Amerant Bancorp Inc. (NYSE:AMTB) Q1 2021 Earnings Conference Call April 29, 2021 9:00 AM ET Company Participants Laura Rossi - Investor Relations Jerry Plush - Chief Executive Officer Carlos Iafigliola - Chief Financial Officer Conference Call Participants Michael Rose - Raymond James Brady Gailey - KBW Stephen Scouten - Piper Sandler Operator Good day, and thank you for standing by. Welcome to the Amerant First Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today's co ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________ to __________ Commission File Number 001-38534 Amerant Bancorp Inc. (Exact Name of Registrant as Specified in Its Charter) Florida 65-0032379 (State or Other Jurisd ...

Amerant Bancorp Inc. (NYSE:AMTB) Q4 2020 Earnings Conference Call January 29, 2021 9:30 AM ET Company Participants Laura Rossi - Investor Relations Officer-Amerant Banc Millar Wilson - Chief Executive Officer Carlos Iafigliola - Executive Vice-President and Chief Financial Officer Thiel Fischer - Credit Risk Manager Miguel Palacios - Executive Vice-President and Chief Business Officer Conference Call Participants Will Jones - KBW Michael Rose - Raymond James Operator Ladies and gentlemen, thank you for stan ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period __________ to __________ Commission File Number: 001-38534 AMERANT Amerant Bancorp Inc. (Exact Name of Registrant as Specified in Its Charter) | --- | --- | --- | ...

Amerant Bancorp Inc. (NYSE:AMTB) Q3 2020 Earnings Conference Call October 29, 2020 9:30 AM ET Company Participants Laura Rossi – Investor Relations Officer-Amerant Banc Millar Wilson – Chief Executive Officer Carlos Iafigliola – Executive Vice-President and Chief Financial Officer Thiel Fischer – Credit Risk Manager Miguel Palacios – Executive Vice-President and Chief Business Officer Conference Call Participants Michael Young – Truist Michael Rose – Raymond James Stephen Scouten – Piper Sandler Brady Gaile ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=Part%201.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The unaudited interim consolidated financial statements detail the company's financial position, operations, equity changes, and cash flows for the periods ended June 30, 2020 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The balance sheets reflect a slight increase in total assets and deposits, a significant rise in the allowance for loan losses, and the introduction of senior notes | Metric | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | Total assets | $8,130,723 | $7,985,399 | | Cash and cash equivalents | $217,349 | $121,324 | | Securities | $1,674,811 | $1,739,410 | | Loans held for investment, gross | $5,872,271 | $5,744,339 | | Allowance for loan losses | $119,652 | $52,223 | | Total deposits | $6,024,702 | $5,757,143 | | Advances from FHLB and other borrowings | $1,050,000 | $1,235,000 | | Senior notes | $58,419 | — | | Junior subordinated debentures | $64,178 | $92,246 | | Total stockholders' equity | $830,198 | $834,701 | [Consolidated Statements of Operations and Comprehensive (Loss) Income](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20(Loss)%20Income) The company reported a net loss for the three and six months ended June 30, 2020, driven by a substantial increase in the provision for loan losses | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total interest income | $64,167 | $79,226 | $135,482 | $159,533 | | Total interest expense | $17,844 | $25,437 | $39,930 | $50,307 | | Net interest income | $46,323 | $53,789 | $95,552 | $109,226 | | Provision for (reversal of) loan losses | $48,620 | $(1,350) | $70,620 | $(1,350) | | Total noninterest income | $19,753 | $14,147 | $41,663 | $27,303 | | Total noninterest expenses | $36,740 | $52,905 | $81,607 | $104,850 | | Net (loss) income | $(15,279) | $12,857 | $(11,897) | $25,928 | | Basic (loss) earnings per common share | $(0.37) | $0.30 | $(0.28) | $0.61 | | Diluted (loss) earnings per common share | $(0.37) | $0.30 | $(0.28) | $0.60 | [Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity slightly decreased due to a net loss and common stock repurchases, partially offset by an increase in accumulated other comprehensive income | Metric (in thousands) | December 31, 2019 | June 30, 2020 | | :--- | :--- | :--- | | Total Stockholders' Equity | $834,701 | $830,198 | | Class A Common Stock (shares) | 28,927,576 | 28,873,196 | | Class B Common Stock (shares) | 14,218,596 | 13,286,137 | | Additional Paid in Capital | $419,048 | $359,028 | | Treasury Stock | $(46,373) | — | | Retained Earnings | $444,124 | $432,227 | | Accumulated Other Comprehensive Income | $13,234 | $34,727 | - Repurchase of Class B common stock: **(932,459) shares for $15,239 thousand**[12](index=12&type=chunk) - Other comprehensive income for the six months ended June 30, 2020, was **$21,493 thousand**, contributing positively to equity[10](index=10&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents significantly increased, driven by financing activities like increased deposits and senior notes issuance, offsetting cash used in investing | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $26,970 | $33,469 | | Net cash (used in) provided by investing activities | $(28,534) | $224,137 | | Net cash provided by (used in) financing activities | $97,589 | $(252,999) | | Net increase in cash and cash equivalents | $96,025 | $4,607 | | Cash and cash equivalents, beginning of period | $121,324 | $85,710 | | Cash and cash equivalents, end of period | $217,349 | $90,317 | - Operating activities were positively impacted by a **$70.6 million provision for loan losses** (non-cash adjustment) despite a net loss[15](index=15&type=chunk) - Investing activities included significant purchases of available-for-sale securities (**$293.0 million**) and a net increase in loans (**$146.3 million**)[15](index=15&type=chunk) - Financing activities saw a net increase in demand, savings, and money market accounts (**$253.8 million**) and proceeds from Senior Notes issuance (**$58.4 million**)[15](index=15&type=chunk) [Notes to Interim Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Notes%20to%20Interim%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes provide detailed disclosures on business operations, accounting policies, and specific financial line items, offering crucial context for the interim results [Note 1. Business, Basis of Presentation and Summary of Significant Accounting Policies](index=12&type=section&id=Note%201.%20Business%2C%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Amerant Bancorp Inc operates as a bank holding company with a single-segment management approach, significantly impacted by the COVID-19 pandemic - Amerant Bancorp Inc is a Florida corporation, a bank holding company, with its principal office in Coral Gables, Florida[17](index=17&type=chunk) - The Company is managed as a **single segment**, with no separate reportable segment disclosures required under U.S GAAP[19](index=19&type=chunk) - In response to the COVID-19 pandemic, the Company activated its Business Continuity Plan on March 16, 2020, with approximately **86% of employees working remotely** as of June 30, 2020[22](index=22&type=chunk)[140](index=140&type=chunk) - The Bank participated in the SBA's Paycheck Protection Program (PPP), providing **$214.1 million in loans** across over 2,000 applications as of June 30, 2020[24](index=24&type=chunk)[142](index=142&type=chunk) - Loan payment relief options were offered to customers impacted by COVID-19, totaling **$1.1 billion** as of June 30, 2020, which are not considered Troubled Debt Restructurings (TDRs)[25](index=25&type=chunk)[144](index=144&type=chunk) - The Company recorded a provision for loan losses of **$48.6 million in Q2 2020**, including $20.2 million related to COVID-19's macroeconomic impact[30](index=30&type=chunk)[146](index=146&type=chunk) - As an Emerging Growth Company (EGC), Amerant plans to adopt **CECL in 2023** or earlier if it ceases to be an EGC[34](index=34&type=chunk)[38](index=38&type=chunk)[41](index=41&type=chunk) [Note 2. Interest Earning Deposits with Banks](index=17&type=section&id=Note%202.%20Interest%20Earning%20Deposits%20with%20Banks) Interest-earning deposits with banks, primarily with the Federal Reserve, significantly increased while their average interest rate declined | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Deposits with Federal Reserve | ~$182,000 | ~$93,000 | | Average interest rate | ~0.54% | ~2.19% | - These deposits mature within one year[43](index=43&type=chunk) [Note 3. Securities](index=17&type=section&id=Note%203.%20Securities) The securities portfolio experienced changes in fair value and realized gains, with a notable increase in net realized gains from sales in the first half of 2020 | Debt Securities Available for Sale (in thousands) | June 30, 2020 Estimated Fair Value | December 31, 2019 Estimated Fair Value | | :--- | :--- | :--- | | U.S government-sponsored enterprise debt securities | $831,920 | $933,112 | | Corporate debt securities | $386,109 | $252,836 | | U.S government agency debt securities | $232,454 | $228,397 | | U.S treasury securities | $2,515 | $104,236 | | Municipal bonds | $66,786 | $50,171 | | **Total** | **$1,519,784** | **$1,568,752** | | Realized Gains/Losses (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Gross realized gains | $7,537 | $1,125 | $16,803 | $1,573 | | Gross realized losses | — | $(133) | $(23) | $(577) | | **Realized gains, net** | **$7,537** | **$992** | **$16,780** | **$996** | - Unrealized losses on debt securities available for sale were **$5.6 million** at June 30, 2020, considered temporary and primarily due to changes in interest rates[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk) - Equity securities (mutual funds) had a fair value of **$24.4 million** at June 30, 2020, recognizing $0.6 million in unrealized gains for the six months ended June 30, 2020[51](index=51&type=chunk) [Note 4. Loans](index=19&type=section&id=Note%204.%20Loans) The loan portfolio increased slightly, with growth in consumer and residential loans offsetting a decline in commercial real estate and international loans | Loan Class (in thousands) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Real estate loans | $4,477,515 | $4,405,278 | | Commercial loans | $1,247,455 | $1,234,043 | | Loans to financial institutions and acceptances | $16,597 | $16,552 | | Consumer loans and overdrafts | $130,704 | $88,466 | | **Total Loans held for investment, gross** | **$5,872,271** | **$5,744,339** | | International Loans (in thousands) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Venezuela | $93,770 | $112,297 | | Others | $62,395 | $59,140 | | **Total** | **$156,165** | **$171,437** | - Loans pledged as collateral to secure FHLB advances were **$1.5 billion** at June 30, 2020, down from $1.6 billion at December 31, 2019[54](index=54&type=chunk) - The company phased out its legacy credit card products, resulting in **no outstanding credit card balances** as of June 30, 2020[57](index=57&type=chunk) [Note 5. Allowance for Loan Losses](index=22&type=section&id=Note%205.%20Allowance%20for%20Loan%20Losses) The allowance for loan losses significantly increased due to substantial provisions reflecting macroeconomic deterioration from COVID-19 and specific reserve needs | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Balances at beginning of period | $72,948 | $60,322 | $52,223 | $61,762 | | Provision for loan losses | $48,620 | $(1,350) | $70,620 | $(1,350) | | Loans charged-off (net of recoveries) | $(1,916) | $(1,568) | $(3,191) | $(3,008) | | Balances at end of period | $119,652 | $57,404 | $119,652 | $57,404 | | ALL by Impairment Methodology (in thousands) | June 30, 2020 | June 30, 2019 | | :--- | :--- | :--- | | Individually evaluated | $27,704 | $4,525 | | Collectively evaluated | $91,948 | $52,879 | | **Total** | **$119,652** | **$57,404** | - Impaired loans totaled **$77.5 million** at June 30, 2020, compared to $30.3 million at December 31, 2019, with a significant portion having a valuation allowance[71](index=71&type=chunk)[72](index=72&type=chunk) - Loan payment relief options offered due to COVID-19 totaled **$1.1 billion** as of June 30, 2020, and are not considered TDRs[75](index=75&type=chunk) [Note 6. Time Deposits](index=28&type=section&id=Note%206.%20Time%20Deposits) Time deposits increased, particularly those in larger denominations, while brokered time deposits decreased | Time Deposits (in thousands) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | $100,000 or more | ~$1,500,000 | ~$1,400,000 | | More than $250,000 | ~$784,000 | ~$733,000 | | Brokered time deposits | $588,000 | $662,000 | [Note 7. Advances from the Federal Home Loan Bank and Other Borrowings](index=28&type=section&id=Note%207.%20Advances%20from%20the%20Federal%20Home%20Loan%20Bank%20and%20Other%20Borrowings) Outstanding FHLB advances decreased following a significant restructuring of fixed-rate advances in April 2020 to extend maturities and lower interest rates | Year of Maturity | Interest Rate (2020) | Outstanding at June 30, 2020 (in thousands) | Outstanding at December 31, 2019 (in thousands) | | :--- | :--- | :--- | :--- | | 2020 | 0.44% to 2.35% | — | $135,000 | | 2020 | 1.73% to 2.03% | — | $150,000 | | 2021 | 1.75% to 3.08% | — | $210,000 | | 2022 | 0.65% to 2.80% | $50,000 | $120,000 | | 2023 and after | 0.62% to 3.23% | $1,000,000 | $620,000 | | **Total** | | **$1,050,000** | **$1,235,000** | - In early April 2020, **$420.0 million of fixed-rate FHLB advances were restructured**, extending maturities and lowering interest rates, resulting in a $17.0 million loss blended into new yields[84](index=84&type=chunk) [Note 8. Senior Notes](index=29&type=section&id=Note%208.%20Senior%20Notes) The company completed a $60.0 million offering of unsecured senior notes in June 2020 with a 5.75% coupon rate due in 2025 - On June 23, 2020, Amerant Bancorp Inc completed a **$60.0 million offering of senior notes** with a 5.75% coupon rate, due 2025[85](index=85&type=chunk) - Net proceeds from the senior notes offering totaled **$58.4 million** after $1.6 million in direct issuance costs[85](index=85&type=chunk) - The Senior Notes are unsecured, unsubordinated, and fully and unconditionally guaranteed by Amerant Florida Bancorp[85](index=85&type=chunk) [Note 9. Junior Subordinated Debentures Held by Trust Subsidiaries](index=29&type=section&id=Note%209.%20Junior%20Subordinated%20Debentures%20Held%20by%20Trust%20Subsidiaries) The company redeemed $26.8 million of its 8.90% trust preferred capital securities in January 2020, reducing liabilities and annual interest expense | Trust Subsidiary | Principal Amount of Debenture Issued to Trust (in thousands) | Year of Issuance | Annual Rate | Year of Maturity | | :--- | :--- | :--- | :--- | :--- | | Commercebank Capital Trust I | — (redeemed) | 1998 | 8.90% | 2028 | | Commercebank Capital Trust VI | $9,537 | 2002 | 3-M LIBOR + 3.35% | 2033 | | Commercebank Capital Trust VII | $8,248 | 2003 | 3-M LIBOR + 3.25% | 2033 | | Commercebank Capital Trust VIII | $5,155 | 2004 | 3-M LIBOR + 2.85% | 2034 | | Commercebank Capital Trust IX | $25,774 | 2006 | 3-M LIBOR + 1.75% | 2038 | | Commercebank Capital Trust X | $15,464 | 2006 | 3-M LIBOR + 1.78% | 2036 | | **Total (June 30, 2020)** | **$64,178** | | | | | **Total (December 31, 2019)** | **$92,246** | | | | - On January 30, 2020, the Company **redeemed all $26.8 million** of its outstanding 8.90% trust preferred capital securities, reducing financial liabilities by $28.1 million[86](index=86&type=chunk)[88](index=88&type=chunk) - This redemption is expected to reduce the Company's annual pretax interest expense by approximately **$2.4 million**[368](index=368&type=chunk) [Note 10. Derivative Instruments](index=31&type=section&id=Note%2010.%20Derivative%20Instruments) The company utilizes interest rate swaps and caps to manage interest rate risk, with significant notional amounts for customer and mirror contracts | Derivative Instrument (in thousands) | June 30, 2020 Fair Value (Assets) | June 30, 2020 Fair Value (Liabilities) | December 31, 2019 Fair Value (Assets) | December 31, 2019 Fair Value (Liabilities) | | :--- | :--- | :--- | :--- | :--- | | Interest rate swaps (cash flow hedges) | $79 | $2,005 | $301 | — | | Interest rate swaps (not hedging) | $47,116 | $47,116 | $11,236 | $11,236 | | Interest rate caps (not hedging) | $16 | $57 | $33 | $46 | | **Total** | **$47,211** | **$49,178** | **$12,097** | **$11,809** | - As of June 30, 2020, the Company had 67 interest rate swap contracts with customers (notional amount **$456.9 million**) and 67 mirror contracts[91](index=91&type=chunk) - As of June 30, 2020, the Company had 18 interest rate cap contracts with customers (notional amount **$360.5 million**) and 11 mirror contracts (notional amount **$184.4 million**)[94](index=94&type=chunk) [Note 11. Stock-based Incentive Compensation Plan](index=32&type=section&id=Note%2011.%20Stock-based%20Incentive%20Compensation%20Plan) The stock-based incentive plan saw activity in restricted stock awards and units, resulting in recognized compensation expenses and remaining unamortized compensation | Restricted Stock Awards Activity | Number of restricted shares | Weighted-average grant date fair value | | :--- | :--- | :--- | | Non-vested shares, beginning of year | 495,131 | $13.48 | | Granted | 6,591 | $15.17 | | Vested | (433) | $13.58 | | Forfeited | (64,281) | $13.45 | | Non-vested shares at June 30, 2020 | 437,008 | $13.51 | - Compensation expense for restricted stock awards was **$1.0 million** for the six months ended June 30, 2020, with **$2.1 million** in unamortized deferred compensation remaining[96](index=96&type=chunk) | Restricted Stock Units (RSUs) Activity | Stock-settled RSUs (Number) | Cash-settled RSUs (Number) | Total RSUs (Number) | | :--- | :--- | :--- | :--- | | Nonvested, beginning of year | 35,489 | 19,230 | 54,719 | | Granted | 22,302 | 11,151 | 33,453 | | Vested | (3,439) | — | (3,439) | | Non-vested, end of year | 54,352 | 30,381 | 84,733 | - Compensation expense for RSUs was **$0.2 million** for the six months ended June 30, 2020, with **$0.4 million** in unamortized deferred compensation remaining for stock-settled RSUs[98](index=98&type=chunk) [Note 12. Income Taxes](index=33&type=section&id=Note%2012.%20Income%20Taxes) The company's effective tax rate for the first half of 2020 was 20.75%, slightly lower than the prior year due to non-taxable income and state taxes | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Effective tax rate | 20.75% | 21.50% | - The effective tax rates differ from statutory rates mainly due to forecasted permanent non-taxable interest and other income, and the effect of corporate state taxes[100](index=100&type=chunk) [Note 13. Accumulated Other Comprehensive Income ("AOCI")](index=34&type=section&id=Note%2013.%20Accumulated%20Other%20Comprehensive%20Income%20(%22AOCI%22)) AOCI significantly increased, driven by net unrealized holding gains on debt securities, partially offset by unrealized losses on cash flow hedges | AOCI Component (in thousands) | June 30, 2020 Net of Tax Amount | December 31, 2019 Net of Tax Amount | | :--- | :--- | :--- | | Net unrealized holding gains on debt securities available for sale | $30,928 | $7,225 | | Net unrealized holding gains on interest rate swaps designated as cash flow hedges | $3,799 | $6,009 | | **Total AOCI** | **$34,727** | **$13,234** | | Other Comprehensive Income (in thousands) | Six Months Ended June 30, 2020 Net of Tax Amount | Six Months Ended June 30, 2019 Net of Tax Amount | | :--- | :--- | :--- | | Net unrealized holding gains on debt securities available for sale | $23,703 | $29,839 | | Net unrealized holding losses on interest rate swaps designated as cash flow hedges | $(2,210) | $(536) | | **Total other comprehensive income** | **$21,493** | **$29,303** | [Note 14. Stockholders' Equity](index=36&type=section&id=Note%2014.%20Stockholders'%20Equity) Stockholders' equity decreased slightly due to a net loss and Class B common stock repurchases, with the company also canceling a significant number of treasury shares | Common Stock (shares) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Class A outstanding | 28,873,196 | 28,927,576 | | Class B outstanding | 13,286,137 | 14,218,596 | | Class B treasury stock | — | 3,532,457 | - In February 2020, the Company repurchased **932,459 shares of Class B common stock** for approximately $15.2 million[107](index=107&type=chunk) - In March 2020, the Board authorized the cancellation of all **4,464,916 shares of Class B Common Stock** previously held as treasury stock[108](index=108&type=chunk) [Note 15. Commitments and Contingencies](index=36&type=section&id=Note%2015.%20Commitments%20and%20Contingencies) The company is involved in ordinary course legal actions and has off-balance sheet credit risk commitments, with potential liabilities not deemed material - Management believes the outcome of legal proceedings will not have a significant effect on the Company's consolidated financial position or results of operations[109](index=109&type=chunk) | Off-Balance Sheet Credit Risk (in thousands) | Approximate Contract Amount at June 30, 2020 | | :--- | :--- | | Commitments to extend credit | $786,034 | | Standby letters of credit | $12,268 | | Commercial letters of credit | $3,428 | | **Total** | **$801,730** | - Rent expense under noncancelable lease agreements was **$3.0 million** for the six months ended June 30, 2020[110](index=110&type=chunk) [Note 16. Fair Value Measurements](index=37&type=section&id=Note%2016.%20Fair%20Value%20Measurements) The company measures various assets and liabilities at fair value, primarily using observable market inputs (Level 2), with fair values of certain instruments differing from carrying values | Assets Measured at Fair Value (in thousands) | June 30, 2020 Total | December 31, 2019 Total | | :--- | :--- | :--- | | Debt securities available for sale | $1,519,784 | $1,568,752 | | Equity securities with readily determinable fair values not held for trading | $24,425 | $23,848 | | Bank owned life insurance | $214,693 | $211,852 | | Derivative instruments | $47,211 | $12,097 | | **Total Assets** | **$1,806,113** | **$1,816,549** | | Liabilities Measured at Fair Value (in thousands) | | | | Derivative instruments | $49,178 | $11,809 | - The majority of fair value measurements for assets and liabilities are categorized as **Level 2**, indicating the use of third-party models with observable market inputs[114](index=114&type=chunk)[116](index=116&type=chunk) | Financial Instrument (in thousands) | June 30, 2020 Carrying Value | June 30, 2020 Estimated Fair Value | December 31, 2019 Carrying Value | December 31, 2019 Estimated Fair Value | | :--- | :--- | :--- | :--- | :--- | | Loans | $2,966,143 | $2,847,190 | $2,819,477 | $2,721,291 | | Time deposits | $1,833,597 | $1,864,959 | $1,745,735 | $1,759,347 | | Advances from the FHLB | $1,050,000 | $1,083,807 | $1,235,000 | $1,244,515 | | Senior notes | $58,419 | $60,724 | — | — | | Junior subordinated debentures | $64,178 | $53,180 | $92,246 | $86,738 | [Note 17. Earnings Per Share](index=39&type=section&id=Note%2017.%20Earnings%20Per%20Share) The company reported basic and diluted losses per common share due to a net loss, which rendered potential dilutive instruments anti-dilutive | EPS Metric (in thousands, except per share data) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income available to common stockholders | $(15,279) | $12,857 | $(11,897) | $25,928 | | Basic weighted average shares outstanding | 41,720 | 42,466 | 41,953 | 42,610 | | Diluted weighted average shares outstanding | 41,720 | 42,819 | 41,953 | 42,865 | | Basic (loss) earnings per common share | $(0.37) | $0.30 | $(0.28) | $0.61 | | Diluted (loss) earnings per common share | $(0.37) | $0.30 | $(0.28) | $0.60 | - Potential dilutive instruments were **excluded from diluted EPS** for June 30, 2020, due to the reported net loss making their inclusion anti-dilutive[119](index=119&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=40&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This analysis details the company's financial condition and operational results, highlighting the significant impact of the COVID-19 pandemic and strategic responses [Cautionary Notice Regarding Forward-Looking Statements](index=40&type=section&id=Cautionary%20Notice%20Regarding%20Forward-Looking%20Statements) Statements about future results and the impact of the COVID-19 pandemic are forward-looking and subject to significant risks and uncertainties - Forward-looking statements cover future financial and operating results, economic conditions, and the challenges posed by the **COVID-19 pandemic**[123](index=123&type=chunk) - The potential adverse effect of the COVID-19 pandemic is identified as one of the most significant factors that could materially affect the Company's results[123](index=123&type=chunk) - Additional factors causing deviation from expectations include strategic plan execution, operational risks, market conditions, interest rate changes, credit quality, and regulatory requirements[125](index=125&type=chunk)[127](index=127&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[132](index=132&type=chunk) [Overview](index=45&type=section&id=Overview) The company's operations were significantly impacted by COVID-19, leading to a net loss in Q2 2020 from increased loan loss provisions despite improved operating income - Amerant Bancorp Inc is headquartered in Coral Gables, Florida, operating banking centers in **South Florida, Houston, Dallas, and New York City**[135](index=135&type=chunk) - The Company is closing one banking center in Florida and one in Texas by year-end 2020 to optimize its retail network[135](index=135&type=chunk) - The Business Continuity Plan was activated on March 16, 2020, with **86% of employees working remotely** as of June 30, 2020[140](index=140&type=chunk) - The Bank participated in the SBA's Paycheck Protection Program (PPP), approving **$214.1 million in loans** across over 2,000 applications by June 30, 2020[142](index=142&type=chunk) - Loan payment relief options were offered to customers impacted by COVID-19, totaling **$1.1 billion** as of June 30, 2020[144](index=144&type=chunk) - The Company recorded a provision for loan losses of **$48.6 million in Q2 2020**, primarily due to specific reserve requirements and estimated macroeconomic deterioration[146](index=146&type=chunk) Summary Results for Three Months Ended June 30, 2020 vs. 2019 | Metric | Q2 2020 (in millions) | Q2 2019 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Net (loss) income | $(15.3) | $12.9 | (218.8)% | | Operating income | $21.6 | $14.0 | 53.8% | | Net interest income (NII) | $46.3 | $53.8 | (13.9)% | | Net interest margin (NIM) | 2.44% | 2.92% | (48 bps) | | Provision for loan losses | $48.6 | $(1.4) | N/M | | ALL to total loans | 2.04% | 0.99% | 105 bps | | Net charge-offs to average total loans | 0.13% | 0.11% | 2 bps | | Noninterest income | $19.8 | $14.1 | 39.6% | | Noninterest expense | $36.7 | $52.9 | (30.6)% | | Efficiency ratio | 55.6% | 77.9% | (22.3 pp) | | Stockholders' book value per common share | $19.69 | $19.35 | 1.8% | | Total loans | $5.9 billion | $5.7 billion | 2.2% | | Total deposits | $6.0 billion | $5.8 billion | 4.6% | [Selected Financial Information](index=54&type=section&id=Selected%20Financial%20Information) This summary of key financial data highlights the company's net loss, increased loan loss provisions, and improved efficiency, alongside adjusted non-GAAP metrics Consolidated Balance Sheets (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total assets | $8,130,723 | $7,985,399 | | Total gross loans | $5,872,271 | $5,744,339 | | Allowance for loan losses | $119,652 | $52,223 | | Total deposits | $6,024,702 | $5,757,143 | | Advances from FHLB and other borrowings | $1,050,000 | $1,235,000 | | Senior notes | $58,419 | — | | Junior subordinated debentures | $64,178 | $92,246 | | Stockholders' equity | $830,198 | $834,701 | | Assets under management and custody | $1,715,804 | $1,815,848 | Consolidated Results of Operations (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $46,323 | $53,789 | $95,552 | $109,226 | | Provision for loan losses | $48,620 | $(1,350) | $70,620 | $(1,350) | | Noninterest income | $19,753 | $14,147 | $41,663 | $27,303 | | Noninterest expense | $36,740 | $52,905 | $81,607 | $104,850 | | Net (loss) income | $(15,279) | $12,857 | $(11,897) | $25,928 | Key Financial Ratios (%) | Metric | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Net interest margin (NIM) | 2.44% | 2.92% | 2.55% | 2.94% | | Net (loss) income / Average total assets (ROA) | (0.75)% | 0.66% | (0.30)% | 0.66% | | Net (loss) income / Average stockholders' equity (ROE) | (7.21)% | 6.56% | (2.82)% | 6.76% | | Total capital ratio | 14.34% | 14.70% | 14.34% | 14.70% | | Non-performing assets / Total assets | 0.95% | 0.41% | 0.95% | 0.41% | | Allowance for loan losses / Total loans | 2.04% | 0.99% | 2.04% | 0.99% | | Efficiency ratio | 55.60% | 77.87% | 59.47% | 76.80% | [Non-GAAP Financial Measures Reconciliation](index=56&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) This reconciliation of non-GAAP measures to their GAAP counterparts excludes restructuring costs and other items to clarify underlying operational performance - Non-GAAP financial measures are used to explain results to shareholders and for internal evaluation, adjusting for items like restructuring costs and securities gains[196](index=196&type=chunk)[197](index=197&type=chunk) Adjusted Noninterest Expenses (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total noninterest expenses | $36,740 | $52,905 | $81,607 | $104,850 | | Less: Total restructuring costs | $1,318 | $2,736 | $1,672 | $3,669 | | **Adjusted noninterest expenses** | **$35,422** | **$50,169** | **$79,935** | **$101,181** | Adjusted Net (Loss) Income (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income | $(15,279) | $12,857 | $(11,897) | $25,928 | | Plus after-tax restructuring costs | $1,045 | $2,148 | $1,325 | $2,880 | | **Adjusted net (loss) income** | **$(14,234)** | **$15,005** | **$(10,572)** | **$28,808** | Operating Income (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income | $(15,279) | $12,857 | $(11,897) | $25,928 | | Plus: income tax (benefit) expense | $(4,005) | $3,524 | $(3,115) | $7,101 | | Plus: provision for (reversal of) loan losses | $48,620 | $(1,350) | $70,620 | $(1,350) | | Less: securities gains, net | $7,737 | $992 | $17,357 | $996 | | **Operating income** | **$21,599** | **$14,039** | **$38,251** | **$30,683** | [Results of Operations - Comparison of Results of Operations for the Three and Six Month Periods Ended June 30, 2020 and 2019](index=60&type=section&id=Results%20of%20Operations%20-%20Comparison%20of%20Results%20of%20Operations%20for%20the%20Three%20and%20Six%20Month%20Periods%20Ended%20June%2030%2C%202020%20and%202019) This comparison analyzes the drivers behind the net loss, changes in income and expenses, and the significant increase in the allowance for loan losses [Net (loss) income](index=60&type=section&id=Net%20(loss)%20income) The company reported a net loss due to a substantial increase in the provision for loan losses, partially offset by lower noninterest expenses and higher noninterest income | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $46,323 | $53,789 | $95,552 | $109,226 | | Provision for (reversal of) loan losses | $48,620 | $(1,350) | $70,620 | $(1,350) | | Noninterest income | $19,753 | $14,147 | $41,663 | $27,303 | | Noninterest expense | $36,740 | $52,905 | $81,607 | $104,850 | | Net (loss) income | $(15,279) | $12,857 | $(11,897) | $25,928 | | Basic (loss) earnings per common share | $(0.37) | $0.30 | $(0.28) | $0.61 | | Diluted (loss) earnings per common share | $(0.37) | $0.30 | $(0.28) | $0.60 | - The **$28.1 million decrease in net income** for Q2 2020 was mainly due to a **$48.6 million provision for loan losses**, primarily from COVID-19 impacts and specific commercial loan reserves[204](index=204&type=chunk) - **Adjusted net loss** for Q2 2020 was **$14.2 million**, excluding restructuring costs[209](index=209&type=chunk) - **Operating income increased to $21.6 million** in Q2 2020 (vs $14.0 million in Q2 2019), excluding loan loss provisions, securities gains, and income tax[209](index=209&type=chunk) [Net interest income](index=62&type=section&id=Net%20interest%20income) Net interest income declined due to a significant drop in average yields on interest-earning assets, partially offset by lower funding costs and strategic actions - Net interest income for Q2 2020 was **$46.3 million**, a **13.9% decline** from Q2 2019, driven by a 91 basis point drop in average yield on interest-earning assets[216](index=216&type=chunk) - Net interest margin (NIM) **decreased 48 basis points to 2.44%** in Q2 2020 from 2.92% in Q2 2019[216](index=216&type=chunk) - Interest expense on total interest-bearing liabilities **decreased by $7.6 million (29.9%)** in Q2 2020, mainly due to lower deposit costs and FHLB advances[224](index=224&type=chunk) - Average online deposits **increased by $143.2 million (188.4%)** in Q2 2020 compared to Q2 2019, contributing to higher time deposits[225](index=225&type=chunk) - The company restructured **$420.0 million of fixed-rate FHLB advances** in April 2020, extending maturities and lowering interest rates[217](index=217&type=chunk) [Average Balance Sheet, Interest and Yield/Rate Analysis](index=66&type=section&id=Average%20Balance%20Sheet%2C%20Interest%20and%20Yield/Rate%20Analysis) This analysis illustrates the impact of declining interest rates on asset yields and liability costs, resulting in net interest margin compression Three Months Ended June 30, 2020 vs. 2019 | Metric | Q2 2020 Average Balances (in thousands) | Q2 2020 Yield/Rates | Q2 2019 Average Balances (in thousands) | Q2 2019 Yield/Rates | | :--- | :--- | :--- | :--- | :--- | | Total interest-earning assets | $7,635,630 | 3.38% | $7,400,802 | 4.29% | | Loan portfolio, net | $5,712,548 | 3.77% | $5,641,686 | 4.75% | | Total interest-bearing liabilities | $6,272,441 | 1.14% | $6,225,123 | 1.64% | | Total deposits | $5,039,631 | 1.12% | $5,035,035 | 1.36% | | Net interest income | | $46,323 | | $53,789 | | Net interest rate spread | | 2.24% | | 2.65% | | Net interest margin | | 2.44% | | 2.92% | Six Months Ended June 30, 2020 vs. 2019 | Metric | H1 2020 Average Balances (in thousands) | H1 2020 Yield/Rates | H1 2019 Average Balances (in thousands) | H1 2019 Yield/Rates | | :--- | :--- | :--- | :--- | :--- | | Total interest-earning assets | $7,549,163 | 3.61% | $7,491,440 | 4.29% | | Loan portfolio, net | $5,643,088 | 4.04% | $5,674,606 | 4.74% | | Total interest-bearing liabilities | $6,267,053 | 1.28% | $6,335,185 | 1.60% | | Total deposits | $5,016,230 | 1.24% | $5,130,489 | 1.32% | | Net interest income | | $95,552 | | $109,226 | | Net interest rate spread | | 2.33% | | 2.69% | | Net interest margin | | 2.55% | | 2.94% | - Average non-performing loans were **$50.4 million** in Q2 2020 and **$41.6 million** in H1 2020[243](index=243&type=chunk) [Analysis of the Allowance for Loan Losses](index=71&type=section&id=Analysis%20of%20the%20Allowance%20for%20Loan%20Losses) The allowance for loan losses significantly increased, driven by substantial provisions reflecting the estimated impact of the COVID-19 pandemic and specific loan deterioration Changes in Allowance for Loan Losses (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Balance at beginning of period | $72,948 | $60,322 | $52,223 | $61,762 | | Total Charge-offs | $(2,126) | $(2,021) | $(3,734) | $(3,633) | | Total Recoveries | $210 | $453 | $543 | $625 | | Net charge-offs | $(1,916) | $(1,568) | $(3,191) | $(3,008) | | Provision for (reversal of) loan losses | $48,620 | $(1,350) | $70,620 | $(1,350) | | Balance at end of period | $119,652 | $57,404 | $119,652 | $57,404 | - The provision for loan losses in Q2 2020 was **$48.6 million**, including **$28.2 million for specific reserve requirements** and **$20.2 million for estimated losses from COVID-19**[249](index=249&type=chunk) - A **$20.0 million specific reserve** was recorded for a $39.8 million commercial loan relationship with a Miami-based coffee trader in Q2 2020[250](index=250&type=chunk) - Approximately **42% of the outstanding loan portfolio** was tied to industries potentially more vulnerable to COVID-19[252](index=252&type=chunk) - Commercial Real Estate (CRE) loans represented **50.2% of total loans** at June 30, 2020, with an estimated weighted average LTV of 61% and DSCR of 1.7x[253](index=253&type=chunk) [Noninterest Income](index=74&type=section&id=Noninterest%20Income) Noninterest income significantly increased, driven by substantial net gains on the sale of securities and higher income from brokerage and advisory activities Noninterest Income (in thousands) | Noninterest Income Category | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Deposits and service fees | $3,438 | $4,341 | $7,728 | $8,427 | | Brokerage, advisory and fiduciary activities | $4,325 | $3,736 | $8,458 | $7,424 | | Securities gains, net | $7,737 | $992 | $17,357 | $996 | | Cards and trade finance servicing fees | $273 | $1,419 | $668 | $2,334 | | Other noninterest income | $2,619 | $1,875 | $4,684 | $3,857 | | **Total noninterest income** | **$19,753** | **$14,147** | **$41,663** | **$27,303** | - The increase in noninterest income for Q2 2020 was mainly due to **$7.5 million in net gains** on the sale of 30-year Treasury securities[260](index=260&type=chunk) - Brokerage, advisory, and fiduciary activities increased due to a larger allocation of AUMs in advisory services and higher customer trading activity[262](index=262&type=chunk)[267](index=267&type=chunk) - Cards and trade finance servicing fees declined significantly due to changes in the company's credit card programs[263](index=263&type=chunk)[268](index=268&type=chunk) - Data processing and fees for other services, previously provided to the Former Parent, were absent in 2020[265](index=265&type=chunk) [Noninterest Expense](index=76&type=section&id=Noninterest%20Expense) Noninterest expenses decreased significantly, driven by lower salaries and benefits from staff reductions and deferral of PPP loan origination expenses Noninterest Expense (in thousands) | Noninterest Expense Category | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $21,570 | $34,057 | $50,896 | $67,494 | | Occupancy and equipment | $4,220 | $4,232 | $8,023 | $8,274 | | Professional and other services fees | $3,965 | $3,954 | $6,919 | $7,398 | | Telecommunications and data processing | $3,157 | $3,233 | $6,621 | $6,259 | | Other operating expenses | $628 | $4,242 | $2,871 | $8,903 | | **Total noninterest expenses** | **$36,740** | **$52,905** | **$81,607** | **$104,850** | - Salaries and employee benefits **decreased by $12.5 million (36.7%)** in Q2 2020, primarily due to staff reductions and the deferral of **$7.8 million in PPP loan origination expenses**[275](index=275&type=chunk) - Other operating expenses **decreased by $3.6 million (85.2%)** in Q2 2020, mainly due to the absence of rebranding costs[276](index=276&type=chunk) - Restructuring costs for H1 2020 included **$1.7 million**, primarily for staff reduction and digital transformation expenses[214](index=214&type=chunk) - The Company is progressing with digital transformation efforts and plans to close two banking centers[277](index=277&type=chunk) [Income Taxes](index=78&type=section&id=Income%20Taxes) The company reported an income tax benefit due to its net loss, with the effective tax rate remaining relatively stable | Income Tax Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Income tax benefit (expense) | $4,005 | $(3,524) | $3,115 | $(7,101) | | Effective income tax rate | 20.77% | 21.51% | 20.75% | 21.50% | - The net deferred tax asset increased by **$10.2 million to $15.6 million** at June 30, 2020, mainly due to a **$67.4 million net increase** in the allowance for loan losses[285](index=285&type=chunk) [Financial Condition - Comparison of Financial Condition as of June 30, 2020 and December 31, 2019](index=78&type=section&id=Financial%20Condition%20-%20Comparison%20of%20Financial%20Condition%20as%20of%20June%2030%2C%202020%20and%20December%2031%2C%202019) This analysis details changes in assets, liabilities, and equity, including an increase in total assets, a rise in deposits, and reduced FHLB advances [Assets](index=78&type=section&id=Assets) Total assets increased by $145.3 million to $8.1 billion, primarily due to higher cash and cash equivalents and net loans - Total assets increased to **$8.1 billion** at June 30, 2020, from $8.0 billion at December 31, 2019, a **1.8% increase**[286](index=286&type=chunk) - This change includes increases of **$96.0 million (79.1%)** in cash and cash equivalents and **$60.5 million (1.1%)** in loans held for investment, net[286](index=286&type=chunk) - Partially offsetting these increases was a decrease of **$64.6 million (3.7%)** in total securities[286](index=286&type=chunk) [Cash and Cash Equivalents](index=78&type=section&id=Cash%20and%20Cash%20Equivalents) Cash and cash equivalents significantly increased by $96.0 million, driven by higher Federal Reserve balances and proceeds from Senior Notes issuance - Cash and cash equivalents increased to **$217.3 million** at June 30, 2020, from $121.3 million at December 31, 2019, an increase of **$96.0 million or 79.1%**[287](index=287&type=chunk) - The increase is attributed to higher balances at the Federal Reserve for COVID-19 mitigation and **$58.4 million in net proceeds** from Senior Notes[287](index=287&type=chunk) - Net cash provided by financing activities was **$97.6 million** for the six months ended June 30, 2020, including a **$253.8 million net increase** in demand, savings, and money market deposits[290](index=290&type=chunk) [Loans](index=79&type=section&id=Loans) The loan portfolio grew by $127.9 million to $5.9 billion, driven by domestic loan growth including PPP loans, while international loans declined | Loan Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total loans, gross | $5,872,271 | $5,744,339 | | Total loans, gross / total assets | 72.2% | 71.9% | | Allowance for loan losses | $119,652 | $52,223 | | ALL / total loans, gross | 2.04% | 0.91% | | CRE Loan Portfolio by Industry (in thousands) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Retail | $1,116,359 | $1,143,565 | | Multifamily | $823,450 | $801,626 | | Office space | $444,621 | $453,328 | | Land and construction | $284,766 | $278,688 | | Hospitality | $191,946 | $198,807 | | Industrial and warehouse | $88,149 | $96,102 | | **Total** | **$2,949,291** | **$2,972,116** | - Domestic loan exposure increased by **$143.2 million (2.6%)**, including **$214.1 million in PPP loans** and growth in jumbo mortgages[298](index=298&type=chunk) - International loans **declined by $15.3 million (8.9%)**, with syndicated loans also decreasing by **$84.9 million (15.1%)**[298](index=298&type=chunk)[300](index=300&type=chunk) [Foreign Outstanding](index=81&type=section&id=Foreign%20Outstanding) The international loan portfolio decreased by $15.3 million, primarily due to a decline in Venezuelan exposure | Country of Risk (in thousands) | June 30, 2020 Net Exposure | % Total Assets | December 31, 2019 Net Exposure | % Total Assets | | :--- | :--- | :--- | :--- | :--- | | Venezuela | $93,770 | 1.1% | $112,297 | 1.4% | | Other | $62,395 | 0.8% | $59,140 | 0.7% | | **Total** | **$156,165** | **1.9%** | **$171,437** | **2.1%** | | Maturities of International Loans (in thousands) | Less than 1 year | 1-3 Years | More than 3 years | Total | | :--- | :--- | :--- | :--- | :--- | | June 30, 2020 | $7,213 | $24,369 | $124,583 | $156,165 | | December 31, 2019 | $14,287 | $12,899 | $144,251 | $171,437 | | **Change** | **$(7,074)** | **$11,470** | **$(19,668)** | **$(15,272)** | - All foreign loans are denominated and payable in U.S Dollars[301](index=301&type=chunk) [Loan Quality](index=82&type=section&id=Loan%20Quality) Loan quality deteriorated as non-performing assets increased significantly due to a large commercial loan and other loans placed on non-accrual status Allocation of Allowance for Loan Losses (in thousands) | Loan Segment | June 30, 2020 ALL | % of Loans in Each Category to Total Loans | December 31, 2019 ALL | % of Loans in Each Category to Total Loans | | :--- | :--- | :--- | :--- | :--- | | Real estate | $54,498 | 49.8% | $25,040 | 51.7% | | Commercial | $56,783 | 38.9% | $22,132 | 38.1% | | Consumer and others | $5,712 | 8.3% | $1,677 | 6.9% | | International Loans | $2,659 | 2.7% | $3,332 | 3.0% | | **Total ALL** | **$119,652** | **100.0%** | **$52,223** | **100.0%** | | % of Total Loans | 2.04% | | 0.91% | | Non-Performing Assets (in thousands) | Non-Performing Asset Category | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Non-Accrual Loans | $77,260 | $32,922 | | Total Past Due Accruing Loans | — | $5 | | Total Non-Performing Loans | $77,260 | $32,927 | | Other Real Estate Owned | $42 | $42 | | **Total Non-Performing Assets** | **$77,302** | **$32,969** | - Non-performing assets **increased by $44.3 million (134.5%)**, mainly due to a **$39.8 million commercial loan relationship** placed on non-accrual status[310](index=310&type=chunk) Loans by Credit Quality Indicators (in thousands) | Loan Class (Credit Risk Rating) | June 30, 2020 Total | December 31, 2019 Total | | :--- | :--- | :--- | | Special Mention | $22,871 | $32,986 | | Substandard | $64,803 | $30,766 | | Doubtful | $22,758 | $4,962 | | **Total Classified Loans** | **$110,432** | **$68,714** | - Substandard loans **increased by $34.0 million (110.6%)** due to the downgrade of a $39.8 million commercial loan relationship[314](index=314&type=chunk) - Doubtful loans **increased by $17.8 million (358.7%)** mainly from the downgrade of $19.3 million within the same commercial loan relationship[316](index=316&type=chunk) - Potential problem loans **increased by $7.5 million (267.0%)** to $10.3 million at June 30, 2020[322](index=322&type=chunk)[323](index=323&type=chunk) [Securities](index=87&type=section&id=Securities) The securities portfolio decreased slightly, with a notable increase in corporate debt and a decrease in U.S Treasury debt, while average duration shortened Securities Portfolio Composition (in thousands) | Security Category | June 30, 2020 Amount | June 30, 2020 % | December 31, 2019 Amount | December 31, 2019 % | | :--- | :--- | :--- | :--- | :--- | | Debt securities available for sale | $1,519,784 | 90.8% | $1,568,752 | 90.1% | | Corporate debt (available for sale) | $386,109 | 23.1% | $252,836 | 14.5% | | U.S Treasury debt (available for sale) | $2,515 | 0.2% | $104,236 | 6.0% | | Debt securities held to maturity | $65,616 | 3.9% | $73,876 | 4.3% | | Equity securities | $24,425 | 1.5% | $23,848 | 1.4% | | Other securities (FHLB & Fed Reserve stock) | $64,986 | 3.8% | $72,934 | 4.2% | | **Total Securities** | **$1,674,811** | **100.0%** | **$1,739,410** | **100.0%** | - The investment portfolio's average duration **decreased to 2.6 years** from 3.8 years, due to strategic purchases of U.S Treasuries and CMOs[331](index=331&type=chunk)[420](index=420&type=chunk) Weighted Average Yields for Securities Portfolio (June 30, 2020) | Security Category | Total Yield | | :--- | :--- | | Debt securities available for sale | 2.71% | | U.S Government sponsored enterprise debt | 2.62% | | Corporate debt (domestic) | 3.21% | | U.S Government agency debt | 2.11% | | Municipal bonds | 3.11% | | Corporate debt (foreign) | 2.89% | | U.S treasury securities | 0.34% | | Debt securities held to maturity | 2.38% | | Equity securities | 2.05% | | Other securities | 5.65% | | **Total Securities** | **2.80%** | [Liabilities](index=89&type=section&id=Liabilities) Total liabilities increased by $149.8 million to $7.3 billion, driven by higher deposits and Senior Notes issuance, partially offset by reduced FHLB advances - Total liabilities increased to **$7.3 billion** at June 30, 2020, from $7.2 billion at December 31, 2019, a **2.1% increase**[332](index=332&type=chunk) - This increase was primarily driven by a **$267.6 million (4.6%) rise in total deposits** and **$58.4 million from Senior Notes issuance**[332](index=332&type=chunk) - These increases were partially offset by a **$185.0 million (15.0%) decrease in FHLB advances** and the **$28.1 million redemption of junior subordinated debentures**[332](index=332&type=chunk) [Deposits](index=90&type=section&id=Deposits) Total deposits increased by $267.6 million to $6.0 billion, primarily due to PPP loan funds and reciprocal deposit growth, while foreign deposits declined - Total deposits increased to **$6.0 billion** at June 30, 2020, from $5.8 billion at December 31, 2019, a **4.6% increase**[334](index=334&type=chunk) - Deposit growth was mainly driven by **$132.7 million in PPP loan funds**, **$67.8 million in reciprocal deposit account balances**, and higher online CDs[334](index=334&type=chunk) Deposits by Country of Domicile (in thousands) | Deposit Category | June 30, 2020 | December 31, 2019 | Change Amount | Change % | | :--- | :--- | :--- | :--- | :--- | | Domestic | $3,432,971 | $3,121,827 | $311,144 | 10.0% | | Foreign: Venezuela | $2,202,340 | $2,270,970 | $(68,630) | (3.0)% | | Foreign: Others | $389,391 | $364,346 | $25,045 | 6.9% | | **Total Deposits** | **$6,024,702** | **$5,757,143** | **$267,559** | **4.6%** | - Core deposits were **$4.7 billion** at June 30, 2020, representing **77.2% of total deposits**[341](index=341&type=chunk) - Brokered deposits **decreased by $94.5 million (13.8%)** to $587.9 million at June 30, 2020[342](index=342&type=chunk) [Short-Term Borrowings](index=92&type=section&id=Short-Term%20Borrowings) The company had no outstanding short-term borrowings at June 30, 2020, a significant decrease from year-end 2019 - **No outstanding short-term borrowings** were reported at June 30, 2020[346](index=346&type=chunk) | Short-Term Borrowings (in thousands) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Outstanding at period-end | — | $285,000 | | Average amount | $167,500 | $478,333 | | Maximum amount outstanding at any month-end | $300,000 | $600,000 | | Weighted average interest rate (during period) | 1.45% | 2.29% | [Return on Equity and Assets](index=93&type=section&id=Return%20on%20Equity%20and%20Assets) The company reported negative returns on average assets (ROA) and average equity (ROE) for the period, reflecting the net loss incurred Return on Equity and Assets (%) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income / Average total assets (ROA) | (0.75)% | 0.66% | (0.30)% | 0.66% | | Net (loss) income / Average stockholders' equity (ROE) | (7.21)% | 6.56% | (2.82)% | 6.76% | | Adjusted net (loss) income / Average total assets (Adjusted ROA) | (0.70)% | 0.77% | (0.26)% | 0.73% | | Adjusted net (loss) income / Average stockholders' equity (Adjusted ROE) | (6.72)% | 7.66% | (2.51)% | 7.51% | - Average stockholders' equity to average total assets ratio was **10.46% for Q2 2020** and **10.53% for H1 2020**[350](index=350&type=chunk) [Capital Resources and Liquidity Management](index=93&type=section&id=Capital%20Resources%20and%20Liquidity%20Management) Stockholders' equity slightly decreased, while the company actively managed liquidity by restructuring FHLB advances, issuing Senior Notes, and increasing cash reserves - Stockholders' equity **decreased by $4.5 million (0.5%)** to $830.2 million, primarily due to a **$11.9 million net loss** and **$15.2 million Class B common stock repurchase**[354](index=354&type=chunk) - The company repurchased **932,459 Class B common shares** for $15.2 million and canceled all **4,464,916 treasury Class B shares**[355](index=355&type=chunk)[356](index=356&type=chunk) - Outstanding FHLB advances were **$1.05 billion** at June 30, 2020, with an additional **$1.4 billion available**[357](index=357&type=chunk)[361](index=361&type=chunk) - A **$60.0 million offering of Senior Notes** was completed in June 2020, providing $58.4 million in net proceeds[363](index=363&type=chunk) - The company increased cash and cash equivalents by **$96.0 million** in H1 2020 as a preventive measure against COVID-19 impacts[366](index=366&type=chunk) - On January 30, 2020, **$26.8 million of 8.90% trust preferred capital securities** were redeemed, reducing Tier 1 equity capital by $24.7 million and annual pretax interest expense by $2.4 million[368](index=368&type=chunk) [Regulatory Capital Requirements](index=97&type=section&id=Regulatory%20Capital%20Requirements) The company and the bank maintained capital ratios above regulatory minimums and adopted simplified capital rules with no material effect Company's Consolidated Regulatory Capital Ratios (%) | Capital Ratio | June 30, 2020 Actual Ratio | December 31, 2019 Actual Ratio | Regulatory Minimums Capitalized Ratio | | :--- | :--- | :--- | :--- | | Total capital ratio | 14.34% | 14.78% | 10.00% | | Tier 1 capital ratio | 13.08% | 13.94% | 8.00% | | Tier 1 leverage ratio | 10.39% | 11.32% | 5.00% | | Common Equity Tier 1 (CET1) | 12.13% | 12.60% | 6.50% | Bank's Consolidated Regulatory Capital Ratios (%) | Capital Ratio | June 30, 2020 Actual Ratio | December 31, 2019 Actual Ratio | Regulatory Minimums Capitalized Ratio | | :--- | :--- | :--- | :--- | | Total capital ratio | 13.39% | 13.15% | 10.00% | | Tier 1 capital ratio | 12.13% | 12.32% | 8.00% | | Tier 1 leverage ratio | 9.64% | 10.01% | 5.00% | | Common Equity Tier 1 (CET1) | 12.13% | 12.32% | 6.50% | - The Company adopted simplified capital rules in Q1 2020, which had **no material effect** on its regulatory capital and ratios[373](index=373&type=chunk) - The Company **opted out of adopting the new 'community bank leverage ratio' (CBLR)** due to its current and projected size and operations[374](index=374&type=chunk) [Off-Balance Sheet Arrangements](index=98&type=section&id=Off-Balance%20Sheet%20Arrangements) Off-balance sheet arrangements primarily consist of commitments to extend credit and letters of credit, which saw a slight decrease | Off-Balance Sheet Arrangement (in thousands) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Commitments to extend credit | $786,034 | $820,380 | | Letters of credit | $15,696 | $17,414 | | **Total** | **$801,730** | **$837,794** | [Contractual Obligations](index=99&type=section&id=Contractual%20Obligations) Material changes to contractual obligations include the restructuring of FHLB advances and the issuance of Senior Notes - In early April 2020, **$420.0 million of fixed-rate FHLB advances were restructured**, extending maturities from 2021 to 2023 at lower interest rates[379](index=379&type=chunk) - On June 23, 2020, the Company completed a **$60.0 million offering of Senior Notes** (5.75% coupon, due 2025), providing $58.4 million in net proceeds[380](index=380&type=chunk) [Critical Accounting Policies and Estimates](index=99&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The preparation of financial statements requires significant management estimates, particularly for the allowance for loan losses and goodwill impairment - Key estimates include the **allowance for loan losses and goodwill impairment**, which are sensitive to economic conditions and the COVID-19 pandemic[386](index=386&type=chunk) - The ALL is determined using specific and general reserves, considering historical loss rates, economic conditions, and qualitative factors, including the probable deterioration from COVID-19[387](index=387&type=chunk)[388](index=388&type=chunk)[392](index=392&type=chunk) - An interim goodwill impairment test was performed as of June 30, 2020, due to COVID-19 related triggering events, concluding that **goodwill was not impaired**[396](index=396&type=chunk) [Recently Issued Accounting Pronouncements](index=102&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) There are no recently adopted accounting pronouncements; information on pending standards is referenced to Note 1 of the interim consolidated financial statements [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=102&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company manages market risks, primarily interest rate and price risks, through sensitivity analyses on earnings, economic value of equity, and investment portfolios [Market Risk Measurement](index=102&type=section&id=Market%20Risk%20Measurement) The company uses sensitivity analyses to monitor interest rate and price risks, managing exposures within board-approved limits while remaining asset sensitive - Interest rate and price risks are the most significant market risks, monitored using sensitivity analyses on earnings, economic value of equity (EVE), and investment portfolio exposure[401](index=401&type=chunk)[406](index=406&type=chunk) - The company is **asset sensitive**, meaning income is expected to increase when interest rates rise and decrease when they fall[407](index=407&type=chunk) Earnings Sensitivity to Interest Rate Changes (Change in Net Interest Income over 12 months, in thousands) | Change in Interest Rates (Basis points) | June 30, 2020 Change in earnings | June 30, 2020 % Change | December 31, 2019 Change in earnings | December 31, 2019 % Change | | :--- | :--- | :--- | :--- | :--- | | Increase of 200 | $19,823 | 11.1% | $14,237 | 6.9% | | Increase of 100 | $12,446 | 7.0% | $10,091 | 4.9% | | Decrease of 25 | $(3,368) | (1.9)% | $(4,856) | (2.3)% | | Decrease of 100 | — | —% | $(20,739) | (10.0)% | Economic Value of Equity (EVE) Sensitivity to Interest Rate Changes (%) | Change in Interest Rates (Basis points) | June 30, 2020 Change in equity | December 31, 2019 Change in equity | | :--- | :--- | :--- | | Increase of 200 | (2.10)% | (11.10)% | | Increase of 100 | 1.3% | (3.86)% | | Decrease of 25 | (0.80)% | 0.24% | | Decrease of 100 | —% | (0.11)% | Available for Sale Portfolio Mark-to-Market Exposure (in thousands) | Change in Interest Rates (Basis points) | June 30, 2020 Change in market value | December 31, 2019 Change in market value | | :--- | :--- | :--- | | Increase of 200 | $(100,107) | $(148,369) | | Increase of 100 | $(42,789) | $(69,956) | | Decrease of 25 | $9,547 | $14,008 | | Decrease of 100 | — | $53,946 | [Limits Approval Process](index=105&type=section&id=Limits%20Approval%20Process) The Asset/Liability Committee (ALCO) is responsible for managing market risk exposures and monitoring compliance with board-approved limits - The ALCO manages market risk exposures, monitors compliance with board-approved limits, and recommends changes to these limits[422](index=422&type=chunk) - Limits are reviewed annually or more frequently, considering factors like capital levels and earnings[422](index=422&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=106&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2020, with no material changes in internal control [Evaluation of Disclosure Controls and Procedures](index=106&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, ensuring timely and accurate reporting - The company's disclosure controls and procedures are designed to ensure information required for SEC reports is recorded, processed, summarized, and reported timely[426](index=426&type=chunk) - The CEO and CFO concluded that disclosure controls and procedures were **effective** as of June 30, 2020[427](index=427&type=chunk) [Changes in Internal Control Over Financial Reporting](index=107&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No changes in internal control over financial reporting were identified that materially affected, or are reasonably likely to materially affect, internal controls - **No material changes** in internal control over financial reporting occurred during the period covered by this Form 10-Q[428](index=428&type=chunk) [Limitations on Effectiveness of Controls and Procedures](index=107&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) Management acknowledges that any control system can only provide reasonable, not absolute, assurance of achieving control objectives due to inherent limitations - Controls and procedures provide only **reasonable, not absolute, assurance** of achieving desired control objectives[429](index=429&type=chunk) - The design of controls must consider resource constraints and management judgment in evaluating benefits versus costs[429](index=429&type=chunk) [PART II. OTHER INFORMATION](index=108&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=108&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in ordinary course legal actions, with a previously disclosed lawsuit settled confidentially in July 2020 with no material impact - The company is engaged in ordinary course litigation, with management believing potential liabilities are **not material**[431](index=431&type=chunk) - A lawsuit against Amerant Trust and Kunde Management, LLC, filed in September 2017, was **settled confidentially** on July 6, 2020[432](index=432&type=chunk)[433](index=433&type=chunk) - The settlement agreement did **not have a material impact** on the Company's financial condition or operating results[433](index=433&type=chunk) [ITEM 1A. RISK FACTORS](index=108&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section updates risk factors, emphasizing the significant adverse impact of the COVID-19 pandemic and risks associated with the PPP and debt servicing - The **COVID-19 pandemic** has significantly impacted economic conditions, adversely affecting the company's business, financial condition, and results of operations[435](index=435&type=chunk)[438](index=438&type=chunk) - The company **increased its provision for loan losses** in Q1 and Q2 2020 due to estimated macroeconomic deterioration from COVID-19[439](index=439&type=chunk) - Participation in the SBA's Paycheck Protection Program (PPP) exposes the company to **litigation risks** and risks that the SBA may not fund all PPP loan guaranties[446](index=446&type=chunk)[449](index=449&type=chunk)[450](index=450&type=chunk) - The fair value of investment securities can fluctuate due to market conditions beyond the company's control, such as changes in interest rates and defaults[451](index=451&type=chunk) - The company's ability to service its debt depends on future operating performance, economic conditions, and regulatory constraints on subsidiary dividends[452](index=452&type=chunk)[454](index=454&type=chunk)[455](index=455&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=113&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF

Amerant Bancorp Inc. (NYSE:AMTB) Q2 2020 Earnings Conference Call July 24, 2020 9:30 AM ET Company Participants Laura Rossi - Investor Relations Officer Millar Wilson - Chief Executive Officer Carlos Iafigliola - Chief Financial Officer Miguel Palacios - Chief Business Officer Thiel Fischer - Credit Risk Manager Conference Call Participants Michael Rose - Raymond James Michael Young - SunTrust Brady Gailey - KBW Operator Good morning, ladies and gentlemen, and welcome to the Amerant Second Quarter 2020 Earn ...