Financial Data and Key Metrics Changes - The net income for Q1 2023 was $21.3 million or $0.69 per diluted share, down from $24.8 million or $0.80 per diluted share in Q4 2022, primarily due to a loss related to the sale of a portion of the Silicon Valley Bank senior note and increased expenses [19][20] - Core net income for Q1 2023 was $23.0 million or $0.74 per diluted share, compared to $27.2 million or $0.87 per diluted share in Q4 2022 [20] - The net interest margin increased to 3.59% in Q1 2023, up 5 basis points from 3.54% in Q4 2022, driven by loan growth and higher yields [28] Business Line Data and Key Metrics Changes - Total loans receivable increased by $92.2 million or 2.2% to $4.2 billion, with multifamily loans increasing by $95.3 million and residential loans by $18.4 million, while consumer loans and commercial real estate loans decreased [26][27] - The PACE portfolio grew by $84.5 million or 9.3% [11] - Core deposits decreased by 1% to $6.6 billion, primarily due to pension customer timing and client diversification for yield [21] Market Data and Key Metrics Changes - Total deposits at March 31, 2023, were $7.0 billion, an increase of $446.4 million from Q4 2022, but decreased to approximately $6.8 billion by April 21, 2023 [21][22] - Non-interest-bearing deposits represented 48% of average deposits, contributing to an average cost of deposits of 81 basis points, a 47 basis point increase from the previous quarter [21] Company Strategy and Development Direction - The company emphasizes its mission-based banking model, which has shown resilience amid market turmoil, and aims to continue its "Growth For Good" strategy [11][17] - The focus is on digital transformation to enhance customer experience and maintain competitive advantage [18] - The company plans to manage expenses carefully while investing in growth opportunities [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged headwinds in the banking industry but expressed confidence in the bank's stability and competitive advantage [12][19] - The company expects net interest income to decline to approximately $62 million to $63 million in Q2 2023 due to pressure on deposit costs [39] - Future loan growth is anticipated to moderate to approximately 2% to 3% for the remainder of 2023, primarily driven by commercial portfolios [37] Other Important Information - The bank celebrated its 100th anniversary on March 16, 2023, highlighting its long-standing commitment to responsible banking [9][10] - The allowance for credit losses on loans increased to $67.3 million, reflecting the adoption of the CECL standard [31][32] Q&A Session Summary Question: Can you provide more details on the deposit shifts and the impact of recent bank failures? - Management noted that the shift from non-interest-bearing to interest-bearing deposits began in Q4 2022 and accelerated post-SVB and Signature Bank events, with a focus on customer needs and deposit insurance [40][41] Question: How does the bank plan to manage potential recession impacts on donations and contributions? - Management indicated that historical trends show deposits from donor-based organizations have grown during past recessions, suggesting resilience in their deposit base [43][45] Question: What is the current status of the construction loan that became non-performing? - The loan was previously a special mention and is structured in two parts, with one part still performing. Management expressed confidence in eventual repayment despite current challenges [46][47] Question: What factors contributed to the decline in core deposits? - The decline was primarily due to slower new customer acquisition following recent bank events, although there were some new deposit wins during the quarter [48][49] Question: Can you elaborate on the CECL reserve build and its impact on the consumer solar loan portfolio? - The majority of the CECL build was related to the consumer solar portfolio, with expectations for charge-off rates to decrease over time [56][59]

Regulatory Environment - The company is subject to extensive regulation by federal and state agencies, which restricts activities such as dividend payments and mergers and acquisitions [269]. - Future dividend payments are subject to regulatory limitations and depend on the financial condition and profitability of the Bank [288]. - The company may face significant civil money penalties for noncompliance with the Bank Secrecy Act and anti-money laundering regulations [277]. - Noncompliance with fair lending laws could lead to material penalties and adversely impact the company's reputation and financial condition [279]. - The company may face increased litigation costs in difficult market conditions, which could adversely affect its financial condition and results of operations [280]. Financial Performance - Net income for the year ended December 31, 2022, was $81.5 million, or $2.61 per average diluted share, compared to $52.9 million, or $1.68 per average diluted share, for the same period in 2021, reflecting a $28.6 million increase primarily due to net interest income growth [335]. - Net interest income for the year ended December 31, 2022, was $239.8 million, an increase of $65.5 million from $174.3 million in 2021, driven by loan growth and higher average securities balances [340]. - Non-interest income decreased by $4.5 million, which also affected the overall financial performance [335]. - Total non-interest expense for 2022 was $140.6 million, an increase of $8.3 million from $132.3 million in 2021, mainly due to higher compensation and other expenses [352]. - The effective tax rate for the year ended December 31, 2022, was 24.7%, a slight decrease from 25.2% in 2021 [353]. Asset and Liability Management - Total assets as of December 31, 2022, were $7.73 billion, compared to $6.57 billion at the end of 2021, indicating significant growth in the asset base [339]. - Total liabilities increased to $7.21 billion as of December 31, 2022, from $6.02 billion in the previous year, reflecting the company's expansion strategy [339]. - Total loans, net of deferred origination fees and allowance for loan losses, increased to $4.06 billion as of December 31, 2022, up from $3.28 billion as of December 31, 2021, representing a growth of 23.7% [366]. - Total deposits increased to $6.60 billion, up from $6.36 billion at December 31, 2021, reflecting a growth of approximately 3.8% [396]. - The company reported a deferred tax asset of $62.5 million as of December 31, 2022, compared to $26.7 million at December 31, 2021, indicating a significant increase of 134.1% [395]. Loan Portfolio and Risk Management - The allowance for loan losses was $45.0 million as of December 31, 2022, compared to $35.9 million in 2021, indicating a proactive approach to risk management [370]. - The total loan charge-offs for the year 2022 were $8.396 million, compared to $8.988 million in 2021 [384]. - Nonperforming assets totaled $34.8 million, or 0.44% of total assets, at December 31, 2022, a decrease from $54.6 million, or 0.77% of total assets, at December 31, 2021 [392]. - The ratio of allowance to total loans was 1.10% at December 31, 2022, compared to 1.08% at December 31, 2021 [384]. - The provision for loan losses was $15.002 million in 2022, compared to a recovery of $287 thousand in 2021 [384]. Capital Structure - As of December 31, 2022, the total capital to risk-weighted assets ratio was 14.87%, with a total capital amount of $721,324,000 [415]. - The Tier 1 capital to risk-weighted assets ratio was 12.31%, with a Tier 1 capital amount of $597,022,000 [415]. - The common equity Tier 1 to risk-weighted assets ratio was 12.31%, with a common equity Tier 1 amount of $597,022,000 [415]. - The total capital to risk-weighted assets ratio for the bank was 14.75%, with a total capital amount of $715,458,000 [415]. - The bank's Tier 1 capital to risk-weighted assets ratio was 13.79%, with a Tier 1 capital amount of $668,864,000 [415]. Securities and Investments - Held-to-maturity securities increased to $1.54 billion at December 31, 2022, from $843.6 million at December 31, 2021, due to growth in mortgage-related securities [358]. - Available for sale securities decreased to $1.81 billion at December 31, 2022, from $2.11 billion in 2021, primarily due to strategic sales and transfers [357]. - The total securities portfolio is valued at $3,353,777,000 as of December 31, 2022 [360]. - The company anticipates full recovery of amortized cost for investment securities with unrealized losses by maturity, with $3.19 billion of such securities at fair value as of December 31, 2022 [359]. - The weighted average yield for held-to-maturity securities due after ten years is 4.2% [363].

Amalgamated Financial Corp. (NASDAQ:AMAL) Q4 2022 Earnings Conference Call January 26, 2023 11:00 AM ET Company Participants Jason Darby - Chief Financial Officer Priscilla Sims Brown - President & Chief Executive Officer Conference Call Participants Janet Lee - J.P. Morgan Alex Twerdahl - Piper Sandler Chris O'Connell - KBW Operator Good morning, ladies and gentlemen, and welcome to the Amalgamated Financial Corporation Fourth Quarter 2022 Earnings Conference Call. During today's presentation, all parties ...

Amalgamated Financial Corp. Fourth Quarter 2022 Earnings Presentation January 26, 2023 amalgamatedbank.com Member FDIC Safe Harbor Statements INTRODUCTION On March 1, 2021 (the "Effective Date"), Amalgamated Financial Corp. (the "Company") completed its holding company reorganization and acquired all of the outstanding stock of Amalgamated Bank (the "Bank"). In this presentation, unless the context indicates otherwise, references to "we," "us," and "our" refer to the Company and the Bank. However, if the di ...

PART I – FINANCIAL INFORMATION [ITEM 1. Financial Statements](index=6&type=section&id=ITEM%201.%20Financial%20Statements) Presents unaudited consolidated financial statements, including financial condition, income, comprehensive income, equity, and cash flows, highlighting increased net income and net interest income, higher loan loss provisions, and decreased stockholders' equity [Consolidated Statements of Financial Condition](index=6&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) Consolidated Statements of Financial Condition Highlights | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :------------------------------------- | :------------------------- | :------------------------- | :------------------- | :--------- | | **Total Assets** | $7,868,217 | $7,077,876 | $790,341 | 11.17% | | **Loans receivable, net** | $3,829,168 | $3,276,358 | $552,810 | 16.87% | | **Held-to-maturity securities** | $1,492,423 | $843,569 | $648,854 | 76.92% | | **Total Liabilities** | $7,380,479 | $6,514,001 | $866,478 | 13.30% | | **Total Stockholders' Equity** | $487,738 | $563,875 | $(76,137) | -13.50% | | **Accumulated other comprehensive income (loss)** | $(107,876) | $5,409 | $(113,285) | -2094.37% | [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Statements of Income Highlights | Metric | 3 Months Ended Sep 30, 2022 ($ thousands) | 3 Months Ended Sep 30, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | :--------- | | **Net Income** | $22,944 | $14,416 | $8,528 | 59.16% | | **EPS - Diluted ($)** | $0.74 | $0.46 | $0.28 | 60.87% | | **Net Interest Income** | $67,628 | $43,387 | $24,241 | 55.87% | | **Provision for (recovery of) loan losses** | $5,363 | $(2,276) | $7,639 | - | | **Non-Interest Income** | $5,003 | $6,702 | $(1,699) | -25.35% | | **Non-Interest Expense** | $36,258 | $33,034 | $3,224 | 9.76% | | **Income Tax Expense** | $8,066 | $4,915 | $3,151 | 64.11% | | | | | | | | **Metric** | **9 Months Ended Sep 30, 2022 ($ thousands)** | **9 Months Ended Sep 30, 2021 ($ thousands)** | **Change ($ thousands)** | **Change (%)** | | **Net Income** | $56,722 | $37,013 | $19,709 | 53.25% | | **EPS - Diluted ($)** | $1.82 | $1.17 | $0.65 | 55.56% | | **Net Interest Income** | $172,494 | $127,223 | $45,271 | 35.58% | | **Provision for (recovery of) loan losses** | $10,568 | $(3,855) | $14,423 | - | | **Non-Interest Income** | $19,671 | $16,028 | $3,643 | 22.73% | | **Non-Interest Expense** | $105,001 | $97,223 | $7,778 | 8.00% | | **Income Tax Expense** | $19,874 | $12,870 | $7,004 | 54.42% | [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Statements of Comprehensive Income Highlights | Metric | 3 Months Ended Sep 30, 2022 ($ thousands) | 3 Months Ended Sep 30, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | :--------- | | **Total Comprehensive Income (Loss), net of taxes** | $(6,764) | $10,078 | $(16,842) | -167.12% | | | | | | | | **Metric** | **9 Months Ended Sep 30, 2022 ($ thousands)** | **9 Months Ended Sep 30, 2021 ($ thousands)** | **Change ($ thousands)** | **Change (%)** | | **Total Comprehensive Income (Loss), net of taxes** | $(56,563) | $31,214 | $(87,777) | -281.19% | | **Net unrealized gains (losses) on securities** | $(156,455) | $(7,781) | $(148,674) | -1910.79% | [Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Consolidated Statements of Changes in Stockholders' Equity Highlights | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :---------------------------------------- | :------------------------- | :------------------------- | :------------------- | :--------- | | **Total Stockholders' Equity** | $487,738 | $563,875 | $(76,137) | -13.50% | | **Other comprehensive income (loss), net of taxes (9 Months)** | $(113,285) | $(5,799) | $(107,486) | -1853.53% | | **Repurchase of common stock (9 Months)** | $(12,478) | $(2,920) | $(9,558) | 327.33% | [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (9 Months Ended Sep 30) | Metric | 2022 ($ thousands) | 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------------------------- | :----------------- | :----------------- | :------------------- | :--------- | | **Net cash provided by operating activities** | $94,868 | $53,400 | $41,468 | 77.66% | | **Net cash (used in) provided by investing activities** | $(1,210,404) | $(275,790) | $(934,614) | 338.89% | | **Net cash provided by financing activities** | $851,274 | $873,867 | $(22,593) | -2.59% | | **Increase (decrease) in cash, cash equivalents, and restricted cash** | $(264,262) | $651,477 | $(915,739) | -140.56% | [Notes to Consolidated Financial Statements](index=16&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. BASIS OF PRESENTATION AND CONSOLIDATION](index=16&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20AND%20CONSOLIDATION) - The Company's accounting and reporting policies conform to GAAP and predominant practices within the banking industry[31](index=31&type=chunk) - The accompanying unaudited consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its majority-owned subsidiaries[32](index=32&type=chunk) - There have been no significant changes to the Company's accounting policies or estimates as described in the 2021 Annual Report[32](index=32&type=chunk) [2. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=17&type=section&id=2.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20%28LOSS%29) Net Change in Unrealized Gains (Losses) on Securities | Period | 3 Months Ended Sep 30, 2022 ($ thousands) | 3 Months Ended Sep 30, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | :--------- | | **Net change in unrealized gains (losses) on securities** | $(29,751) | $(4,406) | $(25,345) | -575.24% | | | | | | | | **Period** | **9 Months Ended Sep 30, 2022 ($ thousands)** | **9 Months Ended Sep 30, 2021 ($ thousands)** | **Change ($ thousands)** | **Change (%)** | | **Net change in unrealized gains (losses) on securities** | $(113,414) | $(5,657) | $(107,757) | -1904.93% | [3. INVESTMENT SECURITIES](index=19&type=section&id=3.%20INVESTMENT%20SECURITIES) Investment Securities Portfolio Overview | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :------------------------- | :------------------------- | :------------------- | :--------- | | **Available for sale, at fair value** | $1,957,486 | $2,113,410 | $(155,924) | -7.38% | | **Held-to-maturity, at amortized cost** | $1,492,423 | $843,569 | $648,854 | 76.92% | | **Total Unrealized Losses on AFS Securities** | $(129,823) | $(7,393) | $(122,430) | -1656.01% | | **Total Unrealized Losses on HTM Securities** | $(123,040) | $(1,883) | $(121,157) | -6434.25% | - The Company reassessed the classification of certain investments during the nine months ended September 30, 2022, transferring **$277.3 million** book value of securities from available-for-sale to held-to-maturity at a fair value of **$260.1 million**[48](index=48&type=chunk) - Management does not intend to sell temporarily impaired investments and expects to collect all amounts due according to contractual terms, thus not considering them other-than-temporarily impaired[61](index=61&type=chunk) [4. LOANS RECEIVABLE, NET](index=25&type=section&id=4.%20LOANS%20RECEIVABLE%2C%20NET) Loans Receivable and Allowance for Loan Losses | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------------------------- | :------------------------- | :------------------------- | :------------------- | :--------- | | **Total loans receivable, net of deferred loan origination costs (fees)** | $3,871,290 | $3,312,224 | $559,066 | 16.88% | | **Allowance for loan losses** | $42,122 | $35,866 | $6,256 | 17.44% | | **Non-accrual loans (excluding held for sale and restructured)** | $7,499 | $14,722 | $(7,223) | -48.92% | | **Troubled debt restructured loans - nonaccrual** | $12,322 | $13,497 | $(1,175) | -8.71% | - The primary driver of the decrease in non-accrual loans from December 31, 2021, to September 30, 2022, was a **$13.2 million** transfer of non-accrual loans to loans held for sale[70](index=70&type=chunk) Loan Portfolio Composition (Sep 30, 2022) | Loan Type | Amount ($ thousands) | % of Total Loans | | :---------------------------------------- | :------------------- | :--------------- | | **Commercial and industrial** | $805,087 | 20.8% | | **Multifamily mortgages** | $884,790 | 22.9% | | **Commercial real estate mortgages** | $338,002 | 8.7% | | **Construction and land development mortgages** | $38,946 | 1.0% | | **Residential real estate lending** | $1,332,010 | 34.5% | | **Consumer and other** | $467,793 | 12.1% | [5. DEPOSITS](index=33&type=section&id=5.%20DEPOSITS) Deposits Overview | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :---------------------------------------- | :------------------------- | :------------------------- | :------------------- | :--------- | | **Total Deposits** | $7,160,307 | $6,356,255 | $804,052 | 12.65% | | **Non-interest bearing demand deposit accounts** | $3,839,155 | $3,335,005 | $504,150 | 15.12% | | **Weighted Average Rate on Total Deposits** | 0.17% | 0.06% | 0.11% | 183.33% | - Political deposits totaled approximately **$1.2 billion** as of September 30, 2022, and **$989.6 million** as of December 31, 2021, primarily in demand deposits, exhibiting seasonality based on election cycles[250](index=250&type=chunk) [6. BORROWED FUNDS](index=34&type=section&id=6.%20BORROWED%20FUNDS) - The Company completed a public offering of **$85.0 million** of 3.250% Fixed-to-Floating Rate subordinated notes due 2031 on November 8, 2021[100](index=100&type=chunk) - The Company repurchased **$3.25 million** and **$3.0 million** of subordinated notes on July 26, 2022, and September 29, 2022, respectively[101](index=101&type=chunk) FHLB Advances | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change ($ thousands) | | :------------------- | :------------------------- | :------------------------- | :------------------- | | **Outstanding FHLB advances** | $75,000 | $0 | $75,000 | [7. EARNINGS PER SHARE](index=35&type=section&id=7.%20EARNINGS%20PER%20SHARE) Earnings Per Common Share | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | **Basic EPS ($)** | $0.75 | $0.46 | $1.84 | $1.19 | | **Diluted EPS ($)** | $0.74 | $0.46 | $1.82 | $1.17 | [8. EMPLOYEE BENEFIT PLANS](index=36&type=section&id=8.%20EMPLOYEE%20BENEFIT%20PLANS) - The Company does not currently maintain an active stock option plan for issuing new options; all options are fully vested[109](index=109&type=chunk) - During the nine months ended September 30, 2022, the Company granted **222,109** restricted stock units (RSUs) to employees under the Equity Plan, including time-vesting and performance-based units[112](index=112&type=chunk) - As of September 30, 2022, there was **$4.9 million** of total unrecognized compensation cost related to non-vested employee RSUs, expected to be recognized over **2.1 years**[117](index=117&type=chunk) - The Amalgamated Financial Corp. Employee Stock Purchase Plan (ESPP) was implemented on March 2, 2022, allowing employees to purchase common stock at a discount[118](index=118&type=chunk) [9. FAIR VALUE OF FINANCIAL INSTRUMENTS](index=38&type=section&id=9.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) - Fair value measurements are categorized into a three-level hierarchy: Level 1 for quoted prices in active markets, Level 2 for observable inputs, and Level 3 for unobservable and significant inputs[122](index=122&type=chunk)[123](index=123&type=chunk) Fair Value of Financial Instruments (Sep 30, 2022) | Financial Instrument | Total Fair Value ($ thousands) | Level 1 ($ thousands) | Level 2 ($ thousands) | Level 3 ($ thousands) | | :-------------------------------- | :----------------------------- | :-------------------- | :-------------------- | :-------------------- | | **Available for sale securities** | $1,957,486 | $8,015 | $1,949,471 | $0 | | **Held to maturity securities** | $1,369,383 | $0 | $578,876 | $790,507 | | **Loans receivable, net** | $3,438,967 | $0 | $0 | $3,438,967 | | **Impaired loans (non-recurring)** | $32,998 | $0 | $0 | $32,998 | [10. COMMITMENTS, CONTINGENCIES AND OFF BALANCE SHEET RISK](index=41&type=section&id=10.%20COMMITMENTS%2C%20CONTINGENCIES%20AND%20OFF%20BALANCE%20SHEET%20RISK) Off-Balance Sheet Credit Commitments | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------- | :------------------------- | :------------------------- | :------------------- | :--------- | | **Commitments to extend credit** | $835,241 | $927,428 | $(92,187) | -9.94% | | **Standby letters of credit** | $21,536 | $18,752 | $2,784 | 14.85% | - The Company reserves for the credit risk inherent in off-balance-sheet credit commitments, with a reserve of approximately **$1.6 million** as of September 30, 2022[136](index=136&type=chunk) - The Company has an estimated remaining commitment of **$45.0 million** for the purchase of PACE assessment securities as of September 30, 2022[138](index=138&type=chunk) [11. LEASES](index=42&type=section&id=11.%20LEASES) Operating Lease Information (9 Months Ended Sep 30) | Metric | 2022 ($ thousands) | 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :------------------------------------------------------------------ | :----------------- | :----------------- | :------------------- | :--------- | | **Operating lease cost** | $6,765 | $6,679 | $86 | 1.29% | | **Cash paid for amounts included in the measurement of Operating leases liability** | $7,976 | $7,573 | $403 | 5.32% | | **Weighted average remaining lease term on operating leases (in years)** | 4.2 | 5.0 | -0.8 | -16.00% | | **Weighted average discount rate used for operating leases liability** | 3.25% | 3.26% | -0.01% | -0.31% | - The total operating leases liability as of September 30, 2022, was **$43.2 million**[146](index=146&type=chunk) [12. GOODWILL AND INTANGIBLE ASSETS](index=44&type=section&id=12.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) - The carrying amount of goodwill was **$12.9 million** at both September 30, 2022, and December 31, 2021, with no impairment identified in the annual test as of June 30, 2022[150](index=150&type=chunk) Estimated Amortization Expense for Core Deposit Intangible | Year | Amount ($ thousands) | | :----------------- | :------------------- | | **2022 remaining** | $261 | | **2023** | $888 | | **2024** | $730 | | **2025** | $574 | | **2026** | $419 | | **Thereafter** | $494 | | **Total** | $3,366 | [13. VARIABLE INTEREST ENTITIES](index=45&type=section&id=13.%20VARIABLE%20INTEREST%20ENTITIES) - The Company invests in unconsolidated entities that construct, own, and operate solar generation facilities, generating returns through tax credits and operational distributions[154](index=154&type=chunk) - As of September 30, 2022, the Company's maximum exposure to loss from these variable interest entities was **$35.1 million**[154](index=154&type=chunk) Tax Benefits from Solar Generation VIE Investments (9 Months Ended Sep 30) | Metric | 2022 ($ thousands) | 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :---------------------------------------- | :----------------- | :----------------- | :------------------- | :--------- | | **Tax credits and other tax benefits recognized** | $2,004 | $1,479 | $525 | 35.50% | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes financial performance and condition for the three and nine months ended September 30, 2022, highlighting increased net interest income and net income, driven by asset growth and rising interest rates [General](index=46&type=section&id=General) - The discussion focuses on the consolidated financial condition as of September 30, 2022, compared to December 31, 2021, and results of operations for the three and nine months ended September 30, 2022 and 2021[159](index=159&type=chunk) - Historical results of operations and trends may not indicate results for any future periods[159](index=159&type=chunk) - The discussion includes forward-looking statements, with related cautionary disclosures provided[160](index=160&type=chunk) [Overview](index=46&type=section&id=Overview) - Amalgamated Financial Corp. serves as the holding company for Amalgamated Bank, offering commercial and retail banking, investment management, and trust and custody services[161](index=161&type=chunk)[162](index=162&type=chunk) Company Financial Snapshot (Sep 30, 2022) | Metric | Amount ($ billions) | | :-------------------------- | :------------------ | | **Total Assets** | $7.9 | | **Total Loans, net** | $3.8 | | **Total Deposits** | $7.2 | | **Stockholders' Equity** | $0.4877 | | **Assets under custody** | $37.6 | | **Assets under management** | $12.5 | - The Bank is B Corporation certified and a member of the Global Alliance for Banking on Values, focusing on socially responsible and values-oriented clients[163](index=163&type=chunk)[164](index=164&type=chunk) [Critical and Significant Accounting Policies and Estimates](index=48&type=section&id=Critical%20and%20Significant%20Accounting%20Policies%20and%20Estimates) - The consolidated financial statements are prepared based on GAAP and conform to general practices within the banking industry[165](index=165&type=chunk) - There have been no significant changes to the Company's critical and significant accounting policies or estimates as described in the 2021 Annual Report[165](index=165&type=chunk) [Recent Accounting Pronouncements](index=49&type=section&id=Recent%20Accounting%20Pronouncements) - The Company will adopt ASU 2016-13, 'Financial Instruments – Credit Losses (Topic 326)' (CECL), on January 1, 2023, and currently does not expect it to have a significant impact on operating results or financial condition[167](index=167&type=chunk)[169](index=169&type=chunk) - ASU 2022-02, which eliminates the troubled debt restructuring (TDR) accounting model for CECL adopters, will also be applied upon CECL adoption[170](index=170&type=chunk) - ASU 2021-01, Reference Rate Reform, is not expected to have a material impact on the Company's operating results or financial condition[171](index=171&type=chunk) [Results of Operations](index=50&type=section&id=Results%20of%20Operations) [General](index=50&type=section&id=General_Results_of_Operations) Net Income Overview | Metric | 3 Months Ended Sep 30, 2022 ($ millions) | 3 Months Ended Sep 30, 2021 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------ | :--------- | | **Net Income** | $22.9 | $14.4 | $8.5 | 59.0% | | | | | | | | **Metric** | **9 Months Ended Sep 30, 2022 ($ millions)** | **9 Months Ended Sep 30, 2021 ($ millions)** | **Change ($ millions)** | **Change (%)** | | **Net Income** | $56.7 | $37.0 | $19.7 | 53.2% | - The **$19.7 million** increase in net income for the nine months ended September 30, 2022, was primarily due to a **$35.1 million** increase in interest income on securities, partially offset by a **$7.8 million** increase in non-interest expense[174](index=174&type=chunk) [Net Interest Income](index=50&type=section&id=Net%20Interest%20Income) Net Interest Income and Margin | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | **Net Interest Income ($ millions)** | $67.6 | $43.4 | +$24.2 (+55.8%) | | **Net Interest Spread** | 3.28% | 2.60% | +68 bps | | **Net Interest Margin** | 3.50% | 2.70% | +80 bps | | **Yield on average earning assets** | 3.66% | 2.79% | +87 bps | | **Average rate on interest-bearing liabilities** | 0.38% | 0.19% | +19 bps | | | | | | | **Metric** | **9 Months Ended Sep 30, 2022** | **9 Months Ended Sep 30, 2021** | **Change** | | **Net Interest Income ($ millions)** | $172.5 | $127.2 | +$45.3 (+35.6%) | | **Net Interest Spread** | 2.93% | 2.65% | +28 bps | | **Net Interest Margin** | 3.11% | 2.77% | +34 bps | | **Yield on average earning assets** | 3.24% | 2.86% | +38 bps | | **Average rate on interest-bearing liabilities** | 0.31% | 0.21% | +10 bps | - The increase in net interest income was primarily attributable to a strategic **$1.0 billion** increase in average securities and a **114 basis point** increase in securities yield due to the rising rate environment, as well as a **$605.9 million** increase in average loan balances[178](index=178&type=chunk) [Provision for Loan Losses](index=53&type=section&id=Provision%20for%20Loan%20Losses) Provision for Loan Losses | Metric | 3 Months Ended Sep 30, 2022 ($ millions) | 3 Months Ended Sep 30, 2021 ($ millions) | Change ($ millions) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------ | | **Provision for loan losses** | $5.4 (expense) | $2.3 (release) | +$7.7 | | | | | | | **Metric** | **9 Months Ended Sep 30, 2022 ($ millions)** | **9 Months Ended Sep 30, 2021 ($ millions)** | **Change ($ millions)** | | **Provision for loan losses** | $10.6 (expense) | $3.9 (release) | +$14.5 | - The increase in provision for loan losses was primarily driven by loan growth, an increase in specific reserves on one loan in the CRE portfolio, and **$1.6 million** in charge-offs related to nonperforming loans transferred to held for sale[190](index=190&type=chunk)[191](index=191&type=chunk) [Non-Interest Income](index=54&type=section&id=Non-Interest%20Income) Non-Interest Income Overview | Metric | 3 Months Ended Sep 30, 2022 ($ thousands) | 3 Months Ended Sep 30, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | :--------- | | **Total Non-Interest Income** | $5,003 | $6,702 | $(1,699) | -25.35% | | **Gain (loss) on sale of securities** | $(1,844) | $413 | $(2,257) | -546.49% | | **Equity method investments** | $(1,151) | $(483) | $(668) | 138.30% | | **Trust Department fees** | $3,872 | $3,353 | $519 | 15.48% | | | | | | | | **Metric** | **9 Months Ended Sep 30, 2022 ($ thousands)** | **9 Months Ended Sep 30, 2021 ($ thousands)** | **Change ($ thousands)** | **Change (%)** | | **Total Non-Interest Income** | $19,671 | $16,028 | $3,643 | 22.73% | | **Equity method investments** | $(1,357) | $(5,720) | $4,363 | -76.28% | | **Gain (loss) on sale of securities** | $(2,264) | $755 | $(3,019) | -399.87% | - The decrease in Q3 2022 non-interest income was primarily due to a **$1.8 million** loss on sale of securities and a **$1.2 million** loss related to equity investments in solar initiatives[194](index=194&type=chunk) - The increase in YTD Q3 2022 non-interest income was primarily due to a reduced loss from equity investment projects, a **$1.1 million** increase in service charges on deposit accounts, and a **$1.0 million** increase in income from BOLI[196](index=196&type=chunk)[197](index=197&type=chunk) [Non-Interest Expense](index=55&type=section&id=Non-Interest%20Expense) Non-Interest Expense Overview | Metric | 3 Months Ended Sep 30, 2022 ($ thousands) | 3 Months Ended Sep 30, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | :--------- | | **Total Non-Interest Expense** | $36,258 | $33,034 | $3,224 | 9.76% | | **Compensation and employee benefits** | $19,527 | $17,482 | $2,045 | 11.70% | | | | | | | | **Metric** | **9 Months Ended Sep 30, 2022 ($ thousands)** | **9 Months Ended Sep 30, 2021 ($ thousands)** | **Change ($ thousands)** | **Change (%)** | | **Total Non-Interest Expense** | $105,001 | $97,223 | $7,778 | 8.00% | | **Data processing** | $13,660 | $10,848 | $2,812 | 25.92% | | **Compensation and employee benefits** | $55,242 | $52,485 | $2,757 | 5.25% | - The increase in Q3 2022 non-interest expense was driven by a **$2.0 million** increase in compensation and benefits and a **$0.9 million** increase in professional fees[199](index=199&type=chunk) - The increase in YTD Q3 2022 non-interest expense was primarily due to a **$2.9 million** increase in data processing expense related to Trust Department modernization and a **$2.7 million** increase in compensation and benefits[200](index=200&type=chunk) [Income Taxes](index=55&type=section&id=Income%20Taxes) Income Tax Expense and Effective Tax Rate | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | **Income tax expense ($ millions)** | $8.1 | $4.9 | +$3.2 (+65.3%) | | **Effective tax rate** | 26.0% | 25.4% | +0.6% | | | | | | | **Metric** | **9 Months Ended Sep 30, 2022** | **9 Months Ended Sep 30, 2021** | **Change** | | **Income tax expense ($ millions)** | $19.9 | $12.9 | +$7.0 (+54.3%) | | **Effective tax rate** | 25.9% | 25.8% | +0.1% | [Financial Condition](index=56&type=section&id=Financial%20Condition) [Balance Sheet](index=56&type=section&id=Balance%20Sheet_Financial_Condition) - Total assets increased by **$0.8 billion** to **$7.9 billion** at September 30, 2022, from **$7.1 billion** at December 31, 2021[203](index=203&type=chunk) - The increase in total assets was primarily driven by a **$492.9 million** increase in investment securities and a **$552.8 million** increase in loans receivable, net[203](index=203&type=chunk) [Investment Securities](index=56&type=section&id=Investment%20Securities) Investment Securities Portfolio | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------- | :------------------------- | :------------------------- | :------------------- | :--------- | | **Total securities** | $3,449,909 | $2,956,979 | $492,930 | 16.67% | | **Available for sale** | $1,957,486 | $2,113,410 | $(155,924) | -7.38% | | **Held to maturity** | $1,492,423 | $843,569 | $648,854 | 76.92% | - At September 30, 2022, the Company had **$3.3 billion** of investment securities with unrealized losses, of which **$9.5 million** had a continuous unrealized loss position for **12 consecutive months** or longer[207](index=207&type=chunk) - Management determined substantially all of the decline in value to be temporary and does not intend to sell these securities, anticipating full recovery of amortized cost[207](index=207&type=chunk) [Loans](index=59&type=section&id=Loans) - Total loans, net of deferred origination fees and allowance for loan losses, were **$3.8 billion** as of September 30, 2022, up from **$3.3 billion** at December 31, 2021[216](index=216&type=chunk)[217](index=217&type=chunk) Loan Portfolio Composition | Loan Type | Sep 30, 2022 (% of total loans) | Dec 31, 2021 (% of total loans) | | :-------------------------- | :------------------------------ | :------------------------------ | | **Commercial portfolio** | 53.4% | 59.0% | | **Retail portfolio** | 46.6% | 41.0% | | **Commercial and industrial** | 20.8% | 22.0% | | **Multifamily mortgages** | 22.9% | 24.8% | | **Commercial real estate mortgages** | 8.7% | 11.2% | | **Residential real estate lending** | 34.5% | 32.2% | | **Consumer and other** | 12.1% | 8.8% | - In the third quarter of 2022, the Company purchased **$62.3 million** of residential loans, **$5.2 million** of home improvement loans, **$49.6 million** of consumer solar loans, and **$10.7 million** of commercial loans unconditionally guaranteed by the U.S. government[216](index=216&type=chunk) [Allowance for Loan Losses](index=62&type=section&id=Allowance%20for%20Loan%20Losses_Financial_Condition) Allowance for Loan Losses and Impaired Loans | Metric | Sep 30, 2022 ($ millions) | Dec 31, 2021 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------- | :------------------------ | :------------------------ | :------------------ | :--------- | | **Allowance for Loan Losses** | $42.1 | $35.9 | $6.2 | 17.3% | | **Impaired loans** | $38.2 | $53.2 | $(15.0) | -28.2% | | **Specific allowance for impaired loans** | $5.2 | $5.1 | $0.1 | 1.96% | | **Ratio of allowance to total loans** | 1.09% | 1.08% | +0.01% | 0.93% | - The increase in the allowance was primarily due to increases in loan balances[237](index=237&type=chunk) [Nonperforming Assets](index=64&type=section&id=Nonperforming%20Assets) Nonperforming Assets Overview | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :---------------------------------------- | :------------------------- | :------------------------- | :------------------- | :--------- | | **Total nonperforming assets** | $54,291 | $54,586 | $(295) | -0.54% | | **Nonperforming assets to total assets** | 0.69% | 0.77% | -0.08% | -10.39% | | **Nonaccrual loans to total loans** | 0.51% | 0.85% | -0.34% | -40.00% | | **Allowance for loan losses to nonaccrual loans** | 212.51% | 127.10% | +85.41% | 67.20% | - The decrease in non-performing assets was primarily driven by the sale of **$3.9 million** of residential loans held for sale and the payoff of **$5.8 million** of commercial and industrial loans and one **$3.5 million** nonaccrual multifamily loan[245](index=245&type=chunk) - This decrease was almost entirely offset by the restructuring of **$6.5 million** in loans and two loans totaling **$5.2 million** that were moved to nonaccrual[245](index=245&type=chunk) - Potential problem loans totaled **$84.9 million**, or **1.1%** of total assets, at September 30, 2022[246](index=246&type=chunk) [Resell Agreements](index=66&type=section&id=Resell%20Agreements) Resell Agreements Overview | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------- | :------------------------- | :------------------------- | :------------------- | :--------- | | **Resell agreements** | $192,834 | $229,018 | $(36,184) | -15.80% | | **Weighted interest rate** | 3.69% | 1.21% | +2.48% | 204.96% | [Deferred Tax Asset](index=66&type=section&id=Deferred%20Tax%20Asset) Deferred Tax Asset, Net | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------- | :------------------------- | :------------------------- | :------------------- | :--------- | | **Deferred tax asset, net** | $64,046 | $26,719 | $37,327 | 139.70% | - The deferred tax asset is considered fully realizable with no valuation allowance held against the balance[248](index=248&type=chunk) [Deposits](index=66&type=section&id=Deposits_Financial_Condition) - Total deposits were **$7.2 billion** at September 30, 2022, compared to **$6.4 billion** at December 31, 2021, representing an increase of **$0.8 billion**[249](index=249&type=chunk) - Political deposits amounted to approximately **$1.2 billion** at September 30, 2022, and **$989.6 million** at December 31, 2021, primarily in demand deposits[250](index=250&type=chunk) [Evaluation of Interest Rate Risk](index=66&type=section&id=Evaluation%20of%20Interest%20Rate%20Risk) Estimated Impact of Immediate Interest Rate Shifts (Sep 30, 2022) | Immediate Shift | Economic Value of Equity Change (%) | Economic Value of Equity Change ($ thousands) | Year 1 Net Interest Income Change (%) | Year 1 Net Interest Income Change ($ thousands) | | :-------------------- | :---------------------------------- | :-------------------------------------------- | :------------------------------------ | :---------------------------------------------- | | **+400 basis points** | -24.1% | $(349,850) | -7.0% | $(20,062) | | **+300 basis points** | -15.0% | $(218,710) | -1.5% | $(4,427) | | **+200 basis points** | -7.9% | $(114,645) | 1.5% | $4,271 | | **+100 basis points** | -2.0% | $(29,518) | 1.9% | $5,494 | | **-100 basis points** | -3.2% | $(46,575) | -3.7% | $(10,531) | - The simulation results are hypothetical and not indicative of expected operating results, as various factors could cause actual results to differ substantially[256](index=256&type=chunk) [Liquidity](index=67&type=section&id=Liquidity) - The Company's liquidity position is supported by liquid assets, liability management, and access to alternative funding sources like FHLB advances and the Federal Reserve's discount window[259](index=259&type=chunk)[261](index=261&type=chunk) Cash and Equivalents | Metric | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------- | :------------------------- | :------------------------- | :------------------- | :--------- | | **Cash and equivalents** | $66,223 | $330,485 | $(264,262) | -80.00% | | **% of total assets** | 0.8% | 4.7% | -3.9% | -82.98% | - At September 30, 2022, the Company had **$75.0 million** in FHLB advances and a remaining credit availability of **$1.4 billion**[261](index=261&type=chunk) [Capital Resources](index=68&type=section&id=Capital%20Resources) - Total stockholders' equity decreased by **$76.1 million** to **$487.7 million** at September 30, 2022, primarily due to a **$113.3 million** decrease in accumulated other comprehensive income and **$12.5 million** in common stock repurchases, partially offset by **$56.7 million** of net income[262](index=262&type=chunk) Regulatory Capital Ratios (Consolidated, Sep 30, 2022) | Metric | Actual Ratio | Minimum for Capital Adequacy | Minimum for Well Capitalized | | :---------------------------------------- | :----------- | :--------------------------- | :--------------------------- | | **Total capital to risk weighted assets** | 14.43% | 8.00% | 10.00% | | **Tier 1 capital to risk weighted assets** | 11.91% | 6.00% | 8.00% | | **Common equity tier 1 to risk weighted assets** | 11.91% | 4.50% | 6.50% | - As of September 30, 2022, the Company and the Bank were categorized as 'well capitalized' under prompt corrective action measures and met the capital conservation buffer requirements[266](index=266&type=chunk) [Contractual Obligations](index=69&type=section&id=Contractual%20Obligations) Contractual Obligations (Sep 30, 2022) | Obligation Type | Total ($ thousands) | Less than 1 year ($ thousands) | 1-3 years ($ thousands) | 3-5 years ($ thousands) | More than 5 years ($ thousands) | | :-------------------------- | :------------------ | :----------------------------- | :---------------------- | :---------------------- | :------------------------------ | | **Subordinated Debt** | $77,679 | $0 | $0 | $0 | $77,679 | | **Operating Leases** | $46,068 | $2,768 | $33,169 | $10,131 | $0 | | **Purchase Obligations** | $27,646 | $4,612 | $9,224 | $6,660 | $7,150 | | **Certificates of Deposit** | $183,011 | $62,249 | $118,645 | $1,765 | $352 | | **Total** | $334,404 | $69,629 | $161,038 | $18,556 | $85,181 | - Total contractual obligations decreased from **$374.1 million** at December 31, 2021, to **$334.4 million** at September 30, 2022[268](index=268&type=chunk)[270](index=270&type=chunk) [Investment Obligations](index=70&type=section&id=Investment%20Obligations) - The Company has an estimated remaining commitment of **$45.0 million** for the purchase of PACE assessment securities until the end of 2022[271](index=271&type=chunk) - These commitments are anticipated to be funded by means of normal cash flows, a reduction in cash and cash equivalents, or by pay-downs and maturities of loans and other investments[271](index=271&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk from the 2021 Annual Report, with interest rate sensitivity detailed in the 'Evaluation of Interest Rate Risk' section of this Quarterly Report - No material changes in market risk as of September 30, 2022, from that presented in the 2021 Annual Report[273](index=273&type=chunk) - The interest rate sensitivity position is set forth in the 'Evaluation of Interest Rate Risk' table within Management's Discussion and Analysis of Financial Condition and Results of Operation[273](index=273&type=chunk) [ITEM 4. Controls and Procedures](index=71&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - The Company's disclosure controls and procedures were evaluated and concluded to be effective as of September 30, 2022[274](index=274&type=chunk) - There was no change in internal control over financial reporting during the quarter ended September 30, 2022, that materially affected, or is reasonably likely to materially affect, internal control over financial reporting[275](index=275&type=chunk) PART II - OTHER INFORMATION [ITEM 1. Legal Proceedings](index=72&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is subject to ordinary course legal proceedings, with management believing aggregate liabilities will not materially affect financial condition or results of operations - The Company is subject to certain pending and threatened legal proceedings that arise out of the ordinary course of business[277](index=277&type=chunk) - Management believes that the aggregate liabilities, if any, arising from such actions would not have a material adverse effect on the consolidated financial position or results of operations[277](index=277&type=chunk) [ITEM 1A. Risk Factors](index=72&type=section&id=ITEM%201A.%20Risk%20Factors) Investing in common stock involves risks identified in the 2021 Annual Report on Form 10-K, with no material changes to previously disclosed risk factors - Investing in shares of the Company's common stock involves certain risks, including those identified in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021[278](index=278&type=chunk) - There have been no material changes to the risk factors previously disclosed in the 2021 Annual Report[278](index=278&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=72&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **43,588** common shares at **$21.78** average price, including tax-withheld shares and program purchases, with **$28.1 million** remaining under the **$40 million** repurchase program Issuer Purchases of Equity Securities (3 Months Ended Sep 30, 2022) | Period | Total number of shares purchased | Average price per share ($) | Total number of shares purchased as part of publicly announced plans or programs | Approximate dollar value remaining under plans or programs ($) | | :-------------------------- | :------------------------------- | :-------------------------- | :------------------------------------------------------------------------------- | :----------------------------------------------------------- | | **July 1 through July 31, 2022** | 19,756 | 20.48 | 14,656 | 28,553,565 | | **August 1 through August 31, 2022** | 23,832 | 22.85 | 20,000 | 28,098,365 | | **September 1 through September 30, 2022** | 0 | 0 | 0 | 28,098,365 | | **Total** | 43,588 | 21.78 | 34,656 | - | - The total number of shares purchased includes **8,932** shares withheld by the Company to pay taxes associated with the vesting of stock options[280](index=280&type=chunk) - The Company's Board of Directors approved an increase to the share repurchase program, authorizing the repurchase of up to **$40 million** of outstanding common stock, effective February 25, 2022[281](index=281&type=chunk) [ITEM 6. Exhibits](index=73&type=section&id=ITEM%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including CEO and CFO certifications, iXBRL data files, and references to previously filed corporate documents - Includes Rule 13a-14(a) Certifications of the Chief Executive Officer and Chief Financial Officer[284](index=284&type=chunk) - Includes Section 1350 Certifications[285](index=285&type=chunk) - Interactive data files for the Quarterly Report on Form 10-Q, formatted in iXBRL, are provided[285](index=285&type=chunk) [Signatures](index=74&type=section&id=Signatures) The report is signed by Priscilla Sims Brown, President and CEO, and Jason Darby, CFO, on November 4, 2022, certifying its submission - The report was signed by Priscilla Sims Brown, President and Chief Executive Officer, and Jason Darby, Chief Financial Officer[289](index=289&type=chunk)[290](index=290&type=chunk) - The signing date for the report was November 4, 2022[289](index=289&type=chunk)[290](index=290&type=chunk)

Financial Data and Key Metrics Changes - The company reported record earnings of $0.63 per share, an increase of $0.18 from Q1 2022 [8] - Net income for Q2 2022 was $19.6 million, up from $14.2 million in Q1 2022, driven by an $8.1 million increase in net interest income [21][22] - The return on average assets increased to 1.01% from 0.78% in Q1 2022 [8] - Net interest margin expanded by 27 basis points to 3.03% [27] Business Line Data and Key Metrics Changes - Total loans increased by 5.1% to $3.6 billion, with significant growth in residential loans and multifamily loans [26] - Deposits grew by 4.6% to $7.3 billion, with noninterest-bearing deposits representing 54% of total deposits [24] - Core noninterest income rose to $8.7 million from $7.2 million in Q1 2022 [27] Market Data and Key Metrics Changes - Political deposits increased to $1.3 billion, with expectations of further increases in Q3 2022 [24] - The company anticipates a runoff of approximately $500 million to $600 million in political deposits in Q4 2022 [25] Company Strategy and Development Direction - The company aims to become the most improved bank in the country regarding financial performance metrics [10] - The "growth for good" strategy focuses on loan growth, profitability, and social impact [7][9] - The company is enhancing its digital strategy and information technology capabilities to support growth [18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about loan growth potential in new markets, despite economic uncertainty [19] - The company expects to exceed high single-digit loan growth guidance for the full year 2022 [19] - Management highlighted the importance of maintaining expense control while pursuing growth [10] Other Important Information - The company is actively involved in social issues, including reproductive health care access and gun violence prevention [12][13] - The company released its 2021 Annual Corporate and Social Responsibility Report, showcasing its ESG efforts [14] Q&A Session Summary Question: Why didn't the PPNR and NII guide increase despite rate hikes? - Management indicated a cautious approach due to uncertainty in the rate environment and potential changes in deposit expense behavior [38][39] Question: What are the expectations for deposit beta and plans for deposit rate increases? - Management noted that there was no change in cost of funds in Q2 2022, but deposit repricing occurred in June, with an implied beta of about 5% [41] Question: How will the company fill the gap from political deposit runoff in Q4? - Management expects balance sheet contraction but does not foresee a need for borrowings, relying on cash and short-term agreements [43][44] Question: What are the current loan origination yields and growth drivers for the second half of the year? - Yields are rising, with multifamily loans in the low to mid-4% range, and management expects a shift towards commercial loans for growth [46][48] Question: What is the outlook for noninterest-bearing deposits by the end of 2023? - Management anticipates a normalization of the ratio to around 50-50, influenced by political deposit fluctuations [61] Question: Will there be growth in residential loans in the second half of 2022? - Management expects continued growth in residential loans but at a slower pace compared to the first half of the year [64][66] Question: What is the trajectory of NIM through 2023? - Management is optimistic about continued NIM expansion, driven by rising earning asset yields and potential balance sheet contraction [68][70]

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents the unaudited consolidated financial statements and management's discussion and analysis for Amalgamated Financial Corp [ITEM 1. Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Amalgamated Financial Corp. for the quarter ended March 31, 2022, including the statements of financial condition, income, comprehensive income, changes in stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial instrument details [Consolidated Statements of Financial Condition](index=6&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition%20as%20of%20March%2031,%202022%20and%20December%2031,%202021) This section provides a comparative overview of the company's assets, liabilities, and equity at March 31, 2022, and December 31, 2021 Consolidated Statements of Financial Condition (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | |:---|:---|:---| | Total Assets | $7,653,331 | $7,077,876 | | Total Liabilities | $7,126,569 | $6,514,001 | | Total Stockholders' Equity | $526,762 | $563,875 | - Total assets increased by **$575.455 million (8.13%)** from December 31, 2021, to March 31, 2022, primarily driven by increases in interest-bearing deposits in banks, available-for-sale securities, and loans receivable, net[12](index=12&type=chunk) - Total liabilities increased by **$612.568 million (9.40%)** over the same period, mainly due to a significant increase in deposits[12](index=12&type=chunk) - Total stockholders' equity decreased by **$37.113 million (6.58%)** from December 31, 2021, to March 31, 2022, largely influenced by a decrease in accumulated other comprehensive income (loss)[12](index=12&type=chunk) [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income%20for%20the%20Three%20Months%20Ended%20March%2031,%202022%20and%202021) This section presents the company's financial performance, detailing revenues, expenses, and net income for the three months ended March 31, 2022 and 2021 Consolidated Statements of Income (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (YoY) | |:---|:---|:---|:---| | Total Interest and Dividend Income | $50,461 | $43,417 | +$7,044 | | Total Interest Expense | $2,093 | $1,573 | +$520 | | Net Interest Income | $48,368 | $41,844 | +$6,524 | | Provision for (recovery of) Loan Losses | $2,293 | $(3,261) | +$5,554 | | Total Non-Interest Income | $7,422 | $4,000 | +$3,422 | | Total Non-Interest Expense | $34,397 | $32,793 | +$1,604 | | Net Income | $14,165 | $12,189 | +$1,976 | | Earnings per Common Share - Basic | $0.46 | $0.39 | +$0.07 | | Earnings per Common Share - Diluted | $0.45 | $0.39 | +$0.06 | - Net income increased by **$2.0 million (16.2%)** year-over-year, primarily driven by higher interest and dividend income and increased non-interest income, partially offset by a shift from loan loss recovery to a provision for loan losses[14](index=14&type=chunk) - Total interest and dividend income saw a significant increase of **$7.0 million (16.2%)** YoY, mainly from securities[14](index=14&type=chunk) - Non-interest income increased by **$3.4 million (85.6%)** YoY, largely due to a gain from equity method investments in solar initiatives in 2022 compared to a loss in 2021[14](index=14&type=chunk) [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20for%20the%20Three%20Months%20Ended%20March%2031,%202022%20and%202021) This section outlines the components of comprehensive income, including net income and other comprehensive income, for the three months ended March 31, 2022 and 2021 Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (YoY) | |:---|:---|:---|:---|\n| Net Income | $14,165 | $12,189 | +$1,976 | | Net Unrealized Gains (Losses) on Securities Available for Sale | $(63,869) | $(5,454) | $(58,415) | | Total Other Comprehensive Income (Loss), Net of Taxes | $(46,255) | $(4,365) | $(41,890) | | Total Comprehensive Income (Loss), Net of Taxes | $(32,090) | $7,824 | $(39,914) | - Total comprehensive income shifted from a gain of **$7.8 million** in Q1 2021 to a loss of **$32.1 million** in Q1 2022, primarily due to significant net unrealized losses on available-for-sale securities[17](index=17&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20for%20the%20Three%20Months%20Ended%20March%2031,%202022%20and%202021) This section details changes in the company's stockholders' equity, including net income, dividends, and other comprehensive income, for the three months ended March 31, 2022 and 2021 Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric | Balance at Dec 31, 2021 (in thousands) | Net Income (in thousands) | Dividends (in thousands) | Repurchase of Common Stock (in thousands) | Other Comprehensive Income (Loss) (in thousands) | Balance at Mar 31, 2022 (in thousands) | |:---|:---|:---|:---|:---|:---|:---| | Total Stockholders' Equity | $563,875 | $14,165 | $(2,490) | $(2,941) | $(46,255) | $526,762 | - Stockholders' equity decreased by **$37.1 million** from December 31, 2021, to March 31, 2022, primarily due to a **$46.3 million** decrease in accumulated other comprehensive income (loss) and **$2.5 million** in dividends paid, partially offset by **$14.2 million** in net income[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Three%20Months%20Ended%20March%2031,%202022%20and%202021) This section presents the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2022 and 2021 Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | |:---|:---|:---| | Net Cash Provided by Operating Activities | $16,829 | $12,142 | | Net Cash (Used in) Provided by Investing Activities | $(584,805) | $76,636 | | Net Cash Provided by Financing Activities | $611,534 | $377,376 | | Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $43,558 | $466,154 | - Net cash provided by operating activities increased by **$4.687 million (38.6%)** YoY, driven by higher net income and adjustments for non-cash items[24](index=24&type=chunk) - Investing activities shifted from providing **$76.6 million** in cash in Q1 2021 to using **$584.8 million** in Q1 2022, primarily due to significant net decreases in loans and increased purchases of available-for-sale and held-to-maturity securities[24](index=24&type=chunk) - Financing activities provided **$611.5 million** in Q1 2022, up from **$377.4 million** in Q1 2021, mainly due to a substantial net increase in deposits[24](index=24&type=chunk) [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Statements) This section provides detailed explanations and supplementary information for the consolidated financial statements, covering accounting policies and specific financial instrument details [1. Basis of Presentation and Consolidation](index=13&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20AND%20CONSOLIDATION) This note describes the company's formation as a holding company, its operating segment, and adherence to GAAP for financial reporting - Amalgamated Financial Corp. became the holding company for Amalgamated Bank on March 1, 2021, following a statutory share exchange transaction[28](index=28&type=chunk) - The Company operates as a single banking segment for financial reporting purposes, with substantially all operations occurring through the Bank[30](index=30&type=chunk) - Financial statements are prepared in accordance with GAAP and there have been no significant changes to accounting policies or estimates since the 2021 Annual Report[31](index=31&type=chunk)[32](index=32&type=chunk) [2. Accumulated Other Comprehensive Income (Loss)](index=14&type=section&id=2.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) This note details the components and changes in accumulated other comprehensive income (loss), primarily focusing on unrealized gains and losses on available-for-sale securities Accumulated Other Comprehensive Income (Loss) (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | |:---|:---|:---| | Balance as of January 1, 2022 | $5,409 | $17,176 | | Current Period Change | $(63,810) | $(5,811) | | Income Tax Effect | $17,555 | $1,446 | | Balance as of March 31, 2022 | $(40,846) | $12,811 | - Accumulated other comprehensive income (loss) shifted from a gain of **$5.4 million** at December 31, 2021, to a loss of **$40.8 million** at March 31, 2022, primarily due to significant unrealized holding losses on available-for-sale securities[37](index=37&type=chunk)[38](index=38&type=chunk) [3. Investment Securities](index=16&type=section&id=3.%20INVESTMENT%20SECURITIES) This note provides a breakdown of the company's investment securities, including available-for-sale and held-to-maturity categories, and their fair values Investment Securities (in thousands) | Security Type | March 31, 2022 Amortized Cost (in thousands) | March 31, 2022 Fair Value (in thousands) | December 31, 2021 Amortized Cost (in thousands) | December 31, 2021 Fair Value (in thousands) | |:---|:---|:---|:---|:---| | Available for Sale | $2,474,572 | $2,421,064 | $2,103,049 | $2,113,410 | | Held-to-Maturity | $946,347 | $921,395 | $843,569 | $849,704 | - Available-for-sale securities increased by **$307.654 million (14.6%)** in fair value from December 31, 2021, to March 31, 2022[46](index=46&type=chunk)[49](index=49&type=chunk) - Held-to-maturity securities increased by **$102.778 million (12.2%)** in amortized cost over the same period[46](index=46&type=chunk)[49](index=49&type=chunk) - As of March 31, 2022, available-for-sale securities had **$55.951 million** in gross unrealized losses, while held-to-maturity securities had **$25.063 million** in gross unrealized losses, primarily due to rising interest rates[46](index=46&type=chunk) [4. Loans Receivable, Net](index=22&type=section&id=4.%20LOANS%20RECEIVABLE,%20NET) This note details the composition of the loan portfolio by category and the associated allowance for loan losses Loans Receivable, Net (in thousands) | Loan Category | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | |:---|:---|:---| | Commercial and industrial | $724,177 | $729,385 | | Multifamily | $813,702 | $821,801 | | Commercial real estate | $354,174 | $369,429 | | Construction and land development | $40,242 | $31,539 | | Residential real estate lending | $1,143,175 | $1,063,682 | | Consumer and other | $389,452 | $291,818 | | Total Loans Receivable | $3,464,922 | $3,307,654 | | Allowance for Loan Losses | $(37,542) | $(35,866) | | Total Loans Receivable, Net | $3,432,632 | $3,276,358 | - Total loans receivable, net, increased by **$156.274 million (4.77%)** from December 31, 2021, to March 31, 2022[66](index=66&type=chunk) - Residential real estate lending increased by **$79.493 million (7.47%)** and consumer and other loans increased by **$97.634 million (33.46%)**, while commercial loan categories generally saw slight decreases[66](index=66&type=chunk) - The allowance for loan losses increased by **$1.676 million (4.67%)** to **$37.542 million** at March 31, 2022[66](index=66&type=chunk) [5. Deposits](index=29&type=section&id=5.%20DEPOSITS) This note provides a breakdown of deposit types, their amounts, and weighted average rates, highlighting changes over the period Deposits (in thousands) | Deposit Type | March 31, 2022 Amount (in thousands) | March 31, 2022 Weighted Average Rate | December 31, 2021 Amount (in thousands) | December 31, 2021 Weighted Average Rate | |:---|:---|:---|:---|:---| | Non-interest bearing demand deposit accounts | $3,759,349 | 0.00% | $3,335,005 | 0.00% | | NOW accounts | $212,550 | 0.08% | $210,844 | 0.08% | | Money market deposit accounts | $2,416,201 | 0.12% | $2,227,953 | 0.12% | | Savings accounts | $386,253 | 0.11% | $375,301 | 0.11% | | Time deposits | $199,120 | 0.29% | $207,152 | 0.32% | | Total Deposits | $6,973,473 | 0.06% | $6,356,255 | 0.06% | - Total deposits increased by **$617.218 million (9.71%)** from December 31, 2021, to March 31, 2022, primarily driven by a **$424.344 million** increase in non-interest bearing demand deposit accounts[94](index=94&type=chunk) - The weighted average rate on total deposits remained stable at **0.06%** despite changes in individual deposit categories[94](index=94&type=chunk) - Time deposits of **$250,000** or more increased to **$47.8 million** at March 31, 2022, from **$43.7 million** at December 31, 2021[95](index=95&type=chunk) [6. Borrowed Funds](index=30&type=section&id=6.%20BORROWED%20FUNDS) This note details the company's borrowed funds, including subordinated notes and available credit facilities - The Company completed a public offering of **$85.0 million** in 3.250% Fixed-to-Floating Rate subordinated notes due 2031 on November 8, 2021[99](index=99&type=chunk) - The subordinated notes will mature on November 15, 2031, with a fixed rate until November 15, 2026, then a floating rate based on three-month term SOFR plus 230 basis points[99](index=99&type=chunk) - As of March 31, 2022, there were no outstanding FHLB advances, but the Bank had **$1.5 billion** in eligible assets pledged to the FHLB to secure potential advances and letters of credit[101](index=101&type=chunk) [7. Earnings Per Share](index=31&type=section&id=7.%20EARNINGS%20PER%20SHARE) This note presents the basic and diluted earnings per common share calculations for the three months ended March 31, 2022 and 2021 Earnings Per Share | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | |:---|:---|:---| | Net income attributable to Amalgamated Financial Corp. (in thousands) | $14,165 | $12,189 | | Weighted average common shares outstanding, basic (in thousands) | 31,107 | 31,082 | | Basic earnings per common share | $0.46 | $0.39 | | Weighted average common shares outstanding, diluted (in thousands) | 31,456 | 31,524 | | Diluted earnings per common share | $0.45 | $0.39 | - Basic earnings per common share increased by **$0.07 (17.9%)** YoY, and diluted earnings per common share increased by **$0.06 (15.4%)** YoY[105](index=105&type=chunk) - The Company had **0.2 million** anti-dilutive shares as of March 31, 2022, compared to **0.4 million** in the prior year[104](index=104&type=chunk) [8. Employee Benefit Plans](index=32&type=section&id=8.%20EMPLOYEE%20BENEFIT%20PLANS) This note outlines the company's employee benefit plans, including stock options and restricted stock units, and associated compensation costs - The Company does not currently maintain an active stock option plan for new issuances; all outstanding options were fully vested as of January 1, 2021[108](index=108&type=chunk) - As of March 31, 2022, **783,880** stock options were outstanding and exercisable, with a weighted average exercise price of **$13.13** and an intrinsic value of **$3.794 million**[109](index=109&type=chunk) - During Q1 2022, the Company granted **152,795** restricted stock units (RSUs) to employees under the 2022 Equity Incentive Plan, comprising both time-vesting and performance-based units[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk) - Unrecognized compensation cost related to non-vested RSUs was **$4.4 million** as of March 31, 2022, expected to be recognized over **2.2 years**[116](index=116&type=chunk) [9. Fair Value of Financial Instruments](index=34&type=section&id=9.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) This note explains the fair value hierarchy and provides a breakdown of financial instruments by their fair value measurement levels - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable significant inputs)[121](index=121&type=chunk)[122](index=122&type=chunk) Fair Value of Financial Instruments (in thousands) | Financial Instrument | March 31, 2022 Fair Value (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | |:---|:---|:---|:---|:---| | Available for sale securities | $2,421,064 | $195 | $2,420,869 | $0 | | Held to maturity securities | $921,395 | $0 | $208,691 | $712,704 | | Loans held for sale | $2,490 | $0 | $0 | $2,490 | | Loans receivable, net | $3,316,115 | $0 | $0 | $3,316,115 | | Resell agreements | $180,150 | $0 | $0 | $180,150 | - A significant portion of held-to-maturity securities, loans held for sale, loans receivable, net, and resell agreements are valued using Level 3 inputs, indicating reliance on unobservable data and management's judgments[130](index=130&type=chunk) [10. Commitments, Contingencies and Off Balance Sheet Risk](index=37&type=section&id=10.%20COMMITMENTS,%20CONTINGENCIES%20AND%20OFF%20BALANCE%20SHEET%20RISK) This note details the company's off-balance-sheet commitments, including credit extensions, standby letters of credit, and related risk reserves Commitments, Contingencies and Off Balance Sheet Risk (in thousands) | Commitment Type | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | |:---|:---|:---| | Commitments to extend credit | $928,527 | $927,428 | | Standby letters of credit | $18,261 | $18,752 | | Total | $946,788 | $946,180 | - Total credit commitments, including commitments to extend credit and standby letters of credit, remained stable at approximately **$946.8 million** at March 31, 2022[136](index=136&type=chunk) - The Company had an estimated remaining commitment of **$132.6 million** for the purchase of PACE assessment securities until the end of 2022[135](index=135&type=chunk) - A reserve for credit risk inherent in off-balance-sheet commitments amounted to **$1.7 million** at March 31, 2022, up from **$1.5 million** at December 31, 2021[133](index=133&type=chunk) [11. Leases](index=38&type=section&id=11.%20LEASES) This note provides information on the company's operating lease costs, cash payments, and future lease payment maturities Operating Lease Metrics (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | |:---|:---|:---| | Operating lease cost | $2,251 | $2,237 | | Cash paid for operating leases liability | $2,630 | $2,514 | | Weighted average remaining lease term (in years) | 4.6 | 5.5 | | Weighted average discount rate | 3.25% | 3.27% | - Operating lease costs remained stable YoY, with a slight increase in cash paid for lease liabilities[141](index=141&type=chunk) - The weighted average remaining lease term decreased from **5.5 years** in Q1 2021 to **4.6 years** in Q1 2022[141](index=141&type=chunk) Undiscounted Operating Lease Payments (in thousands) | Maturity | Undiscounted Operating Lease Payments (in thousands) | |:---|:---| | 2022 remaining | $8,115 | | 2023 | $11,285 | | 2024 | $11,310 | | 2025 | $10,574 | | 2026 | $9,176 | | Thereafter | $955 | | Total Undiscounted Operating Lease Payments | $51,415 | | Less: present value adjustment | $3,532 | | Total Operating leases liability | $47,883 | [12. Goodwill and Intangible Assets](index=39&type=section&id=12.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note reports the carrying amount of goodwill and provides estimated amortization expenses for intangible assets - The carrying amount of goodwill remained at **$12.9 million** as of March 31, 2022, with no impairment identified in the annual test performed as of June 30, 2021[145](index=145&type=chunk) Estimated Amortization Expense (in thousands) | Year | Estimated Amortization Expense (in thousands) | |:---|:---| | 2022 | $785 | | 2023 | $888 | | 2024 | $730 | | 2025 | $574 | | 2026 | $419 | | Thereafter | $494 | | Total | $3,890 | - Accumulated amortization of the core deposit intangible asset was **$5.2 million** as of March 31, 2022[147](index=147&type=chunk) [13. Variable Interest Entities](index=40&type=section&id=13.%20VARIABLE%20INTEREST%20ENTITIES) This note describes the company's investments in unconsolidated solar generation facilities and its maximum exposure to loss from these entities - The Company invests in unconsolidated entities that construct, own, and operate solar generation facilities, generating returns through tax credits and operational distributions[149](index=149&type=chunk) - As of March 31, 2022, the Company's maximum exposure to loss from these investments was **$54.5 million**[149](index=149&type=chunk) Variable Interest Entities (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | |:---|:---|:---| | Tax credit investments included in equity investments | $1,872 | $1,681 | | Loans and letters of credit commitments | $52,654 | $52,813 | | Funded portion of loans and letters of credit commitments | $15,352 | $15,512 | | Tax credits and other tax benefits recognized (Q1) | $668 | $343 | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of Amalgamated Financial Corp.'s financial condition as of March 31, 2022, compared to December 31, 2021, and results of operations for the three months ended March 31, 2022, and 2021. It covers key financial metrics, recent developments including the terminated merger agreement, the ongoing impact of the COVID-19 pandemic, and discussions on critical accounting policies, net interest income, loan portfolio, non-interest income/expense, and capital resources [Holding Company Reorganization](index=41&type=section&id=Holding%20Company%20Reorganization) This section outlines the formation of Amalgamated Financial Corp. as the holding company for Amalgamated Bank - Amalgamated Financial Corp. was formed on August 25, 2020, and became the holding company for Amalgamated Bank on March 1, 2021, through a statutory share exchange[154](index=154&type=chunk) [General](index=41&type=section&id=General) This section specifies the reporting periods covered in the management's discussion and analysis - The discussion focuses on the consolidated financial condition as of March 31, 2022, compared to December 31, 2021, and results of operations for the three months ended March 31, 2022, and March 31, 2021[156](index=156&type=chunk) [Overview](index=41&type=section&id=Overview) This section provides a high-level summary of the company's financial position, trust business, and strategic focus on socially responsible clients - As of March 31, 2022, the Company reported total assets of **$7.7 billion**, total loans (net) of **$3.4 billion**, total deposits of **$7.0 billion**, and stockholders' equity of **$526.8 million**[158](index=158&type=chunk) - The trust business held **$39.7 billion** in assets under custody and **$15.1 billion** in assets under management[158](index=158&type=chunk) - The Company offers commercial and retail banking, investment management, and trust/custody services, targeting socially responsible, values-oriented clients like non-profits, labor unions, and political organizations[159](index=159&type=chunk)[160](index=160&type=chunk)[162](index=162&type=chunk) [Recent Developments](index=43&type=section&id=Recent%20Developments) This section highlights key recent events, including the termination of a merger agreement and a subordinated notes offering - The Merger Agreement to acquire Amalgamated Investments Company (AIC) and Amalgamated Bank of Chicago (ABOC) was terminated on March 15, 2022, due to an inability to obtain regulatory approval[163](index=163&type=chunk) - The Company completed a public offering of **$85.0 million** in 3.250% Fixed-to-Floating Rate subordinated notes due 2031 on November 8, 2021, for general business purposes[164](index=164&type=chunk) [Continued Impact of the COVID-19 Pandemic on Our Business](index=43&type=section&id=Continued%20impact%20of%20the%20COVID-19%20pandemic%20on%20our%20business) This section discusses the ongoing effects of the COVID-19 pandemic on the company's operations, loan portfolio, and economic outlook - The COVID-19 pandemic continues to disrupt the global economy, impacting the Company's clients, loan portfolio, and operations, with ongoing uncertainties regarding macro-economic effects like supply chain issues, inflation, and labor shortages[165](index=165&type=chunk) - The Company implemented payment deferral programs for customers, which were not considered troubled debt restructurings (TDRs) under CARES Act guidance for borrowers current before the pandemic[169](index=169&type=chunk) - As of March 31, 2022, no loans remained on COVID-19 related payment deferral programs[74](index=74&type=chunk) - Potential future impacts include increased allowance for loan losses, lower loan originations, and higher expenses due to talent turnover[170](index=170&type=chunk) [Critical and Significant Accounting Policies and Estimates](index=44&type=section&id=Critical%20and%20Significant%20Accounting%20Policies%20and%20Estimates) This section confirms the company's adherence to GAAP and the absence of significant changes to accounting policies since the last annual report - The Company's financial statements adhere to GAAP, and there have been no significant changes to critical accounting policies or estimates since the 2021 Annual Report[172](index=172&type=chunk) [Recent Accounting Pronouncements](index=44&type=section&id=Recent%20Accounting%20Pronouncements) This section outlines the company's plans for adopting new accounting standards, including CECL, and their expected impact - The Company will adopt ASU 2016-13, 'Financial Instruments – Credit Losses (Topic 326)' (CECL model), on January 1, 2023, utilizing the extended transition period for emerging growth companies[173](index=173&type=chunk)[174](index=174&type=chunk) - Management is evaluating the quantitative and qualitative effects of CECL and does not currently expect a material impact on operating results or financial condition, despite it being a significant departure from current GAAP[175](index=175&type=chunk)[176](index=176&type=chunk) - The adoption of ASU 2021-01, 'Reference Rate Reform (Topic 848): Scope,' is not expected to have a material impact due to the limited exposure to LIBOR-tied securities and commercial loans[177](index=177&type=chunk) [Results of Operations](index=45&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including net income, interest income, and non-interest income and expenses [General](index=45&type=section&id=General%20(within%20Results%20of%20Operations)) This section provides an overview of the company's net income and the primary drivers of its year-over-year change - Net income for Q1 2022 was **$14.2 million** (**$0.45** diluted EPS), an increase from **$12.2 million** (**$0.39** diluted EPS) in Q1 2021[179](index=179&type=chunk) - The **$2.0 million** increase in net income was primarily driven by a **$7.1 million** increase in total interest and dividend income (mainly from securities), partially offset by a **$2.3 million** provision for loan loss (compared to a **$3.3 million** recovery in Q1 2021) and a **$1.6 million** increase in non-interest expense[179](index=179&type=chunk) [Net Interest Income](index=47&type=section&id=Net%20Interest%20Income) This section analyzes the company's net interest income, spread, and margin, highlighting the impact of earning assets and interest-bearing liabilities Net Interest Income and Margin | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (YoY) | |:---|:---|:---|:---| | Net Interest Income | $48.4 million | $41.8 million | +$6.6 million | | Net Interest Spread | 2.61% | 2.73% | -12 bps | | Net Interest Margin | 2.76% | 2.85% | -9 bps | | Yield on Average Earning Assets | 2.88% | 2.96% | -8 bps | | Average Rate on Interest-Bearing Liabilities | 0.27% | 0.23% | +4 bps | | Total Cost of Deposits | 0.09% | 0.11% | -2 bps | - Net interest income increased by **$6.6 million (15.8%)** YoY, primarily due to higher income on securities[184](index=184&type=chunk) - Net interest spread decreased by **12 basis points** to **2.61%**, and net interest margin decreased by **9 basis points** to **2.76%** YoY[185](index=185&type=chunk) - The yield on average earning assets decreased by **8 basis points** to **2.88%**, attributed to deploying strong deposit growth into investment securities at a higher pace than loans[185](index=185&type=chunk) [Rate-Volume Analysis](index=50&type=section&id=Rate-Volume%20Analysis) This section breaks down changes in net interest income into components attributable to volume and rate fluctuations Rate-Volume Analysis (in thousands) | Category | Change Due to Volume (in thousands) | Change Due to Rate (in thousands) | Net Change (in thousands) | |:---|:---|:---|:---| | Total Interest Income | $6,094 | $950 | $7,044 | | Total Interest Expense | $782 | $(262) | $520 | | Change in Net Interest Income | $5,312 | $1,212 | $6,524 | - The increase in net interest income was primarily driven by volume changes (**$5.312 million**) rather than rate changes (**$1.212 million**)[188](index=188&type=chunk) - Securities and FHLB stock contributed the most to interest income growth due to volume (**$6.025 million**)[188](index=188&type=chunk) - Other borrowings significantly increased interest expense due to volume (**$691 thousand**), reflecting the issuance of subordinated debt[188](index=188&type=chunk) [Provision for Loan Losses](index=50&type=section&id=Provision%20for%20Loan%20Losses) This section details the provision for loan losses, explaining the shift from a recovery to an expense due to loan growth and charge-offs - The Company recorded a provision for loan losses of **$2.3 million** in Q1 2022, a significant shift from a **$3.3 million** recovery in Q1 2021[191](index=191&type=chunk) - This expense was primarily driven by higher loan balances and a **$0.4 million** charge-off related to a loan transferred to held for sale, partially offset by improved credit quality[191](index=191&type=chunk) [Non-Interest Income](index=51&type=section&id=Non-Interest%20Income) This section analyzes the components of non-interest income, highlighting significant changes from equity method investments and loan sales Non-Interest Income (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (YoY) | |:---|:---|:---|:---| | Trust Department fees | $3,491 | $3,827 | $(336) | | Service charges on deposit accounts | $2,447 | $2,178 | +$269 | | Bank-owned life insurance | $814 | $788 | +$26 | | Gain (loss) on sale of investment securities | $162 | $21 | +$141 | | Gain (loss) on sale of loans, net | $(157) | $707 | $(864) | | Equity method investments | $432 | $(3,682) | +$4,114 | | Other income | $233 | $161 | +$72 | | Total Non-Interest Income | $7,422 | $4,000 | +$3,422 | - Total non-interest income increased by **$3.4 million (85.6%)** YoY, primarily due to a **$4.1 million** swing from a loss to a gain in equity method investments (solar initiatives)[193](index=193&type=chunk) - This increase was partially offset by an **$0.9 million** decrease in gain on sale of loans, shifting from a gain in 2021 to a loss in 2022[193](index=193&type=chunk) - Trust Department fees decreased by **$0.3 million (8.8%)** YoY, mainly due to the run-off of the ULTRA real estate fund[194](index=194&type=chunk) [Non-Interest Expense](index=51&type=section&id=Non-Interest%20Expense) This section examines the changes in non-interest expenses, particularly the increase in data processing costs and decrease in professional fees Non-Interest Expense (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (YoY) | |:---|:---|:---|:---| | Compensation and employee benefits, net | $17,669 | $18,039 | $(370) | | Occupancy and depreciation | $3,440 | $3,501 | $(61) | | Professional fees | $2,815 | $3,661 | $(846) | | Data processing | $5,184 | $3,005 | +$2,179 | | Office maintenance and depreciation | $725 | $655 | +$70 | | Amortization of intangible assets | $262 | $302 | $(40) | | Advertising and promotion | $854 | $597 | +$257 | | Other | $3,448 | $3,033 | +$415 | | Total Non-Interest Expense | $34,397 | $32,793 | +$1,604 | - Total non-interest expense increased by **$1.6 million (4.9%)** YoY, primarily driven by a **$2.2 million** increase in data processing expenses related to Trust Department modernization[197](index=197&type=chunk) - This increase was partially offset by an **$0.8 million** decrease in professional fees[197](index=197&type=chunk) [Income Taxes](index=52&type=section&id=Income%20Taxes) This section reports the company's income tax expense and effective tax rate for the periods presented Income Taxes (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | |:---|:---|:---| | Provision for income tax expense | $4,935 | $4,123 | | Effective tax rate | 25.8% | 25.4% | - Income tax expense increased by **$0.8 million (19.7%)** YoY, with the effective tax rate slightly rising from **25.4%** to **25.8%**[198](index=198&type=chunk) [Financial Condition](index=52&type=section&id=Financial%20Condition) This section provides an in-depth analysis of the company's balance sheet, including assets, liabilities, and equity, and their changes over time [Balance Sheet](index=52&type=section&id=Balance%20Sheet) This section summarizes the key changes in the company's total assets, cash, investment securities, and net loans receivable - Total assets increased by **$0.6 billion** to **$7.7 billion** at March 31, 2022, from **$7.1 billion** at December 31, 2021[199](index=199&type=chunk) - This growth was primarily driven by a **$43.6 million** increase in cash and cash equivalents, a **$410.4 million** increase in investment securities (including **$96.2 million** from PACE assessments), and a **$158.0 million** increase in net loans receivable[199](index=199&type=chunk) [Investment Securities](index=52&type=section&id=Investment%20Securities) This section details the company's investment securities portfolio, its objectives, and changes in available-for-sale and held-to-maturity categories - The securities portfolio aims to provide liquidity, efficient investment return, manage interest rate risk, meet CRA goals, and offer collateral[200](index=200&type=chunk) - Available-for-sale securities increased by **$307.7 million** to **$2.4 billion** at March 31, 2022, primarily from purchases of asset-backed securities (ABS) and mortgage-related securities[202](index=202&type=chunk) - Held-to-maturity securities increased to **$946.3 million** at March 31, 2022, from **$843.6 million** at December 31, 2021, primarily consisting of PACE bonds, tax-exempt municipal securities, and ABS[203](index=203&type=chunk) - At March 31, 2022, **$3.1 billion** of investment securities had unrealized losses, but management determined the decline in value to be temporary, expecting full recovery by maturity[204](index=204&type=chunk) [Loans](index=56&type=section&id=Loans) This section reports the total loan portfolio, net of deferred origination fees and allowance for loan losses, and details recent loan purchases - Total loans, net of deferred origination fees and allowance for loan losses, increased to **$3.4 billion** at March 31, 2022, from **$3.3 billion** at December 31, 2021[213](index=213&type=chunk) - In Q1 2022, the Company purchased **$3.0 million** in commercial solar loans, **$28.4 million** in residential loans, **$20.0 million** in home improvement loans, **$90.7 million** in consumer solar loans, and **$20.0 million** in government-guaranteed commercial loans[213](index=213&type=chunk) [Commercial Loan Portfolio](index=56&type=section&id=Commercial%20loan%20portfolio) This section provides a detailed breakdown of the commercial loan portfolio by category and its proportion of total loans Commercial Loan Portfolio (in thousands) | Loan Type | March 31, 2022 Amount (in thousands) | % of Total Loans (Mar 31, 2022) | December 31, 2021 Amount (in thousands) | % of Total Loans (Dec 31, 2021) | |:---|:---|:---|:---|:---| | Commercial and industrial | $724,177 | 20.9% | $729,385 | 22.0% | | Multifamily | $813,702 | 23.5% | $821,801 | 24.8% | | Commercial real estate | $354,174 | 10.2% | $369,429 | 11.2% | | Construction and land development | $40,242 | 1.2% | $31,539 | 1.0% | | Total Commercial Portfolio | $1,932,295 | 55.8% | $1,952,154 | 59.0% | - The commercial loan portfolio decreased from **59.0%** to **55.8%** of total loans between December 31, 2021, and March 31, 2022[215](index=215&type=chunk) - C&I loans decreased by **0.7%** to **$724.2 million**, multifamily loans decreased by **1.0%** to **$813.7 million**, and CRE loans decreased by **4.1%** to **$354.2 million** during Q1 2022[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) [Retail Loan Portfolio](index=57&type=section&id=Retail%20loan%20portfolio) This section details the composition of the retail loan portfolio and its growth as a percentage of total loans Retail Loan Portfolio (in thousands) | Loan Type | March 31, 2022 Amount (in thousands) | % of Total Loans (Mar 31, 2022) | December 31, 2021 Amount (in thousands) | % of Total Loans (Dec 31, 2021) | |:---|:---|:---|:---|:---| | Residential real estate lending | $1,143,175 | 33.0% | $1,063,682 | 32.2% | | Consumer and other | $389,452 | 11.2% | $291,818 | 8.8% | | Total Retail Portfolio | $1,532,627 | 44.2% | $1,355,500 | 41.0% | - The retail loan portfolio increased from **41.0%** to **44.2%** of total loans between December 31, 2021, and March 31, 2022[219](index=219&type=chunk) - Residential real estate lending increased by **7.5%** to **$1.14 billion**, and consumer and other loans increased by **33.5%** to **$389.5 million** during Q1 2022[220](index=220&type=chunk)[221](index=221&type=chunk) [Maturities and Sensitivity of Loans to Changes in Interest Rates](index=57&type=section&id=Maturities%20and%20Sensitivity%20of%20Loans%20to%20Changes%20in%20Interest%20Rates) This section analyzes the maturity profile of the loan portfolio and its sensitivity to interest rate changes, distinguishing between fixed and floating rates Loan Maturities (in thousands) | Maturity Period | Total Loans (in thousands) | |:---|:---| | One year or less | $323,510 | | After one but within five years | $877,554 | | After 5 years | $2,263,858 | | Total Loans (March 31, 2022) | $3,464,922 | - A significant portion of the loan portfolio, **$2.26 billion (65.3%)**, matures after five years, indicating a long-term asset profile[225](index=225&type=chunk) Loan Interest Rate Type by Maturity (in thousands) | Interest Rate Type | After one but within five years (in thousands) | After 5 years (in thousands) | Total (in thousands) | |:---|:---|:---|:---| | Fixed interest rates | $692,877 | $1,682,778 | $2,375,655 | | Floating or adjustable interest rates | $184,677 | $581,080 | $765,757 | | Total Loans (March 31, 2022) | $877,554 | $2,263,858 | $3,141,412 | - Fixed-rate loans constitute a larger portion (**$2.38 billion**) of loans maturing after one year compared to floating/adjustable rate loans (**$0.77 billion**)[226](index=226&type=chunk) [Allowance for Loan Losses](index=58&type=section&id=Allowance%20for%20Loan%20Losses) This section details the changes in the allowance for loan losses, including charge-offs, recoveries, and the provision for loan losses - The allowance for loan losses increased by **$1.6 million** to **$37.5 million** at March 31, 2022, from **$35.9 million** at December 31, 2021, primarily due to an increase in loan balances[234](index=234&type=chunk) - The ratio of allowance to total loans remained stable at **1.08%** for both March 31, 2022, and December 31, 2021[234](index=234&type=chunk) Allowance for Loan Losses Activity (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | |:---|:---|:---| | Balance at beginning of period | $35,866 | $41,589 | | Total loan charge-offs | $1,323 | $2,389 | | Total loan recoveries | $706 | $723 | | Net (recoveries) charge-offs | $617 | $1,666 | | Provision for (recovery of) loan losses | $2,293 | $(3,261) | | Balance at end of period | $37,542 | $36,662 | [Allocation of Allowance for Loan Losses](index=61&type=section&id=Allocation%20of%20Allowance%20for%20Loan%20Losses) This section presents the distribution of the allowance for loan losses across different loan categories Allocation of Allowance for Loan Losses (in thousands) | Loan Category | March 31, 2022 Allowance (in thousands) | % of Total Loans (Mar 31, 2022) | December 31, 2021 Allowance (in thousands) | % of Total Loans (Dec 31, 2021) | |:---|:---|:---|:---|:---| | Commercial and industrial | $12,169 | 20.9% | $10,652 | 22.0% | | Multifamily | $4,232 | 23.5% | $4,760 | 24.8% | | Commercial real estate | $6,840 | 10.2% | $7,273 | 11.2% | | Construction and land development | $654 | 1.2% | $405 | 1.0% | | Residential real estate lending | $9,336 | 33.0% | $9,008 | 32.2% | | Consumer and other | $4,311 | 11.2% | $3,768 | 8.8% | | Total Allowance for Loan Losses | $37,542 | | $35,866 | | - The allocation of allowance for loan losses increased for commercial and industrial, construction and land development, residential real estate lending, and consumer and other categories, while decreasing for multifamily and commercial real estate[237](index=237&type=chunk) [Nonperforming Assets](index=61&type=section&id=Nonperforming%20Assets) This section reports the total nonperforming assets, including nonaccrual and troubled debt restructured loans, and their ratio to total assets Nonperforming Assets (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | |:---|:---|:---| | Total Nonperforming Assets | $61,057 | $54,586 | | Nonaccrual loans | $28,942 | $28,219 | | Troubled debt restructured loans - nonaccrual | $18,107 | $13,497 | | Troubled debt restructured loans - accruing | $29,259 | $24,997 | | Nonperforming assets to total assets | 0.80% | 0.77% | | Allowance for loan losses to nonaccrual loans | 129.71% | 127.10% | - Total nonperforming assets increased by **$6.5 million (11.8%)** to **$61.1 million** at March 31, 2022, primarily due to a new multi-loan troubled debt restructuring of **$10.5 million**[243](index=243&type=chunk) - The ratio of nonperforming assets to total assets slightly increased from **0.77%** to **0.80%**[243](index=243&type=chunk) - Potential problem loans (special mention and substandard-accruing commercial loans, and 30-89 days past due loans) totaled **$164.6 million** at March 31, 2022[244](index=244&type=chunk) [Resell Agreements](index=62&type=section&id=Resell%20Agreements) This section details the company's resell agreements, their outstanding amounts, and weighted average interest rates - Resell agreements, backed by government-guaranteed loans, decreased to **$180.2 million** at March 31, 2022, from **$229.0 million** at December 31, 2021[245](index=245&type=chunk) - The weighted average interest rate on these agreements increased from **1.21%** to **1.39%** over the same period[245](index=245&type=chunk) [Deferred Tax Asset](index=63&type=section&id=Deferred%20Tax%20Asset) This section reports the net deferred tax asset and management's assessment of its realizability - The net deferred tax asset increased to **$46.1 million** at March 31, 2022, from **$26.7 million** at December 31, 2021[247](index=247&type=chunk) - Management concluded that the entire amount of the deferred tax asset was fully realizable with no valuation allowance[247](index=247&type=chunk) [Deposits](index=63&type=section&id=Deposits) This section discusses the growth in total deposits, including political deposits, and the maturity profile of time deposits - Total deposits increased to **$7.0 billion** at March 31, 2022, from **$6.4 billion** at December 31, 2021, driven by relationship-based banking and a mission-based strategy[248](index=248&type=chunk) - Political deposits, which exhibit seasonality, increased to approximately **$1.1 billion** at March 31, 2022, from **$989.6 million** at December 31, 2021[249](index=249&type=chunk) Time Deposit Maturities (in thousands) | Maturity | March 31, 2022 (in thousands) | |:---|:---| | Within three months | $45,823 | | After three but within six months | $46,023 | | After six months but within twelve months | $26,706 | | After twelve months | $10,337 | | Total | $128,889 | [Evaluation of Interest Rate Risk](index=63&type=section&id=Evaluation%20of%20Interest%20Rate%20Risk) This section describes the company's approach to assessing interest rate risk using simulation models for net interest income and economic value of equity - The Company uses simulation models to assess potential changes to net interest income (NII) and economic value of equity (EVE) under hypothetical rising and declining interest rate scenarios[252](index=252&type=chunk)[253](index=253&type=chunk) Interest Rate Sensitivity Analysis | Immediate Shift | Estimated Increase (Decrease) in EVE (%) | Estimated Increase (Decrease) in EVE ($ in thousands) | Estimated Increase (Decrease) in Year 1 NII (%) | Estimated Increase (Decrease) in Year 1 NII ($ in thousands) | |:---|:---|:---|:---|:---| | +400 basis points | -3.9% | $(53,232) | 19.9% | $48,743 | | +300 basis points | 1.6% | $21,971 | 19.3% | $47,213 | | +200 basis points | 4.8% | $64,207 | 15.9% | $38,806 | | +100 basis points | 4.4% | $59,422 | 8.7% | $21,260 | | -100 basis points | -10.7% | $(143,837) | -10.0% | $(24,359) | - A **100 basis point** increase in interest rates is estimated to increase Year 1 Net Interest Income by **8.7% ($21.26 million)** and Economic Value of Equity by **4.4% ($59.42 million)**[256](index=256&type=chunk) - A **100 basis point** decrease in interest rates is estimated to decrease Year 1 Net Interest Income by **10.0% ($24.36 million)** and Economic Value of Equity by **10.7% ($143.84 million)**[256](index=256&type=chunk) [Liquidity](index=64&type=section&id=Liquidity) This section outlines the company's liquidity management strategy, including liquid assets, liabilities, and access to funding sources - Liquidity is managed through liquid assets, liabilities, and access to alternative funding sources, with customer deposits being the primary source of funds[257](index=257&type=chunk)[258](index=258&type=chunk)[260](index=260&type=chunk) - Cash and equivalents increased to **$374.0 million (4.9% of total assets)** at March 31, 2022, from **$330.5 million (4.7% of total assets)** at December 31, 2021[259](index=259&type=chunk) - Available-for-sale securities were **$2.4 billion (31.6% of total assets)** at March 31, 2022, up from **$2.1 billion (29.9% of total assets)** at December 31, 2021[259](index=259&type=chunk) - The Company had no FHLB advances and a remaining credit availability of **$1.5 billion** at March 31, 2022, along with **$69.6 million** in borrowing capacity at the Federal Reserve's discount window[260](index=260&type=chunk) [Capital Resources](index=65&type=section&id=Capital%20Resources) This section details the company's capital resources, including stockholders' equity and regulatory capital ratios - Total stockholders' equity decreased by **$37.1 million** to **$526.8 million** at March 31, 2022, from **$563.9 million** at December 31, 2021, mainly due to a **$46.3 million** decrease in accumulated other comprehensive income[261](index=261&type=chunk) Capital Ratios | Capital Ratio | March 31, 2022 (Consolidated) | December 31, 2021 (Consolidated) | Minimum for Capital Adequacy | Minimum for Well Capitalized | |:---|:---|:---|:---|:---| | Total capital to risk weighted assets | 15.16% | 15.95% | 8.00% | 10.00% | | Tier 1 capital to risk weighted assets | 12.36% | 12.98% | 6.00% | 8.00% | | Tier 1 capital to average assets | 7.34% | 7.62% | 4.00% | 5.00% | | Common equity tier 1 to risk weighted assets | 12.36% | 12.98% | 4.50% | 6.50% | - As of March 31, 2022, both the Company and the Bank were categorized as 'well capitalized' under prompt corrective action measures and met capital conservation buffer requirements[266](index=266&type=chunk) [Contractual Obligations](index=66&type=section&id=Contractual%20Obligations) This section outlines the company's contractual obligations, including subordinated debt, operating leases, purchase obligations, and certificates of deposit, by maturity Contractual Obligations (in thousands) | Obligation Type | Total (in thousands) | Less than 1 year (in thousands) | 1-3 years (in thousands) | 3-5 years (in thousands) | More than 5 years (in thousands) | |:---|:---|:---|:---|:---|:---| | Subordinated Debt | $83,870 | $0 | $0 | $0 | $83,870 | | Operating Leases | $51,415 | $8,115 | $22,595 | $19,750 | $955 | | Purchase Obligations | $30,169 | $4,612 | $9,224 | $7,883 | $8,450 | | Certificates of Deposit | $199,120 | $152,279 | $40,769 | $6,004 | $68 | | Total (March 31, 2022) | $364,574 | $165,006 | $72,588 | $33,637 | $93,343 | - The majority of subordinated debt (**$83.87 million**) matures in more than 5 years, while most certificates of deposit (**$152.28 million**) mature within one year[267](index=267&type=chunk) [Investment Obligations](index=67&type=section&id=Investment%20Obligations) This section describes the company's remaining commitment for PACE assessment securities and its funding strategy - The Company has an estimated remaining commitment of **$132.6 million** for the purchase of PACE assessment securities until the end of 2022, to be held in its held-to-maturity portfolio[270](index=270&type=chunk) - These commitments are anticipated to be funded through normal cash flows, reductions in cash and cash equivalents, or pay-downs and maturities of other investments[270](index=270&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=68&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes in the Company's market risk as of March 31, 2022, compared to the 2021 Annual Report, and refers to the 'Evaluation of Interest Rate Risk' table in the MD&A for details - No material changes in market risk were reported as of March 31, 2022, compared to the 2021 Annual Report[272](index=272&type=chunk) - Interest rate sensitivity position details are incorporated by reference from the 'Evaluation of Interest Rate Risk' table in the Management's Discussion and Analysis[272](index=272&type=chunk) [ITEM 4. Controls and Procedures](index=68&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures as of March 31, 2022, and reports no material changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of March 31, 2022[273](index=273&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2022[274](index=274&type=chunk) [PART II - OTHER INFORMATION](index=69&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits [ITEM 1. Legal Proceedings](index=69&type=section&id=ITEM%201.%20Legal%20Proceedings) This section states that the Company is involved in various legal proceedings in the ordinary course of business, but management believes that any aggregate liabilities from such actions would not have a material adverse effect on its consolidated financial position or results of operations - The Company is subject to pending and threatened legal proceedings arising from the ordinary course of business[276](index=276&type=chunk) - Management, in consultation with legal counsel, believes that the aggregate liabilities from these actions would not materially adversely affect the Company's financial position or results of operations[276](index=276&type=chunk) [ITEM 1A. Risk Factors](index=69&type=section&id=ITEM%201A.%20Risk%20Factors) This section supplements the risk factors from the 2021 Annual Report, specifically highlighting the potential adverse effects of the recently terminated Merger Agreement with AIC and ABOC on the Company's business, results of operations, and financial condition - The termination of the Merger Agreement with AIC and ABOC due to inability to obtain regulatory approval could materially and adversely affect the Company[277](index=277&type=chunk)[278](index=278&type=chunk) - Potential adverse effects include litigation, negative media attention, negative reactions from financial markets (stock price decline), and negative reactions from customers and personnel[278](index=278&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=70&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's common stock repurchases during the first quarter of 2022, including the number of shares purchased and the remaining authorization under its share repurchase program Common Stock Repurchases | Period | Total Number of Shares Purchased | Average Price Per Share | |:---|:---|:---| | February 1 through February 29, 2022 | 34,016 | $16.87 | | March 1 through March 31, 2022 | 140,576 | $17.33 | | Total (Q1 2022) | 167,572 | $17.26 | - The Company repurchased **167,572** shares of common stock during the first quarter of 2022 at an average price of **$17.26** per share[282](index=282&type=chunk) - Effective February 25, 2022, the Board of Directors approved an increase to the share repurchase program, authorizing up to **$40 million** of outstanding common stock, with **$2.9 million** purchased in Q1 2022[283](index=283&type=chunk) [ITEM 6. Exhibits](index=71&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Merger Agreement and its termination, organizational documents, certifications, and interactive data files - Exhibit 2.1 references the Agreement and Plan of Merger dated September 21, 2021[285](index=285&type=chunk) - Exhibit 2.2 references the Termination of a Material Definitive Agreement with Amalgamated Investments Company[286](index=286&type=chunk) - Includes certifications from the Chief Executive Officer and Chief Financial Officer (Rule 13a-14(a)) and Section 1350 Certifications[290](index=290&type=chunk)[291](index=291&type=chunk) [Signatures](index=72&type=section&id=Signatures) This section contains the signatures of the Company's principal executive officer, principal financial officer, and principal accounting officer, certifying the filing of the report - The report is signed by Priscilla Sims Brown (President and CEO), Jason Darby (CFO), and Frank DeMaria (Chief Accounting Officer) on May 6, 2022[295](index=295&type=chunk)

Financial Data and Key Metrics Changes - Net income for Q1 2022 was $14.2 million or $0.45 per diluted share, down from $15.9 million or $0.50 per diluted share in Q4 2021, but up from $12.2 million or $0.39 per diluted share in Q1 2021 [12] - Net interest income increased by 2.8%, reflecting the earnings power of the asset-sensitive balance sheet [8] - Non-interest income for Q1 2022 was $7.4 million, down from $12.4 million in the previous quarter [18] Business Line Data and Key Metrics Changes - Net loan growth was 4.8% excluding pace assessments and 6.5% including pace assessments, indicating solid momentum in core loan growth [7] - Deposits increased by 9.7% to $7 billion from the previous quarter, with political deposits rising to $1.1 billion [8][15] - Loans totaled $3.4 billion, an increase of $158 million compared to the end of Q4 2021, driven by residential and consumer loans [16] Market Data and Key Metrics Changes - Non-interest-bearing deposits represented 53% of average deposits, contributing to a stable average cost of deposits at 9 basis points [15] - The yield on total loans was 3.85%, a slight decrease from 4.01% in Q4 2021 [17] - The net interest margin was 2.76%, down from 2.77% in the previous quarter [18] Company Strategy and Development Direction - The company is focused on a "growth-for-good" strategy, emphasizing organic loan growth and expanding its lending platform [6][9] - The strategic plan includes enhancing customer insights and efficiency while maintaining a commitment to environmental and social responsibility [10][11] - The company aims to achieve high-single-digit loan growth and improve efficiency ratios, targeting around 65% [31][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in loan growth prospects, particularly in residential and consumer segments, while being cautious about commercial growth [26][28] - The rising interest rate environment is expected to benefit net interest income, with guidance for core pre-tax, pre-provision earnings of $97 million to $105 million for 2022 [24][25] - Management remains focused on maintaining strong asset quality while pursuing organic growth opportunities [67] Other Important Information - The company repurchased $2.8 million of common stock under its $40 million share repurchase program and maintained its dividend at $0.08 per share [21] - Non-performing assets totaled $61.1 million, representing 0.80% of total assets, with an increase in non-performing assets attributed to a multi-loan troubled debt restructuring [20] Q&A Session Summary Question: Clarity on loan growth outlook and targets - Management indicated strong prospects for loan growth, with residential and consumer loans being key drivers, while commercial growth is expected to improve as new bankers come online [26][27] Question: Differences between PACE loans and consumer solar loans - PACE loans are tied to tax positions for repayment, while consumer solar loans are more akin to unsecured loans [29][30] Question: Efficiency ratio and expense initiatives - Management confirmed a disciplined approach to expenses, indicating that increased revenues from rising rates will not lead to proportional increases in spending [31][32] Question: New banker hires and areas of focus - Six new bankers were hired, focusing on various areas including CDFI and climate-related expertise [38][40] Question: Update on the ABOC deal and regulatory expenses - Management stated that no additional regulatory expenses are anticipated beyond what was already planned, despite the withdrawal of the ABOC deal [65][66] Question: Deposit growth expectations amid Fed's QT - Management expressed confidence in the stickiness of deposits, suggesting that the bank is somewhat insulated from typical runoff risks [72][74]