Related Party Transactions

12 Months Ended

Dec. 31, 2021

The Company’s related parties include directors, executive officers, holders of 5% or more of the Company’s common stock, or any member of the immediate family of these persons. Transactions with related parties were entered into pursuant to the Company’s policies and procedures and applicable law, including Federal Reserve Regulation W, on substantially the same terms and conditions as transactions with unaffiliated third parties.

In addition to loans to related parties and associated interest income, which are described further below, consolidated balance sheets and the consolidated statements of operations include the following amounts with related parties:


	December 31,
(in thousands)	2021		2020



Liabilities
Demand deposits, noninterest bearing	$	10,613	$	3,891
Demand deposits, interest bearing	5,090		4,704
Savings and money market	1,674		1,771
Time deposits and accounts payable	2,740		1,991
Total due to related parties	$	20,117	$	12,357


	Years Ended December 31,
(in thousands)	2021		2020		2019
Income
Data processing and other services	$	—	$	—	$	955



Expenses
Interest expense	$	13	$	36	$	34

Fees and other expenses	53		26		501
	66		62		535
	$	(66)	$	(62)	$	420

The Cayman Bank Acquisition

On November 15, 2019, the Bank completed the acquisition of Grand Cayman-based Mercantil Bank and Trust Limited, or the Cayman Bank, from Mercantil Holding Financiero Internacional (the “Cayman Bank Acquisition.”) The Cayman Bank is now a wholly owned subsidiary of the Bank and was rebranded “Elant Bank and Trust Ltd.”

The purchase price of approximately $15.0 million was paid in cash and represented the Cayman Bank’s fair market value of its shareholder’s equity, adjusted to reflect income and losses to the closing date and purchase accounting adjustments, including the mark to market of all assets acquired and liabilities assumed at the closing date, plus a premium of $885,000. Net assets acquired consisted of $0.6 million in cash and due from banks, debt securities available for sale of $27.9 million and time deposits of $14.4 million.

The Cayman Bank Acquisition was recorded as a business acquisition using the acquisition method of accounting. All assets and liabilities of the Cayman Bank were remeasured at their fair value as of the acquisition date. The Cayman Bank Acquisition resulted in goodwill of approximately $0.3 million and an identifiable intangible asset of approximately $0.5 million. The identifiable intangible asset corresponds to the fair value of established customer relationships as of the date of the acquisition and is amortized over its estimated useful life of 14 years on a straight-line basis.

Securities transactions

On March 7, 2019 the Company repurchased all the remaining Class B common stock outstanding from the Former Parent. See Note 17 for more details.

In connection with the tender offer completed in December 2020, the Company paid an aggregate cash amount of approximately $1.1 million for the shares of Class B common stock tendered by and purchased from certain related parties.

Loan transactions

The Company originates loans in the normal course of business to certain related parties. At December 31, 2021 and 2020, these loans amounted to $5.7 million and $4.7 million, respectively. These loans are generally made to persons who participate or have authority to participate (other than in the capacity of a director) in major policymaking functions of the Company or its affiliates, such as principal owners and management of the Company and their immediate families. Interest income on these loans was approximately $0.2 million and $0.1 million in the years ended December 31, 2021 and 2020, respectively.

There were no sales of participations to affiliates in 2021, 2020 and 2019. There were no participations purchased from affiliates in 2021, 2020 and 2019.

Common Stock Transactions

The Company was a wholly-owned subsidiary of the Former Parent through August 10, 2018 when the Distributed Shares were distributed to the Former Parent’s shareholders. The Former Parent sold all of its voting Class A common stock in the IPO, and reduced its nonvoting Class B common stock to less than 5% of the Company’s total common stock on December 28, 2018. As a result, at year end 2018, the Former Parent no longer controlled the Company or the Bank. In March 2019, we completed the repurchase of the remaining Class B Retained Shares from the Former Parent. Following this repurchase, the Former Parent no longer owns any shares of common stock of the Company.

Services provided and received

The Company had historically provided certain data processing and corporate services to non-U.S. subsidiaries of the Former Parent under the terms of certain service and transition agreements. Fee income for those services are included in data processing and other fees above. These services ended in 2019.

The Former Parent granted the Company a two-year license under the Amended and Restated Separation and Distribution Agreement dated as of June 12, 2018, commencing on August 18, 2018, to use the “Mercantil” name and marks in connection with its business. Under the terms of the Amended and Restated Separation and Distribution Agreement, no fees were payable for the first year of the license. After the first year, the Company was required to pay a monthly license fee should it continue to use the “Mercantil” name and marks. The Company rebranded as “Amerant” on June 5, 2019 and, therefore, no fees were payable under the terms of the license agreement pursuant to the Amended and Restated Separation and Distribution Agreement.

Effective on August 2018, the Company entered into a Book-Entry Securities Custody Agreement with a wholly owned Venezuelan bank of the Former Parent. As a service to its smaller shareholders and to promote shareholder liquidity generally, the Company paid fees in consideration for assistance with the separation and distribution of the shares of common stock of the Company, as well as for the custody, safekeeping and information agent services provided to smaller shareholders. These initial services were terminated on June 30, 2019. Under the terms of the agreement, the Company continues to receive custody, safekeeping and information agent services to smaller shareholders. The agreement, which had an initial term of 18 months, was renewed in February 2019 for an additional year, and provides for a monthly fee payable by the Company. The Company incurred a total of approximately $0.1 million and $0.4 million as a result of this agreement in 2020 and 2019, respectively.

Other assets and liabilities

In connection with litigation between the Bank, Amerant Trust and Kunde Management, LLC (”Kunde”), the parties entered into a confidential settlement agreement and the court entered an agreed order of dismissal with prejudice on July 6, 2020. The Company incurred approximately $1.1 million in legal fees through June 30, 2020 litigating this case. In connection with this litigation and settlement, certain related parties agreed to reimburse Amerant Trust, a maximum of $1.0 million of all legal fees and costs related to and arising from the litigation. As of December 31, 2020, the Company expected to be reimbursed up to $750,000 of these legal fees. In 2021, the Company was reimbursed $875,000 in connection with this event. The terms of the settlement agreement did not have a material impact on the Company's financial condition or operating results.

The Company had approximately $1.2 million and $1.1 million, respectively, due to its Trust Subsidiaries as of December 31, 2021 and 2020. This amount is included in other liabilities in the precedent table.