Amalgamated Beats And Raises Guidance A Third Time, But An Election-Driven Deposit Drain Sets Up A Fourth-Quarter Pause

Amalgamated Financial Corp. (NASDAQ: AMAL) delivered another record quarter. Core earnings of $1.14 per share beat the $1.08 consensus by 5.6% and grew 25.3% year over year, while GAAP net income reached a record $36.4 million, or $1.20 per diluted share. Earnings Whispers revenue of $133.56 million beat expectations by 34.6% and grew 12.5%. That surprise largely reflects a gross revenue measure that includes total interest income. The company's own operating revenue, net of interest expense, was a record $101.7 million, its first quarter above $100 million. The more important development came on the call. Management raised full-year guidance for a third straight quarter, and it also told investors the fourth quarter will be an election-cycle pause. That is the central tension: the earnings engine keeps improving just as one of its cheapest funding sources begins to drain.

The beat deserves some scrutiny. GAAP earnings ran ahead of core because of $2.9 million in ICS One-Way Sell fees from off-balance-sheet deposits, which management excludes from core results. Core non-interest income rose to $11.2 million from $10.0 million. The release attributed that gain mainly to retail banking and wealth fees. On the call, however, management said third-quarter fees included a one-time equity valuation adjustment, which is one reason fourth-quarter pre-provision earnings are implied to decline.

The core spread business is solid. Net interest income rose 2.2% sequentially to a record $87.9 million. The net interest margin held at 3.77%, effectively flat once the prior quarter's 3-basis-point benefit from nonaccrual loan income is stripped out. Deposit costs held at 1.46%, and non-interest-bearing deposits reached 42% of the total. Core return on tangible common equity of 16.57% and a core efficiency ratio near 49% show a bank earning well above its historical run rate.

The guidance raise was meaningful. Full-year net interest income guidance moved to $341-342 million from $338-340 million. That compares with $327-331 million when the year began. Core pre-provision earnings guidance rose to $193-194 million from $188-190 million. The math, however, implies flat net interest income in the fourth quarter, modest margin compression and lower pre-provision earnings.

The pressure point is political deposits. These deposits were flat at $2.0 billion at quarter-end, compared with gains of $212 million in Q2 and $133 million in Q1, and had already fallen to roughly $1.7 billion by October 15. Management expects non-interest-bearing deposits to slide from about 42% to about 36% of the total after the election. Growth also cooled: commercial loans grew $93.5 million versus roughly $155 million in Q2.

Credit remains the other legitimate source of bear ammunition. Nonaccrual loans are 2.01% of total loans, compared with 0.47% a year ago, driven by the unresolved $78 million DC multifamily relationship. Reserves cover only 67% of nonaccruals. Criticized and classified loans rose $7.4 million after an $11 million C&I downgrade. Management guided fourth-quarter provision to about $5-5.5 million, above the third quarter's $3.6 million. Net charge-offs did improve to 20 basis points. Rising long-term rates also cut into capital: accumulated other comprehensive loss widened by $27.9 million, pushing the tangible common equity ratio down to 8.44% from 8.74%.

Management also laid out a credible path for 2027:

• C-PACE assessments grew a record $54.2 million in the quarter.
• Consumer solar runoff will accelerate, with that liquidity redeployed into PACE.
• New PACE yields of roughly 7% could reach 7.75%-8% next year.
• Management explicitly flagged margin expansion through 2027 as non-interest-bearing deposits rebuild after the election.
• The buyback authorization was expanded to $40 million, and the company repurchased about 137,000 shares in the quarter.

The call's tone was the most confident of the year, but rising rates add uncertainty around deposit pricing. Historical interest-bearing deposit beta runs just under 40%.

Investors cooled noticeably heading into the report. Earnings Whispers sentiment slid from 0.27 to -0.05, moving from moderately positive to slightly negative. Shares closed at $47.82 the day before the release, down 1.4% from the open after the July report. The stock sat 7.3% below the $51.59 52-week high set in mid-August and only 5.9% above its October 14 low. Shares were still 10.6% above the 200-day moving average, so the longer-term trend has held even as the post-July enthusiasm faded. The trend readings are mixed, with momentum positive and AVWAP negative.

The bottom line is that Amalgamated keeps out-earning its own forecasts. Record net interest income, a third guidance raise and a clear PACE-driven 2027 margin story support the long-term thesis. The near term is less clean. A one-time fee boost flattered the quarter, the post-election deposit drain is already visible, and multifamily credit remains unresolved. Together, these point to a softer fourth quarter that the market had already begun to price in.

Read our earnings preview for Amalgamated Financial Corp.: https://www.earningswhispers.com/article/AMAL/20501

This earnings review was originally published on Earnings Whispers.

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