- Revenue: Not explicitly mentioned.
- Net Interest Income (NII): $79.4 million, up 1.8% from the first quarter.
- Net Interest Margin (NIM): 3.56%, up from 3.51% in the first quarter.
- Non-Interest Income: $19.4 million, up $4.9 million from the first quarter.
- Non-Interest Expenses: $73.3 million, up $6.7 million from the first quarter.
- Provision for Credit Losses: $19.2 million, up $6.8 million from the first quarter.
- Total Loans: $7.3 billion, up $316.5 million from the first quarter.
- Total Deposits: $7.82 billion, down $62.2 million from the first quarter.
- Total Assets: $9.75 billion, down from $9.82 billion in the first quarter.
- Assets Under Management (AUM): $2.45 billion, up $94.2 million from the first quarter.
- Allowance for Credit Losses: $94.4 million, down 1.7% from the first quarter.
- Non-Performing Loans (NPLs): 138 basis points, up from 43 basis points in the first quarter.
- Net Charge-Offs: $19.3 million.
- Efficiency Ratio: 74.21%, up from 72.03% in the first quarter.
- Return on Assets (ROA): 0.21%, down from 0.44% in the first quarter.
- Return on Equity (ROE): 2.68%, down from 5.69% in the first quarter.
- Tier-1 Capital Ratio: 10.44%, down from 10.87% in the first quarter.
- Common Equity Tier 1 (CET1) Ratio: 9.7%, down from 10.10% in the first quarter.
- Tangible Equity Ratio: 7.3%.
- Dividend: $0.09 per share, payable on August 30, 2024.
- Share Repurchase: 200,652 shares for $4.4 million at an average price of $22.17 per share.
Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Amerant Bancorp Inc (AMTB, Financial) reported strong loan growth, with total loans increasing by $316.5 million, driven by organic growth.
- Net interest margin improved to 3.56% in the second quarter, up from 3.51% in the first quarter, due to higher yielding loan production and lower deposit costs.
- Non-interest income increased significantly to $19.4 million, primarily driven by higher income from loan derivatives and the mortgage business.
- The company opened a new banking center in Downtown Miami and hired new market presidents for Palm Beach and Central Florida, indicating ongoing expansion efforts.
- Amerant Bancorp Inc (AMTB) repurchased 200,652 shares for $4.4 million in the second quarter, reflecting a commitment to returning value to shareholders.
Negative Points
- Total deposits decreased by $62.2 million, primarily due to the runoff of higher-cost municipal deposits and reductions in two large corporate deposit relationships.
- The provision for credit losses increased to $19.2 million, up from $12.4 million in the first quarter, driven by downgrades of certain loans to substandard.
- Non-performing loans increased significantly, with the ratio of non-performing loans to total loans rising to 138 basis points from 43 basis points in the previous quarter.
- Non-interest expenses rose to $73.3 million, up from $66.6 million in the first quarter, partly due to non-routine transaction costs related to the sale of the Houston franchise.
- The company's total assets decreased slightly to $9.75 billion from $9.82 billion in the first quarter, indicating a slight contraction in the overall asset base.
Q & A Highlights
Q: Is there one or two of those credits that were downgraded to non-accrual this quarter that are particularly concerning to you? And what is your outlook for charge-offs through the rest of the year?
A: Jerry Plush (CEO): We have painted multiple scenarios on one particular relationship and took a prudent approach by booking $8 million. We see a positive outcome due to private equity backing. The other significant credit has strong collateral, and we expect a positive resolution. Sharymar Calderon Yepez (CFO): Excluding indirect consumer loans, charge-offs should be around 25-30 basis points. Including indirect consumer loans, it should be closer to 70 basis points, progressively decreasing.
Q: Can you lay out some of the key drivers of the 10% loan growth target, and do you expect deposit growth to pick back up?
A: Jerry Plush (CEO): We aim to maintain a loan-to-deposit ratio around 95%. The loan production is driven by the quality people we've added over the last 12-18 months and the existing team. We added significant business development personnel this past quarter, contributing to the growth.
Q: What is the timeline to get back to a normalized charge-off level of 30 basis points?
A: Sharymar Calderon Yepez (CFO): The higher charge-off rate is primarily driven by the indirect consumer portfolio, which we expect to run off by the first quarter of 2025. After that, we should be back to a normalized level of charge-offs lower than 30 basis points.
Q: Are there any other cost savings expected from the Houston sale transaction?
A: Sharymar Calderon Yepez (CFO): In addition to direct costs covered in the transaction disclosure, we see an opportunity to redeploy some Florida team members to focus on increased production in Florida. Jerry Plush (CEO): We are providing full support to Houston until the transaction closes, and those personnel can be repositioned to support growth in Florida.
Q: What is a good growth rate to think about for expenses into 2025?
A: Sharymar Calderon Yepez (CFO): After adjusting for the Houston transaction, we expect expenses to be closer to $68 million, repurposing expenses towards investment in Florida. Jerry Plush (CEO): We'll give clear guidance next quarter, but the ramp-up includes expansion of facilities and growth in Palm Beach, Miami Beach, and Tampa.
Q: Was there any negative impact to the NIM from interest accrual reversals due to higher non-accrual loans?
A: Sharymar Calderon Yepez (CFO): There was a slight impact on the NIM, roughly $700,000, but most of these credits are still performing, so the reversal amount was not significant.
Q: Any updated thoughts on the potential for utilization of the buyback?
A: Jerry Plush (CEO): We are authorized for another $15.6 million. We put it in a 10b5-1 plan and are continuously in the market. We will evaluate our capital needs and growth plans, but maintaining strong capital ratios and future earnings are critical for continuing buybacks.
Q: Are there any trends in Florida's economic or business environment that are concerning?
A: Jerry Plush (CEO): The issues are more idiosyncratic. One credit is related to a specialty healthcare industry, and the other involves a leadership transition. We see a path to good resolution for both.
Q: Does what you've seen make you more apprehensive about near-term growth in larger commercial loans?
A: Jerry Plush (CEO): We are continuously refining our risk appetite to avoid specialty-oriented credits that could create challenges. We have added strong personnel in both C&I and commercial real estate, giving us confidence in meeting growth targets.
Q: What is a fair percentage for the loan loss reserve once the indirect consumer loans run down?
A: Jerry Plush (CEO): We expect the loan loss reserve to be closer to 1.25% once specific reserves are resolved. For new production, we aim for around 1% given the asset mix.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
