Amalgamated Financial (AMAL) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for Amalgamated Financial Corp., highlighting total asset growth to $6.6 billion and net income of $22.6 million for the first six months of 2021 Consolidated Statements of Financial Condition Total assets increased to $6.6 billion by June 30, 2021, driven by higher cash and securities, while loans decreased and deposits significantly increased Consolidated Statements of Financial Condition (in thousands) | Account | June 30, 2021 (unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Total cash and cash equivalents | $547,445 | $38,769 | | Securities | $2,449,552 | $2,034,311 | | Loans receivable, net | $3,137,449 | $3,447,306 | | Total assets | $6,556,272 | $5,978,631 | | Liabilities & Equity | | | | Deposits | $5,909,992 | $5,338,711 | | Total liabilities | $6,008,061 | $5,442,810 | | Total stockholders' equity | $548,211 | $535,821 | | Total liabilities and stockholders' equity | $6,556,272 | $5,978,631 | Consolidated Statements of Income Net income for the six months ended June 30, 2021, increased to $22.6 million, primarily due to a significant reduction in the provision for loan losses Consolidated Statements of Income (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $41,991 | $44,439 | $83,836 | $89,127 | | Provision for (recovery of) loan losses | $1,682 | $8,221 | $(1,579) | $16,808 | | Non-interest Income | $5,327 | $8,671 | $9,326 | $17,789 | | Non-interest Expense | $31,395 | $31,068 | $64,189 | $63,339 | | Net Income | $10,408 | $10,374 | $22,597 | $19,919 | | Earnings per common share - diluted | $0.33 | $0.33 | $0.72 | $0.64 | Consolidated Statements of Comprehensive Income Total comprehensive income for the six months ended June 30, 2021, decreased to $21.1 million, primarily due to a net unrealized loss on securities Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $10,408 | $10,374 | $22,597 | $19,919 | | Total other comprehensive income (loss), net of taxes | $2,904 | $21,937 | $(1,461) | $4,045 | | Total comprehensive income (loss), net of taxes | $13,312 | $32,311 | $21,136 | $23,964 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $548.2 million by June 30, 2021, driven by net income, partially offset by dividends and share repurchases - Key activities affecting stockholders' equity in the first six months of 2021 include net income of $22.6 million, dividend payments of $5.0 million ($0.16 per share), and share repurchases totaling $2.9 million[24] Consolidated Statements of Cash Flows Cash and cash equivalents increased by $508.7 million, primarily due to significant cash provided by financing activities from increased deposits Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $24,716 | $17,747 | | Net cash (used in) provided by investing activities | $(77,883) | $(694,524) | | Net cash provided by financing activities | $561,843 | $1,142,200 | | Increase (decrease) in cash, cash equivalents | $508,676 | $465,423 | | Cash, cash equivalents at beginning of year | $38,769 | $122,538 | | Cash, cash equivalents at end of period | $547,445 | $587,961 | Notes to Consolidated Statements This section details accounting policies, financial data, and key notes on reorganization, CECL adoption, loan portfolio, and commitments - On March 1, 2021, Amalgamated Financial Corp. completed its reorganization to become the holding company for Amalgamated Bank[34] - The company will adopt the Current Expected Credit Loss (CECL) standard on January 1, 2023, which is expected to significantly change the credit loss estimation model[41] - The company has commitments to purchase up to $375 million of PACE assessment securities by Q4 2021 and an additional $100 million for other PACE-related purchases, with $262.6 million of these obligations fulfilled as of June 30, 2021[141] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operations, noting net income growth to $22.6 million, asset expansion to $6.6 billion, and net interest margin compression Overview The company, a full-service bank with $6.6 billion in assets, adapted to COVID-19 impacts, including branch closures and reduced loan deferrals - The company is a certified B Corporation and a member of the Global Alliance for Banking on Values, targeting clients like non-profits, unions, political organizations, and socially responsible businesses[169] - In response to the COVID-19 pandemic, the company permanently closed six branches, expecting annual non-interest expense savings of approximately $4.0 million once fully phased in[173] - As of June 30, 2021, loans on COVID-19 related payment deferral programs had decreased to $4.0 million, the majority of which were residential loans[176] Results of Operations Net income increased to $22.6 million for the six months ended June 30, 2021, driven by a significant decrease in the provision for loan losses Key Performance Summary - Six Months Ended June 30 | Metric (in millions) | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net Income | $22.6 | $19.9 | $2.7 | | Net Interest Income | $83.8 | $89.1 | $(5.3) | | Provision for Loan Losses | $(1.6) | $16.8 | $(18.4) | | Non-interest Income | $9.3 | $17.8 | $(8.5) | | Non-interest Expense | $64.2 | $63.3 | $0.9 | - Net interest margin (NIM) for Q2 2021 was 2.75%, down 35 basis points from 3.10% in Q2 2020, primarily due to lower yields on assets in the low interest rate environment[186] - Non-interest income for Q2 2021 decreased by $3.4 million year-over-year, mainly due to a $1.6 million loss on equity method investments compared to a $1.3 million gain in Q2 2020[201] Financial Condition Total assets grew to $6.6 billion by June 30, 2021, fueled by increased cash and securities, while deposits rose and nonperforming assets declined Loan Portfolio Composition (in thousands) | Loan Category | June 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Commercial and industrial | $619,037 | $677,192 | | Multifamily mortgages | $848,651 | $947,177 | | Commercial real estate mortgages | $351,707 | $372,736 | | Residential real estate lending | $1,085,791 | $1,238,697 | | Consumer and other | $222,265 | $190,676 | | Total loans | $3,169,754 | $3,482,565 | Nonperforming Assets (in thousands) | Category | June 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Nonaccrual loans | $51,931 | $60,924 | | Troubled debt restructured loans - accruing | $18,683 | $19,553 | | Other real estate owned | $307 | $306 | | Total nonperforming assets | $70,980 | $82,234 | - The allowance for loan losses decreased to $38.0 million at June 30, 2021, from $41.6 million at December 31, 2020, primarily due to lower loan balances, with the ratio of allowance to total loans at 1.20%[240] - Political deposits, which are seasonal, increased to $791.3 million as of June 30, 2021, from $602.8 million at December 31, 2020[255] Evaluation of Interest Rate Risk Interest rate risk modeling indicates a 100 basis point rate increase would boost net interest income by 13.3% and equity by 10.2%, while a decrease would have inverse effects Interest Rate Sensitivity Analysis as of June 30, 2021 | Immediate Shift | Change in Economic Value of Equity (%) | Change in Year 1 Net Interest Income (%) | | :--- | :--- | :--- | | +400 basis points | 7.9% | 35.1% | | +300 basis points | 12.7% | 31.6% | | +200 basis points | 14.2% | 24.5% | | +100 basis points | 10.2% | 13.3% | | -100 basis points | -15.4% | -13.7% | Liquidity and Capital Resources The company maintains strong liquidity and capital, with $547.4 million in cash and $1.8 billion in available-for-sale securities, remaining 'well capitalized' with a 13.63% Tier 1 capital ratio - As of June 30, 2021, the company had no advances from the FHLB and a remaining credit availability of $1.4 billion, plus an additional $88.4 million in borrowing capacity at the Federal Reserve's discount window[267] - Total stockholders' equity increased by $12.4 million to $548.2 million at June 30, 2021, from year-end 2020, driven by net income of $22.6 million, partially offset by dividends and share repurchases[268] Regulatory Capital Ratios as of June 30, 2021 (Consolidated) | Ratio | Actual | For Capital Adequacy | To Be Well Capitalized | | :--- | :--- | :--- | :--- | | Total capital to risk weighted assets | 14.68% | 8.00% | 10.00% | | Tier I capital to risk weighted assets | 13.63% | 6.00% | 8.00% | | Common equity tier 1 to risk weighted assets | 13.63% | 4.50% | 6.50% | | Tier I capital to average assets | 7.93% | 4.00% | 5.00% | Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risk profile were reported as of June 30, 2021, consistent with prior disclosures - There were no material changes in market risk from the end of the previous fiscal year[275] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2021[277] - There were no material changes to the internal control over financial reporting during the quarter ended June 30, 2021[278] PART II - OTHER INFORMATION Legal Proceedings Management believes no pending or threatened legal matters will materially adversely affect the company's financial condition or operations - Management has concluded that there are no pending or threatened legal matters that would materially and adversely affect the company's financial condition or operations[280] Risk Factors No material changes to risk factors have occurred since the 2020 Annual Report on Form 10-K - No material changes to risk factors have occurred since the 2020 Annual Report on Form 10-K[281] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 187,325 shares in Q2 2021, with $7.5 million remaining under its $10 million repurchase program Issuer Purchases of Equity Securities (Q2 2021) | Period (2021) | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Approx. Value Remaining under Program ($) | | :--- | :--- | :--- | :--- | :--- | | April | 16,989 | $16.73 | — | $10,000,000 | | May | 158,957 | $16.23 | 154,049 | $7,499,476 | | June | 11,379 | $16.35 | — | $7,499,476 | | Total | 187,325 | $16.28 | 154,049 | | - A share repurchase program for up to $10 million was authorized on April 13, 2021, and during Q2 2021, $2.5 million of common stock was purchased under this authorization[284] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, employment agreements, and certifications