Amerant Bancorp Inc.

Good day and thank you for standing by. Welcome to the Amarant Bancorp second quarter 2022 conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star one on your telephone. The idea that today's conference is being recorded. I would like to hand the conference over to your speaker today, Laura Rossi, Head of Investor Relations at Amarant. Please go ahead.

Thank you, Victor. Good morning, everyone, and thank you for joining us to review Ameran Bancorp's second quarter 2022 results. Also on today's call are Jerry Plosh, our Chairman and Chief Executive Officer, and Carlos Yafiliola, our Chief Financial Officer. As we begin, please note that the company's press release, our discussion on today's call, and our responses to your questions contain forward-looking statements. Ameren'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 earnings release and presentation. 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 31st, 2021. The quarterly report on Form 10-Q for the quarter ended March 31st, 2022, and our other filings with the SEC, as you can access these filings on the SEC's website. Amarant 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. Please also note that the company's press release, earnings presentation, and today's call include references to certain adjusted financial measures, also known as non-GAAP financial measures. Exhibit 2 and Appendix 1 of the company's press release and earnings presentation, respectively, contain a reconciliation of each non-GAAP financial measure to its most comparable gut financial measure. I will now turn it over to our Chairman and CEO, Jerry Plush.

Thank you, Laura. Good morning, everyone, and thank you for joining Ameren's second quarter 2022 earnings call. I'm pleased to be here today to report on our results for the quarter and provide an update on very important steps taken during the period toward the completion of our transformation efforts. so that we will be best positioned for the balance of the year and beyond for profitable growth. We believe our commitment to continue to execute throughout 2022 and build an even better and stronger version of Ameren is showing in our loan growth, our deposit growth, and margin expansion. Most importantly, you can see our belief in ourselves by making the necessary people, technology, and partnership investments to consistently grow our company. Also, based on the company's second quarter results, on July 20 of 2022, our board of directors approved the $0.09 per share dividend payable on August 31, 2022. Our commitment to the payment of dividends is strong. As we've stated before, we believe dividends are an essential part of providing greater value to our shareholders. I'll now provide a brief overview of our performance in the second quarter and outline the steps we took to best position ourselves over the balance of the year and beyond. And then I'll hand it over to Carlos to get into the details. So turning to slide three, you can see a summary of our second quarter highlights. Net income attributable to the company was $7.7 million, down 51.9% quarter over quarter. This decrease was primarily driven by $8 million of non-routine charges recorded in the quarter, which we'll cover in greater detail in a few slides. During the second quarter, we had higher average yields and balances on loans, Lower average balances on customer time deposits and FHLB advances were replaced by higher average balances and lower cost core deposits. All of that resulted in a higher net interest margin. Our total gross loans were $5.85 billion, up from $5.72 billion last quarter, even with $272 million in loan prepayments. Total deposits were $6.2 billion, up by over $511 million compared to last quarter, And more importantly, core deposits increased by $505 million this quarter compared to the first quarter of 2022, as the company continued to seek new sources of deposits. We also repaid $350 million in callable FHOB advances, and we borrowed $200 million in longer-term fixed advances, as we anticipate advances in the balance sheet would become variable rate given higher rate expectations. So with this action, we effectively increased the duration of our liabilities and locked in fixed interest rates under a scenario of an eminent increase in market rates. We'll move now to slide four. The company's capital continued to be strong and well in excess of minimum regulatory requirements to be considered well capitalized at June 30, 2022. During the quarter, we paid out on the previously announced cash dividend of $0.09 per share on May 31. And as of quarter end, we had completed two consecutive $50 million repurchase programs Effectively repurchasing an aggregate 3,148,399 shares of Class A common stock since mid-November of 2021 when we announced the successful conversion to one class of common stock. Specific to this quarter, you can see that we repurchased a total of 611,525 shares and that our shares outstanding at quarter end totaled 33,759,604 shares. As they say, buying back part of your business, as we have done, shows how much you believe in what you are doing and the value you can create. So we'll turn now to slide five and cover core PPNR. Core PPNR was $19.4 million this quarter, up by 8.8% compared to the $17.9 million reported in the previous quarter. We've been consistent in stating this. It's essential to show the net revenue growth of the company, excluding the one-time and non-routine gains and losses, in order to show Ameren's core earnings power. If we turn to slide six, we'll cover the key actions taken during the quarter. We reduced non-performing loans to $25.2 million as of June 30, 2022, compared to $47 million as of 1Q22. We said we needed to get the level of NPL significantly lower, as part of our commitment to increase our percentage of earning assets to total assets, and we did. And we intend to continue to pursue driving NPLs as low as possible. As part of this reduction in NPLs, we received a $5.5 million payment and charged off the remaining $3.6 million, which was partially reserved, on the previously disclosed coffee-trader relationship. We plan to record all future receipts as recoveries. Amerit Mortgage reported improved results and breached breakeven on a standalone basis despite headwinds from current market conditions. Rising interest rates coupled with declining refinance demand and other factors also led us to reassess our staffing needs, which declined by 12 FTEs at June 30th. As we previously noted, we successfully completed the company's second $50 million Class A common stock repurchase. We've now completed the two repurchase programs and have repurchased an aggregate of 3,148,399 shares of Class A common stock since mid-November of 2021. We effectively now have bought back 8.5% of the company with these two repurchase programs. We launched the new white label equipment finance solution, and two of the three business development officers planned for are on board and they generated $10 million in new originations in Q2. As we continue seeking branch efficiencies, we will be closing one more banking center in South Florida, which is expected to occur in October of 2022. This action represents 1.1 million in expected annual savings, and it generated a non-routine closure charge of 1.6 million in Q2. The customer relationships will move to a nearby more modern location. At the same time, we're investing in the future in brand awareness and in digital banking to ensure sustainable growth. Our downtown Miami branch is in the permit stage, and we are hopeful by year end or early 2023 to be announcing the grand opening. Additionally, we recorded an additional $2.8 million in estimated contract termination costs during the quarter in connection with the upcoming conversion to FIS. We believe the non-routine charges related to this conversion are now behind us. We also incurred $3.6 million in other non-routine charges, including a $3.2 million valuation adjustment on a real estate-owned property and $0.7 million in severance charges, which were partially offset by improved valuation of $0.3 million in loans held for sale. Also, we continued executing on building our brand awareness by entering into a multiyear agreement to become the official bank of the NBA's Miami Heat. We also just announced that we entered into a multiyear agreement as proud partner of the NHL's Florida Panthers. We believe these partnerships, coupled with our previously announced University of Miami multiyear deal, reflect the commitment we have toward being fully invested in Miami in comparison to our competitors here. We also announced four senior executive appointments, including a new head of consumer banking, who's also a new member of our executive management committee, our new chief digital officer, our new chief legal and administrative officer, and a new chief people officer, all of whom we feel are key in the positioning of our management team for future success. With these hires and moves, we've reached completion of the management team build out. From here on out, it's all about execution. Finally, regarding our Tampa LPO, we announced our new commercial banking team, including onboarding our new market president. This team now consists of 10 full-time equivalents, with most of them focused on commercial and industrial originations. We've already closed on a number of Cree and CNI transactions to date, totaling $37 million through June 30th, and have a similar pipeline already in 3Q in Cree and in CNI, and we're just getting started. I think it's important to stop here and note the obvious that's been taking place at Ameren. We've seized the opportunity to make a substantial investment in people to drive future performance. In addition to the hires just mentioned during the quarter, we added additional pre-private banking and commercial banking business development personnel, and we continue to continue to do so. This, of course, will likely impact near-term stated goals of getting expenses down in order to achieve a 60% efficiency by year end, as we previously discussed. But we believe it's more important to seize the opportunity to invest in ourselves and in future growth than delay such hires at this time. But please note, we are working hard to still get there on the 60% efficiency as soon as possible. But we do believe it's important to seize the day and make these hires now, which will drive even greater profitability in 2023. and Insure has 60% or better efficiency ratio going forward. If we turn to slide seven, we've outlined here key performance metrics and their change compared to last quarter. It's worth highlighting that in the second quarter, our operating profitability improved as our margin was up to 3.28%, and that's 10 basis point improvement over the last quarter. Other profitability metrics are somewhat skewed given the non-routine charges we recorded in the period. We again show the three core metrics of ROA, ROE, and operating efficiency, including one-time non-routine items in the footnotes to this slide to more clearly show the underlying performance for the quarter. On our next slide, slide eight, this one focuses solely on Amerit Mortgage. This quarter, Amerit Mortgage reported improved results and reached breakeven on a standalone basis despite headwinds resulting from the interest rate environment. In the second quarter of 2022, we increased our ownership to 80% from 57.4% at the close of the first quarter of 22, primarily from two of the former principals surrendering their interest in AMTM to the company when they became full-time employees of the bank. In addition, the company made a $1 million capital contribution to Amrit Mortgage in the second quarter. The mortgage team is now at 67 FTEs, at 2Q22 compared to 79 at 1Q22, which we believe was needed in light of current market conditions. During the second quarter of 2022, we received a total of 285 applications and funded 253 loans totaling $118.6 million. The current pipeline shows $77.8 million in process or 119 applications in process as of July 11, 2022. So with all that said, I'll turn things over to Carlos, who will walk through our results for the quarter in more detail.