Amerant Bancorp’s Earnings Call: Balancing Growth and Risk

Amerant Bancorp Inc. Class A ((AMTB)) has held its Q3 earnings call. Read on for the main highlights of the call.

Amerant Bancorp Inc. Class A’s recent earnings call painted a picture of both strength and caution. The company reported a robust net interest margin and solid capital strength, but also faced challenges with increased nonperforming assets and a decline in loan growth. While there were positive strides in international banking and capital management, a focus on asset quality and expense management signaled a cautious outlook moving forward.

Strong Net Interest Margin

Amerant reported a net interest margin of 3.92%, surpassing projections due to higher average rates for loans and securities, coupled with lower average rates on deposits. This performance underscores the bank’s effective interest rate management and its ability to leverage market conditions to its advantage.

Increase in Core Deposits

The company saw a $59.4 million increase in core deposits, highlighting a strategic focus on improving the quality and mix of deposits. This growth reflects Amerant’s commitment to strengthening its deposit base, which is crucial for sustaining long-term financial health.

International Banking Expansion

Amerant’s international banking initiatives bore fruit, with approximately 50% of new accounts in the third quarter originating from Latin American countries such as Argentina, Guatemala, Costa Rica, Bolivia, and Peru. This expansion demonstrates the success of the bank’s business development efforts in the region.

Capital Strength

The bank’s capital levels remain robust, with a Common Equity Tier 1 (CET1) ratio of 11.54%. The declaration of a quarterly cash dividend of $0.09 per share further reinforces Amerant’s confidence in its long-term financial stability and growth prospects.

Increase in Nonperforming Assets

Nonperforming assets rose to $140 million, or 1.3% of total assets, up from $98 million, or 0.9% in the previous quarter. This increase was primarily driven by downgrades in commercial real estate and commercial loans, indicating a need for heightened focus on asset quality.

Higher Provision for Credit Losses

The provision for credit losses increased to $14.6 million in the third quarter, influenced by specific reserves and charge-offs. This rise highlights the bank’s proactive approach to managing potential credit risks in its portfolio.

Decline in Loan Growth

Loans declined by 3.4% quarter-over-quarter, with a $288 million decrease attributed to payoffs and asset quality-related sales. This decline reflects a strategic decision to prioritize asset quality over aggressive loan growth.

Increased Expenses

Core expenses rose by $2 million compared to the previous quarter, primarily due to legal and consulting expenses. This increase impacted pre-provision net revenue, which decreased to $33.6 million from $35.9 million, prompting the bank to implement expense reduction initiatives.

Forward-Looking Guidance

Looking ahead, Amerant is focusing on enhancing asset quality over loan growth, with a noted 3.4% decline in loans due to payoffs and asset quality-related sales. Despite challenges, the company maintains a strong net interest margin and plans to achieve $2-3 million in quarterly savings through expense reduction initiatives in 2026. The bank also aims for fourth-quarter loan growth between $125-175 million and plans to utilize the remaining $13 million in its buyback program.

In conclusion, Amerant Bancorp Inc. Class A’s earnings call highlighted a balanced approach to managing growth and risk. While the company reported strong net interest margins and capital strength, challenges with nonperforming assets and loan growth remain. The focus on asset quality and strategic initiatives in international banking and expense management positions Amerant for cautious optimism in the coming quarters.