CRAINSNEW YORK BUSINESS NEW YORK BUSINESS® JANUARY 7 - 13, 2019 PROFITS AND CAUSES CEO Keith Mestrich is taking New York’s Amalgamated Bank national by embracing social responsibility VOL. XXXV, NO. 1 WWW.CRAINSNEWYORK.COM BANKING MESTRICH, in the bank’s Woody Guthrie conference room, has plans to expand Amalgamated from the New York island to California. t was the morning after the 2018 by Mestrich to diversify beyond the midterm elections and Keith bank’s organized-labor roots. The bank BANKING Mestrich, chief executive of was founded 96 years ago by a New York Amalgamated Bank, was placing garment workers union and for most congratulatory calls to the bank’s of its existence has served local union Iclients. His first three calls were to Anto- members and their pension funds. Since FOR nio Delgado, Max Rose and Anthony becoming CEO in June 2014, Mestrich Brindisi, Democrats who ousted Repub- has moved to embrace a broader set of licans in New York districts as part of organizations and businesses that share GOOD a statewide blue sweep. Also on his list the bank’s social and environmental were national Democratic leaders such concerns. (Planned Parenthood and the Founded to support the city’s as Sens. Jon Tester of Montana and Sher- Sierra Club are clients.) Getting political, rod Brown of Ohio, ranking member of it turns out, can be a winning business union workers, Amalgamated the Senate banking committee. strategy. plans to grow by financing “We do a nice national business bank- Mestrich built an Amalgamated pres- socially responsible causes ing the Democratic Party,” Mestrich said, ence in Washington, D.C., almost from sitting on a couch in his office above an scratch, hiring former Obama adminis- BY AMY CORTESE Amalgamated branch in the Garment tration officials as bankers. Amalgamated District. That might be an understate- in May completed the acquisition of San ment. Amalgamated’s clients include the Francisco–based New Resource Bank, Democratic National Committee, pro- netting a portfolio of commercial loans gressive super PACs and rising national to socially responsible firms in areas stars such as Alexandria Ocasio-Cortez such as clean energy, organic food and as well as stalwarts including Sen. Kirsten green building. In August the bank was Gillibrand. The bank serviced Bill de listed on Nasdaq, becoming the first Blasio’s mayoral campaigns and Hillary labor-owned company of any kind to go Clinton’s billion-dollar presidential run. public and providing access to the kind All told, Amalgamated raked in more of capital Mestrich will need to finance than $2 million in fees from Democratic more acquisitions. campaigns and organizations during last The goal is to create a national financial year’s midterms, according to Federal powerhouse that serves socially respon- Election Commission filings. sible organizations—the Patagonia of The turn to politics is part of a plan banking, you might say. That mission PHOTOS BY BUCK ENNIS BANKING could grow Amalgamated from nearly the climate impact hid- $5 billion in assets today to $50 billion in den in loan portfolios. a decade or two, Mestrich forecasts. That’s a big ambition for a bank that is Amalgamated is also tiny by the standards of JPMorgan Chase one of the few banks, and Bank of America, which each have along with New Resource, more than $2 trillion in assets. to become a certified B “Size really matters,” Mestrich said. Corp., a voluntary des- “When you don’t have a big balance ignation that requires sheet, you can’t do things for the largest businesses to rigorously players. You can’t bear the risk of product measure and report the development. You can’t build a national impact they have on their name and national footprint.” employees, customers, the Mestrich’s plan relies heavily on a communities they work in digital banking plat- form with a limited physical footprint. “The model won’t work in Topeka or Little Rock,” he acknowledged. “But it does work well in places like Boston, Chi- cago, Los Angeles and Seattle, where there’s a concentration of non- profit organizations and unions and political groups. I think we can build a real business a rou n d t h at .” Values play Across the finan- cial industry, players including BlackRock and Goldman Sachs are adopting so-called socially responsible investing. Often that CHARTERED IN 1923 IN UNION SQUARE, Amalgamated involves splashy ini- brought affordable banking to the working classes. tiatives but little fundamental change in how the institutions operate. JPMorgan and the environment. Employees International Union—is not Chase, for example, made headlines in That all-in strategy sets Amalgamated your typical banker. 2017 for committing to 100% renew- apart, said Dennis Kelleher, president “I’ve had a pretty nontraditional able energy by 2020. Yet it financed and chief executive of Better Markets, a career path to becoming a bank CEO— $25 billion in “extreme” fossil-fuel proj- watchdog group. Amalgamated is “trying to say the least,” he said. ects, including tar sands and coal, from to bring a socially responsible financing Labor organizer Sidney Hillman and 2015 to 2017, according to a Rainforest model to the financial industry,” Kelle- the Amalgamated Clothing Workers of Action Network report. her said. “That’s obviously very hard to America founded the bank in 1923. As In contrast, Amalgamated was born out of a platform of workers’ rights do in an industry where the competitive New York City’s first labor bank, it sought and solidarity, and those values are pressures on revenues and profits are so to provide working folks with affordable baked into its DNA. The bank, which intense. But it’s an exciting experiment services. The year after its founding, the has championed a $15 minimum wage, that the country really needs to see.” bank introduced the nation’s first unse- became the nation’s first to raise its own It’s also an experiment you wouldn’t cured personal loans, akin to today’s minimum to that level in 2015. (Jamie expect from Wall Street. But then, Amal- credit cards. It also offered the city’s Dimon followed suit a year later.) It uses gamated has never been a typical bank. first free checking accounts and the first its $40 billion trust business to pressure And Mestrich, who spent the bulk of his foreign-exchange transfer service for public companies on issues including career in the labor movement—start- immigrants looking to send money to board diversity, gun control and curbing ing as a financial analyst at the AFL- relatives who stayed behind. carbon emissions. It’s leading an initia- CIO and rising to chief financial officer Hillman also helped to create the COURTESY OF AMALGAMATED BANK COURTESY OF AMALGAMATED tive to devise a framework for measuring and deputy chief of staff for the Service Amalgamated Housing Cooperative in BANKING the Bronx—the oldest limited-equity interests in 2017.) The next year Mes- Obama’s re-election campaign. cooperative housing in the nation, with a trich left the SEIU, an affiliate of UNITE Meanwhile, Amalgamated has several-year waiting list. It was financed, (now Workers United), to join the bank. committed to doubling the loans naturally, by Amalgamated Bank. His mandate: Expand the bank’s sleepy New Resource could make to triple– The bank’s Manhattan headquar- Washington, D.C., presence. With his bottom line businesses (those aiming ters celebrates that history. Posters of connections, Mestrich soon landed the for environmental, social and financial Hillman hang on the walls, and confer- Democratic National Committee as a results), from $350 million to $700 mil- ence rooms are named after progressive client. lion by 2020. Amalgamated remains the heroes such as Woody Guthrie and Elea- Two years later he was promoted to largest manager of union pension funds nor Roosevelt. president and CEO. He moved to New in the country and Workers United its The union merged in 1995 with the York and began to close underperform- largest shareholder. International Ladies’ Garment Work- ing branches and unwind problem loans. Since Mestrich has taken over, the ers’ Union to form the Union of Needle The financial crisis led Amalgamated, bank has increased deposits by $1.5 bil- Trades, Industrial and Textile Employees, and Mestrich, to think more broadly lion and earnings from $3.3 million in or UNITE—“the best acronym ever for and grow the bank’s business beyond 2014 to $32 million as of last year’s third the labor movement,” Mestrich said. the labor community to nonprofit and quarter. But that proud history almost came to political organizations and—with New Wall Street has cheered the bank’s an inglorious end. By the turn of the cen- Resource Bank—socially conscious busi- moves. Amalgamated shares closed tury, unions were under assault. Mem- nesses. After New York and D.C., “San the year at $19.50, up 25% despite the bership numbers plummeted. Infighting Francisco was the next best market for broader market swoon. broke out at UNITE, which had by then us,” Mestrich said. “We were trying to get In reiterating his “overweight” rat- merged with a union for hotel and restau- there organically, but it was really hard.” ing in December, JPMorgan analyst Ste- rant workers. The New Resource acquisition, which ven Alexopoulos wrote: Amalgamated Around that time, the bank embarked grew out of talks between Mestrich and “appears to have years of double-digit on a rapid expansion growth potential into underserved within its reach as the communities. “BECOMING A $50 BILLION BANK company expands ‘A perfect storm’ market share within Then the 2008 WOULD SAY SOMETHING its targeted niche.” financial crisis hit.