Amalgamated Bank ((AMAL)) has held its Q1 earnings call. Read on for the main highlights of the call.
Amalgamated Bank’s recent earnings call presented a balanced outlook, highlighting strong deposit growth, solid net interest income, and robust capital returns. However, concerns were raised due to an increase in nonperforming assets, higher professional fees, and a nonaccrual loan in the solar sector. Despite these challenges, the bank remains confident in its growth projections, resulting in a neutral overall sentiment.
Strong Deposit Growth
Amalgamated Financial reported a significant increase in deposits, with a total growth of $446 million in Q1. Notably, political deposits surged by $103 million, marking an 11% increase to reach $1.1 billion. This growth reflects the bank’s ability to attract and retain deposits, even in a competitive market.
Solid Net Interest Income
The bank’s net interest income was reported at $70.6 million, aligning with the guidance range of $70-$71 million. With a strong net interest margin of 3.55%, Amalgamated Bank demonstrated its ability to maintain profitability despite market fluctuations.
Robust Capital Returns
Amalgamated Bank returned more capital to shareholders than ever before, with a dividend of $0.14 per share and $3.5 million in stock repurchases. This brought the payout ratio to over 30% of earnings, showcasing the bank’s commitment to rewarding its investors.
Resilient Balance Sheet
The bank maintained a low-risk asset profile with high levels of liquidity. It improved its CET1 ratio by 43 basis points to 14.32%, underscoring its financial stability and resilience in uncertain times.
New Headquarters Announcement
Amalgamated Bank announced plans to move to a new headquarters in New York City by mid-2026. This strategic move aims to attract and retain top-tier talent, positioning the bank for future growth and success.
Projected Revenue Growth
Despite Q1 being expected to have the most earnings pressure, the bank expressed confidence in revenue growth and margin expansion throughout the year. This optimism is supported by strategic initiatives and market positioning.
Nonaccrual Loan
An $8.3 million commercial industrial loan in the solar sector moved to nonaccrual status. However, the bank noted sufficient collateral value, mitigating potential risks associated with this loan.
Core Earnings and Revenue Decline
The bank experienced a modest decline in core earnings and revenue from the fourth quarter, attributed to expected rate cuts and balance sheet adjustments. This decline was anticipated and factored into the bank’s strategic planning.
Higher Professional Fees
Professional fees increased by $2.1 million due to costs associated with digital transformation and partnerships. These investments are expected to enhance the bank’s operational efficiency and competitive edge.
Increased Nonperforming Assets
Nonperforming assets rose by $8 million to $33.9 million, primarily due to a rise in commercial industrial nonaccrual loans. This increase highlights the challenges faced in managing asset quality.
Criticized Assets and Charge-offs
While criticized assets decreased by $12 million, the bank reported $1.7 million in charge-offs related to consumer solar loans. This reflects ongoing efforts to manage and mitigate credit risks.
Muted C&I Loan Growth
C&I loan growth is expected to remain muted in the second quarter, with reacceleration anticipated in the latter half of the year. This cautious outlook reflects the bank’s strategic approach to lending in a volatile market.
Forward-Looking Guidance
During the earnings call, Amalgamated Financial provided detailed guidance, demonstrating strong financial performance despite market uncertainties. Core earnings per share were reported at $0.88, supported by net interest income of $70.6 million. The bank maintained its full-year guidance for core pretax pre-provision earnings at $159-$163 million and net interest income at $293-$297 million, projecting revenue growth and margin expansion for the year.
In conclusion, Amalgamated Bank’s earnings call presented a balanced view of its financial health, with strong deposit growth and capital returns countered by challenges in asset quality and increased professional fees. The bank’s forward-looking guidance remains optimistic, with expectations of revenue growth and margin expansion throughout the year. Investors and market watchers will be keen to see how these projections unfold in the coming quarters.