Amalgamated Bank Reports Second Quarter 2020 Financial Results

Rhea-AI Summary

Amalgamated Bank (AMAL) reported second-quarter 2020 net income of $10.4 million, or $0.33 per diluted share, a rise from $9.5 million in Q2 2019. Core net income was $10.6 million, or $0.34 per diluted share. Deposit growth surged by $793.8 million, equating to 62.9% annualized growth, while loans increased by $123.0 million. The net interest margin decreased to 3.10%. The bank's nonperforming assets rose to $74.3 million, 1.15% of total assets. CEO Keith Mestrich highlighted a commitment to social responsibility amidst the pandemic's challenges.

Positive

• Net income increased to $10.4 million, up 9.5% YoY.
• Deposit growth of $793.8 million, 62.9% annualized.
• Core net income (non-GAAP) grew to $10.6 million.

Negative

• Nonperforming assets increased to $74.3 million, 1.15% of total assets.
• Net interest margin decreased to 3.10% from 3.66% YoY.
• Provision for loan losses increased by $6.1 million YoY.

NEW YORK, July 28, 2020 (GLOBE NEWSWIRE) -- Amalgamated Bank (Nasdaq: AMAL) (“Amalgamated”) today announced financial results for the second quarter ended June 30, 2020. 

Second Quarter 2020 Highlights

• Net income of $10.4 million, or $0.33 per diluted share, compared to $9.5 million, or $0.30 per diluted share, for the second quarter of 2019
• Core net income (non-GAAP)¹ of $10.6 million, or $0.34 per diluted share, compared to $9.2 million, or $0.29 per diluted share, for the second quarter of 2019
• Deposit growth of $793.8 million, or 62.9% annualized, to approximately $5.9 billion compared to a balance of $5.1 billion on March 31, 2020
• Loan growth of $123.0 million, or 14.1% annualized, from a balance of $3.5 billion on March 31, 2020
• PACE assessment growth of $68.1 million, or 106.7% annualized, from a balance of $255.3 million on March 31, 2020
• Cost of deposits was 0.20%, compared to 0.33% for the first quarter of 2020 and 0.34% for the second quarter of 2019
• Net interest margin was 3.10%, compared to 3.46% for the first quarter of 2020 and 3.66% for the second quarter of 2019
• Common Equity Tier 1, Total Risk-Based, and Tier 1 Leverage capital ratios were 12.29%, 13.54%, and 7.69%, respectively, at June 30, 2020
• Total nonperforming assets were $74.3 million or 1.15% of total assets as of June 30, 2020, compared to $65.6 million or 1.14% of total assets at March 31, 2020 and $73.9 million, or 1.50% of total assets at June 30, 2019

Keith Mestrich, President and Chief Executive Officer of Amalgamated Bank, commented, “For almost 100 years, Amalgamated Bank has stood with companies, organizations and individuals that have led the charge to make a more just and sustainable world. Social responsibility is embedded in Amalgamated’s history, policies, products, programs, operations and culture. Now more than ever, we need to act boldly in addressing the racism embedded in our society, including the private sector. As a result, and after long conversations both inside and outside of the Bank, we have outlined a series of near-term commitments and actions intended to drive tangible results over time. It will take time to drive meaningful change and we are committed to keeping this at the forefront of our work.”

Mr. Mestrich, continued, “We have always believed that a Bank can do good in the world while also delivering profitable growth. Our second quarter results not only validate this view but further emphasize the value that we provide to our core customer base as can be seen in our average deposit growth of $606 million during the quarter, or 50.5% on an annualized basis. Additionally, we have nearly doubled our West Coast deposits since acquiring New Resource two years ago. On the asset side of the balance sheet, we continue to grow our PACE portfolio, having effectively added $68 million in PACE securities during the quarter. While the pandemic has negatively affected the cities where we have physical locations, our customer base has a geographic diversity that, along with our conservative underwriting, should benefit the performance of our loan portfolio. Lastly, the pandemic has allowed the Bank to benefit from higher levels of digital adoption, effectively obliging our customers to utilize our technology when the ability for in-person banking was not an option. This successful transition to online banking allowed us to close several of the Bank’s branches earlier than anticipated. We expect to realize a one-time, non-core expense increase of approximately $6 million in the third quarter as we exit the branches, however, moving forward, beginning in 2021, our non-interest expense is expected to benefit by approximately $4 million annually.”

____________________________________

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

COVID-19 Update

Amalgamated’s primary concern during the COVID-19 pandemic is for the health and wellbeing of the Company’s employees, customers, and communities. Our employees continue to manage from a work from home environment, and our operations continue to perform well, effectively transitioning many customers to our digital platform, allowing for further consolidation of our branch network.

We have offered payment deferrals as an option for our consumer and commercial borrowers who are experiencing financial stress as a result of COVID-19 impacts. As of the week ending July 25, 2020, we have provided payment deferrals on the following amount of loan balances.

	Total Loans		Deferrals as of:				% of		Exited
	6/30/20		7/25/20		6/20/20		Portfolio		Deferral
Multifamily	$	972	$	178	$	218	18	%	$	39
CRE + Construction	469		111		122		24	%	12
C&I	618		39		39		6	%	-
Residential	1,433		90		122		6	%	33
Consumer & Student	188		10		11		6	%	1
Total	$	3,680	$	428	$	512	12	%	$	84

Results of Operations, Quarter Ended June 30, 2020

Net income for the second quarter of 2020 was $10.4 million, or $0.33 per diluted share, compared to $9.5 million, or $0.30 per diluted share, for the first quarter of 2020 and $11.2 million, or $0.35 per diluted share, for the second quarter of 2019. The $0.8 million decrease in net income for the second quarter of 2020, compared to the second quarter of 2019, was primarily due to a $6.1 million increase in provision for loan losses, partially offset by a $2.6 million increase in net interest income and a $2.3 million increase in non-interest income.

Core net income (non-GAAP) for the second quarter of 2020 was $10.6 million, or $0.34 per diluted share, compared to $9.2 million, or $0.29 per diluted share, for the first quarter of 2020 and $11.6 million, or $0.36 per diluted share, for the second quarter of 2019. Core net income for the second quarter of 2020 excludes $0.5 million of non-interest income gains on the sale of securities, $0.7 million in expense related to the closure of six branches, and other adjustments, including the tax effect of such adjustments.

Net interest income was $44.4 million for the second quarter of 2020, compared to $44.7 million for the first quarter of 2020 and $41.9 million for the second quarter of 2019. The $2.5 million year-over-year increase was primarily attributable to a decrease in interest expense due to a decrease in borrowings and deposit rate paid, and an increase in average securities and loans of $509.5 million and $383.9 million, respectively with lower yields. These impacts were partially offset by an increase in average interest-bearing deposits of $340.4 million.

Net interest margin was 3.10% for the second quarter of 2020, a decrease of 36 basis points from 3.46% in the first quarter of 2020, and a decrease of 56 basis points from 3.66% in the second quarter of 2019. The accretion of the loan mark from the loans we acquired in our New Resource Bank acquisition contributed three basis points to our net interest margin in the second quarter of 2020, compared to four and six basis points in the first quarter of 2020 and the second quarter of 2019, respectively. Prepayment penalties earned through loan income contributed $0.2 million, or two basis points, to our net interest margin in the second quarter of 2020, compared to six and three basis points in the first quarter of 2020 and the second quarter of 2019, respectively.

Provisions for loan loss expense totaled $8.2 million in the second quarter of 2020 compared to $8.6 million in the first quarter of 2020 and $2.1 million for the second quarter of 2019. The provision expense in the second quarter of 2020 was primarily driven by a $3.2 million increase in allowance related to payment deferrals in our loan portfolio, a $2.7 million increase in specific reserves related to one hotel which was downgraded to non-accrual, and $1.5 million related to downgrades to the risk rating of loans, primarily construction loans.

Non-interest income was $8.7 million in the second quarter of 2020 compared to $9.1 million in the first quarter of 2020, and $6.3 million in the second quarter of 2019. The $2.3 million increase in the second quarter of 2020, compared to the like period in 2019, was primarily due to $1.3 million tax credit on an equity investment in a solar project, a $0.5 million gain on the sale of securities compared to a loss of $0.4 million in the comparable quarter of 2019, and a $0.7 million increase in Bank-owned life insurance income due to the receipt of a death benefit payout. These increases were partially offset by a $0.5 million decrease in Trust Department fees primarily related to the decrease in revenue from a real estate fund which is liquidating assets.

Non-interest expense was $31.1 million in the second quarter of 2020 compared to $32.3 million in the first quarter of 2020, and $31.0 million in the second quarter of 2019. Expenses in the second quarter of 2020 were relatively unchanged compared to the same period in 2019. The $1.2 million decrease in the second quarter of 2020 compared to the linked quarter was primarily due to a $1.3 million decrease in branch closure expense in occupancy and depreciation and a $1.0 million decrease in professional fees from external audit, subadvisors and consultants. These decreases were partially offset by an increase in data processing and other expenses of $0.7 million and $0.5 million, respectively.

Our provision for income tax expense was $3.4 million for the second quarter of 2020, compared to a provision of $3.4 million for the first quarter of 2020 and a provision of $3.9 million for the second quarter of 2019. Our effective tax rate for the second quarter of 2020 was 24.9%, compared to 26.3% for the first quarter of 2020 and 25.8% for the second quarter of 2019.

Results of Operations, Six Months Ended June 30, 2020

Net income for the six months ended June 30, 2020 of $19.9 million, or $0.64 per diluted share, compared to $22.0 million, or $0.68 per diluted share, for same period in 2019. The $2.1 million decrease was primarily due to a $12.5 million increase in the provision for loan losses and a $0.9 million increase in non-interest expense, partially offset by a $6.5 million increase in net interest income and a $4.0 million increase in non-interest income.

Core net income (non-GAAP) for the six months ended June 30, 2020 of $19.7 million, or $0.63 per diluted share, compared to $22.3 million or $0.69 per diluted share, for the same period last year. Core net income for the first six months of 2020 exclude branch closure expenses and the gain on sale of a closed branch, gains on the sale of securities, severance, and the tax effect of such adjustments.

Net interest income was $89.1 million for the six months ended June 30, 2020, an increase of $6.5 million from the same period in 2019. This increase was primarily attributable to a decrease in interest expense due to a decrease in borrowings and deposit rate paid, and an increase in average securities and loans of $433.1 million and $292.9 million, respectively with lower yields. These impacts were partially offset by an increase in average interest-bearing deposits of $273.4 million.

Provisions for loan loss expense totaled $16.8 million for the six months ended June 30, 2020, an increase of $12.5 million compared to $4.3 million in the same period of 2019. The provision expense in the six months ended June 30, 2020 was primarily driven by a $6.2 million increase in COVID-19 qualitative factors tied to economic factors and payment deferrals in our loan portfolio, a $6.1 million increase in specific reserves related to indirect C&I and hotel loans, and other factors.

Non-interest income was $17.8 million for the six months ended June 30, 2020 compared to $13.8 million for the same period in 2019. The $4.0 million increase for the six months ended June 30, 2020, compared to the like period in 2019, was primarily due to a $1.4 million gain on the sale of a closed branch included in other non-interest income, a $1.3 million tax credit on an equity investment in a solar project, a $1.0 million gain on the sale of securities, and a $0.7 million increase in Bank-owned life insurance income due to the receipt of a death benefit payout. These increases were partially offset by a $1.2 million decrease in Trust Department fees primarily related to the decrease in revenue from a real estate fund which is liquidating assets.

Non-interest expense was $63.3 million for the six months ended June 30, 2020 compared to $62.5 million for the same period in 2019. The $0.9 million increase in expenses for the six months ended June 30, 2020 compared to the same period in 2019 was primarily due to the $1.3 million increase in branch closure expense in occupancy and depreciation, partially offset by a $0.6 million decrease in professional fees.

We had income tax expense of $6.9 million for the six months ended June 30, 2020, compared to $7.6 million for the same period in 2019. The $0.8 million decrease in income tax expense was primarily due to a decrease in pre-tax earnings of $2.9 million in the six months ended June 30, 2020, compared to the same period in 2019. Our effective tax rate was 25.6% for the six months ended June 30, 2020, compared to 25.8% for the same period in 2019.

Financial Condition

Total assets were $6.5 billion at June 30, 2020, compared to $5.3 billion at December 31, 2019. The increase of $1.1 billion was driven primarily by a $465.4 million increase in cash and cash equivalents, a $428.2 million increase in investment securities, and a $199.2 million increase in loans receivable, net. In the second quarter of 2020, the Bank also made a $2.7 million investment in a solar project with federal tax benefits and added $45.6 million of reverse repurchase agreements backed by Government Guaranteed loans.

Total loans, net at June 30, 2020 were $3.6 billion, an increase of $199.2 million, or 11.7% annualized, compared to December 31, 2019. Loan growth in the first six months of 2020 was primarily driven by a $143.2 million increase in C&I loans including $80.7 million of government guaranteed and Paycheck Protection Program loans, a $69.4 million increase in residential first liens, and a $41.9 million increase in consumer residential solar loans. These increases were partially offset by a $19.1 million decrease in commercial real estate and multifamily loans.

Deposits at June 30, 2020 were $5.9 billion, an increase of $1.2 billion, or 53.3% annualized, as compared to $4.6 billion as of December 31, 2019. Deposits held by politically active customers, such as campaigns, PACs, advocacy-based organizations, and state and national party committees were $1.1 billion as of June 30, 2020, an increase of $522.1 million compared to $578.6 million as of December 31, 2019. Noninterest-bearing deposits represent 49.2% of average deposits and 52.6% of ending deposits for the six months ended June 30, 2020, contributing to an average cost of deposits of 0.20% in the second quarter of 2020, a 13 basis point decrease from the linked quarter.

Nonperforming assets totaled $74.3 million, or 1.15% of period-end total assets at June 30, 2020, an increase of $7.6 million, compared with $66.7 million, or 1.25% of period end total assets at December 31, 2019. The increase in nonperforming assets at June 30, 2020 compared to the year-ended December 31, 2019 was primarily driven by a $14.7 million increase in non-accruing loans, including a $10.2 million hotel loan.

The allowance for loan losses increased $16.2 million to $50.0 million at June 30, 2020 from $33.8 million at December 31, 2019, primarily due to increases in the specific reserves for indirect C&I and hotel loans and an increase in allowance related to the coronavirus pandemic. At June 30, 2020, we had $70.3 million of impaired loans for which a specific allowance of $14.5 million was made, compared to $65.4 million of impaired loans at December 31, 2019 for which a specific allowance of $7.5 million was made. The ratio of allowance to total loans was 1.36% at June 30, 2020 and 0.98% at December 31, 2019.

Capital

As of June 30, 2020, our Common Equity Tier 1 Capital Ratio was 12.29%, Total Risk-Based Capital Ratio was 13.54%, and Tier-1 Leverage Capital Ratio was 7.69%, compared to 13.01%, 14.01% and 8.90%, respectively, as of December 31, 2019. Stockholders’ equity at June 30, 2020 was $503.7 million, compared to $490.5 million at December 31, 2019. The increase in stockholders’ equity was driven by $19.9 million of net income and a $4.0 million increase in accumulated other comprehensive income due to the mark to market on our securities portfolio, offset by a $7.0 million decrease due to share repurchases and a $5.0 million decrease due to dividends to shareholders.

Our tangible book value per share was $15.61 as of June 30, 2020 compared to $14.93 as of December 31, 2019.

Conference Call
As previously announced, Amalgamated Bank will host a conference call to discuss its second quarter 2020 results today, July 28, 2020 at 10:00am (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 Bank Second Quarter 2020 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 13706036. The telephonic replay will be available until 11:59 pm (Eastern Time) on August 4, 2020.

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 Bank 

Amalgamated Bank is a New York-based full-service commercial bank and a chartered trust company with a combined network of 11 branches in New York City, Washington D.C., and San Francisco. Amalgamated 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 provides commercial banking and trust services nationally and offers a full range of products and services to both commercial and retail customers. Amalgamated is a proud member of the Global Alliance for Banking on Values and is a certified B Corporation®. As of June 30, 2020, our total assets were $6.5 billion, total net loans were $3.6 billion, and total deposits were $5.9 billion. Additionally, as of June 30, 2020, the trust business held $32.0 billion in assets under custody and $13.3 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,” “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 2020 versus certain periods in 2019 and to prepare internal projections. We believe these non-GAAP financial measures facilitate making period-to-period comparisons and are meaningful indications of our operating performance. In addition, because intangible assets such as goodwill and other discrete items unrelated to our core business, which are excluded, vary extensively from company to company, we believe that the presentation of this information allows investors to more easily compare our results to those of other companies. 

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

Terminology

Certain terms used in this release are defined as follows:

“Core 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, 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” and 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,” “may” and “intend,” as well as other similar words and expressions of the future, and in this press release include statements about expected performance of our loan portfolio and payment deferrals, and the expected charges and anticipated future expense savings resulting from branch closures. 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) the inability of Amalgamated Bank to maintain the historical growth rate of its loan portfolio; (iv) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (v) effectiveness of Amalgamated Bank’s asset management activities in improving, resolving or liquidating lower-quality assets; (vi) the impact of competition with other financial institutions, including pricing pressures and the resulting impact on Amalgamated Bank’s results, including as a result of compression to net interest margin; (vii) greater than anticipated adverse conditions in the national or local economies including in Amalgamated Bank’s core markets, including, but not limited to, the negative impacts and disruptions resulting from the recent outbreak of the novel coronavirus, or COVID-19, which may have an adverse impact on our business, operations and performance, and could have a negative impact on our credit portfolio, share price, borrowers, and on the economy as a whole, both domestically and globally (viii) fluctuations or unanticipated changes in interest rates on loans or deposits or that affect the yield curve; (ix) the results of regulatory examinations; (x) potential deterioration in real estate values; (xi) changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act, or the “CARES Act”; and (xi) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized. Additional factors which could affect the forward-looking statements can be found in Amalgamated’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the FDIC and available on the FDIC's website at https://efr.fdic.gov/fcxweb/efr/index.html. Amalgamated Bank disclaims 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.

Media Contact:
Kaye Verville
The Levinson Group
kaye@mollylevinson.com
202-244-1785

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

Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except for per share amount)

	Three Months Ended												Six Months Ended
	June 30,				March 31,				June 30,				June 30,
		2020				2020				2019				2020				2019
INTEREST AND DIVIDEND INCOME
Loans	$	35,225			$	35,612			$	35,559			$	70,837			$	70,855
Securities		11,746				12,554				10,524				24,299				20,398
Federal Home Loan Bank of New York stock		66				69				191				135				501
Interest-bearing deposits in banks		83				396				254				479				548
Total interest and dividend income		47,120				48,631				46,528				95,750				92,302
INTEREST EXPENSE
Deposits		2,681				3,915				3,499				6,596				6,444
Borrowed funds		-				27				1,173				27				3,229
Total interest expense		2,681				3,942				4,672				6,623				9,673
NET INTEREST INCOME		44,439				44,689				41,856				89,127				82,629
Provision for (recovery of) loan losses		8,221				8,588				2,127				16,808				4,312
Net interest income after provision for loan losses		36,218				36,101				39,729				72,319				78,317
NON-INTEREST INCOME
Trust Department fees		3,980				4,085				4,508				8,066				9,229
Service charges on deposit accounts		1,850				2,411				2,068				4,261				3,939
Bank-owned life insurance		1,111				384				408				1,495				828
Gain (loss) on sale of investment securities available for sale, net		486				499				(377	)			985				(85	)
Gain (loss) on other real estate owned, net		(283	)			(23	)			(315	)			(306	)			(564	)
Equity method investments		1,289				-				-				1,289				-
Other		238				1,762				57				1,999				419
Total non-interest income		8,671				9,118				6,349				17,789				13,766
NON-INTEREST EXPENSE
Compensation and employee benefits, net		17,334				17,458				16,992				34,792				34,422
Occupancy and depreciation		4,241				5,506				4,145				9,747				8,417
Professional fees		1,988				2,983				2,401				4,971				5,566
Data processing		2,977				2,264				2,729				5,241				5,478
Office maintenance and depreciation		818				856				830				1,675				1,716
Amortization of intangible assets		342				342				298				685				687
Advertising and promotion		672				667				692				1,339				1,313
Other		2,696				2,194				2,915				4,889				4,851
Total non-interest expense		31,068				32,270				31,002				63,339				62,450
Income before income taxes		13,821				12,949				15,076				26,769				29,633
Income tax expense (benefit)		3,447				3,404				3,891				6,850				7,634
Net income		10,374				9,545				11,185				19,919				21,999
Net income attributable to noncontrolling interests		-				-				-				-				-
Net income attributable to Amalgamated Bank and subsidiaries	$	10,374			$	9,545			$	11,185			$	19,919			$	21,999
Earnings per common share - basic	$	0.33			$	0.30			$	0.35			$	0.64			$	0.69
Earnings per common share - diluted	$	0.33			$	0.30			$	0.35			$	0.64			$	0.68

Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)

	June 30,				December 31,
		2020				2019
Assets	(Unaudited)
Cash and due from banks	$	9,209			$	7,596
Interest-bearing deposits in banks		578,752				114,942
Total cash and cash equivalents		587,961				122,538
Securities:
Available for sale, at fair value (amortized cost of $1,562,033 and $1,217,087, respectively)		1,575,175				1,224,770
Held-to-maturity (fair value of $382,830 and $292,837, respectively)		370,498				292,704
Loans receivable, net of deferred loan origination costs (fees)		3,687,992				3,472,614
Allowance for loan losses		(50,010	)			(33,847	)
Loans receivable, net		3,637,982				3,438,767
Resell agreements		45,653				-
Accrued interest and dividends receivable		21,836				19,088
Premises and equipment, net		16,180				17,778
Bank-owned life insurance		80,694				80,714
Right-of-use lease asset		42,758				47,299
Deferred tax asset		34,251				31,441
Goodwill and other intangible assets		18,980				19,665
Other assets		38,376				30,574
Total assets	$	6,470,344			$	5,325,338
Liabilities
Deposits	$	5,870,319			$	4,640,982
Borrowed funds		-				75,000
Operating leases		56,842				62,404
Other liabilities		39,481				56,408
Total liabilities		5,966,642				4,834,794
Commitments and contingencies		-				-
Stockholders’ equity
Common stock, par value $.01 per share (70,000,000 shares authorized; 31,049,525 and
31,523,442 shares issued and outstanding, respectively)		310				315
Additional paid-in capital		299,997				305,738
Retained earnings		195,991				181,132
Accumulated other comprehensive income (loss), net of income taxes		7,270				3,225
Total Amalgamated Bank stockholders' equity		503,568				490,410
Noncontrolling interests		134				134
Total stockholders' equity		503,702				490,544
Total liabilities and stockholders’ equity	$	6,470,344			$	5,325,338

Select Financial Data

	As of and for the Three Months Ended												As of and for the Six Months Ended
	June 30,				March 31,				June 30,				June 30,
		2020				2020				2019				2020				2019
Selected Financial Ratios and Other Data
Earnings per share
Basic	$	0.33			$	0.30			$	0.35			$	0.64			$	0.69
Diluted		0.33				0.30				0.35				0.64				0.68
Core Earnings per share (non-GAAP)
Basic	$	0.34			$	0.29			$	0.36			$	0.63			$	0.70
Diluted		0.34				0.29				0.36				0.63				0.69
Book value per common share		16.22				15.26				14.89				16.22				14.89
(excluding minority interest)
Tangible book value per share (non-GAAP)		15.61				14.64				14.25				15.61				14.25
Common shares outstanding		31,049,525				31,000,299				31,886,669				31,049,525				31,886,669
Weighted average common shares		31,022,517				31,410,848				31,824,930				31,216,683				31,798,405
outstanding, basic
Weighted average common shares		31,034,666				31,805,901				32,237,116				31,345,192				32,279,342
outstanding, diluted

Select Financial Data

	As of and for the Three									As of and for the Six
	Months Ended									Months Ended
	June 30,			March 31,			June 30,			June 30,
	2020			2020			2019			2020			2019
Selected Performance Metrics:
Return on average assets	0.69	%		0.71	%		0.92	%		0.70	%		0.92	%
Core return on average assets (non-GAAP)	0.70	%		0.68	%		0.96	%		0.69	%		0.93	%
Return on average equity	8.56	%		7.65	%		9.65	%		8.10	%		9.73	%
Core return on average tangible common equity (non-GAAP)	9.07	%		7.66	%		10.45	%		8.35	%		10.32	%
Loan yield	3.97	%		4.13	%		4.42	%		4.05	%		4.43	%
Securities yield	2.59	%		3.29	%		3.34	%		2.91	%		3.35	%
Deposit cost	0.20	%		0.33	%		0.34	%		0.26	%		0.32	%
Net interest margin	3.10	%		3.46	%		3.66	%		3.27	%		3.66	%
Efficiency ratio (1)	58.50	%		59.97	%		64.31	%		59.24	%		64.79	%
Core efficiency ratio (non-GAAP) (1)	57.68	%		59.44	%		63.50	%		58.56	%		64.45	%
Asset Quality Ratios:
Nonaccrual loans to total loans	1.24	%		0.96	%		0.49	%		1.24	%		0.49	%
Nonperforming assets to total assets	1.15	%		1.14	%		1.50	%		1.15	%		1.50	%
Allowance for loan losses to nonaccrual loans	109	%		125	%		209	%		109	%		209	%
Allowance for loan losses to total loans	1.36	%		1.19	%		1.01	%		1.36	%		1.01	%
Net charge-offs (recoveries) to average loans	0.06	%		0.01	%		-0.01	%		0.04	%		0.49	%
Capital Ratios:
Tier 1 leverage capital ratio	7.69	%		8.47	%		9.04	%		7.69	%		9.04	%
Tier 1 risk-based capital ratio	12.29	%		12.74	%		13.57	%		12.29	%		13.57	%
Total risk-based capital ratio	13.54	%		13.96	%		14.67	%		13.54	%		14.67	%
Common equity tier 1 capital ratio	12.29	%		12.74	%		13.57	%		12.29	%		13.57	%
(1) Efficiency ratio is calculated by dividing total non-interest expense by the sum of net interest income and total non-interest income

Loan and Held-to-Maturity Securities Portfolio Composition

(In thousands)	At June 30, 2020							At March 31, 2020							At June 30, 2019
	Amount				% of total loans			Amount				% of total loans			Amount				% of total loans
Commercial portfolio:
Commercial and industrial	$	617,579			16.8	%		$	532,351			15.0	%		$	424,319			12.8	%
Multifamily		972,129			26.4	%			936,350			26.4	%			925,747			27.9	%
Commercial real estate		404,064			11.0	%			408,766			11.5	%			453,393			13.7	%
Construction and land development		65,259			1.8	%			65,706			1.9	%			58,696			1.7	%
Total commercial portfolio		2,059,031			56.0	%			1,943,173			54.8	%			1,862,155			56.1	%
Retail portfolio:
Residential real estate lending		1,432,645			38.9	%			1,416,796			39.9	%			1,286,662			38.8	%
Consumer and other		187,980			5.1	%			189,152			5.3	%			168,201			5.1	%
Total retail		1,620,625			44.0	%			1,605,948			45.2	%			1,454,863			43.9	%
Total loans		3,679,656			100.0	%			3,549,121			100.0	%			3,317,018			100.0	%
Net deferred loan origination fees (costs)		8,336							8,214							7,562
Allowance for loan losses		(50,010	)						(42,348	)						(33,630	)
Total loans, net	$	3,637,982						$	3,514,987						$	3,290,950
Held-to-maturity securities portfolio:
PACE assessments	$	323,391			87.3	%		$	255,298			89.2	%		$	-			0.0	%
Other securities		47,107			12.7	%			30,953			10.8	%			19,336			100.0	%
Total held-to-maturity securities	$	370,498			100.0	%		$	286,251			100.0	%		$	19,336			100.0	%

Net Interest Income Analysis

		Three Months Ended											Three Months Ended											Three Months Ended
		June 30, 2020											March 31, 2020											June 30, 2019
(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		$	364,932			$	83			0.09	%		$	185,281			$	396			0.86	%		$	70,442			$	254			1.45	%
Securities and FHLB stock			1,834,892				11,812			2.59	%			1,544,848				12,623			3.29	%			1,287,520				10,715			3.34	%
Total loans, net (1)			3,571,160				35,225			3.97	%			3,464,438				35,612			4.13	%			3,225,129				35,559			4.42	%
Total interest earning assets			5,770,984				47,120			3.28	%			5,194,567				48,631			3.77	%			4,583,091				46,528			4.07	%
Non-interest earning assets:
Cash and due from banks			74,877											9,539											6,838
Other assets			224,531											222,757											264,046
Total assets		$	6,070,392										$	5,426,863										$	4,853,975
Interest bearing liabilities:
Savings, NOW and money market deposits		$	2,313,772			$	1,755			0.31	%		$	2,143,247			$	2,737			0.51	%		$	1,857,715			$	1,962			0.42	%
Time deposits			370,969				926			1.00	%			381,053				1,178			1.24	%			486,652				1,537			1.27	%
Total deposits			2,684,741				2,681			0.40	%			2,524,300				3,915			0.62	%			2,344,367				3,499			0.60	%
Federal Home Loan Bank advances			-				-			0.00	%			6,374				27			1.70	%			190,501				1,166			2.46	%
Other Borrowings			-				-			0.00	%			-				-			0.00	%			1,099				7			2.56	%
Total interest bearing liabilities			2,684,741				2,681			0.40	%			2,530,674				3,942			0.63	%			2,535,967				4,672			0.74	%
Non-interest bearing liabilities:
Demand and transaction deposits			2,746,529											2,300,999											1,762,426
Other liabilities			151,591											93,309											90,680
Total liabilities			5,582,861											4,924,982											4,389,073
Stockholders' equity			487,531											501,881											464,902
Total liabilities and stockholders' equity		$	6,070,392										$	5,426,863										$	4,853,975
Net interest income / interest rate spread						$	44,439			2.88	%						$	44,689			3.14	%						$	41,856			3.33	%
Net interest earning assets / net interest margin		$	3,086,243							3.10	%		$	2,663,893							3.46	%		$	2,047,124							3.66	%
Total Cost of Deposits										0.20	%										0.33	%										0.34	%
(1) Amounts are net of deferred origination costs / (fees) and the allowance for loan losses
* Net interest margin includes prepayment penalty income in 2Q20, 1Q20 and 2Q19 of $239,190, $761,568 and $320,633 respectively

 

Net Interest Income Analysis

		Six Months Ended											Six Months Ended
		June 30, 2020											June 30, 2019
(In thousands)		Average Balance				Income / Expense				Yield / Rate			Average Balance				Income / Expense				Yield / Rate
Interest earning assets:
Interest-bearing deposits in banks		$	275,107			$	479			0.35	%		$	71,861			$	548			1.54	%
Securities and FHLB stock			1,689,870				24,434			2.91	%			1,256,781				20,899			3.35	%
Total loans, net (1)			3,517,799				70,837			4.05	%			3,224,868				70,855			4.43	%
Total interest earning assets			5,482,776				95,750			3.51	%			4,553,510				92,302			4.09	%
Non-interest earning assets:
Cash and due from banks			42,208											8,404
Other assets			223,643											259,194
Total assets		$	5,748,627										$	4,821,108
Interest bearing liabilities:
Savings, NOW and money market deposits		$	2,228,509			$	4,492			0.41	%		$	1,867,478			$	3,829			0.41	%
Time deposits			376,011				2,104			1.13	%			463,668				2,615			1.14	%
Total deposits			2,604,520				6,596			0.51	%			2,331,146				6,444			0.56	%
Federal Home Loan Bank advances			3,187				27			1.70	%			259,108				3,213			2.50	%
Other Borrowings			-				-			0.00	%			1,215				16			2.66	%
Total interest bearing liabilities			2,607,707				6,623			0.51	%			2,591,469				9,673			0.75	%
Non-interest bearing liabilities:
Demand and transaction deposits			2,523,764											1,680,984
Other liabilities			122,450											92,921
Total liabilities			5,253,921											4,365,374
Stockholders' equity			494,706											455,734
Total liabilities and stockholders' equity		$	5,748,627										$	4,821,108
Net interest income / interest rate spread						$	89,127			3.00	%						$	82,629			3.33	%
Net interest earning assets / net interest margin		$	2,875,069							3.27	%		$	1,962,041							3.66	%
Total Cost of Deposits										0.26	%										0.32	%
(1) Amounts are net of deferred origination costs / (fees) and the allowance for loan losses
* Net interest margin includes prepayment penalty income in Jun YTD 2020 and Jun YTD 2019 of $1,000,758 and $626,038 respectively

 

Deposit Portfolio Composition

(in thousands)	June 30, 2020				March 31, 2020				June 30, 2019
Noninterest-bearing demand deposit accounts	$	3,089,004			$	2,423,760			$	1,908,741
NOW accounts		198,653				234,268				216,834
Money market deposit accounts		1,876,540				1,708,818				1,239,387
Savings accounts		342,477				329,583				340,258
Time deposits		363,645				380,128				411,250
Brokered CD		-				-				19,991
Total deposits	$	5,870,319			$	5,076,557			$	4,136,462
* Total deposit balance as of June 30, 2020 excludes off balance sheet Insured Cash Sweep (ICS) balance of $90.9 million

		Three Months Ended							Three Months Ended							Three Months Ended
		June 30, 2020							March 31, 2020							June 30, 2019
(In thousands)		Average Balance				Average Rate Paid			Average Balance				Average Rate Paid			Average Balance				Average Rate Paid
Noninterest-bearing demand deposit accounts		$	2,746,529			0.00	%		$	2,300,999			0.00	%		$	1,762,426			0.00	%
NOW accounts			237,279			0.17	%			231,707			0.40	%			220,516			0.47	%
Money market deposit accounts			1,741,466			0.36	%			1,587,242			0.60	%			1,298,033			0.41	%
Savings accounts			335,027			0.12	%			324,298			0.18	%			339,165			0.22	%
Time deposits			370,969			0.99	%			381,053			1.23	%			424,848			1.25	%
Brokered CD			-			0.00	%			-			0.00	%			61,804			2.45	%
Total deposits		$	5,431,270			0.20	%		$	4,825,299			0.33	%		$	4,106,792			0.34	%

Asset Quality

	June 30,				March 31,				June 30,
(In thousands)		2020				2020				2019
Loans 90 days past due and accruing	$	-			$	3,856			$	13,939
Nonaccrual loans excluding held for sale loans and restructured loans		18,901				7,537				9,893
Nonaccrual loans held for sale		-				-				-
Troubled debt restructured loans - nonaccrual		26,776				26,435				6,221
Troubled debt restructured loans - accruing		28,031				26,968				43,277
Other real estate owned		503				786				526
Impaired securities		46				64				88
Total nonperforming assets	$	74,257			$	65,646			$	73,944
Nonaccrual loans:
Commercial and industrial	$	15,742			$	15,949			$	4,180
Multifamily		-				-				-
Commercial real estate		13,768				3,634				3,832
Construction and land development		3,652				3,652				-
Total commercial portfolio		33,162				23,235				8,012
Residential 1-4 family 1st mortgages		11,106				9,173				6,330
Residential 1-4 family 2nd mortgages		729				884				1,267
Consumer and other		680				680				505
Total retail portfolio		12,515				10,737				8,102
Total nonaccrual loans	$	45,677			$	33,972			$	16,114
Nonperforming assets to total assets		1.15	%			1.14	%			1.50	%
Nonaccrual assets to total assets		0.71	%			0.60	%			0.34	%
Nonaccrual loans to total loans		1.24	%			0.96	%			0.49	%
Allowance for loan losses to nonaccrual loans		109	%			125	%			209	%

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 Three												As of and for the Six
		Months Ended												Months Ended
(in thousands)		June 30,				March 31,				June 30,				June 30,
			2020				2020				2019				2020				2019
Core operating revenue
Net interest income (GAAP)		$	44,439			$	44,689			$	41,856			$	89,127			$	82,629
Non-interest income (GAAP)			8,671				9,118				6,349				17,789				13,766
Less: Branch sale loss (gain)(1)			34				(1,428	)			-				(1,394	)			-
Less: Securities loss (gain)			(486	)			(499	)			377				(985	)			85
Core operating revenue (non-GAAP)		$	52,658			$	51,880			$	48,582			$	104,537			$	96,480
Core non-interest expenses
Non-interest expense (GAAP)		$	31,068			$	32,270			$	31,002			$	63,339			$	62,450
Less: Branch closure expense(2)			(695	)			(1,432	)			-				(2,051	)			-
Less: Severance (3)			-				-				(154	)			(76	)			(271	)
Core non-interest expense (non-GAAP)		$	30,373			$	30,838			$	30,848			$	61,212			$	62,179
Core net income
Net Income (GAAP)		$	10,374			$	9,545			$	11,185			$	19,919			$	21,999
Less: Branch sale (gain)(1)			34				(1,428	)			-				(1,394	)			-
Less: Securities loss (gain)			(486	)			(499	)			377				(985	)			85
Add: Branch closure expense(2)			695				1,432				-				2,051				-
Add: Severance (3)			-				-				154				76				271
Less: Tax on notable items			(61	)			130				(137	)			65				(92	)
Core net income (non-GAAP)		$	10,556			$	9,180			$	11,579			$	19,731			$	22,264
Tangible common equity
Stockholders' Equity (GAAP)		$	503,702			$	473,269			$	474,944			$	503,702			$	474,944
Less: Minority Interest (GAAP)			(134	)			(134	)			(134	)			(134	)			(134	)
Less: Goodwill (GAAP)			(12,936	)			(12,936	)			(12,936	)			(12,936	)			(12,936	)
Less: Core deposit intangible (GAAP)			(6,043	)			(6,386	)			(7,415	)			(6,043	)			(7,415	)
Tangible common equity (non-GAAP)		$	484,589			$	453,813			$	454,458			$	484,589			$	454,458
Average tangible common equity
Average Stockholders' Equity (GAAP)		$	487,531			$	501,881			$	464,902			$	494,706			$	455,734
Less: Minority Interest (GAAP)			(134	)			(134	)			(134	)			(134	)			(134	)
Less: Goodwill (GAAP)			(12,936	)			(12,936	)			(12,936	)			(12,936	)			(12,936	)
Less: Core deposit intangible (GAAP)			(6,210	)			(6,552	)			(7,575	)			(6,381	)			(7,738	)
Average tangible common equity (non-GAAP)		$	468,250			$	482,258			$	444,256			$	475,254			$	434,925
Core return on average assets
Core net income (numerator) (non-GAAP)			10,556				9,180				11,579				19,731				22,264
Divided: Total average assets (denominator) (GAAP)			6,070,392				5,426,863				4,853,975				5,748,627				4,821,107
Core return on average assets (non-GAAP)			0.70	%			0.68	%			0.96	%			0.69	%			0.93	%
Core return on average tangible common equity
Core net income (numerator) (non-GAAP)			10,556				9,180				11,579				19,731				22,264
Divided: Average tangible common equity (denominator) (non-GAAP)			468,250				482,258				444,256				475,254				434,925
Core return on average tangible common equity (non-GAAP)			9.07	%			7.66	%			10.45	%			8.35	%			10.32	%
Core efficiency ratio
Core non-interest expense (numerator) (non-GAAP)			30,373				30,838				30,848				61,212				62,179
Core operating revenue (denominator) (non-GAAP)			52,658				51,880				48,582				104,537				96,480
Core efficiency ratio (non-GAAP)			57.68	%			59.44	%			63.50	%			58.56	%			64.45	%
(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

FAQ

What are the recent earnings results for Amalgamated Bank (AMAL)?

Amalgamated Bank reported Q2 2020 net income of $10.4 million, or $0.33 per diluted share.

How did Amalgamated Bank's deposits change in Q2 2020?

Deposits grew by $793.8 million, reflecting a 62.9% annualized growth rate.

What is the current net interest margin for Amalgamated Bank (AMAL)?

The net interest margin decreased to 3.10% in Q2 2020.

What is the trend in nonperforming assets for Amalgamated Bank?

Nonperforming assets rose to $74.3 million, representing 1.15% of total assets.

What was the provision for loan losses for Amalgamated Bank in Q2 2020?

The provision for loan losses increased to $8.2 million in Q2 2020.