Amerant Bancorp Inc.

ladies and gentlemen thank you for standing by and welcome to the emirate bank corp first quarter 2020 earnings conference call at this time all participant lines on a listen-only mode after the speaker's presentation there will be a question and answer session to ask a question during this session you'll need to press star 1 on your telephone please be advised that today's conference is being recorded if you require any further assistance please press star zero i would not like to hand the conference over to your speaker today Laura Rossi, Investor Relations Officer at Amerit Bancorp. Please go ahead, ma'am.

Thank you, operator. Good morning to everyone on the call, and thank you for joining us to review Amerit Bancorp's first quarter 2020 results. In the call this morning are Miller Wilson, Chief Executive Officer, Carlos Zafigliola, Head of Treasury and Interim Chief Financial Officer, Miguel Palacios, Chief Business Officer, and T.L. Fisher, Credit Risk Manager. Before we begin, note that the company's press release, comments made on today's call, and responses to your questions contain forward-looking statements. The company's business and operations are subject to a variety of risks and uncertainties, many of which are beyond its control, and consequently, actual results may differ materially from those expressed or implied. please refer to the cautionary notices regarding forward-looking statements in the company's press release. For a more complete description of these and other possible risks, please refer to the company's annual report on Form 10-K for the year ended December 31, 2019, as well as to subsequent filings with the SEC. You can access these filings on the SEC's website. Please note that Amaranth has no obligation and makes no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances, or changes in expectations, except as required by law. You should also note that the company's press release, earnings presentation, and today's call include reference to certain adjusted financial measures, also known as non-GAAP financial measures. This referred to Appendix 1 of the company's earnings presentation for a reconciliation of each non-financial measure to its most comparable gap financial measure. I will now turn the call over to Mr. Wilson.

Good morning, and thank you for joining Amaranth's first quarter 2020 earnings call. Before we start, I want to take a quick moment to introduce our interim CFO, Carlos C.F. Aguiola. Carlos has been with Amaranth since 2004 and our head of treasury since 2015. He played an integral role in our IPO process and is a valued member of our team. We are fortunate to have an executive with Carlos' experience serve as interim CFO, and I'm excited to welcome him to the call. Today, I'll begin with some comments around the current environment and the steps we are taking to ensure business continuity, and that we continue to deliver exceptional value to our customers. I will also touch on our first quarter 2020 highlights before Carlos reviews our financial performance for the quarter in greater detail. After our prepared remarks, Carlos, Miguel, Piel, and I will address questions. I want to start by saying that our thoughts are with the individuals and communities directly impacted by COVID-19, including healthcare workers on the front lines and all essential workers who keep the country running. It has been incredible to watch the country and the world come together during these extraordinary times. Everyone has a role to play in overcoming this pandemic. as the largest community bank headquartered in Florida, is taking its role to provide financial stability and confidence to customers and to the broader economy very seriously. I am proud of the entire company's efforts over these difficult past few months to come together and support each other as well as the communities we serve. Amarant responded to the COVID-19 pandemic by promptly activating its business continuity plan in mid-March, which has successfully ensured seamless and uninterrupted service for customers, as well as the safety of our employees, customers, and communities, which remains our top priority. At a high level, we have implemented remote work arrangements across the organization, currently with 86% of our employees working remotely, and shortened banking center hours, encouraging customers to leverage our digital channels, took all necessary steps to minimize impact on operations and customers, as well as critical vendor and supplier readiness, ensured system stability and bandwidth capacity, continued our monitoring to detect and prevent suspicious activity, and communicated frequently with customers regarding assistance programs and with employees regarding health and safety, remote working tools, and security guidelines. I am happy to report that our technology and communications infrastructure, the bedrock of our BCP, is performing well in its stables, effectively supporting the work of our team. Moving to slide four, we continue to proactively provide customers with best-in-class service during these difficult times. Following regulatory guidance on loan modifications, we have started offering payment relief options, including interest-only payments and interest deferrals to customers impacted by COVID-19. We are also participating in the Small Business Administration's Paycheck Protection Program with the goal of providing relief to our small business customers. We have seen a significant level of interest in this program and are working hard to ramp up our processing capacity to meet this demand. To further support customers during this difficult time, Amaranth has temporarily eliminated ATM fees waive late payment fees on business and consumer loans, as well as deposit account fees, and refrain from reporting negative information to credit bureaus, among other individualized account measures. Turning to slide five, we have already received relief requests on 1.1 billion of loans, or 20% of our total loan portfolio. with the 20 largest requests accounting for 56% of that total. Most of these relief requests are in the CRE hotel, CRE retail, gas station, and apparel manufacturing industries. Additionally, we have received approval for 485 paycheck protection program loans totaling $130 million. Given the current market environment, I want to quickly provide a few highlights around our overall loan portfolio, of which you can find a comprehensive breakdown in the supplemental loan portfolio information section of our earnings presentation. While approximately 30% of our portfolio is exposed to the most COVID-19 impact industries, such as CRE, retailers, hotels, restaurants, entertainment, recreation, daycare centers, manufacturing, and wholesalers, 50% of these exposures are secured with real estate collateral. Additionally, our CRE portfolio is well diversified by property type and region and has conservative loan-to-value and debt service coverage ratios with strong sponsorship profiles and no significant tenant concentrations. The majority of our hotel exposure is to popular travel destinations in Florida and New York. Given the relief request granted, the executive management team has increased its oversight and monitoring of credit and liquidity risks and is working hard to understand and quantify the potential magnitude of the current pandemic on our business I am proud to say that at this time, our credit profile and loan portfolio remain very strong. In this time of disrupted markets and high volatility, we have focused our attention on liquidity and credit risk. On slide six, we have detailed several protective measures that we believe will position us well to manage through the current environment. In terms of liquidity, we are maintaining a high cash position at the Federal Reserve with $271 million in cash and equivalents as of the end of the first quarter, which is more than double our usual position. In terms of credit risk, we have significantly increased our loan loss provision to account for estimated portfolio deterioration due to COVID-19. Additional measures, which we will discuss in more detail later in the presentation, include proactive pricing of deposits and wholesale funding, leveraging opportunities for higher-yield investments, and reducing our asset sensitivity, amongst others. Importantly, we continue to monitor our credit exposures as well as credit approval practices on an ongoing basis. to safeguard our strong asset base, as well as ensure that sound and prudent underwriting standards continue to underpin our business relationships. I am proud of the team's prompt response to the current environment and their dedication to protecting our value while meeting the needs of our customers during this unprecedented time. Turning now to the other highlights of the quarter, On slide seven, Ameren continued to execute on our relationship-centric strategy, prioritize low-risk domestic loans, preserve asset quality, and focus on increasing our domestic funding from core deposits while actively managing the investment portfolio and wholesale funding to mitigate the impact of lower rates. As you can expect, first quarter profitability was materially impacted by the loan loss provision. Driven primarily to account for the estimated impact of COVID-19 on our portfolio, we recorded a provision of $22 million in the current quarter compared to a release of 0.3 million in the fourth quarter of 2019 and no provision recorded in the first quarter of 2019. While net income was down, our first quarter operating income, which excludes provision for income tax, provision for loan losses or reversals, and net gains on securities, was strong at $16.7 million, up 12.5% from the fourth quarter of 2019 and flat compared to first quarter 2019. We continue to monitor our loan loss reserves as market conditions change. We made progress on our other strategic initiatives to better cross-sell and increase our share of customers' wallets. This included building stronger customer relationships and enhancing our customer service capabilities to better meet their needs by implementing more disciplined customer outreach using improved CRM tools. and introducing new products and services. We also worked on our digital transformation and expanded our geographic reach by enhancing our online account opening platform for domestic customers. As a result of these efforts, in the first quarter we increased our domestic deposit base, driven by higher capture of online CDs and relationship money market deposits. In addition, we opened a new state-of-the-art banking center of the future in the affluent coastal city of Delray Beach in South Florida this quarter, in line with our focus to continue improving the bank's customer service capabilities and operational efficiency, as well as enhancing our core products and services in the coming quarters. Moving to slide eight, Our net income for the quarter was down 74.9% from fourth quarter 2019 and down 74.1% from the same quarter last year. On an adjusted basis, which excludes restructuring expenses, net income declined 67.9% compared to the fourth quarter of 2019. and was down 73.5% from the first quarter of 2019. Our return on assets was 0.17% or 0.19% on an as-adjusted basis. And our earnings per share was 8 cents per share or 9 cents on an as-adjusted basis. Allowance for loan losses to total loans increased by 38 basis points from fourth quarter 2019 and by 24 basis points from the year-ago period. As I previously mentioned, this increase is primarily due to the loan loss provision of $22 million we recorded this quarter. While the economic disruption caused by COVID-19 by the COVID-19 pandemic is expected to impact our credit quality. It is difficult to estimate and quantify this potential impact due to the uncertain duration and scope of the slowdown in U.S. and global economic activity. As I mentioned earlier, we will continuously reassess our loan loss provisions and monitor credit quality as market conditions evolve. And now I will turn the call over to Carlos, who will go over the court in more detail.