Amalgamated Financial Corp, New York, NY (AMAL)

Unionized Banking at its Best

Posting the January 2024 Timyan Bank Alert™ Review of AmeriServ Financial got me looking into unionized banks as a class. 

The Big Aha for me? There's both room and reason for Unionized Banking in America, and it can be done well. 

Unionized banks are a rarity in the US –– it takes a special banker to even know what to do with them, and those bankers are even more rare than the banks in this niche. 
 
Although there were 50 or so before the Great Depression, only six of 4,458 community banks left in the US today are unionized. Among them, Amalgamated is the top performer, and it owes its success to the good fortune of having been led by a non-traditional banker — Keith Mestrich.

Were AmeriServ or any other of the country’s unionized banks to engage Mestrich in any capacity, I would Follow The Leader and seriously consider buying shares in that entity.


Disclosure: As of this posting, I do not own any shares of AMAL.


Prospective Buyers

As attractive as the Amalgamated franchise is from a fundamentals standpoint, I don't see any acquisitive bankers in the area who'd be open to moving into unionized banking.

Financial Snapshot
as of 12/31/2023

Total assets:$8B
Tangible book value per share:   $18.74
NPAs to assets:0.4%
Price to book:125%
Market cap:$730M
Dividend yield:1.7%
Trailing 12-month ROA:1.15%
Trailing 12-month ROE:17.1%

Luminaries

Keith Mestrich, Former CEO
Lynne P. Fox, Chair
Priscilla Sims Brown, President and CEO

Gold Stars

Most of the Gold Stars that apply to Amalgamated now are attributable to Keith Mestrich, whom the bank hired in 2012. (Amalgamated had lost money in 4 of the prior 5 years.)

Despite being a newbie in the field, Mestrich managed the fundamentals of “normal” banking expertly, by:
  • Closing most of Amalgamated's 32 unprofitable consumer branches in New York,
  • Hiring talented bankers,
  • Bringing in needed low-cost deposit customers,
  • Cleaning up poor credit, and 
  • Introducing efficiencies in every corner of the bank.
Mestrich even grew Amalgamated's value via effective acquisition by:
  • Leading Amalgamated's purchase of the underperforming New Resource Bank in San Francisco, and turned it around, too. 
If you bought NWBN shares when the February 2014 Timyan Bank Alert™ Review of New Resource Bank and/or NRBC shares after our February 2017 Updated Review of New Resource Bank were posted, you have Mestrich to thank for the 281% and/or 194% bumps in value of those shares to what they're worth now in AMAL stock.

Even more impressive to me are the ways Mestrich brought unique value to the Amalgamated franchise and community by:
  • Embracing unions and unionization instead of fighting them; 
  • Building on the bank’s history serving diverse populations, including immigrants; and, 
  • Inventing profitable products and services for the union marketplace. 
In my perfect world, Amalgamated would scale the Mestrich game! 

Roll up some other unionized banks, bring Amalgamated's innovative products and superior service to their uniquely shared markets, and ring out their inefficiencies. 

Sources


UPDATE: AmeriServ Financial, Johnstown, PA (ASRV)

On the 10-year anniversary of my January 2014 Timyan Bank Alert™ Review of AmeriServ Financial, I'm disheartened to report that this bank is being run into the ground by a bunch of bumbling money grubbers.

ASRV is still flying under the radar in terms of coverage it gets from industry analysts and reporters, and I would still very much like to see it get on the radar, albeit for different — and less friendly — reasons.

My sincerest apologies to readers of my original post and/or 2017 Updated Review of AmeriServ. My only consolation is this: if you meet SEC Rule §240.14a-8 criteria, you could try submitting a Shareholder Proposal to change the bank's bylaws to make it easier to nominate a more independent slate of directors. 

Per AmeriServ's April 2023 Proxy, the window for submitting shareholder proposals is between January 27 and Feburary 26, 2024.


Disclosure: As of this posting, I own shares of ASRV and may subsequently either dispose of them or purchase more.


Prospective Buyers

AmeriServ has a unionized workforce, which likely acts as a poison pill for potential acquirers. 

The only acquisitive bank I can imagine might not be put off by this is Amalgamated Bank, which is also unionized.

Amalgamated Financial Corp, New York, NY (AMAL)

Financial Snapshot
as of 09/30/2023

Total assets:
$1.361B
Tangible book value per share:   
$5.11
NPAs to assets:
0.4%
Price to book:
55%
Market cap:
$55.9M
Dividend yield:
3.7%
Trailing 12-month ROA:
0.22%
Trailing 12-month ROE:
2.82%

Scoundrels

Jerome Michael Adams, Jr, Chairman
Jeffrey A. Stopko, President, CEO, and Head of Investor Relations
Allan R. Dennison, Former Chairman and CEO

Red Flags

The red flags about AmeriServ and ASRV are too many, for too long, to enumerate succinctly, but here are a few summative and recent highlights. 
  • With an efficiency ratio that's consistently running over 50% higher than the average bank (i.e., 85% vs 55%, respectively), AmeriServ is just too inefficiently managed to have a prayer of earning a competitive return on equity or assets under current leadership.
  • Note: AmeriServ can't blame its disastrous efficiency ratio on its unionized workforce — Amalgamated has a unionized workforce, too, and boasts a better-than-average 52% efficiency ratio.
  • In the first 9 months of 2023, AmeriServ blew over $2M just to keep shareholders from having the opportunity to vote on qualified candidates for the Board that a fellow shareholder with expertise in the banking sector (Driver Management) had recruited and recommended.
  • Had AmeriServ simply invested that $2M in a stock repurchase, they could have retired 4% of the company's shares, yielding an immediate 50% return to shareholders.

Sources

BankFinancial, Burr Ridge, IL (BFIN)

An 18-Year Old Prodigal Bank Conversion


Image of Boy Throwing Confetti
Under the leadership of Chairman and CEO Morgan Gasior, BankFinancial has been squandering assets with the arrogance of inherited affluence for nearly two decades.

Despite his repeated promises, in no year has Gasior produced "peer-like" returns, and this prodigal son shows no signs of changing his ways. 

Clearly, BankFinancial's Board of Directors needs a serious kick in the pants, which any shareholder who meets the SEC Rule §240.14a-8 criteria can deliver by submitting a proposal recommending the bank be sold to a more mature operator. 

Per BankFinancial's April 2023 Proxy, the deadline to submit a shareholder proposal is December 13, 2023.

Disclosure: As of this posting, I own shares of BFIN and may subsequently either dispose of them or purchase more.


Prospective Buyers

Any of these neighboring banks would have no trouble putting BankFinancial's assets to better use if they could acquire the franchise at a small premium to book value.

Byline Bancorp, Chicago, IL (BY)
Old Second Bancorp, Aurora, IL (OSBC)
Wintrust Financial, Rosemont, IL (WTFC)

Financial Snapshot
as of 09/30/2023

Total assets:
$1.5B
Tangible book value per share:   
$12.25
NPAs to assets:
1.6%
Price to book:
74%
Market cap:
$113M
Dividend yield:
4.4%
Trailing 12-month ROA:
0.69%
Trailing 12-month ROE:
7%

Scoundrels

F. Morgan Gasior, Chairman, President, and CEO
John M. Hausmann, Director since 1990
Terry R. Wells, Director since 1994
Glen R. Wherfel, Director since 2001

Red Flags

In preparation for publishing this review, I re-read all 18 years of transcripts from BankFinancial’s quarterly conference calls
 
In those transcripts, Gasior tosses glowing projections for future performance like a kid with confetti. 

Over the past 18 years, Gasior took nearly $13M in total compensation from BankFinancial. That money was real. The projections — mostly fairy dust. 

Since BankFinancial’s conversion in 2005, both its stock price and book value have declined. Share price is down 34%. Book value per share is down 5%. During that same period, the NASDAQ Bank Index has climbed by 15%. Under Gasior, BankFinancial has flagrantly underperformed its peers, year after year after year. 

All of this surprises me so much less now that I know Gasior was just 19 years old when his father, CEO Frank Gasior, made him a Bank Director, and just 24 years old when Dad appointed him COO. It's also no mystery now why Gasior has kept BankFinancial's Board of Directors so small.

Perhaps Gasior can't be expected to treat this publicly traded institution responsibly, but that's why banks have Boards of Directors. 

BankFinancial is publicly traded. Its board has a legally binding fiduciary responsibility to its shareholders. BankFinancial directors are accountable for hiring and firing the bank's CEO. Given BankFinancial's dreadful performance, its directors are obligated to either replace the CEO or sell the bank.

Sources