8-K: Amerant Bancorp to Sell Houston Operations to MidFirst Bank, Focusing on Florida Expansion

Amerant Bancorp Inc. has agreed to sell its Houston banking operations, including six branches, to MidFirst Bank for a deposit premium and the net book value of assets, as it shifts its focus to growth in Florida.

Summary

• Amerant Bancorp Inc. is selling its Houston, Texas banking operations to MidFirst Bank.
• The sale includes six branches with approximately $576 million in deposits and $529 million in loans.
• The purchase price includes a $13 million deposit premium, subject to adjustments based on deposit balances, plus the net book value of other assets.
• The transaction is expected to close in the second half of 2024, pending regulatory approval.
• Amerant intends to use the proceeds to focus on growth in Florida, including organic expansion, potential acquisitions, and share buybacks.
• The sale is expected to improve Amerant's capital position, balance sheet liquidity, and reduce CRE concentration.
• The deal is anticipated to result in a tangible book value per share accretion of approximately 2%, or $0.36 per share.

Sentiment

Score: 8

Explanation: The document conveys a positive outlook due to the strategic sale of non-core assets, improved capital ratios, and a focus on high-growth markets. The transaction is expected to be accretive to tangible book value per share, which is a positive signal for investors.

Positives

• The sale will improve Amerant's capital position and balance sheet liquidity.
• The transaction is expected to be accretive to tangible book value per share by approximately 2% or $0.36 per share.
• The sale allows Amerant to focus on its core Florida markets, where it sees significant growth opportunities.
• The deal reduces Amerant's CRE concentration.
• The sale provides financial and operational flexibility to accelerate Amerant's Florida expansion strategy.
• The deposit premium is a fixed amount, with a minimum of $9.25 million, providing a degree of certainty.

Negatives

• The sale means Amerant will exit the Texas market.
• The deposit premium is subject to adjustments if deposit balances decrease by more than 15% before closing.
• The transaction is subject to regulatory approval and customary closing conditions, which could delay or prevent the sale.

Risks

• The transaction is subject to regulatory approval, which may not be granted.
• There is a risk that deposit balances could decrease by more than 15% before closing, which would reduce the deposit premium.
• The integration of the Houston operations into MidFirst Bank could face challenges.
• Amerant's ability to successfully execute its Florida expansion strategy is not guaranteed.
• The company may not be able to replace the earnings from the divested Houston franchise.

Future Outlook

Amerant plans to use the proceeds from the sale to focus on growth in Florida, including organic expansion, potential acquisitions, and share buybacks. The company aims to replace the earnings from the divested Houston franchise through these initiatives.

Management Comments

• Jerry Plush, Chairman and CEO, stated that the company recognized that additional investment would be needed for the Houston operations to materially contribute to future results.
• Jerry Plush also stated that the company believes it is prudent to focus on the execution of ongoing expansion plans in South Florida and Tampa.
• Management aims to achieve the goal of being the bank of choice in the markets they serve.

Industry Context

This transaction reflects a trend of banks focusing on core markets and divesting non-core operations to improve efficiency and profitability. The sale allows Amerant to concentrate on the high-growth Florida market, which is experiencing strong labor market conditions.

Comparison to Industry Standards

• Amerant's pro forma loan-to-deposit ratio of 87% is favorable compared to the median of 90% for banks with assets between $7.5 to $12.5 billion.
• The pro forma CET1 ratio of 11.0% is also favorable compared to the median of 11.8% for the same peer group.
• Amerant's pro forma CRE concentration of 220% is higher than the median of 234% for the peer group, but significantly improved from the standalone 276%.
• The company's tangible common equity to tangible assets ratio of 7.9% is below the median of 8.4% for the peer group, indicating room for improvement.
• The company's implied price to tangible book value multiple of 1.21x is below the median of 1.45x for the peer group, suggesting potential for market performance upside.

Stakeholder Impact

• Shareholders are expected to benefit from the improved capital ratios and increased tangible book value per share.
• Employees in the Houston branches will be onboarded by MidFirst Bank.
• Customers in Houston will be served by MidFirst Bank.
• The company's focus on Florida is expected to benefit customers and employees in that region.

Next Steps

• The transaction is subject to regulatory approval and customary closing conditions.
• The closing of the transaction is expected in the second half of 2024.
• Amerant will evaluate capital deployment options, including balance sheet repositioning, share buybacks, and potential acquisitions in Florida.
• Amerant intends to open between 3 to 5 additional locations in the Tampa area over the next 24 months.
• The company is actively recruiting for additional commercial relationship bankers and private banking officers in Broward County, Palm Beach County and greater Tampa markets.

Key Dates

Keywords

Amerant Bancorp, MidFirst Bank, Houston, Florida, branch sale, bank acquisition, deposit premium, capital ratios, tangible book value, expansion strategy