Amalgamated Financial: Earnings Outlook Remains Positive Thanks To Loans And Margin

Core Viewpoint - Amalgamated Financial Corp. is expected to see an increase in earnings this year due to loan growth and slight margin expansion, with projected earnings of $3.11 per share, representing an 8.9% year-over-year increase [2][8]. Loan Growth - Loan growth for Amalgamated Financial was 7% for the full year, exceeding previous expectations, despite a deceleration in the last quarter of 2023 [3]. - The management anticipates a stable balance sheet in the first half of the year, followed by a projected 3% increase in the second half [3]. - The company primarily focuses on lending in Washington D.C., New York City, and San Francisco, with the regional economy supporting continued loan growth [3]. - The loan portfolio is expected to grow by 5% in 2024 [5]. Balance Sheet and Margin Trends - The net interest margin improved by 15 basis points in the last quarter of 2023, although it shrank by 12 basis points overall for the year [7]. - The management expects the Fed funds rate to decline by 50-75 basis points in 2024, which may negatively impact the net interest margin due to sticky deposit costs and the need for repricing of some assets [7]. - Despite these challenges, the management is optimistic about margin expansion due to planned changes and the maturity of high-cost borrowings [7]. Earnings Outlook - The company reported earnings of $2.86 per share for 2023, up 9.4% year-over-year, and is projected to continue this upward trend in 2024 with expected earnings of $3.11 per share [8]. - The income statement estimates show a net interest income increase from $261 million in FY23 to $277 million in FY24E [9]. Valuation and Target Price - The stock is currently offering a dividend yield of 1.7%, with a potential for a dividend hike due to a low payout ratio of 12.9% for 2024 [11]. - The target price based on historical price-to-tangible book (P/TB) and price-to-earnings (P/E) multiples suggests a price of $26.3, indicating a 9.6% upside from the current market price [11]. - The combined target price reflects a total expected return of 11.2% when including the forward dividend yield [11].