Amerant Bancorp Inc. — 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021; comparisons are primarily with 2020. Amerant is a Florida bank holding company operating Amerant Bank, with 24 banking centers in South Florida and Houston and a Tampa loan production office.
Financial performance and condition
| Metric | 2021 | 2020 |
|---|---|---|
| Net income (loss) attributable to Amerant | $112.9 million | $(1.7) million |
| Diluted earnings (loss) per share | $3.01 | $(0.04) |
| Net interest income | $205.1 million | $189.6 million |
| Net interest margin | 2.90% | 2.52% |
| Noninterest income | $120.6 million | $73.5 million |
| Noninterest expense | $198.2 million | $178.7 million |
| Efficiency ratio | 60.9% | 68.0% |
| Cash flow from operating activities | $67.4 million | $57.2 million |
- Earnings drivers: Results benefited from a $62.4 million pretax gain on the headquarters sale and a $16.5 million reversal of loan-loss provision, versus an $88.6 million provision in 2020. Noninterest income also included a $3.8 million PPP loan-sale gain. The 2020 comparison included $27.0 million of securities gains.
- Balance sheet at year-end: Assets were $7.64 billion, loans held for investment were $5.41 billion gross, and total gross loans including loans held for sale were $5.57 billion. Deposits were $5.63 billion, cash and cash equivalents $274.2 million, and shareholders’ equity $831.9 million.
- Funding and debt: FHLB advances were $809.6 million, senior notes were $58.9 million net of issuance costs, and junior subordinated debentures were $64.2 million. Senior notes carry a 5.75% coupon and mature in 2025.
- Liquidity and capital: The Bank’s CET1 ratio was 13.83%, total risk-based capital ratio 14.94%, and leverage ratio 11.84%; it was classified as well capitalized. The Company reported $1.4 billion of additional FHLB borrowing capacity and $105 million available under uncommitted federal funds lines.
- Asset quality: Nonperforming loans were $49.8 million, or 0.89% of total loans, versus $87.7 million, or 1.5%, in 2020. The allowance was $69.9 million, or 1.29% of loans held for investment, versus $110.9 million, or 1.90%. Net charge-offs were 0.44% of average loans versus 0.52%.
Material changes versus 2020
- Net interest income rose 8.2%, chiefly as funding costs and average interest-bearing liabilities fell; NIM increased 38 basis points. Interest expense declined 39.9% to $42.7 million.
- Net income improved substantially, but the comparison reflects both the 2021 headquarters gain and the sharp reversal in loan-loss provisioning from 2020.
- Noninterest expense increased 10.9%, including costs tied to mortgage operations, internal-audit outsourcing, the capital-structure merger and technology initiatives. Restructuring costs were $7.1 million, down from $11.9 million.
- Total deposits declined 1.8%, while the mix shifted toward lower-cost deposits: core deposits increased 16.3% to $4.3 billion, noninterest-bearing deposits rose to 21.0% of deposits from 15.2%, and brokered deposits fell to 6.9% from 11.1%.
- Loans declined 4.7%, reflecting repayments, PPP runoff and sales, lower production, and the exit from New York originations. The company increased indirect consumer lending; those loans totaled $297 million at year-end.
Outlook, management commentary, and risks
- Management’s stated priorities include growing core deposits, keeping the loan-to-deposit ratio below 100%, reducing brokered deposits to 5% of deposits, digital transformation, expanding treasury and wealth services, and improving operating efficiency. The year-end loan-to-deposit ratio was 98.9%.
- The filing provides no specific earnings or revenue guidance. Management anticipated assets could exceed $10 billion within five years, which would bring additional regulatory requirements.
- The $135 million headquarters sale generated $62.4 million in pretax gain; Amerant leased the building back for 18 years under a triple-net lease. It reported $132.4 million of net sale proceeds in investing cash flows.
- Amerant entered a multiyear FIS outsourcing agreement, including a core-processing transition. It recorded approximately $3.9 million of estimated initial contract-termination costs in January 2022 and expects additional costs that could not yet be estimated.
- CRE represented 45.3% of loans held for investment and 289.1% of risk-based capital. About 55% of CRE loans were in South Florida; the portfolio also had New York and Houston exposure. Venezuela-resident customers supplied approximately $2.0 billion, or 35.9%–36% of deposits.
- Other material risks include interest-rate and securities valuation sensitivity, credit and collateral risk, dependence on deposits and wholesale funding, regulatory and AML compliance (including international customer exposure), cybersecurity and third-party technology execution, and continuing COVID-19 uncertainty.
- Amerant Mortgage had a Fannie Mae seller/servicer net-worth decline exceeding the stated 40% tolerance over two consecutive quarters at year-end. It expected to demonstrate compliance by April 30, 2022; failure could limit its ability to deliver new loans to Fannie Mae.
- The company reported $931.1 million of off-balance-sheet commitments and letters of credit. Management said pending legal matters were not expected to materially affect results, while acknowledging outcomes remain uncertain.
- LIBOR-linked loans and derivatives were to transition gradually to SOFR during 2022. The company expected to adopt CECL in 2023 while it remained an emerging growth company.
Most important facts for investors to verify
- How much of 2021 earnings and improved efficiency persists after excluding the headquarters gain, provision reversal, PPP sale gain, and other unusual items.
- Whether credit quality and the allowance remain adequate, especially across CRE, commercial borrowers, New York exposures, and the growing indirect consumer portfolio.
- Whether core-deposit growth continues, brokered funding declines toward management’s target, and the large Venezuelan-resident deposit base remains stable.
- The costs, timing, operational risks, and realized savings from the FIS conversion and other digital and efficiency programs.
- Whether Amerant Mortgage satisfies Fannie Mae’s net-worth requirements and how the mortgage business affects consolidated profitability.
- How rising rates affect net interest income, economic value of equity, and the market value of securities; the filing’s modeled 200-basis-point rate increase reduced EVE by 9.60% at year-end 2021.
- Capacity for dividends and repurchases after regulatory constraints, parent-company liquidity needs, and the 2025 senior-note maturity are considered.