NEW YORK–(COMMERCIAL THREAD) – On October 27, 2020, Kroll Bond Rating Agency (KBRA) assigned New York, New York senior unsecured debt and deposit ratings of BBB +, a subordinated debt rating of BBB and debt ratings of short term and deposits of K2- amalgamated Bank (NASDAQ: AMAL) (“Amalgamated” or “the bank”). The outlook for long-term ratings is stable.
The ratings reflect Amalgamated’s clear and defensible business strategy focused on niche customers with ample growth opportunities. Competent leadership was instrumental in reducing AMAL’s risk after 2014. While the current CEO recently announced his imminent departure, the collective leadership team is very competent and we do not expect a change in basic strategy. In its contemporary form, AMAL reflects a lower credit risk profile than its peers, as evidenced by a low density of RWA (mid range 60%). While we view AMAL’s strategy as defensible, we note that organic loan growth generated by its niche clientele has been complemented by other channels, including purchases of selected portfolios, albeit cautiously guaranteed. A slightly higher APM level than peers includes old loans in liquidation. However, the content of last year’s losses was negligible, in part due to favorable credit conditions leading up to 1Q20, but also the credit culture of the management team. KBRA notes AMAL’s lower exposure to “risky” sectors, which account for 3% of loans. AMAL’s attractive and low-cost deposit base (14 bps cost of deposits in 3Q20) is also critical to ratings, which fully finance loans (LTD ratio tending to be below 80% in recent years). periods) and supported the durability of the NIM, before difficult conditions occurring in 1Q20. Published earnings are slightly lower than their peers, although AMAL’s risk-adjusted return profile is strong (RORWA of 1.45% in 2019) and has shown gradual improvement over time. Capital ratios are adequate in the context of a low risk profile and, when considered in conjunction with reserve coverage (ALL / loan ratio of 1.34% in 3Q20) and earnings, provide a strong cushion to absorb potential credit losses during the current down cycle.
KBRA continues to monitor the potential direct and indirect effects of the coronavirus on the banking sector, among others. Please refer to our publication Compendium of U.S. Bank Ratings Q2 2020 for our final thoughts.
Ratings are based on KBRA Global rating methodology for the bank and the bank holding company published on October 16, 2019.
Further information on key credit considerations, sensitivity analyzes that examine the factors that may affect these credit ratings and how they might lead to an upgrade or downgrade, and ESG factors (where they are a major driver of change in credit rating or rating outlook) can be found in the full rating report mentioned above.
A description of all substantially significant sources that were used in preparing the credit rating and information on the method (s) (including models and sensitivity analyzes of relevant key rating assumptions, if any) used to determine the credit rating is available in the United States Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further information relating to this rating measure is available in the US Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures can be found at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the United States Securities and Exchange Commission. In addition, KBRA is appointed as the designated rating agency by the Ontario Securities Commission for issuers of asset-backed securities to file a simplified prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a credit rating provider and is a credit rating agency (ARC) certified with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a rating agency.