Amerant Bancorp Inc. - Annual Report: 2019 (Form 10-K)

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•	our strategic plan and growth strategy may not be achieved as quickly or as fully as we seek;

•	operational risks are inherent in our businesses;

•	market conditions and economic cyclicality may adversely affect our industry;

•	our profitability and liquidity may be affected by changes in interest rates and interest rate levels, the shape of the yield curve and economic conditions;

•	our cost of funds may increase as a result of general economic conditions, interest rates, inflation and competitive pressures;

•	many of our loans and our obligations for borrowed money are priced based on variable interest rates tied to the London Interbank Offering Rate, or LIBOR. We are subject to risks that LIBOR will no longer be available as a result of the United Kingdom’s Financial Conduct Authority ceasing to require the submission of LIBOR quotes after 2021;

•	our derivative instruments may expose us to certain risks;

•	our valuation of securities and investments and the determination of the amount of impairments taken on our investments are subjective and, if changed, could materially adversely affect our results of operations or financial condition;

•	our success depends on our ability to compete effectively in highly competitive markets;

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•	our success depends on general and local economic conditions where we operate;

•	severe weather, natural disasters, global pandemics, acts of war or terrorism, theft, civil unrest, government expropriation or other external events could have significant effects on our business;

•	defaults by or deteriorating asset quality of other financial institutions could adversely affect us;

•	nonperforming and similar assets take significant time to resolve and may adversely affect our results of operations and financial condition;

•	changes in the real estate markets, including the secondary market for residential mortgage loans, may adversely affect us;

•	our allowance for loan losses may prove inadequate or we may be negatively affected by credit risk exposures;

•	if our business does not perform well, we may be required to recognize an impairment of our goodwill or other long-lived assets or to establish a valuation allowance against the deferred income tax asset, which could adversely affect our results of operations or financial condition;

•	mortgage servicing rights requirements may change and require us to incur additional costs and risks;

•	we may be contractually obligated to repurchase mortgage loans we sold to third-parties on terms unfavorable to us;

•	our concentration of CRE loans could result in further increased loan losses, and adversely affect our business, earnings, and financial condition;

•	liquidity risks could affect operations and jeopardize our financial condition;

•	certain funding sources may not be available to us and our funding sources may prove insufficient and/or costly to replace;

•	our Venezuelan deposit concentration may lead to conditions in Venezuela adversely affecting our operations;

•	our investment advisory and trust businesses could be adversely affected by conditions affecting our Venezuelan customers;

•	our brokered deposits and wholesale funding increases our liquidity risk, could increase our interest rate expense and potentially increase our deposit insurance costs;

•	technological changes affect our business including potentially impacting the revenue stream of traditional products and services, and we may have fewer resources than many competitors to invest in technological improvements;

•	the fair value of our investment securities can fluctuate due to market conditions out of our control;

•	potential gaps in our risk management policies and internal audit procedures may leave us exposed to unidentified or unanticipated risk, which could negatively affect our business;

•	we may determine that our internal controls and disclosure controls could have deficiencies or weaknesses;

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•	any failure to protect the confidentiality of customer information could adversely affect our reputation and subject us to financial sanctions and other costs that could have a material adverse effect on our business, financial condition and results of operations;

•	our information systems may experience interruptions and security breaches, and are exposed to cybersecurity threats;

•	future acquisitions and expansion activities may disrupt our business, dilute shareholder value and adversely affect our operating results;

•	attractive acquisition opportunities may not be available to us in the future;

•	certain provisions of our amended and restated articles of incorporation and amended and restated bylaws, Florida law, and U.S. banking laws could have anti-takeover effects by delaying or preventing a change of control that you may favor;

•	we may be unable to attract and retain key people to support our business;

•	our employees may take excessive risks which could negatively affect our financial condition and business;

•	we are subject to extensive regulation that could limit or restrict our activities and adversely affect our earnings;

•	litigation and regulatory investigations are increasingly common in our businesses and may result in significant financial losses and/or harm to our reputation;

•	we are subject to capital adequacy and liquidity standards, and if we fail to meet these standards our financial condition and operations would be adversely affected;

•	our operations are subject to risk of loss from unfavorable fiscal, monetary and political developments in the U.S. and other countries where we do business;

•	changes in accounting rules applicable to banks and financial institutions could adversely affect our financial condition and results of operations;

•	the Dodd-Frank Act currently restricts our future issuance of trust preferred securities and cumulative preferred securities as eligible Tier 1 risk-based capital for purposes of the regulatory capital guidelines for bank holding companies;

•	we may need to raise additional capital in the future, but that capital may not be available when it is needed or on favorable terms;

•	we will be subject to heightened regulatory requirements if our total assets grow in excess of $10 billion;

•	the Federal Reserve may require us to commit capital resources to support the Bank;

•	we may face higher risks of noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations than other financial institutions;

•	failures to comply with the fair lending laws, CFPB regulations or the Community Reinvestment Act could adversely affect us;

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•	Fannie Mae and Freddie Mac restructuring may adversely affect the mortgage markets;

•	we adopted a new accounting principle that requires immediate recognition in the statement of income of unrealized changes in the fair value of equity securities, which includes mutual funds, increasing the volatility of our results of operations;

•	we changed our brand from “Mercantil” to “Amerant,” which could adversely affect our business and profitability;

•	we are incurring incremental costs as a separate, public company;

•	as a separate, public company, we spend additional time and resources to comply with rules and regulations that previously did not apply to us;

•	our historical consolidated financial data are not necessarily representative of the results we would have achieved as a separate company and may not be a reliable indicator of our future results;

•	certain of our directors may have actual or potential conflicts of interest because of their equity ownership in the Former Parent or their positions with the Former Parent and us;

•	if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the price of our common stock and trading volume could decline;

•	our stock price may fluctuate significantly;

•	a limited market exists for the Company’s shares of Class B common stock on the Nasdaq Global Select Market. An active trading market may not develop or continue for the Company’s shares of Class B common stock, which could adversely affect the market price and market volatility of those shares;

•	certain of our existing stockholders could exert significant control over the Company;

•	we have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding Company Shares;

•	we expect to issue more Class A common stock in the future which may dilute holders of Class A common stock;

•	holders of Class B common stock have limited voting rights. As a result, holders of Class B common stock will have limited ability to influence shareholder decisions;

•	our dual classes of Company Shares may limit investments by investors using index-based strategies;

•	we are an “emerging growth company,” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors;

•	we do not currently intend to pay dividends on our common stock;

•	our ability to pay dividends to shareholders in the future is subject to profitability, capital, liquidity and regulatory requirements and these limitations may prevent us from paying dividends in the future;

•	we face strategic risks as an independent company and from our history as a part of the Former Parent; and

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•	the other factors and information in this Form 10-K and other filings that we make with the SEC under the Exchange Act and Securities Act. See “Risk Factors” in this Form 10-K.

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•	Increase domestic core deposits, focused on client acquisition and deepen relationships by bundling products to increment client stickiness, as well as gain a greater share of each customer’s business;

•	Enhance retail and commercial sales and servicing approaches with a consultative needs based and high touch perspective, using CRM tools;

•	Retain international deposits by adding new and revamped products bundles and improving the customer journey;

•	Expand and improve the capabilities of our online bank to offer deposit accounts nationwide;

•	Focus on domestic lending opportunities, especially relationship-driven consumer loans (including residential first mortgages and home equity loans), retail lending (including personal and small business loans) and C&I and CRE loans, which may improve our returns at lower risks than various types of credits we have made historically;

•	Improve cross-selling among all business lines, with a focus on attracting core deposits, fee income and loans, while building broader, more profitable customer relationships, including wealth management;

•	Increase non-interest fee income through our cash management products, interest rate swaps, private banking and wealth management services;

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•	Buildup our scalable wealth management business with more domestic, as well as international customers;

•	Where possible, reconfigure banking centers to smaller banking centers of the future facilities, and relocate certain banking centers to better locations as existing leases expire;

•	Upgrade the customer experience by:

◦	improving online and mobile banking for retail and commercial customers;

◦	transforming our banking centers to provide a seamless retail banking experience with staff focused on consultative customer service across the full range of products we offer with less emphasis on routine transactions;

◦	streamlining and expediting product applications, transactions and customer processes compliant with regulatory requirements, such as data privacy and anti-money laundering; and

◦	providing quicker decisions on customer requests while maintaining accountability and appropriate credit and compliance standards;

•	Reduce the number of computer applications and programs and streamline our processes to increase efficiency through approximately $10.0 to $15.0 million of technology investments through 2021;

•	Increase the use of digital tools (CRM and a new loan origination system) to streamline the sales process and increase efficiency;

•	Reduce staffing generally, including as a result of more automated and better integrated systems, and reduced staffing in the banking centers of the future;

•	Reduce and reorganize the space we occupy in our main office to increase the amount and attractiveness of space available for lease to third parties; and

•	Align responsibilities and incentives to achieve these goals.

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•	Certain limited existing business and transitional service relationships existing as of December 2018, all of which substantially ended in the second quarter of 2019;

•	The Cayman Bank Acquisition, completed in the third quarter of 2019; and

•	The lease of space at market rates by the Company to the Former Parent to house certain employees of the Former Parent who perform treasury and administrative services.

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•	charter a national bank;

•	establish new branch offices (banking centers) that accept deposits;

•	relocate an office;

•	merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution; or

•	obtain deposit insurance coverage for a newly chartered institution.

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•	internal policies, procedures and controls designed to implement and maintain the savings association’s compliance with all of the requirements of the USA PATRIOT Act, the BSA and related laws and regulations;

•	systems and procedures for monitoring and reporting of suspicious transactions and activities;

•	a designated compliance officer;

•	employee training;

•	an independent audit function to test the anti-money laundering program;

•	procedures to verify the identity of each customer upon the opening of accounts; and

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•	heightened due diligence policies, procedures and controls applicable to certain foreign accounts and relationships.

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Additionally, the USA PATRIOT Act requires each financial institution to develop a customer identification program, or CIP as part of its anti-money laundering program. The key components of the CIP are identification, verification, government list comparison, notice and record retention. The purpose of the CIP is to enable the financial institution to determine the true identity and anticipated account activity of each customer. To make this determination, among other things, the financial institution must collect certain information from customers at the time they enter into the customer relationship with the financial institution. This information must be verified within a reasonable time. Furthermore, all customers must be screened against any CIP-related government lists of known or suspected terrorists. On May 11, 2018, the U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a final rule under the BSA requiring banks to identify and verify the identity of the natural persons behind their customers that are legal entities - the beneficial owners. We and our affiliates have adopted policies, procedures and controls designed to comply with the BSA and the USA PATRIOT Act.

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•	its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends;

•	its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or

•	it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

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Well-capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a CET1 capital ratio of 6.5% or greater, a leverage capital ratio of 5% or greater and is not subject to any written agreement, order, capital directive or prompt corrective action directive by a federal bank regulatory agency to maintain a specific capital level for any capital measure;

•	“Adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a CET1 capital ratio of 4.5% or greater, and generally has a leverage capital ratio of 4% or greater;

•	“Undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 6%, a CET1 capital ratio of less than 4.5% or generally has a leverage capital ratio of less than 2%;

•	“Significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 4%, a CET1 capital ratio of less than 3%, or a leverage capital ratio of less than 3%; or

•	“Critically undercapitalized” if its tangible equity is equal to or less than 2% to total assets.

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•	The generally applicable prompt corrective action leverage and risk-based capital standards, or generally applicable standards, including the types of instruments that may be counted as Tier 1 capital, will be applicable on a consolidated basis to depository institution holding companies, as well as their bank and thrift subsidiaries.

•	The generally applicable standards in effect prior to the Dodd-Frank Act will be “floors” for the standards to be set by the regulators.

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Bank and thrift holding companies with assets of less than $15 billion as of December 31, 2009, will be permitted to include trust preferred securities that were issued before May 19, 2010, as Tier 1 capital, but trust preferred securities issued by a bank holding company after May 19, 2010 will no longer count as Tier 1 capital. Our trust preferred securities outstanding at December 31, 2019 were issued before May 19, 2010, and are included in our Tier 1 capital.

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•	Goodwill and other intangibles, other than mortgage servicing assets, which are treated separately, net of associated deferred tax losses (“DTLs”);

•	Deferred tax assets (“DTAs”) arising from operating losses and tax credit carryforwards net of allowances and DTLs;

•	Gains on sale from any securitization exposure; and

•	Defined benefit pension fund net assets (i.e., excess plan assets), net of associated DTLs.

•	Mortgage servicing assets, net of associated DTLs;

•	DTAs arising from temporary differences that could not be realized through net operating loss carrybacks, net of any valuation allowances and DTLs;

•	significant common stock investments in unconsolidated financial institutions, net of associated DTLs; and

•	Noncumulative perpetual preferred stock, Tier 1 minority interest not included in CET1, subject to limits, and current Tier 1 capital instruments issued to the U.S. Treasury, including shares issued pursuant to the TARP or SBLF programs.

•	the banking organization’s CET1 capital ratio minus 4.5%;

•	the banking organization’s Tier 1 risk-based capital ratio minus 6.0%; or

•	the banking organization’s total risk-based capital ratio minus 8.0%.

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•	Assign a 250% risk-weight to MSRs;

•	Assign up to a 1,250% risk-weight to structured securities, including private label mortgage securities and asset backed securities;

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Retain existing risk-weights for residential mortgages, but assign a 100% risk-weight to most CRE loans and a 150% risk-weight for “high volatility CRE loans,” or “HVCRE,” which are credit facilities for the acquisition, construction or development of real property other than one-to-four family residential properties or commercial real projects where: (i) the loan-to-value ratio is not in excess of interagency real estate lending standards; and (ii) the borrower has contributed capital equal to not less than 15% of the real estate’s “as completed” value before the loan was made.

•	Assign a 150% risk-weight to past due exposures (other than sovereign exposures and residential mortgages);

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•	Assign a 250% risk-weight to DTAs, to the extent not deducted from capital (subject to certain maximums);

•	Retain the existing 100% risk-weight for corporate and retail loans; and

•	Increase the risk-weight for exposures to qualifying securities firms from 20% to 100%.

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•	Total reported loans for construction, land development, and other land of 100% or more of a bank’s total risk-based capital; or

•	Total reported loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land are 300% or more of a bank’s total risk-based capital.

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•	provide employees incentives that appropriately balance risk and reward;

•	be compatible with effective controls and risk-management; and

•	be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

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•	consumer credit and mortgage lending;

•	capital requirements;

•	Volcker Rule compliance;

•	stress testing and enhanced prudential standards; and

•	capital formation.

•	“qualifying community banks,” defined as institutions with total consolidated assets of less than $10 billion, which meet a “community bank leverage ratio” of 8.00% to 10.00%, may be deemed to have satisfied applicable risk based capital requirements as well as the capital ratio requirements;

•	section 13(h) of the BHC Act, or the “Volcker Rule,” is amended to exempt from the Volcker Rule, banks with total consolidated assets valued at less than $10 billion, and trading assets and liabilities comprising not more than 5.00% of total assets;

•	“reciprocal deposits” will not be considered “brokered deposits” for FDIC purposes, provided such deposits do not exceed the lesser of $5 billion or 20% of the bank’s total liabilities; and

•	the consolidated asset threshold at which company-run stress tests are required increased from $10 billion to $250 billion, and the consolidated asset threshold for mandatory risk committees increased from $10 billion to $50 billion.

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•	Our focus on domestic lending in highly competitive markets may not meet our objectives, and may pose additional or other risks than low margin loans to foreign financial institutions.

•	Our funding has depended on foreign deposits and we may not be able to replace lost low cost foreign deposits with domestic deposits with similar costs and long-term customer relationships.

•	Our business strategy includes growth plans, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

•	The benefits from our technology investments may take longer than expected to be realized and may not be as large as expected, or may require additional investments.

•	If we are unable to reduce our cost structure, we may not be able to meet our profitability objectives.

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•	Our strategic plan may take longer than anticipated to execute, benefits may be more expensive to implement than is currently anticipated, and otherwise may achieve less than we expect, any of which could adversely affect our business growth, results of operations and financial conditions.

•	Our wealth management business currently relies heavily on our Venezuelan customers. Our strategic plan for expanding our wealth management business to U.S.-based customers, in this highly competitive business, may not be as successful as we anticipate.

•	All our market and customer initiatives are being made in highly competitive markets.

•	Any significant unanticipated or unusual charges, provisions or impairments, including as a result of any legal proceedings or industry regulatory changes, could adversely affect our ability to implement or realize the expected results of the strategic plan.

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We expect to face continued high levels of regulation of our industry as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, related rulemaking and other initiatives by the U.S. government and its regulatory agencies, including the Consumer Financial Protection Bureau, or the CFPB. Compliance with such laws and regulations may increase our costs, reduce our profitability, and limit our ability to pursue business opportunities and serve customers’ needs. The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, or the 2018 Growth Act, various pending bills in Congress and statements by our regulators may offer some regulatory relief for banking organizations of our size. We believe that comprehensive regulatory relief will be slow and contentious. We are uncertain about the scope, nature and timing of any regulatory relief, and its effect on us, if any.

•	Market developments, including employment and price levels, stock market volatility and declines, and tax changes, may affect consumer confidence levels from time to time in different directions, and may cause adverse changes in payment behaviors and payment rates, causing increases in delinquencies and default rates, which could affect our charge-offs and provisions for credit losses.

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Despite having one of the lowest unemployment rates in the history, the U.S. Economy is not showing significant GDP growth or inflationary pressures. Extreme market events like disruptions in global method of payments due to prolonged and severe weather conditions, insolvency of large market participants, outbreak of life threatening epidemics or pandemics (including but not limited to the novel Coronavirus, or COVID-19), default in payments of systemically important financial institutions, or organized acts of terrorism with high impact over several interconnected financial markets, may trigger unexpected and significant decreases in interest rates by the Federal Reserve or other Central Banks to correct market distortions and/or provide sufficient liquidity to market participants. In addition, trade conflicts between the U.S. and China, Brexit and other geopolitical events have created specific shocks to financial markets. The Federal Reserve decreased its benchmark interest rate three times in 2019 and another 50 basis points more recently in 2020 in the first between-meetings move since the financial crisis. These decreases have brought the benchmark interest rate from 2.50% at the close of 2018 to 1.25% at the filing of this Form 10-K.

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Our ability to assess the creditworthiness of our customers and those we do business with, and to estimate the values of our assets and collateral for loans may be impaired if the models and approaches we use become less predictive of future behaviors and valuations. The process we use to estimate losses inherent in our credit exposure, or estimate the value of certain assets, requires difficult, subjective, and complex judgments, including forecasts of economic conditions and how those economic predictions might affect the ability of our borrowers to repay their loans or the value of assets.

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The 2017 Tax Act substantially limits the deductibility of all state and local taxes for U.S. taxpayers, including property taxes, and lowers the cap on the amount of primary and secondary residential mortgage indebtedness for which U.S. taxpayers may deduct interest. These changes, with or without increases in interest rates, generally, could have adverse effects on home sales, the volume of new mortgage and home equity loans and the values and saleability of residences held as collateral for loans.

•	Our ability to borrow from and engage in other business with other financial institutions on favorable terms, or at all, could be adversely affected by disruptions in the capital markets or other events, including, among other things, investor expectations and changes in regulations in the U.S. and foreign markets.

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•	Failures of other financial institutions in our markets and increasing consolidation of financial services companies as a result of market conditions could increase our deposits and assets and necessitate additional capital, and could have unexpected adverse effects upon us and our business.

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The “Volcker Rule,” including final regulations adopted in December 2013, may affect us adversely by reducing market liquidity and securities inventories at those institutions where we buy and sell securities for our portfolio and increasing the bid-ask spreads on securities we purchase or sell. These rules have decreased the range of permissible investments, such as certain collateralized loan obligation interests, which we could otherwise use to diversify our assets and for asset/liability management. The 2018 Growth Act removed Volcker Rule restrictions on banks under $10 billion in assets, and the federal banking agencies finalized a rule with required compliance by January 1, 2021, that simplifies and tailors compliance requirements relating to the Volcker Rule. See “Supervision and Regulation-Other Legislative and Regulatory Changes.”

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•	risks of unknown or contingent liabilities;

•	unanticipated costs and delays;

•	risks that acquired new businesses will not perform consistent with our growth and profitability expectations;

•	risks of entering new markets (domestic and international) or product areas where we have limited experience;

•	risks that growth will strain our infrastructure, staff, internal controls and management, which may require additional personnel, time and expenditures;

•	exposure to potential asset quality issues with acquired institutions;

•	difficulties, expenses and delays in integrating the operations and personnel of acquired institutions or business generation teams;

•	potential disruptions to our business;

•	possible loss of key employees and customers of acquired institutions;

•	potential short-term decreases in profitability; and

•	diversion of our management’s time and attention from our existing operations and business.

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•	the exclusive right of our board to fill any director vacancy;

•	advance notice requirements for shareholder proposals and director nominations;

•	provisions limiting the shareholders’ ability to call special meetings of shareholders or to take action by written consent; and

•	the ability of our board to designate the terms of and issue new series of preferred stock without shareholder approval, which could be used, among other things, to institute a rights plan that would have the effect of significantly diluting the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our board.

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•	losses and/or increases in our and the Bank’s credit risk assets and expected losses resulting from the deterioration in the creditworthiness of borrowers and the issuers of equity and debt securities;

•	difficulty in refinancing or issuing instruments upon redemption or at maturity of such instruments to raise capital under acceptable terms and conditions;

•	declines in the value of our securities or loan portfolios;

•	adverse changes in foreign currency exchange rates;

•	revisions to the regulations or their application by our regulators that increase our capital requirements;

•	reductions in the value of our DTAs and other adverse developments; and

•	unexpected growth and an inability to increase capital timely.

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•	ability to grow;

•	costs of and availability of funds;

•	FDIC deposit insurance premiums;

•	ability to raise, rollover or replace brokered deposits;

•	ability to make acquisitions, open new branches or engage in new activities;

•	flexibility if we become subject to prompt corrective action restrictions;

•	ability to make discretionary bonuses to attract and retain quality personnel;

•	ability to make payments of principal and interest on our capital instruments; and

•	ability to pay dividends on our capital stock.

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•	examined directly by the CFPB with respect to various federal consumer financial laws;

•	subject to reduced dividends on the Bank’s holdings of Federal Reserve Bank of Atlanta common stock;

•	subject to limits on interchange fees pursuant to the “Durbin Amendment” to the Dodd-Frank Act which were not applicable to us in 2019 as a result of the Spin-off in 2018;

•	subject to enhanced prudential standards, to the extent not reduced or eliminated as a result of the 2018 Growth Act;

•	subject to annual Dodd-Frank Act self-administered stress testing, or DFAST, or similar stress testing, to the extent not reduced or eliminated by the 2018 Growth Act and our regulators; and

•	no longer treated as a “small institution” for FDIC deposit insurance assessment purposes.

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•	actual or anticipated fluctuations in our operating results due to factors related to our business;

•	the success or failure of our business strategies;

•	quarterly or annual earnings and earnings expectations for our industry, and for us;

•	our ability to obtain financing as needed;

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•	our announcements or our competitors’ announcements regarding new products or services, enhancements, significant contracts, acquisitions or strategic investments;

•	changes in accounting standards, policies, guidance, interpretations or principles;

•	changes in tax laws;

•	the failure of securities analysts to cover our Company Shares;

•	changes in earnings estimates by securities analysts;

•	the operating and stock price performance of other comparable companies;

•	investor perceptions of the Company and the banking industry;

•	our profile, dividend policy or market capitalization may not fit the investment objectives of a large number of shareholders, many of whom are Venezuelans who became shareholders as a result of the Spin-off;

•	events affecting our shareholders in Venezuela, including hyperinflation and currency controls;

•	the intent of our shareholders, including institutional investors, to hold or sell their Company Shares;

•	fluctuations in the stock markets or in the values of financial institution stocks, generally;

•	changes in laws and regulations, including banking laws and regulations, affecting our business; and

•	general economic conditions and other external factors.

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•	the Spin-off;

•	the IPO; and

•	the Company's repurchase of certain of its shares of Class B common stock from the Former Parent.

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(1)

Expenses incurred for actions designed to implement the Company’s strategy as a new independent company. These actions include, but are not limited to reductions in workforce, streamlining operational processes, rolling out the Amerant brand, implementation of new technology system applications, enhanced sales tools and training, expanded product offerings and improved customer analytics to identify opportunities.

(2)

On October 30, 2018, the Board of Directors of the Company adopted a voluntary early retirement plan (the “Voluntary Plan”) for certain eligible long-term employees and an involuntary severance plan (the “Involuntary Plan”) for certain other positions.  The Company incurred approximately $4.2 million of expenses in 2018 in connection with the Voluntary Plan, substantially all of which will be paid over time in the form of installment payments until January 2021. The Company incurred approximately $0.5 million of expenses in 2018 in connection with the Involuntary Plan, substantially all of which will be paid over time in the form of installment payments until December 2019.

(3)

The Spin-off caused an unexpected early distribution for U.S. federal income tax purposes from our deferred compensation plan. This distribution was taxable to plan participants as ordinary income during 2018. We partially compensated plan participants, in the aggregate amount of $1.2 million, for the higher tax expense they incurred as a result of the distribution increasing the plan participants’ estimated effective federal income tax rates by recording a contribution to the plan on behalf of its participants. The after tax net effect of this $1.2 million contribution for the year ended December 31, 2018, was approximately $952,000. As a result of the early taxable distribution to plan participants, we have expensed and deducted for federal income tax purposes, previously deferred compensation of approximately $8.1 million, resulting in an estimated tax credit of $1.7 million, which exceeded the amount of the tax gross-up paid to plan participants.

(4)

Calculated based upon the estimated annual effective tax rate for the periods, which excludes the tax effect of discrete items, and the amounts that resulted from the difference between permanent spin-off costs that are non-deductible for Federal and state income tax purposes, and total spin-off costs recognized in the consolidated financial statements. The estimated annual effective rate applied for the calculation differs from the reported effective tax rate since it is based on a different mix of statutory rates applicable to these expenses and to the rates applicable to the Company and its subsidiaries.

(5)	Calculated based upon an estimated annual effective rate of 31.71%.

(6)

As of December 31, 2019, potential dilutive instruments consisted of unvested shares of restricted stock and restricted stock units mainly related to the Company’s IPO in 2018. As of December 31, 2019 unvested shares of restricted stock and restricted stock units totaled 530,620. These potential dilutive instruments were included in the diluted earnings per share computation because, when the unamortized deferred compensation cost related to these shares was divided by the average market price per share at those dates, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at those dates, such awards resulted in higher diluted weighted average shares outstanding than basic weighted average shares outstanding, and had a dilutive effect in per share earnings for the year ended December 31, 2019. We had no potential dilutive instruments at any period prior to December 2018.

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•	Net income for the full-year 2019 was $51.3 million, up 12.0% compared to $45.8 million in full-year 2018. Diluted earnings per share of $1.20 in 2019, compared to $1.08 per share in 2018 on a GAAP basis.

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Net interest income for the full-year 2019 was $213.1 million, down 2.7% compared to $219.0 million in 2018. The NIM for full-year 2019 improved to 2.85% from 2.78%, primarily attributed to an improved loan portfolio mix, including the planned strategic run-off of foreign financial institution (“FI”) loans and non-relationship Shared National Credits (“SNCs”), partially offset by higher costs of deposits.

•	Credit quality remained strong during 2019. The Company released $3.2 million from the allowance for loan losses (“ALL”) during 2019, compared to a $0.4 million provision for loan losses during 2018. The ratio of ALL to total loans was 0.91% as of December 31, 2019, down from 1.04% at the end of 2018. The ratio of net charge-offs to average total loans in 2019 was 0.11%, down from 0.18% in 2018.

•

Noninterest income was $57.1 million for the full-year of 2019, up 6.0% from $53.9 million in 2018, driven by the gain on sale of vacant land adjacent to our Beacon operations center (“vacant Beacon land”), and a significant increase in fees from derivative contracts sold to loan customers. Also included in 2019 was a $0.7 million benefit from the adoption of a new accounting standard applicable to marketable equity securities.

•

Noninterest expense was $209.3 million for the full-year 2019, down 2.6% from $215.0 million in 2018, mainly driven by lower salaries and employee benefits, lower legal and professional fees compared to the previous year when the Company completed its spin-off, and lower FDIC-related costs. Partially offsetting these declines were additional compensation expense of $5.9 million related to the amortization of restricted stock awards granted in connection with the Company’s initial public offering (“IPO”) in 2018. Adjusted noninterest expense for the full-year 2019 was $204.3 million, up 1.2% compared to $201.9 million for 2018.

•	The efficiency ratio was 77.5% (76.4% adjusted for restructuring costs and the one-time gain on sale of vacant Beacon land) for the full-year 2019, compared to 78.8% (74.0% adjusted for restructuring costs and spin-off costs) for 2018.

•	Stockholders’ book value per common share increased to $19.35 for the full-year 2019, representing an 11.8% improvement compared to $17.31 for 2018. Tangible book value per common share rose to $18.84, a 12.0% improvement compared to $16.82 at year-end 2018.

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(1)

At December 31, 2019 and 2018, potential dilutive instruments consist of unvested shares of restricted stock and restricted stock units totaling 530,620 and 794,529, respectively, mainly related to the Company’s IPO in 2018. See Note 20 to our audited annual consolidated financial statements in this Form 10-K for details on the dilutive effects of the issuance of restricted stock on earnings per share in 2019 and 2018.We had no outstanding dilutive instruments at December 31, 2017

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(1)	Average non-performing loans of $27.4 million, $30.8 million and $46.1 million for the years ended December 31, 2019, 2018 and 2017, respectively, are included in the average loan portfolio, net balance.

(2)

Includes nontaxable securities with average balances of $98.1 million, $172.3 million and $163.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. The tax equivalent yield for these nontaxable securities was 4.00%, 4.11% and 3.86% for the years ended December 31, 2019, 2018 and 2017, respectively. In 2019 and 2018, the tax equivalent yield was calculated by assuming a 21% tax rate and dividing the actual yield by 0.79. In 2017, the tax equivalent yields were calculated by assuming a 35% tax rate and dividing the actual yields by 0.65.

(3)

Includes nontaxable securities with average balances of $80.8 million, $87.8 million and $24.6 million for the years ended December 31, 2019, 2018 and 2017, respectively. The tax equivalent yield for these nontaxable securities was 3.05%, 2.28% and 3.61% for the years ended December 31, 2019, 2018 and 2017, respectively. In 2019 and 2018, the tax equivalent yield was calculated assuming a 21% tax rate and dividing the actual yield by 0.79. In 2017, the tax equivalent yield was calculated assuming a 35% tax rate and dividing the actual yield by 0.65.

(4)	The terms of the advance agreement require the Bank to maintain certain investment securities or loans as collateral for these advances.

(5)	Net interest margin is defined as net interest income divided by average interest-earning assets, which are loans, debt securities available for sale and held to maturity, equity securities with readily determinable fair value not held for trading, deposits with banks and other financial assets, which yield interest or similar income.

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(1)	Changes in cash surrender value of BOLI are not taxable.

(2)	Includes income from derivative and foreign currency exchange transactions with customers, rental income, net gains on the disposition of bank properties, and valuation income on the investment balances held in the non-qualified deferred compensation plan.

N/M	Means not meaningful

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(1)	Total loans, gross is the principal balance of outstanding loans held for investment net of deferred loan fees and costs, but not net of the allowance for loan losses.

(2)	See Note 5 to our audited consolidated financial statements for more details on our impairment models.

(3)	Total loans, net is the principal balance of outstanding loans held for investment net of deferred loan fees and costs, and net of the allowance for loan losses.

(1)	Includes loans generally granted to finance the acquisition or operation of non-owner occupied properties such as retail shopping centers, free-standing single-tenant properties, and mixed-use properties primarily dedicated to retail, where the primary source of repayment is derived from the rental income generated from the use of the property by its tenants.

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(1)	Secured by cash or U.S. government securities

(2)	Includes customers’ overdraft balances totaling $1.3 million, $1.0 million, $1.8 million, $1.7 million and $0.7 million at each of the dates presented.

(3)

Mostly comprised of credit card extensions of credit to customers with deposits with the Bank. In April 2019, we revised our credit card program to further strengthen the Company’s credit quality. We stopped charge privileges to our riskiest cardholders and required repayment of their balances by November 2019. Other cardholders’ charging privileges ended in October 2019 and they were required to repay all balances by January 2020. We are closely monitoring the performance of the outstanding balance of our credit cards until it is completely repaid.

(4)	Secured by real estate properties located in the U.S.

(5)	International customers’ overdraft balances were de minimis at each of the dates presented.

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(1)

Includes a total of $183.6 million of fixed-rate loans (mainly comprised of 60.2% single-family residential and 35.1% owner occupied), and $360.1 million of variable-rate loans (mainly comprised of 78.1% single-family residential and 17.6% owner occupied), maturing in 10 years or more. Fixed-rate and variable-rate loans maturing in 15 years or more represent 59.1% of total fixed-rate and 75.6% of total variable-rate loans maturing in 10 years or more, respectively, and correspond primarily to single-family residential loans.

(2)

Includes a total of $1.2 billion, or 21% of total loans, which mature after December 31, 2021 and are priced based on variable interest rates tied to the LIBOR. In December of 2019, the Asset/Liability Committee appointed a management team charged with the responsibility of monitoring developments related to the proposed alternative reference interest rates to replace LIBOR and guide the Company through the potential discontinuation of LIBOR.

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(1)	Consists of outstanding principal amounts, net of collateral of cash, cash equivalents or other financial instruments totaling $15.2 million, $19.5 million and $31.9 million as of December 31, 2019, 2018 and 2017, respectively.

(2)

Includes mortgage loans for single-family residential properties located in the U.S. totaling $104.0 million, $129.0 million and $145.1 million as of December 31, 2019, 2018 and 2017, respectively. Based upon the diligence we customarily perform to "know our customers" for anti-money laundering, OFAC and sanctions purposes, and a review of the Executive Order issued by the President of the United States on August 5, 2019 and the related Treasury Department Guidance, we believe that the U.S. economic embargo on certain Venezuelan persons will not adversely affect our Venezuelan customer relationships, generally.

(1)	Consists of outstanding principal amounts, net of collateral of cash, cash equivalents or other financial instruments totaling $15.2 million.

(2)	Includes mortgage loans for single-family residential properties located in the U.S. totaling $104.0 million.

(3)	Includes credit card balances of $7.8 million.

(4)	Includes loans to borrowers in other countries which do not individually exceed one percent of total assets in 2019 and 2018. In 2017, includes $141.1 million and $94.5 million in loans to borrowers in Brazil and Chile, and other countries which do not individually exceed one percent of total assets in 2017.

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(1)	Consists mainly of domestic non-bank financial services companies and trade finance facilities granted to Latin American banks.

(2)	Comprised mostly of CRE loans throughout South Florida, the greater Houston, Texas area, and New York.

(4)	Primarily loans belonging to industrial sectors not included in the above sectors, which do not individually represent more than 1 percent of the total loan portfolio, and consumer loans which represented around 2% of the total.

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(1)	Includes: (i) credit card receivables to cardholders for whom charge privileges have been stopped as of December 31, 2019; (ii) mortgage loans for and secured by single-family residential properties located in the U.S. The total allowance for loan losses for credit card receivables, after the charge-offs, stands at $1.8 million at December 31, 2019.

(2)	Includes transactions in which the debtor or customer is domiciled outside the U.S. despite all collateral being located in the U.S.

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(1)	Includes loan modifications that met the definition of TDRs, which may be performing in accordance with their modified loan terms. As of December 31, 2019, non-performing TDRs include $9.8 million in a multiple loan relationship to a South Florida borrower.

(2)	Includes transactions in which the debtor or customer is domiciled outside the U.S., despite all collateral being located in the U.S.

(3)	Loans past due 90 days or more but still accruing.

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•	investment quality;

•	liquidity requirements;

•	interest-rate risk sensitivity; and

•	potential returns on investment

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(1)

December 31, 2019 and 2018 includes $5.2 million and $36.2 million, respectively, in “investment-grade” quality securities issued by corporate entities. From Japan in the financial services sector in 2019 and from Europe and Japan in three different sectors in 2018. December 31, 2017 includes $24.3 million in obligations issued by corporate entities from Panama, Europe and others in three different sectors. The Company limits exposure to foreign investments based on cross border exposure by country, risk appetite and policy. All foreign investments are denominated in U.S. Dollars.

(2)	Includes an open-end fund incorporated in the U.S. The Fund's objective is to provide a high level of current income consistent with the preservation of capital and investments deemed to be qualified under the Community Reinvestment Act of 1977.

(3)	Amounts correspond to original cost at the date presented. Original cost approximates fair value because of the nature of these investments.

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(1)	Includes brokered deposits of $682.4 million, $642.1 million, $780.0 million, $690.9 million and $536.0 million at December 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(2)

Based upon the diligence we customarily perform to "know our customers" for anti-money laundering, OFAC and sanctions purposes, and a review of the Executive Order issued by the President of the United States on August 5, 2019 and the related Treasury Department Guidance, we believe that the U.S. economic embargo on certain Venezuelan persons will not adversely affect our Venezuelan customer relationships, generally.

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(1)

The Bank selectively closed deposit accounts held by Venezuelan and other international customers with balances of approximately $76.4 million in 2018 and $196.1 million in 2017, to reduce its compliance costs and risks. No accounts held by Venezuelan or other international customers were preemptively closed in 2019 to reduce compliance costs and risks. We believe our deposit de-risking process is complete.

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(1)

As of December 31, 2019, potential dilutive instruments consisted of unvested shares of restricted stock and restricted stock units mainly related to the Company’s IPO in 2018. As of December 31, 2019 unvested shares of restricted stock and restricted stock units totaled 530,620. These potential dilutive instruments were included in the diluted earnings per share computation because, when the unamortized deferred compensation cost related to these shares was divided by the average market price per share at those dates, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at those dates, such awards resulted in higher diluted weighted average shares outstanding than basic weighted average shares outstanding, and had a dilutive effect in per share earnings for the year ended December 31, 2019. We had no potential dilutive instruments at any period prior to December 2018.

(2)	See “Non-GAAP Financial Measures Reconciliation” for an explanation of certain non-GAAP measures.

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(1)	As of December 31, 2019, includes $530 million (interest rate - from 0.71% to 0.97%) in advances from the FHLB that are callable prior to maturity. There were no callable advances from the FHLB as of December 31, 2018.

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(2)

At December 31, 2018, we had designated certain interest rate swaps as cash flow hedges to manage this variable interest rate exposure. In the first quarter of 2019, the Company terminated these interest rate swap contracts. As a result, the Company received cash equal to the contracts’ fair value at the date of termination of approximately $8.9 million which is recorded in AOCI. This amount will be amortized over the original remaining lives of the contracts as an offset to interest expense on the Company’s FHLB advances. As a result of this amortization, the Company recorded a credit of approximately $1.2 million against interest expense on FHLB advances in 2019.

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(1)

We are phasing out our legacy credit card products to further strengthen overall credit quality. In April 2019, the Company stopped the charging privileges to our smallest and riskiest cardholders and required repayment of their balances by November 2019. Other cardholders’ charging privileges ended in October 2019 and they were required to repay all balances by January 2020. As a result of these actions, the Company no longer carries off-balance sheet credit risk associated with its former credit card programs.

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(1)	Calculated assuming a constant interest rate as of December 31, 2019.

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•	maintains a comprehensive market risk and ALM framework;

•	measures and monitors market risk and ALM across the organization to ensure that they are within approved risk limits and reports to ALCO and to the board of directors; and

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•	recommends changes to risk limits to the board of directors.

•	earnings sensitivity;

•	economic value of equity, or EVE; and

•	investment portfolio mark-to-market exposure (debt and equity securities available for sale and held to maturity securities).

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(1)	“Loan portfolio-performing” excludes $32.9 million of non-performing loans.

N/M	Not meaningful

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3.	Securities

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4.	Loans

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(1)	Loans to borrowers in 14 other countries which do not individually exceed 1% of total assets (17 countries in 2018).

(2)	Corresponds to mortgage loans secured by single-family residential properties located in the U.S.

(3)

Mostly comprised of credit card extensions of credit to customers with deposits with the Bank. The Company is phasing out its legacy credit card products to further strengthen its credit quality. In April 2019, the Company stopped charge privileges to its riskiest cardholders and required repayment of their balances by November 2019. Other cardholders’ charging privileges ended in October 2019 and they were required to repay all balances by first quarter of 2020. The Company is closely monitoring the performance of the outstanding credit card balances until complete repayment.

(4)	Overdrafts to customers outside the United States were de minimis.

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5.	Allowance for Loan Losses

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(1)	In the fourth quarter of 2018, the Company sold one non-performing loan in the Houston area with a carrying value of $10.2 million, and charged off $5.8 million against the allowance for loan losses. This loan had been modified and met the definition of a TDR during the second quarter of 2018.

(2)	There were no charge-offs against the allowance for loan losses as a result of these TDRs during 2019. During 2018 and 2017, the Company charged off a total of approximately $6.9 million and $6.0 million, respectively, against the allowance for loan losses as a result of these TDR loans.

(3)

At December 31, 2018 and 2017, all TDR loans were primarily real estate and commercial loans under modified terms, including interest payment deferments and others, that did not substantially impact the allowance for loan losses since the recorded investment in these impaired loans corresponded to their realizable value, which approximated their fair values, or higher, prior to their designation as TDR.

(4)

Includes a multiple loan relationship with a South Florida customer consisting of CRE, owner occupied and commercial loans totaling $9.8 million as of December 31, 2019. This TDR consisted of extending repayment terms and adjusting future periodic payments which resulted in no additional reserves. Four residential loans, totaling $2.2 million, which are included in this loan relationship, were not modified. The Company believes the specific reserves associated with these loans, which total $2.4 million at December 31, 2019, are adequate to cover probable losses given current facts and circumstances. In the fourth quarter of 2019, this $9.8 million TDR loan relationship did not perform in accordance with the restructured terms. The Company will continue to closely monitor the performance of these loans under their modified terms.

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8.	Advances From the Federal Home Loan Bank and Other Borrowings

(1)	As of December 31, 2019, includes $530 million (interest rate - from 0.71% to 0.97%) in advances from the FHLB that are callable prior to maturity. There were no callable advances from the FHLB as of December 31, 2018.

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9.	Junior Subordinated Debentures Held by Trust Subsidiaries

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10.	Derivative Instruments

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11.	Incentive Compensation and Benefit Plans

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12.	Income Taxes

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13.	Accumulated Other Comprehensive Income (Loss) (“AOCI/AOCL”):

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15.	Stockholders’ Equity

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16.	Commitments and Contingencies

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17.	Fair Value Measurements

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•	Similar securities actively traded which are selected from recent market transactions;

•	Observable market data which includes spreads in relationship to LIBOR, swap curve, and prepayment speed rates, as applicable.

•	The captured spread and prepayment speed is used to obtain the fair value for each related security.

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18.	Fair Value of Financial Instruments

•	Because of their nature and short-term maturities, the carrying values of the following financial instruments were used as a reasonable estimate of their fair value: cash and cash equivalents, interest earning deposits with banks, variable-rate loans with re-pricing terms shorter than twelve months, demand and savings deposits, short-term time deposits and other borrowings.

•	The fair value of loans held for sale, debt and equity securities, bank owned life insurance and derivative instruments, are based on quoted market prices, when available. If quoted market prices are unavailable, fair value is estimated using the pricing process described in Note 17.

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•	The fair value of commitments and letters of credit is based on the assumption that the Company will be required to perform on all such instruments. The commitment amount approximates estimated fair value.

•	The fair value of fixed-rate loans, advances from the FHLB, and junior subordinated debentures are estimated using a present value technique by discounting the future expected contractual cash flows using the current rates at which similar instruments would be issued with comparable credit ratings and terms at the measurement date.

•	The fair value of long-term time deposits, including certificates of deposit, is determined using a present value technique by discounting the future expected contractual cash flows using current rates at which similar instruments would be issued at the measurement date.

19.	Regulatory Matters

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20.	Earnings Per Share

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21.	Condensed Unconsolidated Holding Companies’ Financial Statements

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(1)	Other expenses mainly consist of professional and other service fees.

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