KBRA Affirms Ratings for Amerant Bancorp Inc.

KBRA affirms the senior unsecured debt rating of BBB- and the short-term debt rating of K3 for Coral Gables, Florida-based Amerant Bancorp Inc. (NYSE: AMTB) (“the company”). In addition, KBRA affirms 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 is Stable.

Key Credit Considerations

The ratings are reflective of AMTB’s execution of the transformative initiatives over the past several years as the company is now well-positioned with a recalibrated strategy further strengthened by several recent key strategic hires in the past year. As a result, the company has reflected volatile earnings over the past year, though excluding non-recurring items related to the company’s derisking strategy, core ROA was 0.51% at YE24 largely impacted by elevated provision expense attributable to increased charge-off activity. Nonetheless, the bolstered core foundation of the company supports AMTB's focus on improving earnings power. KBRA expects the earnings profile to improve over time as the company completes building the infrastructure supportive of the growth strategy. Recent asset quality trends reflect negative credit migrations as credit quality deteriorated with the recent NPA ratio increasing to 1.96%. Risk rating migration trends reveal an increase in criticized loans, with classified loans rising to $206 million from $167 million, and special mention loans increasing to $100 million from $5.4 million. While credit migration in the CRE book has been negative, AMTB has adequate LTV, DSCR or structural enhancements in place to mitigate potential losses. The increased reserve build recently was largely related to five specific loans downgraded to substandard nonaccrual. While KBRA expects meaningful improvement in credit standards with the addition of a new Chief Credit Officer bolstering the credit culture, near-term pressures may persist as AMTB re-evaluates underwriting criteria and proactively works to mitigate risk and strengthen the credit portfolio. Additionally, AMTB’s capital profile improved significantly following the sale of the Houston franchise and a capital raise of ~$156 million in the 4Q24 with the CET1 ratio increasing to 11.1% in 1Q25. Additionally, following the securities repositioning in 4Q24, the TCE ratio increased to 8.7% at 1Q25. With a focus on capital preservation, KBRA expects prudent capital management with the CET1 ratio maintained in the 11% range. With Amerant’s total assets crossing $10 billion in 1Q25, management remains focused on building the infrastructure to support the growth.

Rating Sensitivities

Positive rating momentum would require stabilization in credit quality and reduced NPAs and NCOs, as well as a core funding profile that translates into core earnings that are more consistent with the next rating category higher while building on its capital profile. A negative rating action could result from deterioration in credit quality that creates elevated credit costs which negatively impact earnings performance and core capital.

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Methodologies