Amalgamated Financial Corp.

Greetings and welcome to Amalgamated Bank Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Drew LeVon, Chief Financial Officer. Please proceed.

Thank you, Operator, and good morning, everyone. We appreciate your participation in the third quarter 2020 earnings call. With me today is Keith Mesbridge, President and Chief Executive Officer. As a reminder, a telephonic replay of this call will be available on the Investors section of our website for an extended period of time. Additionally, the slide deck to complement today's discussion is also available on the Investors section of our website. Before we begin, let me remind everyone that this call may contain certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We caution investors that a number of factors, some of which are beyond our control, could cause actual results to differ from the expectations indicated or implied by any such forward-looking information or statements. Investors should refer to slide two of our earnings deck as well as our 2019 10-K filed on March 13, 2020 and our other periodic reports that we file from time to time with the FDIC, typically under cautionary note regarding forward-looking statements and risk factors. For further description or explanation of those items, that could cause actual results to differ materially from those indicated or implied by any forward-looking statements that we may make. Additionally, during today's call we will discuss certain non-GAAP measures which we believe are useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in our earnings release as well as on our website. At this point, I'll turn the call over to Keith.

Thank you, Drew, and good morning, everyone. We appreciate your time and attention today. On today's call, I will start by providing an overview of our current operations and an update on our business given the ongoing COVID-19 pandemic before turning the call over to Drew to discuss our third quarter results in more detail. First, as most of you are aware, after eight rewarding and fulfilling years serving this great institution, I announced my plan to step down as President and CEO of the bank at the end of January 2021. A difficult decision in which I came to the conclusion after much reflection about what I wanted to achieve next. Six years ago, when I assumed my current position, Amalgamated was in a very different place than it is today. It was at this time that the Board and I worked closely to establish a number of key objectives to be accomplished. These included resolving the consent order from the regulators, setting a strategic direction for the bank aimed at recruiting a new management team, returning the company to profitability and reestablishing the payment of the dividend, and lastly, providing an exit opportunity for our private equity investors. Together as an organization, we have achieved these goals. As I look at the bank today, I am so proud of the fact that Amalgamated is financially and operationally much stronger than it was when I assumed this role back in 2014, as demonstrated by our third quarter results. During the past six years, we have cultivated an exceptional leadership team that first led us out of the precarious position the bank found itself in following the financial crisis and then put us on a solid path for growth, highlighted by our acquisition of New Resource Bank and our successful initial public offering in 2018. Together, we also responded to the unprecedented times that we continue to face, instituting protocols that allowed us to seamlessly transition to a remote working environment in the face of the COVID-19 pandemic. In addition to our financial and operational success, I'm proud that during my tenure, Amalgamated cemented its place as America's socially responsible bank. This has been demonstrated in the growth of our impact lending, exceeding our commitment nearly half the time, the countless positions we took on social issues of the day, such as gun safety, reproductive rights, and racial justice, and the launching of the Amalgamated Foundation to enhance the bank's corporate giving. All of these examples show how the bank's mission has been deeply ingrained in our culture and our work. and I'm confident it will continue after my time here. It was with the aforementioned goals in mind that I felt very much like mission accomplished. There cannot be a better time for me to step back, identify the next challenge for myself and leave the bank in the very capable hands of my colleagues who have been on this journey with me. I'm deeply grateful to the board for providing me with the opportunity to lead this great institution. Though a successor has not been identified, a formal search committee has been formed and a leading executive search firm has been engaged. I look forward to assisting the board and our next CEO with the transition to help ensure we continue to grow while remaining true to our values. In order to ensure business as usual is not interrupted, I have agreed to serve as a special advisor to the board through next July, and I'm very pleased that Lynn Fox has agreed to step in as interim president and CEO if our next leader is not identified prior to my departure on January 31, 2020. Lynn knows the organization exceptionally well as a board member for the last 20 years, Chair for the past four, while also serving as the International President of Workers United, which owns 41% of Amalgamated's common shares. As we think about the takeaways for the third quarter, I am most impressed with the bank's superb operational execution, especially given the ongoing challenging environment. The steps we have taken to improve the bank's performance can clearly be seen in our third quarter results, which are a testament to our entire leadership team here at Amalgamated. Turning to our third quarter highlights, our average deposits grew $459 million during the quarter to $5.9 billion compared to the second quarter. The positive growth was strong in both political and nonpolitical sectors and continues to demonstrate the competitive brand recognition Amalgamated holds in this significant market segment. Drew will discuss more on our political deposit outflows as we are on the eve of the November 3rd election day. With the close of the third quarter, the bank continues to be well-positioned as it concerns credit. Our strong capital base and conservatively underwritten loan portfolio is further evident as our loan deferrals decline to $201 million, or 6% of our portfolio. This compares to 13% at the end of the second quarter. Provision for the third quarter declined to $3.4 million, comparing favorably to the $8.2 million provision recorded during the second quarter. This low level of remaining deferrals reflects the strong credit underwriting of the bank, and we are excited to see our loan deferral activity largely behind us, though we are cautious to the potential of any impacts of a second wave due to COVID-related shutdowns. We continue to monitor our loan portfolio and remain committed to working with our borrowers as problems arise. As we transitioned our customers to our online banking platform throughout the pandemic, we were presented with the opportunity to consolidate several of our branch locations. We accelerated this initiative during the third quarter and took the opportunity to permanently close six branches given the backdrop of the pandemic and the resultant decline in customer traffic. This resulted in a $6.4 million one-time expense this quarter. Importantly, the branches were only closed once we had complete confidence that the high levels of adoption and customer satisfaction in our digital platform would prevent client losses. We expect to realize an annual expense benefit of approximately $4 million over time due to the branch closures, but the impact will gradually be felt as we place almost all employees from those branches to temporary and permanent positions in the bank. Turning to capital allocation, we continue to like the growth opportunities that we have in front of us and will continue to prioritize investments as the strongest avenues we drive book value growth and shareholder value. Our share buyback remains under suspension, and our dividend is evaluated on a quarterly basis with our board of directors. Last night, we also received our first bank reading from Kroll, which was BBB plus slash BBB for senior and sub-debt, respectively. This is another independent validation of the strength of the franchise we have built. Before I close, I want to highlight that Amalgamated received some positive press coverage this quarter about our work to track sustainability principles in finances. First, Motley Fool named amalgamated as one of the few banks actively working to combat climate change. We also received coverage in Politico and several other publications for our leadership in the Partnership for Carbon Accounting Financials, or PCAF, and the recent banks that have joined that effort. These examples and more are additional proof of our leadership in the ESG investing space, and I am proud to see them highlighted. To conclude, I would like to take this opportunity to thank our employees for their tireless work and commitment to our important mission as America's socially responsible bank. Together, we have made a great team and have built a bank positioned to weather all economic cycles, and I have every confidence that the bank is an excellent hand. I consider myself extremely fortunate to have had the opportunity to work with such a talented group of individuals. I'd now like to turn the call over to Drew for a more detailed review of our financial results.