Amalgamated Financial Remains Appealing

Amalgamated Financial (AMAL) is exhibiting balance sheet growth, with deposits increasing to $7.41 billion in Q1 2025 and loan growth from $4.35 billion in 2023 to $4.62 billion in the most recent quarter. Net interest income also improved, rising to $70 million in Q1 2025, however, non-interest income declined due to equity method investment losses and lower service charges, impacting net profits. Despite some weakness in profitability and higher price-to-book ratios compared to peers, the author maintains a 'buy' rating due to the bank's strong asset quality, return on assets, and attractive valuation relative to earnings.

Analysis

Amalgamated Financial (AMAL), with a market capitalization of $935.4 million, presents a mixed but ultimately positive outlook, characterized by robust balance sheet expansion and strong asset quality metrics, despite some recent profitability headwinds and valuation concerns in specific areas. The bank's deposits grew to $7.41 billion in Q1 2025, a 3.2% increase from year-end 2024 and notably achieved without brokered deposits, which previously carried a higher cost of 5.16%. This growth is supported by an increase in not-for-profit deposits to $1.37 billion, though the inherent volatility from political deposits, which halved from $2 billion in Q3 2024 to $1 billion in Q4 2024, remains a characteristic. Loan balances also edged up to $4.62 billion in Q1 2025 from $4.35 billion in 2023, with a diversified portfolio including $1.37 billion in multifamily mortgages. Critically, debt has seen a significant reduction, falling from $304.9 million to $69.7 million. Financially, net interest income rose to $70 million in Q1 2025 from $66.4 million in Q1 2024, aided by an expanding net interest margin which reached 3.55%. However, non-interest income declined sharply in Q1 2025 to $6.4 million from $10.2 million year-over-year, primarily due to a $2.5 million equity method investment loss (versus a $2.1 million gain previously) and reduced service charges on deposit accounts from $6.1 million to $3.4 million; this caused Q1 2025 net profit to fall to $25 million from $27.2 million. Despite this quarterly profit dip, annual net profit grew from $88 million in 2023 to $106.4 million in 2024. AMAL trades at an attractive price-to-earnings multiple of 8.8 based on 2024 earnings, favorable compared to peers. Conversely, its price-to-book and price-to-tangible-book multiples are elevated. The bank's key strengths lie in its asset quality, with a return on assets of 1.22% and a return on equity of 14.05%, both surpassing industry benchmarks and most peers, underpinning the analyst's continued 'buy' recommendation despite a recent share price drop of 5.9% (while the S&P 500 rose 2%), though it has outperformed the broader market by 23.1% to 13% since May 2024.

Key Decisions for Investors

• Investors may find AMAL's strong balance sheet growth, evidenced by increased deposits to $7.41 billion in Q1 2025 and significant debt reduction to $69.7 million, coupled with robust asset quality metrics such as a 1.22% ROA and 14.05% ROE, fundamentally attractive despite recent share price volatility.
• Careful monitoring of non-interest income is warranted due to its sharp Q1 2025 decline to $6.4 million, and investors should note that while AMAL's P/E ratio of 8.8 is compelling, its P/B and P/TB multiples are elevated relative to peers.
• Consider the cyclical nature of AMAL's political deposits, which can cause significant fluctuations, and weigh the bank's strong earnings-based valuation and superior asset quality against the recent dip in quarterly profitability when making investment decisions.