KBRA Releases Surveillance Report for Amerant Bancorp Inc.

On May 19, 2023, KBRA affirmed the senior unsecured debt rating of BBB- and the short-term debt rating of K3 for Coral Gables, Florida-based Amerant Bancorp Inc. (NASDAQ: AMTB) (“the company”). In addition, KBRA affirmed the deposit and senior unsecured debt ratings of BBB, the subordinated debt rating of BBB-, and the short-term deposit and debt ratings of K3 for its subsidiary, Amerant Bank, N.A. The Outlook for all long-term ratings was revised to Stable from Positive.

The change to a Stable Outlook reflects the 150 – 200 bps decline in risk based capital over the last five quarters, driven by loan growth and stock buybacks, combined with a continuation of asset quality challenges above peer levels, specifically the more recent upward trend in NPAs and NCOs. KBRA expects the anticipated economic headwinds from higher interest rates to further challenge the credit performance of the loan portfolio, specifically in the indirect, high yield consumer book, office CRE, and equipment financing portfolios going forward. We view the loan loss reserve of 1.20% and LLR/NPLs of >400% to be adequate as of 1Q23, although additional provisioning could weigh on the company’s earnings profile. Additionally, growth experienced in 2022 within the earning asset base outstripped the core deposit base raising loans-to-core deposits to 118%, which places increased reliance on noncore funding and reducing levels will be challenging in the current deposit environment, pressuring NIM. AMTB’s liquidity profile with core deposit funding as a percentage of total funding of 71% as of 1Q23 is lower than many similarly positioned peers. Uninsured deposits are manageable at 32% of total deposits with 142% coverage from primary and secondary liquidity sources to cover a reasonable level of potential deposit outflows as of 1Q23. Supporting the ratings is AMTB’s above peer noninterest income (as a percentage of total revenue) that includes over 75% from durable, fee income services that are derived from the wealth management ($2.1 billion in AUM/C at 1Q23) and brokerage services.

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