Amalgamated Bank Reports Fourth Quarter and Full Year 2020 Financial Results

NEW YORK, Jan. 28, 2021 (GLOBE NEWSWIRE) -- Amalgamated Bank (Nasdaq: AMAL) (“Amalgamated” or the “Bank”) today announced financial results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Highlights

• Net income of $13.8 million, or $0.44 per diluted share, compared to $12.5 million, or $0.40 per diluted share, for the third quarter of 2020 and $12.0 million, or $0.37 per diluted share for the fourth quarter of 2019
• Core net income (non-GAAP)^[1] of $13.8 million, or $0.44 per diluted share, compared to $16.8 million, or $0.54 per diluted share for the third quarter of 2020 and $12.6 million, or $0.39 per diluted share, for the fourth quarter of 2019
• Deposit decline of $682.3 million, primarily due to the election cycle, to $5.3 billion compared to a balance of $6.0 billion on September 30, 2020
• Total loans of $3.4 billion, compared to a balance of $3.6 billion on September 30, 2020
• Growth in PACE assessments of $53.6 million, or 58.1% annualized, from a balance of $367.4 million on September 30, 2020
• Cost of deposits was 0.13%, compared to 0.14% for the third quarter of 2020 and 0.36% for the fourth quarter of 2019
• Net interest margin was 3.06%, compared to 2.88% for the third quarter of 2020 and 3.43% for the fourth quarter of 2019
• Common Equity Tier 1, Total Risk-Based, and Tier 1 Leverage capital ratios were 13.11%, 14.25%, and 7.97%, respectively, at December 31, 2020
• Total nonperforming assets were $82.2 million or 1.38% of total assets as of December 31, 2020, compared to $80.6 million or 1.22% of total assets at September 30, 2020 and $66.7 million, or 1.25% of total assets at December 31, 2019

Full Year 2020 Highlights

• Net income of $46.2 million, or $1.48 per diluted share, as compared to $47.2 million, or $1.47 per diluted share, for the full year of 2019
• Core net income (non-GAAP)^[1] of $50.3 million, or $1.61 per diluted share, as compared to $48.2 million, or $1.49 per diluted share, for the full year of 2019
• Deposit growth of $697.7 million, or 15.0%, compared to December 31, 2019
• Loan growth of $8.5 million, or 0.2%, compared to December 31, 2019
• Growth in PACE assessments of $157.2 million, or 59.6%, from a balance of $263.8 million on December 31, 2019
• Cost of deposits was 0.19%, compared to 0.35% for the full year of 2019
• Net interest margin was 3.11%, compared to 3.55% for the full year of 2019
  
  

Keith Mestrich, President and Chief Executive Officer of Amalgamated Bank, commented, “As I look back on our fourth quarter and full year 2020 results, I am not only pleased, but proud of all that we have accomplished in such challenging, unprecedented times, highlighted by our net income growth of 10.5% to $13.8 million in the fourth quarter as compared to $12.5 million in the third quarter of 2020. Additionally, we expanded our position this election cycle as demonstrated in our political deposit balance as of year-end of $602.8 million which compares to the 2018 cycle trough of $181.9 million. While we expect political deposits to modestly run off further through the first quarter, our results greatly exceeded our expectations. Our ability to succeed, proven during the ongoing pandemic, is largely attributed to the strong foundation we have built over our near 100-year history, and, in recent years, the work we have completed to strengthen the Bank’s operations, management team, and credit profile of our loan portfolio. Our team has worked diligently through the current crisis to proactively address issues in our portfolio and position the Bank for success as we expect the credit metrics of our loan portfolio to improve throughout 2021. Looking to the year ahead, there is much to be excited about as we continue to build upon our reputation as America’s Socially Responsible Bank and execute our growth strategy designed to increase the franchise value of Amalgamated. I look forward to working with the team that I am so very proud of as I transition into my new role as Special Advisor to the Board at the beginning of February.”

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^[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,

COVID-19 Update

Amalgamated’s primary concern during the COVID-19 pandemic is for the health and well-being of the Bank’s employees, customers, and communities. Our employees continue to operate in a work from home environment, and we 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 December 31, 2020, the following loan balances are still on deferral, accruing interest, and no loan has been on deferral longer than six months.

The table below shows the credit risk rating of loans that have exited deferral status as of December 31, 2020, including those loans that did not resume payments and have been moved to non-accrual. These loans do not include other special mention or substandard loans that were never granted a payment deferral:

Results of Operations, Quarter Ended December 31, 2020

Net income for the fourth quarter of 2020 was $13.8 million, or $0.44 per diluted share, compared to $12.5 million, or $0.40 per diluted share, for the third quarter of 2020 and $12.0 million, or $0.37 per diluted share, for the fourth quarter of 2019. The $1.3 million increase for the 2020 fourth quarter, compared to the 2020 third quarter, was primarily due to a $5.2 million decrease in non-interest expense, partially offset by a $2.7 million decrease in non-interest income and a $1.2 million increase in the provision for loan losses.

Core net income (non-GAAP) for the fourth quarter of 2020 was $13.8 million, or $0.44 per diluted share, compared to $16.8 million, or $0.54 per diluted share, for the third quarter of 2020 and $12.6 million, or $0.39 per diluted share, for the fourth quarter of 2019. Core net income for the fourth quarter of 2020 included no adjustments to GAAP net income, and the third quarter of 2020 excluded $0.6 million of non-interest income gains on the sale of securities, $6.4 million in expense related to the closure of six branches and severance costs, and the tax effect of such adjustments. Core net income for the fourth quarter of 2019 excluded $0.2 million of non-interest income gains on the sale of securities, $1.1 million in expense related to the closure of one branch and severance costs, and the tax effect of such adjustments.

Net interest income was $45.7 million for the fourth quarter of 2020, compared to $45.2 million for the third quarter of 2020 and $42.3 million for the fourth quarter of 2019. The year-over-year increase of $3.4 million was primarily attributable to a decrease in interest expense due to a decrease in deposit rates paid and FHLB advances, and an increase in average securities of $734.3 million and average loans of $97.1 million, with such growth more than offsetting the lower yields earned on such assets. These impacts were partially offset by an increase in average interest-bearing deposits of $224.5 million.

Net interest margin was 3.06% for the fourth quarter of 2020, an increase of 18 basis points from 2.88% in the third quarter of 2020, and a decrease of 37 basis points from 3.43% in the fourth quarter of 2019. The accretion of the loan mark from the loans we acquired in our New Resource Bank acquisition contributed two basis points to our net interest margin in the third and fourth quarters of 2020, compared to five basis points in the fourth quarter of 2019. Prepayment penalties earned through loan income contributed 13 basis points to our net interest margin in the fourth quarter of 2020, compared to seven and two basis points in the third quarter of 2020 and the fourth quarter of 2019, respectively.

Provisions for loan losses totaled an expense of $4.6 million for the fourth quarter of 2020 compared to an expense of $0.1 million for the same period in 2019. The provision expense in the fourth quarter of 2020 was primarily driven by an $11.0 million charge-off primarily related to an indirect C&I loan, of which $8.3 million was reserved for in previous quarters, and by specific reserves on multifamily loans of $2.0 million.

Non-interest income was $10.0 million for the fourth quarter of 2020, compared to $12.8 million in the third quarter of 2020 and $7.8 million for the same period in 2019. This decrease of $2.7 million in the fourth quarter of 2020 compared to the previous quarter was primarily due to a decrease of $2.5 million in tax credits on equity investments in solar projects. The increase of $2.2 million in the fourth quarter of 2020 compared to the fourth quarter of 2019 was primarily due to $1.8 million in tax credits on equity investments in solar projects in the fourth quarter of 2020 and an increase of $1.3 million in gains on the sale of loans. These increases were partially offset by a $0.9 million decrease in Trust Department fees primarily related to the decrease in revenue from a real estate fund that is liquidating assets, the movement of funds to lower yielding products and market volatility. Our real-estate fund is expected to stop earnings fees in 2021; this fund generated $0.4 million in fees, included within Trust Department fees, during the three months ended December 31, 2020. Additionally, we expect a loss in equity method investments of approximately $5.6 million during 2021; this loss is due to the timing of the $7.4 million in tax benefits earned during 2020. These impacts do not include any benefits of new solar equity investments that we may make in the future.

Non-interest expense for the fourth quarter of 2020 was $32.7 million, a decrease of $5.2 million from the third quarter of 2020 and a decrease of $0.8 million from the fourth quarter of 2019. The decrease of $5.2 million from the previous quarter was primarily due to a $6.5 million decrease in occupancy and depreciation expenses related to closing six branches in New York City, partially offset by an increase of $1.8 million in professional fees related to the formation of a bank holding company, the transition of our CEO and other strategic initiatives.

Our provision for income tax expense was $4.6 million for the fourth quarter of 2020, compared to $4.3 million for the third quarter of 2020 and $4.4 million for the fourth quarter of 2019. Our effective tax rate for the fourth quarter of 2020 was 25.2%, compared to 25.4% for the third quarter of 2020 and 27.0% for the fourth quarter of 2019.

Results of Operations, Full Year Ended December 31, 2020

Net income for the year ended December 31, 2020 was $46.2 million, or $1.48 per average diluted share, compared to $47.2 million, or $1.47 per average diluted share, for year ended December 31, 2019. The $1.1 million decrease was primarily due to a $21.0 million increase in the provision for loan losses and a $6.1 million increase in non-interest expense, partially offset by a $13.4 million increase in net interest income and an $11.4 million increase in non-interest income.

Core net income (non-GAAP) for the year ended December 31, 2020 of $50.3 million, or $1.61 per diluted share, compared to $48.2 million or $1.49 per diluted share, for the year ended December 31, 2019. Core net income for the twelve months ended December 31, 2020 excludes branch closure expenses and the gain on sale of a closed branch, gains on the sale of securities, severance costs, and the tax effect of such adjustments.

Net interest income was $180.0 million for the year ended December 31, 2020, compared to $166.6 million for the year ended December 31, 2019. This increase of $13.4 million 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 of $552.5 million and average loans of $250.7 million, with such growth more than offsetting the lower yields earned on such assets. These impacts are partially offset by an increase in average interest-bearing deposits of $295.7 million.

Provisions for loan losses totaled an expense of $24.8 million for the year ended December 31, 2020, compared to an expense of $3.8 million for the year ended December 31, 2019. The provision expense for the year ended December 31, 2020 was primarily driven by a $4.4 million increase in allowance related to negative economic factors and payment deferrals in our loan portfolio, $17.0 million in charge offs primarily related to hotel, construction loans, and indirect C&I loans (of which $4.4 million was previously reserved for in 2019), a $4.6 million increase related to loan downgrades and other factors.

Non-interest income was $40.6 million for the year ended December 31, 2020, compared to $29.2 million for the year ended December 31, 2019, an increase of $11.4 million. This increase was primarily due to $7.4 million in tax credits on equity investments in solar projects, an increase of $2.5 million on gains on the sale of originated loans, a $1.5 million change in gain on the sale of securities, a $1.4 million gain on the sale of a branch reported in other non-interest income, and a $1.4 million increase in Bank-owned life insurance income due to the receipt of multiple death benefit payouts. These increases were partially offset by a $3.4 million decrease in Trust Department fees primarily related to the impact of low asset values in the first half of 2020 due to market fluctuations and the real estate fund that is liquidating its assets noted above.

Non-interest expense for the year ended December 31, 2020 was $133.9 million, an increase of $6.1 million from $127.8 million for the year ended December 31, 2019. The increase was primarily due to a $5.3 million increase in occupancy and depreciation expense related to branch closures and a $1.5 million increase in other expenses due to FDIC insurance rebates in 2019 that ceased in 2020.

We had income tax expense of $15.8 million for the year ended December 31, 2020, compared to $17.0 million for the year ended December 31, 2019. Our effective tax rate was 25.4% for the year ended December 31, 2020, compared to 26.4% for the year ended December 31, 2019.

Financial Condition

Total assets were $6.0 billion at December 31, 2020, compared to $5.3 billion at December 31, 2019. The increase of $0.7 billion was driven primarily by a $516.8 million increase in investment securities, of which $157.2 million was from PACE assessments, and a $154.8 million increase in resell agreements backed by Government Guaranteed loans. In the twelve months ended December 31, 2020, the Bank also made $26.1 million of investments in solar projects with federal tax benefits.

Total loans, net at December 31, 2020 were $3.4 billion, an increase of $8.5 million, or 0.2% annualized, compared to December 31, 2019. Loan growth in 2020 was primarily driven by a $202.9 million increase in C&I loans including $97.7 million of government guaranteed and Paycheck Protection Program loans, and a $27.6 million increase in consumer loans. These increases were partially offset by a $127.8 million decrease in residential loans and a $78.4 million decrease in commercial real estate and multifamily loans.

Deposits at December 31, 2020 were $5.3 billion, an increase of $0.7 billion, or 15.0% 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 $603 million as of December 31, 2020, an increase of $24 million compared to $579 million as of December 31, 2019. Noninterest-bearing deposits represent 53% of average deposits and 49% of ending deposits for the year ended December 31, 2020, contributing to an average cost of deposits of 0.13% in the fourth quarter of 2020, a one basis point decrease from the previous quarter.

Nonperforming assets totaled $82.2 million, or 1.38% of period-end total assets at December 31, 2020, an increase of $15.1 million, compared with $66.7 million, or 1.25% of period-end total assets at December 31, 2019. The increase in non-performing assets at December 31, 2020 compared to the December 31, 2019 was primarily driven by the addition of $13.5 million of non-accruing residential first-lien mortgages related to the COVID-19 pandemic. These loans were moved to non-accrual after not resuming payments after six months of payment deferrals. Loans that were rated special mention or substandard increased by $305.7 million as of December 31, 2020 compared to December 31, 2019. This change was primarily due to an increase in CRE/multifamily loans categorized as special mention or substandard of $179.5 million and $84.4 million, respectively; these increases were primarily due to impacts of COVID-19 on rental income of these properties.

The allowance for loan losses increased $7.8 million to $41.6 million at December 31, 2020 from $33.8 million at December 31, 2019, primarily due to increases in allowance related to the coronavirus pandemic. At December 31, 2020, we had $73.7 million of impaired loans for which a specific allowance of $6.2 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 1.19% at December 31, 2020 and 0.98% at December 31, 2019.

Capital

As of December 31, 2020, our Common Equity Tier 1 Capital Ratio was 13.11%, Total Risk-Based Capital Ratio was 14.25%, and Tier-1 Leverage Capital Ratio was 7.97%, compared to 13.01%, 14.01% and 8.90%, respectively, as of December 31, 2019. Stockholders’ equity at December 31, 2020 was $535.8 million, compared to $490.5 million at December 31, 2019. The increase in stockholders’ equity was driven by $46.2 million of net income and a $14.0 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 in the first quarter and a $10.1 million decrease due to dividends to shareholders.

Our tangible book value per share was $16.66 as of December 31, 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 fourth quarter and full year 2020 results today, January 28, 2021 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 Fourth 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 13714757. The telephonic replay will be available until 11:59 pm (Eastern Time) on February 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 . 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 .

About 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 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 December 31, 2020, our total assets were $6.0 billion, total net loans were $3.4 billion, and total deposits were $5.3 billion. Additionally, as of December 31, 2020, the trust business held $36.8 billion in assets under custody and $15.4 billion in assets under management.

Non-GAAP Financial Measures

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

Our management utilizes this information to compare our operating performance for December 31, 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,” “in the future,” “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, the wind-down of our real estate fund and the expected charges and anticipated consolidation of our branch network and our solar tax equity investments. 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 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 (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”; (xi) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized; (xii) our inability to timely identify a new Chief Executive Officer in light of, among other things, competition for experienced executives in the banking industry; and (xiii) unexpected challenges and potential operational disruptions related to our Chief Executive Officer’s transition. 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 /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:

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Reconciliation of GAAP to Non-GAAP Financial Measures

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

(1) 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