Mercantil Bank Holding Corp. Class A Stock

Thank you, and welcome to the Amerant Third Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. If anyone should require operator assistance, please press *0. It's now my pleasure to turn the call over to Laura Rossi, Executive Vice President, Head of Investor Relations. Laura, please go ahead.

Thank you, Operator. Good morning, everyone, and thank you for joining us to review Amerant Bancorp's third quarter 2026 results. On today's call are Carlos Iafigliola, our President and CEO, and Sharymar Calderon, our CFO.

As we begin, please note that discussions on today's call contain forward-looking statements, meaning of the Securities Exchange Act. In addition, we will also refer 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. We'll now turn it over to our CEO, Carlos Iafigliola.

Thank you, Laura. Good morning, everyone, and thank you for joining us today to discuss Amerant's third quarter 2026 results. This quarter represents another step forward in building a more profitable and resilient franchise. Our net income increased to $25.7 million, or $0.65 per diluted share, and our return on assets reached 1%. That progress reflects stronger net interest income and margin expansion, management, continued balance sheet optimization, and improving credit quality. Most importantly, we continue advancing the strategic priorities that are moving our brand from stabilization towards sustainable growth.

Following our annual board strategy session, our direction remains clear. Deliver on our financial and credit quality commitments, continue simplifying our operating model, focus investment toward the market and capabilities where Amerant has a distinct competitive advantage, and deploy capital and resources toward the most attractive opportunities. In that context, I would like to update you on the evolution of our 4 strategic initiatives during the quarter.

First, Transform Credit. This initiative is about strengthening credit selection, portfolio monitoring, and credit operating model to enable profitable growth with greater consistency and performance predictability and within established risk appetite. During the third quarter, the work completed early in the year began to show more clearly in our results. Non-performing loans continue to decline and classified balances also moved lower.

We continue actively resolving criticized exposures while advancing workflow enhancements and automation of the credit approval process to improve data integrity, accountability, and consistency aimed at lending stakeholders. With the credit foundation strengthened, our focus is increasingly on pairing data, discipline underwriting with growth in more granular and higher quality relationships.

Second, operational efficiency. This initiative is about simplifying how we operate, optimizing structural costs, increasing capacity, and creating a more scalable platform that can deliver consistent service and stronger returns. We continue disciplined expense management while improving our earnings generation power. This resulted in a significant improvement in the efficiency ratio, narrowing the gap to the 60% we have been targeting. We are now moving from identifying opportunities to making clear decisions across the organization. This includes reviewing team structures, client coverage, and productivity of our channels, while advancing in digitization and deploying practical AI use cases.

Third, client profitability. This initiative is about managing the full relationship return, not simply individual products, and directing our people and capital toward the clients and businesses where we can create the greatest value. During the quarter, we continued strengthening referral discipline and coordination across commercial banking, private banking, treasury management, and wealth management. In the following strategy session, we're taking this work further by assessing relationships based on profitability, aligning service models and pricing within client needs, and identifying targeted opportunities to cross-sell single-profit relationships.

Fourth, grow the bank. This initiative is about growing loans, deposits, assets under management, and fee income in the market and businesses where Amerant has differentiated capabilities while remaining aligned with our risk appetite and return objectives. We are focused on building scale in priority verticals and client segments, including more granular C&I, residential lending, practice finance, logistics and wholesale, asset-based and supply chain finance, and selected CRE opportunities with experienced sponsors. We will also continue to use our syndication capacity to manage larger, new, and existing exposures.

Our international business remains a distinctive source of low-cost funding and an important platform for relationship growth. We remain focused on deepening wallet share across international clients through wealth, treasury management, and specialized personal and commercial lending solutions. As we continue to optimize our deposit mix by reducing higher-cost deposits and selectively exiting non-profitable single-product relationships, the overall quality and economics of our deposit franchise will continue to strengthen.

With this in mind, we have migrated certain low-cost interest-bearing balances to DDAs, which improve our ratio of non-interest-bearing deposits to total deposits without any impact to the retention of these accounts. In our domestic markets, we have prioritized in Florida, where our brand, market position, and client relationships give us a clear right to win, and refining our branch and coverage model to support profitable growth.

Taken together, these initiatives are producing measurable progress. Return on assets reached our target 1%, return liquidity improved, net interest margin expanded, and capital remains strong. These results are creating a new baseline for our company and reinforce our confidence that Amerant is moving in the right direction. Our strong capital position also provides us with the flexibility to continue returning value to shareholders.

Accordingly, on October 21, our Board authorized a share repurchase program for up to $50 million through December 31, 2027. Our priorities remain the same: disciplined loan growth, continued credit improvement, greater operating efficiency, deeper and more profitable client relationships, and thoughtful capital allocation. We have more work ahead, but we enter the final quarter of the year with a stronger foundation, clear choices, and growing momentum. With that strategic context, I will turn it to Sharymar to walk through the quarter's financial results in more detail.

Thank you, Carlos, and good morning, everyone. Let's turn to slide 4, where you will see our balance sheet highlights. Total assets were $10.2 billion as of the end of the third quarter, a decrease from $10.3 billion as of the end of the second quarter. The decrease was primarily driven by lower interest-bearing deposits. Cash and cash equivalents were $361.5 million, up by $60.3 million compared to $301.1 million in the second quarter, reflecting higher liquidity balances during the quarter. Total investment securities were $2.2 billion, down by $382.8 million compared to $2.6 billion in the previous quarter. This was primarily driven by lower debt securities available for sale.

Total gross loans were $7.1 billion, up by $207.8 million compared to $6.9 billion in the second quarter. This was driven primarily by increases in single-family residential and commercial loans. These were partially offset by decreases in CRE, loans to non-depository financial institutions, as well as owner-occupied loans. Additionally, elevated payoffs partially offset loan production, including several repayments that also contributed to improved asset quality.

On the deposit side, total deposits were $8.2 billion, down by $109.6 million compared to $8.4 billion in the second quarter, primarily driven by decreases in interest-bearing demand deposits, as well as savings and money market deposits. These were partially offset by increases in non-interest-bearing demand deposits and time deposits. Also relevant for this quarter, on September 17, 2026, the company completed a registered offering of $50 million of 7% senior notes due in 2031. Offering added attractive long-term funding in a rising rate environment while also enhancing liquidity at the holding company.

We are pleased to report that our assets under management increased $77.9 million to $3.45 billion in the third quarter, driven primarily by net new assets of $76.5 million. This is a strong result that reflects the growing momentum in our wealth management business, which we continue to view as an increasingly important source of fee income. During the quarter, we made meaningful progress by onboarding new talent and deepening cross-sell activity with commercial clients, both of which contributed to our growth.

This reinforces our conviction that this business can play a significant and expanding role in diversifying our income stream over time. The relationship-first model and the depth of our domestic and international client base position us well to capture that opportunity, and we remain excited about deepening advisory relationships across both markets.

Let's turn to slide 5. Looking at the income statement, diluted earnings per share for the third quarter was $0.65 per share, compared to $0.53 per share in the second quarter. Net interest income was $90.5 million, up $7.9 million from $82.6 million in the second quarter. The increase was primarily driven by higher interest income on loans and investment securities, combined with lower total interest expense on deposits and FHLB advances due to lower average balances and average rates. Net interest margin was 3.77% compared to 3.52% in the second quarter. The increase reflected a lower cost of funds from non-interest-bearing deposits and shorter-term advances we took during the quarter, as well as benefits from additional interest on longer payments previously in non-accrual status that was recorded during the quarter.

The provision for credit losses was $6.2 million, compared to $4.8 million in the second quarter, reflecting higher specific reserves in the commercial portfolio, offset by lower collectively evaluated reserves driven by changes in portfolio composition and macroeconomic assumptions. Non-interest income was $18.3 million, up by $177,000 from $18.2 million. This increase was primarily driven by higher deposit and service fees and higher gains on the early extinguishment of FHLB advances. These were partially offset by lower loan-level derivative income and lower other non-interest income during the quarter.

Non-interest expense was $69.1 million, up by $221,000, or 0.3%, from $68.9 million in the second quarter. The increase in non-interest expense was primarily driven by higher professional fees and higher salaries and employee benefits. These were partially offset by a decrease of $1.9 million in advertising expenses, as well as an increase of $1.1 million in OREO income. Pre-tax pre-provisioned revenue reached $39.7 million, which is the highest quarterly result recorded since 4Q 2022, compared to $31.9 million in the second quarter of this year. This increase was primarily driven by higher net interest income and non-interest income, partially offset by the increase in non-interest expense.

You can also see that ROA and ROE this quarter were 1% and 11.29%, which are the highest quarterly results reported since 3Q 2022 and 4Q 2021 respectively, compared to 0.84% and 9.23% respectively in the prior quarter. Our efficiency ratio was 63.51% compared to 68.37% in the second quarter. The improvement reflected stronger revenue and stable operating expenses as cost-saving initiatives offset higher personnel and professional fees.

Turning now to slide 6 to discuss our capital metrics. Our CET1 increased to 12.07% from 11.94% in the prior quarter, mainly driven by higher net income during the quarter, while partially offset by $3.6 million in shareholder dividends and $2 million in share repurchases. Tangible common equity declined during the quarter, primarily driven by unrealized losses in the available-for-sale investment portfolio. Market yields rose by more than 100 basis points, well beyond the single Federal Reserve rate increase, as markets priced in additional tightening.

The decline in TCE was partially offset by higher earnings and lower share repurchases. Importantly, the valuation of the AFS portfolio has significantly improved compared to quarter-end as market rates have dropped since quarter-end. We paid a cash dividend of $0.09 per share of common stock on August 28, 2026, and our Board of Directors just approved a quarterly dividend of $0.09 per share payable on November 27 of this year. During the third quarter, we repurchased approximately 70,592 shares at a weighted average price of $28.47 per share, compared to tangible book value per share of $20.94 as of September 30, 2026. This represented 1.36 times tangible book value and 1.32 times book value.

On slide 7, we show our well-diversified deposit mix along with the composition of our loan portfolio. Total deposits for the quarter were $8.2 billion, down $109.6 million, or 1.3%, compared to $8.4 billion in the previous quarter. This decrease was primarily driven by lower balances from large domestic commercial fund providers and was partially offset by higher balances in private banking deposits. International deposits were stable, with a slight decline of $9.5 million or 0.3% from the previous quarter. Also, as part of our strategic diversification efforts, while deposits from customers domiciled in Venezuela decreased $96.8 million or 3.9%, deposits from countries other than Venezuela increased $87.3 million or 12%, a testament to the value of our international customer relationships.

In terms of deposit mix, broker deposits remained mostly stable quarter over quarter at $497.4 million. Core deposits decreased by $125.8 million or 2% driven by decreases in higher cost, interest-bearing demand, savings, and money market deposits. As Carlos mentioned, non-interest-bearing demand deposits increased as we continued optimizing our deposit base. During the quarter, we migrated approximately $270 million in low-cost interest-bearing deposits to non-interest-bearing demand deposits without affecting client retention. This migration provides a clearer view of the strength of our non-interest-bearing deposit base and the underlying value of these stable relationships.

Total loans were $7.1 billion, up $107.8 million or 3% compared to $6.9 billion in the second quarter. As mentioned earlier, this increase was driven by increases in single-family residential and commercial loans. These were partially offset by decreases in CRE, loans to financial institutions, as well as owner-occupied loans. As a reminder, we use our international funding to support domestic loan growth as we don't currently take credit risk outside of the U.S.

Next, on slide 8, you can see the evolution of our net interest income. NII increased $7.9 million from the prior quarter to $90.5 million in 3Q. This increase was primarily driven by higher interest income on loans and investment securities, combined with lower total interest expense on deposits and FHLB advances due to lower average balances and rates. Net interest margin was 3.77% compared to 3.52% in the second quarter. Cost of total deposits declined to 2.07% from 2.21% in the prior quarter, and cost of funds declined to 2.23% from 2.38%.

Moving to slide 9, here we show the drivers of the 25-basis-point increase in net interest margin from 3.52% in the second quarter to 3.77% in the third quarter. Loans were the largest contributor, adding 18 basis points, primarily as a result of the repricing of our variable rate portfolio, the timing within the quarter when we redeployed our liquidity into yielding assets, and fees upon early loan exits. Additional interest collected on NPLs that we exited during the quarter contributed an additional 6 basis points. Securities contributed 3 basis points, and cost of funds added 2 basis points. These positive contributions were partially offset by a 4-basis-point reduction from other earning assets. Taken together, these components reconcile the quarter-over-quarter expansion in net interest margin and demonstrate the benefit of our continued and disciplined loan growth efforts.

Now, turning to asset quality as shown on slide 10, non-performing loans were down $21.6 million or 12.6% to $149.5 million or 1.46% of total assets. During the third quarter, criticized loans decreased primarily driven by the payoff of 3 commercial and CRE relationships, partially offset by downgrades of 4 relationships across commercial, owner-occupied, and CRE loans, as well as several smaller commercial and residential loans. Subsequent to quarter-end, a $5 million commercial loan that was downgraded during the quarter was also paid off, further improving our NPL to total loans and to total assets ratios.

In the next slide, we provide a similar view over our classified portfolio. During the third quarter, downgrades to classified loans were primarily driven by 4 relationships across commercial, owner-occupied, and CRE loans. At the same time, we continue to make progress reducing balances in this category, with payoffs and paydowns totaling $80.3 million, which includes the payoff of 4 large relationships during the period.

Now moving to slide 12, we discuss special mention loans and their key characteristics, including portfolio composition and collateral coverage. During the quarter, downgrades to special mention were primarily driven by 2 relationships and were partially offset by paydowns. Overall, third quarter results demonstrate continued progress in our credit enhancement efforts. Non-performing and overall criticized loans declined during the quarter, supported by disciplined monitoring, timely identification of emerging credit risk, and continued resolution activity through payoffs and paydowns. While we continue to closely monitor developments across the portfolio, the reductions this quarter reflect the actions we have taken to improve portfolio quality and enhance visibility over time.

Now moving on to slide 13. Here we show the drivers of the provision recorded this quarter and impact to the allowance for credit losses. The provision for credit losses was $6.2 million in the third quarter. The provision was driven by a $12.6 million net increase in specific reserves, primarily due to 4 commercial relationships, $2 million in requirements for charge-offs, and $600,000 due to loan growth. This was partially offset by $6.4 million release mainly attributable to changes in macroeconomic factors and a $2.7 million release in reserves for contingencies as lines of credit were funded. In addition, the bank recorded a $2.5 million reserve due to recently acquired season loans.

During the third quarter of 2026, gross charge-offs totaled $3.9 million, composed mainly of 1 commercial loan, and the remaining charge-offs were related to indirect consumer loans and smaller commercial and consumer loans, with $1.9 million in recoveries. We estimate gross charge-offs to be in the range of 30 to 35 basis points for the fourth quarter, including some possible write-offs of existing specific reserves. Also, recoveries may occur as our Special Assets team continues efforts toward resolution of previously charged-off loans. Lastly, the allowance for credit losses ratio was up slightly to 1.36% from 1.27% in the second quarter, primarily due to increases in coverage of individually evaluated loans.

On slide 14, you can see our expectations for the fourth quarter of 2026. We expect total loans to reach approximately $7.3 billion by the fourth quarter of 2026. Following the work completed in the first half of the year to strengthen our credit foundation, we are seeing increased momentum in the loan production, including opportunities primarily through C&I lending programs supported by residential lending as we focus on building a more granular, higher quality portfolio. On the funding side, we are revising our total deposit guidance to approximately $8.5 billion by the fourth quarter of 2026. As noted earlier, exits by large commercial fund providers during the quarter are weighing on our expected domestic deposit balance at year-end. We are also refining our outlook for international deposit growth to reflect the expected pace of balance formation.

The progress we saw during the quarter and the increased activity we observed among commercial and corporate clients across a range of industries in Venezuela continues to reflect the gradual pickup in economic activity and reinforces our confidence in this as a meaningful source of growth and in our ability to capture funds across the client ecosystem. The pace of realization reflects the timing of inflows, the conversion of commercial activity into personal liquidity, and compliance and due diligence timelines that vary with the complexity of each account and relationship.

We are revising our expectations for the net interest margin to be in the range of 3.65% to 3.70% in the fourth quarter. Although the interest rate environment will place upward pressure on our cost of funds, we expect the repricing of the variable rate loan portfolio, our deposit repricing discipline, and the continued growth in lower cost deposits to provide more than an offset. From an expense perspective, we expect fourth quarter non-interest expense to be approximately $68 million as we continue making progress toward a target efficiency ratio of approximately 60%. In terms of capital management, we will continue to optimize our approach by balancing capital retained to support growth with share repurchases and dividends designed to enhance shareholder returns. And with that, I will pass it back to Carlos for additional comments and closing remarks.

Thank you, Sharymar. As we move through the last quarter of the year, we remain focused on executing against our strategic priorities with discipline and purpose, translating the strategic process we have made into measurable financial results. First, we will sustain our loan growth momentum with a continued focus on risk-adjusted returns, and balancing asset quality. The growth we pursue must be purposeful, granular, and consistent with our risk appetite. Capital directed toward the markets, industries, and client relationships where Amerant is best positioned to create value.

Second, we will continue advancing on credit quality. We're deepening our credit culture through consistent underwriting standards, relationship-based decision-making, and proactive portfolio oversight. At the same time, we are cultivating a high-quality pipeline with greater transparency into risk-adjusted returns and stronger accountability throughout the credit process.

Third, we will continue to realize the benefits of the efficiency initiatives we announced earlier this year. The current cost reductions and incremental revenue are strengthening operating leverage, and we will continue simplifying processes, improving productivity, and aligning resources with our highest return opportunities.

Fourth, we will continue advancing our relationship-first approach to deepen client engagement, and support lower cost deposits growth across both domestic and international markets. This means bringing the full capabilities of Amerant to our clients, increasing share of wallet and managing relationships based on their total profitability and long-term potential.

Finally, we remain committed to preserving strong capital ratios while balancing capital retained to support growth with dividends and share repurchases that return value to shareholders. We have a stronger foundation, clear priorities, and a disciplined execution plan. We are encouraged by the progress reflected in this quarter's results and remain focused on converting that momentum into sustainable value for our shareholders. With that, Sharymar and I will take questions. Operator, please open the line for Q&A.

[Operator Instructions] Our first question is coming from Michael Rose from Raymond James. Your line is now live.

I wanted to start on deposits. I was a little bit surprised to see the benefit as much as they were just given all the progress and momentum that you've talked about, Carlos. Can you just describe kind of what happened there and then, you know, as it relates to the fourth quarter and the growth that you're expecting there, how much of that is coming from kind of the international piece versus the domestic piece? Thanks.

Thank you, Michael, and good morning, everyone. I believe what you have seen during the third quarter is that the reactivation of the Venezuelan economy has needed additional CAPEX and additional distributions between commercial and corporate accounts within the country, so the money is starting to move in order to create the necessary investments within the economy to support the reactivation. So I see it more as a transactional decline, more than a structural decline.

We still believe the momentum is extremely positive and we will continue to see positive momentum. I'm not sure if you also noticed the AUM increased. So I believe you should look into the bundle between deposits and AUM. So even though the deposits took a little drop during the quarter, you know, also some funds ended up in AUM as well. At the same time, as I mentioned before, the operational activity of nature of these accounts is creating this fluctuation. Sharymar?

It's important, Carlos, to reiterate that the fundamentals of the Venezuelan and LATAM growth have not changed. When we look at balances quarter over quarter, they can reflect that natural timing of and wealth management formation. And as Carlos mentioned, you saw that happening through the wealth management portfolio in 3Q with upside of almost $100 million. So the momentum is still there, it's still strong, and we feel very confident about this growth opportunity. And regarding the expectation for the fourth quarter, we could see a mix of 60% coming from the international side, and 40% from the domestic side.

That's very helpful, Carlos. I appreciate the thorough response. Sharymar, just switching to the margin. The guide assumes some contraction. I assume some of that has to do with just the decline in Venezuelan deposits this quarter, and then the notes that you issued as well. As we think about the fourth quarter, how much of the impact is from those 2 items versus just core compression? Just trying to get a better understanding of the bridge between third and fourth. Thanks.

Sure, Michael. So, I would say actually it's an improvement versus the normalized 3Q NIM. The 3Q NIM had a portion related to collections on loans that were NPL. So, if we take that component out and some early exits that provided some improvements to the yield and we normalize the NIM, we actually would see some improvement in 4Q. We do continue to see some pressure and cost of funds. I mean, customers have interest for higher yield short-term products.

But at the same time, we will have a full quarter's worth of repricing of variable rate loans. We continue to expect growth on the international low-cost deposits. We have modeled 1 rate hike happening in December. It won't be a significant contribution, but it does provide for an improvement in NII. I would say that if rate hikes happen, we would get closer to the 3.70%, and if rates are stable, that would take us closer to the 3.65%.

And, Sharymar, there is also something that we said, that the growth of the international side has allowed us to lower dependency on high-cost deposits, so the blended rate has definitely helped us.

I appreciate all that, Carlos. And if I could just slip 1 more in. Carlos, you hit the 1% target. I guess the simple way to ask it is what's next? And, you know, with the efficiency expected to continue to come down to your target, you know, how should we think about the opportunity for ROA expansion into next year? Thanks.

Yeah, no, thank you for the question. So, as you can imagine, 4Q, there is a lot of planning for 2027. We are conducting capacity analysis on the business. As you know, we're coming from a period of reshuffle, recalibrating risk, exiting relationships that are not accretive for the bank nor the income or the risk side of the house. So we're very optimistic about 2027. Again, I believe the 1% ROA is a new baseline that we have from now on.

And now, what we believe it will happen is that our operating expenses would need to reflect the impact of the hiring of more business people, as we're trying to the whole commercial and the domestic side of the house for a steady loan growth. And that would definitely help us to achieve a better return on asset for 2027. So we have been, you know, very active, projecting balance sheet for next year and what will be the impact, but we definitely remain, you know, committed to improve the 1%. So, you know, if you think, the Amerant of the future should be definitely trying to target the 1.20% in the longer term.

Okay, I appreciate all the color. Thanks, everyone.

Next question today is coming from Russell Gunther from Stephens, your line is now live.

This is Nick calling in for Russell. I just wanted to go back on the deposit side. You know, NIBs were up pretty meaningful this quarter. How much of that was tied to new relationships versus existing customer moving balances? And should we think about that current mix as sustainable or was there anything unusual about the quarter?

Well, the combination, and thank you for the question, so we have analyzed our interest-bearing base over the past year or so. And we identified several accounts that were carrying a very low interest expense. And what we did, this is a project that took us a couple of quarters to complete. We classified those as non-interest-bearing evidently by dropping the rate to 0. So the change was approximately $270 million going into that category due to the reclass, but at the same time we were able to grow $100 million into the non-interest-bearing category.

So that is pretty much the combination. I believe it's a reflection of who we really are as a bank. Those are non-sensitive deposits that should have been DDAs since the beginning. And due to different, you know, product characteristics over time, they were interest-bearing. So going forward, there will be an additional migration that should be expected. But at the same time, we continue to grow within that category. And we...

We are very focused on making sure we can expand share of wallet of existing customers as part of the relationship-first approach. But we're also making sure that we can capture new accounts. In slide 23 of our presentation, we included some information related to new accounts and you're going to see that around 1,200 accounts were opened on the international side and almost the same amount on the domestic side. So we're very confident and optimistic of what we're seeing for new accounts as well as increase of existing.

Okay, great. Thank you. And lastly, just moving to expenses real quick. I know I saw 4Q's expected to be around $68 million. How should we think about the 2027 expense trajectory, though? Is the goal to hold that run rate flat, or should we still expect, you know, continued investment alongside those efficiency initiatives you mentioned?

Yes, I think as we think about early 2027, we can expect expenses around, let's call it $69.5 million to almost $70 million. So you're going to see a slight increase and that's going to be related to hiring for growth. We expect that hiring will be partially offset by continued renegotiations of contracts and cost-saving initiatives that we are actively working with. So, from a run rate perspective, we could be looking at something closer to the $69.5 million to $70 million. With that said, we also see the increase on the revenue side that will help us make sure that we continue to improve the efficiency ratio through time.

Great, I'll step back. Thank you.

Next question is coming from Stephen Scouten from Piper Sandler. Your line is now live.

Maybe just on the deposits for 1 more question on my end. The international deposit growth, which was impressive, can you give me a feel for, with Venezuela declining slightly, where the other geographic regions were that led to that nice growth? Yes.

Yes, thank you and good morning. So the growth came from other countries that we typically manage under the international division. So there is a combination between Argentina and other Central American countries that our team also has experience and has been growing over the past few years. So definitely there is an experience that has been acquired over the course of the year. Again, we are very strategic when we attack these countries. We are not, you know, just don't cast a net and get whatever. We're very specific and we need to have specific knowledge to go into specific countries. So, I can tell you that it's probably about 5 countries, the ones that we target the most, always obviously Venezuela being the most important.

Okay, great. Um, and then I think, Sharymar, you noted probably future deposit growth kind of similar to the existing competition, I mean, constitution there, 60-40 or so. Is there a limit for you guys on international deposits as a concentration or I mean, given their advantage costs, would you allow them to grow as much as they could? I mean, kind of talk to me about if there's any regulatory pushback or BSA or anything else that would cause you to limit that growth in any way.

Yes, no, that's a great question. And what I can tell you is that Amerant, evidently by being headquartered in South Florida, this is a very international jurisdiction and it's natural for market players in this region to be exposed to international deposits. Our BSA program and our BSA team is very consolidated and ingrained within the culture of the bank. We have a very solid BSA program, and we have been enforcing and creating technology around the controls and everything that pertains these complex jurisdictions or more, I would say, that merits more due diligence jurisdictions. So with this said, I believe we are very well prepared and actually we have been used as a reference by other institutions and regulatory agencies as an example of having a great AML and BSA program. I'm very comfortable with the way that we have been managing these deposits and the controls that we have in place.

OK, great. So, don't feel like there's any kind of internal cap that you'd need to enforce on the side of the international deposits at any point?

So there is no set cap. I believe that's important. For the time being, we are 40-60. We can definitely have room to grow. Again, the way that we manage this is on a relative basis, and at the same time, we manage large fund providers' concentrations through ALCO, so we keep an eye on the largest exposures from the liquidity standpoint at ALCO and making sure that we have specific targets and limits for those type of exposures. So yeah, we're very judicious in the way that we...

See all this close. Got it. That's fantastic. And maybe last thing for me, just curious around the use of the repurchase moving forward, if the movement in ACL and where TCE is, if that impacts your maybe willingness to be as aggressive on that repurchase or kind of how we should think about the pace and maybe construction strength from any capital ratios or otherwise.

So I will take 2 different approaches or 2 different approaches of this explanation. So the first one is that we believe in the weighted average cost of capital. So we have definitely declined our weighted average cost of capital when we did the debt issuance earlier in September, so that's 1. Getting the debt at 7% combined with the other pieces of the capital composition definitely helped us. And part of that being redeployed in the retirement of some shares is definitely accretive to existing shareholders. That's something that our board understands and is very actively involved in those discussions.

So getting the $50 million blanket until 2027, represents the strong belief that our share still has room to go and still constitutes a good opportunity at the level that we trade. So being between the 1.38 to 1.45, I believe it still represents a very attractive valuation. And we'll keep an eye, close attention, but the fact that we already have that approval in place will give us the flexibility to get into the market and get in some at those levels.

And part of that conversation is that capital is healthy and provides us the opportunity to balance both growth and the buyback program. Right.

Fantastic. Appreciate the comprehensive answer there. Thanks so much.

We've reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

Thank you, everyone, for connecting today, and have a great day.

Thank you. That does conclude today's teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Greetings. Welcome to Amerant's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. At this time, I'll turn the conference over to Laura Rossi, Head of Investor Relations and Strategy. Thank you, Laura. You may now begin.

Thank you, operator. Good morning, everyone, and thank you for joining us to review Amerant Bancorp's Second Quarter 2026 results. On today's call are Carlos Iafigliola, our President and CEO, and Sharymar Calderon, our 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, we will also refer 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 CEO, Carlos Iafigliola.

Thank you, Laura, and good morning, everyone. Thank you for joining us today to discuss Amerant's second quarter 2026 results. Before turning to our results, I would like to acknowledge the devastating impact of the earthquakes that struck Venezuela this past month. Our thoughts and heartfelt condolences are with the families and communities impacted as they begin the difficult work of recovery and rebuilding.

With that important context, let me turn to our second quarter results and more importantly, the progress we are making against the strategic priorities that are reshaping Amerant's progression. Our objective is clear: stabilize the business, strengthen the foundation and positioning the company for disciplined, sustainable growth and improved shareholder value.

I want to spend a few minutes providing additional clarity on the 4 strategic initiatives that are driving this work, the intention behind each and the tangible progress we have made during the second quarter. First, transforming credit. As I shared in previous calls, this is our highest priority initiative given its connection to current and prospective asset quality, capital efficiency, and predictability of future earnings.

Our objective here is to continue developing our credit capabilities to support profitable and sustainable growth through stronger risk selection practices. During the second quarter, we revised our credit policy and procedures, including approval authorities and key product programs and completed the loan origination stage revamp. We also continue to optimize our portfolio by exiting select exposures out of footprint loans and criticized credits, which contributed to the decline in special mention and classified loans we reported during this quarter.

Second, operational efficiency. This initiative is about simplifying how we operate. We are standardizing, streamlining, and digitizing end-to-end processes to remove structural cost, increase capacity and deliver faster, more reliable client services at scale. To this end, we're happy to report that we have identified multiple use cases for AI that will enhance our productivity in the near future.

During the second quarter, we identified additional cost savings initiatives that are expected to materialize in the fourth quarter and support continued improvement in the efficiency ratio. This gives us greater confidence in our path towards a more scalable operating model and reflects our commitment to structurally decreasing our expenses versus previous years.

Third, relationship first. This strategic initiative is designed to deepen existing client relationships through an integrated sales model that coordinates private and commercial banking with our advisory and treasury management capabilities to increase cross-sell, boost fee income and improve overall client profitability.

During the quarter, we advanced this work by strengthening CRM tracking and referral discipline, improving coordination across client-facing teams and focusing execution on opportunities to grow revenue. Fourth, grow the bank. This initiative is about growing balance and revenues with sustainability within our core markets at a pace consistent with our risk appetite and return objectives.

In 2Q, we continue to prioritize loan growth in Florida, our core market, and a more granular C&I production as well as select residential mortgage growth. On the deposit side, momentum remains strong with total deposits increasing over $400 million, primarily driven by international deposit growth. Having a source of low-cost funding becomes a great attribute within our competitive environment.

This performance reflects the strength of our international franchise, the depth of our long-standing client relationships and the clear advantage of our differentiated business model. We continue to see significant progress in our Latin American business, especially in Venezuela, where Amerant capitalized on its brand recognition, established client relationships and the work we have done over many years to preserve relationships with local financial institutions, commercial and private banking clients.

During the second quarter, that opportunity continued to materialize with Venezuelan deposits increasing close to $500 million from the first quarter and contributing significantly to the total international deposit growth. These are operating deposits tied to essential industries, processed through established banking channels and supported by our existing compliance, due diligence, and relationship management framework.

Our focus remains on relationship deposits that are low cost, operational in nature and aligned with our risk appetite. As these balances grow, we will continue to manage concentration, compliance and pricing discipline carefully while cross-selling our advisory and wealth management platforms. Taken together, these initiatives are beginning to show up in our results.

During the quarter, net income increased, profitability improved, and we maintained strong capital levels while continuing to return capital to shareholders. We also made further progress on our credit with classified loans and special mentions declining meaningfully. These outcomes reinforce our confidence that our strategic initiatives are effective and that we are building a more efficient, relationship-driven and profitable franchise.

With that strategic context, I will turn it over to Shary to walk through the quarter's financial results in more detail.

Thank you, Carlos, and good morning, everyone. Let's turn to Slide 4, where you will see our balance sheet highlights. Total assets were $10.3 billion as of the end of the second quarter, an increase from $9.9 billion as of the end of the first quarter. The increase was primarily driven by higher deposit balances. We reallocated our assets to fund net loan growth and debt securities available for sale.

Cash and cash equivalents were $301 million, up by $112 million compared to $189 million in the first quarter, reflecting higher interest-earning deposit balances and overall balance sheet liquidity. Total investment securities were $2.6 billion, up by $178 million compared to $2.4 billion in the previous quarter. We continue to grow the investment portfolio as part of our liquidity management due to the growth of our international deposits.

Total gross loans were $6.9 billion, up by $112 million compared to $6.8 billion in the first quarter. Growth was driven primarily by production in C&I as well as residential mortgages, partially offset by elevated commercial loan prepayments, strategic loan sales and continued exits aligned with our credit optimization strategy.

On the deposit side, total deposits were $8.4 billion, up by $416 million compared to $7.9 billion in the first quarter, primarily driven by strong growth in international deposits, as Carlos mentioned. Our assets under management decreased $53 million to $3.4 billion in the second quarter. This decrease was primarily driven by the departure of a large trust relationship, partially offset by increased market valuations.

Importantly, this relationship did not represent a significant contribution to fee income as it was fixed rather than balance based. We continue to view the wealth management business as an important opportunity to grow fee income over time, supported by our relationship-first model and the opportunity to deepen advisory relationships across both domestic and international clients.

Let's turn to Slide 5. Looking at the income statement, diluted earnings per share for the second quarter was $0.53 compared to $0.44 in the first quarter. Net interest income was $82.6 million, up $2.3 million from $80.3 million in the first quarter. The increase was primarily driven by higher average interest-earning asset balances, including growth in the loan and investment securities portfolios, partially offset by lower loan yields.

Net interest margin was 3.52% compared to 3.55% in the first quarter. The modest decline reflected lower loan yields, largely offset by a lower cost of funds and continued growth in lower-cost international deposits. Provision for credit losses was $4.8 million compared to $7.8 million in the first quarter, reflecting lower provision needs for specific reserves and higher recoveries, offset by need for loan portfolio growth and adjustments to account for macroeconomic conditions.

Noninterest income was $18.2 million, up by approximately $800,000 from $17.4 million. Noninterest income this quarter includes an increase of approximately $500,000 in deposit and service fees and $200,000 in brokerage, advisory, and fiduciary fees. Additionally, this quarter, other noninterest income includes proceeds from life insurance benefits. Noninterest expense was $68.9 million, up by $2 million or 2.9% from $66.9 million in the first quarter.

Noninterest expense this quarter includes an increase of $2.9 million in variable compensation, an increase of $1.8 million in less savings related to third-party vendor fees this quarter and an increase of $1.3 million primarily related to the last portion of a sports partnership agreement that was terminated. The increase in noninterest expense was primarily offset by the absence of $1.7 million in investment impairment expense and other expenses that we had in the prior quarter.

The absence of the impairment on investment carried at cost that we had in the first quarter as well as lower losses on loans held for sale. Pretax pre-provision net revenue was $31.9 million compared to $30.7 million in the first quarter, reflecting higher net interest income and noninterest income, partially offset by the increase in noninterest expense.

You can also see that the ROA and ROE this quarter were 0.84% and 9.23% compared to 0.73% and 7.63%, respectively, in the prior quarter. Our efficiency ratio was 68.37% compared to 68.52% in the first quarter. These improvements were primarily driven by higher net income and continued operating discipline.

Turning now to Slide 6 to discuss our capital metrics. Our CET1 remains strong at 11.94% compared to 11.84% last quarter, mainly driven by lower risk-weighted assets and higher net income during the quarter, while partially offset by $16 million in share repurchases and $3.6 million in shareholder dividends.

We paid a cash dividend of $0.09 per share of common stock on May 29, 2026, and our Board of Directors just approved a quarterly dividend of $0.09 per share payable on August 28 of this year. During the second quarter, we repurchased 690,000 shares at a weighted average price of $23.29 per share compared to tangible book value of $22.78 as of June 30, 2026. This represented 1x tangible book value and book value.

On Slide 7, we show our well-diversified deposit mix, along with the composition of our loan portfolio. Total deposits for the quarter were $8.4 billion, up $416 million or 5.2% compared to $7.9 billion in the previous quarter. This increase was primarily driven by significant growth in international deposits, particularly from Venezuela, while domestic deposits reflect the exit of a high-cost large fund provider.

In terms of deposit mix, broker deposits totaled $498 million, a decrease of $50 million compared to $548 million in the first quarter. Core deposits increased by $553 million or 9.4%, supported by strong growth in noninterest-bearing and lower-cost international deposits. Total loans were $6.9 billion, up $112 million or 1.7% compared to $6.8 billion in the first quarter.

The increase was driven by production in C&I as well as residential mortgages, partially offset by higher commercial prepayments and loan sales completed during the period. Of note, we use our international funding to support domestic loan growth as we don't currently take credit risk outside of the U.S.

Next, on Slide 8, you can see the evolution of our net interest income. NII increased $2.3 million from the prior quarter to $82.6 million in 2Q. This increase was primarily driven by higher average interest-earning asset balances as we redeployed our deposit growth as well as 1 additional day in the quarter. The increase was partially offset primarily by lower loan yields and higher average balances in interest-bearing deposit accounts.

Net interest margin was 3.52% compared to 3.55% in the first quarter. Lower loan yields were largely offset by a lower cost of deposits, supported by disciplined deposit pricing and continued growth in lower-cost international deposits with the current cost rate under 1%. As a result, cost of total deposits declined to 2.21% from 2.31% in the prior quarter and cost of funds declined to 2.38% from 2.47%.

Now turning to asset quality, as shown on Slide 9. Nonperforming loans were down $5 million or 2.8% to $171 million or 1.7% of total assets. During 2Q '26, downgrades to NPL were primarily driven by one large classified residential loan, which was later sold during the quarter, 2 large commercial relationships, and smaller commercial and residential loans. These downgrades were offset by payoffs and note sales as noted in the slide.

Subsequent to quarter end, a $9 million New York CRE loan was paid off, bringing NPLs further down to $162 million, improving the NPL-to-total assets ratio. In the next slide, we have included similar information as it relates to the classified portfolio. During 2Q '26, downgrades to classified loans were primarily driven by 4 relationships with commercial and owner-occupied loans.

On this slide, you can also see the results of our efforts to reduce the loan balances in this bucket during the quarter with loan payoffs totaling $24 million and loans sold totaling approximately $40 million during the period. Now moving into Slide 11. We discuss special mention loans and their key characteristics, including portfolio composition and collateral coverage. During 2Q '26, downgrades to special mention were primarily driven by one CRE loan and one owner-occupied relationship, offset by the payoff of one large CRE loan and the sale of another CRE loan.

Overall, second quarter results demonstrate continued progress in our credit optimization efforts. Nonperforming loans, classified loans and special mention loans all declined during the quarter, supported by disciplined monitoring, timely downgrades where warranted and active resolution through payoffs, paydowns and loan sales. While we continue to proactively manage any new developments in our portfolio, the reductions this quarter reflect the impact of the actions we have been taking to strengthen the portfolio, improve visibility and reduce risk over time.

Now moving on to Slide 12. Here, we show the drivers of the provision recorded this quarter and impact to the allowance for credit losses. The provision for credit losses was $4.8 million in the second quarter. The provision was driven by a $2.2 million net increase in specific reserve allocation, $0.8 million requirement for charge-offs, $0.9 million due to loan growth, and $1.9 million mainly attributable to changes in macroeconomic factors.

This was offset by $1 million release in reserves for contingencies as lines were funded. During the second quarter of 2026, gross charge-offs totaled $5.5 million, composed mainly of 2 commercial loans. The remaining charge-offs were related to indirect consumer loans and smaller commercial and consumer loans. These charge-offs were offset by $4 million in recoveries.

We expect gross charge-offs to be in the range of 25 to 30 basis points. This could be offset by recoveries as our special assets team continues efforts toward resolution of previously charged-off loans. Lastly, the allowance for credit losses ratio was up slightly to 1.27% from 1.21% in the first quarter, primarily due to increases in coverage of collectively evaluated loans.

On Slide 13, you can see our expectations for the remainder of 2026. We expect total loans to reach approximately $7.3 billion by the fourth quarter of 2026. Following the work completed in the first half of the year to strengthen our credit foundation, we are seeing increased momentum in the loan pipeline, including opportunities via credit programs in C&I and residential lending as we focus on building a more granular, higher-quality portfolio.

On the funding side, we expect total deposits to reach approximately $9.1 billion by the fourth quarter of 2026. This outlook is supported by continued momentum expected in low-cost international deposit growth and our efforts to deepen domestic relationships. We expect net interest margin to be approximately 3.50% for the remainder of the year, supported by disciplined balance sheet management and the benefit of continued growth in lower-cost deposits.

From an expense perspective, we are projecting 3Q expenses to be in line with 2Q, declining to a range of $66 million to $67 million in 4Q '26 as we continue to make progress toward a target efficiency ratio of approximately 60%. In terms of capital management, we continue to believe that buying back our stock represents an attractive use of capital, and we expect to continue using a portion of our cash to directly return capital to our shareholders through repurchases and dividends.

Lastly, we would like to provide guidance as to the contributions to ROA and help you reconcile how we expect to reach 1% by year-end. As you can see on Slide 14, we expect the net interest income to be the largest contributor in line with the guidance I just provided regarding loan and low-cost deposit growth.

Operating expenses and other income will also contribute to net income improvement, although to a lesser extent. We expect this contribution to be partially offset by tax expense and provision for credit losses due to reserves related to loan growth.

And with that, I will pass it back to Carlos for additional comments and closing remarks.

Thank you, Shary. As we wrap up today's call, I want to reiterate that our priorities for the second half of the year remain clear and firmly aligned with our strategic plan. First, we will continue driving disciplined, sustainable loan growth that supports our financial objectives and remain consistent with our risk appetite. That means growing with purpose, maintaining clear accountability, and ensuring that our risk selection practices meet our standards for quality, granularity and risk-adjusted returns.

Second, we will continue advancing credit quality by embedding a stronger credit culture across the organization. This includes disciplined underwriting, enhanced portfolio monitoring, and a high-quality loan pipeline. Third, we remain focused on improving efficiency across the organization. We are executing cost efficiency initiatives that are expected to create sustainable recurring savings while supporting a more scalable operating model in alignment with our efficiency goals.

We're also reassessing our product offering and fee income services to continue to boost noninterest income. And fourth, we will continue strengthening our relationship-first model to deepen client engagement, increase collaboration across the business and support lower cost deposit growth in both domestic and international markets.

At the same time, we remain committed to maintaining strong capital levels while continuing to return capital to shareholders through dividends and share repurchases. We have a durable franchise, a clear strategic vision and a disciplined execution plan. While there is more work ahead, we are encouraged by our progress and confident in our ability to deliver sustainable value for our shareholders over time.

With that, Shary and I will take questions. Operator, please open the line for Q&A.

[Operator Instructions] Our first question comes from the line of Woody Lay with KBW.

Wanted to start on the deposit growth. I mean it was really encouraging. And I think the guide where you all point to by year-end, that's -- it's about $800 million above where the Street is forecasting. I was just curious how much of that incremental deposit growth will be used for funding remix and what that means for the total asset size that you're expecting by year-end?

Sure. So no, good question, and thank you for that one. I believe one of the critical points that we have been using the specific source of funding that we have been getting is precisely to let run off high-cost deposits that we carry on balance sheet. I believe the recomposition has been extremely valuable. We have let go hypersensitive deposits during the first 2 quarters of the year that had a significant cost of funds pressure, and we have been using these deposits to recompose the depository base. Most of these new deposits coming our way are 0 cost, noninterest-bearing. So we are very encouraged by the recomposition that we'll have in the source of funds from now to year-end. So from that perspective, really positive. Shary, do you have.

Yes. And to complement that, Carlos, we do expect to use a significant portion being redeployed into high-quality assets onboarded into our balance sheet. But we're also going to take the opportunity to pay off maturing wholesale funds. And also any excess liquidity due to the low cost of these funds, any excess liquidity, even if placed in yielding cash accounts, we still see that we can get a contribution to NIM.

And everything will be, I guess, redeployed within our new credit policy and credit standards that are consistent with the revamped risk appetite of Amerant.

Yes. So you're over $10 billion in assets as of the second quarter. Do you expect to be over the $10 billion in asset threshold by year-end '26?

Yes. Yes, we do expect to. Yes.

Okay. Got it. And then -- so it sounds like on that deposit guide, most of that's expected to be low cost, if not noninterest-bearing, which is -- which would be a huge positive and would make me think that you had a 3.52% NIM in the second quarter. It feels like there could be upside based on that noninterest-bearing growth. But I guess maybe some of the moving pieces on how the margin stays flat from here would be helpful.

Right. Yes. So one of the items that we telegraphed during the previous earnings calls was the spreads that we're seeing in the loan origination at this point. As you know, we are operating in markets that are very competitive. And at the same time, the high-quality assets that we're playing right now, they tend to be more tighter in nature.

So when you get to see the spreads to origination over SOFR that, in the past, we were probably above the 200 basis points over SOFR. Right now, we're seeing a lot of competition for the same asset class. The competitors that we are facing right now, they're pricing these new structures with very competitive spreads. And even though we're getting significant improvement in the cost of funds, the diminishing yield on the new asset generation will definitely make us feel like 3.50-ish is the right financial margin for the rest of the year.

Got it. And then maybe just last for me. Noninterest-bearing growth was really impressive. The international side drove a majority of that and especially Venezuela. Could you just talk about the momentum you're seeing in the country and how it's impacting deposits? And are most of the deposits coming from the country, are they commercial deposits, retail deposits? And are they related to any specific industry?

Yes. So they are specifically tied to the oil production. As you know, the country is currently facing the benefit of being able to sell oil at a higher price and the production is essentially being higher than what used to be before. So those are 2 positive factors playing in favor of the country. So most of the funds are related to institutional depository base. But the advantage of Amerant is that we recapture those funds that are ultimately redeployed into commercial and personal accounts. So it's -- we believe that we have a great stickiness between those deposits.

The next question is from the line of Russell Gunther with Stephens.

I wanted to follow up on the loan growth and spread discussion. It would be helpful to get some specifics around just where and how you tighten that credit box. You mentioned the reduced -- or excuse me, revised credit policy and procedures this quarter. So just any update into changes in loan size targets or asset classes that no longer fit the revised profile? And then you mentioned, I think, you were getting plus 200 bps to SOFR. Kind of where does that stand today on the type of commercial growth that now fits your credit box?

Right. Thank you for the question. So typically, what we're projecting for the rest of the year, most of the growth will come from the C&I space. We still believe that the CRE space even though we have a strong pipeline on the CRE side, we're still going through recomposition of that portfolio. So some of the classified that we still have and some of the NPLs that we still have are in the CRE portfolio, we do expect them to roll down as we approach year-end.

So all the efforts on CRE, even very positive, still will be kind of muted in the sense that we still have rolling out these assets on the criticized bucket. When it comes to the spreads of origination and the size of the transactions, the new sweet spot for Amerant transactions typically close to the $30 million. That would be kind of the max that we're trying to keep our sweet spot. But obviously, we're increasing granularity, which is something that we have been working a lot over the past few months, trying to -- if you look at the average balance size of the loans nowadays compared to 2025, there has been an improvement.

So we are doing just the $30 million or $35 million in very specific case whenever there is a top-tier customer or when there is a very solid and stable type of property or project that we believe, and there are a few exceptions that we're doing for those type of transactions. But typically, what we are fostering is granularity across the portfolio. When it comes to the spreads, yes, as I mentioned before, very competitive, especially in the credit box that we're taking when they're playing on the stabilized territory, when you're playing on industries that the projections are very predictable, you are getting into the territory of more tighter credit spreads. Shary, I'm not sure if you want to.

No, yes. Production and growth, the way we're expecting it is primarily on the C&I side, some -- to a lesser extent, some on the resi portfolio. And on the CRE side, as Carlos was saying, we're going to be very selective as to which segments within CRE we would be working with. But as Carlos was mentioning, we have some offsets happening to that production related to the strategic exits and credit optimization. So expectation overall would be C&I space.

Got it. Okay. And then within your margin guide, are you assuming anything out of the Fed from a rate hike perspective? And if so, how is that contemplated in the guide?

Yes. No rate hikes, no drops either that would cause anything significant, at least through December of this year. Projections are based on the loan pipeline and production that we have and that we're estimating and also the low-cost funding inflows that we're expecting through the end of the year.

Got it. Okay. And then last one for me on the expenses. I appreciate the update and lower exit run rate for this year. You mentioned crossing $10 billion in assets. I wonder if the cost associated with that in noninterest expense is contemplated in the guide or might some of that spill into '27? And as we think about Amerant moving into next year with whatever franchise investment you may be considering, what type of growth rate or normalized growth rate expectation should we contemplate for expenses next year?

So, great question. So I believe most of the investments that were related to crossing the $10 billion we're already factoring into our run rate. As you probably remember, last year, there were a couple of instances that we crossed. So we are already utilizing or setting aside or part of our run rate is already the elements that took us a hold of the $10 billion. So we don't anticipate incremental expenses to be ready for that. Durbin amendment, if whenever that happened, which we anticipate is the second half of 2027, that wouldn't be significant for Amerant.

Yes. And to complement that, so several periods ago, we completed a readiness assessment of crossing the $10 billion threshold from both a compliance and a risk management standpoint. So the expenses or the investments that typically you see for an organization that's crossing the $10 billion threshold are embedded into the figures that we are providing from a guidance standpoint. And going into 2027, as Carlos was saying, yes, we expect some slight investments associated to technology. But at the same time, we have built the offsets to be able to maintain the run rate at the levels where we see them in Q4.

Our next question comes from the line of Cole Martin with Raymond James.

Just on the 1% ROA target, I was hoping you could talk a bit more about your NIM and NII expectations, both going into 4Q '26 and also 2027.

Shary will take that one.

Yes, sure. So as we think about the NII, a portion of this is related to scale, right? We have invested and spent efforts into making sure we optimize our expense structure. And now we see the benefits out of that. We're focusing now on the NII side from a revenue perspective and what scale can provide.

So having access and having inflows from low-cost deposits and being able to redeploy them into high-quality assets provide the necessary contribution to NII to get to that 1% ROA. And the inflows as they relate to the deposit accounts are expected to continue in upcoming periods. So it's something that will allow us to continue to improve both the efficiency ratio and the ROA.

I guess one of the critical points for the ROA is the incremental low-cost deposits that we're expecting from -- that we have been having a big part of 2026, but then through the rest of this year, that blended rate would definitely help us to keep up with the financial margin.

Okay. Great. And then also just on capital, I was hoping you could talk a bit more about how you're going to balance loan growth versus future repurchases moving forward? And I guess, also the implications of accelerating deposit growth with that.

Yes. Great question. So our CET1 close to 12% for quarter end. We believe and internally, we have been doing a lot of analysis is very strong. We run a stress test all the time to analyze what could be the potential impact on a stress scenario to that CET1, which still after those shocks shows a very strong number. So we will continue to use our buyback, which I believe we have approximately $6 million left. And we still believe that there is a big opportunity with the way that we're trading to add value to the shareholders. And obviously, after doing all our capital sufficiency analysis, we believe that there is still opportunity for Amerant to be opportunistic and return value to shareholders.

At this time, I'll turn the floor back to management for closing comments.

Thank you so much for connecting to today's call. Have a great day.

Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.

Greetings, and welcome to the Amerant First Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions]

It's now my pleasure to turn the call over to Laura Rossi, Executive Vice President and Head of Investor Relations. Laura, please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us to review Amran Bancorp's first quarter 2026 results. On today's call are Carlos Iafigliola, our Interim CEO and Sharymar Calderon, our CFO. Additionally, we're pleased to welcome faces speaker this quarter, Lee Ann Cragg, Chief Credit Officer, who will share further insight into our credit risk management initiatives.

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 interim CEO, Carlos Iafigliola.

Thank you, Laura. Good morning, everyone, and thank you for joining us today to discuss Amerant's first quarter 2026 results. As we begin, I want to acknowledge where we are in the execution of our strategic plan. I'm proud of the continued progress we have made on the 3 priorities we outlined this quarter, stabilizing the business, optimizing our credit portfolio and growing sustainably. I also want to thank the Amerant team for their hard work and dedication throughout the quarter. Our people are the key enabler of this plan and that continues to guide our execution.

So let's begin with our primary focus, which has been credit quality and improving our loan portfolio. As a reminder, in Q4 last year, we completed a comprehensive reassessment of our portfolio in terms of risk identification and classification, and subsequently exited a segment of loans from classified categories. This process continued into the first quarter, where we demonstrated proactive credit management and further refined de classifications of certain loans based on current macroeconomic data and new information received. We identify both necessary downgrades as well as meritable upgrades.

Additionally, we exited and transferred to held-for-sale another group of loans that we no longer consider core to our business. The new process and people we have put in place has significantly improved our credit evaluation capabilities and the team is executing well. The composition of our loan portfolio now reflects a healthier mix with a risk profile that is more consistent with our long-term goals. Lee Ann will share additional details shortly.

Going forward, as we prioritize business development, we will pursue growth within credit parameters that allow for sustainable financial results. To this end, we have enhanced risk-based limits to adjust concentration risk and prevent single borrower overexposure. We have also refined our market approach by moving away from out-of-market collateral projects, except selectively for existing clients in core markets where we have deeper borrower insight.

We have also fundamentally shifted on the right, prioritizing borrowers with proven stable operating history over projection-based lending and tightened our policy exception framework by lowering allowable exception thresholds to better align with our risk appetite.

Lastly, we have continued to invest in experienced talent, and we're taking a more intentional approach to growth, focusing on what we believe are derived fundamentals to drive stability, consistency and sustainable top line performance. Our top priority is continuing to improve our efficiency, which the team executed well against this quarter.

Our net income for Q1 was in line with our guidance. and we have significantly reduced noninterest expenses quarter-over-quarter, supported by better-than-expected cost savings. To put this in perspective, our expense management efforts represents approximately $30 million in cost savings for 2026.

Additionally, we saw strong growth in favorable low-cost international deposits as a result of the reactivation of the Venezuelan economy and our deep knowledge and experience in the market as well as the extensive work that for many years we have done to preserve and expand our relationships in the country. In line with this, I would like to take a moment to provide some additional context on our international deposit growth.

Last quarter, we highlighted Venezuela as an area of opportunity. And this quarter, we delivered recorded $188 million of total deposit growth in Q1 from which $95 million came from Venezuela and $66 million of this growth was in March alone. These deposits are quite attractive due to the stability. Overall cost of funds and beta in rates of cycle, such as the one we recently experienced allowing for improved profitability as we continue to grow our international presence.

Furthermore, these customers are well aligned with our relationship-first approach as they can be cross sold via our wealth management offering. Moving forward, Venezuela represents a key opportunity to continue generating net interest income from a source of funds and to capture increased market share. We believe Amerant is uniquely positioned to take advantage of this opportunity and support both individual entities as the country reopens.

In summary, we believe we executed well against our strategic plan. We took a focused, deliberate action to further optimize our credit portfolio while reinforcing risk management. We implemented cost savings initiatives that have reduced our expenses and improve our efficiency.

We generated loan growth that is aligned with our risk appetite despite exits of certain criticized loans and significant loan repayments, which provides a clear line of sight to sustain credit performance, and we executed well on our international strategy, particularly in Venezuela, which we view as a meaningful opportunity to further scale our international deposit franchise and drive incremental earnings.

With that, I will turn it over to Shary to review our quarterly financial results in more detail.

Thank you, Carlos, and good morning, everyone. I want to begin by saying that going forward, we will be discussing results without breaking down core versus noncore metrics in our financials. We would like to be more selective with adjustments with the goal of providing a clear and more straightforward view of our quarterly performance. All comparisons made to last quarter's results are to our GAAP reported figures.

Let's turn to Slide 4, where you will see our balance sheet highlights. Note that in the next 3 slides, I will focus on those items that are most relevant to the quarter and will not be covered in subsequent slides. Total assets were $9.9 billion as of the end of the first quarter, an increase from $9.8 billion as of the end of the fourth quarter. The increase was primarily driven by higher deposit balances.

Additionally, we reallocated our assets to fund net loan growth, including selected residential loan purchases and deployed available cash into higher-yielding assets. Cash and cash equivalents were $188.7 million, down by $281.5 million compared to $470.2 million in the fourth quarter due to the purchases of investment securities at attractive yields, as well as to fund loan growth.

Total investment securities were $2.4 billion, up by $346.3 million compared to $2.1 billion in the previous quarter. Total gross loans were $6.8 billion up by $56.5 million compared to $6.7 billion in the fourth quarter. While we experienced increases in certain portfolios, overall loan balances were only slightly higher than in the fourth quarter due to a high level of prepayments and some loans that we exited in line with our focus on credit quality. This was anticipated and guided to in our call last quarter.

On the deposit side, total deposits were $7.9 billion up by $152.2 million compared to $7.8 billion in the fourth quarter, primarily driven, as Carlos mentioned, by strong growth in international deposits. Our assets under management increased $148.6 million to $3.4 billion, driven by higher market valuations. As we've shared previously, we continue to see this business as an area of opportunity for us to grow fee income going forward increasingly in light of the opportunity in Venezuela.

Let's turn to Slide 5. Looking at the income statement, diluted income per share for the first quarter was $0.44 compared to $0.07 in the fourth quarter. Net interest income was $80.3 million, down $9.9 million from $90.2 million in the fourth quarter. This was primarily driven by lower average balances and yields on interest-earning assets largely attributable to the anticipated cuts of 50 basis points in market rates, impacting the portfolio for the entire quarter.

The decrease in net interest income was also driven by the asset mix reallocation. That translated into a contraction of our financial margin to 3.55% from 3.78% in the fourth quarter. Provision for credit losses was $7.8 million compared to $3.5 million in the fourth quarter. Noninterest income was $17.4 million, down $4.6 million from $22 million, primarily driven by the absence of the gain that we had in the fourth quarter from the sale and leaseback of 2 banking centers as well as lower securities gains this quarter compared to the fourth quarter.

Noninterest income this quarter includes securities gains of $516,000. Noninterest expense was $66.9 million, down by $39.9 million or 37.3% from $106.8 million in the fourth quarter. The significant reduction in noninterest expenses this quarter was primarily driven by our cost savings efforts, which included $3.3 million savings in vendor contract renegotiations.

The decrease in noninterest expenses in 1Q '26 was partially offset by $1.7 million in an impairment on investment carried at cost and $1.8 million in net losses on loans held for sale.

Pretax pre-provision net revenue was $30.7 million compared to $5.4 million in 4Q '25. As mentioned earlier, we have significantly reduced noninterest expenses this quarter which more than offsets the lower net interest income and noninterest income driving an improvement in PPNR. You can also see that ROA and ROE this quarter were 0.73% and 7.63% compared to 0.10% and 1.12%, respectively, and our efficiency ratio was 68.2%, compared to 95.19%. These ratios were primarily impacted by the increase in net income and significant decreases in expenses this quarter.

Turning now to Slide 6 to discuss our capital metrics. Our CET1 remains strong at 11.84% compared to 11.80% last quarter, mainly driven by lower risk-weighted assets and from net income during the quarter. were partially offset by $18.7 million in share repurchases and $3.7 million in shareholder dividends. We paid our quarterly cash dividend of $0.09 per share of common stock on February 27, 2026, and our Board of Directors just approved a quarterly dividend of $0.09 per share payable on May 29 of this year.

During the first quarter, we also repurchased 859,493 shares at a weighted average price of $21.77 per share compared to tangible book value of $22.38 as of March 31, 2026. This represented 97% of tangible book value and 95% of book value.

On Slide 7, we show our well-diversified deposit mix, along with the composition of our loan portfolio. Total deposits for the quarter were $7.9 billion, up $152.2 million or 2% compared to $7.8 billion in the previous quarter. As Carlos mentioned, this increase was primarily driven by the significant deposit growth in our international deposits as a result of Venezuela's economy starting to reactivate, which we believe presents a strong opportunity for us to pursue.

In terms of deposit mix, broker deposits totaled $548.1 million, up by $112.4 million compared to $435.7 million in the fourth quarter as we use mostly short-term funding to compensate for some large fund providers that left in the prior quarter. We also saw an increase in interest-bearing demand, savings and money market deposits partially offset by a reduction on noninterest-bearing deposits.

Total loans were $6.8 billion, up $56.5 million or 0.8% compared to $6.7 billion in the fourth quarter. This increase was driven by a combination of originations as well as purchases of selected residential mortgages during the quarter, which were largely offset by the higher prepayments we received as well as loan sales completed this period.

Next, on Slide 8, you can see the evolution of our net interest income. You can see that we maintained a healthy net interest margin despite this first quarter fully capturing the impact of 2 rate cuts towards the end of the last year and our asset mix reallocation. We continue to reprice our interest-bearing deposits during the quarter to maintain a healthy NIM and saw the cumulative beta at 0.48% since the rates down period started.

Our net interest income was also impacted by nonperforming loans and some of the exits of classified loans that I mentioned earlier. While this may have a short-term impact, it improves the long-term sustainability of our business.

Now I'd like to turn it over to Lee Ann who will speak a bit more about some of the updates we have made to our portfolio management processes as we continue improving credit quality.

Thanks, Shary, and thank you for having me on today's call. As Carlos highlighted, we are taking significant steps to improve our credit quality evaluation processes, which I'd like to highlight for you today.

To begin, we staffed a dedicated portfolio management team to improve the timelines of the collection of financial information from borrowers and for the escalation of possible issues to the credit team. We've also invested in additional training for both credit and line of business teams to improve the accuracy and consistency of assigning regulatory risk ratings.

We have further embedded new checkpoints throughout our monitoring process upon which updated risk rating models should be run and attested. Beyond that, we've made our review procedures more rigorous and risk focused. We redesigned our annual review format to drive deeper risk identification and recalibrated the review threshold from total credit exposures of $5 million to $3 million to expand portfolio coverage.

Subsequently, and with additional process and staff build-out, we expect to review all exposures over $1 million through our standardized review. We also introduced quarterly top 20 reviews across CRE, C&I and private banking segments to closely monitor our largest relationships. These discussions include risk ratings, exceptions and exposure strategy.

These quarterly meetings will be held for portfolio segments that may be deemed in higher-risk categories throughout the year. We have also increased the cadence of hosting multiple loan monitoring meetings. These meetings are for adversely classified loans with ongoing proactive strategy discussions focusing on restructures or obtaining additive credit enhancements where possible.

Finally, we're aligning our incentives with asset quality by incorporating portfolio management metrics into bank or conversation starting in 2026. Collectively, these steps provide stronger controls, better visibility and more hands on portfolio management.

Now turning to asset quality. As shown on Slide 10, nonperforming loans were up $4.7 million or 2.7% for a total of $176.1 million or 1.78% of total assets. During Q1 '26, downgrades to NPL were primarily driven by 3 relationships that included a combination of CRE, owner-occupied and commercial loans, and were offset by payoff and note sales as noted on the slide.

In the next slide, we have included similar information as it relates to the classified portfolio. During 1Q '26 downgrades to classified loans were primarily driven by the 3 relationships just mentioned in NPL as well as a large nondepository financial institution loan with underlying CRE property as collateral and one large single-family residential loan, which was adequately secured with real estate.

On this slide, you can also see the results of our efforts to reduce the loan balances in this classification during this quarter with loan payoffs totaling $59.5 million and loans sold totaling $65.7 million during the period.

Now moving into Slide 12, we discuss special mention loans and their key characteristics, including portfolio composition and collateral coverage. During the first quarter of 2026, downgrades to special mention were primarily driven by 3 CRE loans, partially offset by upgrades to pass totaling $67.3 million, this is based on new year end financial information that was received and analyzed.

As of April 22, special mention loans were reduced to $117.3 million due to a $30.9 million CRE loan sale and is projected to reach a further reduced level to $88.3 million as a result of an additional CRE loan exit of $29 million. This is expected in the coming weeks. Overall, these results reflect the proactive approach to credit monitoring, evaluation and resolution that we have taken to effectively manage risk across the portfolio. You will also see the impact of these efforts as we continue to exit these credits through paydowns, payoffs and loan sales with expected balances declining as a result.

And with that, I'd like to pass it back to Shary.

Thank you, Lean. Now moving on to Slide 13. Here, we show the drivers of the provision recorded this quarter an impact to the allowance for credit losses. The provision for credit losses was $7.8 million in the first quarter. The provision was driven by $6.3 million in additional reserves for charge-offs, a $1.7 million net increase in specific reserve allocation and $2.6 million attributable to changes in credit quality and macroeconomic factors. These increases were partially offset by a $2.9 million release related to held for investment loan volume changes.

During the first quarter of 2026, gross charge-offs totaled $9.1 million, which includes $4.4 million related to a commercial loan participation agreement that the borrower and the company agreed to wind down in 4Q 2025, and no further charge-offs are expected from this agreement going forward. The remaining charge-offs were related to one commercial relationship and indirect consumer loans. These charge-offs were offset by $1.9 million due to recoveries.

Lastly, the allowance for credit losses ratio was up slightly to 1.21% from 1.20% in the fourth quarter, primarily due to increases in specific reserves.

On Slide 14, you can see our outlook for 2026. For 2Q '26, we project loan balances to reach approximately $7 billion, driven by organic originations and selective residential loan purchases, which also support a shift towards a more granular portfolio. For the full year 2026, we expect annualized loan growth of approximately 7%. These expectations will be governed by 2 deliberate and nonnegotiable priorities.

First, we will continue to exit certain credits to further optimize our loan portfolio, which will offset a portion of organic production in the near term. Second, we will pursue future loan growth that is consistent with our risk appetite and supports the predictability of our core -- of our credit metrics.

On the funding side, we expect deposits to reach $8 billion by 2Q '26 and cumulative deposit growth between 8% to 10% for 2026. The confidence in our deposit growth outlook is supported by emerging opportunities in Venezuela, as Carlos mentioned, and our continued efforts to grow domestically.

We expect net interest margin to be in the 3.4% to 3.5% range in 2Q '26, stabilizing around 3.4% towards year-end, reflecting disciplined balance sheet management and pricing. From an expense perspective, we are projecting approximately $68 million to $69 million in expenses for 2Q '26, with quarterly expenses stabilizing around $68 million by the second part of the year, as we continue to make progress towards our target efficiency ratio of approximately 60%.

Lastly, we continue to believe that buying back our stock represents an attractive use of capital, and we expect to continue using a portion of our cash to directly return capital to our shareholders through repurchases and dividends.

And with that, I pass it back to Carlos for additional comments and closing remarks.

Thank you, Shary. As we wrap up today's call, I would like to reiterate, as shown on Slide 15, the continued progress we have made in stabilizing the business, optimizing our credit portfolio and growing sustainably. Our results this quarter reflect strong execution and tangible progress from the decisive actions we have taken over the past 2 quarters across these priorities.

As we look ahead, we will continue to prioritize building a healthier loan portfolio that is consistent with our risk capital and long-term goals. We will also continue our disciplined expense management efforts driving efficiencies across the organization. And lastly, we will emphasize growth in our core business with a clear line of sight to sustain credit performance. We will continue to strengthen our relationship-first model to enhance collaboration across our business lines to unlock synergies, proactively managed deposit funding cost and capitalize on strong deposit growth opportunities, including Venezuela.

We have a global franchise, a clear strategic vision and a disciplined execution plan. While there is more work ahead, we are excited about the opportunities and remain confident in our ability to deliver value for our shareholders over the long term.

With that, Shary, Lee and I will take questions. Operator, please open the line for Q&A.

[Operator Instructions] Our first question today is coming from Evan Lee from Raymond James.

So just want to start on expenses. So it looks like expenses trended a little bit better than the initial first half of 2026 expectation. Could you just give us some color into what is factoring in your outlook for the rest of the year?

Yes. Thank you so much for the question. So pretty much we accelerated some of the contract renegotiation that we have scheduled for later into 2026. So we had it completed in early 2026 and the runup rate seems to be closer to the $68 million for the entire year quarter-over-quarter. So that's a collective effort that we have done to improve expenses. Shary, I'm not sure...

Yes. Yes, Carlos, to complement that, I think it's important that we state that we're not looking into just a onetime cost reduction. We're looking more into sustainability quarter-over-quarter. So that's why you're going to see that the run rate that we have provided some guidance on it goes to the $68 million more or less in the upcoming quarters. as we continue to plan to cross the $10 billion threshold. I know we're at $9.9 million right now, but we continue to plan to cross that threshold. We're going to have some investments in people and technology. So it means that we have to make sure that we materialize those cost savings initiatives that we have identified so that we get to that run rate of $68 million that we have guided to.

I guess the takeaways that those savings are durable throughout the entire 2026.

Got it. That's super helpful. And then I guess switching over to capital. So it looks like you used a large utilization -- a large portion of our utilization this quarter. Just kind of curious on what the appetite is there moving forward? I know you've mentioned it was an attractive option.

You mean in terms of the buyback, the leftover of the buyback right now is $21 million, and we are planning to complete the buyback through Q2.

And we have -- I mean we definitely saw opportunity, we believe, in the bank, and we saw a lot of value and opportunity in the first quarter because we were trading below tangible book. We're now over tangible book but we continue to see opportunities through the buyback program. So as Carlos mentioned, the plan is to continue with the plan throughout the year with the remaining portion.

Next question today is coming from Russell Gunther from Stephens.

This is Nick stepping in for Russell. It's good to see progress on special mention, especially with that $31 million sale already closed, but looking ahead to that additional CRE that you guys have targeted for mid-2Q. Does that effectively wrap up the heavy lifting on derisking? I'm just trying to gauge if there are more bulk exits on the horizon or if the portfolio is finally where you want it to be.

Sure. Thank you for the question. And the exercise that we have been doing and probably you noticed the progression has been risk identification, we exit the relationships that we consider. They were critical exits in Q4 2024. And from now on, it will be a risk calibration exercise. So what we place in available for sale reflects a combination of line items that are either out of footprint or they are too bulky with our new risk appetite.

So the progression will be that those line items will continue to fade away out of the balance sheet. Right now, we executed on the 30 and there is another exit of coming weeks, so that will left with 130 in available for sale, but the plan is to continue to execute and the path is to create a portfolio that is more granular going forward. So you minimize the swings between the risk rating categories.

Yes. And Carlos, to complement that, too, if we look also in the categories of classified or NPLs, we are looking into different paths to exit those some have opportunities for upgrades, which we'll look into, but others have opportunities, whether it's to refi and so on. So when we think about what is the derisking that we have left over the portfolio, as Carlos mentioned, we have the available for sale that we plan to exit and then we have the reductions of the classified portfolio as well.

Got it. That's all I have.

Next question today is coming from Wood Lay from KBW.

Wanted to start on the net interest margin in the quarter. It came below the guide. You all had given for the quarter, and it looks like it came from lower loan yields. One was just wondering, were there any elevated interest reversals in the quarter? And two, is new loan production coming on at lower yields just given the adjustment and the risk appetite and trying to put on cleaner and safer credits?

Sure. And Woody, what I'm going to do is I'm going to walk you through some of the elements of the NIM that may be helpful to get to that response. But the first thing is we had a change -- I mean, we have the repricing of the loan portfolio due to the cost as we had planned for. So that did happen, and that's why we had guided to a lower number versus the NIM that we had in Q4.

But then after that, during Q1, we had a different asset mix. You're going to see that we had a higher proportion of investments available for sale. We had some impact due to the timing of the funding of the loan growth, which occurred later in the quarter. And then additionally, to your point, we had onboarding of production with a quality that's aligned with the current risk appetite that will come and is expected to come with an overall lower yield than the existing portfolio.

And then on top of that, we also had an impact of approximately 3 basis points associated to the number of days in the quarter versus the last quarter.

I think you also had a question regarding if we had certain impacts of nonaccrual. I don't -- I didn't see anything significant this quarter. But if we compare that to the last quarter, last quarter, we did have some impact due to collections or recoveries on NPL loans. So trying to create something comparable for apples-to-apples. You're going to see that because we didn't have that in Q1, the NIM is slightly lower as well. So I hope that helps with that bridge.

Woody, the other item that I would like to emphasize is that this guidance that we're providing and we're pending still to see the progression. International deposits started to resume. And as you know, they come with a lower cost of funds, closer to the 1% or in some cases even lower. So we started to see that coming over. As we started to see a significant progression, we started to see a clear path towards accumulation of those deposits. that may have an impact on the cost of funds and will trigger a recalibration on the guidance for the financial margin.

So for the time being, the financial margin projected includes the lower loan spreads. Remember that the production that we're looking at right now, it's probably closer to the 200 basis points, so even lower in some cases. over software. And generally speaking, what we'll have is that if the international portfolio of deposits started to increase furthermore, we'll have additional savings in the cost of funds. But that's something that we're carefully assessing right now. We have a good quarter from that perspective and looking forward to see what's the accumulation of those line items.

And Carlos, to add to the -- now on the deposit side, given the uncertainty in the rate environment, although we are expecting some positive improvement in terms of cost of funds due to the maturities of customer time deposits and broker deposits as it relates to other interest-bearing products there's still uncertainty as to the timing of those -- as to the timing of the repricing of those deposits. So it's something that we will continue to look and model, but that definitely will impact the guidance to the NIM.

That's really helpful color. I appreciate you walking me through that. And then maybe to follow up on the international deposits. As you mentioned, the growth was really impressive as Venezuelan market is opening up. But how are you shifting the strategy on your end? Do you need to hire more people that call in that market? How do you unlock the potential of Venezuela? And could you also just remind us of the cost of those Venezuelan deposits or the cost on the incremental deposits that would be helpful.

No. Thank you so much for the question. So definitely, we are looking to increase the staff to help us with these efforts. -- something that is really important is that we have seen a progression in the way that the jurisdiction is being looked from the perspective of sanctions. So progressively, we have seen a path towards reducing the number of sanctions towards Venezuela.

And the Central Bank from the country having access to their phones. So therefore, there is an incremental flow of funds through the economy, and this has happened in conjunction with the U.S. treasury department. So we're seeing that positive uptick looking to increase the staff in the international side.

And we also resume in our outreach to the region since now traveling into the country is much easier now than it used to be before. And the cost of funds right now for the entire international portfolio sits around 130, actually even a little bit lower 115 maybe. And then we have the incremental deposits that we're getting are actually sub 1%.

Got it. And then maybe just last for me. on credit, thinking about the charge-off expectations going forward, it's good to see the quarter-over-quarter improvement over charge-offs. But there's the noise in the Middle East and some of the inflation to input cost, does that make achieving resolution for some of these credits more expensive, and we would expect charge-offs to go up? Or any thoughts there?

So we have no direct exposure to exploration or extraction on the oil piece. So we're obviously looking at our overall portfolio to see impact there. But -- what I would say from a high level on our overall charge-off is that we're predicting around 30 to 35 basis points, which is in line with our guidance. We're not seeing any need for elevation at this point.

Got it.

We reach the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you, everyone, for joining our first quarter earnings call as well as your continued support and interest in Amerant, and have a great day.

Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to the Amerant Bancorp Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to your host, Laura Rossi, executive Vice President and Head of Investor Relations. Please go ahead, Laura.

Thank you, Kevin. Good morning, everyone, and thank you for joining us to review Amerant Bancorp's Fourth Quarter and Full Year 2025 Results. On today's call are Carlos Iafigliola, our Senior Executive Vice President and Interim CEO; and Sharymar Calderon, our Senior 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 the 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 interim CEO, Carlos Iafigliola.

Thank you, Laura, and good morning, everyone, and thank you for joining us today to discuss Amerant's fourth quarter and full year 2025 results.

As we begin today's call, I would like to turn to Slide 3 and frame our discussion around the clarity of our direction and the disciplined execution underway across the organization. Our strategic direction remains clear. In December, the Board approved our 3-year strategic plan. Our plan is built on a disciplined and sequenced road map in order to stabilize, optimize a disciplined and sequence road map and grow the organization. This strategy reflects our confidence in Amerant's future and our ability to significantly enhance shareholder value in the coming years.

We believe human capital is a key enabler of our strategic plan. We intentionally focused on our strategy on leveraging Amerant intrinsic values, which encourages teamwork, support talent development and retention that promotes effective challenge at all levels of the organization. We're investing in the development of our teams, promoting talent recognition and ensuring that our workforce remains stable, supported, aligned and empowered to contribute to our long-term success.

As part of the stabilization phase, our immediate priorities are focused on strengthening the foundation through the following high impact areas.

Credit transformation. We concentrated on restoring predictability to our loan portfolio's credit performance. We have taken a decisive approach to review our loan portfolio and work diligently on the resolution of our credit issues to improve asset quality. We are focused on aligning our credit portfolio with our strategic objectives, such as targeting exits from noncore markets and large exposures as well as avoiding migration into criticized buckets. At the same time, we made significant progress to improve our risk selection practices by making disciplined decisions aligned with our risk appetite.

Our second point is balance sheet optimization or growing wiser. We identified components that expanded Amerant's assets above the $10 billion watermark and reduced noncore funding by quarter end to rightsize our balance sheet and improve key metrics.

Our third initiative is operational efficiency, assessing processes and leveraging our technology tools to improve productivity, reduce cost and enhance client experience. We have initiated several actions resulting from our cost review process, and we'll continue to provide updates in the following quarters. Notably, we have launched an AI project aimed at discovering use cases that will assist in optimizing our processes.

We remain confident in the results of our ongoing efforts to strategically reposition Amerant. Accordingly, we have approved a share repurchase program recognizing the intrinsic value of our shares. Our continued momentum will allow us to advance with clear direction and stability, position the organization for sustained growth and long-term value creation.

To our investors, clients and team members, thank you for the continued partnership and confidence in our future. We believe we have the right people, the right plan and the right focus. We are aligned, we're committed and we are executing with discipline. I'm confident in where we are headed and proud of what we are building together.

Before I turn it to Shary, I want to briefly address recent events in Venezuela, considering our historical customer base and upcoming opportunities there. Our view on these events may impact Amerant is positive. We almost have $2 billion in deposits, significant AUM and close to 50,000 customers in this country.

We see meaningful opportunities for growth in a market we know exceptionally well across both in the wealth and deposit flows as well as commercial banking relationships. We expect commercial activity to pick up again after the administration recently announced plans to restore U.S. oil extraction licenses and return them to American companies. We suggest that a key sector of Venezuela's economy could reopen soon.

We believe Amerant is well positioned to support international oil industry participants through account onboarding, payment processing and transactional services tied to activity between operators and subcontractors. We have also seen an incremental value and trading flow of Venezuela bonds through our broker-dealers since early January. We are closely monitoring the situation in the country connected with current and potential customers and assessing opportunities. We will continue to provide updates as appropriate.

With that, I will turn it to Shary to review our financial results for the quarter.

Thank you, Carlos, and good morning, everyone. Let's turn to Slide 4, where you will see the highlights of our balance sheet. Total assets were $9.8 billion as of the end of the fourth quarter, a decrease from $10.4 billion as of the end of the third quarter. The decrease was primarily driven by the reduction of wholesale funding through the use of our ex liquidity and sale of investments as well as reduction of higher cost deposits.

Cash and cash equivalents decreased $160.7 million to $470.2 million compared to $630.9 million in the third quarter. Total investments were $2.1 billion, down from $2.3 billion in the third quarter. Total gross loans decreased by $244.6 million to $6.7 billion from $6.9 billion in the third quarter as a result of higher prepayments and repayments compared to the loan production in the quarter as we focused on credit quality improvement efforts.

On the deposit side, total deposits decreased by $514 million to $7.8 billion compared to $8.3 billion in the third quarter, although as a result of our efforts to reduce higher cost deposits and broker deposits. Broker deposits continued to decrease from $550.2 million in the third quarter to $435.7 million as of the fourth quarter. As just mentioned, we decreased FHLB advances by repaying $119.7 million in long-term advances as we continue to execute on prudent asset liability management and use excess liquidity at hand to optimize our balance sheet.

Our assets under management increased $87.2 million to $3.3 billion, primarily driven by higher market valuations and net new assets. As we've shared in past calls, we continue to see this as an area of opportunity for us to grow fee income going forward.

Let's turn to Slide 5. Looking at the income statement. You will see that diluted income per share for the fourth quarter was $0.07 compared to $0.35 in the third quarter. Net interest income was $90.2 million, down $4 million from $94.2 million in 3Q '25, primarily driven by a smaller balance sheet size, the timing of repricing of assets versus liabilities after the interest rate cuts and lower impact versus prior quarter due to collection efforts over previously classified loans.

The net interest margin decreased to 3.78% from 3.92% in the third quarter. Provision for credit losses was $3.5 million, down $11.1 million from $14.6 million in the third quarter. Noninterest income was $22 million, up from $17.3 million in the third quarter, driven by the gain on sale and leaseback of two of our banking centers, higher gains from available-for-sale securities sold and lower derivative losses. Core noninterest income excluding noncore items was $16.9 million.

Noninterest expense was $106.8 million, up $28.9 million from the third quarter, primarily due to valuation expenses on loans held for sale, contract termination costs, staff separation costs, impairment charges on an investment carried at cost and intangible assets related to the mortgage company's wind-down. Excluding noncore items, core noninterest expense was $77.6 million.

You can also see that ROA and ROE this quarter were 0.1% and 1.12% and compared to 0.57% and 6.21%, respectively, and our efficiency ratio was 95.9% compared to 69.84%. These ratios were primarily impacted by the decrease in net income and the increase in expenses this quarter.

Turning on to Slide 6, you can see our non-GAAP metrics. Pre-provision net revenue was $5.4 million compared to $33.6 million in 3Q '25. Excluding noncore items in noninterest income and expense, core PPNR was $29.3 million compared to $35.8 million in 3Q '25. The decrease in core PPNR was primarily driven by higher noncore expenses in the fourth quarter, which were partially offset by higher noncore income items in the same period. A reconciliation of core PPNR and the impact on key ratios is shown in Appendix 1 included in this presentation.

We have the following non-core items during the fourth quarter: noninterest income of $5.3 million, which included a $3.3 million gain on the sale and leaseback of the two banking centers located in South Florida; noncore noninterest expenses of $29.2 million, which included $14.9 million in losses on loans held for sale, which include [ $13.8 million ] related to our year-end valuation allowance on loans classified for sale carried at the lower of cost or fair value; $7.5 million in contract termination costs as part of our restructuring costs aimed at improving the company's cost structure. These initiatives include terminating certain rights and benefits associated with existing advertising contracts and a third-party loan origination agreement under our white label program; $3.8 million in separation costs, primarily in connection with the leadership transition in the fourth quarter; $2.5 million impairment charge on an investment carried at cost and $500,000 in an intangible asset impairment related to the downsizing of Amerant Mortgage.

Adjusting for these noncore items, our core efficiency ratio was 72.68%, core ROA was 0.84% and core ROE was 8.98%.

Turning to Slide 7, which shows the quarter-over-quarter comparison of some of our capital ratios. Our CET1 was 11.8% compared to 11.54% last quarter mainly driven by lower risk-weighted assets and from net income during the quarter while partially offset by $13 million in share repurchases and $3.7 million in shareholder dividends.

We paid our quarterly cash dividend of $0.09 per share of common stock on November 28, 2025, and our Board of Directors just approved a quarterly dividend of $0.09 per share payable on February 27 of this year. During the fourth quarter, we also repurchased 737,334 shares at a weighted average price of $17.53 per share compared to tangible book value of $22.56 as of December 31, 2025. This represented 78% of tangible book value.

Turning now to Slide 8 where we show our well-diversified deposit mix along with the composition of our loan portfolio. Total deposits for the quarter were $7.8 billion, down $514 million or 6.2% compared to $8.3 billion in the previous quarter. We had decreases in every category as we reduced higher cost deposits but had a slight increase in customer CDs. Total loans on the other hand were $6.7 billion, a decrease of $244.6 million or 3.5% compared to $6.8 billion, primarily due to decreases in CRE and owner-occupied loans.

Next, on Slide 9, you will see additional information related to net interest income and net interest margin. This quarter, we continue to reprice our interest-bearing deposits to maintain a healthy NIM and saw the cumulative beta at 0.4 since the rate down period started.

Moving on to asset quality. As you can see on Slide 11, nonperforming assets increased to $187 million or 1.9% of total assets compared to $140 million or 1.3% of total assets in the prior quarter. The increase in nonperforming assets is the result of rigorous efforts by portfolio management, credit administration and credit review, complemented by an independent third-party firm brought in to ensure timely reviews of updated financial information and risk rating including the identification of any possible deteriorated conditions to allow us to be more proactive in expediting resolution.

As disclosed before year-end, these reviews covered approximately $5.3 billion or [ 85% ] of the commercial loan portfolio through covenant testing, annual reviews or limited financial reviews. The remaining portfolio not covered by the reviews consists primarily of small balance loans that are evaluated through payment performance, recent originations in 2025 and loans secured with cash or investments as collateral. We will continue our scheduled review process throughout 2026 and we'll prioritize efforts on proactive credit quality and portfolio management measures.

Now moving into criticized loans. On the next 3 slides, we provide details for nonperforming, classified and special mention loan movements during the quarter. In the first slide, we show the composition of our nonperforming loans at the end of the fourth quarter. We have included details of the sufficiency of collateral coverage and the type of individual evaluation performed over them.

During 4Q '25, downgrades into nonperforming loans were primarily in the commercial Florida portfolio and certain other loans that have tangible collateral. You will also see the results of efforts to exit these credits via paydowns, payoffs and loan sales, with balances declining now in January to $155 million as a result of this work.

In the next slide, we have included similar information as it relates to the classified portfolio. During 4Q '25, downgrades to classified loans were primarily driven by CRE loans in Florida and Texas, commercial Florida loans and certain other loans that have tangible collateral. In this slide, you will also see the results of the efforts to reduce the loan balances in this bucket by now in January 2026 when 4 loan sales closed totaling $66 million. We continue to work on the exit of the remaining $15 million credit, which is expected to occur during the first quarter of 2026. Classified loans net of held-for-sale loans closed at $274 million.

In the next slide, we cover special mention loans and their characteristics as it relates to collateral coverage. During 4Q 2025 downgrades to special mention were driven by 1 CRE Texas loan and 1 CRE relationship with collateral diversified in different geographies. Overall, this composition reflects the disciplined approach to credit monitoring, valuation and resolution as we continue to proactively manage risk across the portfolio.

Now moving on to Slide 15. Here, we show the drivers of the provision recorded this quarter and impact to the allowance for credit losses. The provision for credit losses was $3.5 million in the fourth quarter and was comprised of $7.9 million in additional reserves for charge-offs, $800,000 in net change in specific reserve allocation, offset by releases of $3.6 million due to credit quality and macroeconomic factors, $2.3 million due to the reduction in loan balances. In addition, we recorded $700,000 for unfunded loan commitments.

During the fourth quarter of 2025, gross charge-offs totaled $29.5 million related to 5 commercial loans totaling $22.3 million, in direct consumer loans totaling $1.5 million, 1 CRE loan totaling 900,000 and multiple commercial loans totaling $4.8 million. These charge-offs were offset by $11.1 million due to recoveries, mainly the recovery of $8 million that we had previously disclosed in the 3Q 25 10-Q. Lastly, the allowance for credit losses coverage ratio was down to 1.20% from 1.37% last quarter, primarily due to charge-offs of specific reserves. Excluding specific reserves, the coverage ratio decreased slightly from 1.23% to 1.20%.

In Slide 16, we provide the following regarding financial expectations. In the short term for 1Q '26, we are projecting loan balances at similar levels as of 4Q '25 as excess of credit would offset loan production. However, growth for the year is estimated between 7% to 9% with the higher end driven by funding of existing lines. Our projected deposit growth is expected to match loan growth. We continue to focus on improving the ratio of noninterest-bearing to total deposits and the overall cost of funds.

Net interest margin is projected to be in the 3.65% to 3.70% range. We are projecting expenses of approximately $70 million to $71 million in the first half of 2026, progressively reducing to $67 million to $68 million at the end of the year. We intend to continue executing on prudent capital management, balancing between retaining capital for growth and buybacks and dividends to enhance returns.

And with that, I pass it back to Carlos for additional comments and closing remarks.

Thank you, Shary. As we close today's call, let me point out Slide 17, where I would like to reaffirm the priorities shaping our strategic execution and the fundamental advantages that continue to differentiate Amerant. Our capital levels remained strong. Our net interest margin continues to stand out, and we see meaningful potential to expand fee income as asset management and treasury management continue to grow. We're also driving greater efficiencies across the organization with disciplined expense management.

Central to all this is an elevated focus on improving predictability of credit quality and enhancing asset quality to support sustainable performance. During the quarter, we took focused deliberate action to reinforce risk management and strengthen our credit processes. These enhancements demonstrate our commitment to resolution, allocating resources where they matter the most and ensuring the portfolio remains resilient. Although these measures influence results this period, they position us well and remain confident in both the durability of our franchise and the opportunities ahead.

Looking ahead, our operating focus is firmly aligned with priorities we have shared: advancing a high-quality loan pipeline supported by disciplined underwriting, strengthening asset quality through a disciplined relationship-driven credit culture and strong monitoring process executing cost efficiency initiatives designed to deliver ongoing and recorded savings, deepening core deposit relationships to increase share of wallet, maintaining strong capital and shareholder returns, including our dividend and authorized share repurchases.

Thank you for your continued support as we execute on these commitments. So with that, I will stop. Shary and I will take questions. And Kevin, please open the line for Q&A.

[Operator Instructions] Our first question is coming from Michael Rose from Raymond James.

I guess the main question here is -- and I really appreciate all the color that you guys just gave here on the call. But you have this 3-year program. From the outside looking in, what can we use to kind of measure the progress. Again, I know there's a lot of moving pieces here, a lot of heavy lifting. But again, as analysts and shareholders from the outside looking in, whether it's at the end of year 1, year 2 or the full 3 years, what kind of metrics can we look at and things can we look at to get a better handle on if your strategy is now successful after the prior efforts over the past couple of years?

Thank you, Michael, for the question. I believe one of the critical items that we're trying to address this quarter is its credit quality and that, I believe, the improvements of those metrics related to either migration and key credit metrics would be the most important items to define success. After regaining confidence on the migration and the risk rate in accuracy is critical for us, and that's most of the work being placed during the third quarter and the fourth quarter we're precisely to accomplish that objective.

So going forward, a critical measure for success for Amerant after several quarters missing the guidance and estimates related to credit quality is precisely regaining that confidence. So whenever we discuss specific line items on the credit quality buckets, we really want to accomplish the objectives that were given. So I believe, in my mind, that's one of the critical objectives.

Secondly is a disciplined approach towards loan origination. Those two items in my mind are critical at this point. And the second one will help us with the first as we improve a disciplined approach towards loan origination. As you see that there is a consistency in the approval process, underwriting, we'll get better predictability on the credit bucket. So Shary, if you want to complement.

No. Yes, Carlos, I think that's right on point. To complement what Carlos was saying and, Michael, to your point, as a strategic plan, we have long-term initiatives. But as we think about the immediate term initiatives, I think we can summarize them into two buckets: number one, credit; number two, operational efficiencies.

In terms of credit, we have to do 4 steps: continue the path to reduce the size of the criticized bucket, which is what Carlos was mentioning in terms of measuring how we're reducing those balances there; second, being proactive and avoiding migration into the criticized bucket so that outflows are greater than inflows, if any; third, continue to strengthen portfolio management and credit administration to make sure that we have a very healthy risk-weighting process; and four, that Carlos mentioned as well, we have to be selective with onboarding into our balance sheet. We have to stay disciplined and within our risk appetite.

And then as it relates to operational efficiencies, I think it goes back to ROI and being selective on the items that are really move the needle. But at the same time, we have to balance with investments that are foundational for us as we continue our growth plan. So we have ways to measure that on the credit side, for sure, looking at the criticized buckets. And then as it relates to operational efficiencies, it would be efficiency ratio and ROE.

Okay. That's very helpful. I guess the follow-up would be when do you -- it sounds like maybe at least these next couple of quarters are going to be just kind of working towards stabilization, getting the asset quality down, starting to regrow the balance sheet. But as we get into maybe year 2 and year 3, have you guys outlined any financial target, whether it be ROA, efficiency ratio?

Just to help us from a glide path perspective and given that it has been several years of these turnaround efforts, I think providing some of those targets and making progress towards them is kind of what I was referring to in the first question. Is that something you'd be willing to share today? I know it's early days since the whole transition has started, but I think that would certainly help investors get a little bit more confident, particularly after the move that we've seen in the stock here in the past you have 60 to 90 days.

Yes. No, definitely. So when it comes to key financial metrics, our strategic plan, which has, I guess, four key topics and then each of them has different type of KPIs, return on asset is definitely one that we really want to accomplish by year-end. Getting as close as possible to the 1% is something that we constantly are discussing internally and how to move the different levers to get into that specific number. And when it comes to efficiency ratio, our goal, and with all the actions that you guys seen on the on Q4, we're precisely geared towards the accomplishment of the 60% or getting as close as possible to the 60% at year-end.

I believe this has been two topics that we have been discussing for a while. I believe there has been several earnings calls that we have been flying around the airport of these two numbers but very difficult to land the plane. But we really are looking at everything that we can in terms of what will take us there. And in my mind, those will be the critical measures, at least for 2026 to accomplish. Evidently, as we navigate into the strategic plan, our 3 years get us to compare Amerant to other peers that have a significant price to book. And that will get us into a lower 60% in the long term and a higher of 1% for 2027 and 2028.

So those are ultimately goals. I believe that -- and a way to think on this is immediately for 2026, aspirational goals is getting to the 1% and 60%. For 2027, it's even better than 1 and improving to 60% and reaching, I believe, aspirationally what everyone wants is to break the 60% and get into 55% to 58% in the long term. Those are our exploration goals and those are the key metrics that we'll be focusing really, really closely.

Your next question is coming from Russell Gunther from Stephens.

I wanted to follow up on the expense conversation. I appreciate the glide path that you guys provided for '26. Can you give some color on the specific drivers that are going to get us from point A to point B.? And then as we think about 2027, how should we think about sort of an annualized 4Q '26 number and a good growth rate off of that, if any?

Sure. Russell, I think, as I was mentioning a little bit earlier, it goes back to ROI and the contributions that they provide to the company. And we want to look at buckets of where we're seeing all of these opportunities or where we have been executing on these opportunities, I would say, first, we're reducing higher cost deposits that not only impact the NIM but that could also have high earnings credit. So this is an impact to noninterest expenses. And we see definitely room for opportunities to improve that.

But I also think that when we looked at the marketing and advertising spend, we definitely saw opportunities to optimize our cost structure for 2026 and going forward. So what this will allow us is while some of these expenses will still be noticed in the first half of 2026, we will see an improvement in the second half of the year, which is why we're identifying a progressive reduction of expenses going forward.

The other thing is from a hiring perspective, we certainly continue to hire. But what we're doing is we're being very strategic and making sure we're disciplined as to the hiring to make sure that everything is aligned to our strategic plan.

And I think you had a second question related to what the normalized expense would be. I think we gave some guidance as to the $67 million to $68 million for 4Q. That's, I guess, what I would call it a bit of a normalized expense level. And the other way to see it is, as Carlos was mentioning, we're targeting to hit the 60% efficiency ratio and, post that, improve that metric. So I guess doing the math backwards, that's what we're seeing from a normalized expense standpoint.

Thank you, Shary. I believe it's important to also make the point that once we reach the $67 million, $68 million, the expectation is that those expenses for 2027, 2028 on or our key metric being the efficiency ratio for the long-term sustainability is breaking the 60%. So for 2027 and 2028, if we accomplish the 55% to 60% efficiency ratio for those years, you will expect to see around $70 million per quarter. But that would be once we cross the 2026 and going into 2027 and 2028. So those are the type of things that we have been discussing.

When it goes to expenses specifically, you see the actions that we took in the end of the quarter 2025. And those contract terminations and all those actions will set the plate for a leaner cost structure especially in the marketing space. We believe we needed to rationalize certain partnerships and reduce the activation component. I believe the brand awareness that we needed to accomplish was already done, and we see already the impact of that. So I believe there is no need to overlap certain partnerships.

I believe we have to stick to core partnerships and monetize on them as opposed of creating an overlap or diminishing the impact of additional partnerships. So only doing that going forward, just for 2026, that will imply savings of more than $6 million in marketing expenses. So just giving you a sense of from where the cost reductions are coming.

Yes. That's very helpful. Switching gears to kind of an asset quality discussion. I appreciate what you've already shared with us. As we look at NPLs and classified levels intra-quarter, they are above where they were at the end of the third quarter. How do you see that progressing over the course of how we end the first quarter, how we end the year? Would you expect it to be linear? And then kind of what level of provisioning do you think will be necessary to address related losses and provide for that high single-digit loan growth guide?

Sure, Russell. So as it relates to migration during the first quarter, this was the result of the significant coverage that we had over the portfolio as it relates to credit reviews. Whether it was done through the first line or whether it was under credit reviews, the penetration over the portfolio as it relates to risk rating was very significant. And after that, the result of that is now we have a full understanding of the characteristics of these loans.

It allows us to get to a resolution and expedite resolution and address the buckets both of criticized and, I think, importantly, being proactive and avoiding loans getting into those criticized buckets. So as we think about an outshift into 2026, what we're seeing is outflows outweighing any type of inflow or any type of migration that we can see into those buckets. So we do project an improvement in the criticized portfolio.

You had a question as it relates to provision. Provision has multiple components that we're thinking about in the full year. There's a portion related to growth, and I know that in the first quarter we're projecting to be overall flat. But we do have annualized growth. We have to build the reserves for that loan growth. And also, we also have some weight as to the composition of that growth. To the extent we have a higher composition of C&I, typically, those loans require higher coverage level. So we're expecting that to be seen in provision.

And then we have some loss content that is embedded within the provision as well. Within all of that, we could be seeing something in the 40 to 45 basis points from a P&L impact throughout the year. But again, it's not lost content only. It's building up reserves and other factors, any macro factors that could impact the portfolio as well.

And to complement Shary, I believe most of the effort -- if you think on the progression of the efforts that we have been doing is risk identification, trying to be upfront with the different credit buckets and thereafter trying to exit things that could potentially migrate into this bucket. So our idea is that we're trying to prevent that further items will fall into this bucket. We have to become more proactive with the credit risk management process, and we are working towards that.

Okay. If I could sneak one more in. I appreciate your prepared remarks around events in Venezuela. So it looks like international deposit levels were flat this quarter. Wondering if you could share how that has trended so far year-to-date. Also, if you could touch upon how recent current events are likely to impact your international deposit gathering efforts specifically. And then big picture sounded like you view current events as a potential tailwind at Amerant. Is there anything that would be cause for concern?

Yes. No, good question. I believe, historically, we have been very well positioned to leverage on our international capacities. The bank, as you know, is vertically integrated, especially on the personal side to onboard customers to have their banking needs and the investment needs all under the same umbrella. I believe that's a great thing that we have. And traditionally, our international customers have been using these platforms throughout the year.

So I believe it's still too soon, but we see very good signs and very fast progression. We have engaged with economists and with different advisers to understand the situation down there. And I believe it's very promising. The events are moving really, really fast. We believe there is a great opportunity that we cannot size as of now. But we see that the oil production in the country will definitely surge and will create the opportunity for regaining wealth in the country that will, in turn, create opportunity for Amerant to increase deposits on the international side.

So we are assessing very closely. It's still too soon to understand the impact. But we believe once it starts, it may create a positive impact for the international depository base.

And Carlos, to complement that, too. In the fourth quarter, we did see an increase in the personal account balances on the international side offset with some commercial reductions. The commercial reductions are typically occurring and that's part of the business as usual for the companies. So nothing extraordinary that we're seeing there. But I think the important piece as Carlos was highlighting is we see a lot of opportunities. Although it's early to tell, we see opportunities on the deposit and AUM side. But we continue to plan on focusing on the deposit and AUMs and not looking into the lending strategy at all.

[Operator Instructions] Our next question is coming from Woody Lay from KBW.

Wanted to start on deposits. It looks like core deposits were down about $40 million. And I was just wondering how much of that was intentional runoff? And now that assets came below $10 billion at the end of the year, do you expect bringing those deposits back on balance sheet?

Right. No, good question. I believe those -- and we made comments along the presentation regarding to optimize the balance sheet composition. We analyze the balance sheet in quarter end -- or actually in Q4. And we started to discuss once I took over the components and trying to understand if we really were a $10 billion institution or not. So understanding the excess liquidity that we carry and understanding the inorganic source of deposits, we decided there is no need to carry the burden of being a $10 billion financial institution for quarter end if the sources that are taking us there are not organic or they are not part of our core business.

So we decided to exit this specific deposits at quarter end and accomplish the goal of being under the $10 billion. So now if we're going to declare Amerant to be over the $10 billion, we really want to make it because they have the right fundamentals behind that. not just because of the sake of being over the $10 billion. So I believe it was a process of rationalizing and understanding what are the true drivers behind the growth and not just because of the sake of being $10 billion.

Got it. And then you still have an elevated broker deposits [indiscernible]. Is the intention to continue to remix that in '26 and likely stay [ $15 billion ]?

Yes. Well, we definitely -- remember, we will use broker deposits as an ALM tool. So if there is an opportunistic approach on that side to lock in long interest rate at an advantageous level for the bank, we'll reuse that line item to hedge. But the intention is not to use it as a source of increasing the bank. So you can expect low levels going forward.

Got it. And just last one is a quick follow-up on expenses. Do you expect any elevated restructuring charges in 2026? Or do you feel like you have all of that behind you now in the fourth quarter?

So great question. Our internal discussions have been centered about diverting or stop using non-GAAP metrics as much as we can. I believe there was an excessive usage of non-GAAP metrics to track the performance of the company. That creates a lot of noise and a lot of add-backs and a lot of distraction. So we are actually transferring to the scorecards to, either the Executive Committee and the bank in general, metrics at our GAAP that we can actually trace through our financials and with no need of additional explanations. So all the efforts that we did in Q4 were precisely related to trying to have a clean 2026.

We reached end of our question-and-answer session. I'd like to turn the floor back over to management for any further closing comments.

Thank you so much for connecting today and the call. Kevin will close out the call. And have a great day.

Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to the Amerant Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Laura Rossi, Head of Investor Relations. You may begin.

Thank you, Kate. Good morning, everyone, and thank you for joining us to review Amerant Bancorp’s third quarter 2025 results.

On today's call are Jerry Plush, our Chairman and CEO; and Sharymar Calderon, our Senior 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 Amerant's third quarter 2025 results. First, I want to thank everyone for adjusting their schedules to accommodate the rescheduling of our earnings call this quarter. We intend to establish this new time frame as when Amerant will report going forward. So our team has the appropriate time to prepare each quarter end. We greatly appreciate your understanding.

So similar to the approach we implemented last quarter during today's call, I'll start with some overall comments, and then Shary will provide commentary on results and asset quality. Then I'll provide several prepared remarks on some strategic updates in order to allow time for Q&A. You will note today that there are several new slides in the deck this quarter that we think show capital levels and asset quality quarter-to-quarter comparisons in an easier to follow format.

So, while we continue to make progress in key areas of our strategy, our primary focus this quarter was on asset quality over loan growth. I'll provide more details on this in a minute, but the increase in nonperforming asset levels must be immediately addressed, and I will cover the plan here in the fourth quarter to approach achieving reduced levels in the coming quarters. Clearly, the higher provision from a detailed loan-by-loan review kept us from achieving consensus or better overall results this quarter. We will also provide some color on progress so far here in the fourth quarter on this call.

Otherwise, you will see solid performance as shown by an outstanding net interest margin and higher net interest income. Shary will cover the other P&L items in detail shortly. But I do want to note in advance that while core expenses rose $2 million over the prior quarter. This increase was from legal expenses related to trust services and to asset quality resolution efforts as well as higher consulting expenses in connection with our AI governance build-out and ERM enhancements, and we do not expect a continuation of expense at these levels in the fourth quarter.

Regarding expenses, please note that in my closing remarks, I'll also provide more color on our planned expense reduction initiatives already underway, which will begin to be seen in the fourth quarter and throughout 2026.

On the funding side, our core deposits increased while total deposits remained stable given the planned reduction in broker deposits we previously indicated on last quarter's call. We continue to focus on the quality and mix of deposits as a priority.

International Banking continues to strengthen its presence across LatAm. It is worth noting that approximately 50% of the new accounts opened during the third quarter of 2025 originated from other countries, most notably Argentina, Guatemala, Costa Rica, Bolivia and Peru. This expansion reflects the success of our business development initiatives, client relationship management and targeted marketing efforts throughout the LatAm region.

Loans declined by 3.4% quarter-over-quarter, as again, our focus was on AQ over growth, but our pipeline build is underway here in the fourth quarter. Approximately $288 million of the loan decline in 3Q was related to payoffs and asset quality-related sales. So as I promised earlier, we'll turn back to asset quality and addressing asset quality head on was and will continue to be our top priority.

3Q was the quarter with the highest volume of annual and limited reviews along with covenant testing with over $3.5 billion in loans review. We did see continued deterioration in both classified and criticized. And while we exited $35 million in nonperforming loans through third-party refinancing payoffs, charge-offs, transfers to OREO and upgrades, as I previously noted, additional downgrades to NPLs were primarily driven by the receipt of borrowers' updated financials and certain covenant failures in the quarter.

We are all in on driving progress post quarter end, and we believe we have a line of sight on several significant opportunities to do so already. So for example, we just, as in this past Friday, received an $11.8 million full payoff, which results in an $8.7 million recovery of previous charge-offs, $341,000 of interest income to be recorded in the fourth quarter as well as a recovery of $188,000 in legal expenses, and again, all of which will be recorded in 4Q.

Our coverage of reserves over NPLs is at 0.77x due to the increased level of NPLs. However, please note that all NPLs with balances over $1 million were individually evaluated for exposure to charge-offs and our reserves, which explains the increase in provisioning for credit losses in 3Q and in specific reserves quarter-over-quarter. While Shary will provide additional detail on this, I wanted to just put this upfront, and we'll go through more detail in NPLs, ACL and the specifics on the provision for credit losses.

Let's turn to capital. And if you look at capital, all levels remain very strong. Our Board declared a quarterly cash dividend of $0.09 per share, reinforcing confidence in Amerant's long-term outlook and capital strength. We also intend to resume share buybacks post earnings when the blackout period ends under the existing remaining authorization and 10b5-1 plan as we continue to execute on our strategy going forward.

So with that, let me turn it over to Shary now to cover 3Q results in detail.

Thank you, Jerry, and good morning, everyone. Let's turn to Slide 3. Here, you will see the highlights of our balance sheet. Total assets reached $10.4 billion as of the close of the third quarter. As we guided in the second quarter, we offset lower loan originations, loan payoffs and paydowns with purchases of investment securities.

Total investment securities were $2.3 billion, up by $336.8 million, all of which are highly marketable securities and were classified as available for sale. Total gross loans were down by $247.4 million to $6.9 billion, primarily driven by increased prepayments and the sale of a large substandard loan, which more than offset loan production in the quarter as well as the focus on asset quality over production, which delayed the business pipeline materializing.

On the deposit side, total deposits were relatively flat, only down by $5.6 million to $8.3 billion, although core deposits increased by $59.4 million. Additionally, as we previously guided, we reduced brokered deposits by $93.7 million and partially replaced this funding with FHLB advances, which increased by $66.7 million. Brokered to total deposits now stand at 6.6% of total deposits, well below our maximum of 10%.

Also, in the third quarter, we restructured $210 million of fixed rate FHLB advances and changed the original maturity at lower interest rates. We incurred an early termination and modification penalty of $3.4 million, which was deferred and is being amortized over the term of the new advances as an adjustment to the yields. The net effect is an improvement in the cost of this source of funding.

Our assets under management increased $104.49 million to $3.17 billion, primarily driven by higher market valuations. As I've shared in past calls, we continue to see this as an area of opportunity for us to grow fee income going forward.

Looking at the income statement on Slide 4, you will see that we had a strong net interest margin, which was higher than projected at 3.92% due to higher average rates for both loans and securities, lower average rates on deposits, lower average balances in interest-bearing deposits, including broker deposits. NIM increases were partially offset by higher average balances in the investment securities portfolio, lower average loan balances and placements as well as higher average balances on time deposits and FHLB advances.

Net interest income was $94.2 million, up $3.7 million, primarily driven by higher average rates on loans and securities and lower average balances and rates on deposits. Noninterest income was $17.3 million, while noninterest expense was $77.84 million. On a core basis, however, core noninterest income was $17.5 million, while core noninterest expense was $75.9 million. We had guided noninterest expense for this quarter to be approximately $73 million.

The variance to actual results was primarily driven by $2.4 million in expenses on professional fees, as Jerry just described, and $1.4 million in higher other expenses primarily related to earnings credits, which are provided to certain commercial deposits in the mortgage banking industry to help offset deposit service charges incurred. Also adding to the variance of noninterest expenses were noncore expenses of $2.0 million recorded during the quarter, which I will describe in the next slide.

Pre-provision net revenue was down at $33.6 million in 3Q '25 compared to $35.9 million in 2Q '25, and core PPNR was $35.8 million, a decrease of $1.4 million or 3.7% compared to $37.1 million in 2Q '25. The core PPNR impact was primarily from the higher expenses we do not project occurring again at the same level in the fourth quarter, as I just referenced. A reconciliation of core PPNR and the impact on key ratios is shown in Appendix 1 included in this presentation.

Next up in Slide 5, you can see ROA and ROE this quarter were 0.57% and 6.21% compared to 0.90% and 10.06%, respectively, and our efficiency ratio was 69.84% compared to 67.48%. These ratios were primarily impacted by the decrease in net income and the increase in expenses during the quarter, respectively.

This quarter, we had $2 million in nonroutine noninterest expenses, which included $900,000 in losses on loans held for sale carried at the lower of cost or fair value in connection with the sale of one substandard owner-occupied loan, $500,000 in net losses on sale and valuation expense of an OREO in Houston, a single-family property and $600,000 in expenses related to the downsizing of Amerant Mortgage.

Turning to Slide 6. As you can see, we have added a new slide, as Jerry referenced, showing the quarter-over-quarter comparison of our capital ratios. As you can see, our capital ratios are very strong and continue to reflect improvement across the board. Our CET1 was 11.54% compared to 11.24% last quarter, mainly driven by lower risk-weighted assets and from net income during the quarter, while partially offset by $10 million in share repurchases and $3.8 million in dividends.

We paid our quarterly cash dividend of $0.09 per share of common stock on August 29, 2025, and our Board of Directors just approved a quarterly dividend of $0.09 per share payable on November 28 of this year. During the third quarter, we also repurchased 487,657 shares at a weighted average price of $20.51 per share compared to tangible book value of $21.56 as of June 30.

Moving on to asset quality. We added 2 new slides here as well this quarter. As you can see on Slide 8, nonperforming assets increased to $140 million or 1.3% of total assets compared to $98 million or 0.9% of total assets in the prior quarter. I will cover the drivers of this increase in the next slide.

Additionally, special mention loans totaled $224.4 million, with the increase primarily driven by 3 commercial loans totaling $106 million, 2 CRE loans totaling $25 million and 3 owner-occupied loans totaling $20 million. All loans have acceptable mitigants in place, including adequate loan-to-value ratios, interest reserves, personal guarantees and other structural enhancements. These increases were partially offset by $31 million in further downgrades to classified loans and $30 million in payoffs.

These increases are the result of rigorous efforts by portfolio management, credit and credit review complemented by an independent third-party firm brought in to ensure timely reviews of updated financial information and risk rating, including identification of any possible deteriorated conditions to allow us to be more proactive in expediting resolution. Through these reviews, we covered approximately $3.5 billion in the loan portfolio through covenant testing or annual or limited financial reviews. We expect to continue to prioritize efforts on proactive credit quality measures, including continuing to use independent third-party assistance.

Moving on to Slide 9. The increase in nonperforming loans was primarily driven by the downgrade of 3 CRE loans totaling $31 million, of which one is a single-tenant property that is currently vacant and the other 2, which missed contractual milestones. Please note that all 3 loans have adequate collateral coverage and did not require reserves.

Adding to the increase in nonperforming loans were 9 commercial loans totaling $38.9 million, downgraded due to updated financials and missed projections as well as other smaller loans totaling $7.2 million. These additions were partially offset by the payoff of 2 commercial loans totaling $21.2 million, charge-offs for the quarter totaling $9.5 million and other net reductions of $4.1 million, which include loan transfers to OREO, upgrades and paydowns.

In addition, substandard loans and accruing status increased by $84 million, primarily driven by 2 CRE loans totaling $49.5 million, one due to updated financials and the other due to missed contractual milestones. Both loans have adequate collateral coverage. Adding to the increase were 6 commercial loans totaling $37.1 million, primarily due to updated financials.

Important to note that the majority of these loans exhibit adequate payment performance or have other acceptable mitigants in place, including adequate loan-to-value ratios, interest reserves, personal guarantees or other structural enhancements, which support the continued accrual status. These increases were partially offset by $78.2 million from payoffs and $30.5 million in the sale of one substandard loan.

In the next slide, we show the drivers of the provision recorded in 3Q and impact to the allowance for credit losses. The provision for credit losses was $14.6 million in the third quarter, including the release of $700,000 in loan commitments. The provision was comprised of $7.8 million in additional specific reserves, $8.9 million to cover charge-offs, $3.6 million due to credit quality and macroeconomic factors, offset by releases of $2.3 million due to the reduction in loan balances and $2.7 million due to recoveries.

During the third quarter of 2025, gross charge-offs totaled $9.5 million related to 2 commercial loans totaling $4.1 million, several small business commercial loans totaling $1.8 million, 1 CRE loan totaling $1.3 million, indirect consumer loans totaling $1.8 million and other smaller balance loans. Lastly, the allowance for credit losses coverage ratio increased to 1.37% of total loans, up from 1.20% in the second quarter. Excluding specific reserves, the coverage ratio rose from 1.17% to 1.23%.

In the next slide, I'd like to provide some details on our expectations for the fourth quarter of 2025. In terms of loan growth, we currently have a pipeline for 4Q of approximately $350 million via organic production and $150 million via our newly launched syndications program. As we continue to focus on asset quality, we expect some of this loan production and purchases of syndications to be partially offset by reductions in criticized assets as well as payoffs and maturities with the net loan growth for the quarter being between $125 million to $175 million. This represents approximately a 2.5% increase from 3Q 2025.

Regarding deposits, we expect growth to be in line with loan growth. We will evaluate a further reduction in brokered as well as other higher cost deposits. Looking at profitability, we project our net interest margin to be approximately 3.75% for the fourth quarter. We continue to project noninterest income to be between $17.5 million and $18 million in 4Q.

Regarding expenses, we expect them to decrease to the range of $74 million to $75 million. We expect the efficiency ratio to be in the high 60s given the lower growth from payoffs and asset quality-related reductions. And finally, we project core ROA to be between the mid-80s and low 90s, although we could possibly get closer to 1% given recoveries on collections from previously charged off substandard loans like the one Jerry just referenced.

And with that, I pass it back to Jerry for additional comments and closing remarks.

Thanks, Shary. Finally, turning to the final slide we will cover. I'd like to provide some color on the topics shown here. So first, regarding expense reduction initiatives. We've launched an expense reduction initiative with an initial goal of achieving a baseline of $2 million to $3 million in savings per quarter in 2026. Again, this is a baseline and the analysis of additional opportunities are in process. There's going to be more to come on this. You'll begin to see the start of these reductions in the fourth quarter. Examples of items that we are either evaluating or already implementing include contract reviews, transferring certain tasks from third parties to in-house resources and just outright expense elimination. And again, please note, we're in the process of evaluating every opportunity by detailed line item reviews for additional reductions.

So next, regarding commercial banking leadership. I've asked Mike Nursey to step into the Head of Commercial Banking role recently vacated by our former Chief Commercial Banking Officer, as previously announced during the third quarter via Form 8-K. Mike is a seasoned leader with over 35 years of banking experience and is well known and respected in the Florida marketplace. We also intend to further build out our commercial teams in both Palm Beach County and the Greater Tampa market in the coming months.

Also, as we just announced last week, the addition of Angel Medina to bolster our in-market leadership and business development efforts here in the Greater Miami County marketplace, and it's been well received as Angel is well known and respected here as a senior leader. He just started with us this week, and we anticipate that he will be a significant contributor to growth opportunities in this marketplace.

Next, the heightened emphasis we're placing on reducing nonperforming assets. There is no question this is job one. We are realigning even more select personnel in order to drive resolution as prudently and expeditiously as possible and aligning more personnel to proactively address upcoming covenant testing and financial statement updates.

We've complemented our in-house reviews with a well-known third party to expedite risk rating testing in the third quarter and to assess a very significant portion of the portfolio, as I previously mentioned, for any signs of potential concerns. We expect to continue to invest in these reviews in the fourth quarter to ensure timely completion of the review scheduled for 4Q.

We've also launched an extended multi-hour all-hands leadership weekly meeting to address special assets as a working group to monitor and drive progress. We will be looking to provide a mid-quarter update on progress via our investor presentation, which we will file ahead of the upcoming Piper Sandler Conference in mid-November.

Now, turning to buybacks to give an update. With respect to capital management, while we'll continue to take a prudent approach, carefully balancing the need between retaining capital to support growth initiatives or growth objectives compared with buybacks and dividends to enhance returns, we intend to utilize the $13 million remaining in our current authorized buyback program this quarter, given where our stock is currently trading. In 3Q, we utilized a 10b5-1 plan to repurchase 487,000 shares for $10 million in the quarter, as Shary previously noted, and we intend to do the same thing here in the fourth quarter.

So as we wrap up today's comments, I want to underscore the priorities we've outlined and emphasize a number of key underlying strengths here, strong capital levels and outstanding net interest margin, opportunities for additional fee income from growing AUM levels, a heightened focus on driving expense discipline and most importantly, increased focus on accelerating progress on asset quality. We've taken decisive steps this quarter to strengthen risk oversight, and we'll continue to allocate resources and leadership focus to accelerate progress. While this quarter reflected the impact of this proactive approach to credit risk, we remain confident in the strength of our franchise and the opportunities ahead.

With leadership changes in commercial banking, further strengthening of bank strength in special assets and credit, targeted growth initiatives in key markets and lines of business and a clear plan for cost reductions and capital deployment, we are positioning Amerant for the better in the coming periods. I'd just like to thank you for your continued support as we execute on these commitments.

So with that, I'll stop, and Shary and I will look to answer any questions you have. Kate, please open the line for Q&A.

[Operator Instructions] Our first question comes from the line of Michael Rose with Raymond James.

Maybe I'll just start off with the same question I feel like I've asked the past 2 quarters, just on kind of the lay of the land, where you guys think you are on credit. I know the migration is probably as frustrating to you as it is to us. But if I go back to when you raised capital about a year ago, I think the expectations were for much stronger financial performance. And it looks like the resolution of some of these credits over the next couple of quarters is certainly going to weigh on growth performance, et cetera.

So Jerry, I guess the question is, when do you think we kind of hit the inflection point on credit? And when do you think realistically you can get back to a more sustainable, durable 1% plus ROA?

Sure. Appreciate the question and totally understand where you're coming from. Look, I think the third quarter was the highest peak in terms of -- and I referenced that it was over $3.5 billion in the portfolio, right? So you're basically over half the portfolio was evaluated either for annual reviews, limited reviews or covenant tests in the quarter. It is substantially lower here in the fourth quarter. And as I said, Michael, earlier, I think we've got a very good line of sight. I did give a specific example of a very significant resolution. And I believe both in special mention and in substandard, we are well on our way working through these.

Look, the most challenging part, Michael, is the timing of resolution on these items, right? That's the piece that has clearly less predictability. And you can see, look, you're just 3 weeks, almost 4 weeks after quarter end, we have a resolution of a material item. We've got a number of these with a good line of sight. I think with all the comments that I made around -- and I think Shary shares the same belief, the bench strength that we've done, the teamwork that across the areas that's being approached on this, we're heading into having a much better line of sight and a much better path to early identification and resolution rather than seeing the type of flow that's going through the stages that obviously we saw this quarter.

And I do think, Michael, a couple of other things. The expense initiatives are critical. We will give more color on that in a couple of weeks at the upcoming investor conference. And as I said, I believe we are a very low baseline that we just wanted to let people know that all of that's identified, and we can apply those reductions in as we look at projections going forward. And we believe there is significant additional opportunity for us. And again, I think that's just realigning priorities that -- and I guess the other good thing to say is you also heard in terms of there's a rebirth on the credit side. We've already had some nice outstandings booked so far in the fourth quarter. And as Shary referenced, you're going to see the beginnings of not just organic growth coming back in, but also the launch of the syndication program, which is critical for us because, again, remember, we're not just looking to buy, we're looking to participate. And so given the size of exposures, we think that, that's smart for not only growth, but also prudent risk management.

Okay. I appreciate all that commentary. Shary, just a quick one for you. The margin guide for the fourth quarter implies a step down. I'm sorry if I missed this, it's a busy morning. But what's going to specifically drive that step down from this quarter's level?

Sure, Michael. So the guidance that we gave for the fourth quarter is close to the 3.75%. A couple of drivers into that number compared to 3Q is we're now going to see a full quarter's worth of repricing on the asset side on the floating rate loans. After the rate cut that occurred in September, we now will see the full quarter showing that impact.

We're also including an update in terms of an additional rate cut happening now, which will impact 2 out of the 3 months of the quarter. And then that would be offset by the repricing of our deposits. We continue to see a beta close to [ 40 ] as we did in the past. So we definitely see the assets repricing faster than the deposits.

The other thing, Michael, is that within the number that you see in 3Q, we have collections on some special assets, which created a higher level of the NIM. We do expect some of those things to happen in the fourth quarter as we continue to collect on those, but the guidance we're giving is more on the normalized NIM.

Yes. Michael, and I just would like to add to Shary’s comments that I think you're also going to see production given the rate decrease that happened in September, the anticipated decrease, that will result in lower yields on new production coming in as well. And what it does not include is if there's any recoveries, as I just referenced on that one credit of interest income that previously had been reversed. So if we have recoveries on interest income, that could obviously be a positive. And of course, as we've done previously, we'll disclose all of that as part of it.

Okay. I appreciate the color. And maybe just one last one for me, and this is back to you, Jerry. You've been in the seat for a bunch of years now. I know you're not happy with the performance. I know investors aren't. But just given the health of M&A markets at this point, is there a point in time where you might want to consider strategic alternatives?

Yes. Look, Michael, I think we've stated all along, we're a publicly traded organization. The way we have to think about things is -- and I think the way the Board needs to think about things, is our ability to execute and drive the results. Obviously, if there are opportunities, that has to be weighed, right? But I mean, our focus right now is on getting things on the right track and getting back to the kind of returns that Shary referenced here in the fourth quarter as a step in the right direction. We do believe we're taking all the right steps given where we are. But look, I mean, I think, obviously, everything has to be evaluated as it comes up.

Our next question comes from the line of Russell Gunther with Stephens.

I wanted to just start on the loan growth discussion. I appreciate all the color there. Jerry, maybe as you think about what the kind of go-forward organic opportunity is and the sustainability of that kind of $125 million to $175 million net loan growth guidance. And then maybe just more specifically on the syndication activity. I know you gave us some color as to what we would expect from a growth perspective in 4Q. How should we think about sort of the ebbs and flows participating in versus participating out?

Yes. Great question. I think it depends on, Russell, the opportunities that the business development, the RMs generate. Our Head of Syndication is working closely on a lot of different opportunities already with the team. Clearly, we demonstrated -- we've participated in our first big deal. I'm sure you saw the participation in the raise acquisition financing where we were also a syndication agent. I think that was a great way to announce that we're willing and able to look at deals like that and be an active participant and also actually participate in helping get the deal syndicated. And I think that's one of the reasons why when we brought Jack on board, we were so excited to be able to attract someone with his contacts and experience.

As I look at it on a go forward, I think it is -- again, it's a great tool for 2 ways, right? We did stay upfront that the volume was going to be more purchased than us actively participating away. But my expectation in '26 is you'll see that become a bigger piece because part of what we're trying to do is start to get hold sizes back into the sub-$30 million range on deals. And we are seeing much larger opportunities. And so we think this, again, is a great way for us to not only help assist on the growth side, but I think prudent risk management and maintaining lower hold sizes on a go-forward basis.

And Russell, to complement that, the way we see it is on the short term and short term, I mean, now in the fourth quarter, we're focused on the buy side and creating that 2-way 3 relationship. And then starting 2026, the efforts will be more on the sales side and making sure that when we get opportunities that come to our table, we're able to participate some portions out and be there.

Got it. Okay. I appreciate it. And then how should we think about the size of the investment portfolio kind of alongside the net loan growth guide you guys are expecting?

Yes. Look, Russell, I think -- and again, we gave previous guidance that in the absence of loan growth or I should say to supplement the balance sheet, we elected to expand growth in the portfolio. I think on a go-forward basis, it's pretty clear we would much rather be deploying those funds into loan growth than any continued growth in investments. So if you do see some additional growth this would be the, in my opinion, the last period. And frankly, there probably could be some contraction in this period. One of the scenarios we're actually looking at along the way is how much of that do we still even want to maintain here in the fourth quarter. So more to come as we continue to do analysis there.

But I think with the reemergence of the pipeline, the launch of the syndication program here in this quarter with something already done and under our belt, I think you'll start to see that it will be back to the growth coming on the loan side, certainly not on the security side.

Yes. And Russell, to that, the investment portfolio and the way the purchases were made in the last few quarters were on the fixed rate side. So valuation has been really good, and it provides an opportunity for liquidity to be able to redeploy wherever we want, like from a loan perspective or to repay off some higher cost deposits.

Got it. Okay. Super helpful. And then just the last one for me would be a follow-up on the asset quality discussion. Charge-offs came in pretty darn close to what you had expected for this quarter. As you address sort of the inflow that occurred in 3Q, what is the outlook for realized loss content over the next couple of quarters?

Yes. I mean we'll both give some color on that. But in my remarks, what we did was go through credit by credit and do the analysis. And if there was a need for either a charge-off or the addition of specific reserves, they were set. Russell, the one way to potentially think about it is the establishment of specifics maybe where you might see charges. But again, it's already been reserved for. But otherwise, I think our look on charge-off activity, and I'll let Shary go ahead and answer. But on the business book, coupled with the rest of the indirect, it would be back into the...

So we're seeing something close to the 30 to 35 basis points. A portion of that is related to the amount that we still have in the indirect consumer portfolio and some small commercial loans. And then the excess out of that would be if we were to charge off some of the loans that currently have some specific reserves.

Our next question comes from the line of Stephen Scouten with Piper Sandler.

I guess maybe one more kind of follow-up around credit would be, I guess my question is, can you give us any color on kind of the vintages of credits that saw maybe incremental reserves or these specific reserves you were just referencing? Trying to get a feel for if this is just lingering credit issues from the past or if these are actually maybe some issues that are burgeoning up on some of the faster growth that we've seen over the last couple of years.

Yes. Look, I think it's a mix. You can look back to where it was a much lower rate environment. So let me give a good example, where we've looked at credits that are either sort of going into the pass watch or special mention category. We're obviously evaluating given the low rates they're at, what would the potential refinancing risk be, right, under current rates as these things are looking to mature. So I mean, I think you're looking at anywhere from in the 2020 to 2024 range because, again, you're looking at a lower rate environment in those earlier years and then obviously, a higher one more recently.

Got it. Okay. And I guess the follow-up to that is and maybe this is just the depth of the portfolio review we spoke to, Jerry, but what gives you confidence today that the worst could be behind us here after, I think, maybe hoping to feel that way like a year ago around this time? And then do you keep a lid on loan growth until maybe there's greater certainty that these issues are kind of in the past?

Yes. Look, and I'll take the last point you made first, which is kind of where the prioritization was in 3Q. The emergence that you'll see in loan growth, I think we've -- we will tell you, it's much more selective in terms of industry type. We're not really looking -- it's more in the C&I side. It's not really looking at significant growth at all in the commercial real estate side. And I do think that, again, when you look at some of that, a big piece of this would come through as we just referenced on syndication as well.

Look, asset quality, I keep coming back to we've allocated more personnel. I think we've got a really proactive effort going on across the organization right now that I think the way we're working through that is probably, to your question, why I have greater confidence on resolution because the open communication and line of sight and proactively going to each of these and working through solutions is really becoming more and more evident in sort of the feeling, I think we have across the organization, certainly internally at this point.

Okay. And maybe just last thing for me, just around expenses and the potential expense initiatives. I know -- sorry, you noted some of the expenses this quarter were a bit elevated and shouldn't repeat in some of those categories. But I want to make sure I heard you right. I heard -- I think, Jerry, you said like $2 million, $3 million a quarter. I'm assuming that's like $2 million, $3 million annualized. But kind of how do you think about where you hope the expense base to get in 2026? Is the hope to kind of keep it flat? Or do you think we could see actual net reductions in the overall expense base? Just kind of framing up that potential.

Sure. So I'm going to start first with driving from the 3Q to the 4Q expectation. As I mentioned, there were some expenses that we're not expecting to be recurring like downsizing of mortgage, some legal expenses on the trust side, including surrendering the license in Cayman and some investments in governance like AI and ERM, that takes us to a more, I want to call it, the normalized level of the $74 million. But on top of that, then we are expecting some additional reductions through some initiatives, and this includes things like reviewing third-party contracts. Do we need them? Do we need them at that same level? When we're working on a co-source or outsource approach and we have the knowledge and skill set to do that internally, can we shift that back? And that leads us to the $2.5 million to $3 million. It would be per quarter, not annualized of what Jerry just mentioned. So with that, we're still working into finalizing numbers, but we do expect a net reduction starting 2026.

Yes. And Stephen, to add to that, the disciplined way that we are approaching it is the $2 million to $3 million were early identification items. The process we're going through right now is a very stringent line by line, component by component are there opportunities? And again, whether it's bringing anything we've done third party internally, do we still need the level of help that we have? I mean it's all over the -- it's -- every single thing is being analyzed and scrutinized and it's a team-wide effort across all of the functions in the organization.

At the same time, the one area where we're going to continue to build out and make sure is, obviously, whatever we need on the risk side, we're going to implement. I also referenced that we have business development opportunities to expand in both Tampa and Palm Beach. There are areas of priority where we would [ patent ]. So that puts a heightened emphasis on us to find offsets to those plus to continue to look for reductions to get a greater savings than that [ $2 million or $3 million ] a quarter that we've established as a baseline. So as I referenced, more to come. We'll probably have some additional color, frankly, at the upcoming conference that's in mid-November that I referenced.

Our next question comes from the line of Woody Lay with KBW.

Just had another follow-up on credit. I was just interested, have you all used third-party reviews in the past? Or is this really the first quarter that you've used the third party?

In the third quarter of last year, we had a limited review. This year, it was a more considerable effort. And our view is that it is designed to give some comfort on accuracy of risk rating and timeliness of risk rating. And so Woody, a lot of this is the scrutiny that you get by being in the regional bracket. This is all part of the build that we wanted to ensure. But frankly, there is a lot of opportunity for -- internally for the teamwork that I've referenced between the line, between credit, between credit review and being in a very proactive way about it. And this was -- I do want to reference again, this was the highest quarter, right, for annual reviews, limited reviews and covenant testing to be done. It's basically over half the portfolio. So it's much less significant in the other 3 quarters of the year.

Yes. So I think just about 50% was reviewed in the third quarter. How much of the loan portfolio do you expect to be reviewed in the fourth quarter?

Yes. I want to say it's in the [ $1.3 billion to $1.5 billion ] range. And remember, a lot of that is quarterly covenant testing, right? You've probably gone through the bulk of annual reviews at this stage.

Got it. And then when you look at -- I think it was [ 12 ] credits downgraded to NPA in the broader industry, we see some weakness in the subprime consumer and especially auto. When you look at your downgrades, are you seeing any overlying trends that's impacting these borrowers? Or do they seem unconnected?

Yes. I don't think you see the exposure in a material way that others have. Again, we're not someone that had the exposure that others did to NDFIs. We didn't have any impact from some of the big issues that others have reported on this quarter. We were not involved. I think when you look at ours, particularly, I think, on the commercial real estate side and just where there's probably construction underway, it's whether there's -- are they still on track timing-wise and that sometimes because of delays creates issues. We also -- and I already referenced, do we anticipate there could be some refinancing risk over the next 12 to 24 months. And so we've done early identification of those as well. So just examples on the commercial real estate side.

Yes, Jerry, to complement that, I think it's important that it's not only on the industry side that we're seeing that these loans are across multiple industries, but also the drivers for these items are different, whether it's a covenant that was missed, a milestone in a construction project or a milestone in the repositioning of one. So I think it's important that there's no concentration in terms of that risk.

Got it. Do you feel like -- this is my last follow-up. Do you feel like you're being more aggressive with some of the downgrades than you have been in the past? Or has the strategy been pretty consistent?

Yes. Yes, I think we are. And the -- what we're seeing here is that timeliness and being proactive makes a difference. The earlier we get in front of a customer and try to get to a resolution, the better outcome that we expect to have. So that's what's driving this level of reviews and the timeliness of these things that we're doing.

This now concludes our question-and-answer session. I would like to turn the floor back over to management for closing comments.

Yes. Thank you, Kate, and thank you, everyone, for joining us today to review Amerant’s third quarter results. I hope all of you have a great day. Thank you.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.