Amalgamated Financial Corporation (NASDAQ:AMAL) discussed its Q3 2023 earnings in a recent conference call, outlining its strategy for growth, improvements in key ratios, and a commitment to sustainability. The company emphasized its involvement in combating climate change and participation in the UN Zero Target Banking Alliance. AFC also highlighted profitability and a mission-aligned business model, with a focus on increasing capital position and improving profitability in the coming year.
Key takeaways from the call include:
- AFC is preparing its balance sheet for growth by the second half of next year, with a strategy focusing on an improved leverage ratio and tangible common equity ratio. This aligns with InvestingPro's data which indicates that AFC has a strong return on assets at 1.15% LTM2023.Q2.
- The company reported growth in its loan portfolio, especially in the commercial and industrial asset class, with total loans receivable net of deferred fees and costs at $4.4 billion. This is complemented by a solid revenue growth of 20.83% LTM2023.Q2 as reported by InvestingPro.
- Deposits increased, including new deposit inflows from various customer segments. The high-quality super-core deposit base was $3.4 billion, with total uninsured deposits at $3.8 billion or 54% of total deposits.
- The bank reported a net interest margin of 3.29%, with loan yields increasing. The core return on average equity and core return on average tangible common equity were 17.2% and 17.7% respectively. This is in line with InvestingPro Tips suggesting that AFC yields high return on invested capital.
- AFC is focusing on sustainability, participating in the UN Zero Target Banking Alliance, and setting zero-based emission targets.
- The bank filed for a merchant code for gun retailers to support law enforcement efforts in detecting illicit firearm purchases.
- The company expects stability in Q4 expenses, with a baseline of around $37 million, and anticipates reducing the balance sheet size by $150 million through maturing brokered CDs.
- AFC CEO Priscilla Sims Brown expressed concern over recent mass shootings and emphasized the need for collective efforts to end gun violence.
Amalgamated Bank (NASDAQ:AMAL)'s credit rating remained stable, and it maintained significant liquidity with cash and immediate borrowing capacity of $2.6 billion and $576 million of two-day capacity from unpledged securities. The bank expects to continue repurchasing shares while meeting its capital targets and estimates a tax rate of around 27.5% for next year. This aligns with the InvestingPro Tip that AFC's strong earnings should allow management to continue dividend payments, with the bank showing a healthy dividend yield of 2.48% Y2023.D300.
The bank's CEO, Priscilla Sims Brown, also addressed the growth in political deposits and the bank's focus on improving the quality of trust relationships. She mentioned a potential charge-off of $1.2 million in the multifamily sector and stated that new loans are yielding around 7.25% on average. Jason Darby, another representative from the company, mentioned that the full-year projections would be released during the Q4 earnings release and that they expect the balance sheet to grow. He also mentioned that a significant portion of the loan portfolio is set to mature, offering an opportunity to replace assets and maintain the balance sheet.
The call concluded with the management expressing their willingness to answer further questions and bidding farewell to participants. The company is looking forward to Q4, expecting loan growth of 2-3% per quarter, and is prepared for another potential credit issue, despite overall improvements in credit quality.
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