Amerant Bancorp Inc.

Good day and thank you for standing by. Welcome to the Amerit Bank Corp third 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 the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising 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 host today, Laura Rossi, Head of Investor Relations and Sustainability. Please go ahead.

Thank you, Liz. Good morning, everyone, and thank you for joining us to review Amaranth Bancorp's third quarter 2023 results. On today's call are Jerry Plosh, our Chairman and Chief Executive Officer, and Charimar Calderon, our 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 and reconciliation of non-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 Ameren's third quarter 2023 earnings call. We're happy to be here today to update everyone on the continued progress we made during the period. So during the third quarter, we focused on improving balance sheet composition, which included the continued prioritization of organic deposit growth, which enabled us to reduce higher cost institutional deposits, which are highly rate sensitive and therefore subject to flight risk. We've provided more granular information on the sources and type of deposits in today's earnings presentation, and I'll go into that in detail very shortly. We also entered into an agreement to sell the single largest credit exposure in our discontinued New York City portfolio, and you'll see that in loans held for sale, and that's closing is scheduled to take place today. We continue to work on further reductions in non-performing assets, and we've now reached the marketing stage with our real estate owned. We also spent considerable time and energy on the upcoming core conversion in November, and I'll provide more information on that shortly as well. So, while this was not an asset size growth quarter like recent periods, as loans and deposits overall were relatively flat quarter to quarter, And in fact, the key driver of our asset size decrease this quarter was from our using $100 million in excess cash on hand to pay down advances. We made a lot of progress on many fronts, which we will cover as we review the upcoming slides. And as an aside, which Sherry will cover later in her remarks, the loan and deposit pipelines for the fourth quarter are very strong, and we expect to be back in growth mode in 4Q. And in fact, we've already booked $90 million in loan production month to date, which has resulted in a $71 million net increase in loans as of yesterday. So let's turn to slide three, and here we provide a summary of our third quarter highlights. Net income attributable to the company was $22.1 million compared to the $7.3 million in 2Q23. This increase was primarily driven by lower provision for credit losses in 3Q, as the provision recorded in 2Q was substantially higher. The net interest margin was 3.57% compared to the 3.83% we reported last quarter, a few basis points lower than we originally expected. This was driven primarily than higher than expected funding costs and lower loan originations as we continue to prioritize relationship-centric originations and not renew or pursue non-depository financing. So again, back to asset size, we decreased $174 million compared to Q23. Our gross loans were $7.1 billion compared to $7.2 billion last quarter, a decrease of $74 million. And our total deposits were $7.5 billion, relatively flat to the $7.6 billion last quarter. Federal home loan bank advances were $595 million, a decrease of $175 million, or 23%. compared to the $770 million in 2Q due to prepayments we made in 3Q23 as part of our asset and liability management. The company's capital levels continue to be strong and well in excess of the minimum regulatory requirements to be considered well capitalized as of September 30th, 2023. Our tangible common equity ratio remains strong at 7.44% as of September 30th. As we classify the majority of our investment portfolio as available for sale, the mark-to-market on this portfolio is deducted from tangible common equity. We'll get into more detail regarding capital and capital ratios shortly. Also during the quarter, we paid out the previously announced cash quarterly dividend of 9 cents per share on August 31st of 2023. And then lastly, regarding stock repurchases, as you know, we have a $25 million Class A common stock share repurchase program in place And year to date, we've repurchased 260,000 shares for $5 million at an average price of $19 per share, or at 0.9 times price to book value. Availability remaining under this program was $20 million as of quarter end. So let's turn to slide four and take a look at what happened in Shares Outstanding during the quarter. And here you can see that during 3Q, we continued to prudently use our $25 million share repurchase program and we repurchased 142,000 shares of common stock at an average price of $19. We can transition now to slide five, and we'll show you our capital position relative to regulatory minimums. As of 3Q2023, our total capital ratio ended at 12.7%, and our CET1 was 10.3%. Our tangible common equity ratio, which includes 106 million of AOCI resulting from the after-tax change in the valuation of our portfolio was 7.44%. Regarding our tangible common equity ratio, we also show here for reference purposes the impact of adding the $26 million in unrealized losses from our held to maturity portfolio and what that does to TCE, which would result in an adjusted tangible capital ratio of 7.2%, a relatively small impact if included. And tangible book value per share also adjusted for held in maturity stood at 19.9 as of quarter end. We will now take a look at on slide six on deposits and give you an overview of the deposit base. Our total deposits at the end of the third quarter were 7.5 billion and that's down 33 million from the previous quarter. This very slight decrease was driven primarily by reductions in higher cost institutional deposits of 292 million. which was partially enabled by organic deposit growth of $208 million. Of noted, non-interest-bearing deposits increased by $77 million, and time deposits increased by $220 million, and as, of course, customers continued to seek higher returns on their deposits. Note that this increase in time deposits, however, includes brokered time deposits in the amount of $92 million, which was a strategic move to obtain two- to five-year funding, again, as part of asset liability management. And at the same time, as I just mentioned, we reduced federal and low bank advances by $175 million, which are down to $595 million in quarter rent. Please know we remain committed to maintaining our current ratio of loans to deposit with a target of 95% and not to exceed 100%. So we'll turn to slide seven and look at our deposit diversification. And you'll look at the stability we have in this portfolio. And as you can see, it's composed of domestic and international customers. Our domestic deposits now account for 67% of total deposits, totaling $5.1 billion as of the end of the third quarter, and that's down 46 million, or 1%, compared to the previous quarter. And international deposits, which account for 33% of our total deposits, totaled $2.5 billion, up 13 million, or 0.5% compared to the previous quarter. Our domestic deposits include over 48,000 accounts with an average size of 100,000, while our international deposits are approximately 57,000 accounts with an average size of 40,000, which reflects the granularity of our deposit base and stability of this funding source. And as I've shared in previous calls, we intend to take advantage of our infrastructure and capabilities and emphasize international deposit gathering as a source of funds given more favorable pricing while also adding more diversification to our funding base. Our core deposits, defined as total deposits excluding all time deposits, were $5.2 billion as of the end of the third quarter, a decrease of $254 million, or 5%, compared to the previous quarter. The $5.2 billion in core deposits included $1.4 billion in noninterest-bearing demand, up the $77 million I previously referenced, or 6%, compared to the prior quarter. Despite customer demand for higher rate products and in line with our continued efforts to prioritize deep customer relationships. 2.4 billion in interest bearing deposits down 356 million or 13% versus the previous quarter. Primarily driven by the previously referenced reduction in institutional deposits. And 1.5 billion in savings and money market deposits up 26% or 2% versus the previous quarter. So at this point, I'm going to turn things over to Sherry. We'll go over the key metrics, other balance sheet items, and results for the third quarter in more detail.