Amerant Bancorp Inc. — FY2023 Form 10-K Summary
Business context and reporting period
Amerant Bancorp is a Florida-based bank holding company operating primarily in South Florida and Houston, with a banking center in Tampa. The filing covers the fiscal year ended December 31, 2023; comparisons are principally with FY2022. The company reported $9.7 billion in assets, $6.9 billion in loans held for investment, $7.9 billion in deposits, $736.1 million in shareholders’ equity, and $2.3 billion in assets under management and custody at year-end.
Financial performance and condition
| Metric | FY2023 / Dec. 31, 2023 | FY2022 / Dec. 31, 2022 |
|---|---|---|
| Net interest income | $326.5 million | $266.7 million |
| Net interest margin | 3.76% | 3.53% |
| Noninterest income | $87.5 million | $67.3 million |
| Noninterest expense | $311.4 million | $241.4 million |
| Provision for credit losses | $61.3 million | $13.9 million |
| Net income attributable to Amerant | $32.5 million; diluted EPS $0.96 | $63.3 million; diluted EPS $1.85 |
| Return on average assets / equity | 0.34% / 4.39% | 0.77% / 8.45% |
| Total assets / deposits | $9.7 billion / $7.9 billion | $9.1 billion / $7.0 billion |
| Cash and cash equivalents | $321.9 million | $290.6 million |
- Net interest income rose 22.4%, reflecting higher asset yields and loan balances, partly offset by sharply higher deposit and borrowing costs. Average cost of total deposits increased to 2.47% from 0.80%.
- Operating cash flow was $26.7 million; investing activities used $606.6 million and financing activities provided $611.2 million. Investing outflows primarily reflected loan growth, securities purchases, and the BOLI restructuring.
- Core deposits were $5.6 billion, or 70.9% of deposits, versus $5.3 billion, or 75.5%, a year earlier. Brokered deposits were $736.9 million, 9.3% of deposits. The loan-to-deposit ratio improved to 92.0% from 98.2%.
- FHLB advances were $645.0 million, down from $906.5 million. The company also reported $60 million of senior notes due 2025, $30 million of subordinated notes due 2032, and $64.2 million of junior subordinated debentures.
- At year-end, the company’s CET1 and total risk-based capital ratios were 9.79% and 12.12%; the Bank’s were 10.73% and 11.95%. Both were reported as well-capitalized. Additional FHLB borrowing capacity was $1.9 billion.
Material changes versus FY2022
- Net income fell 48.7%, mainly from increased credit provisions and noninterest expenses, despite stronger net interest income and noninterest income.
- Noninterest expense rose 29.0%. It included $66.2 million of non-routine items, compared with $19.0 million in 2022. Major items included $43.1 million of losses on loans held for sale, $15.6 million of restructuring costs, and impairment and BOLI-related charges.
- The company transferred approximately $401 million of Houston CRE loans to held for sale and recorded a $35.5 million valuation charge. It completed the sale of the remaining approximately $365.2 million carrying balance in January 2024, with no material 2024 earnings impact reported.
- Net charge-offs increased to $48.2 million from $19.0 million; gross charge-offs were $59.9 million. The allowance for credit losses reached $95.5 million, or 1.39% of loans held for investment, versus $83.5 million, or 1.22%.
- Nonperforming loans declined to $34.4 million, or 0.47% of total loans, from $37.6 million, but total nonperforming assets increased to $54.6 million because of $20.2 million of OREO.
- Net unrealized losses on available-for-sale debt securities improved: accumulated other comprehensive loss was $70.8 million versus $80.6 million at year-end 2022.
Outlook, management commentary, risks, and unusual items
- Management stated that assets could exceed $10 billion in 2024. Crossing that threshold may bring additional CFPB supervision and other regulatory requirements, potentially higher FDIC assessment costs, and debit interchange limits. The filing provides no specific earnings or margin guidance.
- The company plans additional banking centers and a Florida regional office in 2024. It expects its completed FIS core-system transition to support efficiencies and scalability, although savings may take time and may differ from expectations.
- The company approved dissolution of its Cayman Bank subsidiary, expected in 2024, with certain trust relationships planned to migrate to Florida structures. It also increased ownership of Amerant Mortgage to 100% in 2023.
- Noninterest income included $40.1 million in gains from early repayment of FHLB advances. This gain is an unusual item and materially supported reported income. Securities losses were $11.0 million, including the sale of Signature Bank debt securities.
- Key risks include CRE and commercial credit exposure, higher charge-offs and uncertain credit-loss estimates, deposit competition and funding costs, interest-rate sensitivity, and reliance on Venezuelan customers. Venezuelan residents accounted for approximately $1.9 billion, or 23.7%, of deposits; international loans were $87.6 million.
- Other exposures include the 18-year headquarters lease and dependence on sublease income, third-party technology and cybersecurity risks, and legal and regulatory contingencies. The company disclosed vendor cybersecurity incidents in 2022 and 2023, which it said did not materially adversely affect results. Pending ordinary-course legal matters were not considered likely to be material, though outcomes remain uncertain.
- A material weakness in controls over the credit-loss allowance model, identified in 2022, was reported as remediated in 2023. Management and the independent auditor concluded that internal control over financial reporting was effective at year-end; the financial statements received an unqualified audit opinion.
Important facts for investors to verify
- Whether the Houston CRE portfolio sale closed as disclosed and whether any subsequent credit or valuation impacts emerged.
- Trends in charge-offs, classified and special-mention loans, OREO, and allowance coverage, particularly for CRE and commercial borrowers.
- Deposit mix, renewal pricing and retention; brokered and large-provider funding; and concentration in Venezuelan-resident deposits.
- Net interest margin and deposit costs as rates and customer behavior change, alongside the effect of the FHLB repayment gains that boosted FY2023 noninterest income.
- Capital and liquidity after growth, distributions, and any crossing of the $10 billion asset threshold; also confirm the timing and costs of new regulatory requirements.
- Realization and timing of expected FIS savings, completion of planned branch and Cayman Bank changes, and the ongoing adequacy of credit-loss model controls.