Amerant Bancorp Inc. (AMTB) Q1 2026 Earnings Report, Transcript and Summary

Greetings, and welcome to the Amerant First Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Laura Rossi, Executive Vice President and Head of Investor Relations. Laura, please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us to review Amerant Bancorp's first quarter 2026 results. On today's call are Carlos Iafigliola, our Interim CEO; and Sharymar Calderon, our CFO. Additionally, we're pleased to welcome as a guest speaker this quarter, Lee Ann Cragg, Chief Credit Officer, who will share further insight into our credit risk management initiatives. 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, references will also be made 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 Interim CEO, Carlos Iafigliola.

Thank you, Laura. Good morning, everyone, and thank you for joining us today to discuss Amerant's first quarter 2026 results. As we begin, I want to acknowledge where we are in the execution of our strategic plan. I'm proud of the continued progress we have made on the 3 priorities we outlined last quarter, stabilizing the business, optimizing our credit portfolio and growing sustainably. I also want to thank the Amerant team for their hard work and dedication throughout the quarter. Our people are the key enabler of this plan and that continues to guide our execution. So let's begin with our primary focus, which has been credit quality and improving our loan portfolio. As a reminder, in Q4 last year, we completed a comprehensive reassessment of our portfolio in terms of risk identification and classification and subsequently exited a segment of loans from classified categories. This process continued into the first quarter, where we demonstrated proactive credit management and further refined the classifications of certain loans based on current macroeconomic data and new information received. We identified both necessary downgrades as well as meritable upgrades. Additionally, we exited and transferred to held for sale another group of loans that we no longer consider core to our business. The new process and people we have put in place has significantly improved our credit evaluation capabilities, and the team is executing well. The composition of our loan portfolio now reflects a healthier mix with a risk profile that is more consistent with our long-term goals. Lee Ann will share additional details shortly. Going forward, as we prioritize business development, we will pursue growth within credit parameters that allow for sustainable financial results. To this end, we have enhanced risk-based limits to adjust concentration risk and prevent single borrower overexposure. We have also refined our market approach by moving away from out-of-market collateral projects, except selectively for existing clients in core markets where we have deeper borrower insight. We have also fundamentally shifted underwriting, prioritizing borrowers with proven stable operating history over projection-based lending and tightening our policy exception framework by lowering allowable exception thresholds to better align with our risk appetite. Lastly, we have continued to invest in experienced talent, and we're taking a more intentional approach to growth, focusing on what we believe are the right fundamentals to drive stability, consistency and sustainable top line performance. Our top priority is continuing to improve our efficiency, which the team executed well against this quarter. Our net income for Q1 was in line with our guidance, and we have significantly reduced noninterest expenses quarter-over-quarter, supported by better-than-expected cost savings. To put this in perspective, our expense management efforts represents approximately $30 million in cost savings for 2026. Additionally, we saw strong growth in favorable low-cost international deposits as a result of the reactivation of the Venezuelan economy and our deep knowledge and experience in the market as well as the extensive work that for many years, we have done to preserve and expand our relationships in the country. In line with this, I would like to take a moment to provide some additional context on our international deposit growth. Last quarter, we highlighted Venezuela as an area of opportunity. And this quarter, we delivered, recording $188 million of total deposit growth in Q1, from which $95 million came from Venezuela and $66 million of this growth was in March alone. These deposits are quite attractive due to their stability, overall cost of funds and beta in rates-up cycle, such as the one we recently experienced, allowing for improved profitability as we continue to grow our international presence. Furthermore, these customers are well aligned with our relationship-first approach as they can be cross-sold via our wealth management offering. Moving forward, Venezuela represents a key opportunity to continue generating net interest income from a source of funds and to capture increased market share. We believe Amerant is uniquely positioned to take advantage of this opportunity and support both individual entities as the country reopens. In summary, we believe we executed well against our strategic plan. We took a focused, deliberate action to further optimize our credit portfolio while reinforcing risk management. We implemented cost savings initiatives that have reduced our expenses and improve our efficiency. We generated loan growth that is aligned with our risk appetite despite exits of certain criticized loans and significant loan prepayments, which provides a clear line of sight to sustained credit performance. And we executed well on our international strategy, particularly in Venezuela, which we view as a meaningful opportunity to further scale our international deposit franchise and drive incremental earnings. With that, I will turn it over to Shary to review our quarterly financial results in more detail.

Thank you, Carlos, and good morning, everyone. I want to begin by saying that going forward, we will be discussing results without breaking down core versus noncore metrics in our financials. We would like to be more selective with adjustments with the goal of providing a clearer and more straightforward view of our quarterly performance. All comparisons made to last quarter's results are to our GAAP reported figures. Let's turn to Slide 4, where you will see our balance sheet highlights. Note that in the next 3 slides, I will focus on those items that are most relevant to the quarter and will not be covered in subsequent slides. Total assets were $9.9 billion as of the end of the first quarter, an increase from $9.8 billion as of the end of the fourth quarter. The increase was primarily driven by higher deposit balances. Additionally, we reallocated our assets to fund net loan growth, including selected residential loan purchases and deploy available cash into higher-yielding assets. Cash and cash equivalents were $188.7 million, down by $281.5 million compared to $470.2 million in the fourth quarter due to the purchases of investment securities at attractive yields as well as to fund loan growth. Total investment securities were $2.4 billion, up by $346.3 million compared to $2.1 billion in the previous quarter. Total gross loans were $6.8 billion, up by $56.5 million compared to $6.7 billion in the fourth quarter. While we experienced increases in certain portfolios, overall loan balances were only slightly higher than in the fourth quarter due to a high level of prepayments and some loans that we exited in line with our focus on credit quality. This was anticipated and guided to in our call last quarter. On the deposit side, total deposits were $7.9 billion, up by $152.2 million compared to $7.8 billion in the fourth quarter, primarily driven, as Carlos mentioned, by strong growth in international deposits. Our assets under management increased $148.6 million to $3.4 billion, driven by higher market valuations. As we've shared previously, we continue to see this business as an area of opportunity for us to grow fee income going forward, increasingly in light of the opportunity in Venezuela. Let's turn to Slide 5. Looking at the income statement, diluted income per share for the first quarter was $0.44 compared to $0.07 in the fourth quarter. Net interest income was $80.3 million, down $9.9 million from $90.2 million in the fourth quarter. This was primarily driven by lower average balances and yields on interest-earning assets, largely attributable to the anticipated cuts of 50 basis points in market rates, impacting the portfolio for the entire quarter. The decrease in net interest income was also driven by the asset mix reallocation. That translated into a contraction of our financial margin to 3.55% from 3.78% in the fourth quarter. Provision for credit losses was $7.8 million compared to $3.5 million in the fourth quarter. Noninterest income was $17.4 million, down $4.6 million from $22 million, primarily driven by the absence of the gain that we had in the fourth quarter from the sale and leaseback of 2 banking centers as well as lower securities gains this quarter compared to the fourth quarter. Noninterest income this quarter includes securities gains of $516,000. Noninterest expense was $66.9 million, down by $39.9 million or 37.3% from $106.8 million in the fourth quarter. The significant reduction in noninterest expenses this quarter was primarily driven by our cost savings efforts, which included $3.3 million savings in vendor contract renegotiations. The decrease in noninterest expenses in 1Q '26 was partially offset by $1.7 million in an impairment on investment carried at cost and $1.8 million in net losses on loans held for sale. Pretax pre-provision net revenue was $30.7 million compared to $5.4 million in 4Q '25. As mentioned earlier, we have significantly reduced noninterest expenses this quarter, which more than offset the lower net interest income and noninterest income, driving an improvement in PPNR. You can also see that ROA and ROE this quarter were 0.73% and 7.63% compared to 0.10% and 1.12%, respectively, and our efficiency ratio was 68.52% compared to 95.19%. These ratios were primarily impacted by the increase in net income and significant decreases in expenses this quarter. Turning now to Slide 6 to discuss our capital metrics. Our CET1 remains strong at 11.84% compared to 11.80% last quarter, mainly driven by lower risk-weighted assets and from net income during the quarter, while partially offset by $18.7 million in share repurchases and $3.7 million in shareholder dividends. We paid our quarterly cash dividend of $0.09 per share of common stock on February 27, 2026, and our Board of Directors just approved a quarterly dividend of $0.09 per share payable on May 29 of this year. During the first quarter, we also repurchased 859,493 shares at a weighted average price of $21.77 per share compared to tangible book value of $22.38 as of March 31, 2026. This represented 97% of tangible book value and 95% of book value. On Slide 7, we show our well-diversified deposit mix along with the composition of our loan portfolio. Total deposits for the quarter were $7.9 billion, up $152.2 million or 2% compared to $7.8 billion in the previous quarter. As Carlos mentioned, this increase was primarily driven by the significant deposit growth in our international deposits as a result of Venezuela's economy starting to reactivate, which we believe presents a strong opportunity for us to pursue. In terms of deposit mix, broker deposits totaled $548.1 million, up by $112.4 million compared to $435.7 million in the fourth quarter as we used mostly short-term funding to compensate for some large fund providers that left in the prior quarter. We also saw an increase in interest-bearing demand, savings and money market deposits partially offset by a reduction on noninterest-bearing deposits. Total loans were $6.8 billion, up $56.5 million or 0.8% compared to $6.7 billion in the fourth quarter. This increase was driven by a combination of originations as well as purchases of selected residential mortgages during the quarter, which were largely offset by the higher prepayments we received as well as loan sales completed in this period. Next, on Slide 8, you can see the evolution of our net interest income. You can see that we maintained a healthy net interest margin despite this first quarter fully capturing the impact of 2 rate cuts towards the end of the last year and our asset mix reallocation. We continue to reprice our interest-bearing deposits during the quarter to maintain a healthy NIM and saw the cumulative beta at 0.48% since the rate down period started. Our net interest income was also impacted by nonperforming loans and some of the exits of classified loans that I mentioned earlier. While this may have a short-term impact, it improves the long-term sustainability of our business. Now I'd like to turn it over to Lee Ann, who will speak a bit more about some of the updates we have made to our portfolio management processes as we continue improving credit quality.

Thanks, Shary, and thank you for having me on today's call. As Carlos highlighted, we are taking significant steps to improve our credit quality evaluation processes, which I'd like to highlight for you today. To begin, we staffed a dedicated portfolio management team to improve the timeliness of the collection of financial information from borrowers and for the escalation of possible issues to the credit team. We've also invested in additional training for both credit and line of business teams to improve the accuracy and consistency of assigning regulatory risk ratings. We have further embedded new checkpoints throughout our monitoring process upon which updated risk rating models should be run and attested. Beyond that, we've made our review procedures more rigorous and risk focused. We redesigned our annual review format to drive deeper risk identification and recalibrated the review threshold from total credit exposures of $5 million to $3 million to expand portfolio coverage. Subsequently, and with additional process and staff build-out, we expect to review all exposures over $1 million through our standardized review. We also introduced quarterly top 20 reviews across CRE, C&I and Private Banking segments to closely monitor our largest relationships. These discussions include risk ratings, exceptions and exposure strategy. These quarterly meetings will be held for portfolio segments that may be deemed in higher-risk categories throughout the year. We have also increased the cadence of hosting multiple loan monitoring meetings. These meetings are for adversely classified loans with ongoing proactive strategy discussions, focusing on restructures or obtaining additive credit enhancements where possible. Finally, we're aligning our incentives with asset quality by incorporating portfolio management metrics into banker compensation starting in 2026. Collectively, these steps provide stronger controls, better visibility and more hands-on portfolio management. Now turning to asset quality. As shown on Slide 10, nonperforming loans were up $4.7 million or 2.7% for a total of $176.1 million or 1.78% of total assets. During Q1 '26, downgrades to NPL were primarily driven by 3 relationships that included a combination of CRE, owner-occupied and commercial loans, and were offset by payoff and note sales as noted on the slide. In the next slide, we have included similar information as it relates to the classified portfolio. During 1Q '26, downgrades to classified loans were primarily driven by the 3 relationships just mentioned in NPL as well as a large nondepository financial institution loan with underlying CRE property as collateral and one large single-family residential loan, which was adequately secured with real estate. On this slide, you can also see the results of our efforts to reduce the loan balances in this classification during this quarter, with loan payoffs totaling $59.5 million and loans sold totaling $65.7 million during the period. Now moving into Slide 12, we discuss special mention loans and their key characteristics, including portfolio composition and collateral coverage. During the first quarter of 2026, downgrades to special mention were primarily driven by 3 CRE loans, partially offset by upgrades to pass totaling $67.3 million. This is based on new year-end financial information that was received and analyzed. As of April 22, special mention loans were reduced to $117.3 million due to a $30.9 million CRE loan sale and is projected to reach a further reduced level to $88.3 million as a result of an additional CRE loan exit of $29 million. This is expected in the coming weeks. Overall, these results reflect the proactive approach to credit monitoring, evaluation and resolution that we have taken to effectively manage risk across the portfolio. You will also see the impact of these efforts as we continue to exit these credits through paydowns, payoffs and loan sales with expected balances declining as a result. And with that, I'd like to pass it back to Shary.

Thank you, Lee Ann. Now moving on to Slide 13. Here, we show the drivers of the provision recorded this quarter and impact to the allowance for credit losses. The provision for credit losses was $7.8 million in the first quarter. The provision was driven by $6.3 million in additional reserves for charge-offs, a $1.7 million net increase in specific reserve allocations and $2.6 million attributable to changes in credit quality and macroeconomic factors. These increases were partially offset by a $2.9 million release related to held for investment loan volume changes. During the first quarter of 2026, gross charge-offs totaled $9.1 million, which includes $4.4 million related to a commercial loan participation agreement that the borrower and the company agreed to wind down in 4Q 2025, and no further charge-offs are expected from this agreement going forward. The remaining charge-offs were related to one commercial relationship and indirect consumer loans. These charge-offs were offset by $1.9 million due to recoveries. Lastly, the allowance for credit losses ratio was up slightly to 1.21% from 1.20% in the fourth quarter, primarily due to increases in specific reserves. On Slide 14, you can see our outlook for 2026. For 2Q '26, we project loan balances to reach approximately $7 billion, driven by organic originations and selective residential loan purchases, which also support a shift towards a more granular portfolio. For the full year 2026, we expect annualized loan growth of approximately 7%. These expectations will be governed by 2 deliberate and nonnegotiable priorities. First, we will continue to exit certain credits to further optimize our loan portfolio, which will offset a portion of organic production in the near term. Second, we will pursue future loan growth that is consistent with our risk appetite and supports the predictability of our credit metrics. On the funding side, we expect deposits to reach $8 billion by 2Q '26 and cumulative deposit growth between 8% to 10% for 2026. The confidence in our deposit growth outlook is supported by emerging opportunities in Venezuela, as Carlos mentioned, and our continued efforts to grow domestically. We expect net interest margin to be in the 3.4% to 3.5% range in 2Q '26, stabilizing around 3.4% towards year-end, reflecting disciplined balance sheet management and pricing. From an expense perspective, we are projecting approximately $68 million to $69 million in expenses for 2Q '26 with quarterly expenses stabilizing around $68 million by the second part of the year as we continue to make progress towards our target efficiency ratio of approximately 60%. Lastly, we continue to believe that buying back our stock represents an attractive use of capital, and we expect to continue using a portion of our cash to directly return capital to our shareholders through repurchases and dividends. And with that, I pass it back to Carlos for additional comments and closing remarks.

Thank you, Shary. As we wrap up today's call, I would like to reiterate, as shown on Slide 15, the continued progress we have made in stabilizing the business, optimizing our credit portfolio and growing sustainably. Our results this quarter reflect strong execution and tangible progress from the decisive actions we have taken over the past 2 quarters across these priorities. As we look ahead, we will continue to prioritize building a healthier loan portfolio that is consistent with our risk appetite and long-term goals. We will also continue our disciplined expense management efforts, driving efficiencies across the organization. And lastly, we will emphasize growth in our core business with a clear line of sight to sustained credit performance. We will continue to strengthen our relationship-first model to enhance collaboration across our business lines to unlock synergies, proactively manage deposit funding costs and capitalize on strong deposit growth opportunities, including Venezuela. We have a durable franchise, a clear strategic vision and a disciplined execution plan. While there is more work ahead, we are excited about the opportunities and remain confident in our ability to deliver value for our shareholders over the long term. With that, Shary, Lee Ann and I will take questions. Operator, please open the line for Q&A.

[Operator Instructions] Our first question today is coming from Evan Yee from Raymond James.

So just want to start on expenses. So it looks like expenses trended a little bit better than the initial first half of 2026 expectation. Could you just give us some color into what is factoring in your outlook for the rest of the year?

Yes. Thank you so much for the question. So pretty much we accelerated some of the contract renegotiation that we have scheduled for later into 2026. So we had it completed in early 2026 and the run-up rate seems to be closer to the $68 million for the entire year quarter-over-quarter. So that's a collective effort that we have done to improve expenses. Shary, I'm not sure...

Yes. Yes, Carlos, to complement that, I think it's important that we state that we're not looking into just a onetime cost reduction. We're looking more into sustainability quarter-over-quarter. So that's why you're going to see that the run rate that we have provided some guidance on it goes to the $68 million more or less in the upcoming quarters. And we continue to plan to cross the $10 billion threshold. I know we're at $9.9 billion right now, but we continue to plan to cross that threshold. We're going to have some investments in people and technology. So it means that we have to make sure that we materialize those cost savings initiatives that we have identified so that we get to that run rate of $68 million that we have guided to.

I guess the takeaway is that those savings are durable throughout the entire 2026.

Got it. That's super helpful. And then I guess switching over the capital. So it looks like you used a large utilization -- a large portion of utilization this quarter. Just kind of curious on what the appetite is there moving forward. I know you've mentioned it was an attractive option.

You mean in terms of the buyback, the leftover of the buyback right now is $21 million, and we are planning to complete the buyback through Q2.

Yes. And we have -- I mean, we definitely saw opportunity, we believe, in the bank, and we saw a lot of value and opportunity in the first quarter because we were trading below tangible book. We're now over tangible book, but we continue to see opportunities through the buyback program. So as Carlos mentioned, the plan is to continue with the plan throughout the year with the remaining portion.

Next question today is coming from Russell Gunther from Stephens.

This is Nick stepping in for Russell. So it's good to see progress on special mention, especially with that $31 million sale already closed. But looking ahead to that additional CRE exit you guys have targeted for mid-2Q, does that effectively wrap up the heavy lifting on derisking? I'm just trying to gauge if there are more bulk exits on the horizon or if the portfolio is finally where you want it to be.

Sure. Thank you for the question. And the exercise that we have been doing, and probably you noticed the progression has been risk identification. We exit the relationships that we consider that were critical exits in Q4 2024. And from now on, it will be a risk calibration exercise. So what we place in available for sale reflects a combination of line items that are either out of footprint, or they are too bulky with our new risk appetite. So the progression will be that those line items will continue to fade away out of the balance sheet. Right now, we executed on the $30 million, and there is another exit up coming weeks. So that will left with $130 million in available for sale, but the plan is to continue to execute, and the plan is to create a portfolio that is more granular going forward. So you minimize the swings between the risk rating categories.

Yes. And Carlos, to complement that, too, if we look also at the categories of classified or NPLs, we are looking into different paths to exit those. Some have opportunities for upgrades, which we'll look into, but others have opportunities, whether it's to refi and so on. So when we think about what is the derisking that we have left over the portfolio, as Carlos mentioned, we have the available for sale that we plan to exit, and then we have the reductions of the classified portfolio as well.

Got it.

Next question today is coming from Woody Lay from KBW.

I wanted to start on the net interest margin in the quarter. It came below the guide you all had given for the quarter, and it looks like it came from lower loan yields. One, I was just wondering, were there any elevated interest reversals in the quarter? And two, is new loan production coming on at lower yields just given the adjustment in the risk appetite and trying to put on cleaner and safer credits?

Sure. And Woody, what I'm going to do is I'm going to walk you through some of the elements of the NIM that may be helpful to get to that response. But the first thing is we had a change -- I mean, we have the repricing of the loan portfolio due to the cuts as we had planned for. So that did happen, and that's why we had guided to a lower number versus the NIM that we had in Q4. But then after that, during Q1, we had a different asset mix. You're going to see that we had a higher proportion of investments available for sale. We had some impact due to the timing of the funding of the loan growth, which occurred later in the quarter. And then additionally, to your point, we had onboarding of production with a quality that's aligned with the current risk appetite that will come and is expected to come with an overall lower yield than the existing portfolio. And then on top of that, we also had an impact of approximately 3 basis points associated to the number of days in the quarter versus the last quarter. I think you also had a question regarding if we had certain impacts of nonaccrual. I don't -- I didn't see anything significant this quarter. But if we compare that to the last quarter, last quarter, we did have some impact due to collections or recoveries on NPL loans. So trying to create something comparable for apples-to-apples, you're going to see that because we didn't have that in Q1, the NIM is slightly lower as well. So I hope that helps with that bridge.

Woody, the other item that I would like to emphasize that this guidance that we're providing, and we're pending still to see the progression, international deposits started to resume. And as you know, they come with a lower cost of funds, closer to the 1% or in some cases, even lower. So we started to see that coming over. As we started to see a significant progression and we started to see a clear path towards accumulation of those deposits, that may have an impact on the cost of funds and will trigger a recalibration on the guidance for the financial margin. So for the time being, the financial margin projected includes the lower loan spreads. Remember that the production that we're looking at right now, it's probably closer to the 200 basis points, so it's even lower in some cases over SOFR. And generally speaking, what we'll have is that if the international portfolio of deposits starting to increase furthermore, we'll have additional savings in the cost of funds. But that's something that we're carefully assessing right now. We have a good quarter from that perspective and looking forward to see what's the accumulation of those line items. Okay.

And Carlos, to add to that, now on the deposit side, given the uncertainty in the rate environment, although we are expecting some positive improvement in terms of cost of funds due to the maturities of customer time deposits and broker deposits as it relates to other interest-bearing products, we still -- there's still uncertainty as to the timing of those -- as to the timing of the repricing of those deposits. So it's something that we will continue to look and model, but that definitely will impact the guidance to the NIM.

That's really helpful color. I appreciate you walking me through that. And then maybe to follow up on the international deposits. As you mentioned, the growth was really impressive as Venezuelan market is opening up. But how are you shifting the strategy on your end? Do you need to hire more people that call on that market? How do you unlock the potential of Venezuela? And could you also just remind us of the cost of those Venezuelan deposits or the cost on the incremental deposits that would be helpful.

No. Thank you so much for the question. So definitely, we are looking to increase the staff to help us with these efforts. Something that is really important and is that we have seen a progression in the way that the jurisdiction is being looked from the perspective of sanctions. So progressively, we have seen a path towards reducing the number of sanctions towards Venezuela and the Central Bank from the country having access to their funds. So therefore, there is an incremental flow of funds through the economy, and this is happening in conjunction with the U.S. Treasury Department. So we're seeing that positive uptick. We're looking to increase the staff in the international side, and we're also resuming our outreach to the region since now traveling into the country is much easier now than it used to be before. And the cost of funds right now for the entire international portfolio sits around 1.30% actually even a little bit lower 1.15% maybe. And then we have the incremental deposits that we're getting are actually sub 1%.

Got it. And then maybe just last for me on credit, thinking about the charge-off expectations going forward, it's good to see the quarter-over-quarter improvement over charge-offs. But the noise in the Middle East and some of the inflation to input costs, does that make achieving resolution for some of these credits more expensive, and we would expect charge-offs to go up? Or any thoughts there?

So we have no direct exposure to exploration or extraction on the oil piece. So we're obviously looking at our overall portfolio to see impacts there. But what I would say from a high level on our overall charge-off is that we're predicting around 30 to 35 basis points, which is in line with our guidance. We're not seeing any need for elevation at this point.

Got it.

We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you, everyone, for joining our first quarter earnings call as well as your continued support and interest in Amerant, and have a great day.

Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.