Amalgamated Bank Maps Confident Path With 2026 Targets

Amalgamated Bank ((AMAL)) has held its Q4 earnings call. Read on for the main highlights of the call.

Amalgamated Bank Leans Into Growth as Margins, Deposits and Guidance Strengthen

Amalgamated Bank’s latest earnings call struck a notably constructive tone, with management highlighting record deposit inflows, expanding net interest margin (NIM), healthy loan growth and accelerating PACE volumes. While the quarter included some credit noise in a D.C. multifamily relationship, elevated charge-offs and a loss on the sale of low‑coupon residential loans, executives emphasized that reserves are adequate and that capital and liquidity remain strong. Rising technology and operating expenses represent a deliberate investment in scale and capabilities, and management’s 2026 targets point to confidence in sustaining profitable growth despite near-term credit and cost headwinds.

Record Deposit Gathering Across Core Segments

Amalgamated delivered standout deposit performance, gathering nearly $1.0 billion of new deposits in the quarter. On‑balance sheet deposits rose $179 million to $7.9 billion, while off‑balance sheet balances jumped $789 million to $1.1 billion. Political deposits, a key franchise niche, increased $287 million to $1.7 billion as election-cycle fundraising accelerated. Growth was broad-based across customer segments: Not-for-profit deposits climbed $388 million, Social & Philanthropy added $122 million, and Climate & Sustainability deposits grew $77 million. This breadth suggests the bank is deepening relationships across its mission-aligned client base while building a larger, more diversified funding platform.

Net Interest Margin Expansion and Stronger NII

Profitability from core lending improved as net interest margin expanded by 6 basis points to 3.66%, driven primarily by a 16 basis point decline in cost of funds. Net interest income rose 1% to $77.9 million, exceeding the high end of management’s guidance range, signaling better-than-expected performance on both pricing discipline and balance sheet mix. The margin expansion in a still-competitive deposit environment underscores Amalgamated’s ability to reprice liabilities and deploy assets into higher-yielding categories, providing a solid earnings foundation heading into 2026.

Loan Growth Led by Growth-Mode Portfolios

Total loans increased by $167 million, or 3.5%, to $4.9 billion, with the bank’s designated growth-mode portfolios—multifamily, commercial real estate (CRE), and commercial & industrial (C&I)—doing the heavy lifting. These portfolios grew $218 million, or 7% quarter over quarter, reflecting robust origination momentum and management’s targeted strategy to build scale in higher-return asset classes. The current pace of growth supports management’s outlook for 1.5%–2% quarterly net loan growth in 2026, assuming credit conditions remain manageable.

PACE Portfolio Acceleration and C-PACE Opportunity

The bank’s PACE (Property Assessed Clean Energy) business continued to accelerate, with total assessments up $38 million, or 3%, to $1.3 billion. Commercial PACE (C-PACE) was a particular bright spot, contributing more than $27 million of that growth. Management highlighted C-PACE as a high-yield growth opportunity aligned with Amalgamated’s sustainability focus, and expects to scale volume further through a new originator partnership. As this business expands, it offers both attractive returns and a differentiating niche in climate-related financing.

Consistent Earnings and Shareholder Capital Returns

On the bottom line, core net income (non‑GAAP) came in at $30.0 million, or $0.99 per diluted share, while GAAP net income was $26.6 million, or $0.88 per share, reflecting some non-core items. Tangible book value per share rose $0.87, or 3.4%, underscoring continued capital accretion even as the bank returned capital to shareholders. Amalgamated repurchased $8.7 million of stock during the quarter and raised its quarterly dividend by $0.03 to $0.17 per share. The mix of organic capital build and active capital return supports the narrative of a bank confident in its earnings trajectory and balance sheet strength.

Revenue Diversification and Efficiency Progress

Amalgamated made incremental progress on its strategic goal of diversifying revenue away from pure spread income. Core noninterest income reached $10.1 million, representing 11.4% of core revenue, and continues to trend toward management’s longer-term diversification objectives. On the cost side, the core efficiency ratio stood at 51.13%, and core operating expenses were $44.9 million for the quarter—tracking well with the bank’s roughly $170 million annual target. While efficiency gains could come under pressure from rising tech and operating investments, the current run-rate demonstrates a relatively lean platform capable of supporting further scale.

Robust Capital and Regulatory Positioning

Capital levels remain a key strength. The Tier 1 leverage ratio was reported at 9.36%, and management emphasized that capital ratios remain above many peers. This cushion gives Amalgamated room to support its growth strategy—including its ambition to exceed $10 billion in assets—while absorbing potential credit volatility. The bank framed its capital stance as intentionally conservative, designed to back disciplined loan growth and protect against unexpected shocks while maintaining regulatory flexibility.

Detailed 2026 Financial Targets and Growth Ambitions

Management outlined an ambitious but measured 2026 framework, forecasting full-year net interest income of $327–$331 million, implying roughly 10–11% growth. Core pre‑tax, pre‑provision earnings are expected to reach $180–$183 million, or 9–10% growth, with targeted core return on average assets of about 1.35% and core return on tangible common equity around 15%. The plan assumes approximately 5% balance sheet growth and quarterly net loan growth of 1.5%–2%. Annual core operating expenses are projected at $188 million, with technology spending up about 18%, but management still aims to deliver positive core operating leverage of roughly 3–4%. The guidance also points to quarterly NII of $79–$81 million and further NIM expansion from the current 3.66% level, all on an average 2026 balance sheet of about $8.7 billion, reinforcing the bank’s readiness to scale into a $10 billion-plus institution.

Multifamily Asset Stress and Reserve Build

Notwithstanding overall loan growth, the quarter saw isolated credit pressure in a multifamily relationship tied to Washington, D.C.’s rapid rehousing program. A distressed borrower in this segment prompted a $1.9 million reserve build and a $7.5 million increase in nonaccrual multifamily loans, driving most of the uptick in criticized and classified multifamily assets. Management portrayed this as a concentrated issue rather than a systemic problem in the multifamily portfolio but acknowledged it as a key area to monitor, particularly as the bank continues to grow its multifamily exposure.

Elevated Charge-offs and Provision Outlook

Provision expense was elevated by several specific items, including roughly $800,000 in charge-offs related to a non-accrual multifamily loan that was moved to held‑for‑sale at a marked-down valuation. In addition, the bank continues to contend with ongoing charge-off trends in its consumer solar portfolio, which management expects to remain a drag on credit costs. Looking ahead, the bank anticipates that provision expense in 2026 will be broadly in line with 2025 levels, with only modest improvement at the margin. That stance reflects a conservative bias on credit quality even as management remains comfortable with overall reserve adequacy.

Loss on Sale of Low-Coupon Residential Loans

To reposition its balance sheet and free up capital for higher-yielding opportunities, Amalgamated sold $41.9 million of performing residential loans carrying sub‑3% coupons. The transaction generated a $3.8 million pretax loss, creating a notable gap between GAAP and core earnings for the quarter. While painful in the short term, the sale should help improve the earning profile of the loan book over time, as capital is reallocated away from legacy low-yield assets into higher-return segments such as C-PACE, multifamily and targeted CRE.

Non-Core Severance and Rising Expense Trajectory

Operating costs ticked higher in part due to non-core severance in the residential lending business, where the bank is adjusting its footprint following the loan sale and repositioning. Looking forward, management expects annual core operating expenses to rise to $188 million, with technology spending alone increasing around 18%. This expense trajectory reflects a deliberate push to invest in digital, infrastructure and capabilities to support a larger institution. However, it also introduces risk that near-term efficiency metrics could soften if revenue and loan growth do not materialize in line with plan, making execution on growth targets critical.

Political Deposit Concentration and Cycle Risk

The surge in political deposits—to $1.7 billion—underscores a unique strength of Amalgamated’s franchise but also highlights a key concentration risk. These election‑cycle balances can be highly seasonal, typically peaking before elections and then normalizing afterward. Management openly acknowledged that such deposits may be a source of post‑election volatility, necessitating careful liquidity and funding management. Investors will be watching how the bank manages these cyclical flows and offsets any runoff with more stable core deposits.

Tax Accounting Shift and ETR Uncertainty

Amalgamated adopted a new tax planning approach that runs certain tax credits through the tax provision itself, effectively making them part of core earnings rather than non-core adjustments. While this should ultimately make earnings quality and comparability stronger, guidance around the effective tax rate (ETR) created some short-term confusion, with references ranging from a 26.5% starting point to modeling around a 20.5% ETR. The upshot is that tax-driven earnings could exhibit some volatility as the new approach settles in, and investors may need to track tax assumptions more closely in their models.

Forward-Looking Guidance and Strategic Outlook

Looking ahead, Amalgamated’s 2026 roadmap calls for mid‑single‑digit balance sheet growth, sustained NIM expansion from the current 3.66% level, and quarterly net interest income in the $79–$81 million range. Management is targeting full‑year NII of $327–$331 million and core pre‑tax, pre‑provision earnings of $180–$183 million, underpinned by 1.5%–2% quarterly net loan growth and an average 2026 balance sheet of about $8.7 billion. The bank aims to deliver core ROA of 1.35% and core ROTCE of roughly 15%, while increasing core operating expenses to $188 million, largely due to an approximately 18% rise in technology spending. Despite the higher cost base, the plan still assumes positive core operating leverage of 3–4%. Management’s guidance paints a picture of a bank investing aggressively in infrastructure and growth initiatives while expecting those investments to translate into stronger profitability metrics over the next two years.

In sum, Amalgamated Bank’s earnings call showcased a franchise with strong momentum in deposits, margin and targeted loan growth, offset by manageable but visible credit and expense headwinds. Record deposit gathering, accelerating PACE activity and robust capital levels underpin an upbeat medium-term outlook, while isolated multifamily stress, continued consumer solar charge-offs and rising operating costs serve as key watchpoints. If management can execute on its 2026 growth and efficiency plan, the bank appears well positioned to scale toward and beyond the $10 billion asset mark with improving returns for shareholders.