Executive Summary / Key Takeaways

• Amerant Bancorp is executing a strategic pivot to become a leading regional bank in Florida, shedding non-core assets and expanding its footprint and talent base in key markets like Miami, Palm Beach, and Tampa.
• Recent financial performance reflects this transition, with strong core deposit and loan growth offsetting impacts from divestitures and strategic portfolio repositioning, driving improved Net Interest Income and Net Interest Margin.
• Credit quality remains a key focus, with proactive risk management leading to increased provisions and specific reserves in Q1 2025, primarily linked to updated borrower financials and specific situations rather than broad market deterioration.
• Strategic adjustments, including transitioning the mortgage business to an in-footprint model and leveraging new digital and treasury management platforms, are expected to enhance efficiency and support profitability targets.
• Management is targeting significant improvements in profitability and efficiency, aiming for a 1% Return on Assets (ROA), 12% Return on Equity (ROE), and 60% Efficiency Ratio in the second half of 2025, driven by top-line growth and cost management.

Setting the Scene: A Regional Ambition in the Sunshine State

Amerant Bancorp Inc., established in 1985 and operating since 1987, is undergoing a deliberate transformation. Historically operating as a bank holding company with a presence in Florida and Texas, Amerant has strategically decided to "double down on Florida," divesting non-core assets, including its Houston franchise and certain loan portfolios, to concentrate on becoming the bank of choice within its target Florida markets. This pivot is not merely a geographical shift but a fundamental reorientation towards organic, relationship-driven growth, supported by significant investments in personnel, technology, and physical infrastructure across South Florida and the greater Tampa area.

In the competitive landscape of regional banking, particularly in dynamic markets like Florida, Amerant faces established players such as Regions Financial (RF), Fifth Third Bancorp (FITB), Truist Financial (TFC), and PNC Financial (PNC). These larger institutions often possess advantages in scale, extensive branch networks, and advanced technological capabilities, enabling greater operational efficiency and broader product distribution. For instance, competitors like FITB and PNC leverage sophisticated digital platforms for faster processing and customer onboarding, while TFC benefits from scale built through mergers. RF, with a strong Southeast brand, competes directly in lending and wealth management.

Amerant positions itself by emphasizing relationship banking, localized expertise, and a focus on high-net-worth individuals and commercial clients in its chosen markets. While it may not currently match the technological scale or processing speed of larger rivals, Amerant is investing in new platforms and digital tools to enhance its operational capabilities and customer experience. The strategic adoption of a new treasury management platform and a digital account opening tool are key initiatives aimed at driving core deposit growth and improving efficiency. These investments are critical as Amerant seeks to close the gap in digital offerings and compete effectively for deposits and loans against institutions with more mature digital infrastructures. The company's ability to attract and retain talent, particularly experienced relationship managers, is a core component of its strategy to build market share and differentiate through service quality and local market knowledge, countering the scale advantages of larger competitors.

Performance in Transition: Growth Amidst Strategic Shifts

Amerant's recent financial performance reflects the dynamics of this strategic transition and the prevailing macroeconomic environment. In the first quarter of 2025, the company reported net income attributable to Amerant Bancorp Inc. of $12.0 million, or $0.28 per diluted share. This compares to $10.6 million, or $0.31 per diluted share, in the same period of 2024. The year-over-year increase in net income was primarily driven by higher net interest income and noninterest income, partially offset by a notable increase in the provision for credit losses and higher noninterest expenses.

Net interest income rose to $85.9 million in Q1 2025, up 10.2% from $78.0 million in Q1 2024. This improvement was largely attributable to growth in average interest-earning assets, including debt securities available for sale (up 18.8%), the loan portfolio (up 2.5%), and deposits with banks (up 37.3%). Crucially, the cost of interest-bearing liabilities decreased by 34 basis points year-over-year, contributing positively to the margin. These factors more than offset an 11 basis point decrease in the average yield on total interest-earning assets and a slight increase in the average balance of total interest-bearing liabilities. The net interest margin (NIM) expanded to 3.75% in Q1 2025, a 24 basis point increase from 3.51% in Q1 2024. Management highlighted that less competitive pressure on deposit costs following the Houston sale (which had higher funding costs) and active repricing of deposits contributed to this margin expansion, alongside the benefit of a full period of higher-yielding securities post-repositioning.

Noninterest income saw a significant increase, reaching $19.5 million in Q1 2025, up 34.8% from $14.5 million in the prior year quarter. This growth was fueled by several factors, including a net gain of $2.8 million from the sale of a previously charged-off loan, higher loan-level derivative income ($1.5 million vs. $0.5 million), increased deposits and service fees ($5.1 million vs. $4.3 million), and higher income from brokerage, advisory, and fiduciary activities ($4.7 million vs. $4.3 million). The increase in loan-level derivative income was attributed to new swap contracts and income from swap terminations.

Noninterest expense also rose, totaling $71.6 million in Q1 2025, a 7.5% increase from $66.6 million in Q1 2024. Key drivers included higher professional and other service fees (up $3.7 million, 33.9%), advertising expenses (up $0.6 million, 18.1%), net OREO and repossessed assets expenses (up $0.5 million, 146.3%), salary and employee benefits (up $0.4 million, 1.2%), loan-level derivative expenses (up $0.4 million), and FDIC assessments and insurance (up $0.2 million, 7.6%). The increase in professional fees was linked to outsourced core software/technology services, mortgage servicing, accounting, consulting, and legal fees. Higher salary expenses reflected new hires and increased average FTEs (726 at Mar 31, 2025 vs. 696 at Mar 31, 2024), as well as higher variable compensation. These increases were partially offset by lower other operating expenses and occupancy/equipment costs (due to fewer branches post-Houston sale and increased sublease income).

Overall, pre-provision net revenue (PPNR), a key measure of core profitability before credit costs, stood at $33.9 million in Q1 2025, a significant increase from $25.9 million in Q1 2024, and exceeding consensus estimates of $31.3 million. This indicates a strengthening in the underlying revenue generation and expense management, excluding the impact of credit provisions.

Asset Quality in Focus: Proactive Management in an Uncertain Environment

Asset quality remains a critical area of focus for Amerant, particularly amidst the macroeconomic uncertainty characterized by persistent inflation and potential tariff impacts. The company has adopted a proactive stance on risk management, which was evident in the first quarter of 2025 results.

The allowance for credit losses (ACL) increased to $98.3 million at March 31, 2025, up $13.3 million (15.7%) from $85.0 million at December 31, 2024. As a percentage of total loans held for investment, the ACL rose to 1.37% from 1.18%. The provision for credit losses on loans was $17.2 million in Q1 2025, a substantial increase from $12.4 million in Q1 2024. This higher provision was driven by $13.9 million for specific reserves on five commercial loans, $3.8 million to cover net charge-offs, and $4.7 million due to model adjustments for macroeconomic factors. These increases were partially offset by releases of $4.4 million due to credit quality and other macroeconomic updates and $0.9 million due to lower loan balances.

Net charge-offs in Q1 2025 were $3.9 million, significantly lower than $11.9 million in Q1 2024. The Q1 2025 charge-offs included $2.1 million related to purchased indirect consumer loans and $3.2 million related to retail and business banking loans, partially offset by $1.5 million in recoveries. The ratio of net charge-offs over average total loans held for investment was 0.22% in Q1 2025, down from 0.69% in Q1 2024. Management noted that the charge-off level is expected to increase slightly in Q2 2025 (closer to 55 basis points) due to a QSR-related loan sale in April that was fully reserved in Q1, before normalizing thereafter.

Non-performing assets totaled $140.8 million at March 31, 2025, an increase of $18.6 million (15.2%) from $122.2 million at December 31, 2024. This consisted of $123.2 million in non-performing loans (up $19.1 million) and $17.5 million in OREO. Classified loans also increased, from $166.5 million to $206.1 million. Management attributed the increase in non-performing loans and classified loans primarily to downgrades based on the receipt of year-end 2024 financials and specific borrower situations, such as the loss of a large tenant in a CRE loan or missed milestones. They emphasized that these downgrades were based on timely identification of weaknesses and adherence to regulatory risk rating guidelines, not necessarily indicative of future problem assets.

To address these challenges, Amerant has made strategic additions to its risk management team, including hiring a new Chief Credit Officer, Head of Credit Review, and Head of Enterprise Risk Management. The company is also actively enhancing its special assets group to improve the process for managing problem assets, aiming for expeditious and prudent resolution. Management believes that this proactive approach to credit quality, coupled with investments in the risk management function, will ultimately make credit risk a competitive advantage.

Balance Sheet Evolution and Strategic Funding

Amerant's balance sheet continues to evolve in line with its strategic objectives. Total assets reached $10.2 billion at March 31, 2025, an increase of $268.0 million (2.7%) from $9.9 billion at December 31, 2024. This growth was primarily driven by increases in total securities (up $263.8 million, 17.6%), cash and cash equivalents (up $58.0 million, 9.8%), and BOLI.

These increases were partially offset by a decrease in total loans held for investment and held for sale, net of ACL (down $65.5 million, 0.9%). Management expects to maintain assets above the $10 billion level in 2025, supporting its regional bank aspirations.

Total gross loans (including held for sale) were $7.2 billion at March 31, 2025, down slightly by $52.2 million (0.7%) from $7.3 billion at December 31, 2024. While loan production continues, increased prepayments and some closings sliding into Q2 offset growth in Q1. Domestic loans held for investment decreased, with notable declines in owner-occupied loans (partially due to a transfer to held for sale), commercial loans, and consumer loans (as the purchased indirect portfolio runs off). These decreases were partially offset by increases in domestic CRE and single-family residential loans. Loans to international customers also decreased slightly. Management projects annual loan growth in the 10% to 15% range by year-end 2025, acknowledging that commercial borrowers are currently more cautious. They noted that new loan production yields are expected to be in the 6.25% to 6.50% range going forward.

Funding for asset growth is a top priority, with a strong focus on deposits. Total deposits grew significantly in Q1 2025, increasing by $300.4 million (3.8%) to $8.15 billion. This growth was primarily in core deposits, defined as total deposits excluding all time deposits. Core deposits increased by $372.9 million (6.6%) to $6.0 billion, representing 73.5% of total deposits at quarter-end. This increase was driven by growth in savings and money market deposits (up $181.5 million), noninterest bearing demand deposits (up $160.7 million), and interest-bearing demand deposits (up $30.7 million). Time deposits decreased by $72.5 million, including a decrease in brokered time deposits. Brokered deposits totaled $694.7 million, or 8.5% of total deposits. Management highlighted the strength of their "deposit machine" and the expectation that new hires and platforms will drive continued core deposit growth, targeting 15% annually by year-end 2025. The loan-to-deposit ratio improved to 88.5% at March 31, 2025, down from 92.6% at December 31, 2024, moving closer to the target of 95%.

Amerant also utilizes borrowings for funding and liquidity management. Advances from the Federal Home Loan Bank (FHLB) decreased by $30.0 million (4.0%) to $715.0 million at March 31, 2025, with repayments occurring and no new borrowings in the quarter. The Bank had significant aggregate borrowing capacity of $3.0 billion from the Federal Reserve or FHLB at quarter-end. On April 1, 2025, the company redeemed $60.0 million of its 5.75% Senior Notes.

Capital levels remain strong, with regulatory ratios well above required minimums for being well-capitalized. Total stockholders equity increased by $15.8 million (1.8%) to $906.3 million at March 31, 2025, driven by other comprehensive income ($12.5 million) and net income ($12.0 million), partially offset by common stock repurchases ($5.0 million) and dividends paid ($3.9 million). The company repurchased 215,427 shares in Q1 2025 under its repurchase program, primarily to offset stock grants and avoid dilution. A quarterly cash dividend of $0.09 per share was declared and paid, with another declared for May 2025.

Strategic Evolution: Optimizing for Florida Growth

Amerant's strategic plan is centered on optimizing its operations and focus for growth within Florida. This involves not only expanding its physical footprint and talent base but also refining its business lines.

A significant strategic decision announced in April 2025 is the transition of the mortgage business (Amerant Mortgage) from a national originator to a model focused on in-footprint lending to support the bank's retail and private banking customer base. This move is expected to reduce the mortgage business FTE count from 77 to 20 over 120 days, transfer loans to the core platform, and modify vendor contracts. Management anticipates this will result in lower variable costs and a reduction in operating costs by approximately $2.5 million per quarter starting in Q3 2025, improving operating efficiency by nearly 1%. This strategic action aligns with the "double down on Florida" approach and avoids the capital investment required to scale a national mortgage business, redirecting focus and resources to core bank growth initiatives.

Physical expansion continues with the opening of a new regional headquarters and banking center in West Palm Beach in mid-April 2025. Planned openings include two new locations in Miami Beach and a second location in downtown Tampa in the coming months. These expansions are supported by strategic hiring of business development teams in these key markets, aiming to deepen client relationships and drive organic growth. The organizational change to separate international banking from consumer banking is intended to provide more dedicated focus on this important funding source.

Investments in technology, particularly the new treasury management platform and digital account opening tool, are viewed as crucial for enhancing the customer experience and driving core deposit growth, which is paramount for funding loan expansion. While not detailing a unique proprietary technology moat, Amerant's strategic adoption and effective implementation of these standard banking technologies are key to remaining competitive and improving operational efficiency against rivals who may have more advanced digital capabilities.

Outlook and the Path to 1% ROA

Management has provided clear targets and expectations for the coming periods, signaling confidence in the strategic direction and the ability to improve profitability. For the second quarter of 2025, the net interest margin is projected to be in the mid-3.60% range, slightly lower than Q1 2025, reflecting the full quarter impact of recent asset mix changes and loan repricing dynamics. Operating expenses are projected to be comparable to Q1 2025 levels, reflecting continued strategic investments and expansion initiatives offset by initial cost reductions from the mortgage business transition.

Looking further ahead, management is focused on achieving a 1% Return on Assets (ROA), 12% Return on Equity (ROE), and a 60% Efficiency Ratio in the second half of 2025. These targets are expected to be driven primarily by projected top-line growth (10-15% annual loan growth, 15% annual core deposit growth) and the anticipated cost savings and efficiency improvements from the mortgage business restructuring and other operational enhancements. While the efficiency ratio target timeline was previously adjusted, management remains committed to reaching this level as growth outpaces expense increases.

The outlook for credit quality includes an expectation for charge-offs to normalize closer to the 30-40 basis points range in 2025 and beyond, once the higher-yielding purchased indirect consumer loan portfolio runs off (estimated by Q1 2025). The ACL coverage ratio is expected to normalize closer to the 1.25% range after the resolution of specific credits.

Key assumptions underlying this outlook include continued strong loan demand in their target markets, successful execution of hiring and branch expansion plans, effective implementation of new platforms, and the realization of expected cost savings from strategic initiatives. The macroeconomic environment, particularly the trajectory of interest rates and potential impacts from tariffs, remains a variable that could influence outcomes, but management believes their balance sheet positioning and proactive risk management will help navigate potential volatility.

Conclusion

Amerant Bancorp is actively reshaping itself into a focused regional bank centered on Florida. The strategic divestitures, coupled with targeted investments in talent, infrastructure, and technology, are designed to drive organic growth and enhance profitability. While the transition has involved some near-term impacts, such as increased credit provisions related to proactive risk management and costs associated with strategic adjustments, the underlying core performance, particularly in net interest income and deposit gathering, shows positive momentum.

The path to achieving the stated profitability and efficiency targets (1% ROA, 12% ROE, 60% efficiency) in the second half of 2025 hinges on the successful execution of the Florida expansion, the realization of cost savings from the mortgage business transition, continued strong core deposit growth, and effective management of credit quality in a challenging economic backdrop. Investors should monitor the pace of loan and deposit growth, the trajectory of asset quality metrics and charge-offs, the impact of strategic initiatives on efficiency, and the company's ability to maintain prudent capital levels while balancing growth investments and capital returns. Amerant's story is one of strategic focus and execution, aiming to leverage its regional strengths and relationship banking model to compete effectively and deliver improved financial performance.