Executive Summary / Key Takeaways

• Amalgamated Financial (AMAL) is a mission-driven bank demonstrating robust financial performance, with Q3 2025 core EPS of $0.91 and year-to-date core EPS growth of approximately 3%, positioning its stock value well above recent trading levels.
• The bank's unique and sticky deposit franchise, particularly in political, climate, and not-for-profit segments, continues to drive significant growth, with over $415 million in new deposit generation in Q3 2025.
• Strategic investments in a "data-first, fully integrated digital modernization" platform, which went live in Q3 2025, are enhancing operational efficiency, customer experience, and are foundational for scalable future revenue growth.
• AMAL is strategically expanding its lending platform, accelerating loan growth in commercial and industrial (C&I), multifamily, and commercial real estate (CRE) sectors, alongside a growing Property Assessed Clean Energy (PACE) portfolio, while de-emphasizing consumer solar and residential loans.
• Despite an uncertain economic environment and specific credit challenges, the bank maintains strong credit quality metrics, high liquidity, and robust capital ratios, supported by a conservative risk management approach and opportunistic share repurchases.

The Purpose-Driven Powerhouse: Amalgamated's Strategic Foundation

Amalgamated Financial Corp. (AMAL) stands as a distinctive player in the U.S. banking sector, rooted in a century-long legacy of mission-driven finance. Founded in 1923 by the Amalgamated Clothing Workers of America, the bank has consistently aligned its financial services with social responsibility, catering to a unique clientele that includes advocacy-based non-profits, national labor unions, political organizations, and socially responsible businesses. This foundational ethos has not only shaped its identity but also underpins its strategic resilience and competitive positioning in a dynamic industry. As of September 30, 2025, the company reported total assets of $8.68 billion, with total loans, net of allowance for credit losses, at $4.73 billion, and total deposits reaching $7.77 billion.

The bank's overarching strategy centers on leveraging its differentiated mission to attract and retain a "sticky" deposit base, while simultaneously expanding its lending platform into higher-growth, mission-aligned commercial segments. This involves a deliberate shift away from certain consumer portfolios and a significant investment in technological modernization to ensure scalable and efficient growth. AMAL's commitment to social and environmental performance is further solidified by its B Corporation™ certification and its active roles in global initiatives like the UN convened Net Zero Banking Alliance.

Technological Edge: Powering Efficiency and Customer Engagement

A critical component of Amalgamated's strategy for scalable growth and enhanced competitiveness is its investment in a "data-first, fully integrated digital modernization" program. This platform, which went live in the third quarter of 2025, is designed to drive improved productivity across the organization. It provides a holistic view of customers, enabling the bank to better understand their needs and deliver more customized solutions. Ultimately, this technological differentiator is expected to deliver improved revenue growth and is considered essential to maintaining competitiveness and fostering customer loyalty.

The tangible benefits of this digital transformation are multifaceted. Operationally, it streamlines processes, contributing to the bank's impressive core efficiency ratio of 50.17% in Q3 2025, which places Amalgamated at the top of its peer group ($5 billion to $10 billion asset range, and even competitive with banks in the $10 billion to $100 billion range). For investors, this translates into a stronger competitive moat, as enhanced digital capabilities support higher operating margins and a more efficient cost structure. The strategic intent behind this R&D is to prepare Amalgamated for its eventual growth beyond the $10 billion asset mark, ensuring that its infrastructure can support increased scale without compromising performance.

A Robust and Differentiated Business Model

Amalgamated's business model is characterized by its distinct segment focus across Commercial Banking, Consumer Banking, and Trust and Investment Management, all underpinned by a powerful deposit-gathering capability.

Commercial Banking: Driving Strategic Loan Growth

The Commercial Banking division is at the forefront of AMAL's asset growth strategy, concentrating on Commercial & Industrial (C&I), Multifamily, and Commercial Real Estate (CRE) lending. As of September 30, 2025, the total commercial loan portfolio stood at $3.15 billion, representing 65.70% of total loans. This segment saw significant momentum in Q3 2025, with loans growing by $99 million across these growth-mode portfolios, marking a 3.3% increase and an acceleration from the 2.1% growth rate in Q2 2025.

• C&I Loans: Increased by 8.40% to $1.27 billion from December 31, 2024, with new originations in Q3 2025 yielding in the high 6% to low 7% range. The bank is actively recruiting C&I experts and focusing on sustainable lending to build a more predictable business.
• Multifamily Loans: Grew by 7.60% to $1.45 billion from December 31, 2024, with Q3 2025 originations yielding just above 6%. The portfolio has 66% exposure in New York City, with an average current loan-to-value (LTV) of approximately 55%.
• CRE Loans: Decreased by 3.70% to $396.20 million from December 31, 2024, with 59% exposure in New York City and an average current LTV of approximately 44%.
• PACE Assessments: The Property Assessed Clean Energy (PACE) portfolio, a key component of sustainable lending, saw total assessments grow by $27.4 million in Q3 2025, with over 8% growth in Commercial PACE (C-PACE). Total PACE assessments (available for sale and held-to-maturity securities) reached $1.24 billion as of September 30, 2025, with originations yielding around 7%. The bank is targeting approximately $150 million in net PACE growth for 2025, with C-PACE originations expected to ramp up to $15 million to $20 million per quarter in the second half of the year.

Consumer Banking: A Strategic Run-Off

In contrast to its commercial growth, Amalgamated is strategically de-emphasizing its consumer solar and residential real estate loan portfolios, which are primarily in run-off mode. The total retail loan portfolio decreased from $1.71 billion at December 31, 2024, to $1.64 billion at September 30, 2025. While the consumer solar portfolio is expected to continue experiencing stress, the bank is well-reserved with 7.26% coverage at period end and is actively working to acquire servicing rights to improve collections and recoveries.

Deposit Franchise: A Core Competitive Advantage

Amalgamated's deposit franchise is a standout feature, consistently demonstrating "across-the-board share gain" and "remarkable stability." Total deposits increased by $589.40 million to $7.77 billion at September 30, 2025, from $7.18 billion at December 31, 2024. In Q3 2025 alone, the bank generated over $415 million in new deposits, with all segments contributing to this growth.

• Political Deposits: A significant driver, increasing by $235 million (19%) to $1.4 billion in Q3 2025, as fundraising accelerates towards midterm elections.
• Climate and Sustainability Deposits: Grew by $86 million (21%) in Q3 2025.
• Not-for-profit Deposits: Increased by $42 million in Q3 2025, a segment that has been "one of our best growth segments," growing approximately 29% in the 12 months ended Q1 2025 to $1.37 billion.
• Labor Deposits: Grew by $26 million in Q3 2025.

The bank's ability to attract and retain these mission-aligned deposits provides a stable and low-cost funding source. Non-interest-bearing deposits, while declining to 36.80% of average deposits in Q3 2025 from 49.10% in Q3 2024, still represent a substantial portion of its funding. The bank also strategically utilizes off-balance sheet deposits, holding $265 million at the end of Q3 2025, as a lever to manage balance sheet size and fund loan growth.

Trust and Investment Management: Future Growth Driver

While not a primary revenue driver in the immediate term, the Trust and Investment Management division is a strategic focus for future diversification. As of September 30, 2025, assets under custody were $37.90 billion and assets under management were $16.60 billion. The bank is investing in this business to generate more revenue and diversify its revenue mix, with "2026 results in mind."

Financial Performance and Capital Strength

Amalgamated Financial has consistently delivered solid financial results, reflecting its strategic execution and disciplined management.

• Earnings: For Q3 2025, net income was $26.8 million ($0.88 diluted EPS), with core net income at $27.6 million ($0.91 diluted EPS). Year-to-date core EPS reached $2.66, representing approximately 3% growth. This follows a "stellar" 2024, where core EPS grew over 18% and the company achieved record earnings of $106.4 million.

• Net Interest Income (NII) and Margin (NIM): NII increased by $4.30 million (6%) to $76.4 million in Q3 2025 compared to Q3 2024. The net interest spread expanded by 61 basis points to 2.51%, and the net interest margin increased by 9 basis points to 3.60% in Q3 2025. This was primarily driven by higher yields and average balances on interest-earning assets, with the yield on average earning assets rising 15 basis points to 5.16%.
• Non-Interest Income and Expense: Non-interest income saw a modest increase of $0.20 million to $9.20 million in Q3 2025, benefiting from decreased losses on loan and security sales and higher equity investment income, despite a significant decrease in service charges on deposit accounts. Non-interest expense increased by $2.70 million to $43.60 million in Q3 2025, primarily due to higher compensation, employee benefits, and technology costs, reflecting strategic investments. The core efficiency ratio of 50.17% in Q3 2025 highlights operational effectiveness.
• Capital Ratios: Amalgamated maintains robust capital. As of September 30, 2025, the Common Equity Tier 1 (CET1) ratio was 14.21%, and the Tier 1 leverage ratio was 9.18%. These ratios are "industry-leading" and demonstrate the strength of its balance sheet. The bank actively manages its capital, improving its tangible common equity (TCE) ratio to 8.79% in Q3 2025 and engaging in opportunistic share repurchases. In Q3 2025, approximately $10.4 million was returned to shareholders through buybacks and a $0.14 quarterly dividend. A new $40 million share repurchase program was authorized in March 2025, with management believing the stock is "currently very undervalued."

Credit Quality and Risk Management

Amalgamated takes a conservative and proactive approach to credit quality and risk management. As of September 30, 2025, nonperforming assets totaled $23 million, or 0.26% of total assets, a decrease of $2.90 million from December 31, 2024. This represents a 34.6% decrease in nonperforming assets and an improvement in overall credit quality metrics to $79.2 million or 1.67% of total loans, the best ratio since Priscilla Sims Brown became CEO.

• Allowance for Credit Losses (ACL): The ACL on loans decreased by $3.60 million to $56.50 million at September 30, 2025, from $60.10 million at December 31, 2024, primarily due to a lower reserve calculation requirement and specific reserve releases. The ratio of allowance to total loans was 1.18% at September 30, 2025, down from 1.29% at December 31, 2024.
• Problem Loan Resolution: In Q3 2025, the bank successfully resolved a $10.8 million syndicated C&I business loan that was under stress, resulting in a $5.4 million charge-off but with a P&L impact of only $3.1 million due to prior reserves. This decisive action improved nonperforming assets. A specific reserve of $1.9 million was also built against a multifamily property due to an updated appraisal impacting its LTV, moving the credit to nonaccrual status.
• Consumer Solar Stress: The consumer solar portfolio is expected to "continue to experience stress," with net charge-offs in Q3 2025 at 0.81% of total loans, an elevated number. However, the bank is "well reserved" for this portfolio and is actively working to acquire servicing rights to improve collections.
• Methodology Enhancements: Effective September 30, 2025, the company enhanced its ACL calculation, including a change in software vendors and a shift to the weighted average remaining maturity (WARM) method for consumer solar loans, aiming for better alignment with portfolio risk and improved operational efficiency.

Competitive Positioning and Strategic Outlook

Amalgamated Financial operates in a competitive landscape dominated by larger national and regional banks like JPMorgan Chase (JPM), Bank of America (BAC), Citizens Financial Group (CFG), and PNC Financial Services Group (PNC). While these larger players benefit from immense scale, extensive branch networks, and advanced technological capabilities, AMAL carves out a distinct niche through its mission-driven approach and specialized client segments.

AMAL's "unique sticky deposit base" and "superior profitability" make it a "standout among midsized peers." Its core efficiency ratio of 50.17% in Q3 2025 positions it favorably against banks in both the $5 billion-$10 billion and $10 billion-$100 billion asset ranges. The bank's recent ranking as the #1 most improved bank in the $2 billion-$10 billion asset size range by American Banker further validates its strong performance and competitive trajectory.

The digital modernization platform is crucial for AMAL to "remain competitive and to drive loyalty," addressing potential technological gaps against larger rivals. While larger banks may have faster digital transaction capabilities, AMAL's focus on a "holistic view of our customers" and "customized solutions" leverages its niche strength. Its expansion into new markets like California, with strategic hires for commercial real estate and climate/C&I lending, aims to broaden its reach while maintaining its mission alignment.

Forward-Looking Guidance and Assumptions

Amalgamated Financial has provided clear guidance for 2025, reflecting its strategic investments and expectations for the economic environment.

• Full-Year 2025 Guidance (Revised Q3 2025):
  • Core Pretax Pre-provision Earnings: Raised to $164 million to $165 million.
  • Net Interest Income: Tightened to $295 million to $296 million.
  • This guidance considers the effect of the forward rate curve of 2025, with an estimated $2.2 million decrease in annual NII for a parallel 25 basis point decrease in interest rates beyond the forward curve.
• Q4 2025 Outlook:
  • Average Balance Sheet Size: Approximately $8.65 billion.
  • Net Interest Income: Expected to range between $75 million and $76 million.
  • Net Interest Margin: Expected to remain near flat relative to Q3 2025, as loan yields are projected to drop due to repricing, with the Fed modeled to cut rates by a total of 50 basis points in Q4 2025.
• Expenses: Annual operating expenses are targeted at approximately $170 million, with a ramp-up expected in the latter half of the year due to additional hiring and technology investments.
• Loan Growth: The bank targets around 2% loan growth per quarter for 2025, with a balanced mix between commercial real estate and C&I. C-PACE originations are expected to ramp up to an average of $15 million to $20 million per quarter in the second half of 2025.
• Capital Allocation: The bank targets a quarterly payout ratio of at least 20% to 25% (dividends and share repurchases), with flexibility to exceed this opportunistically.

Conclusion

Amalgamated Financial Corp. presents a compelling investment thesis, grounded in its unique mission-driven identity and a robust strategy for sustainable growth. The bank's ability to consistently generate strong core earnings, coupled with its resilient and growing deposit franchise, underscores its operational effectiveness. Strategic investments in digital modernization and targeted lending expansion, particularly in the high-yield PACE and C&I segments, are positioning AMAL for enhanced profitability and diversified revenue streams in the coming years.

While the bank operates within an uncertain macroeconomic and regulatory environment, its conservative risk management, strong capital and liquidity positions, and proactive approach to credit quality provide a solid foundation. The commitment to technological leadership and strategic talent acquisition further bolsters its competitive standing against larger rivals, allowing it to leverage its niche strengths for long-term value creation. Investors looking for a financially sound institution with a clear growth trajectory and a differentiated, purpose-driven model should find Amalgamated Financial an attractive consideration.