Amerant Bancorp Earnings Call: Restructuring Now, Ambition Ahead

Amerant Bancorp Inc. Class A ((AMTB)) has held its Q4 earnings call. Read on for the main highlights of the call.

Amerant Bancorp Earnings Call Balances Tough Quarter With Long-Term Ambitions

Amerant Bancorp Inc. Class A’s latest earnings call struck a cautious tone as management laid out a detailed three-year strategic plan and reiterated capital return commitments against a backdrop of sharply weaker profitability, rising expenses, asset-quality challenges and a smaller balance sheet. While there were bright spots in fee-related income, lower credit provisioning and rising assets under management, investors were left weighing those positives against an 80% collapse in earnings per share, a spike in non-core charges and a marked deterioration in key return and efficiency metrics.

Three-Year Strategic Plan Targets Credit, Balance Sheet and Efficiency

Amerant’s board signed off on a disciplined three-year roadmap centered on stabilizing and then growing the franchise. Management highlighted four pillars: a “credit transformation” aimed at de-risking and upgrading the loan book, balance sheet optimization to improve funding mix and capital usage, a push for operational efficiency, and targeted investments in technology, including AI, to boost productivity and client experience. The plan is designed to move Amerant closer to peer-level profitability and efficiency over time, but it starts from a quarter marked by heavy clean-up and restructuring actions.

Capital Returns Continue via Buybacks and Dividend

Despite the earnings pressure, Amerant continued to return capital to shareholders. The bank repurchased 737,334 shares at a weighted average price of $17.63, representing roughly $13 million of buyback activity in the quarter. In addition, the board maintained its quarterly common dividend at $0.09 per share, with recent and upcoming payments underscoring management’s intent to keep a consistent capital return framework in place even as it works through credit remediation and cost actions.

CET1 Capital Strengthens, Preserving Regulatory Headroom

Amerant’s common equity tier 1 (CET1) ratio improved to 11.8% from 11.54% sequentially, helped by lower risk-weighted assets and net income, partly offset by share repurchases and dividends. The higher CET1 level provides some cushion as the bank navigates ongoing credit clean-up and restructurings, and suggests that regulatory capital remains a relative strength even as earnings are under strain.

Wealth Management Momentum as AUM Climbs

Assets under management rose by $87.2 million to $3.3 billion in the fourth quarter of 2025, driven by a combination of market gains and net new client assets. This growth in AUM supports Amerant’s fee-income potential, particularly as the bank positions wealth management as a more important contributor to revenues and profitability over the medium term, in contrast to the pressure on spread-based income from the core banking book.

Noninterest Income Gets a Boost From Transactions and Securities

Noninterest income increased to $22.0 million in the quarter from $17.3 million previously, a $4.7 million improvement. The uplift was largely attributed to gains from sale-leaseback transactions and higher securities gains. While these are not necessarily recurring at current levels, they partially offset pressure in other parts of the income statement and highlight the role of one-off transactions in supporting revenues during a transitional period.

Lower Provision for Credit Losses Temporarily Eases the P&L

Provision expense for credit losses fell significantly to $3.5 million from $14.6 million quarter over quarter. The drop reflected reserve releases and a smaller net build in specific reserves. This helped cushion the income statement in a quarter otherwise dominated by higher operating and non-core costs, although management made clear that credit work is ongoing and that provisioning is expected to normalize at a higher-through-the-cycle run rate.

Balance Sheet Optimization Includes Shrinking Below $10 Billion

Amerant continued to reshape its funding profile and overall balance sheet. Management reduced reliance on wholesale funding and higher-cost deposits, including repayment of $119.7 million in long-term FHLB advances. The bank also intentionally reduced total assets below the $10 billion threshold to “right-size” the franchise—an action with regulatory and cost implications. While this optimization supports capital and margin over time, it also translated into lower earning-asset volumes in the near term.

Clear Financial Targets and Cost Roadmap for 2026 and Beyond

Alongside the strategic plan, Amerant laid out concrete near-term financial goals. For 2026, management is targeting an aspirational return on assets around 1% and an efficiency ratio near 60%, with a longer-term goal of approaching peer performance. Expense guidance calls for quarterly noninterest expense of about $70–71 million in the first half of 2026, declining to roughly $67–68 million by year-end as non-core items roll off and cost initiatives take hold. Loan growth for 2026 is expected in the 7%–9% range, with net interest margin projected between 3.65% and 3.70%. These targets underscore the scale of improvement required from current levels.

Earnings and EPS Hit Hard by Higher Costs

Profitability deteriorated sharply in the quarter. Diluted earnings per share dropped to $0.07 from $0.35, an almost 80% decline. The hit was driven by lower net income and a sizable jump in noninterest expenses, including large non-core items. The weak EPS performance underscores the earnings drag from credit clean-up, restructuring and balance sheet actions, and highlights why the bank’s medium-term return goals are framed as aspirational.

Expense Surge and Efficiency Ratio Deterioration

Total noninterest expense surged to $106.8 million, up $28.9 million from the prior quarter. As a result, Amerant’s reported efficiency ratio deteriorated to 95.19% from 69.84%, signaling that nearly all of its revenue was consumed by operating costs. Even on a core basis—excluding one-time items—the efficiency ratio was 72.58%, still well above the bank’s stated medium-term target. Bringing this ratio down will be central to restoring competitive profitability.

Heavy Non-Core Charges Reflect Credit and Strategic Cleanup

The quarter’s results were weighed down by $29.2 million in non-core noninterest expenses. These included $14.9 million in losses on loans held for sale, largely tied to a $13.8 million year-end valuation allowance; $7.5 million of contract termination charges; $3.8 million in separation costs; a $2.5 million investment impairment; and a $0.5 million intangible impairment related to the mortgage business wind-down. While painful, these charges represent management’s effort to accelerate de-risking and repositioning, raising the question of how much additional clean-up remains.

Balance Sheet and Liquidity Shrink Materially Quarter-on-Quarter

Amerant’s balance sheet contracted noticeably. Total assets declined by about $600 million, or 5.8%, to $9.8 billion from $10.4 billion. Cash and cash equivalents dropped by $160.7 million to $470.2 million, while total investments decreased to $2.1 billion from $2.3 billion. The deliberate reduction in size reflects both strategic right-sizing and market- or credit-driven run-off, and it creates a smaller base over which to generate earnings, at least in the near term.

Deposits and Loans See Broad-Based Contraction

Funding and lending volumes also moved lower. Total deposits fell by $514 million, or 6.2% sequentially, to $7.8 billion, while total loans declined by $244.6 million, or 3.5%, to $6.7 billion. Management cited prepayments and payoffs along with intentional run-off tied to credit-quality efforts as drivers of loan contraction. While this supports risk reduction, it also weighs on revenue generation until new, better-quality production can ramp up.

Net Interest Income and Margin Come Under Pressure

Net interest income slipped to $90.2 million from $94.2 million, a $4.0 million decline. The net interest margin compressed to 3.78% from 3.92%, influenced by the smaller balance sheet and the timing dynamics of asset repricing following interest-rate cuts. With management expecting some margin stabilization ahead, the current quarter nonetheless underlines how sensitive Amerant’s earnings remain to balance sheet mix and rate movements.

Return Metrics Reflect a Tough Profitability Picture

Key return ratios weakened significantly. Return on assets fell to 0.10% from 0.57%, and return on equity dropped to 1.12% from 6.21%. These figures confirm that Amerant is currently operating well below its targeted return levels, with elevated expenses and non-core items absorbing much of the revenue base. Achieving the stated 1% ROA and improved efficiency will require both revenue growth and sustained cost discipline.

Pre-Provision Net Revenue Collapses

Pre-provision net revenue (PPNR) plunged to $5.4 million from $33.6 million, an 84% quarter-over-quarter decline. Even on a core basis, PPNR dropped from $35.8 million to $29.3 million. The collapse was largely attributable to the surge in non-core expenses, emphasizing that the bank’s earnings power is currently being masked by restructuring and remediation costs. Restoring PPNR to more robust levels is critical for rebuilding capital organically and supporting future growth.

Asset Quality Deteriorates on Reported Metrics

Reported asset quality indicators worsened. Nonperforming assets increased to $187 million, representing 1.9% of total assets, up from $140 million or 1.3% in the prior quarter. Gross charge-offs were sizable at $29.5 million, and the allowance-for-credit-losses coverage ratio slipped to 1.20% from 1.37%. While some of this reflects the bank’s intensified credit review, investors will be watching closely to see whether these trends stabilize as remediation advances.

Credit Remediation Effort Drives Migrations and Near-Term Headwinds

Amerant is in the midst of a large-scale credit review covering roughly $5.3 billion, or about 85% of its commercial loan book. This process has driven migrations of loans into criticized and nonperforming categories, particularly in commercial real estate and commercial portfolios in Florida and Texas. Management expects continued exits, sales and resolutions as part of this remediation, but acknowledged that the process will create near-term asset-quality and earnings headwinds before the portfolio reaches a more sustainable risk profile.

Guidance Focuses on Gradual Normalization and Efficiency Gains

Looking ahead, management guided to relatively flat loan balances in the first quarter of 2026, followed by full-year loan growth of 7%–9%, with deposits expected to keep pace. The net interest margin is projected at 3.65%–3.70% for 2026, suggesting some modest compression from the current quarter but within a relatively stable band. Quarterly expenses are expected to run about $70–71 million in the first half, trending down to $67–68 million by year-end as non-core items abate and efficiency efforts take hold. The company reiterated its commitment to share repurchases and the $0.09 quarterly dividend, and reaffirmed longer-term targets of around 1.0% ROA and a roughly 60% efficiency ratio for 2026, with aspirations to push efficiency into the mid‑50s and ROA above 1% in 2027–28. Management also pointed to expected credit improvements, with criticized loan outflows anticipated to exceed inflows and a provisioning run-rate in the 40–45 basis point range.

In sum, Amerant Bancorp’s latest quarter presents a mixed picture: decisive strategic actions, firm capital ratios and some growth in fee-earning businesses, set against a steep drop in earnings, a spike in expenses, and worsening reported asset quality. The path laid out is clear but demanding: complete the credit clean-up, rebuild PPNR, drive efficiency lower and reignite disciplined growth. For investors, the story now hinges on execution—whether management can turn a challenging reset phase into the stronger, more profitable franchise it has promised for 2026 and beyond.