Amalgamated Financial Corp. Q3 FY2024 earnings call

• Deposit growth: Strong deposit growth with a low total cost of deposits at 158 basis points, and $311 million in new deposits led by political, social/philanthropy, and sustainable segments. • Loan growth: Loan growth of 2.7% in Q3, with focus on harvesting yield from maturing loans. • Sustainable lending: Added industry experts to the sustainable lending team to work on the $27 billion Greenhouse Gas Reduction Fund. • Financial results: Net interest income grew $2.9 million, net interest margin increased 5 basis points, and tangible book value per share increased $1.69 or 8.2% to $22.29.

During the third quarter, Amalgamated saw strong deposit growth with $311 million in new deposits. Political deposits grew 13% to $2 billion, social and philanthropy deposits rose $82 million, and sustainable deposits rose $77 million. Loan growth was 2.7%, with $352 million of below-market yielding loans maturing by the end of 2025 and $140 million by the end of 2026. Net income was $27.9 million or $0.90 per diluted share, and core net income (non-GAAP) was $28 million or $0.91 per diluted share.

• Core pretax pre-provision earnings revised to $154 million to $156 million and net interest income to $279 million to $281 million. • Year-end balance sheet size target is approximately $8.35 billion. • Q4 net interest income expected to be between $70 million and $72 million, with the margin possibly compressing 1 to 2 basis points depending on political deposit outflows. • Anticipates a $2 million annual decrease in net interest income for a 25 basis point parallel interest rate decrease beyond the forward curve.

• Political deposit outflows pace picked up significantly in October. • Potential impact of political climate on the Greenhouse Gas Reduction Fund. • Sensitivity to interest rate changes, with a $2 million annual hit on net interest income for a 25 basis point rate cut. • Uncertainty in the pace and mix of political deposit outflows affecting net interest margin.

Q: Could you share high-level changes in the trust business?

A: We've been enhancing trust business revenue quality, brought in a new trust officer, and will invest in sales capacity in 2025.

Q: What's the outlook for political deposits ending the year?

A: Expected to trough between $850 million and $875 million, with rebuilding likely to begin at the end of the first quarter.

Q: Details on charge offs in consumer solar?

A: Charge offs in consumer solar are in the traditional lightly secured portfolio, reserve coverage is 7.68%, and run rate is expected to be steady.

Q: Thoughts on expense growth outlook?

A: Q4 expenses expected in the $40 million to $40.5 million range, similar to Q3 run rate.

Q: Loan pipeline mix and yields?

A: Expecting 1%-2% growth in Q4, with strong yields in commercial real estate and C&I, and pipeline yields in multifamily CRE 6.25%-6.5%, C&I upper 7%, and loan pace in high 6% to low 7%.

Q: Impact of interest rate changes on margin?

A: $2 million annual hit factored in, margin should hold but could compress 1-2 basis points depending on deposit outflow mix.

Q: Securities turnover and Tier 1 leverage target?

A: $820 million of securities turned over since 2022, targeting 9% Tier 1 leverage, expecting to reach by first or second quarter of 2025.