Amalgamated Financial Corp. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are primarily with FY 2021. Amalgamated is a bank holding company whose principal subsidiary is Amalgamated Bank. It provides commercial and consumer banking, trust, custody and investment management, with a mission-focused customer base. Workers United held approximately 41% of the company’s equity at year-end.
Key financial results and position
| Metric | FY 2022 / Dec. 31, 2022 | FY 2021 / Dec. 31, 2021 |
|---|---|---|
| Net income | $81.5 million; diluted EPS $2.61 | $52.9 million; diluted EPS $1.68 |
| Net interest income | $239.8 million | $174.3 million |
| Net interest margin | 3.22% | 2.77% |
| Non-interest income | $23.9 million | $28.4 million |
| Non-interest expense | $140.6 million | $132.3 million |
| Provision for loan losses | $15.0 million expense | $0.3 million recovery |
| Total assets | $7.84 billion | $7.08 billion |
| Net loans | $4.06 billion | $3.28 billion |
| Deposits | $6.60 billion | $6.36 billion |
| Stockholders’ equity | $509.0 million | $563.9 million |
- Earnings and margins: Net income rose $28.6 million, mainly on a $65.5 million increase in net interest income. Average earning-asset yield increased to 3.47% from 2.86%; average cost of interest-bearing liabilities rose to 0.55% from 0.22%. Average deposit cost was 0.16%.
- Cash flow: Operating activities provided $147.3 million; investing activities used $1.20 billion; financing activities provided $788.2 million. Cash and cash equivalents decreased $266.9 million to $63.5 million.
- Liquidity and funding: Available-for-sale securities were $1.81 billion. The company reported $580 million of FHLBNY advances, all with overnight contractual maturity, and $77.7 million of subordinated debt. Remaining FHLBNY credit availability was $797.1 million; Federal Reserve discount-window capacity was approximately $151.7 million. Management stated that available liquidity sources were adequate for reasonably foreseeable needs.
- Capital: The Bank was categorized as well capitalized. Its total risk-based capital ratio was 14.75%, CET1 ratio 13.79%, and leverage ratio 8.44% at year-end.
- Credit: The allowance for loan losses was $45.0 million, or 1.10% of loans, versus $35.9 million, or 1.08%, in 2021. Nonperforming assets declined to $34.8 million, or 0.44% of assets, from $54.6 million, or 0.77%. Potential problem loans were $94.4 million.
Material changes versus FY 2021
- Net interest income increased 37.6%, reflecting loan growth, higher average securities balances and higher asset yields as rates rose. Net interest margin expanded 45 basis points.
- Loans grew $784.6 million; deposits increased $238.8 million. Total assets increased $765.2 million.
- Non-interest income fell $4.5 million, including a $3.6 million securities-sale loss versus a gain in 2021, a $2.7 million loss on equity-method investments, and losses on sales of nonperforming loans.
- Non-interest expense increased $8.3 million, principally from compensation, recruiting and travel costs, and trust-system modernization.
- Stockholders’ equity declined $54.9 million, primarily due to a $114.1 million after-tax decline in accumulated other comprehensive income, reflecting securities valuation losses, alongside dividends and share repurchases; net income partly offset the reduction.
- Available-for-sale securities decreased to $1.81 billion while held-to-maturity securities increased to $1.54 billion. The company transferred securities with $277.3 million book value to held-to-maturity during 2022.
Outlook, risks and unusual items
- Outlook: No specific FY 2023 earnings or revenue guidance is provided. Management describes a strategy of organic, deposit-led growth, selective geographic expansion, growth in trust and investment management, and disciplined asset allocation and risk management. The company intended to continue a quarterly dividend of $0.10 per share, subject to Board decisions, regulatory limits and financial conditions.
- Interest-rate exposure: Management identifies rate changes and deposit repricing as material risks. Its year-end simulation estimated that an immediate +400-basis-point parallel shift would reduce first-year net interest income by 13.1%; a +100-basis-point shift was estimated to increase it by 0.9%. These are hypothetical scenarios, not forecasts.
- Securities and liquidity: The filing reports substantial unrealized losses on securities, attributed mainly to market-rate and spread changes; management did not consider them other-than-temporary and said it did not expect to sell before recovery. Cash fell sharply during the year, while overnight FHLBNY advances rose to $580 million.
- Concentrations and credit risks: Real estate is a major part of lending, with significant exposure to New York multifamily properties, including rent-regulated housing. The company also held $911.9 million of residential and commercial PACE securities, generally senior to first mortgage liens, and identified possible regulatory, compliance and credit risks in this portfolio. Political deposits were $643.6 million and fluctuate with election cycles.
- Accounting change: CECL became effective for the company on January 1, 2023. Management expected adoption to materially increase total reserves, but the amount was still subject to model validation and refinement; management did not expect a material effect on capital adequacy or business strategy.
- Other risks and contingencies: The filing highlights recession and real-estate risks, cybersecurity and third-party vendor dependence, regulatory and compliance obligations, and potential multi-employer pension funding or withdrawal liabilities. Management said pending or threatened legal matters were not expected to have a material adverse effect. The financial-statement audit received an unqualified opinion; management concluded internal controls were effective, while the company remained exempt from auditor attestation as an emerging growth company.
Most important facts for investors to verify
- Whether deposit costs and funding needs continue rising, particularly given the overnight advances and election-sensitive political deposits.
- How 2023 CECL adoption changes the allowance, earnings and regulatory capital.
- The severity and duration of securities valuation losses, and the liquidity implications of the available-for-sale and held-to-maturity mix.
- Credit performance in New York multifamily and rent-regulated properties, solar lending, and the PACE portfolio; also track potential problem loans and charge-offs.
- Whether stronger net interest income can offset higher funding costs, operating expenses and credit provisions; the filing provides no specific forward earnings guidance.
- Capital, liquidity and regulatory capacity to sustain dividends and repurchases while funding growth and outstanding PACE purchase commitments.