Amalgamated Financial Corp. · NASDAQ:AMAL
Amalgamated Financial — Investor Day (November 2023)
66 slides from Amalgamated Financial's investor day presentation, Nov 29, 2023
Slide 1: 2023 Investor Day Presentation
amalgamatedbank.com Member FDIC Amalgamated Financial Corp. 2023 Investor Day Presentation November 29, 2023
Slide 2: Safe Harbor Statements
2 Safe Harbor Statements INTRODUCTION On March 1, 2021 (the “Effective Date”), Amalgamated Financial Corp. (the “Company”) completed its holding company reorganization and acquired all of the outstanding stock of Amalgamated Bank (the “Bank”). In this presentation, unless the context indicates other
Slide 3: Safe Harbor Statements cont.
3 Safe Harbor Statements cont. NON-GAAP FINANCIAL MEASURES This presentation refers to certain non-GAAP financial measures including, without limitation, “Core operating revenue,” “Core non-interest expense,” “Core non-interest income,” “Core net income,” “Tangible common equity,” “Average tangible
Slide 4: Key Themes
Key Themes 4 Leader in Social Responsibility Banking Unique and Valuable Deposit Gathering Franchise Lending Growth in Impact Real Estate and Sustainability Asset Remix and Margin Expansion Potential • Large yet fragmented market size • Do well financially and do good for and in the world • Continue
Slide 5: Our Four Strategic Framework Pillars
5 Our Four Strategic Framework Pillars
Slide 6: Key Financial Trends Through 3Q23
Ending Deposits + Brokered CDs Trends 6 KEY FINANCIAL TRENDS THROUGH 3Q23 ($ in millions) 10.4% CAGR(1) 11.5% CAGR(1) 23.5% CAGR(1)(4) NPA / Total Assets Loans + PACE 6.1% CAGR(1) (Loans) Core Pre-Tax Pre-Provision Earnings(2)(3) excluding the impact of solar tax equity investments 9.8% CAGR(1) (exc
Slide 7: Amalgamated Bank Commercial Impact Segments
Amalgamated Bank Commercial Impact Segments FOCUS IS ON 6 MISSION-BASED CUSTOMER SEGMENTS LABOR UNIONS • 30,000+ Labor Organizations • 14.6 million Americans • International, National and Local SUSTAINABILITY • Environmental action organizations • Sustainable businesses • Clean energy companies PHIL
Slide 8: Social Responsibility Banking Landscape
SOCIAL RESPONSIBILITY BANKING LANDSCAPE
Slide 9: Business Lines
9 6 Business Lines Commercial Treasury Management Commercial Real Estate Sustainable & Mission Based Lending Business Banking Trust & Investment Management Consumer Banking Coverage From Coast to Coast 169 Total Professionals • Regional Directors • Relationship Managers • Climate Lenders • Real Esta
Slide 10: Client Acquisition Strategy: A Team of Experts
Amalgamated’s relationship managers are accomplished executives who draw upon decades of experience, leadership, and established relationships from within their segments This diversity means we understand the intricacies and unique needs of our customers and their financial cycles better than anyone
Slide 11: Client Acquisition Strategy: Geographic Reach
Our differentiated strategy transcends geography and is built upon an enormous target market of like-minded organizations and individuals, each with their own unique set of needs 11 Our portfolio is national in scope; we proudly serve customers in all 50 states plus Washington, DC. Client Acquisitio
Slide 12: Political customers have unique challenges and priorities
Political customers have a unique set of challenges and priorities that are distinct from what typical businesses face while running their operations. Made possible by our team of experts strategy; we are deeply entrenched in the operations of this market’s specialized businesses processes. Amalgama
Slide 13: Political Deposits Historical Trend
HISTORICAL TREND ($ in billions) Political Deposits • Although cyclical, political deposit balances overall have shown an upward trend YoY - highs and lows have both grown higher ◦ High deposit points are reflected in the quarter preceding a major election season - orange bars ◦ Low deposit points a
Slide 14: Political Spending Over Time
Political Spending Over Time 14 TOTAL COST OF ELECTIONS (1998 - 2022) ($ in billions) *Presidential Election Cycle Source: OpenSecrets.org Elections Overview, 2023
Slide 15: Deposit Composition
Deposit Composition TOTAL CORE DEPOSITS(2) BY IMPACT SEGMENT ($ in billions) (1) CML - Other contains but is not limited to: nursing homes, commercial real estate, and non-impact accounts (2) Core Deposits is defined as total deposits excluding all brokered deposits, deposits from deposit listing se
Slide 16: Super-Core Deposits
Super-Core Deposits 16 SUPER-CORE DEPOSITS(2) BY IMPACT SEGMENT ($ in billions) 3Q23 HIGHLIGHTS (1) CML - Other contains but is not limited to: nursing homes, commercial real estate, and non-impact accounts (2) Super-core deposits are defined as all deposit accounts with a relationship length of ove
Slide 17: Mission-Aligned Deposit Franchise
MISSION-ALIGNED DEPOSIT FRANCHISE
Slide 18: Meeting the Need - Mission Based Customers
Meeting the Need - Mission Based Customers 18 Amalgamated Bank has a 100 year history of being the bank of choice for nonprofits, unions, foundations, and other organizations that are seeking to align their dollars with their mission. We meet the need by specializing in: • Deep industry insight; • C
Slide 19: Talent and Expertise
19 Mrs. Stratton has over 20 years of experience in providing cash management solutions to nonprofits, unions, and other social impact organizations. Mr. Taylor has over 13 years of experience in community finance, affordable housing, education, health care and environmental justice. Mr. Cody has ov
Slide 20: Banking with a Purpose, Service with an Impact
Banking with a Purpose, Service with an Impact 20 “We are proud to join forces with Amalgamated, an organization with a deep commitment to climate justice and a history of addressing a range of issues – from immigrant and reproductive rights to racial justice and LGBTQ+ rights – with bold solutions.
Slide 21: Union Sector Deposit Focus
Union Sector Deposit Focus 21 Amalgamated Bank is well positioned with unions, as union deposits have grown over 30% from ~$1.4 billion to $1.8 billion over 5 years • High touch service model – our union clients have a track record of being super-core deposit clients, with an average life of 17 year
Slide 22: Union Sector Deposit Focus: Customized Solutions
Union Sector Deposit Focus 22 Amalgamated Bank offers customized solutions that our union clients need including: • Strike loans and other sector specific lending solutions; • Seamless ACH and other electronic payment capability that can handle high volume benefit payments; • Integrated investment m
Slide 23: Union Clients and Growth Opportunities
• Union Sector expertise and pro union policies • Extensive experience executing high volume benefit payments seamlessly • Customized credit products Product Solutions • Operating Checking and Money Market Savings- $20 million • Mortgage and line of credit - $6 million Future Growth Opportunities •
Slide 24: Non-Profit Sector Deposit Focus
Non-Profit Sector Deposit Focus 24 Amalgamated Bank’s talented team and culture has deepened relationships with large non-profits, with deposits growing over 400% from $0.15 billion to $0.78 billion over 5 years. • Comprehensive understanding of the treasury management needs of non-profit organizati
Slide 25: Non-Profit Sector Deposit Focus: Customized Solutions
Non-Profit Sector Deposit Focus 25 Amalgamated Bank offers customized solutions that non-profits need including: • Lending solutions to address delays in the funding of government contracts; • Stock donation and other specifically tailored investment accounts; • Investment policy structure, guidance
Slide 26: Non-Profit Clients and Growth Opportunities
• Comprehensive understanding of treasury management needs • Ability to process large deposit in/outflows • Mission alignment • Operating Checking and Money Market Savings - $70 million • Investments • Additional operating and cash management opportunities • Ability to create an innovative affiliate
Slide 27: Sustainability Sector Deposit Focus
Sustainability Sector Deposit Focus Amalgamated Bank is well positioned grow with sustainability organizations, with deposits growing over 100% from $0.19 billion to $0.44 billion over 5 years. ◦ Increased focus to reduce carbon footprint and focus on funding climate solutions. ◦ 80% of our lending
Slide 28: Sustainability Sector Deposit Focus: Customized Solutions
Sustainability Sector Deposit Focus 28 Amalgamated Bank offers customized solutions for the sustainability sector including: • Customized savings solutions with competitive rates of returns; allowing clients to increase impact; • Lending solutions that are designed to address delays in grant funding
Slide 29: Sustainability Clients and Growth Opportunities
• Customized savings solution which allowed the client to receive full FDIC insurance while maintaining mission impact • Amalgamated Bank’s strong reputation of being a global leader in climate justice • Money Market Savings - $27 million • Additional $50 million in deposit and investment opportunit
Slide 30: Q&A
Q&A
Slide 31: Climate and Impact Lending
CLIMATE AND IMPACT LENDING
Slide 32: Climate Leadership in a Climate Focused Economy
Climate Leadership in a Climate Focused Economy • First US bank to have a comprehensive policy driven exit from fossil fuel finance (2016) • First US bank to commit to disclose loan portfolio financed emissions (2018) • First US bank to commit to the UN Principles for Responsible Banking and Collect
Slide 33: Growth in Climate Solutions
Growth in Climate Solutions 33 We have a plan and we are executing % OF CLIMATE-RELATED SOLUTIONS IN TOTAL LENDING PORTFOLIO TOTAL CLIMATE/SUSTAINABILITY DEPOSITS ($ in billions)
Slide 34: Sustainable Lending Expertise
Sustainable Lending Expertise • In 2018, Amalgamated acquired New Resource Bank, a values based financial institution headquartered in San Francisco • NRB was a pioneer in sustainable banking, developing loan impact verticals in climate, non-profit, and green real estate • Early capital provider for
Slide 35: Impact Verticals
Impact Verticals Climate Protection: Renewable energy, energy efficiency, energy storage Housing: LMI and Workforce housing Community Empowerment: Non-profits, CDFIs, Labor Unions and Political Organizations Sustainable Commerce: Manufacturers, distributors, service companies with sustainable practi
Slide 36: Portfolio Growth by Impact Vertical
Portfolio Growth by Impact Vertical 36 Balances grew from $3.4 billion to $4.1 billion, a 20% increase year over year Growth led by Climate Finance ($419 million or 25%) and Housing ($193 million or 23%) • PACE Balances accounted for $253 million of the Climate Finance growth 3Q22 TO 3Q23 GROWTH BY
Slide 37: Net Zero Targets
Net Zero Targets 37 Electricity Grids $523bn Battery Storage $52bn Low Emission Fuels $132bn EV Chargers $38bn Renewables $1.15tn Energy Efficiency $610bn Electrification $302bn Hydrogen End Use $49bn Hydrogen Infrastructure $7bn Nuclear Generation $90bn Carbon Capture Utilization & Storage | $90bn
Slide 38: Climate Finance – A Growth Industry
Climate Finance – A Growth Industry 38 Huge Opportunity to Finance Solar, Battery Storage, & Energy Efficiency • $3 Trillion of investment required for the U.S. to achieve net zero emissions by 2050 • Renewable Portfolio Standards and Mandatory CO2 reduction/electrification • Inflation Reduction Act
Slide 39: Climate Finance – Experienced Team
Climate Finance – Experienced Team 39 Bill Peterson – Senior Lending Officer & Director of Climate Finance • 35 years in commercial lending and credit administration • Pioneer of sustainable banking at New Resource Bank • 12+ years financing energy efficiency and renewable energy Skyler Webster FVP
Slide 40: Climate Finance – Deep Dive
Climate Finance – Deep Dive Climate Finance now accounts for $924 million in loans and $1 billion of PACE assets across 8 segments 40 Impressive growth should continue as a result of Inflation Reduction Act Strong momentum heading into 2024 in Commercial & Community Solar, Battery Storage, & PACE (1
Slide 41: PACE Assets
PACE Assets 41 Property Assessed Clean Energy - A Unique Financing Vehicle • PACE was first implemented in Berkeley, CA in the early 2000s • Utilized the concept of bond financing through tax assessments for public benefit improvements • Public benefit was expanded to include energy efficiency and r
Slide 42: Commercial Solar Basics
Commercial Solar Basics Project Finance Structure • Project owner (Sponsor) seeking financing for solar asset held by an SPE (Borrowing Entity) ◦ Senior Lender (50-60%) – Leveraging long term project cash flow (i.e. 7-yr loan term; 20-yr amort) ◦ Third-party Tax Equity Investor (30%) - Monetizing th
Slide 43: Community Solar Basics
Community Solar Basics Overview • System owner sells utility bill credits to offsite subscribers (residents, businesses and municipalities), anywhere in the utility’s service territory. • Subscribers receive a monthly bill credit based on their % share of energy produced by the system. Benefits • In
Slide 44: Community Solar Basics
44 Community Solar Basics 1. Owner builds Community Solar Project and delivers energy to the grid 2. Utility delivers bill credits to subscribers based on their % share of production 3. Subscribers pay Owner for bill credits
Slide 45: Community Solar - Case Study
Community Solar - Case Study • Loan - $23 Million, 7-year Delayed Draw Term Loan • Location – Systems located in upstate NY, subscribers located “offsite” across service territory • • What We Like - ◦ Highly experienced Sponsor (Owner/Operator) ◦ Long-term reliable cash flow through 25-year NY Commu
Slide 46: Commercial & Community Solar Outlook
Commercial & Community Solar Outlook 46 Solar Industry Trends • 24% average annual growth rate over 10 years, largest new supply of energy each of last 5-yrs • IRA will help U.S. solar development nearly triple in 5-years, due to tax incentives and long term certainty • State RPS targets/mandates co
Slide 47: Q&A
Q&A
Slide 48: Commercial Lending
COMMERCIAL LENDING
Slide 49: Commercial Lending Team
Commercial Lending 49 John Saltos Director of Commercial Lending (25+ Years of Banking Experience) Jacob Nimmer Director of Commercial Real Estate (15+ Years of Banking Experience) Mitch Gorelick Team Leader Portfolio Management / Originator (5+ Years CRE Experience) Michael Madonia Director of Busi
Slide 50: Commercial Lending Strategy Overview
Commercial Lending • The composition of the AMAL team brings together industry leading subject matter experts in energy financing, commercial real estate (multifamily / industrial), and impact lending ◦ Experienced management team with a demonstrated track record in banking, allows AMAL to be nimble
Slide 51: Commercial Lending Strategy Overview
Commercial Lending • In the past two years, AMAL has been consistently transitioning the asset portfolio from securities towards relationship and mission driven lending opportunities that have increased net interest margin while improving credit discipline ◦ The Bank has increased its commercial loa
Slide 52: Commercial Lending Strategy Overview Since 2022
Commercial Lending • Opportunistically expanding the balance sheet with a continuous emphasis on Portfolio Management for the existing portfolio ◦ Direct Lending balances in the C&I book have grown ~30% (~$250MM increase) year over year ▪ Loan growth through mission aligned lending in C&I (Renewable
Slide 53: Commercial Lending Portfolio Management
Commercial Lending • Success in a more proactive portfolio management / monitoring effort ◦ Emphasis on identifying potential weaknesses with credits within the portfolio ahead of time and working with our customers to work through existing issues ◦ Clear exit or retention strategy for every name in
Slide 54: Commercial Lending Forward-Looking Strategy Overview
Commercial Lending • Manage interest rate risk by being well ahead of future maturities ◦ Proactive portfolio review and borrower outreach ◦ Clear exit or retention strategy for every name in the portfolio • Continue to recycle capital into higher interest-earning assets ◦ AMAL’s distinctive asset m
Slide 55: Q3-23 Financial Performance Review
Q3-23 FINANCIAL PERFORMANCE REVIEW
Slide 56: Quarter 3 - Key Highlights and Progress
• Neutral balance sheet ◦ Slightly higher than neutral - held cash to fund $100mm of Brokered CD's matured in Oct and $52mm maturing in Nov/Dec • 8.5% T1 baseline capital target ◦ Slightly slower capital build due to higher than expected deposit balances • Reduce traditional securities-to-loans rati
Slide 57: Margin Expansion Potential
57 Margin Expansion Potential LOANS PORTFOLIO(1) ($ in billions) SHORT-TERM BORROWINGS PORTFOLIO(2) ($ in billions) (1) For more information on loan maturities, please see page 60 of our Third Quarter 2023 10Q (2) For more information on brokered CD and time deposit maturities, please see page 30 of
Slide 58: Key Themes
Key Themes 58 Leader in Social Responsibility Banking Unique and Valuable Deposit Gathering Franchise Lending Growth in Impact Real Estate and Sustainability Asset Remix and Margin Expansion Potential • Large yet fragmented market size • Do well financially and do good for and in the world • Continu
Slide 59: Q&A
Q&A
Slide 60: Appendix
Appendix
Slide 61: Reconciliation of Non-GAAP Financials
Reconciliation of Non-GAAP Financials 61 As of and for the As of and for the Three Months Ended Nine Months Ended (in thousands) September 30, 2023 June 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Core operating revenue Net Interest income (GAAP) $ 63,728 $ 62,985 $ 67,628 $ 19
Slide 62: Reconciliation of Non-GAAP Financials
Reconciliation of Non-GAAP Financials 62 As of and for the As of and for the Three Months Ended Nine Months Ended (in thousands) September 30, 2023 June 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Tangible common equity Stockholders' equity (GAAP) $ 546,291 $ 528,614 $ 487,738
Slide 63: Solar Tax-Equity Investments
Solar Tax-Equity Investments OVERVIEW OF SOLAR TAX EQUITY INVESTMENTS • Metrics excluding the impact of tax credits or accelerated depreciation is a meaningful way to evaluate our performance and are adjusted in accordance with the below chart ◦ Immediate realization of tax benefits and subsequent a
Slide 64: The Fundamentals of the Climate Crisis: Why We Care
The Fundamentals of the Climate Crisis: Why We Care 64
Slide 65: The Fundamentals of the Climate Crisis: Why We Act
The Fundamentals of the Climate Crisis: Why We Act 65Source: UN Production Gap Report, 2023
Slide 66: Thank You
amalgamatedbank.com Member FDIC Thank You