8-K: Amalgamated Financial Corp. Announces Record Third Quarter 2024 Results, Driven by Margin Expansion and Strong Deposit Growth

Amalgamated Financial Corp. reported record third-quarter 2024 financial results, highlighted by a margin expansion to 3.51% and a 27.9% year-over-year increase in tangible book value per share.

Summary

• Amalgamated Financial Corp. announced its financial results for the third quarter ended September 30, 2024, showcasing record performance.
• Net income reached $27.9 million, or $0.90 per diluted share, compared to $26.8 million, or $0.87 per diluted share, in the previous quarter.
• Core net income was $28.0 million, or $0.91 per diluted share, up from $26.2 million, or $0.85 per diluted share, in the second quarter.
• Total deposits increased by $145.6 million, or 2.0%, to $7.6 billion, with on-balance sheet deposits, excluding brokered CDs, rising by $196.9 million, or 2.7%, to $7.5 billion.
• Political deposits saw a significant increase of $231.9 million, or 13%, reaching $2.0 billion.
• Net loans receivable grew by $78.0 million, or 1.8%, to $4.5 billion, and excluding a package of low-yielding residential loans, the increase was $118.9 million, or 2.7%.
• Net interest income increased by $2.9 million, or 4.2%, to $72.1 million, and the net interest margin expanded by 5 basis points to 3.51%.
• The tangible book value per share increased by $1.69, or 8.2%, to $22.29, and has increased by $4.87, or 27.9% since September 2023.
• The company reported a strong core return on average tangible common equity of 17.04% and a core return on average assets of 1.33%.

Sentiment

Score: 8

Explanation: The document conveys a strong positive sentiment due to record financial results, significant growth in key areas, and an improved outlook. While there are some challenges and risks mentioned, the overall tone is optimistic and confident.

Positives

• The company experienced strong growth in deposits and loans.
• Profitability and returns were robust during the quarter.
• The capital base has grown, positioning the company for future strategic investments.
• The tangible common equity ratio improved for the eighth consecutive quarter.
• The company saw a significant increase in political deposits, indicating a strong market position in this sector.
• The net interest margin expanded, contributing to increased profitability.
• The company's core return on average tangible common equity and core return on average assets are strong.
• The company's non-performing assets decreased by $7.1 million.

Negatives

• The company experienced a $4.3 million reduction in fair value on a pool of lower-yielding residential loans moved to held for sale.
• Non-interest expense increased by $1.5 million.
• Income tax expense increased by $1.3 million.
• Losses on securities sales increased by $0.5 million.
• The average cost of deposits, excluding Brokered CDs, increased by 3 basis points to 151 basis points.
• There was a $1.9 million decrease in the allowance for credit losses on loans.

Risks

• The company faces uncertain conditions in the banking industry and national, regional, and local economies.
• There is a risk of deterioration in the financial condition of borrowers, potentially leading to increased loan losses.
• Deposit outflows and declines in liquidity could occur due to various factors, including lack of confidence in the banking system.
• Changes in interest rates could negatively impact net interest margin.
• The company is exposed to risks related to the real estate and lending markets, particularly in commercial real estate.
• Increased competition for experienced members of the workforce could impact operations.
• There are risks associated with operational or security system failures and breaches.
• The company faces potential greenwashing claims and increased scrutiny related to ESG practices.
• Physical and transitional risks related to climate change could impact the business.

Future Outlook

The company revised its 2024 financial outlook, increasing core pre-tax pre-provision earnings guidance from $149-$152 million to $154-$156 million and net interest income from $274-$278 million to $279-$281 million. The company expects year-end balance sheet growth of approximately 4% and aims to achieve a Tier 1 leverage ratio greater than 8.5%.

Management Comments

• Priscilla Sims Brown, President and Chief Executive Officer, stated that the third quarter financial results demonstrate that Amalgamated remains positioned to achieve sustainable earnings and profitability.
• She highlighted the outstanding deposit and loan growth, strong profitability and returns, and a growing capital base that positions the company to invest in strategic initiatives.

Industry Context

The results reflect a positive trend in the banking sector, with Amalgamated demonstrating strong performance in deposit growth and margin expansion, which are key indicators of a healthy financial institution. The focus on political deposits also highlights a niche market that the bank is successfully leveraging.

Comparison to Industry Standards

• Amalgamated's tangible book value per share growth of 27.9% year-over-year is significantly higher than the average for regional banks, which typically see growth in the single-digit to low double-digit range. For example, comparible banks such as First Republic Bank and Silicon Valley Bank saw significant declines in their tangible book value per share in 2023.
• The net interest margin of 3.51% is competitive with other mid-sized banks, but the company's focus on mission-aligned lending and political deposits provides a unique differentiator.
• The core return on average tangible common equity of 17.04% is strong compared to the industry average, which often falls in the 10-15% range. For example, JP Morgan Chase reported a return on tangible common equity of 17% in Q3 2024.
• The company's deposit growth of 2.7% excluding brokered CDs is a positive sign, especially given the current environment where banks are facing increased competition for deposits. Comparible banks such as Signature Bank saw significant deposit outflows in 2023.

Stakeholder Impact

• Shareholders will benefit from the increased profitability and tangible book value per share.
• Employees may benefit from the company's growth and strategic investments.
• Customers will continue to receive a full range of commercial and retail banking services.
• The company's focus on mission-aligned lending and political deposits may attract new customers and stakeholders.

Next Steps

• The company will hold an earnings conference call and webcast on October 24, 2024, to discuss the financial results.
• The company will continue to invest in strategic initiatives to sustain growth.

Key Dates

Keywords

financial results, net income, deposits, loans, net interest margin, tangible book value, political deposits, core earnings, capital ratios, asset quality