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($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
Don’t get me wrong. I am $$$MR. MARKET$$$ I am HUGE. I invest in stocks because I want to make money. I don’t invest in stocks because the company is out there making people feel good. But what about if I can have both? Then “why not?” I say. Imagine a bank that makes money, but also makes people feel good about banking there. I say Yahtzee!
Today I bought stock in Amalgamated Financial Corp. (AMAL) at 31.69. I will sell it in 4 – 6 weeks at 36.61. Here’s why I like AMAL. First of all, look at this great chart:
First of all, it looks like interest rate cuts are right around the corner. What do lower interest rates do? Lower interest rates generally stimulate demand for loans, as borrowing becomes cheaper. This can lead to increased loan volumes, which could offset some of the reduction in net interest margin if banks can maintain or increase their lending activity. Lower interest rates are often used to stimulate economic growth. A healthier economy can lead to increased business activity and consumer spending, which can benefit banks through increased transaction volumes, fees, and overall banking activity. In summary, while lower interest rates can initially compress net interest margin and reduce profitability, they can also stimulate loan demand and reduce funding costs, potentially leading to increased overall profitability depending on how banks manage their operations and the broader economic conditions.
So we know that the script is good for banks. So what separates Amalgamated from the rest of the pack? Earlier this year, Amalgamated announced the mechanical completion of three community solar projects in Oregon, with commercial operations expected to commence in April and May of this year. Furthermore, Amalgamated is a global leader of the Partnership for Carbon Accounting Financials, which measures the carbon footprint of bank loans and investment assets. They are one of four U.S. banks to join the Net Zero Banking Alliance. In 2020, purchased carbon offsets to support the Garcia National Forest, a sustainable working forest that saves wildlife habitats, improves water quality, and preserves the traditional economic base of the local community. They utilize 100% clean energy for their offices where available. Amalgamated has pledged to not lend to fossil fuel companies. They committed that 32% of loan portfolio goes to climate solutions. So you get the picture…this company has differentiated themselves by being the good guys and this will attract some special customers. But what good is it if they don’t make money? Let’s take a look.
As a commercial bank, Amalgamated Financial provides a wide array of banking services. These include the origination of commercial real estate loans, multifamily loans, consumer deposit accounts, residential loans, money market accounts, and more. It provides customers with online banking and bill payment services. They have branch offices across New York City, Washington, DC, Boston and San Francisco. The Boston branch is the nicest one, if I do say so myself.
Earnings of Amalgamated Financial Corp. will likely increase this year on the back of loan growth and slight margin expansion. One can expect that the company will report earnings north of $3.00 per share, which would be a 10% increase. Given the low PE of 10, this is a very reasonable growth rate at very low risk. What’s better than a low PE of 10? The stock price is up 63% in the last year. That’s a really hefty gain for such a value and it means there is a lot more room to run.
Last year, Amalgamated Financial was able to report healthy full-year loan growth of 7%, which exceeded ANAL-yst expectations. Management expects the balance sheet size to remain stable in the first half and then increase by around 3% in the second half of the year. This will be a piece of cake given that their loan portfolio’s compounded annual growth rate stood was greater than 6% for the last few years. Amalgamated has a national presence so they can focus their product offerings to regions with the highest demand growth prospects. In their conference call, management mentioned that a key advantage for them in 2024 will be that the higher-cost borrowings will be replaced by lower-cost deposits resulting in an improvement in their net interest margin.
What’s the biggest fear facing banks these days? Of course, it’s the work from home phenomenon. No one wants to go to the office anymore. Waaa waaa waaah. They want to be able to go to the gym in the middle of the day and play golf when the weather is nice. Going to the office is just no fun. They need a safe space and the big bad boss makes them work when they are in the office. So if no one wants to go to the office, then office buildings are going to lose all of their value. Who owns these office buildings? Why it’s the banks that hold all these mortgages that could go belly up. So why doesn’t Amalgamated care about this? Their office commercial real estate made up only around 2.1% of total loans. They are laughing their asses off! This company continues to expand nicely, with a growth in deposits supplements by a growth in loans and securities. On top of this, their debt is well covered.
I love dividends. AMAL pays a forward dividend yield of 1.5%. Not bad. It’s a payout ratio of 13.1% for 2024. This further attracts conservative investors. But where is the stock price going to go? With an earnings estimate of $3.25 per share and a conservative PE multiple expansion to 11.5, that gets our stock price to $3.25 x 11.5 = $37.38 which is past my sale target.
At the end of the day, Amalgamated Financial is a growing bank with a strong track record of rapid growth and high-quality assets. The growth story is impressive. Deposits grew from $6.36 billion in 2021 to $7.01 billion in 2023 and their loan growth has been commensurate with the deposits. This trickles down to earnings. From 2021 through 2023, net interest income jumped from $174.6 million to $246.6 million.
This trend continued in their most recent earnings release, and the next earnings report is coming out soon. In April, they reported:
We get the next earnings report very soon and I am licking my chops. Why? Return on equity is 16.5%. There is an earnings engine tucked into this tree hugging bank! Shares are cheap relative to earnings and asset quality remains quite high. What does the boss have to say about all of this?
President and CEO Priscilla Sims Brown highlighted last quarter's success, stating,
“Our first quarter results show Amalgamated as a banking industry leader and we proved once again that our unique and valuable business model is well positioned to thrive in varying economic conditions." Now why would a company that invests in the future of the earth lie about its earnings prospects???
I’m all in on AMAL!
www.mrmarketishuge.com
Don’t get me wrong. I am $$$MR. MARKET$$$ I am HUGE. I invest in stocks because I want to make money. I don’t invest in stocks because the company is out there making people feel good. But what about if I can have both? Then “why not?” I say. Imagine a bank that makes money, but also makes people feel good about banking there. I say Yahtzee!
Today I bought stock in Amalgamated Financial Corp. (AMAL) at 31.69. I will sell it in 4 – 6 weeks at 36.61. Here’s why I like AMAL. First of all, look at this great chart:
First of all, it looks like interest rate cuts are right around the corner. What do lower interest rates do? Lower interest rates generally stimulate demand for loans, as borrowing becomes cheaper. This can lead to increased loan volumes, which could offset some of the reduction in net interest margin if banks can maintain or increase their lending activity. Lower interest rates are often used to stimulate economic growth. A healthier economy can lead to increased business activity and consumer spending, which can benefit banks through increased transaction volumes, fees, and overall banking activity. In summary, while lower interest rates can initially compress net interest margin and reduce profitability, they can also stimulate loan demand and reduce funding costs, potentially leading to increased overall profitability depending on how banks manage their operations and the broader economic conditions.
So we know that the script is good for banks. So what separates Amalgamated from the rest of the pack? Earlier this year, Amalgamated announced the mechanical completion of three community solar projects in Oregon, with commercial operations expected to commence in April and May of this year. Furthermore, Amalgamated is a global leader of the Partnership for Carbon Accounting Financials, which measures the carbon footprint of bank loans and investment assets. They are one of four U.S. banks to join the Net Zero Banking Alliance. In 2020, purchased carbon offsets to support the Garcia National Forest, a sustainable working forest that saves wildlife habitats, improves water quality, and preserves the traditional economic base of the local community. They utilize 100% clean energy for their offices where available. Amalgamated has pledged to not lend to fossil fuel companies. They committed that 32% of loan portfolio goes to climate solutions. So you get the picture…this company has differentiated themselves by being the good guys and this will attract some special customers. But what good is it if they don’t make money? Let’s take a look.
As a commercial bank, Amalgamated Financial provides a wide array of banking services. These include the origination of commercial real estate loans, multifamily loans, consumer deposit accounts, residential loans, money market accounts, and more. It provides customers with online banking and bill payment services. They have branch offices across New York City, Washington, DC, Boston and San Francisco. The Boston branch is the nicest one, if I do say so myself.
Earnings of Amalgamated Financial Corp. will likely increase this year on the back of loan growth and slight margin expansion. One can expect that the company will report earnings north of $3.00 per share, which would be a 10% increase. Given the low PE of 10, this is a very reasonable growth rate at very low risk. What’s better than a low PE of 10? The stock price is up 63% in the last year. That’s a really hefty gain for such a value and it means there is a lot more room to run.
Last year, Amalgamated Financial was able to report healthy full-year loan growth of 7%, which exceeded ANAL-yst expectations. Management expects the balance sheet size to remain stable in the first half and then increase by around 3% in the second half of the year. This will be a piece of cake given that their loan portfolio’s compounded annual growth rate stood was greater than 6% for the last few years. Amalgamated has a national presence so they can focus their product offerings to regions with the highest demand growth prospects. In their conference call, management mentioned that a key advantage for them in 2024 will be that the higher-cost borrowings will be replaced by lower-cost deposits resulting in an improvement in their net interest margin.
What’s the biggest fear facing banks these days? Of course, it’s the work from home phenomenon. No one wants to go to the office anymore. Waaa waaa waaah. They want to be able to go to the gym in the middle of the day and play golf when the weather is nice. Going to the office is just no fun. They need a safe space and the big bad boss makes them work when they are in the office. So if no one wants to go to the office, then office buildings are going to lose all of their value. Who owns these office buildings? Why it’s the banks that hold all these mortgages that could go belly up. So why doesn’t Amalgamated care about this? Their office commercial real estate made up only around 2.1% of total loans. They are laughing their asses off! This company continues to expand nicely, with a growth in deposits supplements by a growth in loans and securities. On top of this, their debt is well covered.
I love dividends. AMAL pays a forward dividend yield of 1.5%. Not bad. It’s a payout ratio of 13.1% for 2024. This further attracts conservative investors. But where is the stock price going to go? With an earnings estimate of $3.25 per share and a conservative PE multiple expansion to 11.5, that gets our stock price to $3.25 x 11.5 = $37.38 which is past my sale target.
At the end of the day, Amalgamated Financial is a growing bank with a strong track record of rapid growth and high-quality assets. The growth story is impressive. Deposits grew from $6.36 billion in 2021 to $7.01 billion in 2023 and their loan growth has been commensurate with the deposits. This trickles down to earnings. From 2021 through 2023, net interest income jumped from $174.6 million to $246.6 million.
This trend continued in their most recent earnings release, and the next earnings report is coming out soon. In April, they reported:
- Net Income: $27.2 million, up from $22.7 million in the previous quarter, exceeding estimates of $22.56 million.
- Earnings Per Share (EPS): Reported at $0.89 per diluted share, surpassing the estimated $0.74.
We get the next earnings report very soon and I am licking my chops. Why? Return on equity is 16.5%. There is an earnings engine tucked into this tree hugging bank! Shares are cheap relative to earnings and asset quality remains quite high. What does the boss have to say about all of this?
President and CEO Priscilla Sims Brown highlighted last quarter's success, stating,
“Our first quarter results show Amalgamated as a banking industry leader and we proved once again that our unique and valuable business model is well positioned to thrive in varying economic conditions." Now why would a company that invests in the future of the earth lie about its earnings prospects???
I’m all in on AMAL!
www.mrmarketishuge.com
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