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Amerant Bancorp (AMTB) - 2024 Q2 - Earnings Call Transcript
AMTBAmerant Bancorp (AMTB)2024-07-25 19:37
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Financial Data and Key Metrics - Core business demonstrated strong performance with solid loan growth, improved net interest margin (NIM), and higher non-interest income (NII) [6] - Total deposits declined by 62.2million,butorganicdepositgrowthnearlyoffsettherunoffofhigher−costmunicipaldepositsandreductionsintwolargecorporatedepositrelationships[6]−Totalloansincreasedby62.2 million, but organic deposit growth nearly offset the runoff of higher-cost municipal deposits and reductions in two large corporate deposit relationships [6] - Total loans increased by 316.5 million, driven by organic loan growth, with a strong pipeline for Q3 2024 [9] - Non-interest income increased to 19.4million,primarilydrivenbyhigherincomefromloanderivativesinthemortgagebusiness[10]−Non−interestexpensesincreasedto19.4 million, primarily driven by higher income from loan derivatives in the mortgage business [10] - Non-interest expenses increased to 73.3 million, but excluding non-routine transaction costs, they remained at 67.7million,comparabletothepriorquarter[10]−DilutedincomepershareforQ2was67.7 million, comparable to the prior quarter [10] - Diluted income per share for Q2 was 0.15 compared to 0.31inQ1,primarilyduetoincreasedprovisionforcreditlosses[12]−Netinterestmargin(NIM)improvedto3.560.31 in Q1, primarily due to increased provision for credit losses [12] - Net interest margin (NIM) improved to 3.56% in Q2 from 3.51% in Q1, driven by higher-yielding loan production and lower deposit costs [12] - Provision for credit losses was 19.2 million, up 6.8millionfromQ1,withonelegacycreditaccountingfor6.8 million from Q1, with one legacy credit accounting for 8 million of the increase [13] - Total assets were 9.75billionattheendofQ2,slightlydownfrom9.75 billion at the end of Q2, slightly down from 9.82 billion in Q1 [13] - Total capital ratio at the end of Q2 was 12%, down from 12.49% in Q1, with CET1 at 9.7% compared to 10.10% in Q1 [14] Business Line Performance - Loan portfolio growth was driven by organic, relationship-driven growth, with single-family residential loans increasing by 107.4millionto107.4 million to 1.6 billion in Q2 [21] - Consumer loans decreased by 41.3millionor12.241.3 million or 12.2% quarter-over-quarter, with indirect consumer loans expected to mostly run off by Q1 2025 [22] - Commercial real estate (CRE) portfolio has a conservative weighted average loan-to-value of 58% and debt service coverage of 1.3x, with 30% of the portfolio in top-tier borrowers [23] - Non-performing loans increased to 438 basis points compared to 43 basis points in Q1, primarily due to downgrades of larger commercial loans [23] Market Performance - Domestic deposits accounted for 68% of total deposits, totaling 5.3 billion, slightly down by 6.8millionor0.16.8 million or 0.1% compared to Q1 [18] - International deposits accounted for 32% of total deposits, totaling 2.5 billion, down 55.5millionor2.155.5 million or 2.1% compared to Q1 [18] - Core deposits, excluding time deposits, were 5.5 billion, a decrease of 127.8millionor2.3127.8 million or 2.3% compared to Q1 [19] Company Strategy and Industry Competition - The company is focused on executing its strategic plan, including the sale of its Houston franchise, expected to close in Q4 2024 [9] - Expansion in Florida includes the opening of a new banking center in Downtown Miami and hiring new market presidents for Palm Beach and Central Florida [11] - The company is positioning its balance sheet for potential interest rate cuts, with 51% of loans having floating rate structures and 58% repricing within a year [32] - The company expects to achieve a 1% ROA and 12% ROE target, with the efficiency ratio potentially sliding to 60% by Q1 2025 [37] Management Commentary on Operating Environment and Future Outlook - Management remains optimistic about resolving downgraded credits, particularly a 26.8 million C&I legacy loan and a 28.2millionowner−occupiedloan[7][8]−ThecompanyexpectsNIMtoremainstableinQ3,withnon−interestincomearound28.2 million owner-occupied loan [7][8] - The company expects NIM to remain stable in Q3, with non-interest income around 17 million and operating expenses at 68million[36]−Managementanticipatescharge−offstonormalizetoaround30basispointsbyearly2025,excludingindirectconsumerloans[44]OtherImportantInformation−Thecompanyrepurchased200,652sharesfor68 million [36] - Management anticipates charge-offs to normalize to around 30 basis points by early 2025, excluding indirect consumer loans [44] Other Important Information - The company repurchased 200,652 shares for 4.4 million in Q2 at an average price of 22.17pershare[11]−TheBoardofDirectorsapprovedadividendof22.17 per share [11] - The Board of Directors approved a dividend of 0.09 per share payable on August 30, 2024 [15] Q&A Session Summary Credit Quality and Charge-offs - Management discussed the downgraded credits, expressing confidence in positive outcomes for the larger commercial loans [42][43] - Charge-offs are expected to be around 25-30 basis points excluding indirect consumer loans, with normalization expected by early 2025 [44] Loan and Deposit Growth - The company targets a 95% loan-to-deposit ratio, with loan growth driven by organic production and new business development personnel [46][48] - Deposit growth is expected to pick up to fund projected loan growth, with a focus on maintaining the 95% target [46] Houston Sale and Cost Savings - The Houston sale is expected to close in Q4 2024, with potential cost savings from redeploying team members to focus on Florida growth [57][59] - Expenses are expected to normalize around 68millionpost−Houstontransaction,withreinvestmentinFloridaexpansion[61][62]InterestRateSensitivityandNIM−Thecompanyispreparingforadownwardratetrendbyincorporatingfloorratesinloanproductionandusinghedgingstrategies[72]−NIMwasslightlyimpactedbyinterestaccrualreversalsduetonon−accrualloans,buttheimpactwasnotsignificant[73]ShareBuybacks−ThecompanyrepurchasedsharesinQ2andhas68 million post-Houston transaction, with reinvestment in Florida expansion [61][62] Interest Rate Sensitivity and NIM - The company is preparing for a downward rate trend by incorporating floor rates in loan production and using hedging strategies [72] - NIM was slightly impacted by interest accrual reversals due to non-accrual loans, but the impact was not significant [73] Share Buybacks - The company repurchased shares in Q2 and has 15.6 million remaining under the current authorization, with plans to continue buybacks based on capital needs and growth plans [76][77]