Amerant Bancorp Inc. Reports Third Quarter Results and Continued Progress in Executing Strategy Shift One Year After Becoming an Independent, Publicly-Traded Company

CORAL GABLES, Fla., Oct. 29, 2019 (GLOBE NEWSWIRE) -- Amerant Bancorp Inc. AMTB (the "Company") today reported continuing improved results for the third quarter of 2019, approximately one year after finishing its first quarter as an independent, publicly-traded company.

Third quarter 2019 net income of $11.9 million and net income of $37.9 million for the nine months ended September 30, 2019 were 3.3% higher than the $11.6 million reported in the third quarter of 2018 and 20.6% higher than the $31.4 million reported in the nine months ended September 30, 2018. Net income per diluted share was $0.28 in the third quarter of 2019, up 3.7% compared to $0.27 per diluted share in the third quarter of 2018. Net income per diluted share for the nine months ended September 30, 2019 was $0.88, up 18.9% compared to $0.74 per diluted share for the nine months ended September 30, 2018.

Annualized return on assets ("ROA") and return on equity ("ROE") were 0.60% and 5.81%, respectively, in the third quarter of 2019, compared to 0.55% and 6.13%, respectively, in the third quarter of 2018. ROA and ROE for the nine months ended September 30, 2019 were 0.64% and 6.43%, respectively, up from 0.50% and 5.63%, respectively, for the nine months ended September 30, 2018.

Millar Wilson, Vice Chairman and Chief Executive Officer, reflected, "In the third quarter, Amerant achieved two important milestones; it celebrated 40 years as a proud and active member of the thriving South Florida community, and its first anniversary as an independent publicly-traded Company. The third quarter of 2019 was very busy at Amerant, as we continued to push forward on our new strategy, making significant progress against our previously stated objectives despite significant headwinds from market interest rates and strong competition. Most notably, the Company completed its planned foreign financial institution and non-relationship Shared National Credit loan run-off, as well as the previously-announced early redemption of the Company's two most expensive trust preferred securities. Additionally, we continued our efforts to grow our presence in core South Florida markets, expanding our Broward County footprint with the opening of our Davie location in late September as well as adding a new Miami-Dade branch in Miami Lakes in early October."

Mr. Wilson added, "We built upon the momentum of the first six months with third quarter net income up year over year, driven by continued strong credit quality and improved noninterest income during the third quarter of 2019. We remain focused on completing our transformation efforts, which include our rebranding and optimization of our workforce."

Summary Results

The summary results of the third quarter and nine months ended September 30, 2019 include:

• Pretax income of $15.2 million, up 1.7% from $14.9 million in the third quarter of 2018. Pretax income for the nine months ended September 30, 2019 was $48.2 million, up 14.7% compared to $42.1 million in the same period of 2018.
   
• Net interest income was $52.6 million, down 5.5% compared to $55.6 million in the third quarter of 2018 mainly due to lower average interest-earning assets, the replacement of lower costs international deposits with higher cost domestic deposits, and higher time deposit costs, partially offset by improved loan yields. Net interest income for the nine months ended September 30, 2019 was $161.8 million, down 0.3% compared to $162.3 million in the same period of 2018.
  
  
• Credit quality remained strong. The Company released $1.5 million from the allowance for loan losses, compared to a $1.6 million provision in the third quarter of 2018. The ratio of allowance for loan losses ("ALL") to total loans was 0.93% as of September 30, 2019, down from 1.13% in the same period last year. The ratio of loan charge-offs to average total loans in the third quarter 2019 was 0.16%, in line with the low level of the same period last year.
   
• Noninterest income was $13.8 million, up 6.8% compared to $13.0 million in the same quarter of 2018, notwithstanding lower fee income from our Venezuelan customers' trading activities being curtailed earlier this year as a result of U.S. sanctions on Venezuelan government securities. Noninterest income was $41.1 million in the nine months ended September 30, 2019, down 1.8% from $41.9 in the same period of 2018.
   
• Noninterest expense was $52.7 million, up 1.3% compared to $52.0 million in the same quarter of 2018. Noninterest expense was $157.6 million in the nine months ended September 30, 2019, down 1.7% from $160.3 million in the same period of 2018. Third quarter 2019 noninterest expense includes an additional compensation expense of $1.5 million ($4.4 million year-to-date) in connection with the amortization of restricted stock awards granted in December 2018 and January 2019 in connection with the Company's IPO. Adjusted noninterest expense was $51.5 million in the third quarter of 2019, down 0.6% from $51.8 million in the same quarter of 2018. Adjusted noninterest expense primarily excludes expenses associated with restructuring activities, including $1.3 million of rebranding and staff reduction expenses in the third quarter of 2019 and $0.3 million of spin-off costs in the third quarter of 2018. Adjusted noninterest expense for the first nine months of 2019 was $152.7 million, down 0.9% compared to $154.0 million in the same period of 2018.
   
• The efficiency ratio was 77.6% (75.2% adjusted for rebranding and staff reduction costs) for the nine months ended September 30, 2019, compared to 78.5% (75.5% adjusted for spin-off costs) for the corresponding period of 2018.
   
• Stockholders' equity per common share increased to $19.11, a 11.6% improvement compared to $17.13 a year ago. Tangible book value per common share rose to $18.63, a 12.0% improvement compared to $16.63 a year ago.

Loans and Deposits

In the third quarter of 2019, we continued the Company's focus on building strong customer relationships across the communities we serve, improving the profitability of our loan portfolio and enhancing our customer service.

Total loans at September 30, 2019 were $5.8 billion, down 6.6% compared to a year-earlier. Similar to previous quarters, this quarter's net decline in loan balance was driven by the completion of the strategic run-off of foreign financial institution ("FI") loans and the sales of non-relationship syndicated Shared National Credits ("SNCs"), which are loans where the Company does not have a direct relationship with the borrower. This was partially offset by an increase of $102.9 million and $115.5 million in Commercial Real Estate ("CRE") and owner-occupied loans, respectively. Excluding the run-off of foreign FI and non-relationship SNC loans, domestic relationship loans increased by 6.5% year over year in the third quarter. We continue training our sales teams building stronger customer relationships in order to capture increased revenue through a larger share of customers' deposits, credit business and wealth management business.

Total deposits at September 30, 2019 were $5.7 billion, down 8.0% compared to September 30, 2018. Foreign deposits declined 14.6% year over year, and 4.0% quarter on quarter, in the most recent quarter. This decrease was driven primarily from the continued outflow of funds of our Venezuelan customers as living conditions in their country remained challenging, and the Venezuelan economy is further dollarized. To offset this run-off, we remain dedicated to enhancing our core deposit products and delivery channels. For example, we launched a new online account opening platform for personal domestic customers, which enables customers to efficiently access our deposit products online. We have seen our online CDs more than double in the third quarter of 2019, compared to the third quarter of 2018. We also launched a program which rewards all Amerant employees for referring friends and family to our loan and deposit products, as well as the Amerant Relationship Rewards Program, which focuses on providing our existing customers with incremental cash rewards as they expand their relationships with us.

During the third quarter of 2019 we opened a new banking center in the South Florida community of Davie in Broward County and more recently, in the first week of October, we opened a banking center in Miami Lakes in Miami-Dade County. Both are state-of-the-art banking centers of the future, featuring a smaller footprint and enhanced technology. Our valued clients will now have access to our convenient services and products in these new locations.

Net Interest Income and Net Interest Margin

Third quarter 2019 net interest income was $52.6 million, down 5.5% compared to $55.6 million in the third quarter of 2018. The decrease from the third quarter of 2018 was primarily due to (i) the reduction in the loan portfolio from the strategic run-off of foreign FI loans and non-relationship SNCs, which have not yet been fully replaced with domestic relationship Commercial and Industrial ("C&I") and CRE loans, and (ii) the decline in the average balance of investment securities from prepayments and sales, which helped fund the international deposit run-off. Additionally, the cost of deposits was higher this quarter driven by replacing some of the run-off in international deposits, which are less expensive, with domestic deposits, coupled with the higher cost of time deposits which, up to this quarter, were repricing at higher levels than previously carried. These factors were partially offset by better yields on the loan portfolio, and a lower balance of average interest-bearing liabilities. The net interest margin for the third quarter of 2019 was 2.80%, a decrease of 3 basis points compared to the third quarter of 2018, driven primarily by the higher time deposit costs and the replacement of the international deposits with higher cost domestic deposits.

Net interest income for the nine months ended September 30, 2019 was $161.8 million, down 0.3% compared to $162.3 million in the comparable period of 2018. The slight decline from the first nine months of 2018 was mainly due to higher deposit costs, mostly related to time deposits, and the shift of deposits from international to domestic. The net interest margin for the first nine months of 2019 was 2.89%, an increase of 15 basis points from the same period last year, driven by higher average rates on assets and the strategic shift in loan mix towards higher-yielding domestic relationship-based loans.

Our net interest income and net interest margin ("NIM") are expected to remain pressured due to the continued run-off of our low cost international deposits and further declines in interest rates which may drive an increase in loan prepayments and the prepayment speeds of investment securities. Against this backdrop, in the third quarter of 2019, the Company took advantage of the yield curve inversion to accelerate the rate decrease on its variable-rate junior subordinated debentures through interest rate swaps, and by taking fixed-rate longer-term advances with callable features. Additionally, during this quarter, we reached the inflexion point for CD costs as maturing CDs are generally repricing at lower rates than those previously carried. The costs of new deposits and loan income are likely to trend with market rates in the coming months.

Noninterest income

In the third quarter of 2019, noninterest income was $13.8 million, up 6.8% compared to $13.0 million in the third quarter of 2018. This improvement was driven by an increase of $1.1 million from derivative contracts sold to loan customers and fees from Treasury Management services. In addition, we saw a $0.9 million net gain on the sale of approximately $23.8 million of municipal bonds and $11.8 million of floating-rate corporate securities. These improvements in the third quarter of 2019 were partially offset by a 12.1% year over year decline in brokerage fees as a result of lower trading volume by our customers, primarily resulting from the U.S. Government's sanctions against trading on Venezuelan government securities. Other offsetting amounts included $0.5 million less in fees as a result of the phase out of transition services to the Company's former parent and its affiliates, as well as lower wire transfer activity and card fees.

The decrease in noninterest income of $0.7 million, or 1.8%, in the first nine months of 2019 compared to the same period of 2018, is mainly due to $1.1 million less in fees from services provided to the Company's former parent and its affiliates, and also a lower gain on early termination of advances from the Federal Home Loan Bank. These declines were partially offset by a $1.7 million increase in income from derivative contracts sold to commercial loan customers, in line with our strategic goals.

The Company's assets under management and custody, or AUMs, increased $26.3 million, or 1.6%, to $1.71 billion at September 30, 2019 compared to $1.69 billion at September 30, 2018. These changes mainly reflect an increase in net new assets, when compared to the same period of 2018.

Noninterest expense  

Third quarter 2019 noninterest expense was $52.7 million, up 1.3% compared to $52.0 million in the third quarter of 2018, mostly due to $0.8 million in rebranding expenses, $0.5 million in staff reduction costs, and $0.3 million in expenses related to the early redemption of trust preferred securities. Partially offsetting this increase was an FDIC assessment credit, and lower salaries and employee benefits despite the $0.5 million in staff reduction costs included in the third quarter of 2019. Salaries expense in the third quarter of 2019 is affected by the average annual cost of living adjustment of 1.8% implemented in July 2019, signaling a marked shift from the average adjustment of 3.2% granted in July 2018. This reduction is in line with the Company's strategy to contain growth in personnel expenses, while striving to motivate and fairly compensate our workforce. In addition, total compensation expense in the third quarter of 2019 includes $1.5 million in connection with the amortization of restricted stock awards granted in December 2018 and January 2019 in connection with the Company's IPO.

Noninterest expense for the nine months ended September 30, 2019 decreased 1.7%, or $2.7 million, compared to the same period in 2018, as the Company continued to streamline its operations and normalize its expenses as an independent company. This was mainly driven by lower professional and other service fees related to the spin-off in 2018, lower personnel costs stemming from staff reductions, and lower FDIC assessment costs due to credits received. Offsets to these declines include $4.9 million of restructuring expenses, including rebranding and staff reduction expenses, as discussed below, in connection with our transformation efforts and $4.4 million in connection with the amortization of restricted stock awards granted in December 2018 and January 2019 in connection with the Company's IPO.

Restructuring expenses in the nine months ended September 30, 2019, consisted of $3.6 million associated with the continuation of our Amerant rebranding process announced earlier this year and $1.4 million of staff realignment expenses. We expect our rebranding to be substantially completed by the end of 2019 and expect to incur approximately $0.9 million in additional expenses by year-end.

Credit Quality

The ratio of non-performing assets to total assets increased to 0.42% at the end of the third quarter of 2019, compared to 0.35% at the end of the third quarter of 2018. This increase is mostly due to the loan relationship placed in non-accrual status in June 2019 with a balance of $11.7 million at September 30, 2019, and lower total assets at September 30, 2019. Additionally, special mention loans, increased by $13.0 million during the quarter. The increase was primarily due to a $10.2 million condo construction relationship SNC loan in New York City. We are closely monitoring the performance of this loan. All special mention loans remain current.

The Company released $1.5 million from the ALL during the third quarter of 2019, compared to a $1.6 million provision during the third quarter of 2018. The release was primarily driven by lower loan balances at the end of this quarter, improved quantitative factors, primarily in CRE and domestic commercial loans and lower reserve requirements on credit cards due to better than anticipated repayments as we sunset this product.

In April 2019, we revised our credit card program to further strengthen the Company's credit quality. We stopped charge privileges to our riskiest cardholders and are requiring repayment of their balances by November 2019. All amounts deemed uncollectible were charged off during the quarter. Charge-offs this quarter were $1.7 million, and $3.1 million in the nine months ended September 30, 2019. The ALL, after the charge-offs, for this product stands at $3.6 million at September 30, 2019. We are closely monitoring the performance of the outstanding balance of $20.8 million as of September 30th, until it is completely repaid.

At the end of October we will curtail charge privileges to the remaining cardholders and require repayment of their balances by January 2020. Concurrently, we entered into referral arrangements with recognized U.S.-based card issuers that will permit us to serve our international and domestic customers and we will earn referral fees and share interchange revenue without exposure to credit risk.

Capital

Stockholders' equity was $825.8 million at September 30, 2019, up 13.5% compared to $727.7 million at September 30, 2018, mainly driven by net income and other comprehensive income stemming from higher market valuations in the Company's available for sale investment portfolio. Book value per common share was $19.11 on September 30, 2019 compared to $17.13 a year ago. Tangible book value per common share was $18.63 on September 30, 2019 compared to $16.63 a year ago.

The Company's capital continues to be strong and well in excess of the minimum regulatory requirements to be considered "well-capitalized."

Third Quarter 2019 Earnings Conference Call

As previously announced, the Company will hold an earnings conference call on Tuesday, October 29th, 2019 at 9:30 a.m. (Eastern Time) to discuss its third quarter 2019 results. The conference call and presentation materials can be accessed via webcast by logging on from the Investor Relations section of the company's website at https://investor.amerantbank.com. The online replay will remain available for a limited time following the call through the above link.

About Amerant Bancorp Inc.

The Company is a bank holding company headquartered in Coral Gables, Florida. The Company operates through its subsidiaries, Amerant Bank, N.A. (the "Bank"), Amerant Investments, Inc. and Amerant Trust, N.A. The Company provides individuals and businesses in the U.S., as well as select international clients, with deposit, credit and wealth management services. The Bank, which has operated for over 40 years, is the largest community bank headquartered in Florida. The Bank operates 25 banking centers—17 in South Florida and 8 in the Houston, Texas area—and loan production offices in Dallas, Texas and New York, New York.

Visit our investor relations page at https://investor.amerantbank.com for additional information.

Cautionary Notice Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, including, without limitation, future financial and operating results; costs and revenues; economic conditions generally and in our markets and among our customer base; loan demand; mortgage lending activity; changes in the mix of our earning assets and our deposit and wholesale liabilities; net interest margin; yields on earning assets; interest rates and yield curves (generally and those applicable to our assets and liabilities); credit quality, including loan performance, non-performing assets, provisions for loan losses, charge-offs, other-than-temporary impairments and collateral values; market trends; rebranding and staff realignment costs and expected savings; and customer preferences, as well as statements with respect to our objectives, expectations and intentions and other statements that are not historical facts. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as "may," "will," "anticipate," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "estimate," "continue," "plan," "point to," "project," "could," "intend," "target," "goals," "outlooks," "modeled," and other similar words and expressions of the future.

Forward-looking statements, including those as to our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the Company's actual results, performance, achievements, or financial condition to be materially different from future results, performance, achievements, or financial condition expressed or implied by such forward-looking statements. You should not rely on any forward-looking statements as predictions of future events. You should not expect us to update any forward-looking statements. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, together with those risks and uncertainties described in "Risk factors" in our annual report on Form 10-K for the fiscal year ended December 31, 2018 and in our other filings with the U.S. Securities and Exchange Commission (the "SEC"), which are available at the SEC's website www.sec.gov.

Interim Financial Information
         
Unaudited financial information as of and for interim periods, including as of and for the three and nine month periods ended September 30, 2019 and 2018, may not reflect our results of operations for our fiscal year ended, or financial condition as of December 31, 2019, or any other period of time or date.

Explanation of Certain Non-GAAP Financial Measures

Certain financial measures and ratios contained in this press release including "adjusted noninterest   expense," "adjusted net income," "adjusted basic and diluted earnings per common share (basic and diluted),"  "adjusted ROA," "adjusted ROE," "adjusted efficiency ratio," and other ratios appearing in Exhibits 1 and 2 are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles ("GAAP"). The Company refers to these financial measures and ratios as "non-GAAP financial measures."

We use certain non-GAAP financial measures, including those mentioned above, both to explain our results to shareholders and the investment community and in the internal evaluation and management of our businesses. Our management believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures permit investors to view our performance using the same tools that our management uses to evaluate our past performance and prospects for future performance, especially in light of the additional costs we have incurred in 2018 in connection with the Spin-off and related transactions, and the rebranding and restructuring expenses which began in 2018 and continue in 2019. While we believe that these non-GAAP financial measures are useful in evaluating our performance, this information should be considered as supplemental and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may differ from similar measures presented by other companies.

Exhibit 2 reconciles these non-GAAP financial measures to reported results.

Exhibit 1- Selected Financial Information

          The following table sets forth selected financial information derived from our unaudited and audited consolidated financial statements.

Exhibit 2- Non-GAAP Financial Measures Reconciliation

The following table sets forth selected financial information derived from the Company's interim unaudited and annual audited consolidated financial statements, adjusted for certain costs incurred by the Company in the periods presented related to tax deductible restructuring and non-deductible spin-off costs. The Company believes these adjusted numbers are useful to understand the Company's performance absent these transactions and events.

Exhibit 3 - Average Balance Sheet, Interest and Yield/Rate Analysis

The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the periods presented.  The average balances for loans include both performing and nonperforming balances.  Interest income on loans includes the effects of discount accretion and the amortization of net deferred loan origination costs accounted for as yield adjustments.  Average balances represent the daily average balances for the periods presented.

Exhibit 4 - Noninterest Income

            This table shows the amounts of each of the categories of noninterest income for the periods presented.

Exhibit 5 - Noninterest Expense

This table shows the amounts of each of the categories of noninterest expense for the periods presented.

Exhibit 6 - Loans

Loans by Type

The loan portfolio consists of the following loan classes:

Non-Performing Assets

This table shows a summary of our non-performing assets by loan class, which includes non-performing loans and other real estate owned, or OREO, at the dates presented.  Non-performing loans consist of (i) nonaccrual loans; (ii) accruing loans 90 days or more contractually past due as to interest or principal; and (iii) restructured loans that are considered TDRs.

Loans by Credit Quality Indicators

This tables shows the Company's loans by credit quality indicators.  We have no purchased credit-impaired loans.

Exhibit 7 - Deposits by Country of Domicile

This tables shows the Company's deposits by country of domicile of the depositor as of the dates presented.