Amerant Bancorp Inc.

Good morning and welcome to the Emirate Bancorp second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Laura Rossi, Head of Investor Relations. Thank you. You may begin.

Thank you, Daryl. Good morning, everyone, and thank you for joining us to review Amer and Bancorp's second quarter 2024 results. On today's call are Jerry Plush, our chairman and CEO, and Sharimar Calderon, our executive vice president and CFO. 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 us today to discuss Ameren's second quarter 2024 results. To start, I'd like to call your attention to how this quarter underscores the continued focus we have demonstrated toward executing on our strategic plan and driving growth. Excluding the impact of $5.6 million of deal-related expenses in connection with the sale of the company's Houston franchise as we disclosed in Form 8K on July 1st, 2024, our core business demonstrated strong performance, highlighted by solid loan growth, continued improvement in the net interest margin in NII, higher non-interest income, and only a moderate increase in expenses compared to the first quarter, primarily from investments we are making in personnel and market expansion. And while total deposits declined by 62.2 million, organic deposit growth in 2Q nearly offset the runoff of higher cost municipal deposits and reductions in two large corporate deposit relationships this quarter as well. However, the sustained high interest rate environment year over year and higher operating costs have impacted several of our borrowers, as we will cover in greater detail in just a few minutes. This quarter, we saw that upon the receipt of updated financial statements from certain borrowers and covenant testing, there were clear signs for five borrowers to be downgraded to substandard, three of which were previously classified as special mention. Two of the downgraded loans are larger relationships, both of which are paying as agreed. One is a CNI legacy loan for $26.8 million, and the other an owner-occupied loan for $28.2 million, which are the more significant drivers of the increase in non-performing loans quarter over quarter. Furthermore, regarding the aforementioned CNI legacy credit, again, while paying as agreed, we booked $8 million in provision this quarter, resulting from running scenarios for multiple outcomes. We remain optimistic about a positive outcome here in the next several months. And regarding the owner-occupied credit, we are in a very strong collateral position in the 40 percent range. I think in the case of the downgrades this quarter, the guidance is clear that where there is a sign of a covenant not being met or other weakness exhibited, that downgrading is appropriate, and that's what we did. More to come regarding credit in the upcoming slides, including the other components of the provision quarter over quarter. We also continue this quarter to execute on prudent asset liability management. Recent results on inflation and industry action to these reports suggest a positive outlook for potential interest rate cuts in the upcoming quarters. Therefore, we continue to position our balance sheet in light of this potential change in interest rates. Regarding our Houston franchise, we are continuously monitoring loan and deposit balances to be sold, and we reclassified assets and liabilities to held for sale this quarter. which resulted in the charges recorded this quarter associated with this transaction. We still anticipate closing in the fourth quarter of this year, and at that time, the premium from the sale would be recognized as income, net of any final investment banking and legal expenses. So, we'll turn now to slide three, and here you can see that total loans increased by $316.5 million, all driven by organic loan growth. The loan pipeline is strong for 3Q, as we've already closed on approximately 80 million month-to-date here in July, and 40 million more is expected before month-end. Total deposits decreased 62.2 million, as I referenced earlier, as organic deposit growth was offset by the reductions on higher-cost municipal and the two large commercial depositors. We increased FHLB advances by 50 million, to add three-year fixed-rate funding as part of our asset liability management strategy. Our assets under management increased $94.2 million to $2.45 billion, primarily driven by market valuations and net new assets. Non-interest income increased to $19.4 million, primarily driven by higher income from loan derivatives in the mortgage business. Non-interest expenses increased to $73.3 million. However, excluding the non-routine transaction costs in connection with the sale of our Houston operations, they remained at $67.7 million, comparable to the prior quarter and to guidance. Regarding our expansion in Florida, we officially opened our banking center in downtown Miami, and we hired our new Palm Beach and Central Florida market presidents. Additionally, we signed agreements for a new banking center in Miami Beach and for our Palm Beach Regional Office and a banking center there as well, both of which we expect to open in the first quarter of 2025. Note that we've received regulatory approval for both locations. We repurchased 200,652 shares for $4.4 million in the second quarter at an average price of $22.17 per share. We had $15.6 million remaining under the current approval as of the end of the second quarter. And of note, in closing on this slide, we paid our quarterly cash dividend of $0.09 for common share on May 30th of 2024. We'll turn now to slide four for financial highlights for the second quarter. Looking at the income statement, diluted income per share for the second quarter was $0.15 compared to $0.31 in the first quarter. This was primarily due to the increased provision for credit losses during the quarter. The net interest income was 3.56% in the second quarter compared to 3.51% in the first quarter. The increase in margin resulted from the higher yielding loan production and lower deposit costs as we reduced higher cost municipal deposits and replaced brokerage seating maturities with lower cost ones. Credit quality events continue to be an area of focus, and reserve levels are carefully monitored to provide sufficient coverage. The provision for credit losses was $19.2 million, up $6.8 million from the $12.4 million we reported in the first quarter. And again, of note, one legacy credit accounted for $8 million of the provision increase. Non-interest income was $19.4 million in the second quarter, up $4.9 million from the $14.5 million in the first quarter. while non-interest expense was $73.3 million, also up $6.7 million from the $66.6 million in the first quarter. Our total assets came in at $9.75 billion as of the end of the second quarter, slightly down from the $9.82 billion in the first quarter. Our total deposits decreased slightly, as noted previously, down to $7.82 billion compared to $7.88 billion in the first quarter. Our total loans increased by $316.5 million up to $7.3 billion up from the $7 billion at the first quarter. Our total securities were $1.5 billion, and that was up $51 million from the first quarter, and cash and cash equivalents decreased $350 million to $310.3 million at the end of the quarter. So if we move on to capital, our total capital ratios at the end of the second quarter was 12% compared to 12.49% as of the first quarter. Our CET1 was 9.7% compared to 10.10%. Our tangible equity ratio was 7.3%, which includes $78.9 million in AOCI, resulting from the after-tax charge of the valuation of the AFS investment portfolio. And lastly, as of the second quarter, our Tier 1 capital ratio was 10.44%, compared to 10.87% as of the first quarter. You'll also note that on July 24th, our Board of Directors approved a dividend of $0.09 per share that's payable on August 30th of 2024. So at this point, I'll turn the presentation over to Sherimar to cover metrics and get into the financials in greater detail.