10-Q: Amalgamated Financial Q3 2025: Net Income Dips Amid Higher Credit Provisions

Amalgamated Financial Corp. reported a slight decrease in net income for Q3 2025, driven by increased provision for credit losses and higher operating expenses, despite growth in net interest income.

Summary

• Net income for the third quarter of 2025 was $26.8 million, or $0.88 per diluted share, a decrease from $27.9 million, or $0.90 per diluted share, for the third quarter of 2024.
• Net income for the nine months ended September 30, 2025, was $77.8 million, or $2.53 per diluted share, down from $81.9 million, or $2.65 per diluted share, for the same period in 2024.
• Total assets increased to $8.68 billion as of September 30, 2025, from $8.26 billion at December 31, 2024.
• Total loans, net of allowance for credit losses, grew to $4.73 billion at September 30, 2025, from $4.61 billion at December 31, 2024.
• Total deposits increased to $7.77 billion at September 30, 2025, from $7.18 billion at December 31, 2024.
• Net interest income for Q3 2025 was $76.4 million, a 6.0% increase from $72.1 million in Q3 2024.
• Net interest income for the nine months ended September 30, 2025, was $219.9 million, a 5.1% increase from $209.3 million in the same period of 2024.
• Provision for credit losses increased to $5.3 million for Q3 2025 from $1.8 million for Q3 2024, and to $10.8 million for YTD 2025 from $6.6 million for YTD 2024.
• Non-interest expense rose to $43.6 million for Q3 2025 from $41.0 million for Q3 2024, and to $125.9 million for YTD 2025 from $118.6 million for YTD 2024.
• Net interest margin improved to 3.60% for Q3 2025 from 3.51% for Q3 2024, and to 3.57% for YTD 2025 from 3.48% for YTD 2024.
• The allowance for credit losses on loans decreased by $3.6 million to $56.5 million at September 30, 2025, from $60.1 million at December 31, 2024.
• Nonperforming assets decreased by $2.9 million to $23.0 million (0.26% of total assets) at September 30, 2025, from $25.9 million (0.31% of total assets) at December 31, 2024.
• Total stockholders' equity increased by $67.9 million to $775.6 million at September 30, 2025, from $707.7 million at December 31, 2024.
• The company repurchased $23.6 million of common stock during the nine months ended September 30, 2025.

Sentiment

Score: 5

Explanation: Net income declined for both the quarter and year-to-date periods, primarily due to a substantial increase in provision for credit losses and higher non-interest expenses. While net interest income and margin showed improvement, and the company maintains strong capital and liquidity positions, the overall earnings performance and the significant drop in service charges on deposit accounts present headwinds.

Positives

• Net interest income increased by 6.0% for Q3 2025 and 5.1% for YTD 2025, driven by higher yields and average balances on interest-earning assets.
• Net interest margin improved by 9 basis points for both Q3 and YTD 2025, reaching 3.60% and 3.57% respectively.
• Total assets grew by $420 million since December 31, 2024, reaching $8.68 billion.
• Total loans, net, increased by $120 million to $4.73 billion, indicating portfolio growth.
• Total deposits increased by $590 million to $7.77 billion, demonstrating strong funding growth.
• Nonperforming assets decreased by $2.9 million, and the ratio of nonperforming assets to total assets improved from 0.31% to 0.26%.
• The allowance for credit losses on loans to nonaccrual loans ratio remains strong at 250.60% as of September 30, 2025.
• Total stockholders' equity increased by $67.9 million, supported by net income and an improvement in accumulated other comprehensive loss.
• The Bank is categorized as 'well capitalized' under prompt corrective action measures and meets capital conservation buffer requirements.
• The company maintains strong liquidity with $4.15 billion of immediately available funds, providing 102% coverage for total uninsured deposits.
• Trust Department fees increased by $0.3 million for Q3 2025 and $0.8 million for YTD 2025.
• Losses on sale of securities and other assets decreased significantly by $2.0 million for Q3 2025 and $5.8 million for YTD 2025.
• Gain on sale of loans and changes in fair value on loans held-for-sale improved from a loss of $4.2 million in Q3 2024 to a gain of $70 thousand in Q3 2025.

Negatives

• Net income decreased by $1.1 million (4.0%) for Q3 2025 and $4.1 million (5.0%) for YTD 2025 compared to the prior year periods.
• Provision for credit losses increased significantly by $3.5 million for Q3 2025 and $4.2 million for YTD 2025, primarily due to an increase in reserve for one syndicated commercial and industrial loan and charge-offs on consumer solar and business banking portfolios.
• Non-interest expense increased by $2.7 million for Q3 2025 and $7.2 million for YTD 2025, driven by higher compensation and employee benefits, technology, and professional fees.
• Service charges on deposit accounts decreased substantially by $7.8 million for Q3 2025 and $15.2 million for YTD 2025, primarily due to decreases in Insured Cash Sweep ('ICS') One-Way Sell income.
• Equity method investments income turned into a loss for YTD 2025, reporting a $1.86 million loss compared to a $0.3 million loss in YTD 2024.
• Non-interest-bearing deposits as a percentage of average deposits decreased from 49.1% to 36.8% for Q3 2025, indicating a shift towards higher-cost interest-bearing deposits.
• The total cost of funds increased to 1.68% for Q3 2025 from 1.60% for Q3 2024, and to 1.65% for YTD 2025 from 1.58% for YTD 2024, despite a decrease in the average rate on interest-bearing liabilities, due to higher average balances.

Risks

• Uncertain conditions in the banking industry and in national, regional, and local economies may adversely impact business, operations, and financial performance.
• Deterioration in the financial condition of borrowers could result in significant increases in credit losses and provisions for those losses.
• Deposit outflows and subsequent declines in liquidity could be caused by factors such as lack of confidence in the banking system or a deterioration in market conditions.
• Changes in deposits, including an increase in uninsured deposits, pose a risk to funding stability.
• Inability to maintain sufficient liquidity to meet deposit and debt obligations may require selling investment securities at a loss, negatively impacting net income, earnings, and capital.
• Unfavorable conditions in the capital markets may cause declines in stock price and the value of investments.
• Negative economic and political conditions could adversely affect the general economy, housing prices, the real estate market, the job market, consumer confidence, and borrower spending habits, impacting non-performing assets and provision expense.
• Fluctuations or unanticipated changes in the interest rate environment, including changes in net interest margin or the yield curve, affect investments, loans, or deposits.
• A general decline in the real estate and lending markets, particularly in commercial real estate, and the effects of rent-control regulations on multi-family housing, pose risks.
• Potential implementation of a regulatory reform agenda significantly different from the prior presidential administration could impact banking regulation.
• Changes in U.S. trade policies and other global political factors, such as tariffs, raise economic uncertainty and could lead to slower growth and decreased loan demand.
• The outcome of legal or regulatory proceedings may be instituted against the company.
• Inability to achieve organic loan and deposit growth and the composition of that growth is a risk.
• The composition of the loan portfolio, including any concentration in industries or sectors experiencing adverse conditions, is a risk.
• Inaccuracy of the assumptions and estimates used in establishing the allowance for credit losses could lead to insufficient reserves.
• Changes in loan underwriting, credit review, or loss reserve policies due to economic conditions, examination conclusions, or regulatory developments are possible.
• Any matter causing impairment of assets, including intangible assets, could negatively impact financial results.
• Limitations on the ability to declare and pay dividends could affect shareholder returns.
• Increased competition with other financial institutions, including pricing pressures and compression to net interest margin, is a continuous risk.
• Increased competition for experienced members of the workforce, including executives in the banking industry, could impact operations.
• A failure in or breach of operational or security systems or infrastructure, or those of third-party vendors, including cyberattacks, poses significant risks.
• Increased regulatory scrutiny, privacy concerns, and exposure from the use of big data techniques, machine learning, and artificial intelligence are emerging risks.
• A downgrade in the company's credit rating could increase funding costs and limit access to capital.
• Greenwashing claims against the company and environmental, social, and governance ('ESG') products, along with increased scrutiny and political opposition to ESG and diversity, equity, and inclusion ('DEI') practices, are risks.
• Unanticipated or greater than anticipated adverse conditions (e.g., natural disasters) affecting the markets in which the company operates.
• Physical and transitional risks related to climate change impact the business and the businesses the company finances.
• Future repurchase of the company's shares through its common stock repurchase program could impact liquidity or capital.

Future Outlook

The company anticipates future growth and aims to achieve its long-term performance goals. It expects to collect all amounts due on temporarily impaired securities. The strategic plan includes focusing organic loan growth on Commercial & Industrial (C&I), multifamily, and Commercial Real Estate (CRE) lending, while the consumer solar portfolio is in run-off mode. The company estimates an additional $22.9 thousand reduction in interest income from cash flow hedges over the next twelve months. The new headquarters lease is set to commence in mid-2026. Management will continue to evaluate the recoverability of its net deferred tax asset periodically and plans to meet future cash needs through deposit generation over the long term. The company maintains sufficient funding for expected capital and debt service obligations for 24 months, assuming wholesale market access, and for 12 months under adverse conditions without external support.

Management Comments

• Our goal is to be the go-to financial partner for people and organizations who strive to make a meaningful impact in our society and who care about their communities, the environment, and social justice.
• The growth of our business is fundamental to our social mission and how we deliver impact and value for our stakeholders.
• Management believes that the aggregate liabilities, if any, arising from legal proceedings would not have a material adverse effect on the consolidated financial position or results of operations of the Company.
• Our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2025.

Industry Context

Operating in the banking industry, the company faces uncertain economic conditions, interest rate fluctuations, and competitive pressures. Its business model is uniquely positioned to serve socially responsible and values-oriented clients, including advocacy non-profits, labor unions, political organizations, and clean energy businesses, differentiating it within the broader financial services sector. The filing notes a decrease in market rates paid on deposits due to several cuts in the federal funds rate, impacting funding costs. The company's B Corporation certification and involvement in global ESG initiatives align with growing sustainable finance trends, though it acknowledges increased scrutiny and political opposition to ESG and DEI practices as a risk.

Comparison to Industry Standards

• The company is the largest of twelve commercial financial institutions in the United States that are members of the Global Alliance for Banking on Values, a network committed to advancing positive change in the banking sector.
• Its non-agency securities portfolio is high quality, with approximately 81% carrying AAA credit ratings and 19% carrying A credit ratings or higher, and only $11.0 million rated below investment grade.
• The average current loan-to-value (LTV) for multifamily loans is approximately 55%, which is generally considered conservative.
• The average current LTV for Commercial Real Estate (CRE) loans is approximately 44%, also indicating a conservative underwriting approach.
• The Bank was categorized as 'well capitalized' under prompt corrective action measures, indicating strong regulatory capital compliance compared to industry benchmarks.

Corporate Governance

Legal Proceedings

• The company is subject to certain pending and threatened legal proceedings arising out of the ordinary course of business.
• Management, in consultation with legal counsel, believes that no pending or threatened legal matter would result in a material adverse effect on the consolidated financial condition or results of operations.

Related Party Transactions

• Deposits from Workers United and its related entities, a related party, totaled $91.3 million as of September 30, 2025, and $71.2 million as of December 31, 2024.
• Loans to related parties and affiliates amounted to $1.5 million as of September 30, 2025, and $1.9 million as of December 31, 2024.
• Lines of credit to related parties and affiliates totaled $70.0 million as of September 30, 2025, and $70.0 million as of December 31, 2024.
• Standby letters of credit to related parties and affiliates totaled $0.3 million as of September 30, 2025, and $0.3 million as of December 31, 2024.

Stakeholder Impact

• Shareholders may experience negative sentiment due to decreased net income and diluted EPS, although share repurchases and increased equity could provide some support.
• Employees benefit from increased compensation and employee benefits expense, as well as ongoing stock-based compensation and the Employee Stock Purchase Plan.
• Customers continue to engage with the company, as evidenced by increased deposits and loans, particularly those aligned with the company's social mission.
• Creditors are supported by the company's strong capital ratios and robust liquidity position, indicating financial stability.
• Regulatory bodies will note the company's 'well capitalized' status and compliance with capital conservation buffer requirements.

Next Steps

• The company will move to its new headquarters in mid-2026.
• Subordinated notes will transition to a floating rate on November 15, 2026, at which point the company may redeem them.
• Commitments for PACE assessment securities purchases extend through December 2026 and June 2028.
• The company will continue its annual test for goodwill impairment as of June 30.
• Management will periodically evaluate the recoverability of its net deferred tax asset.
• The company intends to focus organic loan growth on Commercial & Industrial (C&I), multifamily, and Commercial Real Estate (CRE) lending.
• The company will continue to manage its liquidity position to meet funding requirements.
• The company has an authorized share repurchase program of up to $40 million, with $20.0 million purchased during Q3 2025.
• Mandy Tenner's Rule 10b5-1 trading arrangement sales are scheduled to occur between November 13, 2025, and November 12, 2026.

Key Dates

Recommendation

While Amalgamated Financial Corp. demonstrated solid growth in net interest income, assets, loans, and deposits, the decline in net income and diluted EPS for both the quarter and year-to-date periods is a concern. This was primarily driven by a significant increase in provision for credit losses and higher operating expenses, alongside a notable decrease in service charges. The company maintains strong capital and liquidity, and its niche market strategy is compelling, but the earnings headwinds suggest a 'hold' position until there's clearer evidence of improved profitability and stabilized credit quality trends.

Keywords

Financial Services, Banking, Commercial Banking, Retail Banking, Investment Management, Trust Services, SEC Filing, 10-Q, Financial Results, Net Interest Income, Credit Losses, Deposits, Loans, Capital Ratios, ESG, PACE Assessments, Liquidity, Share Repurchase