AMAL — Q2 2026 Financial Report Analysis

Amalgamated Financial, the New York holding company for union-founded Amalgamated Bank, earned a record $34.8 million ($1.15 per diluted share) in Q2 2026, up 33.8% from $26.0 million ($0.84) a year earlier. Two things did the work: net interest income rose 18.0% as the bank earned more on a larger loan and securities book while paying slightly less for deposits, and the provision for bad loans fell back to $4.4 million after a $13.5 million first quarter dominated by one troubled borrower. That borrower's loans are still unresolved, so problem loans are nearly three times what they were a year ago.

At a glance

• Net interest margin 3.78%, up from 3.55%. The bank keeps more of each dollar it earns on loans and bonds after paying depositors, and that gain fed straight into profit.
• Nonaccrual loans $102.1 million (1.98% of loans), up from $34.7 million. Problem loans tripled in a year, mostly one $78 million multifamily housing relationship in the Washington, D.C. area. Reserves now cover only 67.5% of them, down from 170%.
• Political deposits $2.1 billion, up $211.9 million in the quarter. Campaign and party money is a fast-growing, cheap source of funding ahead of November's midterms, but it is also the deposit pool most likely to leave after election day.

The quarter in numbers

What drove the earnings

Margin and balance-sheet growth. A bank's main income is the gap between what it earns on loans and securities and what it pays depositors. The net interest margin (NIM) expresses that gap as a share of interest-earning assets. Amalgamated's rose to 3.78% from 3.55% a year ago. The 10-Q attributes the $13.2 million year-over-year rise in net interest income to "higher yields and average balances on interest-earning assets, and lower costs on interest bearing liabilities." In numbers: average interest-earning assets grew to $9.14 billion from $8.24 billion, loan yields rose to 5.21% from 5.05%, and the average cost of deposits fell to 1.46% from 1.62%. The cheapest funding grew fastest. Non-interest-bearing demand deposits, on which the bank pays nothing, averaged $3.37 billion, up from $2.90 billion, and made up 40% of average deposits.

Loan mix is moving toward commercial lending. Commercial loans reached $3.62 billion (70.3% of the book), up from $3.05 billion (64.6%). Most of that was multifamily housing, up to $1.86 billion from $1.41 billion. Residential mortgages (down to $1.20 billion from $1.29 billion) and consumer solar loans (down to $303.5 million from $345.6 million) are shrinking on purpose, described as "portfolios in non-growth mode." The bank also holds $1.34 billion of PACE assessments, which finance energy-efficiency upgrades and are repaid through property-tax bills. These sit in the securities book rather than in loans.

Costs rose, but revenue rose faster. Non-interest expense increased 16.6% to $47.3 million. The 10-Q cites a $3.9 million increase in compensation (performance accruals and an extra payroll period in 2026) and a $1.9 million increase in technology spending on "key modernization projects." Revenue grew 21.5%, so the efficiency ratio (operating costs divided by revenue, where lower is better) improved to 48.10% from 50.14%. In plain terms, the bank spent about 48 cents to bring in each dollar of revenue.

What the headline numbers hide

• The credit problem is contained to a few names, but it is not over. Nonaccrual loans, meaning loans where the bank has stopped booking interest because it doubts it will be paid, rose to $102.1 million from $34.7 million a year ago. Multifamily accounts for $87.1 million of that. The core of the problem is $78.0 million of Section 8 multifamily loans in the D.C. area made to a single borrower, who in Q1 "indicated an expected default." The investor deck lists this relationship at an 84.8% loan-to-value ratio and a 0.98 debt-service coverage ratio, which means the buildings' income does not quite cover the loan payments. Management is weighing "foreclosure, note sales, or other exit strategies." Reserves on three of these loans rose another $1.1 million in Q2, and one new $5.3 million New York multifamily loan went to nonaccrual. Reserves now equal 67.5% of nonaccrual loans, down from 170.0%, so the bank is relying on collateral rather than reserves to absorb any loss. Actual write-offs stayed low at an annualized 0.25% of loans.
• The provision comparison flatters the quarter-on-quarter story, not the year-on-year one. Q2's $4.4 million provision is close to Q2 2025's $4.9 million, so the year-over-year profit gain does not depend on lower credit costs. For the first half, though, provision was $17.9 million against $5.5 million. First-half net income grew only 17.6% ($60.0 million vs. $51.0 million), much less than the quarter's 33.8%.
• GAAP vs. core. GAAP EPS of $1.15 is above "core" EPS of $1.10. Core excludes $2.3 million of ICS One-Way Sell fee income, which the bank earns by placing client deposits at other banks through a sweep network (a year earlier this was only $0.1 million). It also excludes small securities losses and $0.1 million of severance. Excluding a fee that the bank itself treats as non-recurring is reasonable. On a core basis, EPS growth was 25%, not 37%.
• Some of the EPS growth did not come from the business. The diluted share count fell 1.9% to 30.19 million, and the effective tax rate dropped to 25.4% from 26.7%, helped by a $0.5 million purchased tax credit. Pre-tax income grew 31.5%, net income 33.8% and EPS 36.9%. Roughly five points of EPS growth came from fewer shares and a lower tax rate rather than from operations. In June the board topped the buyback authorization back up to $40 million, but no shares were repurchased under it during the quarter.
• About 3 basis points of the margin was one-off. Loan prepayment penalties added $0.5 million, which the release says lifted NIM by 3 basis points (0.03 percentage points). A payoff of a nonaccrual construction loan also recaptured interest. Without these, NIM was roughly flat with Q1's 3.75%.
• Cash conversion is not a concern. First-half operating cash flow was $87.3 million against $60.0 million of net income.

Takeaway: Amalgamated's profit engine is its cheap, sticky deposit base. Forty percent of deposits pay no interest, and $5.1 billion of "super-core" relationships have lasted an average of 17 years. That is why the margin can rise even as rates ease. The weak spot is concentrated: a handful of multifamily loans, led by one $78 million D.C. relationship, now make up most of a nonaccrual book that tripled in a year. How those loans are resolved matters more to the next few quarters than another basis point of margin.

Outlook

Management raised its full-year 2026 outlook. Net interest income guidance rose to $338–340 million from $331–333 million a quarter ago, and core pre-tax, pre-provision earnings guidance rose to $188–190 million from $183–185 million. For Q3 it guides net interest income of $86–88 million. Q2's actual $86.1 million beat the $81–83 million it guided for Q2. The year-end balance-sheet growth target was raised to about 8% from about 5%. The core return on assets target, set at about 1.35% at the start of the year and cut to about 1.26% after Q1, now stands at about 1.29%. The company still says core ROTCE of about 15% and core efficiency within a 52% outer band are "on track."

Our read: the guidance implies second-half net interest income of $172–174 million, or about $86–87 million a quarter. That is roughly flat with Q2, so the steep margin-driven growth of the past year is set to level off. Earnings growth from here depends more on balance-sheet size and credit costs. Two things to watch in Q3: whether the D.C. multifamily loans are sold or foreclosed without a loss beyond current reserves, and what happens to the $2.1 billion of political deposits. Management already excludes the $344.8 million of political deposit growth since year-end from its "core deposit" figure. Campaign money that arrives before the November 3 midterms tends to be spent down after them, which would push more funding into costlier sources or shrink the balance sheet.

Source: Amalgamated Financial Corp. Form 10-Q for the quarter ended June 30, 2026 (filed 2026-08-04), plus its Q2 2026 earnings release and investor presentation (8-K, July 23, 2026) for guidance and segment detail.