Amerant Bancorp Inc. 2026 Q3 Earnings Call

Good morning, everyone, and thank you for joining us to review Amerant Bancorp's third quarter 2026 results. On today's call are Carlos Iafigliola, our President and CEO, and Sharymar Calderón, our CFO. As we begin, please note that discussions on today's call contain forward-looking statements within the meaning of the Securities Exchange Act. In addition, we will also refer to non-GAAP financial measures. Please refer to the company's earnings release for a statement regarding forward-looking statements, as well as for information and reconciliation of non-GAAP financial measures to GAAP measures. I will now turn it over to our CEO, Carlos Iafigliola.

Thank you, Laura. Good morning, everyone, and thank you for joining us today to discuss Amerant third quarter 2026 results. This quarter represents another step forward in building a more profitable and resilient franchise. Our net income increased to $25.7 million or $0.65 per diluted share, and our return on assets reached 1%. That progress reflects stronger net interest income and margin expansion, disciplined expense management, continued balance sheet optimization, and improving credit quality. Just as importantly, we continue advancing the strategic priorities that are moving Amerant from stabilization towards sustainable growth. Following our annual board strategy session, our direction remains clear. Deliver on our financial and credit quality commitments, continue simplifying our operating model, focus investment toward the market and capabilities where Amerant has a distinct competitive advantage, and deploy capital and resources toward the most attractive opportunities.

In that context, I would like to update you on the evolution of our four strategic initiatives during the quarter. First, transform credit. This initiative is about strengthening risk selection, portfolio monitoring, and credit operating model to enable profitable growth with greater consistency and predictability and within established risk appetite. During the third quarter, the work completed early in the year began to show more clearly in our results. Non-performing loans continued to decline and classified balances also moved lower. We continue actively resolving criticized exposures while advancing workflow enhancements and automation of the credit approval process to improve data integrity, accountability, and consistency among lending stakeholders. With the credit foundation strengthened, our focus is increasingly on pairing disciplined underwriting with growth in more granular and higher quality relationships. Second, operational efficiency. This initiative is about simplifying how we operate, optimizing structural cost, increasing capacity, and creating a more scalable platform that can deliver consistent service and stronger returns.

We continue disciplined expense management while improving our earnings generation path. This resulted in a significant improvement in the efficiency ratio, narrowing the gap to the 60% we have been targeting. We are now moving from identifying opportunities to making clear decisions across the organization. This includes reviewing team structures, client coverage, and productivity of our channels, while advancing in digitization and deploying practical AI use cases. Third, client profitability. This initiative is about managing the full relationship return, not simply individual products, and directing our people and capital toward the clients and businesses where we can create the greatest value. During the quarter, we continued strengthening referral discipline and coordination across commercial banking, private banking, treasury management, and wealth management.

Following the strategy session, we are taking this work further by assessing relationship based on profitability, aligning service models and pricing within client needs, and identifying targeted opportunities to cross-sell single product relationships. Fourth, grow the bank. This initiative is about growing loans, deposits, assets under management, and fee income in the market and businesses where Amerant has differentiated capabilities while remaining aligned with our risk appetite and return objectives. We are focused on building scale in priority verticals and client segments, including more granular C&I, residential lending, practice finance, logistics and wholesale, asset-based and supply chain finance, and selected CRE opportunities with experienced sponsors. We will also continue to use our syndication capacity to manage larger, new, and existing exposures.

Our international business remains a distinctive source of low cost funding and an important platform for relationship growth. We remain focused on deepening wallet share across international clients through wealth, treasury management, and specialized personal and commercial lending solutions. As we continue to optimize our deposit mix by reducing higher cost deposits and selectively exiting non-profitable single product relationships, the overall quality and economics of our deposit franchise will continue to strengthen. With this in mind, we have migrated certain low-cost interest-bearing balances to DDAs, which improve our ratio of non-interest-bearing deposits to total deposits without any impact to the retention of these accounts. In our domestic markets, we are prioritizing Florida, where our brand, market position, and client relationships give us a clear right to win, and refining our branch and coverage model to support profitable growth. Taken together, these initiatives are producing measurable progress.

Return on assets reach our target 1%, return equity improved, net interest margin expanded, and capital remains strong. These results are creating a new baseline for our company and reinforce our confidence that Amerant is moving in the right direction. Our strong capital position also provide us with the flexibility to continue returning value to shareholders. Accordingly, on October 21st, our board authorized a share repurchase program for up to $50 million through December 31st, 2027. Our priorities remain the same: disciplined loan growth, continued credit improvement, greater operating efficiency, deeper and more profitable client relationships, and thoughtful capital allocation. We have more work ahead, but we enter the final quarter of the year with a stronger foundation, clear choices, and growing momentum. With that strategic context, I will turn it to Sharymar Calderón to walk through the quarter's financials results in more detail.

Thank you, Carlos, and good morning, everyone. Let's turn to slide 4, where you will see our balance sheet highlights. Total assets were $10.2 billion as of the end of the third quarter, a decrease from $10.3 billion as of the end of the second quarter. The decrease was primarily driven by lower interest-bearing deposits. Cash and cash equivalents were $361.5 million, up by $60.3 million compared to $301.1 million in the second quarter, reflecting higher liquidity balances during the quarter. Total investment securities were $2.2 billion, down by $382.8 million compared to $2.6 billion in the previous quarter. This was primarily driven by lower debt securities available-for-sale. Total gross loans were $7.1 billion, up by $207.8 million compared to $6.9 billion in the second quarter. Growth was driven primarily by increases in single-family residential and commercial loans.

These were partially offset by decreases in CRE, loans to non-depository financial institutions, as well as owner-occupied loans. Additionally, elevated payoffs partially offset loan production, including several repayments that also contributed to improved asset quality. On the deposit side, total deposits were $8.2 billion, down by $109.6 million compared to $8.4 billion in the second quarter, primarily driven by decreases in interest-bearing demand deposits, as well as savings and money market deposits. These were partially offset by increases in non-interest-bearing demand deposits and time deposits. Also relevant for this quarter, on September 17, 2026, the company completed a registered offering of $50 million of 7% senior notes due in 2031. The offering added attractive long-term funding in a rising rate environment while also enhancing liquidity at the holding company.

We are pleased to report that our assets under management increased $77.9 million to $3.45 billion in the third quarter, driven primarily by net new assets of $76.5 million. This is a strong result that reflects the growing momentum in our wealth management business, which we continue to view as an increasingly important source of fee income. During the quarter, we made meaningful progress by onboarding new talent and deepening cross-sell activity with commercial clients, both of which contributed to our growth. This reinforces our conviction that this business can play a significant and expanding role in diversifying our income stream over time. Our relationship-first model and the depth of our domestic and international client base position us well to capture that opportunity, and we remain excited about deepening advisory relationships across both markets. Let's turn to slide 5.

Looking at the income statement, diluted earnings per share for the third quarter was $0.65 per share compared to $0.53 per share in the second quarter. Net interest income was $90.5 million, up $7.9 million from $82.6 million in the second quarter. The increase was primarily driven by higher interest income on loans and investment securities, combined with lower total interest expense on deposits and FHLB advances due to lower average balances and average rates. Net interest margin was 3.77% compared to 3.52% in the second quarter. The increase reflected a lower cost of funds from non-interest-bearing deposits and shorter-term advances we took during the quarter. As well as benefits from additional interest on loan repayments previously in non-accrual status that was recorded during the quarter.

Provision for credit losses was $6.2 million, compared to $4.8 million in the second quarter, reflecting higher specific reserves in the commercial portfolio, partially offset by lower collectively evaluated reserves driven by changes in portfolio composition and macroeconomic assumptions. Non-interest income was $18.3 million, up by $177,000 from $18.2 million. This increase was primarily driven by higher deposit and service fees and higher gains on the early extinguishment of FHLB advances. These were partially offset by lower loan-level derivative income and lower other non-interest income during the quarter. Non-interest expense was $69.1 million, up by $221,000, or 0.3%, from $68.9 million in the second quarter. The increase in non-interest expense was primarily driven by higher professional fees and higher salaries and employee benefits.

These were partially offset by a decrease of $1.9 million in advertising expenses, as well as an increase of $1.1 million in OREO income. Pre-tax pre-provision net revenue reached $39.7 million, which is the highest quarterly result recorded since 4Q 2022, compared to $31.9 million in the second quarter of this year. This increase was primarily driven by higher net interest income and non-interest income, partially offset by the increase in non-interest expense. You can also see that ROA and ROE this quarter were 1% and 11.29%, which are the highest quarterly results reported since 3Q 2022 and 4Q 2021 respectively, compared to 0.84% and 9.23% respectively in the prior quarter. Our efficiency ratio was 63.51% compared to 68.37% in the second quarter.