NEW YORK, Jan. 28, 2021 (GLOBE NEWSWIRE) -- Amalgamated Bank (Nasdaq: AMAL) today announced financial results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Highlights

• Net income of $13.8 million, or $0.44 per diluted share, compared to $12.5 million, or $0.40 per diluted share, for the third quarter of 2020 and $12.0 million, or $0.37 per diluted share for the fourth quarter of 2019
• Core net income (non-GAAP)^[1] of $13.8 million, or $0.44 per diluted share, compared to $16.8 million, or $0.54 per diluted share for the third quarter of 2020 and $12.6 million, or $0.39 per diluted share, for the fourth quarter of 2019
• Deposit decline of $682.3 million, primarily due to the election cycle, to $5.3 billion compared to a balance of $6.0 billion on September 30, 2020
• Total loans of $3.4 billion, compared to a balance of $3.6 billion on September 30, 2020
• Growth in PACE assessments of $53.6 million, or 58.1% annualized, from a balance of $367.4 million on September 30, 2020
• Cost of deposits was 0.13%, compared to 0.14% for the third quarter of 2020 and 0.36% for the fourth quarter of 2019
• Net interest margin was 3.06%, compared to 2.88% for the third quarter of 2020 and 3.43% for the fourth quarter of 2019
• Common Equity Tier 1, Total Risk-Based, and Tier 1 Leverage capital ratios were 13.11%, 14.25%, and 7.97%, respectively, at December 31, 2020
• Total nonperforming assets were $82.2 million or 1.38% of total assets as of December 31, 2020, compared to $80.6 million or 1.22% of total assets at September 30, 2020 and $66.7 million, or 1.25% of total assets at December 31, 2019

Full Year 2020 Highlights

• Net income of $46.2 million, or $1.48 per diluted share, as compared to $47.2 million, or $1.47 per diluted share, for the full year of 2019
• Core net income (non-GAAP)^[1] of $50.3 million, or $1.61 per diluted share, as compared to $48.2 million, or $1.49 per diluted share, for the full year of 2019
• Deposit growth of $697.7 million, or 15.0%, compared to December 31, 2019
• Loan growth of $8.5 million, or 0.2%, compared to December 31, 2019
• Growth in PACE assessments of $157.2 million, or 59.6%, from a balance of $263.8 million on December 31, 2019
• Cost of deposits was 0.19%, compared to 0.35% for the full year of 2019
• Net interest margin was 3.11%, compared to 3.55% for the full year of 2019

Keith Mestrich, President and Chief Executive Officer of Amalgamated Bank, commented, “As I look back on our fourth quarter and full year 2020 results, I am not only pleased, but proud of all that we have accomplished in such challenging, unprecedented times, highlighted by our net income growth of 10.5% to $13.8 million in the fourth quarter as compared to $12.5 million in the third quarter of 2020. Additionally, we expanded our position this election cycle as demonstrated in our political deposit balance as of year-end of $602.8 million which compares to the 2018 cycle trough of $181.9 million. While we expect political deposits to modestly run off further through the first quarter, our results greatly exceeded our expectations. Our ability to succeed, proven during the ongoing pandemic, is largely attributed to the strong foundation we have built over our near 100-year history, and, in recent years, the work we have completed to strengthen the Bank’s operations, management team, and credit profile of our loan portfolio. Our team has worked diligently through the current crisis to proactively address issues in our portfolio and position the Bank for success as we expect the credit metrics of our loan portfolio to improve throughout 2021. Looking to the year ahead, there is much to be excited about as we continue to build upon our reputation as America’s Socially Responsible Bank and execute our growth strategy designed to increase the franchise value of Amalgamated. I look forward to working with the team that I am so very proud of as I transition into my new role as Special Advisor to the Board at the beginning of February.”

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^[1] Reconciliations of non-GAAP financial measures to the most comparable GAAP measure are set forth on the last two pages of the financial information accompanying this press release and may also be found on our website, www.amalgamatedbank.com.

COVID-19 Update

Amalgamated’s primary concern during the COVID-19 pandemic is for the health and well-being of the Bank’s employees, customers, and communities. Our employees continue to operate in a work from home environment, and we continue to perform well, effectively transitioning many customers to our digital platform, allowing for further consolidation of our branch network.

We have offered payment deferrals as an option for our consumer and commercial borrowers who are experiencing financial stress as a result of COVID-19 impacts. As of December 31, 2020, the following loan balances are still on deferral, accruing interest, and no loan has been on deferral longer than six months.

Results of Operations, Quarter Ended December 31, 2020

Net income for the fourth quarter of 2020 was $13.8 million, or $0.44 per diluted share, compared to $12.5 million, or $0.40 per diluted share, for the third quarter of 2020 and $12.0 million, or $0.37 per diluted share, for the fourth quarter of 2019. The $1.3 million increase for the 2020 fourth quarter, compared to the 2020 third quarter, was primarily due to a $5.2 million decrease in non-interest expense, partially offset by a $2.7 million decrease in non-interest income and a $1.2 million increase in the provision for loan losses.

Core net income (non-GAAP) for the fourth quarter of 2020 was $13.8 million, or $0.44 per diluted share, compared to $16.8 million, or $0.54 per diluted share, for the third quarter of 2020 and $12.6 million, or $0.39 per diluted share, for the fourth quarter of 2019. Core net income for the fourth quarter of 2020 included no adjustments to GAAP net income, and the third quarter of 2020 excluded $0.6 million of non-interest income gains on the sale of securities, $6.4 million in expense related to the closure of six branches and severance costs, and the tax effect of such adjustments. Core net income for the fourth quarter of 2019 excluded $0.2 million of non-interest income gains on the sale of securities, $1.1 million in expense related to the closure of one branch and severance costs, and the tax effect of such adjustments.

Net interest income was $45.7 million for the fourth quarter of 2020, compared to $45.2 million for the third quarter of 2020 and $42.3 million for the fourth quarter of 2019. The year-over-year increase of $3.4 million was primarily attributable to a decrease in interest expense due to a decrease in deposit rates paid and FHLB advances, and an increase in average securities of $734.3 million and average loans of $97.1 million, with such growth more than offsetting the lower yields earned on such assets. These impacts were partially offset by an increase in average interest-bearing deposits of $224.5 million.

Net interest margin was 3.06% for the fourth quarter of 2020, an increase of 18 basis points from 2.88% in the third quarter of 2020, and a decrease of 37 basis points from 3.43% in the fourth quarter of 2019. The accretion of the loan mark from the loans we acquired in our New Resource Bank acquisition contributed two basis points to our net interest margin in the third and fourth quarters of 2020, compared to five basis points in the fourth quarter of 2019. Prepayment penalties earned through loan income contributed 13 basis points to our net interest margin in the fourth quarter of 2020, compared to seven and two basis points in the third quarter of 2020 and the fourth quarter of 2019, respectively.

Provisions for loan losses totaled an expense of $4.6 million for the fourth quarter of 2020 compared to an expense of $0.1 million for the same period in 2019. The provision expense in the fourth quarter of 2020 was primarily driven by an $11.0 million charge-off primarily related to an indirect C&I loan, of which $8.3 million was reserved for in previous quarters, and by specific reserves on multifamily loans of $2.0 million.

Non-interest income was $10.0 million for the fourth quarter of 2020, compared to $12.8 million in the third quarter of 2020 and $7.8 million for the same period in 2019. This decrease of $2.7 million in the fourth quarter of 2020 compared to the previous quarter was primarily due to a decrease of $2.5 million in tax credits on equity investments in solar projects. The increase of $2.2 million in the fourth quarter of 2020 compared to the fourth quarter of 2019 was primarily due to $1.8 million in tax credits on equity investments in solar projects in the fourth quarter of 2020 and an increase of $1.3 million in gains on the sale of loans. These increases were partially offset by a $0.9 million decrease in Trust Department fees primarily related to the decrease in revenue from a real estate fund that is liquidating assets, the movement of funds to lower yielding products and market volatility. Our real-estate fund is expected to stop earnings fees in 2021; this fund generated $0.4 million in fees, included within Trust Department fees, during the three months ended December 31, 2020. Additionally, we expect a loss in equity method investments of approximately $5.6 million during 2021; this loss is due to the timing of the $7.4 million in tax benefits earned during 2020. These impacts do not include any benefits of new solar equity investments that we may make in the future.

Non-interest expense for the fourth quarter of 2020 was $32.7 million, a decrease of $5.2 million from the third quarter of 2020 and a decrease of $0.8 million from the fourth quarter of 2019. The decrease of $5.2 million from the previous quarter was primarily due to a $6.5 million decrease in occupancy and depreciation expenses related to closing six branches in New York City, partially offset by an increase of $1.8 million in professional fees related to the formation of a bank holding company, the transition of our CEO and other strategic initiatives.

Our provision for income tax expense was $4.6 million for the fourth quarter of 2020, compared to $4.3 million for the third quarter of 2020 and $4.4 million for the fourth quarter of 2019. Our effective tax rate for the fourth quarter of 2020 was 25.2%, compared to 25.4% for the third quarter of 2020 and 27.0% for the fourth quarter of 2019.

Results of Operations, Full Year Ended December 31, 2020

Net income for the year ended December 31, 2020 was $46.2 million, or $1.48 per average diluted share, compared to $47.2 million, or $1.47 per average diluted share, for year ended December 31, 2019. The $1.1 million decrease was primarily due to a $21.0 million increase in the provision for loan losses and a $6.1 million increase in non-interest expense, partially offset by a $13.4 million increase in net interest income and an $11.4 million increase in non-interest income.

Core net income (non-GAAP) for the year ended December 31, 2020 of $50.3 million, or $1.61 per diluted share, compared to $48.2 million or $1.49 per diluted share, for the year ended December 31, 2019. Core net income for the twelve months ended December 31, 2020 excludes branch closure expenses and the gain on sale of a closed branch, gains on the sale of securities, severance costs, and the tax effect of such adjustments.

Net interest income was $180.0 million for the year ended December 31, 2020, compared to $166.6 million for the year ended December 31, 2019. This increase of $13.4 million was primarily attributable to a decrease in interest expense due to a decrease in borrowings and deposit rate paid, and an increase in average securities of $552.5 million and average loans of $250.7 million, with such growth more than offsetting the lower yields earned on such assets. These impacts are partially offset by an increase in average interest-bearing deposits of $295.7 million.

Provisions for loan losses totaled an expense of $24.8 million for the year ended December 31, 2020, compared to an expense of $3.8 million for the year ended December 31, 2019. The provision expense for the year ended December 31, 2020 was primarily driven by a $4.4 million increase in allowance related to negative economic factors and payment deferrals in our loan portfolio, $17.0 million in charge offs primarily related to hotel, construction loans, and indirect C&I loans (of which $4.4 million was previously reserved for in 2019), a $4.6 million increase related to loan downgrades and other factors.

Non-interest income was $40.6 million for the year ended December 31, 2020, compared to $29.2 million for the year ended December 31, 2019, an increase of $11.4 million. This increase was primarily due to $7.4 million in tax credits on equity investments in solar projects, an increase of $2.5 million on gains on the sale of originated loans, a $1.5 million change in gain on the sale of securities, a $1.4 million gain on the sale of a branch reported in other non-interest income, and a $1.4 million increase in Bank-owned life insurance income due to the receipt of multiple death benefit payouts. These increases were partially offset by a $3.4 million decrease in Trust Department fees primarily related to the impact of low asset values in the first half of 2020 due to market fluctuations and the real estate fund that is liquidating its assets noted above.

Non-interest expense for the year ended December 31, 2020 was $133.9 million, an increase of $6.1 million from $127.8 million for the year ended December 31, 2019. The increase was primarily due to a $5.3 million increase in occupancy and depreciation expense related to branch closures and a $1.5 million increase in other expenses due to FDIC insurance rebates in 2019 that ceased in 2020.

We had income tax expense of $15.8 million for the year ended December 31, 2020, compared to $17.0 million for the year ended December 31, 2019. Our effective tax rate was 25.4% for the year ended December 31, 2020, compared to 26.4% for the year ended December 31, 2019.

Financial Condition

Total assets were $6.0 billion at December 31, 2020, compared to $5.3 billion at December 31, 2019. The increase of $0.7 billion was driven primarily by a $516.8 million increase in investment securities, of which $157.2 million was from PACE assessments, and a $154.8 million increase in resell agreements backed by Government Guaranteed loans. In the twelve months ended December 31, 2020, the Bank also made $26.1 million of investments in solar projects with federal tax benefits.

Total loans, net at December 31, 2020 were $3.4 billion, an increase of $8.5 million, or 0.2% annualized, compared to December 31, 2019. Loan growth in 2020 was primarily driven by a $202.9 million increase in C&I loans including $97.7 million of government guaranteed and Paycheck Protection Program loans, and a $27.6 million increase in consumer loans. These increases were partially offset by a $127.8 million decrease in residential loans and a $78.4 million decrease in commercial real estate and multifamily loans.

Deposits at December 31, 2020 were $5.3 billion, an increase of $0.7 billion, or 15.0% annualized, as compared to $4.6 billion as of December 31, 2019. Deposits held by politically active customers, such as campaigns, PACs, advocacy-based organizations, and state and national party committees were $603 million as of December 31, 2020, an increase of $24 million compared to $579 million as of December 31, 2019. Noninterest-bearing deposits represent 53% of average deposits and 49% of ending deposits for the year ended December 31, 2020, contributing to an average cost of deposits of 0.13% in the fourth quarter of 2020, a one basis point decrease from the previous quarter.

Nonperforming assets totaled $82.2 million, or 1.38% of period-end total assets at December 31, 2020, an increase of $15.1 million, compared with $66.7 million, or 1.25% of period-end total assets at December 31, 2019. The increase in non-performing assets at December 31, 2020 compared to the December 31, 2019 was primarily driven by the addition of $13.5 million of non-accruing residential first-lien mortgages related to the COVID-19 pandemic. These loans were moved to non-accrual after not resuming payments after six months of payment deferrals. Loans that were rated special mention or substandard increased by $305.7 million as of December 31, 2020 compared to December 31, 2019. This change was primarily due to an increase in CRE/multifamily loans categorized as special mention or substandard of $179.5 million and $84.4 million, respectively; these increases were primarily due to impacts of COVID-19 on rental income of these properties.

The allowance for loan losses increased $7.8 million to $41.6 million at December 31, 2020 from $33.8 million at December 31, 2019, primarily due to increases in allowance related to the coronavirus pandemic. At December 31, 2020, we had $73.7 million of impaired loans for which a specific allowance of $6.2 million was made, compared to $65.4 million of impaired loans at December 31, 2019 for which a specific allowance of $7.5 million was made. The ratio of allowance to total loans was 1.19% at December 31, 2020 and 0.98% at December 31, 2019.

Capital

As of December 31, 2020, our Common Equity Tier 1 Capital Ratio was 13.11%, Total Risk-Based Capital Ratio was 14.25%, and Tier-1 Leverage Capital Ratio was 7.97%, compared to 13.01%, 14.01% and 8.90%, respectively, as of December 31, 2019. Stockholders’ equity at December 31, 2020 was $535.8 million, compared to $490.5 million at December 31, 2019. The increase in stockholders’ equity was driven by $46.2 million of net income and a $14.0 million increase in accumulated other comprehensive income due to the mark to market on our securities portfolio, offset by a $7.0 million decrease due to share repurchases in the first quarter and a $10.1 million decrease due to dividends to shareholders.

Our tangible book value per share was $16.66 as of December 31, 2020 compared to $14.93 as of December 31, 2019.

About Amalgamated Bank

Amalgamated Bank is a New York-based full-service commercial bank and a chartered trust company with a combined network of six branches in New York City, Washington D.C., San Francisco, and Boston. Amalgamated was formed in 1923 as Amalgamated Bank of New York by the Amalgamated Clothing Workers of America, one of the country's oldest labor unions. Amalgamated provides commercial banking and trust services nationally and offers a full range of products and services to both commercial and retail customers. Amalgamated is a proud member of the Global Alliance for Banking on Values and is a certified B Corporation®. As of December 31, 2020, our total assets were $6.0 billion, total net loans were $3.4 billion, and total deposits were $5.3 billion. Additionally, as of December 31, 2020, the trust business held $36.8 billion in assets under custody and $15.4 billion in assets under management.