[Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section outlines the nature of forward-looking statements within the report, emphasizing that they are not guarantees of future performance and are subject to various risks, uncertainties, and assumptions [Forward-Looking Statements and Risks](index=3&type=section&id=Forward-Looking%20Statements%20and%20Risks) This section outlines the nature of forward-looking statements within the report, emphasizing that they are not guarantees of future performance and are subject to various risks, uncertainties, and assumptions - Forward-looking statements are not historical facts or assurances of future performance and are identified by terms like 'may,' 'will,' 'anticipate,' 'expect,' and 'estimate'[6](index=6&type=chunk) - Key potential risks include uncertain conditions in the banking industry and economies, increased credit losses, deposit outflows, unfavorable capital markets, interest rate fluctuations, fiscal challenges facing the U.S. government, changes in real estate collateral values, regulatory changes, and operational/security breaches[7](index=7&type=chunk) - Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of their date, and the Company disclaims any obligation to update them, except as required by law[9](index=9&type=chunk) [ITEM 1. Financial Statements (unaudited)](index=5&type=section&id=ITEM%201.%20Financial%20Statements%20(unaudited)) This section presents the Company's unaudited consolidated financial statements, including statements of financial condition, income, comprehensive income, changes in stockholders' equity, and cash flows, along with detailed notes [Consolidated Statements of Financial Condition](index=5&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) The Consolidated Statements of Financial Condition provide a snapshot of the Company's assets, liabilities, and stockholders' equity as of June 30, 2023, compared to December 31, 2022, showing a slight decrease in total assets but an increase in total stockholders' equity Consolidated Statements of Financial Condition (Amounts in thousands) | Metric | June 30, 2023 | December 31, 2022 | |:---|:---|:---| | Total Assets | $7,792,812 | $7,843,124 | | Total Liabilities | $7,264,198 | $7,334,169 | | Total Stockholders' Equity | $528,614 | $508,955 | | Deposits | $6,894,651 | $6,595,037 | | Loans receivable, net | $4,184,307 | $4,060,971 | | Allowance for credit losses | $(67,431) | $(45,031) | | Securities Available for Sale | $1,580,248 | $1,812,476 | | Securities Held-to-Maturity | $1,654,531 | $1,541,301 | | FHLBNY advances | $— | $580,000 | | Other borrowings | $230,000 | $— | - Total assets decreased by **$50.3 million** from December 31, 2022, to June 30, 2023[11](index=11&type=chunk) - Total stockholders' equity increased by **$19.6 million**, primarily due to net income and an improvement in accumulated other comprehensive loss[11](index=11&type=chunk) [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) The Consolidated Statements of Income present the Company's financial performance for the three and six months ended June 30, 2023 and 2022, showing an increase in net income driven by higher interest income, partially offset by increased interest expense and provision for credit losses Consolidated Statements of Income (Amounts in thousands, except per share) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Total interest and dividend income | $85,922 | $58,669 | $170,857 | $109,130 | | Total interest expense | $22,937 | $2,171 | $40,593 | $4,264 | | Net interest income | $62,985 | $56,498 | $130,264 | $104,866 | | Provision for credit losses | $3,940 | $2,912 | $8,899 | $5,205 | | Total non-interest income | $7,944 | $7,246 | $13,150 | $14,668 | | Total non-interest expense | $37,529 | $34,346 | $76,156 | $68,743 | | Income before income taxes | $29,460 | $26,486 | $58,359 | $45,586 | | Income tax expense | $7,818 | $6,873 | $15,383 | $11,808 | | Net income | $21,642 | $19,613 | $42,976 | $33,778 | | Earnings per common share - basic | $0.71 | $0.64 | $1.40 | $1.09 | | Earnings per common share - diluted | $0.70 | $0.63 | $1.39 | $1.08 | - Net income increased by **$2.0 million (10.3%)** for the three months ended June 30, 2023, compared to the same period in 2022[13](index=13&type=chunk) - Net interest income increased by **$6.5 million (11.5%)** for the three months ended June 30, 2023, primarily due to higher yields and average balances on interest-earning assets[13](index=13&type=chunk) [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The Consolidated Statements of Comprehensive Income detail the net income adjusted for other comprehensive income (loss) items, primarily unrealized gains and losses on available-for-sale securities, showing a significant improvement in total comprehensive income for the six months ended June 30, 2023, compared to the prior year Consolidated Statements of Comprehensive Income (Amounts in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Net income | $21,642 | $19,613 | $42,976 | $33,778 | | Net unrealized gains (losses) on securities | $(10,948) | $(51,543) | $4,725 | $(115,412) | | Total other comprehensive income (loss), net of taxes | $(7,897) | $(37,322) | $3,493 | $(83,577) | | Total comprehensive income (loss), net of taxes | $13,745 | $(17,709) | $46,469 | $(49,799) | - Total comprehensive income significantly improved from a loss of **$49.8 million** in the six months ended June 30, 2022, to a gain of **$46.5 million** in the same period of 2023, largely due to a positive change in net unrealized gains on securities[15](index=15&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement details the changes in each component of stockholders' equity for the three and six months ended June 30, 2023 and 2022, reflecting the impact of net income, stock repurchases, dividends, and the adoption of new accounting standards Key Changes in Stockholders' Equity (Amounts in thousands) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|\ | Balance at January 1 | $508,955 | $563,875 | | Cumulative effect of adoption of ASU No. 2016-13 | $(17,825) | — | | Net income | $42,976 | $33,778 | | Repurchase of common stock | $(4,582) | $(11,733) | | Dividends declared on common stock | $(6,222) | $(4,957) | | Other comprehensive income (loss), net of taxes | $3,493 | $(83,577) | | Balance at June 30 | $528,614 | $498,041 | - The adoption of ASU No. 2016-13 resulted in a **$17.8 million** decrease in retained earnings as of January 1, 2023[19](index=19&type=chunk) - Total stockholders' equity increased by **$19.7 million** from December 31, 2022, to June 30, 2023, primarily due to net income and other comprehensive income, partially offset by dividends and stock repurchases[19](index=19&type=chunk)[300](index=300&type=chunk) [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows present the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022, highlighting significant shifts in investment and financing strategies Consolidated Statements of Cash Flows (Amounts in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|\ | Net cash provided by operating activities | $62,113 | $68,093 | | Net cash provided by (used in) investing activities | $4,893 | $(983,571) | | Net cash provided by (used in) financing activities | $(64,831) | $917,531 | | Increase in cash, cash equivalents, and restricted cash | $2,175 | $2,053 | | Cash, cash equivalents, and restricted cash at end period | $65,715 | $332,538 | - Net cash provided by investing activities significantly improved from a net outflow of **$983.6 million** in 2022 to a net inflow of **$4.9 million** in 2023, driven by changes in securities purchases/sales and loan activities[26](index=26&type=chunk) - Net cash used in financing activities in 2023 (**$64.8 million outflow**) contrasts sharply with a net inflow in 2022 (**$917.5 million**), primarily due to a **$580.0 million** decrease in FHLBNY advances and subordinated debt repurchases[26](index=26&type=chunk)[28](index=28&type=chunk) [Notes to Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the amounts presented in the consolidated financial statements, covering significant accounting policies, financial instrument details, and other commitments [1. BASIS OF PRESENTATION AND CONSOLIDATION](index=14&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20AND%20CONSOLIDATION) This note details the basis of accounting, significant accounting policies, and recent accounting standard adoptions, particularly focusing on ASU No. 2016-13 (CECL) and ASU 2022-02, and their impact on the Company's financial statements - The Company adopted ASU No. 2016-13 (CECL) on January 1, 2023, replacing the incurred loss methodology with an expected credit loss model[31](index=31&type=chunk) Impact of ASU 2016-13 Adoption (Day 1 Adjustment, in thousands) | Asset/Liability | Gross Adjustment | Tax Impact | Net Adjustment to Retained Earnings | |:---|:---|:---|:---|\ | Allowance for credit losses on held-to-maturity securities | $668 | $(184) | $484 | | Allowance for credit losses on loans | $21,229 | $(5,849) | $15,380 | | Allowance for credit losses on off-balance sheet credit exposures | $2,705 | $(744) | $1,961 | | Total Day 1 Adjustment | $24,602 | $(6,777) | $17,825 | - ASU 2022-02, eliminating the troubled debt restructuring (TDR) model, was adopted on January 1, 2023, on a prospective basis with no material impact on financial statements[50](index=50&type=chunk) [2. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=19&type=section&id=2.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) This note provides a summary of the components of accumulated other comprehensive loss (AOCI), net of income taxes, highlighting changes related to benefit plans and unrealized gains/losses on available-for-sale securities Accumulated Other Comprehensive Loss (AOCI) Summary (Amounts in thousands) | Component | Balance as of Jan 1, 2023 | Current Period Change (Six Months) | Income Tax Effect (Six Months) | Balance as of June 30, 2023 | |:---|:---|:---|:---|:---|\ | Unrealized gains (losses) on benefits plans | $(1,652) | $97 | $(27) | $(1,582) | | Unrealized gains (losses) on available for sale securities | $(95,539) | $3,771 | $(1,039) | $(92,807) | | Unaccreted unrealized loss on securities transferred to held-to-maturity | $(11,516) | $954 | $(263) | $(10,825) | | Total | $(108,707) | $4,822 | $(1,329) | $(105,214) | - Net change in unrealized gains (losses) on available for sale securities for the six months ended June 30, 2023, was a gain of **$4.7 million**, a significant improvement from a loss of **$115.4 million** in the prior year[57](index=57&type=chunk) [3. INVESTMENT SECURITIES](index=21&type=section&id=3.%20INVESTMENT%20SECURITIES) This note details the Company's investment securities portfolio, including available-for-sale (AFS) and held-to-maturity (HTM) categories, their amortized cost, fair value, and unrealized gains/losses Investment Securities Summary (June 30, 2023, in thousands) | Category | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | |:---|:---|:---|:---|:---|\ | Available for sale | $1,708,346 | $1,580,248 | $140 | $(128,238) | | Held-to-maturity | $1,654,531 | $1,476,941 | $— | $(178,297) | | Total | $3,362,877 | $3,057,189 | $140 | $(306,535) | - As of June 30, 2023, available for sale securities with a fair value of **$937.0 million** and held-to-maturity securities with a fair value of **$425.4 million** were pledged, primarily to FHLBNY[61](index=61&type=chunk) - The allowance for credit losses for held-to-maturity securities was **$0.7 million** at June 30, 2023, with a provision of **$20 thousand** for the three months ended June 30, 2023[79](index=79&type=chunk) - The temporary impairment of fixed income securities is primarily attributed to changes in overall market interest rates and/or changes in credit/liquidity spreads[73](index=73&type=chunk) [4. LOANS RECEIVABLE, NET](index=27&type=section&id=4.%20LOANS%20RECEIVABLE,%20NET) This note provides a detailed breakdown of the loan portfolio, including commercial and retail segments, their credit quality indicators, past due status, and activity in the allowance for credit losses Loans Receivable Composition (Amounts in thousands) | Loan Type | June 30, 2023 | December 31, 2022 | |:---|:---|:---|\ | Commercial and industrial | $949,403 | $925,641 | | Multifamily | $1,095,752 | $967,521 | | Commercial real estate | $333,340 | $335,133 | | Construction and land development | $28,664 | $37,696 | | Residential real estate lending | $1,388,571 | $1,371,779 | | Consumer solar | $411,873 | $416,849 | | Consumer and other | $44,135 | $47,150 | | Total loans receivable | $4,251,738 | $4,101,769 | | Allowance for credit losses | $(67,431) | $(45,031) | | Total loans receivable, net | $4,184,307 | $4,060,971 | Allowance for Credit Losses (ACL) Activity (Six Months Ended June 30, 2023, in thousands) | Metric | Commercial and Industrial | Multifamily | Commercial Real Estate | Construction and Land Development | Residential Real Estate Lending | Consumer Solar | Consumer and Other | Total | |:---|:---|:---|:---|:---|:---|:---|:---|:---|\ | Beginning balance - ALLL (Jan 1, 2023) | $12,916 | $7,104 | $3,627 | $825 | $11,338 | $6,867 | $2,354 | $45,031 | | Adoption of ASU No. 2016-13 | $3,816 | $(1,183) | $(1,321) | $(466) | $3,068 | $16,166 | $1,149 | $21,229 | | Beginning balance - ACL (adjusted) | $16,732 | $5,921 | $2,306 | $359 | $14,406 | $23,033 | $3,503 | $66,260 | | Provision for (recovery of) credit losses | $1,745 | $1,603 | $(21) | $(35) | $600 | $2,974 | $(138) | $6,728 | | Charge-offs | $(1,726) | $(1,127) | $— | $— | $(59) | $(3,631) | $(239) | $(6,782) | | Recoveries | $42 | $— | $— | $— | $327 | $842 | $14 | $1,225 | | Ending Balance - ACL (June 30, 2023) | $16,793 | $6,397 | $2,285 | $324 | $15,274 | $23,218 | $3,140 | $67,431 | - Total loans receivable increased by **$149.9 million (3.7%)** from December 31, 2022, to June 30, 2023[84](index=84&type=chunk) - Nonaccrual loans increased to **$33.7 million** at June 30, 2023, from **$21.7 million** at December 31, 2022, primarily driven by construction and land development loans[87](index=87&type=chunk)[281](index=281&type=chunk) [5. DEPOSITS](index=35&type=section&id=5.%20DEPOSITS) This note summarizes the Company's deposit composition, including non-interest-bearing, NOW, money market, savings, time deposits, and brokered CDs, along with their weighted average rates and maturity schedules Deposit Composition (Amounts in thousands) | Deposit Type | June 30, 2023 Amount | June 30, 2023 Weighted Average Rate | December 31, 2022 Amount | December 31, 2022 Weighted Average Rate | |:---|:---|:---|:---|:---|\ | Non-interest-bearing demand deposit accounts | $2,958,104 | 0.00% | $3,331,067 | 0.00% | | NOW accounts | $199,262 | 0.95% | $206,434 | 0.73% | | Money market deposit accounts | $2,744,411 | 2.02% | $2,445,396 | 0.94% | | Savings accounts | $363,058 | 1.04% | $386,190 | 0.75% | | Time deposits | $161,335 | 1.77% | $151,699 | 2.57% | | Brokered CDs | $468,481 | 5.02% | $74,251 | 3.84% | | Total Deposits | $6,894,651 | 1.27% | $6,595,037 | 0.52% | - Total deposits increased by **$299.6 million (4.5%)** from December 31, 2022, to June 30, 2023[118](index=118&type=chunk) - Total estimated uninsured deposits were **$3.93 billion** at June 30, 2023, down from **$4.52 billion** at December 31, 2022[288](index=288&type=chunk) [6. BORROWED FUNDS](index=36&type=section&id=6.%20BORROWED%20FUNDS) This note outlines the Company's borrowed funds, including FHLBNY advances and other borrowings, detailing their collateralization and outstanding balances - There were no outstanding FHLBNY advances as of June 30, 2023, a decrease from **$580.0 million** at December 31, 2022[122](index=122&type=chunk) - The Company had an outstanding balance of **$230.0 million** related to the Federal Reserve's Bank Term Funding Program (BTFP) at June 30, 2023, which was not present at December 31, 2022[123](index=123&type=chunk) - Interest expense on FHLBNY advances for the six months ended June 30, 2023, was **$4.4 million**, up from zero in the prior year[122](index=122&type=chunk) [7. SUBORDINATED DEBT](index=37&type=section&id=7.%20SUBORDINATED%20DEBT) This note describes the Company's 3.250% Fixed-to-Floating Rate subordinated notes due 2031, including their terms, redemption options, and recent repurchases - The Company has **$85.0 million** in 3.250% Fixed-to-Floating Rate subordinated notes due 2031[125](index=125&type=chunk) - The Company repurchased **$4.0 million** of subordinated notes on March 17, 2023, contributing to a **$0.8 million** gain on repurchases for the six months ended June 30, 2023[127](index=127&type=chunk) Subordinated Debt Interest Expense (Amounts in thousands) | Period | Interest Expense | |:---|:---|\ | Three Months Ended June 30, 2023 | $0.6 million | | Three Months Ended June 30, 2022 | $0.7 million | | Six Months Ended June 30, 2023 | $1.2 million | | Six Months Ended June 30, 2022 | $1.4 million | [8. EARNINGS PER SHARE](index=38&type=section&id=8.%20EARNINGS%20PER%20SHARE) This note provides the computation of basic and diluted earnings per common share (EPS) using the two-class method, detailing the factors used in the calculation for the three and six months ended June 30, 2023 and 2022 Earnings Per Share (EPS) Computation | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Income attributable to common stock (thousands) | $21,642 | $19,613 | $42,976 | $33,778 | | Weighted average common shares outstanding, basic (thousands) | 30,619 | 30,818 | 30,662 | 30,962 | | Basic earnings per common share | $0.71 | $0.64 | $1.40 | $1.09 | | Diluted earnings per common share | $0.70 | $0.63 | $1.39 | $1.08 | - Diluted EPS increased by **$0.07 (11.1%)** for the three months ended June 30, 2023, and by **$0.31 (28.7%)** for the six months ended June 30, 2023, compared to the respective prior periods[130](index=130&type=chunk) [9. EMPLOYEE BENEFIT PLANS](index=39&type=section&id=9.%20EMPLOYEE%20BENEFIT%20PLANS) This note details the Company's long-term incentive plans, including stock options, restricted stock units (RSUs), and the Employee Stock Purchase Plan (ESPP, outlining their status, vesting conditions, and associated compensation expenses Restricted Stock Units (RSUs) Summary (Six Months Ended June 30, 2023) | Metric | Time-based RSUs Shares | Performance-based RSUs Shares | |:---|:---|:---|\ | Unvested, January 1, 2023 | 331,023 | 96,970 | | Awarded | 135,837 | 62,945 | | Forfeited/Expired | (8,294) | (6,013) | | Vested | (124,970) | (23,948) | | Unvested, June 30, 2023 | 333,596 | 129,954 | - Total unrecognized compensation cost related to non-vested RSUs and PSUs was **$7.5 million** as of June 30, 2023, expected to be recognized over **2.0 years**[143](index=143&type=chunk) - Compensation expense for RSUs and PSUs increased to **$2.0 million** for the six months ended June 30, 2023, from **$1.1 million** in the prior year[143](index=143&type=chunk) [10. FAIR VALUE OF FINANCIAL INSTRUMENTS](index=42&type=section&id=10.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) This note defines fair value and categorizes financial instruments into a three-level hierarchy based on observability of inputs, presenting assets measured at fair value on a recurring and non-recurring basis, as well as estimated fair values for instruments not recorded at fair value Assets Carried at Fair Value (June 30, 2023, in thousands) | Category | Level 1 | Level 2 | Level 3 | Total | |:---|:---|:---|:---|:---|\ | Available for sale securities | $194 | $1,557,598 | $22,456 | $1,580,248 | | Total assets carried at fair value | $194 | $1,557,598 | $22,456 | $1,580,248 | Estimated Fair Value of Financial Instruments Not Measured at Fair Value (June 30, 2023, in thousands) | Instrument | Carrying Value | Estimated Fair Value | |:---|:---|:---|\ | Held-to-maturity securities | $1,654,531 | $1,476,941 | | Loans receivable, net | $4,184,307 | $3,833,150 | | Deposits payable on demand | $6,264,835 | $6,264,835 | | Subordinated debt, net | $73,766 | $59,013 | - Individually analyzed loans measured at fair value on a non-recurring basis totaled **$6.3 million** at June 30, 2023, all categorized as Level 3[155](index=155&type=chunk) [11. COMMITMENTS, CONTINGENCIES AND OFF BALANCE SHEET RISK](index=46&type=section&id=11.%20COMMITMENTS,%20CONTINGENCIES%20AND%20OFF%20BALANCE%20SHEET%20RISK) This note details the Company's off-balance sheet risks, including credit commitments (commitments to extend credit and standby letters of credit) and investment obligations, particularly related to PACE assessment securities Off-Balance Sheet Credit Risk (Amounts in thousands) | Instrument | June 30, 2023 | December 31, 2022 | |:---|:---|:---|\ | Commitments to extend credit | $641,697 | $723,902 | | Standby letters of credit | $23,095 | $29,568 | | Total | $664,792 | $753,470 | - The allowance for credit losses on off-balance sheet credit commitments increased to **$5.1 million** at June 30, 2023, from **$1.6 million** at December 31, 2022[166](index=166&type=chunk) - The Company has an estimated remaining commitment of **$132.4 million** for the purchase of PACE assessment securities until December 2023[167](index=167&type=chunk) [12. LEASES](index=47&type=section&id=12.%20LEASES) This note provides information on the Company's operating leases, primarily for real estate, detailing lease costs, cash paid, weighted average remaining lease term, and the operating lease liability Operating Lease Costs (Amounts in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Operating lease cost | $1,795 | $2,257 | $3,572 | $4,508 | | Cash paid for operating leases liability | $2,816 | $2,632 | $5,629 | $5,262 | - The weighted average remaining lease term on operating leases was **3.3 years** at June 30, 2023, with a weighted average discount rate of **3.23%**[173](index=173&type=chunk)[174](index=174&type=chunk) Operating Lease Commitments (June 30, 2023, in thousands) | Year | Undiscounted Operating Lease Payments | |:---|:---|\ | 2023 | $5,665 | | 2024 | $11,324 | | 2025 | $10,593 | | 2026 | $9,200 | | 2027 | $959 | | Thereafter | $— | | Total undiscounted payments | $37,741 | | Less: present value adjustment | $1,940 | | Total Operating leases liability | $35,801 | [13. GOODWILL AND INTANGIBLE ASSETS](index=48&type=section&id=13.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note addresses the Company's goodwill and intangible assets, including the annual impairment test for goodwill and the estimated amortization expense for the core deposit intangible asset - The carrying amount of goodwill was **$12.9 million** at both June 30, 2023, and December 31, 2022, with no impairment identified[179](index=179&type=chunk) Estimated Amortization Expense for Core Deposit Intangible (Amounts in thousands) | Year | Total | |:---|:---|\ | 2023 | $444 | | 2024 | $730 | | 2025 | $574 | | 2026 | $419 | | 2027 | $265 | | Thereafter | $229 | | Total | $2,661 | - Amortization expense for the core deposit intangible was **$0.4 million** for the six months ended June 30, 2023[181](index=181&type=chunk) [14. VARIABLE INTEREST ENTITIES](index=49&type=section&id=14.%20VARIABLE%20INTEREST%20ENTITIES) This note describes the Company's investments in unconsolidated variable interest entities (VIEs) related to solar generation facilities, detailing the maximum exposure to loss and tax benefits recognized - The Company's maximum exposure to loss from tax credit investments in unconsolidated VIEs was **$66.9 million** as of June 30, 2023[184](index=184&type=chunk) Tax Credit Investments and Commitments (Amounts in thousands) | Metric | June 30, 2023 | December 31, 2022 | |:---|:---|:---|\ | Tax credit investments included in equity investments | $6,651 | $3,299 | | Loans and letters of credit commitments | $60,276 | $60,857 | | Funded portion of loans and letters of credit commitments | $53,945 | $47,683 | - Tax credits and other tax benefits recognized from solar generation VIE investments totaled **$1.6 million** for the six months ended June 30, 2023[185](index=185&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=50&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a comprehensive analysis of the Company's financial performance and condition, discussing key trends, significant events, and the impact of accounting policies on its results [General](index=50&type=section&id=General) This section provides an overview of Amalgamated Financial Corp. and Amalgamated Bank, detailing their history, current financial position, and the range of commercial and retail banking, investment management, and trust and custody services offered - As of June 30, 2023, total assets were **$7.79 billion**, total loans (net) were **$4.18 billion**, total deposits were **$6.89 billion**, and stockholders' equity was **$528.6 million**[191](index=191&type=chunk) - The Company's trust business held **$40.31 billion** in assets under custody and **$14.52 billion** in assets under management as of June 30, 2023[191](index=191&type=chunk) - The Company is B Corporation certified and a member of the Global Alliance for Banking on Values, committed to social and environmental performance[195](index=195&type=chunk) [New Developments](index=51&type=section&id=New%20Developments) This section discusses the impact of recent bank failures (Silicon Valley Bank, Signature Bank, First Republic Bank) on the banking sector and the Company's proactive measures to monitor and mitigate liquidity risk - Recent bank failures in March and May 2023 generated concerns about the banking sector's health and liquidity[196](index=196&type=chunk) - The Federal Reserve introduced the Bank Term Funding Program (BTFP) to provide additional liquidity to eligible depository institutions[196](index=196&type=chunk) - The Company implemented precautionary actions including increased deposit monitoring, proactive customer outreach, increased pledging of assets to FHLBNY and Federal Reserve, utilization of BTFP, increased brokered CDs, and higher target cash balances[196](index=196&type=chunk) [Critical and Significant Accounting Policies and Estimates](index=51&type=section&id=Critical%20and%20Significant%20Accounting%20Policies%20and%20Estimates) This section highlights the critical accounting policy for the allowance for credit losses (ACL), which changed with the adoption of ASU 2016-13 (CECL), and discusses the inherent uncertainties in estimating future credit losses - The allowance for credit losses (ACL) is a critical accounting policy, with changes due to the adoption of ASU 2016-13 (CECL) effective January 1, 2023[197](index=197&type=chunk) - Estimating future credit losses under CECL involves significant management judgment, relying on past events, current conditions, and reasonable and supportable forecasts, which are subject to volatility[198](index=198&type=chunk) - Incorrect assumptions could lead to material changes in the ACL, impacting net income, and bank regulators may require adjustments to the allowance[199](index=199&type=chunk)[201](index=201&type=chunk) [Recent Accounting Pronouncements](index=53&type=section&id=Recent%20Accounting%20Pronouncements) This section addresses the impact of recently issued accounting standards, specifically ASU 2021-01 (Reference Rate Reform), on the Company's financial reporting - The adoption of ASU 2021-01, related to Reference Rate Reform (LIBOR transition), is not expected to have a material impact on the Company's operating results or financial condition[203](index=203&type=chunk) [Results of Operations](index=54&type=section&id=Results%20of%20Operations) This section analyzes the Company's financial performance, focusing on net income, net interest income, provision for credit losses, non-interest income, non-interest expense, and income taxes for the three and six months ended June 30, 2023, compared to the prior year [General](index=54&type=section&id=General_Results_of_Operations) The Company's results of operations are primarily driven by net interest income, non-interest income, provision for credit losses, income taxes, and non-interest expenses Net Income and EPS (Amounts in millions, except per share) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Net income | $21.6 | $19.6 | $43.0 | $33.8 | | Diluted EPS | $0.70 | $0.63 | $1.39 | $1.08 | - The **$2.0 million** increase in net income for Q2 2023 was primarily due to a **$15.1 million** increase in interest income on securities and an **$11.6 million** increase in interest income on loans, partially offset by a **$20.7 million** increase in interest expense[206](index=206&type=chunk) - The **$9.2 million** increase in net income for the six months ended June 30, 2023, was primarily due to a **$61.8 million** increase in interest income, offset by a **$25.4 million** increase in interest expense[207](index=207&type=chunk) [Net Interest Income](index=54&type=section&id=Net%20Interest%20Income_Results_of_Operations) Net interest income, a key revenue driver, increased for both the three and six months ended June 30, 2023, primarily due to higher yields on interest-earning assets, despite increased costs of interest-bearing liabilities Net Interest Income and Margin (Amounts in thousands, except percentages) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Net interest income | $62,985 | $56,498 | $130,264 | $104,866 | | Net interest spread | 2.33% | 2.88% | 2.52% | 2.74% | | Net interest margin | 3.33% | 3.03% | 3.46% | 2.90% | | Yield on average earning assets | 4.55% | 3.14% | 4.54% | 3.01% | | Average rate on interest-bearing liabilities | 2.22% | 0.26% | 2.02% | 0.27% | - Net interest income increased by **$6.5 million (11.5%)** for Q2 2023 and **$25.4 million (24.2%)** for the six months ended June 30, 2023, year-over-year[211](index=211&type=chunk)[219](index=219&type=chunk) - The yield on average earning assets increased by **141 basis points** for Q2 2023 and **153 basis points** for the six months ended June 30, 2023, driven by the rising rate environment and increased loan/securities balances[214](index=214&type=chunk)[220](index=220&type=chunk) - The average rate on interest-bearing liabilities increased by **196 basis points** for Q2 2023 and **175 basis points** for the six months ended June 30, 2023, due to higher borrowing costs and deposit rates[214](index=214&type=chunk)[220](index=220&type=chunk) [Provision for Credit Losses](index=59&type=section&id=Provision%20for%20Credit%20Losses_Results_of_Operations) The provision for credit losses increased for both the three and six months ended June 30, 2023, reflecting consumer loan charge-offs, increased specific reserves for individually analyzed loans, and an impairment charge on a corporate bond Provision for Credit Losses (Amounts in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Provision for credit losses | $3,940 | $2,912 | $8,899 | $5,205 | | Provision for credit losses on loans | $3,116 | $2,912 | $6,728 | $5,205 | | Provision for credit losses on securities | $20 | — | $1,200 | — | | Provision for credit losses on off-balance sheet credit exposures | $804 | — | $971 | — | - The Q2 2023 provision increase was driven by **$1.4 million** in consumer loan charge-offs and a **$1 million** increase in specific reserves for individually analyzed loans[226](index=226&type=chunk) - The six-month provision increase was primarily due to a **$1.2 million** impairment charge on a SIVB Corporate bond and an additional **$1.1 million** related to a multifamily loan charge-off[227](index=227&type=chunk) [Non-Interest Income](index=59&type=section&id=Non-Interest%20Income_Results_of_Operations) Non-interest income showed a mixed trend, increasing for the three months ended June 30, 2023, but decreasing for the six-month period, primarily due to increased losses on the sale of securities Non-Interest Income (Amounts in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Trust Department fees | $4,006 | $3,479 | $7,935 | $6,970 | | Bank-owned life insurance income | $546 | $1,283 | $1,327 | $2,097 | | Losses on sale of securities | $(267) | $(582) | $(3,353) | $(420) | | Equity method investments income (loss) | $556 | $(638) | $711 | $(206) | | Other income | $389 | $386 | $1,360 | $619 | | Total non-interest income | $7,944 | $7,246 | $13,150 | $14,668 | - Non-interest income increased by **$0.7 million** for Q2 2023, driven by a **$1.2 million** increase in equity method investments income and a **$0.5 million** increase in Trust Department fees[231](index=231&type=chunk) - Non-interest income decreased by **$1.5 million** for the six months ended June 30, 2023, primarily due to **$3.0 million** in increased losses on the sale of securities, including a SIVB Corporate bond[233](index=233&type=chunk) [Non-Interest Expense](index=60&type=section&id=Non-Interest%20Expense_Results_of_Operations) Non-interest expense increased for both the three and six months ended June 30, 2023, primarily due to higher compensation and employee benefits Non-Interest Expense (Amounts in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Compensation and employee benefits, net | $21,165 | $18,046 | $43,180 | $35,715 | | Total non-interest expense | $37,529 | $34,346 | $76,156 | $68,743 | - Total non-interest expense increased by **$3.2 million** for Q2 2023 and **$7.5 million** for the six months ended June 30, 2023, primarily due to increased compensation and benefits related to headcount and corporate incentive payments[236](index=236&type=chunk)[237](index=237&type=chunk) [Income Taxes](index=60&type=section&id=Income%20Taxes_Results_of_Operations) Income tax expense and the effective tax rate increased for both the three and six months ended June 30, 2023, compared to the prior year Income Tax Expense and Effective Tax Rate | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Income tax expense (thousands) | $7,818 | $6,873 | $15,383 | $11,808 | | Effective tax rate | 26.5% | 25.9% | 26.4% | 25.9% | - The effective tax rate for the six months ended June 30, 2023, was **26.4%**, an increase from **25.9%** in the same period of 2022[240](index=240&type=chunk) [Financial Condition](index=61&type=section&id=Financial%20Condition) This section provides an in-depth analysis of the Company's financial position, including balance sheet changes, investment securities, loan portfolio, allowance for credit losses, nonperforming assets, deposits, interest rate risk, liquidity, and capital resources [Balance Sheet](index=61&type=section&id=Balance%20Sheet_Financial_Condition) The Company's total assets slightly decreased at June 30, 2023, compared to December 31, 2022, with notable shifts in loans, investment securities, and resell agreements - Total assets were **$7.79 billion** at June 30, 2023, a decrease from **$7.84 billion** at December 31, 2022[241](index=241&type=chunk) - Notable changes include a **$123.3 million** increase in loans receivable, net, a **$119.0 million** decrease in investment securities, and a **$25.8 million** decrease in resell agreements[241](index=241&type=chunk) [Investment Securities](index=61&type=section&id=Investment%20Securities_Financial_Condition) The investment securities portfolio is managed for liquidity, return, and risk, with a focus on low-risk assets like GSE obligations and PACE assessments Investment Securities Portfolio Composition (Amounts in thousands) | Category | June 30, 2023 Amount | June 30, 2023 % of Total Securities | December 31, 2022 Amount | December 31, 2022 % of Total Securities | |:---|:---|:---|:---|:---|\ | Total available for sale | $1,580,248 | 48.8% | $1,812,476 | 54.0% | | Total held-to-maturity | $1,655,238 | 51.2% | $1,541,301 | 46.0% | | Total securities | $3,235,486 | 100.0% | $3,353,777 | 100.0% | - The held-to-maturity portfolio primarily consists of PACE assessments, tax-exempt municipal securities, and GSE certificates[244](index=244&type=chunk) - Approximately **84%** of non-agency securities (commercial mortgage-backed, CLOs, non-agency mortgage-backed, and asset-backed) carry **AAA credit ratings**, and **16%** carry **A credit ratings or higher**[256](index=256&type=chunk) [Loans](index=65&type=section&id=Loans_Financial_Condition) Lending is a primary driver of net interest income, with the portfolio showing growth in commercial loans, particularly multifamily, and a focus on mission-aligned businesses Loan Portfolio Composition (Amounts in thousands) | Portfolio | June 30, 2023 Amount | June 30, 2023 % of total loans | December 31, 2022 Amount | December 31, 2022 % of total loans | |:---|:---|:---|:---|:---|\ | Commercial portfolio | $2,407,159 | 56.6% | $2,265,991 | 55.2% | | Retail portfolio | $1,844,579 | 43.4% | $1,835,778 | 44.8% | | Total loans | $4,251,738 | 100.0% | $4,101,769 | 100.0% | - The multifamily loan portfolio increased by **13.3%** to **$1.10 billion** at June 30, 2023, from **$967.5 million** at December 31, 2022[261](index=261&type=chunk) - Commercial and Industrial (C&I) loans increased by **2.6%** to **$949.4 million**, focusing on mission-aligned businesses[260](index=260&type=chunk) [Allowance for Credit Losses](index=67&type=section&id=Allowance%20for%20Credit%20Losses_Financial_Condition) The allowance for credit losses (ACL) on loans increased significantly due to the adoption of the CECL standard and subsequent provisions - The allowance for credit losses on loans increased by **$22.4 million** to **$67.4 million** at June 30, 2023, from **$45.0 million** at December 31, 2022[273](index=273&type=chunk) - The adoption of the CECL standard on January 1, 2023, increased the ACL on loans by **$21.2 million** (Day 1 cumulative effect), primarily for the consumer solar portfolio[273](index=273&type=chunk) - The ratio of allowance to total loans was **1.59%** at June 30, 2023, up from **1.10%** at December 31, 2022[273](index=273&type=chunk) [Nonperforming Assets](index=69&type=section&id=Nonperforming%20Assets_Financial_Condition) Nonperforming assets increased at June 30, 2023, primarily driven by an increase in nonaccrual construction loans, while the ratio of nonperforming assets to total assets remained relatively stable Nonperforming Assets (Amounts in thousands) | Metric | June 30, 2023 | December 31, 2022 | |:---|:---|:---|\ | Total nonperforming assets | $35,265 | $28,649 | | Nonaccrual loans - Commercial | $28,078 | $18,308 | | Nonaccrual loans - Retail | $5,606 | $3,391 | | Nonperforming assets to total assets | 0.45% | 0.44% | | Nonaccrual loans to total loans | 0.79% | 0.53% | - The increase in nonperforming assets was primarily due to **$8.8 million** in construction loans placed on nonaccrual status in Q2 2023[281](index=281&type=chunk) - Potential problem loans (special mention and substandard-accruing commercial loans, or 30-89 days past due retail loans) totaled **$81.4 million** at June 30, 2023[282](index=282&type=chunk) [Resell Agreements](index=70&type=section&id=Resell%20Agreements_Financial_Condition) The Company had no outstanding short-term resell agreements backed by residential first-lien mortgage loans as of June 30, 2023, a decrease from the prior period - As of June 30, 2023, the Company had no outstanding short-term resell agreements, compared to **$25.8 million** at December 31, 2022[283](index=283&type=chunk) [Deferred Tax Asset](index=71&type=section&id=Deferred%20Tax%20Asset_Financial_Condition) The net deferred tax asset increased slightly at June 30, 2023, and management concluded it was fully realizable with no valuation allowance - The deferred tax asset, net of deferred tax liabilities, was **$63.5 million** at June 30, 2023, up from **$62.5 million** at December 31, 2022[285](index=285&type=chunk) - Management concluded that the entire deferred tax asset was fully realizable with no valuation allowance held against the balance as of June 30, 2023[285](index=285&type=chunk) [Deposits](index=71&type=section&id=Deposits_Financial_Condition) Deposits, the primary source of funds, increased at June 30, 2023, driven by relationship-based banking - Total deposits were **$6.89 billion** at June 30, 2023, an increase from **$6.60 billion** at December 31, 2022[286](index=286&type=chunk) - Political deposits totaled approximately **$835.8 million** at June 30, 2023, up from **$643.6 million** at December 31, 2022, exhibiting seasonality[287](index=287&type=chunk) - Total estimated uninsured deposits were **$3.93 billion** at June 30, 2023, compared to **$4.52 billion** at December 31, 2022[288](index=288&type=chunk) [Evaluation of Interest Rate Risk](index=71&type=section&id=Evaluation%20of%20Interest%20Rate%20Risk_Financial_Condition) The Company uses simulation models to assess interest rate risk, evaluating the impact of hypothetical rising and declining rate scenarios on net interest income (NII) and economic value of equity (EVE) Sensitivity to Market Interest Rate Changes (June 30, 2023) | Immediate Shift | Economic Value of Equity Change | Year 1 Net Interest Income Change | |:---|:---|:---|\ | +400 basis points | -27.4% | -19.2% | | +300 basis points | -18.5% | -11.8% | | +200 basis points | -10.7% | -6.1% | | +100 basis points | -3.6% | -2.3% | | -100 basis points | -3.4% | -0.9% | | -200 basis points | -11.8% | -1.6% | - The simulation results are hypothetical and indicate that both NII and EVE are sensitive to changes in interest rates, with larger negative impacts in significant upward rate shifts[291](index=291&type=chunk)[294](index=294&type=chunk) [Liquidity](index=72&type=section&id=Liquidity_Financial_Condition) The Company manages liquidity to meet operational needs and obligations, supported by liquid assets, liability management, and access to alternative funding sources - Cash and equivalents increased to **$65.7 million** at June 30, 2023, from **$63.5 million** at December 31, 2022[299](index=299&type=chunk) - Available for sale securities were **$1.58 billion** at June 30, 2023[299](index=299&type=chunk) - The Company had **$2.6 billion** of immediately available funds (cash and borrowing capacity) and **$758.3 million** in unpledged securities with two-day availability, providing **85%** coverage for total uninsured deposits[299](index=299&type=chunk) [Capital Resources](index=73&type=section&id=Capital%20Resources_Financial_Condition) Total stockholders' equity increased at June 30, 2023, driven by net income and AOCI improvement, partially offset by dividends, stock repurchases, and the CECL adoption - Total stockholders' equity increased by **$19.7 million** to **$528.6 million** at June 30, 2023, from **$509.0 million** at December 31, 2022[300](index=300&type=chunk) - The increase was driven by **$43.0 million** of net income and a **$3.5 million** improvement in AOCI, offset by **$6.2 million** of dividends, **$4.6 million** in stock repurchases, and a **$17.8 million** tax-effected charge to retained earnings from CECL adoption[300](index=300&type=chunk) Regulatory Capital Ratios (June 30, 2023, in thousands, except percentages) | Metric | Actual Amount | Actual Ratio | For Capital Adequacy Purposes Ratio | |:---|:---|:---|:---|\ | Consolidated Total capital to risk weighted assets | $750,668 | 15.26% | 8.00% | | Consolidated Tier 1 capital to risk weighted assets | $615,262 | 12.51% | 6.00% | | Consolidated Common equity tier 1 to risk weighted assets | $615,262 | 12.51% | 4.50% | | Bank Total capital to risk weighted assets | $745,912 | 15.17% | 8.00% | | Bank Tier I capital to risk weighted assets | $684,298 | 13.92% | 6.00% | | Bank Common equity tier 1 to risk weighted assets | $684,298 | 13.92% | 4.50% | [Contractual Obligations](index=74&type=section&id=Contractual%20Obligations_Financial_Condition) This section summarizes the Company's contractual obligations, including subordinated debt, operating leases, purchase obligations, and certificates of deposit, categorized by maturity Contractual Obligations (June 30, 2023, in thousands) | Obligation | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |:---|:---|:---|:---|:---|:---|\ | Subordinated Debt | $73,737 | $— | $— | $— | $73,737 | | Operating Leases | $37,741 | $5,665 | $31,117 | $959 | $— | | Purchase Obligations | $23,754 | $4,612 | $9,224 | $4,718 | $5,200 | | Certificates of Deposit | $629,816 | $450,989 | $124,322 | $28,746 | $25,759 | | Total | $765,048 | $461,266 | $164,663 | $34,423 | $104,696 | [Investment Obligations](index=75&type=section&id=Investment%20Obligations_Financial_Condition) The Company has ongoing investment obligations related to the purchase of PACE assessment securities, with a remaining commitment until December 2023 - The Company has an estimated remaining commitment of **$132.4 million** for the purchase of PACE assessment securities until December 2023[308](index=308&type=chunk) - PACE assessments held in the Company's AFS and HTM portfolios at June 30, 2023, were **$22.5 million** and **$1.04 billion**, respectively[308](index=308&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=76&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section provides disclosures regarding the Company's exposure to market risks, particularly interest rate risk, and how these risks are managed and measured [Market Risk Disclosures](index=76&type=section&id=Market%20Risk%20Disclosures) This section refers to the market risk disclosures provided in Management's Discussion and Analysis, specifically the 'Evaluation of Interest Rate Risk' table, for details on the Company's interest rate sensitivity position - Material changes in market risk from the 2022 Annual Report are described in Part II, Item 1A of this Form 10-Q[310](index=310&type=chunk) - The Company's interest rate sensitivity position as of June 30, 2023, is detailed in the 'Evaluation of Interest Rate Risk' table within Management's Discussion and Analysis[310](index=310&type=chunk) [ITEM 4. Controls and Procedures](index=76&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of the Company's disclosure controls and procedures and any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=76&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023 - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023[311](index=311&type=chunk) [Changes in Internal Control Over Financial Reporting](index=76&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) There were no material changes in the Company's internal control over financial reporting during the quarter ended June 30, 2023 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[312](index=312&type=chunk) [PART II - OTHER INFORMATION](index=77&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section contains additional information not covered in Part I, including legal proceedings, risk factors, equity sales, other disclosures, and exhibits [ITEM 1. Legal Proceedings](index=77&type=section&id=ITEM%201.%20Legal%20Proceedings) The Company is involved in various legal proceedings in the ordinary course of business, but management believes that none will have a material adverse effect on its financial condition or results of operations - Management believes that no pending or threatened legal matter will result in a material adverse effect on the Company's consolidated financial condition or results of operation[314](index=314&type=chunk) [ITEM 1A. Risk Factors](index=77&type=section&id=ITEM%201A.%20Risk%20Factors) This section updates the Company's risk factors, emphasizing new and heightened risks related to stress and volatility in the banking sector, increased credit risk, liquidity risk, and potential stock volatility following recent bank failures, as well as fiscal challenges facing the U.S. government - Recent bank failures have generated concerns about the banking sector's health and liquidity, potentially impacting the Company's ability to attract and maintain deposits and increasing FDIC assessment costs[316](index=316&type=chunk) - Increased credit risk is noted due to interdependencies in the financial system, with potential for additional credit losses if counterparties or customers face difficulties[317](index=317&type=chunk) - Liquidity risk is a significant concern, with potential impairment of funding sources due to market downturns, regulatory actions, or deposit outflows, especially from political deposits and uninsured deposits[318](index=318&type=chunk)[319](index=319&type=chunk)[322](index=322&type=chunk) - Fiscal challenges facing the U.S. government, including credit rating downgrades, could negatively impact the value of investments in GSEs and the broader financial markets[325](index=325&type=chunk)[326](index=326&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=79&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides details on the Company's common stock repurchase activities during the three months ended June 30, 2023, including the number of shares purchased and the remaining authorization under its repurchase program Common Stock Repurchases (Three Months Ended June 30, 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased Under Publicly Announced Plans/Programs | Approximate Dollar Value Remaining Under Plans/Programs | |:---|:---|:---|:---|:---|\ | April 1 through April 30, 2023 | — | — | — | $25,672,104 | | May 1 through May 31, 2023 | 69,800 | $15.03 | 69,800 | $24,622,884 | | June 1 through June 30, 2023 | 92,554 | $15.74 | 69,162 | $23,514,795 | | Total | 162,354 | $15.44 | 138,962 | | - The Company repurchased **138,962 shares** as part of its publicly announced program during the quarter, with **$2.2 million** of common stock purchased under this authorization[329](index=329&type=chunk)[330](index=330&type=chunk) - As of June 30, 2023, approximately **$23.5 million** remained authorized for repurchase under the program[329](index=329&type=chunk) [ITEM 5. Other Information](index=80&type=section&id=ITEM%205.%20Other%20Information) This section confirms that no directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2023 - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2023[332](index=332&type=chunk) [ITEM 6. Exhibits](index=81&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, certifications, and interactive data files - Key exhibits include the Certificate of Incorporation, Bylaws, Equity Incentive Plan, Rule 13a-14(a) Certifications of the CEO and CFO, Section 1350 Certifications, and Interactive Data Files (iXBRL)[334](index=334&type=chunk)[335](index=335&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk)[339](index=339&type=chunk) [Signatures](index=82&type=section&id=Signatures) This section contains the required signatures of the Company's principal executive officer, principal financial officer, and principal accounting officer, certifying the report's submission - The report is signed by Priscilla Sims Brown (President and CEO), Jason Darby (Chief Financial Officer), and Leslie Veluswamy (Chief Accounting Officer) on August 4, 2023[343](index=343&type=chunk)

Amalgamated Financial Corp. (NASDAQ:AMAL) Q2 2023 Earnings Conference Call July 27, 2023 11:00 AM ET Company Participants Jason Darby - CFO Priscilla Sims Brown - President and CEO Conference Call Participants Alex Twerdahl - Piper Sandler Janet Lee - JPMorgan Chris O'Connell - KBW Operator Good morning, ladies and gentlemen, and welcome to the Amalgamated Financial Corporation Second Quarter 2023 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to Commission File Number: 001-40136 Amalgamated Financial Corp. (Exact name of registrant as specified in its charter) Delaware 85-2757101 (State or other jurisdiction of i ...

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]