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Business, Basis of Presentation and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

Restructuring costsThe Company continues to work at optimizing its operating structure to best support its business activities.

Significant Accounting Policies

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required for a fair statement of financial position, results of operations and cash flows in conformity with GAAP. These unaudited interim consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for a full year or any other period. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, 2022 and 2021 and for each of the three years in the period ended December 31, 2022 and the accompanying footnote disclosures for the Company, which are included in the 2022 Form 10-K.

For a complete summary of our significant accounting policies, see Note 1 to the Company’s audited consolidated financial statements in the 2022 Form 10-K.

Estimates

EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by management include: (i) the determination of the allowance for credit losses; (ii) the fair values of loans held for sale and securities, the value assigned to goodwill during periodic goodwill impairment tests, and the fair value of other real estate owned (“OREO”); (iii) the cash surrender value of bank owned life insurance; and (iv) the determination of whether the amount of deferred tax assets will more likely than not be realized. Management believes that these estimates are appropriate. Actual results could differ from these estimates.

Reclassifications

In the three and nine month periods ended September 30, 2023, loan-level derivative expenses are presented separately in the Company’s consolidated statement of operations and comprehensive (loss) income. Previously, these expenses were presented as a component of professional and other services fees in the Company’s consolidated statement of operations and comprehensive (loss) income.

In the three and nine months ended September 30, 2023, OREO and repossessed assets, net expense is presented separately in the Company’s consolidated statement of operations and comprehensive (loss) income. OREO and repossessed assets expense includes expenses and revenue (rental income) from the operation of foreclosed property/assets as well as fair value adjustments and gains/losses from the sale of OREO and repossessed assets. In 2022, while OREO valuation expense was presented separately, all other OREO-related expenses were presented as part of other operating expenses in the Company’s consolidated statement of operations and comprehensive (loss) income. We had no other repossessed assets in 2022.

Beginning in the three months ended September 30, 2023, the provision for credit losses for off-balance sheet exposures is included as part of provision for (reversal of) credit losses in the Company’s consolidated statements of comprehensive income (loss). Prior to that period, the provision for credit losses for off-balance sheet exposures was included as part of other operating expenses in the the Company’s consolidated statements of comprehensive income (loss).

Recently Issued Accounting Pronouncements

Issued and Adopted

Guidance on Troubled Debt Restructurings

In March 2022, the Financial Accounting Standards Board (“FASB”) issued guidance that eliminates the recognition and measurement guidance on troubled debt restructurings, or TDR, for creditors, and aligns it with existing guidance to determine whether a loan modification results in a new loan or a continuation of an existing loan. The guidance also requires enhanced disclosures about certain loan modifications by creditors when a borrower is experiencing financial difficulty. The amended guidance is effective in periods beginning after December 15, 2022 using either a prospective or modified retrospective transition approach. Early adoption was permitted if an entity had already adopted the guidance on accounting for credit losses on financial instruments (“CECL”). The Company adopted this guidance on TDR as of January 1, 2023, and determined that its adoption had no material impact to the Company’s consolidated financial statements.

Guidance on Accounting for Credit Losses on Financial Instruments

In 2022, the Company adopted ASC Topic 326 on CECL. The Company adopted the CECL guidance as of the beginning of the reporting period of adoption, January 1, 2022, using a modified retrospective approach for all its financial assets measured at amortized cost and off-balance sheet credit exposures. For more details on the adoption of CECL, see the 2022 Form 10-K.

The following table reflects the impact of adopting CECL on the allowance for credit losses (“ACL”) and other line items on the Company’s consolidated financial statements as of and for the three and nine month periods ended September 30, 2022:

Consolidated Balance Sheets



	As of September 30, 2022
(in thousands)	As Reported		As Recast (1)		Changes








Assets
Allowance for credit losses	$	53,711	$	76,473	$	22,762
Deferred tax assets, net	45,791		51,644		5,853
Liabilities
Accounts payable, accrued liabilities and other liabilities	181,693		181,863		170
Stockholders’ Equity
Retained earnings	588,495		571,416		(17,079)

Consolidated Statements of Operations



	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
(in thousands, except per share amounts)	As Reported		As Recast (1)		Changes		As Reported		As Recast (1)		Changes

Total interest income	$	89,137	$	89,137	$	—	$	225,402	$	225,402	$	—
Total interest expense	19,240		19,240		—		40,915		40,915		—
Net interest income	69,897		69,897		—		184,487		184,487		—
Provision for (reversal of) credit losses	3,000		7,314		4,314		(7,000)		(2,912)		4,088
Net interest income after provision for (reversal of) credit losses	66,897		62,583		(4,314)		191,487		187,399		(4,088)
Total noninterest income	15,956		15,956		—		42,912		42,912		—
Total noninterest expense	56,113		56,113		—		179,172		179,172		—
Income before income taxes	26,740		22,426		(4,314)		55,227		51,139		(4,088)
Income tax expense	(5,864)		(4,936)		928		(11,875)		(10,994)		881
Net income before attribution of noncontrolling interest	20,876		17,490		(3,386)		43,352		40,145		(3,207)
Noncontrolling interest	(44)		(44)		—		(1,192)		(1,192)		—
Net income attributable to Amerant Bancorp Inc.	$	20,920	$	17,534	$	(3,386)	$	44,544	$	41,337	$	(3,207)
Basic earnings per common share	$	0.62	$	0.52	$	(0.10)	$	1.31	$	1.22	$	(0.09)
Diluted earnings per common share	$	0.62	$	0.52	$	(0.10)	$	1.30	$	1.21	$	(0.09)
Cash dividends declared per common share	$	0.09	$	0.09	$	—	$	0.27	$	0.27	$	—

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(1)Quarterly amounts previously reported on our quarterly reports on Form 10-Q for the periods ended March 31, 2022, June 30, 2022 and September 30, 2022 do not reflect the adoption of CECL. In the fourth quarter of 2022, the Company recorded a provision for credit losses totaling $20.9 million, including $11.1 million related to the retroactive effect of adopting CECL for all previous quarterly periods in the year ended December 31, 2022, including loan growth and changes to macro-economic conditions during the period. Quarterly amounts included in the 2022 Form 10-K and in this Form 10-Q reflect the impacts of the adoption of CECL on each interim period of 2022. See the 2022 Form 10-K for more details on the adoption of CECL.

Guidance on Fair Value Hedges

In March 2022, the FASB issued amended guidance to expand and clarify existing guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets. The amendments clarify, among others, the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible. The amendment also improves the last-of-layer concepts and expands them to non-prepayable financial assets, allowing more flexibility in the structure of derivatives used to hedge interest rate risk. The amended guidance is effective for public business entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. For all other entities, the amended guidance is effective for fiscal years beginning after December 15, 2023. The amended guidance is available for early adoption. The Company adopted this guidance as of January 1, 2023, and determined that its adoption had no impact to its consolidated financial statements.

Issued and Not Yet Adopted

For a complete summary of recently issued accounting guidance that has not yet been adopted, see Note 1 to the Company’s audited consolidated financial statements in the 2022 Form 10-K.

Subsequent Events

Subsequent EventsThe effects of other significant subsequent events, if any, have been recognized or disclosed in these unaudited interim consolidated financial statements.