Amerant Bancorp Inc.

Good day and thank you for standing by. Welcome to the Amerit Bank Corp First Quarter 2023 Earnings Conference Call. At this time, all participants are in 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 will need to press star 1-1 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Laura Rossi, Head of Investor Relations and Sustainability. Please go ahead, ma'am.

Thank you, Michelle. Good morning, everyone, and thank you for joining us to review Ameren Bancorp's first quarter 2023 results. On today's call are Jerry Plush, our Chairman and Chief Executive Officer, and Carlos Yafiliola, our Senior Executive Vice President and Chief Financial Officer. As we begin Please note that discussions on today's call contain forward-looking statements within the meaning of the Securities Exchange Act. In addition, references will also be made to non-GAAP financial measures. Please refer to the company's earnings release for a statement regarding forward-looking statements, as well as for information on reconciliation and non-financial GAAP financial measures to GAAP measures. I will now turn it over to our Chairman and CEO, Jerry Plush.

Thank you, Laura. Good morning, everyone, and thank you for joining Amerit's first quarter 2023 earnings call. This morning, we will report on our results for the quarter and we'll make some comments on quarters to come. It has certainly been quite an eventful last 30 days or so for the industry. Carlos and I will provide some color again on the results of the quarter and how well we believe Amerit is positioned for the rest of 2023 and beyond, given the actions we have been taking, not just this quarter, but over the past two years. But before we do that, I am delighted to announce the promotion of Carlos Yafiguiola to Chief Operating Officer. This well-deserved promotion, which is effective immediately, is clearly the result of the significant contributions Carlos has made to Amerit as our CFO over the past three years. In the interim, he will continue to serve as our CFO as well until such time that we announce his successor. By Carlos taking on this new role, I will ultimately have greater bandwidth as well to help drive incremental business for the company. So please join me in wishing Carlos much success here for years to come as he takes on his new responsibilities. Also, we recently announced a new member to our board of directors. Ashaki Rucker, who joined us this week, is a consummate professional with extensive human capital management experience, and she truly complements our current group of highly skilled, dedicated, and growing number of locally based board members. We want our board to eventually be in footprint and involved in the communities we serve, and Ashaki joining our board is another step in that direction. In addition, this week we just announced two significant senior executives joining the company, who we believe will be significant contributors towards the achievement of our strategic objectives. We are pleased to welcome Juan Estorriza as our new head of commercial banking, and Caroline More as our new Houston market president, both of whom are replacing individuals who stepped down from these respective positions. We also announced that the market presidents of TANFA and Houston will now report directly to me. We have significant opportunity for profitable growth in each of these markets, and we're excited about our prospects. So I'll now provide a brief overview of our performance in the first quarter, and then I'll hand it over to Carlos to get into the details. We've added a significant amount of details in our earnings presentation, including information on our liquidity management practices, and Carlos will describe specific actions we took to strengthen our liquidity position this quarter. He will also provide detail on specific one-time items and will cover new charts and information we've included, such as showing the impacts of valuation of our AFS portfolio, as well as the unrealized losses from our held immaturity portfolio and what that does in impacting our tangible common equity ratio. While he will also go into greater detail about the following items that impacted the quarter, I wanted to summarize these points up front. First, we recorded a provision for credit losses of $11.7 million this quarter, of which $2.2 million was related to loan growth and $2 million reflected updated economic factors. with the balance covering charge-offs that took place. The provision was higher than projections for the quarter, giving unexpected charge-offs late in March 2023 related to a specific transportation industry relationship. The trucks and trailers from this relationship have been fair valued, and they're now held in other repossessed assets. Non-interest expenses were $64.7 million this quarter, of which $3.4 million were non-routine items. In addition, we elected to continue to invest in business development personnel, specifically in commercial banking and emirate mortgage, which resulted in higher than expected routine non-interest expense. But please note, we intend to find efficiencies to offset these recent investments in personnel we have made in the coming quarters. More on that in a few minutes. So let's turn to slide three, where you can see a summary of our first quarter highlights. Net income attributable to the company was $20.2 million compared to $22 million in 4Q22. This decrease was primarily driven by lower non-interest income and higher non-interest expenses during the period, partially offset by the lower provision for credit losses compared to the fourth quarter. As a reminder, we adopted CECL in 4Q22, which drove the higher 4Q provision. The higher non-interest expenses include a number of one-time items as well as the increased investment in business development personnel, as I just mentioned. Net interest income in the first quarter was virtually unchanged when compared to the prior quarter, as we were able to offset higher average costs and balances on deposits and FHLB advances with higher average yields and balances on earning assets. As a result, the net interest margin was a strong 3.9%, just slightly below the 3.96 that we reported last quarter. Our balance sheet grew during the first quarter, with total assets reaching $9.5 billion compared to $9.1 billion as of the close of fourth quarter. It's important to highlight that this growth includes $200 million in increased liquidity on hand that we elected to maintain in the second half of March, which Carlos will discuss in just a few minutes. Total gross loans were $7.12 billion compared to $6.92 billion last quarter, an increase of nearly $200 million, and total deposits were $7.29 billion, up $242.5 million compared to the $7.04 billion last quarter. Our capital levels continue to be strong and well in excess of minimum regulatory requirements to be considered well capitalized at March 31st, 2023. More now than ever, preservation and growth and tangible book value is a top priority, and we achieved that this quarter. Also important is we have consistently classified the vast majority of our investment portfolio as available for sale. So the mark to market on that portfolio has always been deducted from tangible common equity. So when you see our tangible book value, these have been and continue to be reflected in the number. And TBV remains a strong 7.44% as of March 31st. During the quarter, we also paid out the previously announced cash quarterly dividend of $0.09 per share on Feb 28th of 2023. So we'll turn now to slide four, where you can see the core PPNR was a solid $37.1 million compared to the $37.8 million reported in the previous quarter. Also outlined on this slide are all the non-recurring items recorded in the quarter, as previously mentioned. Included in non-recurring expenses were costs related to severance, a branch closure that we'll cover in a minute, and conversion-related one-time expenses. So we'll turn to slide five, and we'll cover some key additional actions that we took during the first quarter. So as I mentioned, we continue to add key personnel in Amerit Mortgage to our business development team here at the bank and to our digital transformation team. As also I previously mentioned, we recruited two executives for existing open positions. So we have a new head of commercial banking and a new Houston market president. Amerit Mortgage grew its national footprint with the addition of a Midwest team, adding business development personnel in the quarter to generate conforming mortgages for the sale in the secondary market. We also reorganized our international banking efforts. We wanted to simplify the structure and drive favorable cost deposit growth. So we brought the three separate groups that were previously reporting under retail, private banking, and commercial banking to be under one leader dedicated to solely focus on growing international deposits. We believe this is essential as it provides additional diversification for our funding base. We completed our relocation into our new, highly efficient operations center in Miramar, Florida, and we continue to make strategic investments in our bank centers in key locations, We need to complete the branch refresh to finish our common-looking field initiative that we have at all of our facilities, and our expectations is we'll be completed with that no later than the end of this year. We also announced the closing of our relocation at FM 1960 Road in Houston, Texas in 2Q23. We expect that to happen as of May 31st. And as recently announced, we signed a five-year lease for our first banking center in Tampa with an estimated opening in the fourth quarter of this year. This location is situated in the West Shore Business District, the most central business area in the Tampa Bay area, which is home to more than 4,000 businesses, both large and small, and near some of the most high-valued residential neighborhoods. The opening of this branch transitions our Tampa operation from a loan production office to a full-service bank with full banking capabilities. Since expanding into the Tampa Bay market, our team has grown significantly. We're now at 17 team members providing commercial banking, commercial real estate, treasury management, private client banking, SBA lending, and we also have in-market support personnel from credit portfolio management and other client support positions. We intend to add even more resources to our team in the future to capitalize on the market opportunities available in Tampa, and we now have the space to do so. Other actions include launching our new website, which provides an improved user experience with enhanced navigation and ease of access to information across all device types. We did repurchase 22,403 shares of Class A common stock during the first quarter under our 25 million share repurchase program. We elected to prudently pause on additional repurchases given recent industry events impacting liquidity in the sector. Of note, the FIS conversion date moved from mid-May to mid-July in order to enable us to provide a greater digital experience for our consumers, our consumer banking efforts, and also, as previously referenced, we recruited a new board member who officially joined our board effective April 17th of 2023. We'll turn now to take a look at the key metrics on slide six. Here we've outlined key performance metrics and their changes compared to the last quarter. As I mentioned earlier, our net interest margin was 3.9% the first quarter. Our efficiency ratio was 63.7% compared to 58.4% last quarter. But the core efficiency for the first quarter was 62.47%. Both ROA and ROE were slightly lower this quarter, primarily given the one-time charges. And as we've done in the past for consistency and transparency, we showed the three core metrics of ROA, ROE, and operating efficiency excluding anything that's non-routine in the footnotes so you can more easily understand the underlying performance in each quarter. We'll turn now to cover Amerit Mortgage, which is on slide seven. On a standalone basis, Amerit Mortgage had a negative net PPNR of $1 million in 1Q compared to a negative net PPNR of $1.5 million in 4Q. The improvement resulted from higher revenues driven by the additions in the business development team. Our efficiency ratio, excluding activities from Amerit Mortgage, improves from 63.7% to 61.5%. During the quarter, the company purchased approximately $87.4 million in loans through Amerit Mortgage, and as noted on the slide, these are all related to bank customers. The current pipeline shows a growth up to $117.2 million in processor, 281 applications as of April 11th, with 111 of those being rate locked. We believe the team members we have added will drive increased production of conforming saleable loans into the secondary market, which will positively impact the bottom line in 2Q and future results. So with all that said, I'll now turn things over to Carlos, who'll walk through our results for the quarter in more detail. Carlos?