Good morning, ladies and gentlemen. Thank you for standing by and welcome to The Amalgamated Financial Corporation First Quarter 2022 Earnings Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be opened 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 first quarter 2022 earnings call. With me today, is Priscilla Sims Brown, President and Chief Executive Officer. As a reminder, a telephonic replay of this call will be available in the Investors section of our website for an extended period of time. Additionally, a 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 actual results may differ from the expectations indicated or implied by any such forward-looking statements or information. Investors should refer to Slide 2 and 3 of our earnings slide deck, as well as our 2021, 10-K filed on March 11, 2022 for a list of risk factors that could cause actual results to differ materially from those indicated or implied by such statements. 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 measures can be found in our earnings release, as well as on our website. Let me now turn the call over to Priscilla.

Thank you, Jason, and good morning, everyone. We appreciate your time and interest today. This morning, I will provide an update on our strategic plan to generate sustained and profitable organic loan growth. Jason will then provide a more in-depth review of our first quarter financial results. Our results are a clear indication of the fundamental earnings power of Amalgamated Bank, as we execute on the four pillars of our growth-for-good strategy. Along these lines, there are four key performance measures that I’d like you to take away from this morning’s call. The first is net loan growth. Excluding pace assessments, we were up 4.8%, compared to the linked quarter, reflecting a second consecutive quarter of growth due to the solid momentum of our core loan growth strategy, established in the second half of 2021. Including pace assessments, we grew the lending activity by 6.5%. Over the course of 2022, we anticipate loans will meaningfully drive net interest income and earnings. Second, on the heels of successfully recruiting six new bankers in the fourth quarter of 2021, we’ve continued our talent in acquisition efforts in the first quarter of 2022, also recruiting six new established bankers with relationships across our various focus regions, enabling our ability to tap more broadly into our existing footprint for opportunistic loan origination and to gain market share. We also completed the restructure of the organization to align to our strategic imperatives. Third, our deposit growth was considerable, exceeding our expectations and increasing 9.7% to $7 billion from the linked quarter, as our political deposit franchise rose to $1.1 billion, while we held the cost of deposit steady at 9 basis points. Fourth, our net interest income rose by 2.8%, demonstrating the inherent earnings power of our asset-sensitive balance sheet, paired with our industry-leading low-cost…

Thank you, Priscilla. Net income for the first quarter of 2022 was $14.2 million or $0.45 per diluted share, compared to $15.9 million or $0.50 per diluted share for the fourth quarter of 2021 and $12.2 million or $0.39 per diluted share for the first quarter of 2021. The $1.7 million decrease for the first quarter of 2022 from the preceding quarter was primarily driven by a $5.0 million decrease in non-interest income, which was due to the tax credits in solar equity investments, recognized in the prior quarter, partially offset by a $1.3 million increase in net interest income, a $1.3 million decrease in the provision for loan loss, and a $0.6 million decrease in non-interest expense. Beginning on Slide 5, our solar tax equity investments are presented in a manner to clarify and explain the volatility associated with the GAAP accounting. As of the fourth quarter 2021, we have made three solar tax equity investments. Since these investments are mission-aligned, and offer highly retractive returns over time, we expect to make more solar investments in the future. The accounting treatment of these investments generally results in a near-immediate realization of investment tax benefits, and a subsequent accelerated depreciation of the value of the investment, which creates volatility in our GAAP and core earnings presentations, specifically within non-interest income. We believe metrics excluding the impact of tax credits or accelerated depreciation is a meaningful way to evaluate our current and historical performance. Accordingly, we have begun presenting metrics excluding the tax credit or accelerated depreciation impact of our solar tax equity investments. Exclusions related to solar tax equity investments were $0.1 million of tax credits recorded as equity method non-interest income for the first quarter of 2022; $5.3 million of tax credits in the fourth quarter of 2021; and…

Our first question comes from the line of Alex Twerdahl with Piper Sandler. Please proceed with your question.

Hi, good morning.

Morning.

Morning, Alex.

First off, I was hoping give us a little bit more clarity on the loan growth outlook and the targets you said, if you can maybe help us understand sort of what the complexion of the loan growth that you expect over the rest of the year. I think this quarter is a lot stronger in the consumer, than at least I was anticipating, and if you think that we’re going to get sort of loan growth across different segments? Or if this is going to be a hand-off to commercial, as some of these lenders that you’ve hired come online later this year?

Sure, Alex. I am happy to take that question for you. So, I think the prospects overall for our loan growth are pretty strong. It’s a little bit of a mix bag in the results for Q1 in the sense that the residential and the consumer, mainly our solar-driven business really was the key drivers and it appears there wasn’t a lot of growth that’s coming out of the commercial segment. But I think the thing to think about there is, when we look at the commercial business, we actually had quite a bit of new commitment volume. As our new CRE team for example, they came on in January of the first quarter, they were at about $80 million of new commitments during the year -sorry, sorry, $70 million of new money for the year and $60 million of refinances. We had a fair amount of payoffs that occurred, but what we’ve been able to do as we’ve got the origination volumes going though is be sort of strategic in evaluating some of our pass-grade credits for additional refinance. And so, we’ve been doing a little bit of balance sheet management over the course of this quarter. I expect that in the commercial space and I expect that’ll continue into the second quarter as we sort of look at asset quality as an equally important metric for us in terms of our overall credit portfolio. But you can think of that portfolio as being able to churn in terms of asset quality and then hopefully start to reach a growth pattern as we get a little bit further into the year. The things that we see in the pipeline look really strong. And I think that’s one of the reasons why we we’ve also stayed a little bit off of expanding our loan growth targets, because we want to make sure that we’re growing, I guess, cautiously, but optimistically in terms of making sure that we have our pipeline, but also making sure we have good strong asset quality that’s going to be sustained within the portfolio, and sort of meeting new pricing and new underwriting standards.

Okay. And can you just remind me sort of the differences between the PACE loans and the consumer solar loans?

Yes, so they are relatively the same in terms of the final product. It ultimately ends up in an energy efficient improvement to the consumer residents in a normal state. On the PACE side, it’s very much tethered to the tax position in terms of its repayment process and its position relative to the senior debt on a mortgage. On the consumer side, it’s a little bit more of a - kind of like I wouldn’t say unsecured, but a regular kind of unsecured loan I guess is the best way to describe it which with the same type of kind of asset improvement to the actual underlying property.

Okay. And then just a follow-up question from me, Priscilla, you alluded to the efficiency ratio as being kind of a top priority. Do you have some expense initiatives in mind? Or is that just kind of a promise that as you earn more, because rates are going higher, you are not going to spend all of it - spend all of the sort of the found money away?

Yeah, that’s the latter. It’s the latter, Alex. We are going to stay disciplined. We certainly, as we said to you in prior quarters, intend to invest as we see the revenue coming through on the strap plan, but we wanted to signal to you that we are not looking at this is all found money as we get the benefit of the rate increases.

Okay. So, I think, the last time we spoke, the target for efficiency was around 65% and if we get the forward curve follows through, that maybe can go a little bit lower than that, as sort of a longer-term target?

That’s right, yes. We could get tailwinds that help to enable us to get to a better ratio than that.

Yes. Okay. Thank you.

Sorry, Alex. I was just going to say, we came in at under 62% for the quarter, but I think when we think about the efficiency ratio, I think we’re also thinking about just sort of the overall guidance we’ve given on total expenses. And I think we’ve been out there with, I think $138.5 million for the year and I would expect that we’d stay pretty close to that target, maybe increase slightly on the margin. But you can kind of think about it as a guardrail for what efficiency might look like in the rising rate scenario.

Yeah, that’s a good point. So we were probably about $500,000 better in the quarter than we would expect on that run rate.

Great. Thanks for taking my questions.

Thank you.

Thanks, Alex.

Thank you. Our next question comes from the line of Chris O’Connell with KBW. Please proceed with your question. Chris O’Connell: Morning.

Good morning.

Good morning. Chris O’Connell: I was hoping to start off with the new banker hires that you added this quarter and maybe what areas they are in? And then, how you’re thinking about expense growth for the year encompassed in kind of the PPNR outlook?

Do you want to take the expense growth one and I’ll speak…?

Certainly, yes. So on the expense growth, Chris, I think we came in slightly under where we thought we’d be at - where did we come in, about $34 million on a core basis. We’ve planned for about $34.5 million on a quarterly basis. And what I would expect is that, we are going to catch up that difference from this quarter over the course of the year. So, to Alex’s question previously, we are targeting $138.5 million for the entire year on an OpEx basis core. If there was a marginal uptick in that number as we make some additional investments and maybe some compliance infrastructure or other things that we need to kind of support the growth of the business that that number might increase on the margin, but our view on increases over that $138.5 million would be really funded by profitability from the growth initiatives that we have underway right now. So hopefully that would be kind of a net neutral in terms of incremental expense increase if we had it over that budgeted number.

Alex… Chris O’Connell: Great. And then just on the lender hires?

Yeah. So, the lenders are really pretty well across the board, Alex. We’re looking to, as we’ve talked about in the past, take expertise we have in one area and export it to others and so we’re leveraging people that may be sitting in New York or D.C. to supplement the work in other markets. But we are also hiring CDFI experts, for example, continuing to build on the CRE team. So really, really pretty well distributed.

Chris, maybe to just crystallize that, I think, I think right, Priscilla, the number was six bankers for this quarter?

Six last quarter.

Yes. And then, one was CDFI, one was climate-related, and then filling out the real estate portion of our business. Now, that means we are net four, as we, - no we’re doing a little bit of talent management as well. So, the people that we brought on a net basis were at four incremental from the end of last quarter. Chris O’Connell: Great. And then you mentioned some changes in the internal structure of the business to go align with your strategic goals. Is that banker incentives? Or any expansion on kind of the details there?

Yeah. So there are kind of two ways to look at that. One is, we have just moved work structure around to bring our revenue generating areas together and then just conversely bring our operations areas together. So, in the past, we’d had consumer and commercial completely separate. Today, we recognize that a lot of our consumer business will come through our commercial relationships. And so we’ve brought the revenue and customer-facing parts of the consumer business together with the customer-facing parts of the commercial business. And then in the back office, we’ve also done the same with our operations there. That’s probably the biggest part of the change that we saw in the quarter. We also are, as we talked about with our pillars, we’re focused on this sort of customer centricity. And we’ve added a role associated with developing customer insights. That’s really a transfer of consultant expense to permanent hire once we are able to test the work and really think about how we want that to be focused. We are doing the same with digital, bringing some resources together where appropriate and also bringing in a leader there. So it’s - the biggest part is what I described to you, the consumer and the commercial coming together, both front and back. But there are some tweaks going on around the organization just to align, to create centers of expertise where we think we could benefit from an efficiency or an effectiveness perspective. Chris O’Connell: Great. Appreciate the color. And as far as the origination yields on the loans, where are they coming on and in kind of the blended portfolio? And then, what are the PACE like origination yields coming on at now?

Yes. So I’ll grab that for you, Chris. I think, on average, the loan yields are coming on at in the low 4 percents right now. Our solar pools, which I was talking a little bit about before, those are more in the 5% range. And then in the PACE world, they are coming on now in the mid-4% range. I think also what’s important is a lot of the loan growth that we reported in this particular quarter, we really didn’t book a lot of that until the latter half of March. So when you look a t the yield on the portfolio for the quarter, which didn’t really move very much in the previous quarter, it’s really not baking in any of the effect of the loan growth that we had in this particular quarter. So, we’re also expecting loan yield to on a reported basis to increase fairly dramatically as we move into the second quarter and obviously that’ll pull forward in our NIM as well. Chris O’Connell: Great. And then, for the NII guide, what’s the - you mentioned the 13 basis points of excess liquidity kind of hampering the margin this quarter. What’s embedded in terms of excess liquidity deployment in the NII guide? And how are you seeing that come off over the course of the year in the guide?

Yes. That’s going to be a little bit of a moving target throughout the year, mainly because of the political deposits that are probably going to ramp up over the course of the next two quarters heading into the congressional elections in November. So I tend to think of it a little bit more as what we’ll look like at the end of the year, as opposed to what it will look like over the next couple of quarters. We are trying to manage to $100 million of cash. So, in terms of how we think about our excess liquidity drag, anything above $100 million starts to become the capital drag and the NIM drag. So, I think that said, the NII guidance though doesn’t necessarily focus tremendously on the margin from a calculus point of view. It’s much more focused on the fact that we have the higher loan volumes coming on, the fact that the spreads on the deposits that we are bringing on are much greater and we have an ability to deploy that, either through hopefully our lending or through our securities portfolio. And then just the fact that the 25 basis points that’s already been implemented by the Fed. That’s already flowing through on our resets of our floating rate assets. So, I don’t know if I answered your question exactly the way you wanted, but that’s kind of how we are bridging the difference from the previous guidance to current on NII. Chris O’Connell: Great. And for the NII guide, what are you guys assuming in terms of deposit betas going forward?

Yes. So we’re actually fairly conservative on our deposit beta assumption. I think, I’ll get you the exact number, but I think we assumed a 20% deposit beta in our model. So, clearly there is some room on the upside, I guess, if our deposit betas hold to what they’ve been in the past rising rate cycle. I think, as we spoke and before, deposit betas for us in the last rising rate cycle for the per hundred basis points on a total cost-to-funds basis was about 3%. We think when we model out at 20%, we are being very conservative in our forward assumptions. Chris O’Connell: Okay. And then for the - you mentioned the regulatory capital the variance between that that you are focusing more on that versus the TCE. Is there an absolute level of TCE that does start to become a concern at all for you guys? And, how do you kind of balance that versus the regulatory capital in terms of the buyback utilization going forward?

That’s a really good question. An absolute level of TCE, I think where we are? Sub-seven right now. We are keeping our eye very closely on it. I don’t think we’d have an appetite to go much further below where we’re at. At the same time, we want to be mindful of the fact that we have a tremendous amount of liquidity to be able to kind of hold these unrealized losses in a position of unrealized up until the point where eventually their value will turn when rates start to decline. I think more - a little bit more in terms of a leverage and I think the way we’ve modeled ourselves out, 7% or even slightly below 7%, which kind of gets us to where we thought we might be when we closed ABOC is sort of our floor, if you will. I mean, it moves around a little bit. But that’s generally the way I would think about it and as we’ve communicated before with this rising rate environment and some of the optionality that’s due to the bank, part of our plan is to really return capital to get us back to a more comfortable kind of green zone 7.5% level, by the end of the year. Hopefully that gives you a little bit of a sense for where we’re trying to manage the balance sheet for this year. Chris O’Connell: Yeah. Absolutely. And then for the single credit that went to NPL this quarter, the $10 million, any color you can provide there?

Yeah. It’s a credit that we’d had our eyes on for a little while. It’s been moving in that direction. It’s a relationship. It’s four different credits that are part of this relationship. It’s a credit that we’ve been watching for a while. It’s been moving through our pass-grade and into substandard over the course of the past four quarters. And we just got to a point where we found a way to negotiate terms with the borrower to keep them in a position where they are able to pay and able to keep their business viable, I guess, is the best way to describe it. And then, that’s ultimately where it ends up in terms of being an accruing performing TDR. It’s – I mean, that’s where it kind of fits in our NPL. Not loving it, but that was sort of the background that it’s been a relationship we’ve worked on for a while and ultimately that was the conclusion of how we got them back to paying status or to keep them in paying status, better way to describe it. Chris O’Connell: Great. And then last question for me is, just can you give us an update on kind of the progress of the ESG funds initiative and that rollout?

Do you want me to take that, Jason? I could…

The ResponsiFunds? You want to take an opening shot and then I’ll jump in?

Referring to the ResponsiFunds, and so, yes that’s continuing to roll out. The activity that we have seen for most of the quarter has been really around getting consultants up to speed on the product and answering many of their questions. That’s going very well and we’re starting to see a bit of traction, the pipeline looks decent on it. We do expect that we will have activity around just expanding the number of people focused internally on sales of that as we go forward, now that the foundation has been laid with the consultants.

Yes. Chris O’Connell: Okay. Great.

Oh sorry, I was just - Chris, I would just add to that. We did have a nice uptick in the trust department income and that really was not the result of any increase in ResponsiFunds. It’s more on our base business. So, as ResponsiFunds moves along, like Priscilla has mentioned, we hope that that’s going to be incremental to the revenue opportunity there. Chris O’Connell: Great. Thanks for taking my questions.

Great. Thank you, Chris.

Thanks, Chris.

Thank you. Our next question comes from the line of Janet Lee with JPMorgan. Please proceed with your question.

Hello.

Hi, Janet.

Hi.

Hi. So, I just want to clarify on your NII guidance assuming the forward curve. So, you’ve touched on it a little bit, but can you just tell us how much deposit growth and PACE securities growth is assumed in this guidance? And I believe that 5% balance sheet growth guidance in the prior quarter was pulled aside. So, is there any change to that, as well?

Got it. So, really no - yeah, I am sorry that we pulled that guidance. That was unintended. No. I think we’re still planning on our balance sheet guidance as is with our 5% growth. It may be slightly higher, as we came in a little bit better than expected in this particular quarter. But we still are expecting the balance sheet to grow over Q2 and Q3 and then pull back down in Q4 as a result of the kind of the political deposit sway. And therefore, when we think about the end-of-the-year balance sheet, we’re not seeing it as being tremendously different from what we had originally said at that 5% growth rate. When we think about the forward guidance, we really haven’t changed our assumptions on what we thought loan growth would be in total. So that would be still in that high-single-digit range, although we feel really confident that that’s a very hittable mark at this point. And then on the deposit side, again, we are not really expecting much more than what we talked about maybe in the previous quarter, somewhere in the net range of $300 million to $400 million, maybe $450 million increase in deposits and on the PACE side, I think we are a little bit ahead of our plan with PACE. We had an opportunity to put on a $75 million residential pool early in the quarter that we really hadn’t thought of when we were originally contemplating budget. And so we were able to take that opportunity. But going forward, I think we would stay very much on our PACE target and then I forget what the exact number is, but somewhere in the range of $150 million of total PACE activity for the year.

Okay. That’s helpful. I think that - it might be a sensitive subject, but I think many of us here are looking for any additional color you can give around the ABOC deal that was withdrawn and what this means to you in terms of whether having to potentially increase expenses to meet with regulatory standards. So I would appreciate that if you could shed any light on these points, what happened, given there’s still lots of question marks? Thanks.

Yeah. Janet, there is just not much more that we can say about it. We think we were pretty straightforward. Your specific question about regulatory expense, well, we don’t anticipate any additional expense outside of what’s in our plan and what we would have anticipated doing anyway. And I guess, the additional color I will give is that, look, we - you saw in the quarter a construction loan and you know we don’t do much in that area. For us it was about $9 million. That was a deal in Chicago that we did actually with ABOC post the withdrawal. That was a - when I say we did with it, that’s not exactly accurate. It was a participation where we obviously did our own underwriting, they did theirs, but it was a union customer that we both regard highly, a well-capitalized customer, cash secure, exactly the kind of deal that we would love to continue to be doing with ABOC. But this is what was one of the significant benefits if we had closed the transaction and we are pleased that we are able to get it done even as two separate companies with our own individual process. So, we would look to continue to find opportunities, whether that’s with ABOC or others and we think that that’s going to continue. We think our organic loan growth will continue. And we said to you in the quarter about ABOC is really still accurate and complete from our perspective, which is to say that, we have demonstrated now over these two quarters that our organic progress is strong, and that when faced with the opportunity to continue building on organic – on our business organically or to sort of wait through and go through a very long elongated process, distracting our employees, we chose the former. And we did so because we really felt we had no choice in the immediate period. But we certainly would look to work with ABOC in the future if other opportunities come up.

Okay. That’s really helpful. So if you were to contemplate, I know that your focus is now on driving organic growth. But if you were to contemplate any M&A deals in the long-term future, like, does that mean you have to spend more in order to satisfy whatever that the regulator was looking for? Or what do you have to do in order if you get better still?

Yes, yes. There are things two things we think about with respect to additional deals. The first and foremost, much most important one is, as was the case when this deal was originally presented, it fit really nicely we thought in our plan to both expand and deepen our relationships. And so, we would look for that. We would look to build on the strat plan through any deal. And while we are focused on organic growth for the time being, it’s not a decision we make out of necessity only. We make this decision because there is so much opportunity in each of our markets, and I think we are demonstrating that. Should we see something come across that looks attractive, I don’t think we would want to get off of our trend right now. We just brought on a bunch of new bankers. We’ve got a lot of activity going. But if in the near to intermediate future we started to see something else coming along, we would not expect, as I said, that there would be an additional amount of expense above plan in order to satisfy regulators before we could see a deal happening.

Okay. Great. Just going back to deposit growth, will you also see some - so, besides the political deposits that’s work in its own way, will you also see some deposit growth normally, Jason, given the Fed’s QT on the non-interest-bearing deposit size excluding the political? Or do you expect Amalgamated to be sort of an outlier given your unique customer base?

Yes, Janet, that’s a great question. In fact, we were literally talking about that last night and the day before. As we think about kind of the forward view on deposits. And we think, look, we are never immune to anything, right? I mean, customers are customers and they make their choice as same as anyone else would. But we feel like our deposit franchise as has been built over the past seven or eight years in particular and the types of bankers that we have that are running these deposit relationships and the diversification of the deposits that we have, even this quarter alone, well, we had $160 million of political deposit growth that we had another $350 million of commercial and almost $100 million of consumer growth. We feel we are unique in this space and that we’re somewhat insulated from maybe some of the runoff risk that other banks similar to our size might have. So we think that that might be one of the real value plays that this bank can demonstrate over time would be the stickiness of our deposits and the ability to sort of move through the rate environment cycle in a manner with lower volatility than others. I hope that answers your question.

Yeah, that’s helpful. And my last question is just a follow-up on the deposit beta. You said 3% last rising rate cycle. I actually calculate around like 1% if you look at the total period of rising rates in the prior cycle. And if you are assuming 20%, I know you are trying to be really conservative here. But, like, how does your NII guidance would change if you assume like mid-single-digit deposit beta? Or maybe if you don’t have that handy, like, how does that NII benefit per 25-basis point rate hike change if you assume a much lower beta as you did in the prior raising cycle?

Yeah, so, thanks for asking that. I think I need to correct myself. I had said 20% on total. That was 20% on our – on just our interest-bearing. So the number is going to be substantially less when you mix in our DDA on total cost-of-funds for our estimate. So it’s probably more in the range of about 10% in total in terms of deposit beta. But that said, I think that’s where we kind of come up with that $4.5 million to $4 million range when we factor in the rate sensitivity on the forward curve. I think if we got lower to or if our deposit beta kind of looked a lot like our historical deposit beta, you’d be at that $4.5 million range, possibly even a little bit better than that.

Great. Thanks for taking my questions.

You are welcome.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I’ll turn the floor back to Ms. Brown for any final comments.

Thank you, Melissa. And thank you for those really great questions on both my behalf and Jason’s and the team. They reflect that you understand I think that our balance sheet is well positioned to capture both the upside that we are anticipating with interest rates, but also protects us against the eventual flattening or decline in rates. We have a lending team that we’re very excited about which is focused on asset quality and origination, and I think that’s what a responsible investor would want to see. We really appreciate your time today. We appreciate your continued interest. We really love the opportunity to discuss our optimism for the future of Amalgamated and I know we’ll be continuing some of these conversations in smaller conversations. We are just thrilled with the growth we’ve delivered in this quarter and as our strategically designed team continues to build momentum. We will remain focused on the mission-based niche lending space that we occupy. We continue to make an impact on the customers and communities we serve. We’re excited about the depth of our banking team and the development of the customer relationships to build Amalgamated into a full-service banking franchise. So, thank you again for your time and we look forward to continuing the dialogues.

Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day