8-K: Amerant Bancorp Announces Strategic Capital Raise to Fuel Growth and Optimize Balance Sheet

Amerant Bancorp is undertaking a $150 million capital raise to support organic growth, optimize its balance sheet, and improve financial performance.

Summary

• Amerant Bancorp is planning a $150 million capital raise to support organic growth opportunities.
• A portion of the capital will be used to optimize the balance sheet, including resolving non-performing loans and repositioning securities.
• The company aims to improve its CET1 ratio to approximately 11% after the capital raise and the closing of the Houston transaction.
• Amerant expects to sell $560 million of securities with an average yield of 3.2%, resulting in an after-tax loss of $50 to $60 million.
• The proceeds from the securities sale will be reinvested in securities and loans with anticipated rates of 4.5% and 7.0%, respectively.
• The company projects a $18 million provision for credit losses in Q3 2024, with $13.7 million to offset charge-offs and $4.3 million for loan growth and economic factors.
• Non-performing loans are projected to increase to $113 million in Q3 2024, while non-performing assets are expected to decrease to $113 million due to a $20 million OREO sale.
• The company anticipates diluted earnings per share of $0.16, a net interest margin of 3.50%, and core noninterest expenses of $68.5 million for Q3 2024.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with a strategic plan for growth and improved financial performance. However, there are some risks and costs associated with the plan, such as the loss on securities repositioning, which temper the overall sentiment.

Positives

• The capital raise will support continued organic growth in loans and deposits.
• Balance sheet optimization will improve liquidity and revenue generation.
• The company is well-positioned for growth in attractive markets.
• The securities repositioning is expected to improve the overall portfolio yield.
• The company has a strong and diverse deposit base.
• Amerant has demonstrated a strong organic loan growth engine.
• The company is transitioning from a transformation phase to execution and profitable growth.

Negatives

• The securities repositioning will result in an after-tax loss of $50 to $60 million.
• Non-performing loans are projected to increase in Q3 2024.
• The company is still subject to risks and uncertainties that may affect future results.
• The preliminary financial information is subject to further revision.

Risks

• The potential securities offering is subject to market conditions.
• The company's actual results may differ materially from forward-looking statements.
• The repositioning of the balance sheet is contingent upon the completion of the offering.
• The company's management has broad discretion in allocating the net proceeds of the offering.
• The preliminary financial information is subject to further revision based on final results and auditor reviews.
• The assumptions and estimates underlying the financial information are subject to business, economic, and competitive risks.

Future Outlook

The company aims to become a top-quartile performer through continued organic growth, balance sheet optimization, and strategic capital deployment. They are targeting a ROAA of 1.2% to 1.3%+ in the coming years.

Management Comments

• Management believes that non-GAAP financial measures are useful to investors.
• Management has broad discretion in allocating the net proceeds of the offering.
• Management believes the bank is well-positioned as it crosses $10 billion in total assets and continues to execute on its strategy.

Industry Context

The announcement highlights Amerant's focus on the Florida market, which is experiencing strong population and business growth. The company is positioning itself as a premier growth bank in this region, leveraging its established brand and organic growth capabilities. The document also references peer banks in the $8-25 billion asset range.

Comparison to Industry Standards

• The document compares Amerant's key metrics to a peer group of major exchange-traded banks and thrifts with total assets between $8 to $25 billion, excluding merger targets and mutuals and non-traditional banks (IBOC).
• Amerant's loans to deposits ratio of 94% is within the peer median range of ~90%-95%.
• The company's ACL to loans ratio of 1.4% is slightly above the peer median range of ~1.2%-1.3%.
• Amerant's ACL to criticized loans ratio of 48.9% is above the peer median range of ~40%-45%.
• The company's TCE to TA ratio of 7.3% is below the peer median of ~9.0%, but is expected to improve to 9.1% pro forma.
• Amerant's Common Equity Tier 1 Ratio of 9.6% is below the peer median of ~11.0%, but is expected to improve to 11.6% pro forma.
• The company's CRE to Total Risk-Based Capital Concentration of 260% is above the peer median range of ~200%-250%, but is expected to improve to 227% pro forma.
• The company's projected 2025 ROAA of 1.09% is within the peer range of 1.00%+, and the PPNR ROAA of 1.28% is within the peer range of 1.50%+.
• The company's projected 2025 provision to loans of 0.24% is within the peer range of ~0.20%-0.30%.

Stakeholder Impact

• Shareholders may experience dilution from the capital raise, but are expected to benefit from improved financial performance and growth.
• Employees may benefit from the company's expansion and growth opportunities.
• Customers may benefit from the company's increased capacity to provide loans and other financial services.
• Creditors may benefit from the company's improved financial stability and capital ratios.

Next Steps

• Complete the $150 million capital raise.
• Execute the securities repositioning plan.
• Close the Houston Transaction.
• Reinvest proceeds into securities and loans.
• Continue to focus on organic growth in Florida markets.
• Monitor and manage credit quality and non-performing loans.
• Announce 3Q24 earnings.

Key Dates

Keywords

capital raise, balance sheet optimization, securities repositioning, organic growth, non-performing loans, CET1 ratio, financial performance, loan growth, deposit growth, Florida banking