Amalgamated Financial Corp.

Good morning, ladies and gentlemen, and welcome to the Amalgamated Financial Third Quarter 2024 earnings call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Jason Darby, Chief Financial Officer. Please go ahead, sir.

Thank you, operator, and good morning, everyone. We appreciate your participation in our earnings call. With me today is Priscilla Sims-Brown, our president and chief executive officer. As a reminder, a telephonic replay of this call will be available in the investor section of our website for an extended period of time. Additionally, a slide deck to complement today's discussion is also available in the investor 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 actual results may differ from the expectations indicated or implied by any such forward-looking information or statements. Investors should refer to slide two of our earnings slide deck, as well as our 2023 10-K, filed on March 7, 2024, for a list of risk factors that could cause actual results to differ materially from those indicated or implied by such statements. We will also discuss certain non-GAAP measures during today's call, 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. Let me now turn the call over to Priscilla.

Good morning, everyone, and thank you for joining us. Our third quarter financial results clearly demonstrate that Amalgamated remains positioned to achieve sustainable earnings and profitability. During the quarter, we delivered outstanding deposit and loan growth, strong profitability and returns, and a growing capital base that positions us to invest in our strategic initiatives, which will power our growth well into the future. This was another quarter of growth across customer segments. as we continue to demonstrate a defensible business model that is positioned to thrive as the pace of investment and financing accelerates across politics, labor, sustainability, and other impact areas. Our business is well diversified and not dependent on a single customer segment. It delivers robust growth regardless of which party is in control in Washington. In fact, we have seen broad-based strength across our deposit franchise as our customers increasingly understand that their money can have a significant positive impact in the world when they bank with Amalgamated. Whether it's addressing social issues, the climate crisis, or a range of other topics that our customers are passionate about, they know that their money will be used in a way that aligns with their values. And we are still in the early innings of the societal shift, which presents a significant growth opportunity for the bank. To punctuate this, we have a new tagline that better reflects our impact with clients, the planet, and the financial industry. Impact is in our DNA, and our new tagline, Bank on Impact, shows both how mission meets performance and how you can rely on us to do well through good work. Our third quarter results clearly highlight our unique franchise and position as a deposit franchise once again outperformed the industry with $311 million in new deposits led by strength across our political, social and philanthropy and sustainable customer segments. Our non-political deposits were strong again this quarter as our social and philanthropy deposits rose $82 million and our sustainable deposits rose $77 million. As I will touch on more in a moment, the sustainable segment is a large opportunity for Amalgamated. given the significant amount of investment anticipated in order for the U.S. to achieve net zero emissions by 2050. This spending also represents a significant deposit opportunity. Ultimately, the transition to a clean economy is still only in the opening chapters. We continue to build on our rich expertise in this space and expect to be a leading player in its growth. Our political deposit balances grew 13% and ended the quarter at $2 billion, well ahead of our prior peak of $1.3 billion achieved during the midterm elections in 2022. This cycle is clearly unique as we continue to experience political deposit inflows throughout the third quarter, a period that historically sees higher outflows as balances are spent down as the election nears. This is truly an unprecedented environment with fundraising records continuing to be broken. and a level of engagement that bodes well for future cycles. Looking to the fourth quarter, our updated model shows that our political deposits will likely trough somewhere between $850 and $875 million at the end of this year, which is well above the 2022 trough and our previous estimate of $700 million. We remind investors that the pattern of inflows and outflows in a political cycle tend to be repetitive. However, political deposit flows this late in the cycle are very difficult to pinpoint. Our confidence comes from the publicly reported spending data, which so far has been similar to prior cycles. Turning to the other side of our balance sheet, we experienced an acceleration in our loan growth through the third quarter. with a nice balance across commercial and industrial, real estate, and sustainable lending. Importantly, the effect of paydowns and payoffs in our CNI segment was less, which allowed the steady underlying loan pipeline to show this quarter. Overall, we generated 2.7% of core loan growth in the quarter. Our fourth quarter metric will likely be within our target range of between 1% and 2%. We're also carefully reshaping our balance sheet with a focus on harvesting yield as commercial real estate loans mature in the upcoming years. In fact, we have $352 million of below market yielding loans set to mature by the end of 2025 and an additional $149 million set to mature by the end of 2026, which will be replaced with higher yielding loans even as rates decline. This will allow us to continue NII growth while also keeping our balance sheet relatively neutral. As I think about our business against the backdrop of continued revenue growth, we begin pulling forward necessary investments. During the third quarter, we added to our sustainable lending team, which I will touch on in a moment, our technology team, as well as we made strategic IT investments. I would like to stress that our investments will, as always, be funded through profitability with core efficiency ratio and positive operating leverage constraints. I see many opportunities to further grow Amalgamated and deliver increased value to our shareholders. Our sustainable lending segment is one where I am particularly optimistic as the years go forward. There is tremendous momentum in this segment as the world continues to mobilize to meet climate finance needs, which will require an estimated $3 trillion of financing over the next 10 years just to reduce net emissions to zero by 2050. Our sustainable lending team is working on projects across the country as we look to provide the necessary funding to bring sustainable infrastructure to life. In fact, our mission-based banking franchise truly has no geographic boundaries as we currently have commercial customers in 48 states. During the third quarter, we added industry experts to our sustainable lending team to lead our efforts to successfully execute on the $27 billion greenhouse gas reduction fund. We've been able to attract top tier and well-recognized leaders in sustainable lending, and I'm honored that they have joined Amalgamated as we accelerate our efforts to support America's transition to a clean energy economy. I also remain optimistic that while the greenhouse gas reduction fund could experience some pressure depending upon the political climate next year, We believe that any rollbacks would likely come from allowing the expiration of certain tax credits and other changes at the broader Inflation Reduction Act level. These areas aren't at the core of our strategy to finance the rapidly growing renewable energy market. To conclude, I remain very optimistic on the future for Amalgamated, for our employees, our customers, and, of course, our shareholders. We continue to have a long runway ahead of us. as we carefully grow the bank and drive socially responsible banking to new heights. Jason, over to you.