in the economy and employment levels, as well as general business and economic conditions, coupled with the risk that adverse conditions may be greater than anticipated in the markets that we serve; • the COVID-19 pandemic and its continuing effects on the economic and business environments in which we operate; • continuation of the historically low short-term interest rate environment; • fluctuations or unanticipated changes in interest rates on loans or deposits or that affect the yield curve; • our inability to maintain the historical growth rate of our loan portfolio; • changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments either as they currently exist or as they may be affected by conditions associated with the COVID-19 pandemic; • the impact of competition with other financial institutions, many of which are larger and have greater resources, and fintechs, as well as changes in the competitive environment; • our ability to meet heightened regulatory and supervisory requirements; • our ability to grow and retain low-cost core deposits and retain large, uninsured deposits; • any matter that would cause us to conclude that there was impairment of any asset, including intangible assets; • inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies, required capital maintenance levels or regulatory requests or directives; • risks associated with litigation, including the applicability of insurance coverage; • the risk of not achieving anticipated cost savings related to reduction in the number of branch locations and other expense areas; • 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, the risk of any of which could be exacerbated by employees and others working remotely as a result of the effects of the COVID-19 pandemic; • volatile credit and financial markets both domestic and foreign; • the risk that the preliminary financial information reported herein and our current preliminary analysis could be different when our review is finalized; • unexpected challenges related to our executive officer retention; and • risks related to our proposed acquisition of Amalgamated Bank of Chicago, including, among others, that the acquisition does not close when expected or at all because conditions to closing are not satisfied on a timely basis or at all, or that financial projections from the acquisition are not realized. Additional factors which could affect the forward-looking statements can be found in our Annual Report 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 www.sec.gov/. Forward-looking statements are based upon the current beliefs and expectations of management, and on information currently available to management. We disclaim any obligation to update or revise any forward-looking statements contained in this presentation, which speak only as of the date hereof, or to update the reasons why actual results could differ from those contained in or implied by such statements, whether as a result of new information, future events or otherwise, except as required by law.
3 Safe Harbor Statements cont. NON-GAAP FINANCIAL MEASURES This presentation contains certain non-GAAP financial measures including, without limitation, “Core Operating Revenue,” “Core Non-interest Expense,” “Tangible Common Equity,” “Average Tangible Common Equity,” “Core Efficiency Ratio,” “Core Net Income,” “Core ROAA,” and “Core ROATCE.” We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP. Specifically, we believe these non-GAAP financial measures (a) allow management and investors to better assess our performance by removing volatility that is associated with discrete items that are unrelated to our core business, and (b) enable a more complete understanding of factors and trends affecting our business. Non-GAAP financial measures, however, have inherent limitations, are not required to be uniformly applied, and are not audited. Accordingly, these non-GAAP financial measures should not be considered as substitutes for GAAP financial measures, and we strongly encourage investors to review the GAAP financial measures included in this presentation and not to place undue reliance on 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 presentation with other companies’ non-GAAP financial measures having the same or similar names. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. Reconciliations of non-GAAP financial disclosures to what we believe to be the most directly comparable GAAP measures found in this presentation are set forth in the final pages of this presentation and also may be viewed on the bank’s website, amalgamatedbank.com. You should assume that all numbers presented are unaudited unless otherwise noted.
3Q21 Highlights 4 1. See non-GAAP disclosures on pages 22-23 2. Pre-tax, pre-provision income is defined as net interest income plus non-interest income less non-interest expense INCOME STATEMENT • GAAP net income of $0.46 per diluted share; core net income of $0.46 per diluted share(1) • Pre-tax, pre-provision income(2) of $17.1 million compared to $15.9 million in 2Q21 • Core pre-tax, pre-provision income of $17.0 million compared to $15.6 million in 2Q21 • Efficiency ratio of 65.95% in 3Q21, compared to 66.35% in 2Q21 (1) ◦ Efficiency ratio was unfavorably impacted 1 pct pt and 2 pct pts from equity method investments in solar initiatives in 3Q21 and 2Q21, respectively BALANCE SHEET • Deposits increased $314.5 million compared to 2Q21 primarily due to continued growth in political deposits and new relationships in core markets • Property Assessed Clean Energy (PACE) assessments grew $81.4 million to $627.2 million in 3Q21 primarily from Commercial PACE assessments • Net loans including PACE assessments grew by $31.4 million, or 0.85%, on a linked quarter basis CAPITAL • Capital ratios remained strong with CET1 of 13.98% and Tier 1 Leverage of 7.85% • Tangible book value of $17.33 compared to $17.07 as of 2Q21
Priscilla Sims Brown – President and CEO 5 Four Pillars Designed to Fuel our Growth and Mission while Effectively Managing Risk • Building our business through our mission as America's Socially Responsible Bank by focusing on sustainability through our ESG efforts. • Improving our focus on and deepening insights of our core customers by analyzing customer information and behavior to identify profit tracks, key values, and demonstrated needs. • Developing and expanding our product expertise to grow our lending platform and trust businesses. • Improving our data and technology to drive improved efficiency and effectiveness of our operations by becoming a stronger digital bank.
ABOC Transaction Creates Significant Value 6 Note: All figures contemplate payment of contingent purchase price and associated payouts under management contracts, and achievement of anticipated synergies 1. 2023 GAAP EPS accretion (assumes deal closes in Q4-2021) 2. Pro forma balance sheet estimated at close Strong Financial Metrics… ~17% GAAP EPS Accretion to AMAL(1) $7.6bn Combined Assets $3.7bn Gross Loans/Leases $6.8bn Total Deposits Franchise Scaled for Success (2) ~2 years EPS Pull Forward No Ownership Dilution (Cash Deal) 63% / 37% Balanced Asset Mix Commercial / Consumer 14% increase • Significant Diversification of Revenue & Credit Exposure • Strategic Distribution of Risk in NY / Chicago / CA • C&I and CRE balances improve Diversification & Risk Reduction 14% increase 16% increase $71.2bn AUM and Custody 28% 2.9 years TBV Earn-back … And A Robust Capital Position ~12% CET1 Ratio ~15% Total Capital Ratio ~7% TCE/TA Ratio ~7% Leverage Ratio increase
Trends 7 KEY FINANCIAL TRENDS THROUGH 3Q21 ($ in millions) 1. Compounded Annual Growth Rate (“CAGR”) 2. Sept YTD 2021 Pre-tax Pre-Provision earnings are annualized 3. Pre-tax Pre-provision Earnings, excluding the impact of equity method investments for solar initiatives, was $79.3 million in 2020, and $74.5 million in 2021 annualized 8.0% CAGR(1) 19.1% CAGR(1) 27.9% CAGR(1) Pre-tax Pre-Provision Earnings(2)(3) Ending Deposits NPA / Total Assets Loans + PACE $3,233 $4,105 $4,641 $5,339 $6,225 2017 2018 2019 2020 3Q21 2.20% 1.27% 1.25% 1.38% 0.99% 2017 2018 2019 2020 3Q21 $2,780 $3,211 $3,703 $3,868 $3,715 $3,439 $3,447 $3,087 $264 $421 $627 2017 2018 2019 2020 3Q21 $26.4 $50.1 $68.0 $86.7 $66.4 2017 2018 2019 2020 Sept YTD >>
Deposit Portfolio 8 TOTAL DEPOSITS ($ in millions) 3Q21 HIGHLIGHTS • Total ending deposits increased $314.5 million compared to 2Q21 due to post-election rebound in political deposits and new relationships in core markets ◦ Total average deposits increased $224.8 million • Average non-interest bearing deposits increased $167.7 million, primarily due to political deposits • Non-interest bearing deposits represented 51% of ending deposits in 3Q21, compared to 50% in 2Q21 $5,890 $5,572 $5,580 $5,735 $5,960$6,021 $5,339 $5,720 $5,910 $6,225 Average End of Period 3Q20 4Q20 1Q21 2Q21 3Q21
9 HISTORICAL TREND ($ in millions) Political Deposits $398 $182 $271 $419 $511 $579 $775 $1,101 $1,212 $603 $692 $791 $1,015 $891 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 10/21
Interest Earning Assets 10 INTEREST EARNING ASSETS OF $6.6B AS OF SEPTEMBER 30, 2021 We maintain a diverse, low risk profile of interest earning assets Multifamily & Commercial Real Estate $1.2 B • No fossil fuel exposure • $266mm of government guaranteed loans • $224mm residential solar loans with strong credit profiles • Predominantly NYC properties with low LTV: MF = 53%, CRE = 49% • $871mm agency securities • $1,164mm of non-agency securities • $627mm of PACE securities with low LTV • All non-agency MBS/ABS securities are top of the capital structure • 99% first lien mortgages • Low LTV = 61% • First lien mortgages average FICO of 762 • 84/16% originated to purchased portfolio $6.6B as of 3Q21 Securities $2.7B Cash, Resell Agreements, and Other $0.8B Residential $1.0B Multifamily & Commercial Real Estate $1.2B C&I, Consumer and Other $0.9B
Loans and Held-to-Maturity Securities 11 TOTAL LOANS ($ in millions) HELD-TO-MATURITY SECURITIES ($ in millions) • Total loans decreased $50.0 million, or 1.6%, compared to 2Q21 due to continued prepayment activity and principal paydowns • 3Q21 Yield of 3.84%; an increase of 2 bps compared to 2Q21 and a decrease of 13 bps compared to 3Q20 • PACE securities of $627.2 million increased $81.4 million from $545.8 million in 2Q21 3Q21 HIGHLIGHTS $441 $494 $531 $625 $725 $367 $421 $452 $546 $627 $74 $73 $80 $79 $98 PACE (HTM) Non Pace HTM 3Q20 4Q20 1Q21 2Q21 3Q21 $3,554 $3,447 $3,223 $3,137 $3,087 3.97% 4.04% 3.83% 3.82% 3.84% Total Loans, net Loan Yield 3Q20 4Q20 1Q21 2Q21 3Q21
Investment Securities 12 SECURITIES – BOOK VALUE(1) ($ millions) 1. Securities book value excludes unrealized Available for Sale (AFS) gain / loss on sale 2. MBS/ABS does not include PACE assessments • Investment Securities totaled $2.7 billion book value for 3Q21 • Securities increased $231.0 million in 3Q21 compared to 2Q21 with continued mix shift toward non-agency partially from PACE assessment growth ◦ Non-agency securities in 3Q21 include $627.2 million of PACE assessments, which are non-rated • 85.3% of all non-agency MBS/ABS securities are AAA rated and 99.6% are A rated or higher(2); all CLO’s are AAA-rated • As of 3Q21 average subordination for the C&I CLOs was 42.8% 3Q21 HIGHLIGHTS $1,924 $2,008 $2,199 $2,425 $2,662 $728 $755 $889 $1,031 $1,164 $367 $421 $452 $546 $627$829 $832 $858 $848 $871 2.24% 2.21% 2.18% 2.15% 2.19% Non-Agency PACE Agency Yield 3Q20 4Q20 1Q21 2Q21 3Q21
Net Interest Income and Margin 13 NET INTEREST INCOME & MARGIN ($ millions) • Net interest income was $43.4 million, compared to $42.0 million in 2Q21 • 3Q21 NIM at 2.70%; a decrease of 5 bps and 18 bps, compared to 2Q21 and 3Q20, respectively • NIM was negatively impacted by approximately 24 bps due to the high level of cash on the balance sheet • Loan prepayment penalties favorably impacted NIM by one bp in 3Q21, compared to 3 bps and 7 bps in 2Q21 and 3Q20, respectively 3Q21 HIGHLIGHTS $45.2 $45.7 $41.8 $42.0 $43.4 2.88% 3.06% 2.85% 2.75% 2.70% Net Interest Income Net Interest Margin 3Q20 4Q20 1Q21 2Q21 3Q21
Solar Tax-Equity Investments OVERVIEW OF SOLAR TAX EQUITY INVESTMENTS • Realization of tax benefits in the project life and subsequent change in the fair value of the investment creates volatility in the earnings stream • Current projects are expected to generate a slight loss in the next two quarters; net profitable over the life of investment • We expect more tax-equity investment initiatives in the future (not shown in forecast below) PROJECTED NON-INTEREST INCOME TREND $ millions 14 Actual Forecast $4.3 $1.8 -$3.8 -$1.6 -$0.6 $0.4 $1.2 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 FY22
Non-Interest Expense and Efficiency 15 NON-INTEREST EXPENSE ($ millions) • Efficiency ratio of 66.0% for 3Q21 • Core efficiency ratio of 65.7% for 3Q21(1) • Non-interest expense for 3Q21 was $33.0 million • Non-interest expense for 3Q21 was $1.6 million higher compared to 2Q21 primarily due to $0.4 million of ABOC deal related costs, a $1.2 million increase in data processing costs for our outsourced Trust Department operations, and $0.5 million in compensation and benefits, offset by lower professional service expenses • Efficiency ratio excluding equity method investments in solar initiatives was 65.2% for 3Q21 and 64.1% for 2Q21 3Q21 HIGHLIGHTS 1. See non-GAAP disclosures on pages 22-23 $31.5 $32.7 $31.7 $31.4 $32.6 $37.9 $32.7 $32.8 $31.4 $33.0 54.8% 58.7% 69.2% 66.8% 65.7% 65.3% 58.7% 71.5% 66.4% 66.0% Core NIX NIX Core Eff Ratio Eff Ratio 3Q20 4Q20 1Q21 2Q21 3Q21
Allowance for Loan Losses 16 ALLOWANCE FOR LOAN LOSSES / TOTAL LOANS ALLOWANCE FOR LOAN LOSSES (ALLL) CHANGE FROM 4Q20 TO 3Q21 ($ millions) • Allowance for loan losses totals $35.9 million in 3Q21, or $2.1 million lower compared to 2Q21 primarily due to improved loss and qualitative factors, improved credit quality, and lower loan balances • 3Q21 allowance was $5.7 million lower than 4Q20 due largely to lower loan balances and credit quality improvement 3Q21 HIGHLIGHTS 4Q20 Allowance $ 41.6 Loan balances (2.4) Changes in credit quality (1.9) Qualitative factors (0.6) 1Q21 Allowance $ 36.7 Specific reserves 1.4 Changes in credit quality 0.6 Charge-offs 0.3 Loan balances (1.0) 2Q21 Allowance $ 38.0 Qualitative factors (0.7) Loan balances (0.8) Charge-offs (0.1) Changes in credit quality (0.5) 3Q21 Allowance $ 35.9 1.34% 1.19% 1.13% 1.20% 1.15% 3Q20 4Q20 1Q21 2Q21 3Q21
Credit Quality Portfolio 17 NPA / TOTAL ASSETS NCO / AVERAGE LOANS(1) (Quarter trend) 3Q21 HIGHLIGHTS • Nonperforming assets were $67.8 million as of 3Q21, compared to $71.0 million in 2Q21 • Net charge-offs of -0.02% in 3Q21 was 6 bps lower than 2Q21 due to a shift from a net charge-off position in Q2 to a net recovery position in Q3 • Pass rated loans are 90% of loan portfolio 1. Annualized LOAN CREDIT RISK RATINGS ($ millions) Pass Rated Special Mention Substandard / Doubtful Total Commercial and industrial 579 23 26 628 Multifamily 697 84 45 826 CRE and construction 271 27 84 382 Residential real estate 1,012 — 21 1,033 Consumer and other 248 — 1 249 Total $ 2,808 $ 134 $ 177 $ 3,118 1.22% 1.38% 1.27% 1.08% 0.99% 3Q20 4Q20 1Q21 2Q21 3Q21 0.59% 1.24% 0.20% 0.04% -0.02% 3Q20 4Q20 1Q21 2Q21 3Q21
Returns 18 (1) See non-GAAP disclosures on pages 22-23 (2) ROATCE excluding equity method investments for solar initiatives was 10.9%, 9.7%, 12.3%, 8.6% and 10.7% for 3Q20, 4Q20, 1Q21, 2Q21 and 3Q21 respectively ROAE & CORE ROATCE (1)(2) 9.6% 10.3% 9.1% 7.6% 10.3% 13.4% 10.7% 10.1% 7.7% 10.6% ROAE CORE ROATCE 3Q20 4Q20 1Q21 2Q21 3Q21
Capital 19 TIER 1 LEVERAGE RATIO COMMON EQUITY TIER 1 RATIO • Regulatory capital ratios remained strong ◦ Tier 1 leverage ratio of 7.85% as of 3Q21 ◦ Excluding the excess liquidity, tier 1 leverage ratio would be 8.56% ◦ Common Equity Tier 1 Capital of 13.98% • Tier 1 leverage ratio was 8 bps lower primarily driven by excess cash from strong deposit growth 3Q21 HIGHLIGHTS 7.39% 7.97% 8.06% 7.93% 7.85% 8.07% 8.26% 8.47% 8.50% 8.56% Tier 1 Leverage Leverage Ratio ex-Excess Liquidity 3Q20 4Q20 1Q21 2Q21 3Q21 12.76% 13.11% 13.70% 13.63% 13.98% 3Q20 4Q20 1Q21 2Q21 3Q21
2021 Guidance 20 2021 FINANCIAL OUTLOOK • Core Pre-tax pre-provision earnings of $66 million to $72 million ◦ Excludes impact of solar tax equity income/(loss) and any future non-core items ◦ Net Interest Income of $168 million to $174 million ◦ No change in Fed rate targets
Appendix
Reconciliation of Non-GAAP Financials 22 As of and for the As of and for the Three Months Ended Nine Months Ended (in thousands) September 30, 2021 June 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Core operating revenue Net Interest income $ 43,387 $ 41,991 $ 45,234 $ 127,223 $ 134,361 Non-interest income 6,702 5,327 12,776 16,028 30,565 Less: Branch sale (gain) loss (1) — — — — (1,394) Less: Securities (gain) loss (413) (321) (619) (755) (1,605) Core operating revenue (non-GAAP) $ 49,676 $ 46,997 $ 57,391 $ 142,496 $ 161,927 Core non-interest expense Non-interest expense $ 33,034 $ 31,395 $ 37,877 $ 97,224 $ 101,216 Less: Branch closure expense (2) — — (6,279) — (8,330) Add: Severance (3) — — (125) (1,090) (201) Less: ABOC (392) — — (392) — Core non-interest expense (non-GAAP) $ 32,642 $ 31,395 $ 31,473 $ 95,742 $ 92,685 Core net income Net Income (GAAP) $ 14,416 $ 10,408 $ 12,480 $ 37,013 $ 32,399 Less: Branch sale (gain) loss (1) — — — — (1,394) Less: Securities (gain) loss (413) (321) (619) (755) (1,605) Add: Branch closure expense (2) — — 6,279 — 8,330 Add: Severance (3) — — 125 1,090 201 Add: ABOC 392 — — 392 — Less: Tax on notable items 5 86 (1,472) (188) (1,412) Core net income (non-GAAP) $ 14,400 $ 10,173 $ 16,793 $ 37,552 $ 36,519 (1) Fixed Asset branch sale in March 2020 (2) Occupancy and other expense related to closure of branches during our branch rationalization (3) Salary and COBRA expense reimbursement expense for positions eliminated
Reconciliation of Non-GAAP Financials 23 As of and for the As of and for the Three Months Ended Nine Months Ended (in thousands) September 30, 2021 June 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Tangible common equity Stockholders' Equity (GAAP) $ 556,390 $ 548,211 $ 522,497 $ 556,390 $ 522,497 Less: Minority Interest (GAAP) (133) (133) (133) (133) (133) Less: Goodwill (GAAP) (12,936) (12,936) (12,936) (12,936) (12,936) Less: Core deposit intangible (GAAP) (4,453) (4,755) (5,701) (4,453) (5,701) Tangible common equity (non-GAAP) $ 538,868 $ 530,387 $ 503,727 $ 538,868 $ 503,727 Average tangible common equity Average Stockholders' Equity (GAAP) $ 555,757 $ 547,766 $ 515,906 $ 548,733 $ 501,824 Less: Minority Interest (GAAP) (133) (133) (134) (133) (134) Less: Goodwill (GAAP) (12,936) (12,936) (12,936) (12,936) (12,936) Less: Core deposit intangible (GAAP) (4,602) (4,903) (5,868) (4,900) (6,209) Average tangible common equity (non-GAAP) $ 538,086 $ 529,794 $ 496,968 $ 530,764 $ 482,545 Core return on average assets Core net income (numerator) (non-GAAP) $ 14,400 $ 10,173 $ 16,793 $ 37,552 $ 36,519 Divided: Total average assets (denominator) (GAAP) 6,632,506 6,394,768 6,490,299 6,421,208 5,997,656 Core return on average assets (non-GAAP) 0.86% 0.64% 1.03% 0.78% 0.81% Core return on average tangible common equity Core net income (numerator) (non-GAAP) $ 14,400 $ 10,173 $ 16,793 $ 37,552 $ 36,519 Divided: Average tangible common equity (denominator) (GAAP) 538,086 529,794 496,968 530,764 482,545 Core return on average tangible common equity (non-GAAP) 10.62% 7.70% 13.44% 9.46% 10.11% Core efficiency ratio Core non-interest expense (numerator) (non-GAAP) $ 32,642 $ 31,395 $ 31,473 $ 95,742 $ 92,685 Core operating revenue (denominator) (non-GAAP) 49,676 46,997 57,391 142,496 161,927 Core efficiency ratio (non-GAAP) 65.71% 66.80% 54.84% 67.19% 57.24%
Thank You amalgamatedbank.com Member FDIC