EXPLANATORY NOTE
On March 1, 2021 (the “Effective Date”), Amalgamated Financial Corp., a Delaware public benefit corporation (the “Company”) acquired all of the outstanding stock of Amalgamated Bank, a New York state-chartered bank (the “Bank”), in a statutory share exchange transaction (the “Reorganization”) effected under New York law and in accordance with the terms of a Plan of Acquisition dated September 4, 2020 (the “Agreement”). The Reorganization and the Agreement were approved by the Bank’s stockholders at a special meeting of the Bank’s stockholders held on January 12, 2021. Pursuant to the Reorganization, shares of the Bank’s Class A common stock were exchanged for shares of the Company’s common stock on a one-for-one basis. As a result, the Bank became the sole subsidiary of the Company, the Company became the holding company for the Bank and the stockholders of the Bank became stockholders of the Company.
Before the Effective Date, the Bank’s Class A common stock was registered under Section 12(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), and the Bank was subject to the information requirements of the Exchange Act and, in accordance with Section 12(i) thereof, filed quarterly reports, proxy statements and other information with the Federal Deposit Insurance Corporation (“FDIC”). As of the Effective Date, pursuant to Rule 12g-3 under the Exchange Act, the Company is the successor registrant to the Bank, the Company’s common stock is deemed to be registered under Section 12(b) of the Exchange Act, and the Company has become subject to the information requirements of the Exchange Act and files reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”).
Prior to the Effective Date, the Company conducted no operations other than obtaining regulatory approval for the Reorganization. Accordingly, the consolidated financial statements, discussions of those financial statements, market data and all other information presented herein, are those of the Bank.
In this report, unless the context indicates otherwise, references to “we,” “us,” and “our” refer to the Company and the Bank. However, if the discussion relates to a period before the Effective Date, the terms refer only to the Bank.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements included in this report that are not historical in nature are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe harbor provided by Section 21E of the Exchange Act. The words “may,” “approximately,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “possible,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements. These forward-looking statements include statements related to our projected growth, anticipated future financial performance, and management’s long-term performance goals, as well as statements relating to the anticipated effects on results of operations and financial condition from expected developments or events, or business and growth strategies, including anticipated internal growth.
These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ materially from those anticipated in such statements. Potential risks and uncertainties include, but are not limited to, those described under “Risk Factors” and the following:
•our ability to maintain our reputation;
•our ability to carry out our business strategy prudently, effectively and profitably;
•unexpected challenges related to the transition of our chief executive officer role;
•our ability to attract customers based on shared values or mission alignment;
•the impact of the outbreak of the novel coronavirus, or COVID-19, on our business, including the impact of the actions taken by governmental authorities to try and contain the virus or address the impact of the virus on the United States economy (including, without limitation, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act), and the resulting effect of these items on our operations, liquidity and capital position, and on the financial condition of our borrowers and other customers;
•impairment of investment securities, goodwill, other intangible assets or deferred tax assets;
•inaccuracy of the assumptions and estimates we make in establishing our allowance for loan losses and other estimates, including future changes in the allowance for loan losses resulting from the future adoption and implementation of the Current Expected Credit Loss (“CECL”) methodology;
•our policies with respect to asset quality and loan charge-offs, including future changes in the allowance for loan losses resulting from the anticipated adoption and implementation of CECL;
•the composition of our loan portfolio and the potential deterioration in the financial condition of borrowers resulting in significant increases in loan losses, provisions for those losses that exceed our current allowance for loan losses and higher loan charge-offs;
•the availability of and access to capital, and our ability to allocate capital prudently, effectively and profitably;
•our ability to pay dividends;
•our ability to achieve organic loan and deposit growth and the composition of such growth;
•our ability to identify and effectively acquire potential acquisition or merger targets, including our ability to be seen as an acquirer of choice and our ability to obtain regulatory approval for any acquisition or merger and thereafter to successfully integrate any acquisition or merger target;
•time and effort necessary to resolve nonperforming assets;
•fluctuations in the values of our assets and liabilities and off-balance sheet exposures;
•general economic conditions (both generally and in our markets) may be less favorable than expected, which could result in, among other things, a deterioration in credit quality, a reduction in demand for credit and a decline in real estate values;
•the general decline in the real estate and lending markets, particularly in our market areas, including the effects of the enactment of or changes to rent-control and other similar regulations on multi-family housing;
•changes in the demand for our products and services;
•other financial institutions having greater financial resources and being able to develop or acquire products that enable them to compete more successfully than we can;
•restrictions or conditions imposed by our regulators on our operations or the operations of banks we acquire may make it more difficult for us to achieve our goals;
•legislative or regulatory changes, including changes in tax laws, accounting standards and compliance requirements, whether of general applicability or specific to us and our subsidiaries;
•the costs, effects and outcomes of litigation, regulatory proceedings, examinations, investigations, or similar matters, or adverse facts and developments related thereto;
•competitive pressures among depository and other financial institutions may increase significantly;
•adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors and those vendors performing a service on our behalf;
•changes in the interest rate environment may reduce margins or the volumes or values of the loans we make or have acquired;
•adverse changes in the bond and equity markets;
•cybersecurity risks, and the vulnerability of our network and online banking portals, and the systems of parties with whom we contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches that could adversely affect or disrupt our business and financial performance or reputation;
•our ability to attract and retain key personnel, including our ability to timely identify a new chief executive officer in light of, among other things, competition for experienced employees and executives in the banking industry;
•the possibility of earthquakes, wildfires, and other natural disasters affecting the markets in which we operate;
•war or terrorist activities causing further deterioration in the economy or causing instability in credit markets;
•economic, governmental or other factors may affect the projected population, residential and commercial growth in the markets in which we operate; and
•descriptions of assumptions underlying or relating to any of the foregoing.
All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on any forward-looking statements, which should be read in conjunction with the other cautionary statements that are included elsewhere in this report. In particular, you should consider the numerous risks described in Item 1A, “Risk Factors,” for a description of some of the important factors that may affect actual outcomes. Further, any forward-looking statement speaks only as of the date on which it is made and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, unless required to do so under the federal securities laws.
SUMMARY OF MATERIAL RISKS
An investment in our securities involves risks, including those summarized below. For a more complete discussion of the material risks facing our business, see Item 1A—Risk Factors.
Economic and Geographic-Related Risks
•We are unable to predict the extent to which the COVID-19 pandemic and related impacts will continue to adversely affect our business, financial condition and results of operations.
•Our business may be adversely affected by economic conditions.
•Our operations and clients are concentrated in large metropolitan areas, which could be the target of terrorist attacks.
•Weather-related events or other natural disasters may have a negative effect on the performance of our loan portfolio.
Credit and Interest Rate Risks
•If we fail to effectively manage credit, our business and financial condition will suffer.
•Our business is subject to interest rate risk and fluctuations in interest rates or prolonged low interest rates may adversely affect our earnings, capital levels and overall results.
•We are exposed to higher credit risk by our exposure to construction, residential real estate, CRE, and C&I in New York City.
•Our estimated allowance for loan losses and fair value adjustments on acquired loans may be insufficient to absorb actual losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.
•New accounting standards could require us to increase our allowance for loan losses.
•Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition, and could result in further losses in the future.
•The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, other real estate owned and other repossessed assets may not accurately describe the fair value of the asset.
Operational Risks
•We are at risk of increased losses from fraud.
•Our use of third-party vendors and third-party business relationships are subject to regulatory requirements and attention.
•We could be adversely affected by a failure to establish and maintain effective internal controls over financial reporting.
•If we fail to maintain our reputation, our performance may be materially adversely affected.
•We depend on the accuracy and completeness of information about customers and counterparties, which if inaccurate, incomplete, fraudulent, misleading or untimely could result in loan losses, reputational damage or other adverse effects.
•We participate in a multi-employer non-contributory defined benefit pension plan that could subject us to substantial cash funding requirements in the future.
•We face strong competition from other banks and financial institutions and other wealth and investment management firms that could hurt our business.