Amalgamated Bank: “Purpose goes public” – and looks to more M&A (Corrected)

(Corrects Maryann Bruce’s job history)

On August 13, the initial public offering (IPO) of over 7m of Amalgamated Bank’s shares, at a public offering price of $15.50 per share, was closed – paving the way for greater expansion at the purpose-driven US bank.

Founded in 1923 by the Amalgamated Clothing Workers of America, Amalgamated Bank is the largest union-owned bank and one of the only unionised banks in the US. The bank works with over a thousand unions and is a certified B Corp company powered 100% by renewable energy. It’s also a frequent filer of shareholder resolutions; it claims to be the largest socially responsible bank in the US.

“Purpose goes public,” it announced on its website.
In all, a total of 7.7m shares of Class A common stock, which included the full exercise of the underwriters’ option to purchase an additional 1m shares, was sold.

The shares began trading on Nasdaq under the symbol AMAL on August 9. What investors were buying into was a bank with total assets of $4.2bn, a $2.9bn loan book and deposits of $3.3bn. On top of that, its trust business has some $29bn under custody and $11.6bn under management.

Keith Mestrich, who has been CEO of the bank since 2012, has returned it to profitability as well as raising the minimum wage to $15 an hour.
RI asked him about the share structure.

“Our capital structure is very simple;” he replied, “we have nothing but common stock. Prior to the IPO we redeemed a small class of preferred shares that had been out there for about 20 years. It was owned by some of our union owners. In order to clean up the capital stock, those were redeemed at a little over par in order to compensate for the fact that there haven’t been dividends for several years. The bank has about 31m shares outstanding, and about 7m were put into the secondary IPO market, diversifying our ownership.
Mestrich said the bank did a full roadshow and noted that the deal was multiple times oversubscribed. “Right before the IPO,” he said, “we did 20:1 share split. The IPO was at a nice premium to the tangible book value of the bank.”
The timing between the initial offering and the closing was pretty tight, was there a reason for that?
Mestrich noted that the initial press release was filed with the Federal Deposit Insurance Corporation (FDIC) was in July. “Between then and earlier this month we did some testing of the waters and got a very good reception and were able to go into the marketplace shortly after that,” he said.“We just found that market conditions and our reception was very good, so once we were ready, it was important to complete the IPO before people went way for the August holiday.”
So what was the motivation behind the IPO and who was selling the shares?

“Purpose goes public”

“There was no incredible magic behind the need for an IPO,” he said, “the bank is well capitalized. But the selling shareholders were unions who’d owned shares in us for over 95 years. The union is substantially smaller than it was two decades ago, and it needed to diversify its balance sheet with a liquidity event to get some resources for their own purposes. And then we had two private equity owners who sold in the IPO who are now in the sixth year of their investment, and, as you know, that tends to be something that’s a little long in the tooth for a private equity investor.”
As to the timing, Mestrich said: “Given the favourable IPO market at the moment, it was a good time to do it. For the bank itself, having a liquid currency is an important part of our strategy for M&A going forward.

“It gives us a lot of flexibility about how to structure future M&A opportunities.” It opened up the Amalgamated being able to offer a liquid equity vehicle for potential M&A partners.”
What M&A has there been to date?
Mestrich confirmed: “We’ve really only had one acquisition, in San Francisco, called New Resource bank. We announced that deal in September of last year and closed it in May of this year and we’re doing the work of fully integrating that. It provides us with a national platform. But that acquisition has worked out extremely well for the bank on a number of levels, both the economics of the overall deal and the opportunity to have a nice platform for our strategy in San Francisco. We think there’s a handful of other cities that would be interesting for us to expand our franchise to and M&A is one of the opportunities to get into those markets.”
At this point, the bank is not contemplating further public offerings; but that is clearly not the case with future M&A transactions.

Just a day after the closing, the bank added former Assistant Secretary of State for Human Rights and Humanitarian Affairs Patricia Diaz Dennis to its board, along with Maryann Bruce, an expert in the financial services industry and also has more than 30 years of experience in strategy, distribution and marketing. Ms. Bruce serves as an independent trustee for PNC Funds. Formerly, Ms. Bruce served on the board of MBIA Inc., was an independent director and Chair of the Compensation Committee of Atlanta Life Financial Group, and was an Allianz Funds Trustee.