UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, ~~2018~~2019

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period __________ to __________

Commission File Number: 001-38534

~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc.

(Exact Name of Registrant as Specified in Its Charter)



Florida (State or other jurisdiction of incorporation or organization)	65-0032379 (I.R.S. Employer Identification No.)
220 Alhambra Circle Coral Gables, Florida ~~(305) 460-8728~~	33134
(Address ~~and telephone number~~ of principal executive offices)	(Zip Code)
(305) 460-4038
Registrant’s telephone number, including area code

~~(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)~~

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbols	Name of exchange on which registered
Class A Common Stock	AMTB	NASDAQ
Class B Common Stock	AMTBB	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ¨ý No ý¨

~~The registrant became subject to these requirements on August 8, 2018.~~

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”,~~filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the company has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.



Class		Outstanding as of ~~September 21, 2018~~November 12, 2019
Class A Common Stock, $0.10 par value per share		~~74,212,408~~28,988,579 shares of Class A Common Stock
Class B Common Stock, $0.10 par value per share		~~53,253,157~~14,218,596 shares of Class B Common Stock

~~MERCANTIL BANK HOLDING CORPORATION~~

AMERANT BANCORP INC. AND SUBSIDIARIES

FORM 10-Q

~~June~~September 30, ~~2018~~2019

INDEX



PART I.	FINANCIAL INFORMATION	Page
Item 1	Financial Statements	3
	Consolidated Balance Sheets as of ~~June~~September 30, ~~2018~~2019 (Unaudited) and December 31, ~~2017 (Unaudited)~~2018	3
	Consolidated Statements of Operations and Comprehensive Income for the three and ~~six months~~nine month periods ended ~~June~~September 30, ~~2018~~2019 and ~~2017~~2018 (Unaudited)	4
	Consolidated Statements of Changes in Stockholders’ Equity for the ~~six~~nine months ended ~~June~~September 30, ~~2018~~2019 and ~~2017~~2018 (Unaudited)	6
	~~Condensed~~ Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, ~~2018~~2019 and ~~2017~~2018 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	89
	Note 1. Business, Basis of Presentation and Summary of Significant Accounting Policies	9
	Note 2. Securities	12
	Note 3. Loans	15
	Note 4. Allowance for Loan Losses	17
	Note 5. Time Deposits	23
	Note 6. Advances from the Federal Home Loan Bank and Other Borrowings	23
	Note 7. Junior Subordinated Debentures	24
	Note 8. Derivative Instruments	25
	Note 9. Stock-based Incentive Compensation Plan	26
	Note 10. Income Taxes	26
	Note 11. Accumulated Other Comprehensive Income (Loss)	26
	Note 12. Stockholders’ Equity	28
	Note 13. Commitments and Contingencies	29
	Note 14. Fair Value Measurements	30
	Note 15. Earnings Per Share	34
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4235
	Forward Looking Statements	35
	Overview	37
	Results of Operations	48
	Financial Condition	62
Item 3	Quantitative and Qualitative Disclosures About Market Risk	82
Item 4	Controls and Procedures	82
PART II	OTHER INFORMATION
Item 1	Legal Proceedings	83
Item 1A	Risk Factors	8384
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	8384
Item 3	Defaults Upon Senior Securities	8384
Item 4	Mine Safety Disclosures	8384
Item 5	Other Information	8384
Item 6	Exhibits	8485
	Signatures	8586

Table of Contents

~~PART I.~~

Part 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Consolidated Balance Sheets ~~(Unaudited)~~


(in thousands, except per share data)	June 30, 2018			December 31, 2017			(Unaudited) September 30, 2019			December 31, 2018

Assets
Cash and due from banks	$	27,125		$	44,531		$	32,363		$	25,756
Interest earning deposits with banks	90,105			108,914			68,964			59,954
Cash and cash equivalents	117,230			153,445			101,327			85,710
Securities
Available for sale	1,649,665			1,687,157			1,485,202			1,586,051
Held to maturity	88,440			89,860			77,611			85,188
Federal Reserve Bank and Federal Home Loan Bank stock	74,014			69,934			70,172			70,189
Securities							1,632,985			1,741,428
Loans held for sale	—			5,611			1,918			—
Loans, gross	6,219,549			6,066,225
Loans held for investment, gross							5,751,791			5,920,175
Less: Allowance for loan losses	69,931			72,000			53,640			61,762
Loans, net	6,149,618			5,994,225
Loans held for investment, net							5,698,151			5,858,413
Bank owned life insurance	203,236			200,318			210,414			206,142
Premises and equipment, net	121,683			129,357			126,497			123,503
Deferred tax assets, net	23,219			14,583			5,392			16,310
Goodwill	19,193			19,193			19,193			19,193
Accrued interest receivable and other assets	84,166			73,084			68,383			73,648
Total assets	$	8,530,464		$	8,436,767		$	7,864,260		$	8,124,347
Liabilities and Stockholders' Equity
Deposits
Demand
Noninterest bearing	$	860,745		$	895,710		$	805,032		$	768,822
Interest bearing	1,403,657			1,496,749			1,123,767			1,288,030
Savings and money market	1,646,392			1,684,080			1,484,336			1,588,703
Time	2,452,344			2,246,434			2,279,713			2,387,131
Total deposits	6,363,138			6,322,973			5,692,848			6,032,686
Advances from the Federal Home Loan Bank and other borrowings	1,258,000			1,173,000			1,170,000			1,166,000
Junior subordinated debentures held by trust subsidiaries	118,110			118,110			92,246			118,110
Accounts payable, accrued liabilities and other liabilities	71,834			69,234			83,415			60,133
Total liabilities	7,811,082			7,683,317			7,038,509			7,376,929
Commitments and contingencies (Note 11)
Commitments and contingencies (Note 13)

Stockholders’ equity (Note 1)
Class A common stock, $0.10 par value, 400,000,000 shares authorized; 74,212,408 shares issued and outstanding	7,421			7,421
Class B common stock, $0.10 par value, 100,000,000 shares authorized; 53,253,157 shares issued and outstanding	5,325			5,325
Stockholders’ equity
Class A common stock, $0.10 par value, 400 million shares authorized; 28,985,996 shares issued and outstanding (2018: 26,851,832 shares issued and outstanding)							2,899			2,686
Class B common stock, $0.10 par value, 100 million shares authorized; 17,751,053 shares issued; 14,218,596 shares outstanding (2018: 16,330,917 shares outstanding)							1,775			1,775
Additional paid in capital	359,008			359,008			418,821			385,367
Treasury stock, at cost; 3,532,457 shares of Class B common stock (2018: 1,420,136 shares of Class B common stock)							(46,373		)	(17,908		)
Retained earnings	367,681			387,829			431,521			393,662
Accumulated other comprehensive loss	(20,053		)	(6,133		)
Total stockholders’ equity	719,382			753,450
Total liabilities and stockholders’ equity	$	8,530,464		$	8,436,767
Accumulated other comprehensive income (loss)							17,108			(18,164		)
Total stockholders' equity							825,751			747,418
Total liabilities and stockholders' equity							$	7,864,260		$	8,124,347

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Table of Contents

~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share data)	2018			2017			2018			2017			2019			2018			2019			2018
Interest income
Loans	$	62,448		$	53,790		$	122,118		$	103,870		$	66,118		$	66,776		$	199,641		$	188,894
Investment securities	12,709			12,515			24,450			25,081			11,325			12,183			35,792			36,633
Interest earning deposits with banks	759			364			1,279			737			761			666			2,304			1,945
Total interest income	75,916			66,669			147,847			129,688			78,204			79,625			237,737			227,472

Interest expense
Interest bearing demand deposits	113			84			202			184			191			211			766			413
Savings and money market deposits	3,104			2,187			5,688			4,381			4,125			3,477			11,872			9,165
Time deposits	10,172			6,193			18,872			11,853			13,284			11,531			38,577			30,403
Advances from the Federal Home Loan Bank	6,511			4,345			12,501			8,594			6,253			6,716			18,750			19,217
Junior subordinated debentures	2,025			1,855			3,960			3,679			1,748			2,057			5,943			6,017
Securities sold under agreements to repurchase	2			564			2			1,205			3			—			3			2
Total interest expense	21,927			15,228			41,225			29,896			25,604			23,992			75,911			65,217
Net interest income	53,989			51,441			106,622			99,792			52,600			55,633			161,826			162,255
Provision for loan losses	150			3,646			150			7,743
Net interest income after provision for loan losses	53,839			47,795			106,472			92,049
(Reversal of) provision for loan losses													(1,500		)	1,600			(2,850		)	1,750
Net interest income after (reversal of) provision for loan losses													54,100			54,033			164,676			160,505

Noninterest income
Deposits and service fees	4,471			4,868			9,053			9,774			4,366			4,269			12,793			13,322
Brokerage, advisory and fiduciary activities	4,426			4,897			8,841			10,158			3,647			4,148			11,071			12,989
Change in cash surrender value of bank owned life insurance	1,474			1,242			2,918			2,487			1,449			1,454			4,272			4,372
Cards and trade finance servicing fees	1,173			1,114			2,235			2,185			1,034			1,145			3,368			3,380
Gain on early extinguishment of advances from the Federal Home Loan Bank	882			—			882			—			—			—			557			882
Data processing, rental income and fees for other services to related parties	613			969			1,494			1,552
Securities gains, net	16			177			16			155
Securities gains (losses), net													906			(15		)	1,902			1
Data processing and fees for other services													70			523			955			2,017
Other noninterest income	1,931			4,492			3,492			5,665			2,364			1,426			6,221			4,918
Total noninterest income	14,986			17,759			28,931			31,976			13,836			12,950			41,139			41,881

Noninterest expense
Salaries and employee benefits	34,932			31,666			68,973			63,974			33,862			33,967			101,356			102,940
Occupancy and equipment	4,060			4,052			7,775			8,761			3,878			4,044			12,152			11,819
Professional and other services fees	5,387			2,744			11,831			5,401			4,295			4,268			11,693			16,099
FDIC assessments and insurance	1,468			2,180			2,915			4,143
Telecommunication and data processing	3,011			2,417			6,095			4,169			3,408			3,043			9,667			9,138
Depreciation and amortization	1,945			2,039			4,086			4,466			1,928			1,997			5,880			6,083
FDIC assessments and insurance													597			1,578			3,167			4,493
Other operating expenses	1,835			5,567			6,608			8,899			4,769			3,145			13,672			9,753
Total noninterest expenses	52,638			50,665			108,283			99,813			52,737			52,042			157,587			160,325
Net income before income tax	16,187			14,889			27,120			24,212			15,199			14,941			48,228			42,061
Income tax expense	(5,764		)	(4,499		)	(7,268		)	(7,315		)	(3,268		)	(3,390		)	(10,369		)	(10,658		)
Net income	$	10,423		$	10,390		$	19,852		$	16,897		$	11,931		$	11,551		$	37,859		$	31,403

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Table of Contents

~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share data) 2018 2017 2018 2017
Other comprehensive (loss) income, net of tax
Net unrealized holding (losses) gains on securities available for sale arising during the period $ (5,454 ) $ 5,980
$ (20,431 ) $ 7,552
Net unrealized holding gains (losses) on cash flow hedges arising during the period 2,139
(1,453 ) 6,352
(1,295 )
Reclassification adjustment for net losses (gains) included in net income 2
(93 ) 159
(47 )
Other comprehensive (loss) income (3,313 ) 4,434
(13,920 ) 6,210
Comprehensive income $ 7,110
$ 14,824
$ 5,932
$ 23,107

Basic and diluted earnings per share:
Net income available to common shareholders $ 10,423
$ 10,390
$ 19,852
$ 16,897
Basic and diluted weighted average shares outstanding 127,466
127,466
127,466
127,466
Basic and diluted income per common share $ 0.08
$ 0.08
$ 0.16
$ 0.13
Cash dividends declared per common share (Note 1) $ —
$ —
$ 0.31
$ —



	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share data)	2019			2018			2019			2018

Other comprehensive income (loss), net of tax
Net unrealized holding gains (losses) on securities available for sale arising during the period	$	6,866		$	(4,938	)	$	37,457		$	(25,369	)
Net unrealized holding gains on cash flow hedges arising during the period	68			1,840			57			8,209
Reclassification adjustment for net gains included in net income	(965		)	(160		)	(2,242		)	(18		)
Other comprehensive income (loss)	5,969			(3,258		)	35,272			(17,178		)
Comprehensive income	$	17,900		$	8,293		$	73,131		$	14,225

Earnings Per Share (Note 15):
Basic earnings per common share	$	0.28		$	0.27		$	0.89		$	0.74
Diluted earnings per common share	$	0.28		$	0.27		$	0.88		$	0.74

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Table of Contents

~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

~~Six~~Nine Months Ended ~~June~~September 30, ~~2018~~2019 and ~~2017~~2018


	Common Stock						Additional Paid in Capital			Retained Earnings				Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	Class A			Class B					Common Stock													Additional Paid in Capital				Treasury Stock			Retained Earnings			Accumulated Other Comprehensive (Loss) Income				Total Stockholders' Equity
(in thousands, except share data)	Shares Issued and Outstanding	Par value		Shares Issued and Outstanding	Par value				Shares Outstanding											Issued Shares - Par Value
Balance at December 31, 2016	74,212,408	$	7,421	53,253,157	$	5,325			$				359,008								$				343,678										$				(10,695	)		$	704,737
(in thousands, except share data)																				Class A							Class B				Class A				Class B					Additional Paid in Capital				Treasury Stock			Retained Earnings			Accumulated Other Comprehensive (Loss) Income		Total Stockholders' Equity
(in thousands, except share data)																				24,737,470			17,751,053			$	2,474		$	1,775		$
Dividends																				—			—			—			—			—		(40,000	—
Net income																				—			—			—			—			—				—				31,403				—			31,403
Other comprehensive loss																				—			—			—			—			—				—				—				(17,178		)	(17,178		)
Balance at September 30, 2018																				24,737,470			17,751,053			$	2,474		$	1,775		$	367,505			$	—			$	379,232			$	(23,311	)	$	727,675

Balance at December 31, 2018																				26,851,832			16,330,917			$	2,686		$	1,775		$	385,367			$	(17,908	)		$	393,662			$	(18,164	)	$	747,418
Common stock issued																				2,132,865			—			213			—			29,005				—				—				—			29,218
Repurchase of Class B common stock																				—			(2,112,321	)		—			—			—				(28,465		)		—				—			(28,465		)
Restricted stock issued																				1,299			—			—			—			—				—				—				—			—
Stock-based compensation expense																				—			—			—			—			4,449				—				—				—			4,449
Net income	—	—		—	—				—						16,897			—				16,897			—			—		—			—				—				—				37,859			—			37,859
Other comprehensive income	—	—		—	—		—				—				6,210			6,210			—			—			—			—			—				—				—				35,272			35,272
Balance at June 30, 2017	74,212,408	$	7,421	53,253,157	$	5,325	$	359,008		$	360,575			$	(4,485	)	$	727,844

Balance at December 31, 2017	74,212,408	$	7,421	53,253,157	$	5,325	$	359,008		$	387,829			$	(6,133	)	$	753,450
Dividends (Note 1)	—	—		—	—		—			(40,000		)		—			(40,000		)
Net income	—	—		—	—		—			19,852				—			19,852
Other comprehensive loss	—	—		—	—		—			—				(13,920		)	(13,920		)
Balance at June 30, 2018	74,212,408	$	7,421	53,253,157	$	5,325	$	359,008		$	367,681			$	(20,053	)	$	719,382
Balance at September 30, 2019																				28,985,996			14,218,596			$	2,899		$	1,775		$	418,821			$	(46,373	)		$	431,521			$	17,108		$	825,751

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Table of Contents

~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)


	Six Months Ended June 30,						Nine Months Ended September 30,
(in thousands)	2018			2017			2019			2018
Cash flows from operating activities
Net income	$	19,852		$	16,897		$	37,859		$	31,403
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses	150			7,743
(Reversal of) provision for loan losses							(2,850		)	1,750
Net premium amortization on securities	8,447			9,936			10,763			12,855
Depreciation and amortization	4,086			4,466			5,880			6,083
Increase in cash surrender value of bank owned life insurance	(2,918		)	(2,487		)
Stock-based compensation expense							4,449			—
Change in cash surrender value of bank owned life insurance							(4,272		)	(4,372		)
Deferred taxes, securities net gains or losses and others	(4,374		)	(184		)	(3,394		)	(3,143		)
Net changes in operating assets and liabilities
Net changes in operating assets and liabilities:
Accrued interest receivable and other assets	(2,075		)	2,378			16,917			2,543
Account payable, accrued liabilities and other liabilities	3,071			6,078
Accounts payable, accrued liabilities and other liabilities							10,511			(6,430		)
Net cash provided by operating activities	26,239			44,827			75,863			40,689

Cash flows from investing activities
Purchases of investment securities:
Available for sale	(121,245		)	(116,495		)	(290,059		)	(166,703		)
Held to maturity securities	—			(12,586		)
Federal Reserve Bank and Federal Home Loan Bank stock	(13,642		)	(16,819		)
Federal Home Loan Bank stock							(24,319		)	(24,055		)
							(314,378		)	(190,758		)
Maturities, sales and calls of investment securities:
Available for sale	122,805			311,647			430,118			178,981
Held to maturity	1,338			—			7,182			3,335
Federal Reserve Bank and Federal Home Loan Bank stock	9,563			13,388
Federal Home Loan Bank stock							24,336			16,576
							461,636			198,892
Net increase in loans	(174,197		)	(382,566		)	(98,478		)	(153,019		)
Proceeds from loan portfolio sales	23,781			63,256			259,754			60,856
Net purchases of bank premises and equipment	(3,522		)	(268		)
Net purchases of premises and equipment, and others							(8,384		)	(5,556		)
Net proceeds from sale of subsidiary	7,500			—			—			7,500
Net cash used in investing activities	(147,619		)	(140,443		)
Net cash provided by (used in) investing activities							300,150			(82,085		)

Cash flows from financing activities
Net decrease in demand, savings and money market accounts	(165,745		)	(148,347		)	(232,420		)	(266,159		)
Net increase in time deposits	205,910			170,922
Net decrease in securities sold under agreements to repurchase	—			(15,000		)
Proceeds from Advances from the Federal Home Loan Bank and other banks	656,000			690,500
Repayments of Advances from the Federal Home Loan Bank and other banks	(571,000		)	(610,500		)
Net (decrease) increase in time deposits							(107,418		)	132,689
Proceeds from Advances from the Federal Home Loan Bank and other borrowings							935,000			941,000
Repayments of Advances from the Federal Home Loan Bank and other borrowings							(930,447		)	(776,000		)
Redemption of junior subordinated debentures							(25,864		)	—
Dividend paid	(40,000		)	—			—			(40,000		)
Net cash provided by financing activities	85,165			87,575
Net decrease in cash and cash equivalents	(36,215		)	(8,041		)
Proceeds from common stock issued - Class A							29,218			—
Repurchase of common stock - Class B							(28,465		)	—
Net cash used in financing activities							(360,396		)	(8,470		)
Net increase (decrease) in cash and cash equivalents							15,617			(49,866		)

Cash and cash equivalents
Beginning of period	153,445			134,989			85,710			153,445
End of period	$	117,230		$	126,948		$	101,327		$	103,579

Supplemental disclosures of cash flow information
Cash paid:
Interest	$	40,491		$	29,359
Income taxes	15,203			7,931

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited) (continued)




	Nine Months Ended September 30,
(in thousands)	2019		2018
Supplemental disclosures of cash flow information
Cash paid:
Interest	$	74,928	$	63,987
Income taxes	6,699		18,649

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Table of Contents

~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


1.	Business, Basis of Presentation and Summary of Significant Accounting Policies

a) Business

Amerant Bancorp Inc., formerly Mercantil Bank Holding Corporation, (the “Company”), is a Florida corporation incorporated in 1985, which has operated since January 1987. The Company is a bank holding company registered under the Bank Holding Company Act of 1956, as a result of its 100% indirect ownership of ~~Mercantil~~Amerant Bank, N.A. (the “Bank”). The Company’s principal office is in the City of Coral Gables, Florida. The Bank is a member of the Federal Reserve Bank of Atlanta (“Federal Reserve Bank”) and the Federal Home Loan Bank of Atlanta (“FHLB”). The Bank has two principal subsidiaries, ~~Mercantil Investment Services,~~Amerant Investments, Inc., a securities broker-dealer (“Amerant Investments”), and ~~Mercantil~~Amerant Trust, ~~Company, N.A.~~

~~As of December 31, 2017 the Company was~~N.A, a ~~wholly owned subsidiary of Mercantil Servicios Financieros, C.A.~~non-depository trust company (“~~MSF”). On March 15, 2018, MSF transferred ownership of 100% of the Company Shares to a non-discretionary common law grantor trust governed by the laws of the State of Florida (the “Distribution~~Amerant Trust”).

The ~~Company and MSF are parties to an Amended and Restated Separation and Distribution Agreement dated as of June 12, 2018 that provided for the spin-off (the Spin-off”) of the Company from MSF.~~

~~On February 6, 2018, the Company filed amended and restated articles of incorporation with the Secretary of State of the State of Florida. Pursuant to this action, the total number of~~Company’s Class A ~~and Class B~~ common shares (“Company Shares”), which the Company is authorized to issue is 400,000,000 and 100,000,000, respectively. In addition, effective on February 6, 2018, the Company exchanged 100% of the 298,570,328 Class A and 215,188,764 Class B Company Shares outstanding, for 74,212,408 Class A and 53,253,157 Class B Company Shares. This facilitated the distribution of onestock, par value $0.10 per common share, ~~of Class A and Class B Company Shares for each outstanding share of MSF Class A~~ and Class B common stock, ~~respectively, discussed below. All references made to~~par value $0.10 per common share, ~~or per share amounts~~are listed and trade on the Nasdaq Global Select Market under the symbols “AMTB” and “AMTBB,” respectively.

Reportable Segments

Beginning in the second quarter of 2019, the Company is managed using a single segment concept, on a consolidated ~~financial statements for~~basis, and management determined to that no separate current or historical reportable segment disclosures are required under generally accepted accounting principles in the ~~periods presented~~United States of America (“U.S. GAAP”).

Initial Public Offering and ~~applicable disclosures have been retroactively adjusted~~Shares Repurchase

On December 21, 2018, the Company completed an initial public offering (the “IPO”). For more information about the IPO, see Note 15 to ~~reflect this exchange. See Note 22 to the~~our audited consolidated financial statements ~~for additional information, which are~~ included in the Company’s ~~definitive Information Statement~~annual report on Form 10-K filed with the U.S. Securities and Exchange Commission ~~(“SEC”) as Exhibit 99.1 to its Current Report on Form 8-K on August 10, 2018~~ (the ~~“Information Statement”).~~

~~On March 13, 2018, the Company paid a special, one-time, cash dividend of $40.0 million to MSF.~~

The Distribution Trust was established by MSF and the Company pursuant to a Distribution Trust Agreement with a Texas trust company, unaffiliated with MSF, as trustee. The Distribution Trust held 80.1% of the Company Shares (the “Distributed Shares”) for the benefit of MSF’s Class A and Class B common shareholders of record (“Record Holders”“SEC”) on April ~~2, 2018 (“Record Date”~~1, 2019 (the “Form 10-K”). ~~The remaining 19.9% of all Company Shares of each Class held in~~In March 2019, following the ~~Distribution Trust for the benefit of MSF and its subsidiaries are the “Retained Shares”.~~

~~The Distributed Shares were distributed to MSF shareholders on August 10, 2018 (the “Distribution”). As a result~~partial exercise of the ~~Distribution,~~over-allotment option by the ~~Company is a separate company whose common stock is listed on the Nasdaq Stock Market under the symbols “MBNAA” (for~~IPO’s underwriters, and completion of certain private placements of shares of the Company’s Class A common ~~stock) and “MBNAB” (for~~stock, the ~~Company’s~~Company repurchased the remaining shares of its Class B common ~~stock)~~stock held by Mercantil Servicios Financieros, C.A., the Company’s former parent company (“MSF” or “the Former Parent”). ~~The Distribution Trust continues~~See Note 12 to ~~hold~~these unaudited interim consolidated financial statements for more information about the ~~Retained Shares pending their sale or disposition~~private placements and the repurchase of Class B common stock previously held by ~~MSF or, in certain circumstances where there is a change in control of MSF, their contribution by MSF~~MSF. No shares have been repurchased since March 2019.

Rebranding

On June 4, 2019, the Company’s stockholders approved an amendment to the ~~Company.~~

~~In October 2008, MSF,~~Company’s Amended and Restated Articles of Incorporation (the “Articles of Incorporation”) to change the ~~Company and various individuals as Voting Trustees, entered into a Voting Trust Agreement~~Company’s name from “Mercantil Bank Holding Corporation” to “Amerant Bancorp Inc.” (the ~~“Voting Trust”~~“Name Change”). The ~~Voting Trust was established to promote~~Name Change became effective on June 5, 2019. Each of the ~~interests of~~Company, the Bank and ~~expand~~ its ~~business in~~principal subsidiaries now operate under the United States by facilitating access to the United States’ capital markets, and to provide continued appropriate corporate governance of the Bank upon the occurrence of certain changes or threatened changes in control of MSF not approved by MSF’s board of directors.“Amerant” brand.

Table of Contents

~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

~~On July 24, 2018, the Voting Trust was terminated. Accordingly, all the existing Voting Trust certificates have been canceled. All the issued~~b) Basis of Presentation and ~~outstanding shares~~Summary of capital stock of Mercantil Florida Bancorp, Inc (“Florida Bancorp”), which is the Bank’s sole shareholder, previously held by the Voting Trust, were transferred to the Company on that date. The Company is now the sole shareholder of Florida Bancorp, and the indirect owner of 100% of the Bank.

~~On August 8, 2018, the Company became subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Securities Act”).~~Significant Accounting Policies

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with ~~generally accepted accounting principles~~U.S. GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of SEC Regulation ~~S-X of the SEC.~~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 U.S. ~~generally accepted accounting principles (“U.S. GAAP”).~~GAAP. These unaudited interim ~~unaudited~~ 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 ~~unaudited~~ consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, ~~2017~~2018 and ~~2016~~2017 and for each of the three years in the period ended December 31, ~~2017~~2018 and the accompanying footnote disclosures for the Company, which are included in the ~~Information Statement.~~Form 10-K.

The effects of significant subsequent events, if any, have been adequately recognized or disclosed in these unaudited interim consolidated financial statements. Subsequent events have been evaluated through September 21, 2018, the date when these consolidated financial statements were available to be issued.

For a complete summary of our significant accounting policies, please see Note 1 to the Company’s audited consolidated financial statements ~~as of December 31, 2017 and 2016 and for each of the three years~~ in the ~~period ended December 31, 2017, which are included in the Information Statement.~~Form 10-K.

Estimates

The preparation of financial statements in conformity with U.S. 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.~~

period. Significant estimates made by management include: i)(i) the determination of the allowance for loan losses; (ii) the fair values of securities ~~bank owned life insurance~~ and the ~~reporting unit~~value assigned to ~~which~~ goodwill ~~has been assigned~~ during the annual goodwill impairment test; (iii) the cash surrender value of bank owned life insurance; and ~~(iii)~~(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.

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

~~Revisions~~

During the second quarter of 2018, the Company determined to revise its presentation of loans by classes to correct for certain immaterial misclassifications in the presentation of loans by classes in the footnotes to the Company’s consolidated financial statements as of December 31, 2017. The Company assessed the impact of these misclassifications and determined they had no effect on the Consolidated Balance Sheet as of December 31, 2017, the Consolidated Statements of Operations and Comprehensive Income for the three and six-month periods ended June 30, 2017, or the Consolidated Statement of Cash Flows for the six months ended June 30, 2017.

The following tables show the effects of the correction of the misclassifications to the footnotes to the Company’s consolidated financial statements as of December 31, 2017. This change in classification is reflected in the footnotes to the consolidated financial statements as of June 30, 2018 and for the three and six months periods ended June 30, 2018 and 2017.

~~Loan portfolio by class:~~

December 31, 2017
(in thousands) As Reported As Revised Effect of change
Real estate loans
Commercial real estate
Non-owner occupied $ 1,745,839
$ 1,713,104
$ (32,735 )
Multi-family residential 795,912
839,709
43,797
Land development and construction loans 421,285
406,940
(14,345 )
2,963,036
2,959,753
(3,283 )
Single-family residential 515,237
512,754
(2,483 )
Owner-occupied 429,803
610,386
180,583
3,908,076
4,082,893
174,817
Commercial loans 1,529,572
1,354,755
(174,817 )
Loans to financial institutions and acceptances 497,626
497,626
—
Consumer loans and overdrafts 130,951
130,951
—
$ 6,066,225
$ 6,066,225
$ —

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

~~Age analysis of the loan portfolio by class:~~

~~As reported:~~

December 31, 2017
Total Loans,
Net of
Unearned
Income Past Due Total Loans in
Nonaccrual
Status Total Loans
90 Days or More
Past Due
and Accruing
(in thousands) Current 30-59
Days 60-89
Days Greater than
90 Days Total Past
Due
Real estate loans
Commercial real estate
Non-owner occupied $ 1,745,839
$ 1,745,686
$ —
$ —
$ 153
$ 153
$ 162
$ —
Multi-family residential 795,912
795,912
—
—
—
—
—
—
Land development and construction loans 421,285
421,285
—
—
—
—
—
—
2,963,036
2,962,883
—
—
153
153
162
—
Single-family residential 515,237
504,204
6,609
2,421
2,003
11,033
5,004
226
Owner-occupied 429,803
423,560
1,571
503
4,169
6,243
10,398
—
3,908,076
3,890,647
8,180
2,924
6,325
17,429
15,564
226
Commercial loans 1,529,572
1,523,329
1,814
5
4,424
6,243
11,103
—
Loans to financial institutions and acceptances 497,626
497,626
—
—
—
—
—
—
Consumer loans and overdrafts 130,951
130,846
57
29
19
105
55
—
$ 6,066,225
$ 6,042,448
$ 10,051
$ 2,958
$ 10,768
$ 23,777
$ 26,722
$ 226

~~As revised:~~

December 31, 2017
Total Loans,
Net of
Unearned
Income Past Due Total Loans in
Nonaccrual
Status Total Loans
90 Days or More
Past Due
and Accruing
(in thousands) Current 30-59
Days 60-89
Days Greater than
90 Days Total Past
Due
Real estate loans
Commercial real estate
Non-owner occupied $ 1,713,104
$ 1,712,624
$ —
$ —
$ 480
$ 480
$ 489
$ —
Multi-family residential 839,709
839,709
—
—
—
—
—
—
Land development and construction loans 406,940
406,940
—
—
—
—
—
—
2,959,753
2,959,273
—
—
480
480
489
—
Single-family residential 512,754
501,393
6,609
2,750
2,002
11,361
5,004
226
Owner-occupied 610,386
602,643
3,000
174
4,569
7,743
12,227
—
4,082,893
4,063,309
9,609
2,924
7,051
19,584
17,720
226
Commercial loans 1,354,755
1,350,667
385
5
3,698
4,088
8,947
—
Loans to financial institutions and acceptances 497,626
497,626
—
—
—
—
—
—
Consumer loans and overdrafts 130,951
130,846
57
29
19
105
55
—
$ 6,066,225
$ 6,042,448
$ 10,051
$ 2,958
$ 10,768
$ 23,777
$ 26,722
$ 226

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

~~Age analysis of the loan portfolio by class:~~

~~Effects of change:~~

December 31, 2017
Total Loans,
Net of
Unearned
Income Past Due Total Loans in
Nonaccrual
Status Total Loans
90 Days or More
Past Due
and Accruing
(in thousands) Current 30-59
Days 60-89
Days Greater than
90 Days Total Past
Due
Real estate loans
Commercial real estate
Non-owner occupied $ (32,735 ) $ (33,062 ) $ —
$ —
$ 327
$ 327
$ 327
$ —
Multi-family residential 43,797
43,797
—
—
—
—
—
—
Land development and construction loans (14,345 ) (14,345 ) —
—
—
—
—
—
(3,283 ) (3,610 ) —
—
327
327
327
—
Single-family residential (2,483 ) (2,811 ) —
329
(1 ) 328
—
—
Owner-occupied 180,583
179,083
1,429
(329 ) 400
1,500
1,829
—
174,817
172,662
1,429
—
726
2,155
2,156
—
Commercial loans (174,817 ) (172,662 ) (1,429 ) —
(726 ) (2,155 ) (2,156 ) —
Loans to financial institutions and acceptances —
—
—
—
—
—
—
—
Consumer loans and overdrafts —
—
—
—
—
—
—
—
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —

~~Loans by credit quality indicators:~~

~~As reported:~~

December 31, 2017
Credit Risk Rating
Classified
(in thousands) Nonclassified Substandard Doubtful Loss Total
Real estate loans
Commercial real estate
Non-owner occupied $ 1,745,677
$ 162
$ —
$ —
$ 1,745,839
Multi-family residential 795,912
—
—
—
795,912
Land development and construction loans 421,285
—
—
—
421,285
2,962,874
162
—
—
2,963,036
Single-family residential 509,368
5,869
—
—
515,237
Owner-occupied 417,694
12,109
—
—
429,803
3,889,936
18,140
—
—
3,908,076
Commercial loans 1,513,375
16,197
—
—
1,529,572
Loans to financial institutions and acceptances 497,626
—
—
—
497,626
Consumer loans and overdrafts 125,762
5,189
—
—
130,951
$ 6,026,699
$ 39,526
$ —
$ —
$ 6,066,225

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

~~Loans by credit quality indicators:~~

~~As revised:~~

December 31, 2017
Credit Risk Rating
Classified
(in thousands) Nonclassified Substandard Doubtful Loss Total
Real estate loans
Commercial real estate
Non-owner occupied $ 1,712,615
$ 489
$ —
$ —
$ 1,713,104
Multi-family residential 839,709
—
—
—
839,709
Land development and construction loans 406,940
—
—
—
406,940
2,959,264
489
—
—
2,959,753
Single-family residential 506,885
5,869
—
—
512,754
Owner-occupied 596,519
13,867
—
—
610,386
4,062,668
20,225
—
—
4,082,893
Commercial loans 1,340,643
14,112
—
—
1,354,755
Loans to financial institutions and acceptances 497,626
—
—
—
497,626
Consumer loans and overdrafts 126,838
4,113
—
—
130,951
$ 6,027,775
$ 38,450
$ —
$ —
$ 6,066,225

~~Effects of change:~~

December 31, 2017
Credit Risk Rating
Classified
(in thousands) Nonclassified Substandard Doubtful Loss Total
Real estate loans
Commercial real estate
Non-owner occupied $ (33,062 ) $ 327
$ —
$ —
$ (32,735 )
Multi-family residential 43,797
—
—
—
43,797
Land development and construction loans (14,345 ) —
—
—
(14,345 )
(3,610 ) 327
—
—
(3,283 )
Single-family residential (2,483 ) —
—
—
(2,483 )
Owner-occupied 178,825
1,758
—
—
180,583
172,732
2,085
—
—
174,817
Commercial loans (172,732 ) (2,085 ) —
—
(174,817 )
Loans to financial institutions and acceptances —
—
—
—
—
Consumer loans and overdrafts 1,076
(1,076 ) —
—
—
$ 1,076
$ (1,076 ) $ —
$ —
$ —

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

~~Allocation of allowance for loan losses at end of the period, as reported, revised and effects of change:~~

December 31, 2017 December 31, 2016
(in thousands) As Reported As Revised Effect of change As Reported As Revised Effect of change

Real estate $ 30,246
$ 31,290
$ 1,044
$ 31,055
$ 30,713
$ (342 )
Commercial 33,731
32,687
(1,044 ) 40,555
40,897
342
Financial institutions 4,362
4,362
—
5,304
5,304
—
Consumer and others 3,661
3,661
—
4,837
4,837
—
$ 72,000
$ 72,000
$ —
$ 81,751
$ 81,751
$ —

March 31, 2018 March 31, 2017
(in thousands) As Reported As Revised Effect of change As Reported As Revised Effect of change

Real estate $ 29,416
$ 30,503
$ 1,087
$ 32,742
$ 32,471
$ (271 )
Commercial 34,759
33,672
(1,087 ) 36,387
36,658
271
Financial institutions 3,671
3,671
—
5,615
5,615
—
Consumer and others 4,272
4,272
—
4,619
4,619
—
$ 72,118
$ 72,118
$ —
$ 79,363
$ 79,363
$ —

~~Summary of impaired loans:~~

~~As reported:~~

December 31, 2017
Recorded Investment
(in thousands) With a Valuation Allowance Without a Valuation Allowance Total Year Average Total Unpaid Principal Balance Valuation Allowance
Real estate loans
Commercial real estate
Non-owner occupied $ —
$ —
$ —
$ 143
$ —
$ —
Multi-family residential —
1,318
1,318
7,898
1,330
—
Land development and construction loans —
—
—
1,359
—
—
—
1,318
1,318
9,400
1,330
—
Single-family residential —
877
877
3,100
871
—
Owner-occupied —
9,488
9,488
13,080
10,494
—
—
11,683
11,683
25,580
12,695
—
Commercial loans 7,173
3,743
10,916
18,653
16,940
2,866
$ 7,173
$ 15,426
$ 22,599
$ 44,233
$ 29,635
$ 2,866

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

~~Summary of impaired loans:~~

~~As revised:~~

December 31, 2017
Recorded Investment
(in thousands) With a Valuation Allowance Without a Valuation Allowance Total Year Average Total Unpaid Principal Balance Valuation Allowance
Real estate loans
Commercial real estate
Non-owner occupied $ —
$ 327
$ 327
$ 225
$ 327
$ —
Multi-family residential —
1,318
1,318
7,898
1,330
—
Land development and construction loans —
—
—
1,359
—
—
—
1,645
1,645
9,482
1,657
—
Single-family residential —
877
877
3,100
871
—
Owner-occupied —
10,918
10,918
13,440
12,323
—
—
13,440
13,440
26,022
14,851
—
Commercial loans 7,173
1,986
9,159
18,211
14,784
2,866
$ 7,173
$ 15,426
$ 22,599
$ 44,233
$ 29,635
$ 2,866

~~Effects of change:~~

December 31, 2017
Recorded Investment
(in thousands) With a Valuation Allowance Without a Valuation Allowance Total Year Average Total Unpaid Principal Balance Valuation Allowance
Real estate loans
Commercial real estate
Non-owner occupied $ —
$ 327
$ 327
$ 82
$ 327
$ —
Multi-family residential —
—
—
—
—
—
Land development and construction loans —
—
—
—
—
—
—
327
327
82
327
—
Single-family residential —
—
—
—
—
—
Owner-occupied —
1,430
1,430
360
1,829
—
—
1,757
1,757
442
2,156
—
Commercial loans —
(1,757 ) (1,757 ) (442 ) (2,156 ) —
$ —
$ —
$ —
$ —
$ —
$ —

~~Commitment and contingencies:~~

The Company previously disclosed in Note 16 “Commitments and Contingencies” to its audited consolidated financial statements as of December 31, 2017, the approximate contract amount of credit card facilities of $266.8 million. This amount should have been disclosed as $200.2 millionc) ~~. This change has no effect on the Consolidated Statements of Operations and Comprehensive Income, Balance Sheets or Cash Flows.~~Recently Issued Accounting Pronouncements

~~Table of Contents~~

~~Mercantil Bank Holding Corporation~~Issued and ~~Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~


2.	~~Recently Issued Accounting Pronouncements~~

~~Emerging Growth Company~~

Section 107 of the JOBS Act provides that, as an “emerging growth company” we can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Therefore, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period, for as long as it is available.

~~Changes to the Disclosure Requirements for Fair Value Measurements~~

In August 2018, the Financial Accounting Standards Board (“FASB”) issued amendments to the disclosure requirements for fair value measurements. The amendments modify the fair value measurements disclosures with the primary focus to improve effectiveness of disclosures in the notes to the financial statements that is most important to the users. The new guidance modifies the required disclosures related to the valuation techniques and inputs used, uncertainty in measurement, and changes in measurements applied. These amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently assessing the impact this new guidance may have on the Company’s consolidated financial statements and footnote disclosures.

~~Narrow Amendments to Pending New Guidance on Leases~~

In July 2018, the FASB issued amendments to narrow aspects of the new guidance issued in February 2016 for the recognition and measurement of all leases which is not yet effective. These amendments, and the related pending new guidance, are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for private companies, and for fiscal periods beginning after December 15, 2018, and interim periods within those fiscal years, for public companies. Early adoption is permitted. The Company is in the process of determining whether these amendments and the related new pending guidance will have a material effect on its consolidated financial statements, when adopted.

~~Removal of Outdated OCC Guidance~~

~~In May 2018, the FASB issued amendments which removed outdated guidance related to the Office of the Comptroller of the Currency (“OCC”)’s Banking Circular 202,~~ ~~Accounting for Net Deferred Tax Changes~~. This guidance, which limited the net deferred tax debits that can be carried on a bank’s statement of condition for regulatory purposes, has been rescinded by the OCC. These amendments became effective immediately upon issuance and had no impact to the Company’s interim unaudited consolidated financial statements.

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~

In February 2018, the FASB issued guidance that allows a reclassification from AOCI to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate. The amount of the reclassification is the difference between the historical corporate income tax rate and the newly enacted 21% corporate income tax rate pursuant to H.R. 1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal year 2018, known as the Tax Cuts and Jobs Act of 2017 (“the 2017 Tax Act”). This guidance is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted for (1) public business entities for reporting periods for which financial statements have not been issued, and (2) for other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company early-adopted this guidance and reclassified the effect of remeasuring net deferred tax assets related to items within AOCI to retained earnings resulting in a $1.1 million increase in retained earnings in 2017.

~~Targeted Improvements to Accounting for Hedging Activities~~

In August 2017, the FASB issued targeted amendments to the guidance for recognition, presentation and disclosure of hedging activities. These targeted amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amendments also simplify the application of hedge accounting guidance. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years for public business entities. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company is in the process of determining whether the adoption of this guidance will have a material impact on the Company’s consolidated financial statements and disclosures.

~~Statement of Cash Flows Classification of Certain Receipts and Payments~~

In August 2016 , the FASB issued specific guidance for the classification of a number of cash receipts and payments, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, proceeds from the settlement of insurance claims and proceeds from the settlement of bank-owned life insurance policies. The new guidance is effective for years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, for private companies, and for years beginning after December 15, 2017 and interim periods within those fiscal years for public companies. Early adoption is permitted. The Company is in the process of understanding whether this new guidance will have a material impact on its consolidated statement of cash flows when adopted.

~~Accounting for Credit Losses on Financial Instruments~~

In June 2016, the FASB issued new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The standard is effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021, for private companies, and for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, for public companies. Early adoption is permitted for fiscal years beginning after December 15, 2018. The Company is in the process of determining whether these changes will have a material impact on its consolidated financial position or results of operations or disclosures.

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

~~Accounting for Leases~~

In February 2016, the FASB issued guidance for the recognition and measurement of all leases. The new guidance requires lessees to recognize a right-of-use asset and a lease liability for most leases within the scope of the guidance. There were no significant changes to the guidance for lessors. The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for private companies, and for fiscal periods beginning after December 15, 2018, and interim periods within those fiscal years, for public companies. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition at the beginning of the earliest comparative period presented, and provides for certain practical expedients. The Company is in the process of determining whether this new guidance will have a material impact on its consolidated financial position, results of operations and disclosures, when adopted.

~~Recognition and Measurement of Financial Instruments~~

Revenue from Contracts with Customers

In May 2014, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued a common revenue standard for recognizing revenue from contracts with customers. This new standard establishes principles for reporting information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ~~amended effective date is annual reporting periods beginning after December 15, 2018,~~scope of the guidance excludes net interest income and interim periods beginning after December 15, 2019, for private companies, and for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period, for public companies. Earliermany other revenues from financial assets. Although the Company has not finalized the evaluation, we do not expect the adoption ~~continues~~ to ~~be permitted. The Company is in the process of determining whether the new guidance will~~ have a material impact on its consolidated financial position or results of operations. The Company plans to adopt the new guidance during the fourth quarter of 2019.

1810

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~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

Recognition and Measurement of Financial Instruments

In January 2016, the FASB issued changes to the guidance on the recognition and measurement of financial instruments. The changes include, among others, the removal of the available-for-sale category for equity securities and updates to certain disclosure requirements. As of September 30, 2019, the Company classifies $23.7 million as available for sale equity securities. The Company currently expects that its available for sale equity securities consisting of a mutual fund investment that qualify for Community Reinvestment Act (“CRA”) purposes will be reclassified out of the available for sale classification and presented separately on the face of the consolidated balance sheet. At adoption, the Company currently expects that the cumulative unrealized loss of these securities previously recognized in AOCL will be recorded as an adjustment to the opening balance of retained earnings. Any further changes to the fair value of equity securities, other than equity method investments, will be recorded in net income. At September 30, 2019, the cumulative unrealized gross loss on this available for sale equity investment was $0.3 million. The Company plans to adopt the new guidance during the fourth quarter of 2019.

New Guidance on Leases

In December 2018, the FASB issued amendments to new guidance issued in February 2016 for the recognition and measurement of all leases which has not yet been adopted by the Company. The amendments address certain lessor’s issues associated with: (i) sales taxes and other similar taxes collected from lessees, (ii) certain lessor costs and (iii) recognition of variable payments for contracts with lease and nonlease components. The new guidance on leases issued in February 2016 requires lessees to recognize a right-of-use asset and a lease liability for most leases within the scope of the guidance. There were no significant changes to the guidance for lessors. These amendments, and the related pending new guidance, can be adopted using a modified retrospective transition at the beginning of the earliest comparative period presented, and provides for certain practical expedients.

The amendments and related new guidance on leases are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for private companies, and for fiscal periods beginning after December 15, 2018, and interim periods within those fiscal years, for public companies. Early adoption is permitted. The Company has completed the process of gathering a complete inventory of leases and migrating identified lease data onto a new system and is in the final stages of testing and evaluation. We currently expect to recognize an asset and a corresponding lease liability for an amount currently expected to be less than 1% of the Company’s total consolidated assets at adoption. The Company plans to adopt the new guidance during the first semester of 2020.

d) Subsequent Events

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

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


3.2.	Securities

Amortized cost and approximate fair values of securities available for sale are summarized as follows:



	September 30, 2019
	Amortized Cost		Gross Unrealized					Estimated Fair Value
(in thousands)	Amortized Cost		Gains		Losses			Estimated Fair Value
U.S. government-sponsored enterprise debt securities	$	930,638	$	12,761	$	(3,139	)	$	940,260
Corporate debt securities	239,078		4,281		(210		)	243,149
U.S. government agency debt securities	228,042		1,382		(2,780		)	226,644
Municipal bonds	47,649		2,549		—			50,198
Mutual funds	24,270		—		(313		)	23,957
U.S. treasury securities	994		—		—			994
	$	1,470,671	$	20,973	$	(6,442	)	$	1,485,202

June 30, 2018
Amortized
Cost Gross Unrealized Estimated
Fair Value
(in thousands) Gains Losses
U.S. government sponsored enterprise debt securities $ 855,688
$ 1,110
$ (29,314 ) $ 827,484
Corporate debt securities 376,581
2,062
(3,714 ) 374,929
U.S. government agency debt securities 256,498
300
(5,961 ) 250,837
Municipal bonds 177,632
275
(4,600 ) 173,307
Mutual funds 24,263
—
(1,155 ) 23,108
$ 1,690,662
$ 3,747
$ (44,744 ) $ 1,649,665


	December 31, 2017									December 31, 2018
	Amortized Cost		Gross Unrealized					Estimated Fair Value		Amortized Cost		Gross Unrealized					Estimated Fair Value
(in thousands)	Amortized Cost		Gains		Losses			Estimated Fair Value		Amortized Cost		Gains		Losses			Estimated Fair Value
U.S. government sponsored enterprise debt securities	$	889,396	$	1,784	$	(15,514	)	$	875,666
U.S. government-sponsored enterprise debt securities										$	840,760	$	2,197	$	(22,178	)	$	820,779
Corporate debt securities	310,781		3,446		(835		)	313,392		357,602		139		(5,186		)	352,555
U.S. government agency debt securities	293,908		870		(3,393		)	291,385		221,682		187		(4,884		)	216,985
Municipal bonds	179,524		2,343		(1,471		)	180,396		162,438		390		(2,616		)	160,212
Mutual funds	24,262		—		(645		)	23,617		24,266		—		(1,156		)	23,110
U.S. treasury securities	2,700		2		(1		)	2,701
Commercial paper										12,448		—		(38		)	12,410
	$	1,700,571	$	8,445	$	(21,859	)	$	1,687,157	$	1,619,196	$	2,913	$	(36,058	)	$	1,586,051

At ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had no foreign sovereign or foreign government agency debt securities.

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

The Company’s ~~investment~~ securities available for sale with unrealized losses that are deemed temporary, aggregated by the length of time that individual securities have been in a continuous unrealized loss position, are summarized below:

June 30, 2018
Less Than 12 Months 12 Months or More Total
(in thousands) Estimated
Fair Value Unrealized
Loss Estimated
Fair Value Unrealized
Loss Estimated
Fair Value Unrealized
Loss
U.S. government sponsored enterprise debt securities $ 298,313
$ (6,389 ) $ 482,682
$ (22,925 ) $ 780,995
$ (29,314 )
U.S. government agency debt securities 101,040
(1,949 ) 127,393
(4,012 ) 228,433
(5,961 )
Municipal bonds 59,772
(1,152 ) 72,742
(3,448 ) 132,514
(4,600 )
Corporate debt securities 219,052
(3,537 ) 4,714
(177 ) 223,766
(3,714 )
Mutual funds —
—
22,865
(1,155 ) 22,865
(1,155 )
$ 678,177
$ (13,027 ) $ 710,396
$ (31,717 ) $ 1,388,573
$ (44,744 )

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~



	September 30, 2019
	Less Than 12 Months					12 Months or More					Total
(in thousands)	Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss
U.S. government-sponsored enterprise debt securities	$	130,186	$	(636	)	$	276,102	$	(2,503	)	$	406,288	$	(3,139	)
Corporate debt securities	13,967		(101		)	17,110		(109		)	31,077		(210		)
Municipal bonds	—		—			—		—			—		—
U.S. government agency debt securities	15,718		(46		)	124,128		(2,734		)	139,846		(2,780		)
Mutual funds	—		—			23,707		(313		)	23,707		(313		)
Commercial paper	—		—			—		—			—		—
	$	159,871	$	(783	)	$	441,047	$	(5,659	)	$	600,918	$	(6,442	)


	December 31, 2017															December 31, 2018
	Less Than 12 Months					12 Months or More					Total					Less Than 12 Months					12 Months or More					Total
(in thousands)	Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss
U.S. government sponsored enterprise debt securities	$	333,232	$	(2,956	)	$	485,555	$	(12,558	)	$	818,787	$	(15,514	)
U.S. government-sponsored enterprise debt securities																$	90,980	$	(2,995	)	$	608,486	$	(19,183	)	$	699,466	$	(22,178	)
Corporate debt securities																243,667		(3,800		)	75,762		(1,386		)	319,429		(5,186		)
Municipal bonds																63,580		(939		)	133,886		(3,945		)	197,466		(4,884		)
U.S. government agency debt securities	92,138		(728		)	128,316		(2,665		)	220,454		(3,393		)	1,449		(6		)	94,331		(2,610		)	95,780		(2,616		)
Municipal bonds	4,895		(8		)	76,003		(1,463		)	80,898		(1,471		)
Corporate debt securities	94,486		(751		)	3,694		(84		)	98,180		(835		)
Mutual funds	—		—			23,375		(645		)	23,375		(645		)	—		—			22,865		(1,156		)	22,865		(1,156		)
U.S. treasury securities	—		—			2,199		(1		)	2,199		(1		)
Commercial paper																12,410		(38		)	—		—			12,410		(38		)
	$	524,751	$	(4,443	)	$	719,142	$	(17,416	)	$	1,243,893	$	(21,859	)	$	412,086	$	(7,778	)	$	935,330	$	(28,280	)	$	1,347,416	$	(36,058	)

At ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017~~2018, the Company held certain debt securities issued or guaranteed by U.S. government-sponsored entities and ~~agencies held by the~~agencies. The Company ~~were issued by institutions which the government has affirmed its commitment~~believes these issuers to ~~support.~~present little credit risk. The Company does not consider these securities to be other-than-temporarily impaired because the decline in fair value is attributable to changes in interest rates and investment securities markets, generally, and not credit quality. The Company does not ~~have the intent~~intend to sell these debt securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery.

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

Unrealized losses on ~~municipal~~corporate debt securities and mutual funds at September 30, 2019, and corporate debt securities, municipal bonds, mutual funds and commercial paper at ~~June 30, 2018 and~~ December 31, ~~2017,~~2018, are attributable to changes in interest rates and investment securities markets, generally, and as a result, temporary in nature. The Company does not consider these securities to be other-than-temporarily impaired because the issuers of these debt securities are considered to be high quality, and management does not intend to sell these investments and it is more likely than not that it will not be required to sell these investments before their anticipated recovery.

Amortized cost and approximate fair values of securities held to maturity, are summarized as follows:

June 30, 2018
Amortized
Cost Gross Unrealized Estimated
Fair Value
(in thousands) Gains Losses
Securities Held to Maturity -
U.S. government sponsored enterprise debt securities $ 85,497
$ —
$ (3,486 ) $ 82,011
U.S. Government agency debt securities 2,943
—
(83 ) 2,860
$ 88,440
$ —
$ (3,569 ) $ 84,871

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~



	September 30, 2019
	Amortized Cost		Gross Unrealized					Estimated Fair Value
(in thousands)	Amortized Cost		Gains		Losses			Estimated Fair Value
Securities Held to Maturity -
U.S. government-sponsored enterprise debt securities	$	74,861	$	1,090	$	(124	)	$	75,827
U.S. Government agency debt securities	2,750		93		—			2,843
	$	77,611	$	1,183	$	(124	)	$	78,670


	December 31, 2017									December 31, 2018
	Amortized Cost		Gross Unrealized					Estimated Fair Value		Amortized Cost		Gross Unrealized					Estimated Fair Value
(in thousands)	Amortized Cost		Gains		Losses			Estimated Fair Value		Amortized Cost		Gains		Losses			Estimated Fair Value
Securities Held to Maturity -
U.S. government sponsored enterprise debt securities	$	86,826	$	47	$	(441	)	$	86,432
U.S. government-sponsored enterprise debt securities										$	82,326	$	—	$	(3,889	)	$	78,437
U.S. Government agency debt securities	3,034		—		—			3,034		2,862		—		(49		)	2,813
	$	89,860	$	47	$	(441	)	$	89,466	$	85,188	$	—	$	(3,938	)	$	81,250

Contractual maturities of securities at ~~June~~September 30, ~~2018~~2019 are as follows:

Available for Sale Held to Maturity
(in thousands) Amortized
Cost Estimated
Fair Value Amortized
Cost Estimated
Fair Value
Within 1 year $ 2,816
$ 2,808
$ —
$ —
After 1 year through 5 years 331,256
328,917
—
—
After 5 years through 10 years 253,954
249,963
—
—
After 10 years 1,078,373
1,044,869
88,440
84,871
No contractual maturities 24,263
23,108
—
—
$ 1,690,662
$ 1,649,665
$ 88,440
$ 84,871

At June 30, 2018 and December 31, 2017, securities available for sale with a fair value of approximately $270 million and $246 million, respectively, were pledged as collateral to secure securities sold under agreements to repurchase and advances from the FHLB.



	Available for Sale				Held to Maturity
(in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Within 1 year	$	25,703	$	25,759	$	—	$	—
After 1 year through 5 years	196,322		198,199		—		—
After 5 years through 10 years	228,157		234,815		—		—
After 10 years	996,219		1,002,472		77,611		78,670
No contractual maturities	24,270		23,957		—		—
	$	1,470,671	$	1,485,202	$	77,611	$	78,670

2114

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~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


4.3.	Loans

The loan portfolio consists of the following loan classes:


(in thousands)	June 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018
Real estate loans
Commercial real estate
Non-owner occupied	$	1,864,645	$	1,713,104
Nonowner occupied					$	1,933,662	$	1,809,356
Multi-family residential	858,453		839,709		942,851		909,439
Land development and construction loans	402,830		406,940		268,312		326,644
	3,125,928		2,959,753		3,144,825		3,045,439
Single-family residential	514,912		512,754		527,468		533,481
Owner-occupied	653,902		610,386
Owner occupied					825,601		777,022
	4,294,742		4,082,893		4,497,894		4,355,942
Commercial loans	1,432,033		1,354,755		1,127,484		1,380,428
Loans to financial institutions and acceptances	368,864		497,626		24,815		68,965
Consumer loans and overdrafts	123,910		130,951		101,598		114,840
	$	6,219,549	$	6,066,225	$	5,751,791	$	5,920,175

The amounts above include loans under syndication facilities of approximately ~~$1,048~~$578 million and ~~$989~~$807 million at ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017, respectively.~~2018, respectively, which include Shared National Credit facilities and agreements to enter into credit agreements with other lenders (club deals), and other agreements.

The following tables summarize international loans by country, net of loans fully collateralized with cash of approximately ~~$28.0~~$19.6 million and ~~$31.9~~$19.5 million at ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.


	June 30, 2018								September 30, 2019
(in thousands)	Brazil		Venezuela		Others ⁽¹⁾		Total		Venezuela		Others (1)		Total
Real estate loans
Single-family residential ⁽²⁾	$	212	$	136,681	$	6,286	$	143,179	$	110,142	$	7,218	$	117,360
Commercial loans									—		55,264		55,264
Loans to financial institutions and acceptances	130,866		—		221,498		352,364		—		5,000		5,000
Commercial loans	5,974		—		98,003		103,977
Consumer loans and overdrafts ⁽³⁾	3,653		35,137		7,598		46,388		16,269		8,011		24,280
	$	140,705	$	171,818	$	333,385	$	645,908	$	126,411	$	75,493	$	201,904

__________________


(1)	Loans to borrowers in 1915 other ~~countries; the total by country does~~countries which do not individually exceed 1% of total assets.


(2)	~~Mortgage~~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. 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 are requiring repayment of their balances by November 2019. We are closely monitoring the performance of the outstanding balance of our credit cards until it is completely repaid. At the end of October we curtailed charge privileges to the remaining cardholders and require repayment of their balances by January 2020.


(4)	Overdrafts to customers outside the United States were de minimis at September 30, 2019 and December 31, 2018.

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)



	December 31, 2018
(in thousands)		Venezuela		Others (1)		Total
Real estate loans
Single-family residential (2)		$	128,971	$	6,467	$	135,438
Commercial loans		—		73,636		73,636
Loans to financial institutions and acceptances		—		49,000		49,000
Consumer loans and overdrafts (3)		28,191		13,494		41,685
		$	157,162	$	142,597	$	299,759

__________________


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


(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. Charging privileges for Venezuelan resident card holders are suspended ifwhen the cardholders’ average deposits decline below the ~~authorized~~outstanding credit ~~line.~~balance. At the beginning of 2018, the Company changed the monitoring of such balances from quarterly to monthly.

The age analysis of the loan portfolio by class, including nonaccrual loans, as of September 30, 2019 and December 31, 2018 are summarized in the following tables:



	September 30, 2019
	Total Loans, Net of Unearned Income				Past Due								Total Loans in Nonaccrual Status		Total Loans 90 Days or More Past Due and Accruing
(in thousands)	Total Loans, Net of Unearned Income		Current		30-59 Days		60-89 Days		Greater than 90 Days		Total Past Due		Total Loans in Nonaccrual Status		Total Loans 90 Days or More Past Due and Accruing
Real estate loans
Commercial real estate
Nonowner occupied	$	1,933,662	$	1,933,662	$	—	$	—	$	—	$	—	$	1,936	$	—
Multi-family residential	942,851		942,851		—		—		—		—		—		—
Land development and construction loans	268,312		268,312		—		—		—		—		—		—
	3,144,825		3,144,825		—		—		—		—		1,936		—
Single-family residential	527,468		521,399		—		2,506		3,563		6,069		9,033		—
Owner occupied	825,601		820,430		4,179		510		482		5,171		11,921		—
	4,497,894		4,486,654		4,179		3,016		4,045		11,240		22,890		—
Commercial loans	1,127,484		1,123,535		622		279		3,048		3,949		9,605		—
Loans to financial institutions and acceptances	24,815		24,815		—		—		—		—		—		—
Consumer loans and overdrafts	101,598		99,707		1,040		544		307		1,891		116		213
	$	5,751,791	$	5,734,711	$	5,841	$	3,839	$	7,400	$	17,080	$	32,611	$	213

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~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


											December 31, 2018
	December 31, 2017										Total Loans, Net of Unearned Income				Past Due								Total Loans in Nonaccrual Status		Total Loans 90 Days or More Past Due and Accruing
(in thousands)	Brazil		Venezuela		Chile		Others ⁽¹⁾		Total				Current		30-59 Days		60-89 Days		Greater than 90 Days		Total Past Due
Real estate loans
Single-family residential⁽²⁾	$	219	$	145,069	$	179	$	7,246	$	152,713
Commercial real estate
Nonowner occupied											$	1,809,356	$	1,809,356	$	—	$	—	$	—	$	—	$	—	$	—
Multi-family residential											909,439		909,439		—		—		—		—		—		—
Land development and construction loans											326,644		326,644		—		—		—		—		—		—
											3,045,439		3,045,439		—		—		—		—		—		—
Single-family residential											533,481		519,730		7,910		2,336		3,505		13,751		6,689		419
Owner occupied											777,022		773,876		2,800		160		186		3,146		4,983		—
											4,355,942		4,339,045		10,710		2,496		3,691		16,897		11,672		419
Commercial loans											1,380,428		1,378,022		704		1,062		640		2,406		4,772		—
Loans to financial institutions and acceptances	129,372		—		93,000		258,811		481,183		68,965		68,965		—		—		—		—		—		—
Commercial loans	8,451		—		—		60,843		69,294
Consumer loans and overdrafts ⁽³⁾	3,046		37,609		1,364		10,060		52,079
Consumer loans and overdrafts											114,840		113,227		474		243		896		1,613		35		884
	$	141,088	$	182,678	$	94,543	$	336,960	$	755,269	$	5,920,175	$	5,899,259	$	11,888	$	3,801	$	5,227	$	20,916	$	16,479	$	1,303

~~__________________~~


~~(1)~~	~~Loans to borrowers in 18 other countries; the total by country does not individually exceed 1% of total assets.~~


~~(2)~~	~~Mortgage loans secured by single-family residential properties located in the U.S.~~


~~(3)~~	~~Mostly comprised of credit card extensions of credit secured to customers with deposits with the Bank. Charging privileges are suspended, if the deposits decline below the authorized credit line.~~

~~The analysis of the loan portfolio delinquencies by class, including nonaccrual loans, as of June~~At September 30, ~~2018~~2019 and December 31, ~~2017 are summarized in the following tables:~~

June 30, 2018
Total Loans,
Net of
Unearned
Income Past Due Total Loans in
Nonaccrual
Status Total Loans
90 Days or More
Past Due
and Accruing
(in thousands) Current 30-59
Days 60-89
Days Greater than
90 Days Total Past
Due
Real estate loans
Commercial real estate
Non-owner occupied $ 1,864,645
$ 1,864,496
$ —
$ —
$ 149
$ 149
$ 10,510
$ —
Multi-family residential 858,453
858,453
—
—
—
—
—
—
Land development and construction loans 402,830
402,830
—
—
—
—
—
—
3,125,928
3,125,779
—
—
149
149
10,510
—
Single-family residential 514,912
508,426
919
1,127
4,440
6,486
6,334
—
Owner-occupied 653,902
650,586
1,711
—
1,605
3,316
7,186
—
4,294,742
4,284,791
2,630
1,127
6,194
9,951
24,030
—
Commercial loans 1,432,033
1,428,566
330
200
2,937
3,467
9,934
27
Loans to financial institutions and acceptances 368,864
368,864
—
—
—
—
—
—
Consumer loans and overdrafts 123,910
122,234
653
360
663
1,676
42
663
$ 6,219,549
$ 6,204,455
$ 3,613
$ 1,687
$ 9,794
$ 15,094
$ 34,006
$ 690

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

December 31, 2017
Total Loans,
Net of
Unearned
Income Past Due Total Loans in
Nonaccrual
Status Total Loans
90 Days or More
Past Due
and Accruing
(in thousands) Current 30-59
Days 60-89
Days Greater than
90 Days Total Past
Due
Real estate loans
Commercial real estate
Non-owner occupied $ 1,713,104
$ 1,712,624
$ —
$ —
$ 480
$ 480
$ 489
$ —
Multi-family residential 839,709
839,709
—
—
—
—
—
—
Land development and construction loans 406,940
406,940
—
—
—
—
—
—
2,959,753
2,959,273
—
—
480
480
489
—
Single-family residential 512,754
501,393
6,609
2,750
2,002
11,361
5,004
226
Owner-occupied 610,386
602,643
3,000
174
4,569
7,743
12,227
—
4,082,893
4,063,309
9,609
2,924
7,051
19,584
17,720
226
Commercial loans 1,354,755
1,350,667
385
5
3,698
4,088
8,947
—
Loans to financial institutions and acceptances 497,626
497,626
—
—
—
—
—
—
Consumer loans and overdrafts 130,951
130,846
57
29
19
105
55
—
$ 6,066,225
$ 6,042,448
$ 10,051
$ 2,958
$ 10,768
$ 23,777
$ 26,722
$ 226

~~At June 30,~~ 2018, ~~and December 31, 2017,~~ loans with an outstanding principal balance of ~~$1,730 million and $1,476 million, respectively,~~$1.7 billion were pledged as collateral to secure advances from the FHLB.

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~


5.4.	Allowance for Loan Losses

The analyses by loan segment of the changes in the allowance for loan losses for the three and ~~six months~~nine month periods ended ~~June~~September 30, ~~2018~~2019 and ~~2017,~~2018, and its allocation by impairment methodology and the related investment in loans, net as of ~~June~~September 30, ~~2018~~2019 and ~~2017~~2018 are summarized in the following tables:

Three Months Ended June 30, 2018
(in thousands) Real Estate Commercial Financial
Institutions Consumer
and Others Total
Balances at beginning of the period $ 30,503
$ 33,672
$ 3,671
$ 4,272
$ 72,118
(Reversal of) provision for loan losses (1,814 ) (1,750 ) (354 ) 4,068
150
Loans charged-off
Domestic —
(2,355 ) —
(98 ) (2,453 )
International —
(52 ) —
(230 ) (282 )
Recoveries 4
269
—
125
398
Balances at end of the period $ 28,693
$ 29,784
$ 3,317
$ 8,137
$ 69,931


	Six Months Ended June 30, 2018															Three Months Ended September 30, 2019
(in thousands)	Real Estate			Commercial			Financial Institutions			Consumer and Others			Total			Real Estate		Commercial			Financial Institutions			Consumer and Others			Total
Balances at beginning of the period	$	31,290		$	32,687		$	4,362		$	3,661		$	72,000		$	21,900	$	25,824		$	60		$	9,620		$	57,404
(Reversal of) provision for loan losses	(2,635		)	(1,215		)	(1,045		)	5,045			150
Provision for (reversal of) loan losses																487		(388		)	(2		)	(1,597		)	(1,500		)
Loans charged-off
Domestic	—			(2,737		)	—			(117		)	(2,854		)	—		(907		)	—			(98		)	(1,005		)
International	—			(52		)	—			(630		)	(682		)	—		—			—			(1,661		)	(1,661		)
Recoveries	38			1,101			—			178			1,317			—		190			—			212			402
Balances at end of the period	$	28,693		$	29,784		$	3,317		$	8,137		$	69,931		$	22,387	$	24,719		$	58		$	6,476		$	53,640

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~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

June 30, 2018
(in thousands) Real Estate Commercial Financial
Institutions Consumer
and Others Total
Allowance for loan losses by impairment methodology
Individually evaluated $ 4,055
$ 2,252
$ —
$ —
$ 6,307
Collectively evaluated 24,638
27,532
3,317
8,137
63,624
$ 28,693
$ 29,784
$ 3,317
$ 8,137
$ 69,931
Investment in loans, net of unearned income
Individually evaluated $ 11,078
$ 16,206
$ —
$ 306
$ 27,590
Collectively evaluated 3,078,004
2,184,226
371,498
558,231
6,191,959
$ 3,089,082
$ 2,200,432
$ 371,498
$ 558,537
$ 6,219,549



	Nine Months Ended September 30, 2019
(in thousands)	Real Estate			Commercial			Financial Institutions			Consumer and Others			Total
Balances at beginning of the period	$	22,778		$	30,018		$	445		$	8,521		$	61,762
(Reversal of) provision for loan losses	(391		)	(3,065		)	(387		)	993			(2,850		)
Loans charged-off
Domestic	—			(2,773		)	—			(504		)	(3,277		)
International	—			(61		)	—			(2,961		)	(3,022		)
Recoveries	—			600			—			427			1,027
Balances at end of the period	$	22,387		$	24,719		$	58		$	6,476		$	53,640

Three Months Ended June 30, 2017
(in thousands) Real Estate Commercial Financial
Institutions Consumer
and Others Total
Balances at beginning of the period $ 32,471
$ 36,658
$ 5,615
$ 4,619
$ 79,363
Provision for (reversal of) loan losses 2,262
4,760
(1,639 ) (1,737 ) 3,646
Loans charged-off
Domestic —
(1,097 ) —
(15 ) (1,112 )
International —
(143 ) —
(258 ) (401 )
Recoveries 107
23
—
1,080
1,210
Balances at end of the period $ 34,840
$ 40,201
$ 3,976
$ 3,689
$ 82,706



	September 30, 2019
(in thousands)	Real Estate		Commercial		Financial Institutions		Consumer and Others		Total
Allowance for loan losses by impairment methodology:
Individually evaluated	$	397	$	1,722	$	—	$	1,185	$	3,304
Collectively evaluated	21,990		22,997		58		5,291		50,336
	$	22,387	$	24,719	$	58	$	6,476	$	53,640
Investment in loans, net of unearned income:
Individually evaluated	$	1,936	$	19,234	$	—	$	6,007	$	27,177
Collectively evaluated	3,137,980		2,036,150		24,815		525,669		5,724,614
	$	3,139,916	$	2,055,384	$	24,815	$	531,676	$	5,751,791

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~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


	Six Months Ended June 30, 2017															Three Months Ended September 30, 2018
(in thousands)	Real Estate			Commercial			Financial Institutions			Consumer and Others			Total			Real Estate		Commercial			Financial Institutions			Consumer and Others			Total
Balances at beginning of the period	$	30,713		$	40,897		$	5,304		$	4,837		$	81,751		$	28,693	$	29,784		$	3,317		$	8,137		$	69,931
Provision for (reversal of) loan losses	4,056			6,695			(1,328		)	(1,680		)	7,743			386		1,016			(482		)	680			1,600
Loans charged-off
Domestic	(97		)	(1,415		)	—			(128		)	(1,640		)	—		(526		)	—			(66		)	(592		)
International	—			(6,042		)	—			(477		)	(6,519		)	—		(1,421		)	—			(283		)	(1,704		)
Recoveries	168			66			—			1,137			1,371			—		187			—			49			236
Balances at end of the period	$	34,840		$	40,201		$	3,976		$	3,689		$	82,706		$	29,079	$	29,040		$	2,835		$	8,517		$	69,471

	June 30, 2017
(in thousands)	Real Estate			Commercial			Financial Institutions			Consumer and Others			Total
Allowance for loan losses by impairment methodology
Individually evaluated	$	—		$	3,407		$	—		$	—		$	3,407
Collectively evaluated	34,840			36,794			3,976			3,689			79,299
	$	34,840		$	40,201		$	3,976		$	3,689		$	82,706
Investment in loans, net of unearned income
Individually evaluated	$	13,733		$	36,855		$	—		$	2,277		$	52,865
Collectively evaluated	2,708,546			2,351,544			424,434			539,976			6,024,500
	$	2,722,279		$	2,388,399		$	424,434		$	542,253		$	6,077,365



	Nine Months Ended September 30, 2018
(in thousands)	Real Estate			Commercial			Financial Institutions			Consumer and Others			Total
Balances at beginning of the period	$	31,290		$	32,687		$	4,362		$	3,661		$	72,000
(Reversal of) provision for loan losses	(2,249		)	(199		)	(1,527		)	5,725			1,750
Loans charged-off
Domestic	—			(3,263		)	—			(183		)	(3,446		)
International	—			(1,473		)	—			(913		)	(2,386		)
Recoveries	38			1,288			—			227			1,553
Balances at end of the period	$	29,079		$	29,040		$	2,835		$	8,517		$	69,471



	September 30, 2018
(in thousands)	Real Estate		Commercial		Financial Institutions		Consumer and Others		Total
Allowance for loan losses by impairment methodology:
Individually evaluated	$	5,783	$	969	$	—	$	1,620	$	8,372
Collectively evaluated	23,296		28,071		2,835		6,897		61,099
	$	29,079	$	29,040	$	2,835	$	8,517	$	69,471
Investment in loans, net of unearned income:
Individually evaluated	$	10,965	$	11,887	$	—	$	4,538	$	27,390
Collectively evaluated	2,991,808		2,288,635		311,324		540,122		6,131,889
	$	3,002,773	$	2,300,522	$	311,324	$	544,660	$	6,159,279

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

The following is a summary of the recorded investment amount of loan sales by portfolio segment:

Three Months Ended June 30,
(in thousands) Real Estate Commercial Financial
Institutions Consumer
and others Total
2018 $ 5,049
$ 5,774
$ —
$ —
$ 10,823
2017 $ 2,045
$ 7,696
$ —
$ —
$ 9,741



Three Months Ended September 30, (in thousands)	Real Estate		Commercial		Financial Institutions		Consumer and others		Total
2019	$	—	$	43,190	$	—	$	2,148	$	45,338
2018	$	2,000	$	31,847	$	—	$	3,272	$	37,119

Six Months Ended June 30,
(in thousands) Real Estate Commercial Financial
Institutions Consumer
and others Total
2018 $ 8,007
$ 15,774
$ —
$ —
$ 23,781
2017 $ 3,922
$ 35,057
$ 24,277
$ —
$ 63,256



Nine Months Ended September 30, (in thousands)	Real Estate		Commercial		Financial Institutions		Consumer and others		Total
2019	$	23,475	$	229,310	$	—	$	6,969	$	259,754
2018	$	2,000	$	47,577	$	—	$	11,279	$	60,856

The following is a summary of impaired loans as of September 30, 2019 and December 31, 2018:



	September 30, 2019
	Recorded Investment
(in thousands)	With a Valuation Allowance		Without a Valuation Allowance		Total		Year Average (1)		Total Unpaid Principal Balance		Valuation Allowance
Real estate loans
Commercial real estate
Nonowner occupied	$	1,936	$	—	$	1,936	$	975	$	1,936	$	397
Multi-family residential	—		—		—		521		—		—
Land development and construction loans	—		—		—		—		—		—
	1,936		—		1,936		1,496		1,936		397
Single-family residential	5,764		461		6,225		5,045		6,303		1,233
Owner occupied	5,354		4,396		9,750		7,178		9,735		956
	13,054		4,857		17,911		13,719		17,974		2,586
Commercial loans	8,315		848		9,163		7,628		9,311		662
Consumer loans and overdrafts	94		9		103		57		100		56
	$	21,463	$	5,714	$	27,177	$	21,404	$	27,385	$	3,304

_______________


(1)	Average using trailing four quarter balances.

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~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

~~The following is a summary of impaired loans as of June 30, 2018 and December 31, 2017:~~


	June 30, 2018												December 31, 2018
	Recorded Investment												Recorded Investment
(in thousands)	With a Valuation Allowance		Without a Valuation Allowance		Total		Year-To-Date Average		Total Unpaid Principal Balance		Valuation Allowance		With a Valuation Allowance		Without a Valuation Allowance		Total		Year Average (1)		Total Unpaid Principal Balance		Valuation Allowance
Real estate loans
Commercial real estate
Non-owner occupied	$	10,352	$	—	$	10,352	$	8,734	$	10,402	$	4,055
Nonowner occupied													$	—	$	—	$	—	$	7,935	$	—	$	—
Multi-family residential	—		726		726		927		731		—		—		717		717		724		722		—
Land development and construction loans	—		—		—		—		—		—		—		—		—		—		—		—
	10,352		726		11,078		9,661		11,133		4,055		—		717		717		8,659		722		—
Single-family residential	—		306		306		746		297		—		3,086		306		3,392		4,046		3,427		1,235
Owner-occupied	—		6,303		6,303		6,918		6,222		—
Owner occupied													169		4,427		4,596		5,524		4,601		75
	10,352		7,335		17,687		17,325		17,652		4,055		3,255		5,450		8,705		18,229		8,750		1,310
Commercial loans	4,572		5,331		9,903		8,939		18,302		2,252		4,585		148		4,733		7,464		6,009		1,059
Consumer loans and overdrafts													9		11		20		15		17		4
	$	14,924	$	12,666	$	27,590	$	26,264	$	35,954	$	6,307	$	7,849	$	5,609	$	13,458	$	25,708	$	14,776	$	2,373

~~During the three and six months ended June 30, 2018, the~~_______________


(1)	Average using trailing four quarter balances.

The Company recognized interest income on impaired loans of ~~$83~~$139 thousand and ~~$108~~$11 thousand during the three months ended September 30, 2019 and 2018, respectively, ~~on impaired loans.~~

December 31, 2017
Recorded Investment
(in thousands) With a Valuation Allowance Without a Valuation Allowance Total Year Average Total Unpaid Principal Balance Valuation Allowance
Real estate loans
Commercial real estate
Non-owner occupied $ —
$ 327
$ 327
$ 225
$ 327
$ —
Multi-family residential —
1,318
1,318
7,898
1,330
—
Land development and construction loans —
—
—
1,359
—
—
—
1,645
1,645
9,482
1,657
—
Single-family residential —
877
877
3,100
871
—
Owner-occupied —
10,918
10,918
13,440
12,323
—
—
13,440
13,440
26,022
14,851
—
Commercial loans 7,173
1,986
9,159
18,211
14,784
2,866
$ 7,173
$ 15,426
$ 22,599
$ 44,233
$ 29,635
$ 2,866

and $170 thousand and $119 thousand during the nine months ended September 30, 2019 and 2018, respectively.

During the ~~three and six~~nine months ended ~~June~~September 30, ~~2017,~~2019, new troubled debt restructurings (“TDRs”) consisted of one single-family residential loan with a recorded investment of $187 thousand, and a multiple loan relationship with a South Florida customer consisting of CRE, owner occupied and commercial loans totaling $9.5 million as of September 30, 2019. This $9.5 million TDR restructure consisted of extending repayment terms and adjusting future periodic payments, and the Company ~~recognized interest income~~determined no additional impairment charges were necessary. 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 a $11.7 million impaired loan relationship at September 30, 2019, are adequate to cover probable losses given current facts and circumstances. The Company will continue to closely monitor the performance of ~~$1.1 million on impaired~~these loans under their modified terms. During the nine months ended September 30, 2019, the Company had no charge-offs against the allowance for loan losses as a result of TDR loans. Since September 30, 2018, no TDRs subsequently defaulted under the modified terms of the loan agreement.

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~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

The recorded investment in loans considered troubled debt restructurings (“TDRs”) completed during the six months ended June 30, 2018 totaled approximately $12.9 million, which includes $10.4 million in a commercial real estate non-owner occupied loan, $1.9 million in a real estate owner-occupied loan and $0.6 million in a commercial loan. During the six months ended June 30, 2018, the Company charged off $1.1 million as a result of these TDR loans. In the six months ended June 30, 2018, there were no TDRs completed since June 30, 2017 which subsequently defaulted under the modified terms of the loan agreement. As of June 30, 2018, all TDR loans were real estate and commercial loans under modified terms 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.

Credit Risk Quality

The Company’s investment in loans by credit quality indicators as of ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017~~2018 are summarized in the following tables:


	June 30, 2018										September 30, 2019
	Credit Risk Rating										Credit Risk Rating
			Classified								Nonclassified				Classified
(in thousands)	Nonclassified		Substandard		Doubtful		Loss		Total		Pass		Special Mention		Substandard		Doubtful		Loss		Total
Real estate loans
Commercial real estate
Non-owner occupied	$	1,854,135	$	10,510	$	—	$	—	$	1,864,645
Nonowner occupied											$	1,918,670	$	13,056	$	1,936	$	—	$	—	$	1,933,662
Multi-family residential	858,453		—		—		—		858,453		942,851		—		—		—		—		942,851
Land development and construction loans	402,830		—		—		—		402,830		258,128		10,184		—		—		—		268,312
	3,115,418		10,510		—		—		3,125,928		3,119,649		23,240		1,936		—		—		3,144,825
Single-family residential	508,578		6,334		—		—		514,912		518,435		—		9,033		—		—		527,468
Owner-occupied	644,363		9,539		—		—		653,902
Owner occupied											804,575		5,719		15,307		—		—		825,601
	4,268,359		26,383		—		—		4,294,742		4,442,659		28,959		26,276		—		—		4,497,894
Commercial loans	1,421,122		8,891		2,020		—		1,432,033		1,110,866		5,077		11,541		—		—		1,127,484
Loans to financial institutions and acceptances	368,864		—		—		—		368,864		24,815		—		—		—		—		24,815
Consumer loans and overdrafts	118,176		5,734		—		—		123,910		99,198		—		2,400		—		—		101,598
	$	6,176,521	$	41,008	$	2,020	$	—	$	6,219,549	$	5,677,538	$	34,036	$	40,217	$	—	$	—	$	5,751,791

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Notes to Interim Consolidated Financial Statements (Unaudited)


	December 31, 2017										December 31, 2018
	Credit Risk Rating										Credit Risk Rating
			Classified								Nonclassified				Classified
(in thousands)	Nonclassified		Substandard		Doubtful		Loss		Total		Pass		Special Mention		Substandard		Doubtful		Loss		Total
Real estate loans
Commercial real estate
Non-owner occupied	$	1,712,615	$	489	$	—	$	—	$	1,713,104
Nonowner occupied											$	1,802,573	$	6,561	$	222	$	—	$	—	$	1,809,356
Multi-family residential	839,709		—		—		—		839,709		909,439		—		—		—		—		909,439
Land development and construction loans	406,940		—		—		—		406,940		326,644		—		—		—		—		326,644
	2,959,264		489		—		—		2,959,753		3,038,656		6,561		222		—		—		3,045,439
Single-family residential	506,885		5,869		—		—		512,754		526,373		—		7,108		—		—		533,481
Owner-occupied	596,519		13,867		—		—		610,386
Owner occupied											758,552		9,019		9,451		—		—		777,022
	4,062,668		20,225		—		—		4,082,893		4,323,581		15,580		16,781		—		—		4,355,942
Commercial loans	1,340,643		14,112		—		—		1,354,755		1,369,434		3,943		6,462		589		—		1,380,428
Loans to financial institutions and acceptances	497,626		—		—		—		497,626		68,965		—		—		—		—		68,965
Consumer loans and overdrafts	126,838		4,113		—		—		130,951		108,778		—		6,062		—		—		114,840
	$	6,027,775	$	38,450	$	—	$	—	$	6,066,225	$	5,870,758	$	19,523	$	29,305	$	589	$	—	$	5,920,175


6.5.	Time Deposits

Time deposits in denominations of $100,000 or more amounted to approximately $1.4 billion ~~and $1.2 billion~~ at ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017, respectively.~~2018. Time deposits in denominations of $250,000 or more amounted to approximately ~~$723~~$739 million and ~~$624~~$718 million at ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. ~~Time deposits include brokered time deposits, all in denominations of less than $100,000.~~ As of ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017~~2018, brokered time deposits amounted to ~~$738~~$566 million and ~~$780~~$642 million, respectively.


7.6.	Advances ~~From~~from the Federal Home Loan Bank and Other Borrowings

The Company had outstanding advances from the FHLB and other borrowings. These borrowings bear fixed interest rates or variable rates based on 3-month LIBOR as follows:


Year of Maturity	Interest Rate	June 30, 2018		December 31, 2017		Interest Rate	September 30, 2019		December 31, 2018
(in thousands, except percentages)
2018	0.90% to 2.38%	$	417,000	$	567,000
2019	1.00% to 3.86%	225,000		155,000		1.80% to 3.86%	$	195,000	$	440,000
2020	1.50% to 2.74%	306,000		211,000		1.50% to 2.74%	325,000		306,000
2021	1.93% to 2.50%	190,000		240,000		1.93% to 3.08%	240,000		210,000
2022	2.48% to 2.80%	120,000		—
2022 (1)						1.14% to 2.80%	320,000		120,000
2023 and after						2.95% to 3.23%	90,000		90,000
		$	1,258,000	$	1,173,000		$	1,170,000	$	1,166,000

__________________


(1)	As of September 30, 2019, includes $200 million (fixed interest rate - 1.14%) 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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Notes to Interim Consolidated Financial Statements (Unaudited)

7.Junior Subordinated Debentures Held by Trust Subsidiaries

At September 30, 2019 and December 31, 2018 the Company owns all of the common capital securities issued by 6 and 8 statutory trust subsidiaries (“the Trust Subsidiaries”), respectively. These Trust Subsidiaries were first formed by the Company for the purpose of issuing trust preferred securities (“the Trust Preferred Securities”) and investing the proceeds in junior subordinated debentures issued by the Company. The debentures are guaranteed by the Company. The Company records the common capital securities issued by the Trust Subsidiaries in other assets in its consolidated balance sheets using the equity method. The junior subordinated debentures issued to the Trust Subsidiaries, less the common securities of the Trust Subsidiaries, qualify as Tier 1 regulatory capital.

The following table provides information of the outstanding Trust Preferred Securities issued by, and the junior subordinated debentures issued to, each of the Trust Subsidiaries as of September 30, 2019 and December 31, 2018:



	September 30, 2019				December 31, 2018
(in thousands)	Amount of Trust Preferred Securities Issued by Trust		Principal Amount of Debenture Issued to Trust		Amount of Trust Preferred Securities Issued by Trust		Principal Amount of Debenture Issued to Trust		Year of Issuance	Annual Rate of Trust Preferred Securities and Debentures	Year of Maturity
Commercebank Capital Trust I	$	26,830	$	28,068	$	26,830	$	28,068	1998	8.90%	2028
Commercebank Statutory Trust II	—		—		15,000		15,464		2000	10.60%	2030
Commercebank Capital Trust III	—		—		10,000		10,400		2001	10.18%	2031
Commercebank Capital Trust VI	9,250		9,537		9,250		9,537		2002	3-M LIBOR + 3.35%	2033
Commercebank Capital Trust VII	8,000		8,248		8,000		8,248		2003	3-M LIBOR + 3.25%	2033
Commercebank Capital Trust VIII	5,000		5,155		5,000		5,155		2004	3-M LIBOR + 2.85%	2034
Commercebank Capital Trust IX	25,000		25,774		25,000		25,774		2006	3-M LIBOR + 1.75%	2038
Commercebank Capital Trust X	15,000		15,464		15,000		15,464		2006	3-M LIBOR + 1.78%	2036
	$	89,080	$	92,246	$	114,080	$	118,110

The Company and the Trust Subsidiaries have the option to defer payment of interest on the obligations for up to 10 semi-annual periods. In 2019 and 2018, no payment of interest has been deferred on these obligations. The Trust Preferred Securities are subject to mandatory redemption, in whole or in part, upon the maturity or early redemption of the debentures. Early redemption premiums may be payable.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

On July 31, 2019 and September 7, 2019, the Company redeemed all $10.0 million of its outstanding 10.18% trust preferred securities issued by its Commercebank Capital Trust III (“Capital Trust III”) and all $15.0 million of its outstanding 10.60% trust preferred securities issued by its Commercebank Statutory Trust II (“Statutory Trust II”), respectively. The Capital Trust III and the Statutory Trust II securities were redeemed at the contractual call price of 101.018% and 100.53%, respectively. The Company simultaneously redeemed all $10.4 million and $15.5 million junior subordinated debentures held by its Capital Trust III and Statutory Trust II, respectively, as part of these redemption transactions. These redemptions together reduced total cash and cash equivalents by approximately $23.8 million, financial liabilities by approximately $25.9 million and other assets by approximately $2.4 million. In addition, third quarter 2019 results included a total charge of $0.3 million for the contractual premiums paid to security holders from these redemptions. The redemption of these legacy Tier 1 capital instruments reduced the Company’s Tier 1 equity capital by a net of $23.5 million.

The Company’s regulatory capital ratios continue to exceed regulatory minimums to be well-capitalized, upon these redemptions.


8.	Derivative Instruments

At ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017~~2018, the fair values of the Company’s derivative instruments were as follows:


	June 30, 2018				December 31, 2017				September 30, 2019				December 31, 2018
(in thousands)	Other Assets		Other Liabilities		Other Assets		Other Liabilities		Other Assets		Other Liabilities		Other Assets		Other Liabilities
Interest rate swaps designated as cash flow hedges	$	14,417	$	—	$	5,462	$	—	$	90	$	—	$	9,386	$	283
Interest rate swaps not designated as hedging instruments:
Customers	304		—		1,375		—		15,456		—		1,420		—
Third party broker	—		304		—		1,375		—		15,456		—		1,420
	304		304		1,375		1,375		15,456		15,456		1,420		1,420
Interest rate caps not designated as hedging instruments:
Customers	—		1,084		—		195		—		48		—		685
Third party broker	1,084		—		195		—		48		—		685		—
	1,084		1,084		195		195		48		48		685		685
	$	15,805	$	1,388	$	7,032	$	1,570	$	15,594	$	15,504	$	11,491	$	2,388

Derivatives Designated as Hedging Instruments

At ~~June 30, 2018 and~~ December 31, 2017 the Company’s interest rate swaps designated as cash flow hedges involve the payment of fixed-rate amounts in exchange for the Company receiving variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

~~As of June 30,~~ 2018, ~~and December 31, 2017, respectively,~~ the Company had 16 ~~and 15~~ interest rate swap contracts with total notional amounts of $280 million ~~and $255 million, respectively,~~ that were designated as cash flow hedges of floating rate interest payments on the ~~currently~~ outstanding and expected ~~subsequent~~ rollover of ~~FHLB advances. The Company expects~~variable-rate advances from the FHLB. These hedge relationships were expected to be highly effective in offsetting the effects of changes in interest rates in the cash flows associated with the advances from the FHLB. No hedge ineffectiveness gains or losses were recognized in the ~~three and six~~nine months ended ~~June~~September 30, ~~2018~~2019 and ~~2017.~~2018.

In February and March 2019, the Company terminated these 16 interest rate swaps designated as cash flow hedges. The Company is recognizing the contracts’ cumulative net unrealized gains of $8.9 million in earnings over the remaining original life of the terminated interest rate swaps ranging between four months and seven years.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

On August 8, 2019, the Company entered into five interest rate swap contracts with notional amounts totaling $64.2 million that were designated as cash flow hedges to manage the exposure of floating rate interest payments on all of the Company’s outstanding variable-rate junior subordinated debentures with principal amounts at September 30, 2019 totaling $64.2 million. These interest rate swap contracts mature in approximately three years. The Company expects these interest rates swaps to be highly effective in offsetting the effects of changes in interest rates on cash flows associated with the Company’s variable-rate junior subordinated debentures.

The Company’s interest rate swaps designated as cash flow hedges involve the Company’s payment of fixed-rate amounts in exchange for the Company receiving variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

Derivatives Not Designated as Hedging Instruments

At ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had ~~two~~27 and ~~one~~eight interest rate swap contracts with customers, respectively, with a total notional amount of ~~$57.8~~$304.2 million and ~~$54.6~~$80.4 million, respectively. These instruments involve ~~a variable-rate~~the payment ~~to the customer~~of fixed-rate amounts in exchange for the Company receiving ~~from the customer a fixed-rate payment~~variable-rate payments over the life of the contract. In addition, at ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had 27 and eight interest rate swap mirror contracts, respectively, with a third party broker with similar terms.

In the third quarter of 2019, we entered into swap participation agreements with other financial institutions to manage the credit risk exposure on certain interest rate swaps with customers. Under these agreements, the Company, as the beneficiary, will receive payments from the counterparty if the borrower defaults on the related interest rate swap contract. As of September 30, 2019, we had two swap participation agreements with an aggregate notional amount of approximately $30.2 million. The notional amount of these agreements is based on the Company’s pro-rata share of the related interest rate swap contracts. As of September 30, 2019, the fair value of swap participation agreements was not significant.

At ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had ~~eleven~~15 and ~~seven~~16 interest rate cap contracts with customers with a total notional amount of ~~$275.7~~$292.2 million and ~~$162.1~~$323.7 million, respectively. In addition, at ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had 15 and 16 interest rate cap mirror contracts, respectively, with avarious third party ~~broker~~brokers with similar terms.

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~


9.	Stock-based Incentive Compensation Plan

The Company sponsors the 2018 Equity and Incentive Compensation Plan (the “2018 Equity Plan”). See Note 11 to the Company’s audited consolidated financial statements in the Form 10-K for more information on the 2018 Equity Plan and restricted stock awards for the year ended 2018. The 2018 Equity Plan was renamed as of August 8, 2019 to reflect the change of the Company’s name to Amerant Bancorp Inc. on June 5, 2019.

On January 22, 2019, the Company granted an additional 1,299 shares of restricted stock to an employee who was not included in the December 21, 2018 restricted stock award. These shares of restricted stock will vest in three approximately equal amounts on each of January 21, 2020, 2021 and 2022. The fair value of the restricted stock granted was based on the market price of the shares of the Company’s Class A common stock at the grant date which was $13.58 per share.

During the three and nine month periods ended September 30, 2019, the Company recorded $1.5 million and $4.4 million, respectively, of compensation expense related to the restricted stock awards granted in December 2018 and January 2019. The total unamortized deferred compensation expense of $5.3 million for all unvested restricted stock outstanding at September 30, 2019 will be recognized over a weighted average period of 1.6 years.

On October 7, 2019 the Company granted 2,583 shares of restricted stock to a new employee. These shares of restricted stock will vest in three approximately equal amounts on each October 7, 2020, 2021 and 2022. The fair value of the restricted stock granted was based on the market price of the shares of the Company’s Class A common stock at the grant date which was $19.35.


10.	Income Taxes

The Company uses an estimated annual effective tax rate method in computing its interim tax provision. This effective tax rate is based on forecast annual consolidated pre-tax income, permanent tax differences and statutory tax rates. Under this method, the tax effect of certain items that do not meet the definition of ordinary income or expense are computed and recognized as discrete items when they occur.

The effective combined federal and state tax rates for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 were 21.50% and ~~2017 were 26.80% and 30.21%~~25.34%, respectively. Effective tax rates differ from the statutory rates mainly due to the impact of forecast permanent non-taxable interest and other income, and the impact of permanent non-deductible discrete expense items incurred during the period, which primarily include the non-deductible ~~Spin-off~~spin-off costs in 2018 and the effect of corporate state ~~taxes.~~taxes for the nine months ended September 30, 2019.

~~10.~~11. Accumulated Other Comprehensive ~~Loss~~Income (Loss) (“AOCI/AOCL”):

The components of AOCI/AOCL are summarized as follows using applicable blended average federal and state tax rates for each period:

June 30, 2018 December 31, 2017
(in thousands) Before Tax
Amount Tax
Effect Net of Tax
Amount Before Tax
Amount Tax
Effect Net of Tax
Amount
Unrealized losses on available for sale securities $ (40,997 ) $ 10,023
$ (30,974 ) $ (13,415 ) $ 2,884
$ (10,531 )
Unrealized gains on interest rate swaps designated as cash flow hedges 14,417
(3,496 ) $ 10,921
5,602
(1,204 ) $ 4,398
Total AOCL $ (26,580 ) $ 6,527
$ (20,053 ) $ (7,813 ) $ 1,680
$ (6,133 )



	September 30, 2019							December 31, 2018
(in thousands)	Before Tax Amount		Tax Effect			Net of Tax Amount		Before Tax Amount			Tax Effect			Net of Tax Amount
Net unrealized holding gains (losses) on securities available for sale	$	14,531	$	(3,552	)	$	10,979	$	(33,145	)	$	8,104		$	(25,041	)
Net unrealized holding gains on interest rate swaps designated as cash flow hedges	8,113		(1,984		)	6,129		9,103			(2,226		)	$	6,877
Total AOCI (AOCL)	$	22,644	$	(5,536	)	$	17,108	$	(24,042	)	$	5,878		$	(18,164	)

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Notes to Interim Consolidated Financial Statements (Unaudited)

The components of other comprehensive ~~loss~~income (loss) for the periods presented is summarized as follows:

Three Months Ended June 30,
2018 2017
(in thousands) Before Tax
Amount Tax
Effect Net of Tax
Amount Before Tax
Amount Tax
Effect Net of Tax
Amount
Unrealized (losses) gains on available for sale securities:
Change in fair value arising during the period $ (6,716 ) $ 1,262
$ (5,454 ) $ 9,271
$ (3,291 ) $ 5,980
Reclassification adjustment for net gains included in net income (16 ) 4
(12 ) (177 ) 63
(114 )
(6,732 ) 1,266
(5,466 ) 9,094
(3,228 ) 5,866
Unrealized gains (losses) on interest rate swaps designated as cash flow hedges:
Change in fair value arising during the period 2,574
(435 ) 2,139
(2,253 ) 800
(1,453 )
Reclassification adjustment for net interest expense included in net income 19
(5 ) 14
32
(11 ) 21
2,593
(440 ) 2,153
(2,221 ) 789
(1,432 )
Total other comprehensive (loss) income $ (4,139 ) $ 826
$ (3,313 ) $ 6,873
$ (2,439 ) $ 4,434

Six Months Ended June 30,
2018 2017
(in thousands) Before Tax
Amount Tax
Effect Net of Tax
Amount Before Tax
Amount Tax
Effect Net of Tax
Amount
Unrealized (losses) gains on available for sale securities:
Change in fair value arising during the period $ (27,566 ) $ 7,135
$ (20,431 ) $ 11,708
$ (4,156 ) $ 7,552
Reclassification adjustment for net gains included in net income (16 ) 4
(12 ) (155 ) 55
(100 )
(27,582 ) 7,139
(20,443 ) 11,553
(4,101 ) 7,452
Unrealized gains (losses) on interest rate swaps designated as cash flow hedges:
Change in fair value arising during the period 8,608
(2,256 ) 6,352
(2,008 ) 713
(1,295 )
Reclassification adjustment for net interest expense included in net income 207
(36 ) 171
82
(29 ) 53
8,815
(2,292 ) 6,523
(1,926 ) 684
(1,242 )
Total other comprehensive (loss) income $ (18,767 ) $ 4,847
$ (13,920 ) $ 9,627
$ (3,417 ) $ 6,210



	Three Months Ended September 30,
	2019									2018
(in thousands)	Before Tax Amount			Tax Effect			Net of Tax Amount			Before Tax Amount			Tax Effect			Net of Tax Amount
Net unrealized holding gains (losses) on securities available for sale:
Change in fair value arising during the period	$	9,087		$	(2,221	)	$	6,866		$	(6,537	)	$	1,599		$	(4,938	)
Reclassification adjustment for net (gains) losses included in net income	(906		)	221			(685		)	15			(4		)	11
	8,181			(2,000		)	6,181			(6,522		)	1,595			(4,927		)
Net unrealized holding gains on interest rate swaps designated as cash flow hedges:
Change in fair value arising during the period	90			(22		)	68			2,437			(597		)	1,840
Reclassification adjustment for net interest income included in net income	(370		)	90			(280		)	(227		)	56			(171		)
	(280		)	68			(212		)	2,210			(541		)	1,669
Total other comprehensive income (loss)	$	7,901		$	(1,932	)	$	5,969		$	(4,312	)	$	1,054		$	(3,258	)

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Notes to Interim Consolidated Financial Statements (Unaudited)

~~11.~~



	Nine Months Ended September 30,
	2019									2018
(in thousands)	Before Tax Amount			Tax Effect			Net of Tax Amount			Before Tax Amount			Tax Effect			Net of Tax Amount
Net unrealized holding gains (losses) on securities available for sale:
Change in fair value arising during the period	$	49,578		$	(12,121	)	$	37,457		$	(34,103	)	$	8,734		$	(25,369	)
Reclassification adjustment for net gains included in net income	(1,902		)	465			(1,437		)	(1		)	—			(1		)
	47,676			(11,656		)	36,020			(34,104		)	8,734			(25,370		)
Net unrealized holding (losses) gains on interest rate swaps designated as cash flow hedges:
Change in fair value arising during the period	75			(18		)	57			11,045			(2,836		)	8,209
Reclassification adjustment for net interest income included in net income	(1,065		)	260			(805		)	(20		)	3			(17		)
	(990		)	242			(748		)	11,025			(2,833		)	8,192
Total other comprehensive income (loss)	$	46,686		$	(11,414	)	$	35,272		$	(23,079	)	$	5,901		$	(17,178	)

12. Stockholders’ Equity

a) Class A Common Stock

Shares of the Company’s Class A common stock issued and outstanding as of September 30, 2019 and December 31, 2018 were 28,985,996 and 26,851,832, respectively.

IPO Over-allotment Option

On January 23, 2019, the underwriters of the Company’s IPO partially exercised their over-allotment option by purchasing 229,019 shares of the Company’s Class A common stock at the public offering price of $13.00 per share. The net proceed to the Company from this transaction was approximately $3.0 million.

Private Placements

On February 1, 2019 and February 28, 2019, the Company issued and sold 153,846 and 1,750,000 shares of its Class A common stock, respectively, in private placements exempt from registration under Section 4(a)(2) of the Securities Act and Securities and SEC Rule 506 (the “Private Placements”). The net proceed to the Company from the Private Placements totaled approximately $26.7 million.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

b) Class B Common Stock and Treasury Stock

Shares of the Company’s Class B common stock issued as of September 30, 2019 and December 31, 2018 were 17,751,053. As of September 30, 2019 and December 31, 2018, there were 14,218,596 shares and 16,330,917 shares, respectively, of Class B common stock outstanding. As of September 30, 2019 and December 31, 2018, the Company had 3,532,457 shares and 1,420,136 shares, respectively, of Class B common stock held as treasury stock under the cost method.

On March 7, 2019, the Company repurchased all of MSF’s 2,112,321 remaining shares of nonvoting Class B common stock at a weighted average price of $13.48 per share with proceeds from the IPO over-allotment exercise and the Private Placements, representing an aggregate purchase price of approximately $28.5 million. The aforementioned 2,112,321 shares of Class B common stock are held in treasury stock under the cost method.

Following this repurchase, MSF no longer owns any shares of the Company’s Class A common stock or Class B common stock, and therefore, MSF no longer has any rights to register Company shares for resale.

c) Dividends

On March 13, 2018, the Company paid a special, one-time, cash dividend of $40.0 million to MSF, or $0.94 per common share.

13. Commitments and Contingencies

The Company and its subsidiaries are ~~party~~parties to various legal actions arising in the ordinary course of business. In the opinion of management, the outcome of these proceedings ~~litigation~~ will not have a significant effect on the Company’s consolidated financial position or results of operations.

The Company occupies various ~~banking centers~~premises under noncancelable lease agreements expiring through the year 2046. Actual rental expenses may include deferred rents that are recognized as rent expense on a straight line basis. Rent expense under these leases was approximately ~~$1.6~~$1.3 million and ~~$1.4~~$1.5 million for the three months ended ~~June~~September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$3.0~~$4.1 million and $4.5 million for ~~each of~~ the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, ~~and 2017.~~respectively.

Financial instruments whose contract amount represents off-balance sheet credit risk at ~~June~~September 30, ~~2018~~2019 are generally short-term and are as follows:


(in thousands)	Approximate Contract Amount		Approximate Contract Amount
Commitments to extend credit	$	750,440	$	821,197
Credit card facilities(1)	200,912		145,866
Standby letters of credit	19,271		15,825
Commercial letters of credit	4,718		5,330
	$	975,341	$	988,218

__________________

(1)

In April 2019, we revised our credit card program to further strengthen credit quality. 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 are 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 program.

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~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

~~12.~~

14. Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis are summarized below:


	June 30, 2018								September 30, 2019
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Third-Party Models with Observable Market Inputs (Level 2)		Internal Models with Unobservable Market Inputs (Level 3)		Total Carrying Value in the Consolidated Balance Sheet		Quoted Prices in Active Markets for Identical Assets (Level 1)		Third-Party Models with Observable Market Inputs (Level 2)		Internal Models with Unobservable Market Inputs (Level 3)		Total Carrying Value in the Consolidated Balance Sheet
Assets
Securities available for sale
U.S. government sponsored enterprise debt securities	$	—	$	827,484	$	—	$	827,484	$	—	$	940,260	$	—	$	940,260
Corporate debt securities	—		374,929		—		374,929		—		243,149		—		243,149
U.S. government agency debt securities	—		250,837		—		250,837		—		226,644		—		226,644
Municipal bonds	—		173,307		—		173,307		—		50,198		—		50,198
Mutual funds	—		23,108		—		23,108		—		23,957		—		23,957
U.S treasury securities									—		994		—		994
	—		1,649,665		—		1,649,665		—		1,485,202		—		1,485,202
Bank owned life insurance	—		203,236		—		203,236		—		210,414		—		210,414
Derivative instruments	—		15,805		—		15,805		—		15,594		—		15,594
	$	—	$	1,868,706	$	—	$	1,868,706	$	—	$	1,711,210	$	—	$	1,711,210
Liabilities
Derivative instruments	$	—	$	1,388	$	—	$	1,388	$	—	$	15,504	$	—	$	15,504

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~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


	December 31, 2017								December 31, 2018
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Third-Party Models with Observable Market Inputs (Level 2)		Internal Models with Unobservable Market Inputs (Level 3)		Total Carrying Value in the Consolidated Balance Sheet		Quoted Prices in Active Markets for Identical Assets (Level 1)		Third-Party Models with Observable Market Inputs (Level 2)		Internal Models with Unobservable Market Inputs (Level 3)		Total Carrying Value in the Consolidated Balance Sheet
Assets
Securities available for sale
U.S. government sponsored enterprise debt securities	$	—	$	875,666	$	—	$	875,666	$	—	$	820,779	$	—	$	820,779
Corporate debt securities	—		313,392		—		313,392		—		352,555		—		352,555
U.S. government agency debt securities	—		291,385		—		291,385		—		216,985		—		216,985
Municipal bonds	—		180,396		—		180,396		—		160,212		—		160,212
Mutual funds	—		23,617		—		23,617		—		23,110		—		23,110
U.S. treasury securities	—		2,701		—		2,701
Commercial paper									—		12,410		—		12,410
	—		1,687,157		—		1,687,157		—		1,586,051		—		1,586,051
Bank owned life insurance	—		200,318		—		200,318		—		206,141		—		206,141
Derivative instruments	—		7,032		—		7,032		—		11,491		—		11,491
	$	—	$	1,894,507	$	—	$	1,894,507	$	—	$	1,803,683	$	—	$	1,803,683
Liabilities
Derivative instruments	$	—	$	1,570	$	—	$	1,570	$	—	$	2,388	$	—	$	2,388

Level 2 Valuation Techniques

The valuation of securities and derivative instruments is performed through a monthly pricing process using data provided by ~~third parties considered leading global~~generally recognized providers of independent data pricing services (the “Pricing Providers”). These Pricing Providers collect, use and incorporate descriptive market data from various sources, quotes and indicators from leading broker dealers to generate independent and objective valuations. The fair value of bank-owned life insurance policies is based on the cash surrender values of the policies as reported by the insurance companies.

The valuation techniques and the inputs used in our consolidated financial statements to measure the fair value of our recurring Level 2 financial instruments consider, among other factors, the following:

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; and

The ~~actual interest rate~~captured spread and prepayment speed are used to obtain the fair value for each related security.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

On a quarterly basis, the Company evaluates the reasonableness of the monthly pricing process for the valuation of securities and derivative instruments. This evaluation includes challenging the valuation of a random sample of the different types of securities in the investment portfolio as of the end of the quarter selected. This challenge consists of obtaining from the Pricing Providers a document explaining the methodology applied to obtain their fair value assessments for each type of investment included in the sample selection. The Company then analyzes in detail the various inputs used in the fair value calculation, both observable and unobservable (e.g., prepayment speeds, yield curve benchmarks, spreads, delinquency rates). Management ~~considers~~believes that the consistent application of this methodology allows the Company to understand and evaluate the categorization of its investment portfolio.

~~Table of Contents~~

~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

The methods described above may produce a fair value calculation that may differ from the net realizable value or may not be reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of its financial instruments could result in different estimates of fair value at the reporting date.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

~~There were no assets or liabilities measured at fair value on a nonrecurring basis at June 30, 2018.~~ The following table presents the major category of assets measured at fair value on a nonrecurring basis at September 30, 2019:



	September 30, 2019
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total Impairments
Description
Loans held for sale	$	1,918	$	—	$	—	$	—

There were no assets or liabilities measured at fair value on a nonrecurring basis at December 31, ~~2017:~~

December 31, 2017
(in thousands)
Quoted
Prices in
Active
Markets
for Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Other
Unobservable
Inputs
(Level 3)

Total
Impairments
Description
Loans held for sale $ 5,611
$ —
$ —
$ —
2018.

Loans Held for ~~Sale.~~ Sale. The Company measures the impairment of loans held for sale based on the amount by which the carrying values of those loans exceed their fair values. The Company primarily uses independent third party quotes to measure any subsequent decline in the value of loans held for sale. As a consequence, the fair value of these loans held for sale are considered a Level 1 valuation.

Fair Value of Financial Instruments

The fair value of a financial instrument represents the price that would be received from its sale in an orderly transaction between market participants at the measurement date. The best indication of the fair value of a financial instrument is determined based upon quoted market prices. However, in many cases, there are no quoted market prices for the Company’s various financial instruments. As a result, the Company derives the fair value of the financial instruments held at the reporting period-end, in part, using present value or other valuation techniques. Those techniques are significantly affected by management’s assumptions, the estimated amount and timing of future cash flows and estimated discount rates included in present value and other techniques. The use of different assumptions could significantly affect the estimated fair values of the Company’s financial instruments. Accordingly, the net realized values could be materially different from the estimates presented below.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

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, 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 to the Company’s audited consolidated financial statements ~~for~~in the ~~three years ended December 31, 2017 and as of December 31, 2017 and 2016.~~

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~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

Form 10-K.

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 and fixed-rate loans 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.

The estimated fair value of financial instruments where fair value differs from carrying value are as follows:


	June 30, 2018				December 31, 2017				September 30, 2019				December 31, 2018
(in thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets
Financial assets:
Loans	$	2,754,445	$	2,650,581	$	2,682,790	$	2,566,197	$	2,752,224	$	2,635,286	$	2,850,015	$	2,739,721
Financial liabilities
Financial liabilities:
Time deposits	1,714,145		1,702,150		1,466,464		1,461,908		1,713,322		1,729,324		1,745,025		1,740,752
Advances from the Federal Home Loan Bank	1,256,000		1,252,087		1,161,000		1,164,686
Advances from the FHLB									1,170,000		1,181,775		1,166,000		1,167,213
Junior subordinated debentures	118,110		99,304		118,110		95,979		92,246		86,757		118,110		99,450

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~~Mercantil Bank Holding Corporation~~Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


~~13.~~	~~Segment Information~~

The following tables provide a summary of the Company’s financial information as of June 30, 2018 and December 31, 2017 and for the three and six months periods ended June 30, 2018 and 2017 on a managed basis. The Company’s definition of managed basis starts with the reported U.S. GAAP results and includes funds transfer pricing (“FTP”) compensation and allocations of direct and indirect expenses from overhead, internal support centers, and product support centers. This allows management to assess the comparability of results from period-to-period arising from segment operations. The corresponding income tax impact related to tax-exempt items is recorded within income tax (expense)/benefit.

(in thousands) Personal and Commercial Banking ("PAC") Corporate LATAM Treasury Institutional Total
Three Months Ended June 30, 2018
Income Statement:
Net interest income $ 47,105
$ 1,219
$ 1,942
$ 3,723
$ 53,989
Provision for (reversal of) loan losses 824
494
(329 ) (839 ) 150
Net interest income after provision for (reversal of) loan losses 46,281
725
2,271
4,562
53,839
Noninterest income 5,708
89
3,451
5,738
14,986
Noninterest expense 39,329
1,468
2,832
9,009
52,638
Net income (loss) before income tax:
Banking 12,660
(654 ) 2,890
1,291
16,187
Non-banking contribution⁽¹⁾
1,197
11
—
(1,208 ) —
13,857
(643 ) 2,890
83
16,187
Income tax (expense) benefit (4,486 ) 58
84
(1,420 ) (5,764 )
Net income (loss) $ 9,371
$ (585 ) $ 2,974
$ (1,337 ) $ 10,423

(in thousands) Personal and Commercial Banking ("PAC") Corporate LATAM Treasury Institutional Total
Six Months Ended June 30, 2018
Income Statement:
Net interest income $ 93,786
$ 2,699
$ 2,898
$ 7,239
$ 106,622
(Reversal of) provision for loan losses (1,315 ) (225 ) (446 ) 2,136
150
Net interest income after (reversal of) provision for loan losses 95,101
2,924
3,344
5,103
106,472
Noninterest income 11,416
198
5,401
11,916
28,931
Noninterest expense 79,343
2,643
5,794
20,503
108,283
Net income (loss) before income tax:
Banking 27,174
479
2,951
(3,484 ) 27,120
Non-banking contribution⁽¹⁾
1,247
—
—
(1,247 ) —
28,421
479
2,951
(4,731 ) 27,120
Income tax (expense) benefit (6,707 ) (113 ) 396
(844 ) (7,268 )
Net income (loss) $ 21,714
$ 366
$ 3,347
$ (5,575 ) $ 19,852

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~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

(in thousands) Personal and Commercial Banking ("PAC") Corporate LATAM Treasury Institutional Total
As of June 30, 2018
Loans, net⁽²⁾
$ 5,826,731
$ 394,572
$ —
$ (71,685 ) $ 6,149,618
Deposits $ 5,567,424
$ 20,134
$ 737,898
$ 37,682
$ 6,363,138

(in thousands) Personal and Commercial Banking ("PAC") Corporate LATAM Treasury Institutional Total
Three Months Ended June 30, 2017
Income Statement:
Net interest income $ 43,776
$ 2,339
$ 2,268
$ 3,058
$ 51,441
Provision for (reversal of) loan losses 8,681
(1,845 ) (819 ) (2,371 ) 3,646
Net interest income after provision for (reversal of) loan losses 35,095
4,184
3,087
5,429
47,795
Noninterest income 8,062
148
2,933
6,616
17,759
Noninterest expense 38,618
1,135
2,445
8,467
50,665
Net income before income tax:
Banking 4,539
3,197
3,575
3,578
14,889
Non-banking contribution⁽¹⁾
1,263
24
—
(1,287 ) —
5,802
3,221
3,575
2,291
14,889
Income tax expense (2,001 ) (1,147 ) (446 ) (905 ) (4,499 )
Net income $ 3,801
$ 2,074
$ 3,129
$ 1,386
$ 10,390

(in thousands) Personal and Commercial Banking ("PAC") Corporate LATAM Treasury Institutional Total
Six Months Ended June 30, 2017
Income Statement:
Net interest income $ 85,164
$ 4,903
$ 4,593
$ 5,132
$ 99,792
Provision for (reversal of) loan losses 9,812
358
(894 ) (1,533 ) 7,743
Net interest income after provision for (reversal of) loan losses 75,352
4,545
5,487
6,665
92,049
Noninterest income 14,145
275
4,113
13,443
31,976
Noninterest expense 78,495
2,517
5,194
13,607
99,813
Net income before income tax:
Banking 11,002
2,303
4,406
6,501
24,212
Non-banking contribution⁽¹⁾
2,349
22
—
(2,371 ) —
13,351
2,325
4,406
4,130
24,212
Income tax expense (4,730 ) (823 ) (59 ) (1,703 ) (7,315 )
Net income $ 8,621
$ 1,502
$ 4,347
$ 2,427
$ 16,897

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~~Mercantil Bank Holding Corporation and Subsidiaries~~

~~Notes to Interim Consolidated Financial Statements (Unaudited)~~

(in thousands) Personal and Commercial Banking ("PAC") Corporate LATAM Treasury Institutional Total
As of December 31, 2017
Loans, net⁽²⁾⁽³⁾
$ 5,542,545
$ 521,616
$ —
$ (64,325 ) $ 5,999,836
Deposits $ 5,454,216
$ 18,670
$ 779,969
$ 70,118
$ 6,322,973

~~__________________~~


~~(1)~~15.	~~Non-banking contribution reflects allocations of the net results of the Trust Company and Investment Services subsidiaries to the customers’ primary business unit.~~


~~(2)~~	Provisions for the periods presented are allocated to each applicable reportable segment. The allowance for loan losses and unearned deferred loan costs and fees are reported entirely within Institutional.


~~(3)~~	~~Balances include loans held for sale of $5,611 thousand which are allocated to PAC.~~Earnings Per Share

The following table shows the calculation of basic and diluted earnings per share:



	Three months ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	2019		2018		2019		2018
Numerator:
Net income available to common stockholders	$	11,931	$	11,551	$	37,859	$	31,403
Denominator:			`
Basic weighted average shares outstanding	42,466		42,489		42,562		42,489
Dilutive effect of share-based compensation awards	449		—		319		—
Diluted weighted average shares outstanding	42,915		42,489		42,881		42,489

Basic earnings per common share	$	0.28	$	0.27	$	0.89	$	0.74
Diluted earnings per common share	$	0.28	$	0.27	$	0.88	$	0.74

As of September 30, 2019, potential dilutive instruments consist of 738,138 unvested shares of restricted stock, including 736,839 shares of restricted stock issued in December 2018 in connection with the Company’s IPO and 1,299 additional shares of restricted stock issued in January 2019. As of September 30, 2019, these 738,138 unvested shares of restricted stock 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 that date, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at that date, 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 nine months ended September 30, 2019. As of September 30, 2018, the Company had no outstanding dilutive instruments.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is designed to provide a better understanding of various factors related to ~~the Company’s~~Amerant Bancorp Inc.’s (the “Company,” “our” or “we”) results of operations and financial condition and its wholly owned subsidiaries, including its principal subsidiary, ~~Mercantil~~Amerant Bank, N.A. (the “Bank”). The Bank has two principal subsidiaries, ~~Mercantil~~Amerant Trust, ~~Company,~~ N.A. ~~(the “Trust Company”~~(“Amerant Trust”), a non-depository trust company, and ~~Mercantil Investment Services,~~Amerant Investments, Inc., a securities broker-dealer (“~~Investment Services”~~Amerant Investments”).

This discussion is intended to supplement and highlight information contained in the accompanying unaudited interim ~~unaudited~~ consolidated financial statements and related footnotes included in this Quarterly Report on Form 10-Q (“Form 10-Q”), as well as the information contained in the Company’s ~~definitive Information Statement~~annual report on Form 10-K filed with the ~~SEC as Exhibit 99.1 to its Current Report~~U.S. Securities and Exchange Commission (the “SEC”) on April 1, 2019 (“Form ~~8-K on August 10, 2018 (the “Information Statement”~~10-K”).

~~Special~~Cautionary Notice Regarding Forward-Looking Statements

~~Certain~~Various of the statements made in this ~~discussion and analysis and elsewhere,~~Form 10-Q, including information incorporated herein by reference to other documents, are “forward-looking statements” within the meaning of, and subject to, the protections of ~~Section 27A of~~ the Securities Act of 1933 ~~as amended,~~ (the “Securities Act”) and ~~Section 21E of~~ the Securities Exchange Act of 1934 ~~as amended~~ (the “Exchange Act”).

~~Forward-looking~~ These forward-looking statements include, without limitation, future financial and operating results; costs and revenues; economic conditions generally and in our markets and among our customer base; loan demand; drivers for improvement; mortgage lending activity; changes in the mix of our earning assets and our deposit and wholesale liabilities; net interest income and margin; yields on earning assets; interest rates and yield curves (generally and those applicable to our assets and liabilities); credit quality, including loan performance, non-performing assets, provisions for loan losses, charge-offs, other-than-temporary impairments and collateral values; the effect of redemptions of certain fixed rate trust preferred securities and related junior subordinated debt; rebranding and staff realignment costs and expected savings; market trends; and customer preferences, as well as statements with respect to our ~~beliefs, plans,~~ objectives, ~~goals,~~ expectations ~~anticipations, assumptions, estimates,~~and intentions and ~~future performance, and involve known and unknown risks, uncertainties and~~ other factors, which may be beyond our control, and which may cause the actual results, performance, achievements, or financial condition of the Company to be materially different from future results, performance, achievements, or financial condition expressed or implied by such forward-looking statements. You shouldstatements that are not expect us to update any forward-looking statements. These forward-looking statements should be read together with the “Risk Factors” included in our August 10, 2018 Registration Statement and our other reports filed with the SEC.

historical facts. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “could,” “intend,” ~~“target”~~“target,” “goals,” “outlooks,” “modeled” and other similar words and expressions of the ~~future.~~future in this Form 10-Q. These forward-looking statements should be read together with the “Risk Factors” included in our Form 10-K and our other reports filed with the SEC. Additionally, these forward-looking statements may not be realized due to a variety of factors, including, without limitation:

our ability to successfully execute our strategic plan, manage our growth and achieve our performance targets which assume, among other things, continued growth in our domestic loans, increased domestic deposits, changes in the rates of decline of our foreign deposits, increased cross-selling of services and increased efficiency and cost savings;

the effects of future economic, business, and market ~~conditions and~~condition changes, domestic and foreign, especially those affecting our ~~Venezuela~~Venezuelan depositors and credit card holders;

business and economic conditions, generally and especially in our primary market areas;

operational risks inherent to our business;

our ability to successfully manage our credit risks and the sufficiency of our allowance for possible loan losses;

the failure of assumptions and estimates, as well as differences in, and changes to, economic, market, interest rate, and credit conditions, including ~~seasonality;~~changes in borrowers’ credit risks and payment behaviors, including those resulting from the changes to our credit card program in April 2019 and October 2019;

compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with mortgage origination, sale and servicing operations;

compliance with the Bank Secrecy Act of 1970, the rules of the Treasury Department’s Office of Foreign Assets Control and anti-money laundering laws and regulations, and various U.S. Executive Orders especially given our exposure to Venezuelan customers;

governmental monetary and fiscal ~~policies;~~policies, including market interest rates;

~~legislative~~the effectiveness of our enterprise risk management framework, including internal controls and ~~regulatory changes, including changes in banking, securities, and tax laws, regulations and rules and their application by our regulators, including capital and liquidity requirements, and changes~~disclosure controls;

fluctuations in the ~~scope and cost~~values of ~~FDIC insurance and~~the securities held in our ~~regulation in the U.S. or elsewhere;~~

~~changes in accounting policies, rules, and practices;~~securities portfolio;

the risks of changes in ~~inflation and~~ interest rates on the levels, composition and costs of deposits, loan demand, and the values and liquidity of loan collateral, securities, and ~~interest sensitive~~interest-sensitive assets and liabilities, and the risks and uncertainty of the amounts realizable;

~~changes in borrower credit risks and payment behaviors;~~

changes in the availability and cost of credit and capital in the financial markets, and the types of instruments that may be included as capital for regulatory purposes;

changes in the prices, values and sales volumes of residential real estate and ~~commercial real estate;~~CRE;

the effects of competition from a wide variety of local, regional, national and other providers of financial, investment, trust and other wealth management ~~services;~~services and insurance services, including the disruptive effects of financial technology companies and other competitors who are not subject to the same regulations as the Company and the Bank;

defaults by or deteriorating asset quality of other institutions;

the failure of assumptions and estimates underlying the establishment of allowances for possible loan losses and other asset impairments, losses, valuations of assets and liabilities and other ~~estimates;~~estimates, including the timing and effects of the implementation of the current expected credit losses model to financial instruments (“CECL”) and the changes in our credit card programs;

the ~~failure~~risks of ~~assumptions~~mergers, acquisitions and ~~estimates,~~divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as ~~well as differences in,~~part of these transactions and ~~changes~~possible failures to ~~economic, market, and credit conditions, including changes in borrowers’ credit risks and payment behaviors~~achieve expected gains, revenue growth and/or expense savings from ~~those used in our loan portfolio stress tests and other evaluations;~~such transactions;

changes in technology or products that may be more difficult, costly, or less effective than anticipated;

the effects of war, civil unrest, or other conflicts, acts of terrorism, floods, hurricanes or other catastrophic events that may affect general economic ~~conditions;~~conditions, including in countries where we have depositors and other customers;

~~cyber attacks~~the effects of recent and future legislative and regulatory changes, including changes in banking, securities, tax, trade and finance laws, rules and regulations, such as the planned cessation of LIBOR, and their application by our regulators;

our ability to continue to increase our core domestic deposits, and reduce the rate of decline of foreign deposits;

the occurrence of fraudulent activity, data breaches or failures of our information security controls or cybersecurity-related incidents that may compromise our systems or customers’ information;

interruptions involving our information technology and telecommunications systems or third-party services;

changes in our senior management team and our ability to attract, motivate and retain qualified personnel consistent with our strategic plan;

the ~~risk that~~ costs and obligations associated with being a public company;

our ~~deferred tax assets, if any, could be reduced if estimates of future taxable income from~~ability to maintain our ~~operations and tax planning strategies are less than currently estimated, and sales~~strong reputation, particularly in light of our ~~capital stock could trigger a reduction in the amount of net operating loss carry-forwards, if any, that~~ongoing rebranding effort;

claims or legal actions to which we may be ~~able to utilize for income tax purposes;~~subject in the normal course of business; and

the other factors and information in ~~this report~~our Form 10-K and other filings that we make with the SEC under the Exchange Act ~~including the Information Statement.~~ and Securities Act. See “Risk Factors” in our Form 10-K.

Forward-looking statements, including those as to our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the ~~Information Statement.~~

Company’s actual results, performance, achievements, or financial condition to be materially different from future results, performance, achievements, or financial condition expressed or implied by such forward-looking statements. You should not rely on any forward-looking statements as predictions of future events. In addition, our past results of operations are not necessarily indicative of our future results of operations. You should not expect us to update any forward-looking statements. All written or oral forward-looking statements ~~that are made by or~~ attributable to us are expressly qualified in their entirety by this cautionary ~~notice. We have no obligation~~notice, together with those risks and ~~do not undertake to update, revise or correct any of~~uncertainties described in “Risk factors” in our Form 10-K and in our other filings with the ~~forward-looking statements after~~SEC, which are available at the ~~date of this report, or after the respective dates on which such statements otherwise are made.~~SEC’s website www.sec.gov.

OVERVIEW

Our Company

We are a bank holding company headquartered in Coral Gables, Florida. We provide individuals and businesses a comprehensive array of deposit, credit, investment, wealth management, retail banking and fiduciary ~~services, both to~~services. We serve customers ~~domiciled~~ in ~~the~~our United States markets and to select international customers. These services are offered primarily through the Bank and its Amerant Trust ~~Company~~ and ~~Investment Services~~Amerant Investments subsidiaries. The Bank’s primary markets are South Florida, where ~~it operates 15~~we operate 17 banking centers in Miami-Dade, Broward and Palm Beach counties; the greater Houston, Texas area where ~~it has seven~~we have eight banking centers inthat serve nearby areas of Harris, Montgomery, Fort Bend and ~~Montgomery counties;~~Waller counties, and ~~the~~Dallas, Texas and New York, ~~City area~~New York, where ~~it has a~~we operate loan production ~~office in Midtown Manhattan.~~offices. We have no foreign offices.

Rebranding

We ~~report~~launched “Amerant” as our ~~results~~new brand across all our markets in April 2019. The launch included rebranding of ~~operations~~all digital platforms, new signs in our branches and buildings, and a broad campaign through digital and traditional media focused on brand awareness. We expect our rebranding to be substantially completed by the end of 2019 and expect to incur approximately $0.9 million in additional rebranding expenses by year-end.

On June 4, 2019, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Articles of Incorporation (the “Articles of Incorporation”) to change the Company’s name from “Mercantil Bank Holding Corporation” to “Amerant Bancorp Inc.” (the “Name Change”). The Name Change became effective on June 5, 2019. Each of the Company, the Bank and its principal subsidiaries now operate under the “Amerant” brand.

Segment Reporting

Prior to the second quarter of 2019, the Company had four reportable segments: Personal and Commercial Banking (“PAC”), Corporate LATAM, Treasury, and Institutional. ~~PAC delivers~~Results of these segments were presented on a managed basis. This structure was driven, among other things, by how the ~~Bank’s core services~~Company previously managed the business, how internal reporting was prepared and ~~product offerings~~analyzed, and how management made decisions.

Beginning in the second quarter of 2019, all decisions, including those relating to ~~domestic personal~~loan growth and ~~commercial business customers~~concentrations, deposit and other funding, market risk, credit risk, operational risk and pricing are made after assessing their effects on the Company as a whole, using a single segment concept. This change is consistent with the Company’s strategic shift to focus on community banking after the spin-off from its former parent (“MSF” or “the Former Parent”) in August 2018, and the rebranding of the Company launched in April 2019. As part of this strategic shift, the Company has significantly reduced its international ~~customers,~~lending activities which ~~are primarily personal customers. Our~~had been largely allocated to the Corporate LATAM ~~segment serves financial institution clients and large companies in Latin America. Our Treasury segment manages our securities portfolio, and supports Company-wide initiatives for increasing~~segment. As a result, management reassessed the ~~profitability of other financial assets and liabilities. Our Institutional segment is comprised of balances and results of Investment Services and the Trust Company,~~Company’s remaining international business activities as well as ~~general corporate, administrative~~the remaining three segments to determine whether the Company would continue to manage these businesses as separate operating segments, or consolidated as one single segment. In performing its assessment, management noted a similarity in the nature of products and ~~support activities not reflected in our other three segments.~~services, processes, type of customers, distribution methods, and regulatory environment of its businesses. Further, management determined that it will no longer review discrete financial information related to the remaining operating segments for purposes of assessing performance or to allocate resources.

As a result of the above referenced strategic shift, assessments and determination, the Company is now managed as a single operating segment, on a consolidated basis. Therefore, beginning with the quarter ended June 30, 2019, the Company determined that no separate current or historical reportable segment disclosures are required under U.S. GAAP.

Primary Factors Used to Evaluate Our Business

Results of Operations. In addition to net income, the primary factors we use to evaluate and manage our results of operations include net interest income, noninterest income and ~~expense, and return on equity.~~noninterest expenses.

Net Interest Income. Net interest income represents interest income less interest expense. We generate interest income from interest, dividends and fees received on interest-earning assets, including loans and ~~investment~~ securities we own. We incur interest expense from interest paid on interest-bearing liabilities, including interest-bearing deposits, and borrowings such as ~~FHLB~~ advances from the Federal Home Loan Bank (the “FHLB”) and other borrowings such as repurchase agreements and junior subordinated ~~debentures and other forms of indebtedness.~~debentures. Net interest income typically is the most significant contributor to our revenues and net income. To evaluate net interest income, we measure and monitor: (i) yields on our loans and other interest-earning assets; (ii) the costs of our deposits and other funding sources; (iii) our net interest spread; (iv) our net interest ~~margin;~~margin, or NIM; and (v) our provisions for loan losses. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. ~~Net interest margin~~NIM is calculated by dividing net interest income for the period by average interest-earning ~~assets.~~assets during that same period. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and ~~shareholders’~~stockholders’ equity, also fund interest-earning assets, ~~net interest margin~~NIM includes the benefit of these noninterest-bearing sources of funds.

Changes in market interest rates and interest we earn on interest-earning assets, or which we pay on interest-bearing liabilities, as well as the volumes and the types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and ~~shareholders’~~stockholders’ equity, usually have the largest impact on periodic changes in our net interest spread, ~~net interest margin~~NIM and net interest income. We measure net interest income before and after the provision for loan losses. The Federal Reserve has cut the target market interest rate, the target federal funds rate, twice in the quarterly period ending September 30, 2019, and once more in October, each time in 25 basis point increments.

Noninterest Income. Noninterest income consists of, among other ~~things:~~revenue streams: (i) service fees on deposit ~~and service fees;~~accounts; (ii) income from brokerage, advisory and fiduciary activities; (iii) benefits from and changes in cash surrender value of bank-owned life insurance, or BOLI, policies; (iv) card and trade finance servicing fees; (v) data processing ~~rental income~~ and fees for other services provided to ~~MSF~~our Former Parent and its affiliates; (vi) securities gains or losses; and (vii) other noninterest income.

Our income from service fees on deposit accounts is affected primarily by the volume, growth and mix of deposits we hold. ~~These~~Fees are affected by the volume of customer transactions, prevailing market conditions, including interest rates, generally, and for deposit products, our marketing efforts and other factors.

Our income from brokerage, advisory and fiduciary activities consists of brokerage commissions related to ~~the~~our customers’ trading volume, ~~of our customers’ transactions,~~ fiduciary and investment advisory fees generally based on a percentage of the average value of assets under management and custody and account administrative services and ancillary fees during the contractual period. Our assets under management and custody accounts ~~declined $42.4~~increased $120.8 million, or ~~2.42%~~7.6%, to ~~$1.71~~$1.7 billion at ~~June~~September 30, ~~2018~~2019 from ~~$1.75~~$1.6 billion at December 31, ~~2017, primarily due~~2018. The Company is focused on leveraging our wealth management platform to grow this side of our ~~decision to close certain foreign customer accounts.~~domestic business.

Income from changes in the cash surrender value of our BOLI policies, which is nontaxable, represents the amount that may be realized under the contracts with the insurance ~~carriers, which are nontaxable.~~carriers.

~~Card servicing fees include credit card issuance and credit and debit cards interchange fees.~~ Credit card issuance fees currently are generally recognized over the period in which the cardholders are entitled to use the cards. Interchange fees, other fees and revenue sharing are recognized when earned. Trade finance servicing fees, which primarily include commissions on letters of credit, are generally recognized over the service period on a straight line basis. Card servicing fees have included credit card issuance and credit and debit card interchange and other fees.

We have been revising our card program to continue to serve our card customers, reduce risks and increase the efficiency of a relatively small program. We entered into referral arrangements with recognized U.S.-based card issuers which will permit us to serve our international and domestic customers and we will earn referral fees and share interchange revenue without exposure to credit risk. Our credit card issuance and interchange fees, and interest, will decrease as we cease to be a direct card issuer.

We have historically provided certain administrative services to ~~MSF’s~~our Former Parent and its non-U.S. affiliates under ~~certain service~~administrative services and transition agreements with arms-length terms and charges. Income from this source ~~changes~~was based on ~~changes to~~ the direct costs associated with providing the services ~~and based on changes to the amount and scope of services provided~~plus a markup, which ~~are~~were reviewed periodically. ~~Following the Spin-off, we will continue to provide these services for transition periods of 12-18 months, unless sooner terminated. All services are billed by us and~~These fees were paid by ~~MSF~~our Former Parent and its non-U.S. affiliates in U.S. Dollars. ~~For~~During the ~~six~~nine months ended ~~June~~September 30, ~~2018,~~2019, we were paid approximately ~~$1.2~~$1.0 million for these services. ~~MSF does not currently~~These administrative and transition services have substantially ended, with only a small portion expected to remain through the end of 2019. Our Former Parent’s non-U.S. affiliates have also provided, and continue to provide ~~any material~~certain shareholder services to ~~us for which they are compensated.~~us.

Our gains and losses on sales of securities ~~is income~~are derived from ~~the sale of securities within~~sales from our securities portfolio and isare primarily dependent on changes in U.S. Treasury interest rates and asset liability management activities. Generally, as U.S. Treasury rates increase, our securities portfolio decreases in market value, and as U.S. Treasury rates decrease, our securities portfolio increases in value.

Our gains or losses on sales of property and equipment are recorded at the date of the sale and presented as other noninterest income or expense in the period they occur.

Noninterest Expense.Noninterest expense includes, among other things: (i) salaries and employee benefits; (ii) occupancy and equipment expenses; (iii) professional and other services fees; (iv) FDIC deposit and business insurance assessments and ~~regulatory assessments;~~premiums; (v) telecommunication and data processing expenses; (vi) depreciation and amortization; and (vii) other operating expenses.

Salaries and employee benefits include compensation (including severance expenses), employee benefits and employer tax expenses for our personnel.

Occupancy expense includes lease expense on our leased properties and other occupancy-related expenses. Equipment expense includes furniture, fixtures and equipment related expenses.

Professional and other services fees include legal, accounting and consulting fees, card processing fees, and other fees related to our business operations, and include ~~director’s~~directors’ fees and regulatory agency fees, such as OCC examination and application fees.

~~Insurance~~FDIC deposit and ~~regulatory~~business insurance assessments and premiums include ~~FDIC~~deposit insurance, net of any credits applied against these premiums, corporate liability and ~~corporate~~other business insurance premiums.

Telecommunication and data processing expenses include expenses paid to our third-party data processing system providers and other telecommunication and data service providers.

Depreciation and amortization expense includes the value associated with the depletion of the value on our owned properties and equipment, including leasehold improvements made to our leased properties.

Other operating expenses ~~will~~include advertising, marketing (including our current rebranding), community engagement, and other operational expenses. Other operating expenses include the incremental cost associated with servicing the large number of shareholders ~~we have post-Spin-off, offset to the extent such shareholders consent to electronic delivery of documents that we are required by SEC rules to send to shareholders.~~ resulting from our spin-off from our Former Parent completed in 2018.

Noninterest expenses generally increase as our business grows and whenever necessary to implement or enhance policies and procedures for regulatory compliance. During the first nine months of 2019, we incurred approximately $4.9 million of restructuring expenses which included $1.4 million of staff realignment expenses and $3.6 million of rebranding expenses.

Primary Factors Used to Evaluate Our Financial Condition

The primary factors we use to evaluate and manage our financial condition include asset quality, capital and liquidity.

Asset Quality. We manage the diversification and quality of our assets based upon factors that include the level, distribution and ~~severity~~risks in each category of ~~the deterioration in asset quality.~~assets. Problem assets may be categorized as classified, delinquent, nonaccrual, ~~nonperforming~~non-performing and restructured assets. We also manage the adequacy of our allowance for loan losses, or the allowance, the diversification and quality of loan and investment portfolios, the extent of counterparty risks, credit risk concentrations and other factors.

We review and update our allowance for loan loss model annually to better reflect our loan volumes, and credit and economic conditions in our markets. The model may differ among our loan segments to reflect their different asset types, and includes qualitative factors, which are updated semi-annually, based on the type of loan.

Capital. Financial institution regulators have established ~~guidelines for~~ minimum capital ratios for banks ~~thrifts~~ and bank holding companies. We manage capital based upon factors that include: (i) the level and quality of capital and our overall financial condition; (ii) the trend and volume of problem assets; (iii) the adequacy of reserves; (iv) the level and quality of earnings; (v) the risk exposures in our balance sheet under various scenarios, including stressed conditions; (vi) the Tier 1 capital ratio, the total capital ratio, the Tier 1 leverage ratio, and the ~~Common Equity Tier 1~~CET1 capital ratio; and (vii) other ~~factors.~~factors, including market conditions.

Liquidity. Our deposit base consists primarily of personal and commercial accounts maintained by individuals and businesses in our primary ~~markets.~~markets and select international core depositors. In recent years, we have increased our ~~access to~~ fully-insured brokered time deposits under $250,000, ~~brokered by third-party financial firms in the U.S.~~but we are currently reducing these balances to focus on relationship driven core deposits. We manage liquidity based upon factors that include the amount of core deposit relationships as a percentage of total deposits, the level of diversification of our funding sources, the allocation and amount of our deposits among deposit types, the short-term funding sources used to fund assets, the amount of non-deposit funding used to fund assets, the availability of unused funding sources, off-balance sheet obligations, the lending pipeline, the amount of cash and liquid securities we hold, the availability of assets ~~to be~~ readily ~~converted~~convertible into cash without undue loss, the ~~re-pricing~~ characteristics and maturities of our assets when compared to the ~~re-pricing~~ characteristics of our liabilities and other factors.

~~Performance Highlights~~Summary Results

~~Performance highlights~~The summary results for the ~~three~~third quarter and nine months ended ~~June~~September 30, ~~2018 included~~2019 include the following ~~(See “—~~(See “Selected Financial ~~Highlights”~~Information” for an explanation of non-GAAP financial measures):

~~Net~~Pretax income ~~rose 0.32% compared to the same quarter in 2017. Excluding $3.2~~of $15.2 million, up 1.7% from $14.9 million in ~~pretax expenses associated with Spin-off activities, net~~the third quarter of 2018. Pretax income for the ~~quarter rose 36.11%~~nine months ended September 30, 2019 was $48.2 million, up 14.7% compared to $42.1 million in the same ~~period.~~period of 2018.

Net interest income of $52.6 million, down 5.5% compared to $55.6 million in the third quarter of 2018 mainly due to lower average interest-earning assets, the replacement of lower cost international deposits with higher cost domestic deposits, and higher time deposit costs, partially offset by improved loan yields. Net interest income for the ~~quarter rose 4.95%~~nine months ended September 30, 2019 was $161.8 million, down 0.3% compared to $162.3 million in the same period of 2018.

Credit quality remained strong. The Company released $1.5 million from the allowance for loan losses, compared to a $1.6 million provision in the third quarter of 2018. The ratio of allowance for loan losses (“ALL”) to total loans was 0.93% as of September 30, 2019, down from 1.13% in ~~2017. Net interest margin for~~ the same period last year. The ratio of loan charge-offs to average total loans in the third quarter ~~improved~~2019 was 0.16%, in line with the low level of the same period last year.

Noninterest income was $13.8 million, up 6.8% compared to ~~2.77% from 2.62%~~$13.0 million in the same quarter of 2018, notwithstanding lower fee income from our Venezuelan customers’ trading activities being curtailed earlier this year as a ~~year ago. The increasing amount~~result of ~~time deposits~~U.S. sanctions on Venezuelan government securities. Noninterest income was $41.1 million in ~~our deposit base, and their higher cost, limited~~ the ~~increase~~nine months ended September 30, 2019, down 1.8% from $41.9 in ~~our net interest margin.~~the same nine months of 2018.

~~Annualized ROA and ROE reached 0.50% and 5.57% during the quarter, respectively, versus 0.49% and 5.63%, respectively,~~

Noninterest expense was $52.7 million, up 1.3% compared to $52.0 million in the same quarter ~~last year. Excluding Spin-off expenses, annualized ROA~~of 2018. Noninterest expense was $157.6 million in the nine months ended September 30, 2019, down 1.7% from $160.3 million in the same period of 2018. Third quarter 2019 noninterest expense includes an additional compensation expense of $1.5 million ($4.4 million year-to-date) in connection with the amortization of restricted stock awards granted in December in 2018 and ~~ROE during~~January 2019 in connection with the Company’s IPO. Adjusted noninterest expense was $51.5 million in the third quarter ~~were 0.67% and 7.56%, respectively.~~

~~Annualized efficiency ratio~~ of ~~76.31% compared to 73.22%~~2019, down 0.6% from $51.8 million in the same quarter of 2018. Adjusted noninterest expense primarily excludes expenses associated with restructuring activities, including $1.3 million of rebranding and staff reduction expenses in ~~2017. Excluding Spin-off expenses,~~ the ~~annualized~~third quarter of 2019 and $0.3 million of spin-off costs in the third quarter of 2018. Adjusted noninterest expense for the first nine months of 2019 was $152.7 million, down 0.9% compared to $154.0 million in the same period of 2018.

The efficiency ratio was 77.6% (75.2% adjusted for rebranding and staff reduction costs) for the ~~quarter was 71.68%.~~nine months ended September 30, 2019, compared to 78.5% (75.5% adjusted for spin-off costs) for the corresponding period of 2018.

Stockholders’ equity per common share increased to $19.11, a 11.6% improvement compared to $17.13 a year ago. Tangible book value per common share rose to $18.63, a 12.0% improvement compared to $16.63 a year ago.

~~Commercial real estate loans grew 5.61% compared to~~ ~~December 31, 2017~~. New loan production in our highly attractive and competitive loan markets exceeded repayments during the quarter. Strong capital ratios above regulatory minimums to be considered “well capitalized” supported our loan growth strategy.42

Selected Financial ~~Highlights~~Information

The following table sets forth selected financial information derived from our unaudited interim ~~unaudited~~ consolidated financial statements for the three and ~~six~~nine months ended ~~June~~September 30, ~~2018~~2019 and ~~2017~~2018 and as of ~~June~~September 30, ~~2018~~2019 and our audited consolidated financial statement as of December 31, ~~2017.~~2018. These unaudited interim ~~unaudited~~ consolidated financial statements are not necessarily indicative of our results of operations for the year ending December 31, ~~2018~~2019 or any interim or future period or our financial position at any future date. The selected financial information should be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations and our unaudited interim ~~unaudited~~ consolidated financial statements and the corresponding notes included in this Form 10-Q.


	June 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018
	(in thousands)
(in thousands)
Consolidated Balance Sheets
Total assets	$	8,530,464	$	8,436,767	$	7,864,260	$	8,124,347
Total investment securities	1,812,119		1,846,951
Total loan portfolio⁽¹⁾	6,219,549		6,066,225
Total investments					1,632,985		1,741,428
Total gross loans (1)					5,753,709		5,920,175
Allowance for loan losses	69,931		72,000		53,640		61,762
Total deposits	6,363,138		6,322,973		5,692,848		6,032,686
Junior subordinated debentures(2)	118,110		118,110		92,246		118,110
Advances from the FHLB and other borrowings	1,258,000		1,173,000		1,170,000		1,166,000
Stockholders' equity	719,382		753,450		825,751		747,418


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017		2018		2017		2019			2018			2019			2018
	(in thousands, except per share amounts)
(in thousands, except per share amounts)
Consolidated Results of Operations
Net interest income	$	53,989	$	51,441	$	106,622	$	99,792	$	52,600		$	55,633		$	161,826		$	162,255
Provision for loan losses	150		3,646		150		7,743
(Reversal of) provision for loan losses									(1,500		)	1,600			(2,850		)	1,750
Noninterest income	14,986		17,759		28,931		31,976		13,836			12,950			41,139			41,881
Noninterest expense	52,638		50,665		108,283		99,813		52,737			52,042			157,587			160,325
Net income	10,423		10,390		19,852		16,897		11,931			11,551			37,859			31,403
Basic and diluted income per common share⁽²⁾	0.08		0.08		0.16		0.13
Cash dividend declared per common share ⁽²⁾	—		—		0.31		—
Effective income tax rate									21.50		%	22.69		%	21.50		%	25.34		%

Common Share Data (3)
Stockholders' book value per common share									$	19.11		$	17.13		$	19.11		$	17.13
Tangible stockholders' equity (book value) per common share (4)									$	18.63		$	16.63		$	18.63		$	16.63
Basic earnings per common share									$	0.28		$	0.27		$	0.89		$	0.74
Diluted earnings per common share									$	0.28		$	0.27		$	0.88		$	0.74
Basic weighted average shares outstanding									42,466			42,489			42,562			42,489
Diluted weighted average shares outstanding (5)									42,915			42,489			42,881			42,489
Cash dividend declared per common share (6)									—			—			—			$	0.94

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
(in thousands, except per share amounts and percentages)
Other Financial and Operating Data⁽³⁾

Profitability Indicators (%)
Net interest income / Average total interest earning assets (NIM)⁽⁴⁾
2.77 % 2.62 % 2.72 % 2.52 %
Net income / Average total assets (ROA) ⁽⁵⁾
0.50 % 0.49 % 0.47 % 0.40 %
Net income / Average stockholders' equity (ROE) ⁽⁶⁾
5.57 % 5.63 % 5.31 % 4.66 %

Capital Adequacy Ratios (%)
Total capital ratio ⁽⁷⁾
12.61 % 12.67 % 12.61 % 12.67 %
Tier I capital ratio⁽⁸⁾
11.67 % 11.51 % 11.67 % 11.51 %
Tier I leverage ratio⁽⁹⁾
9.87 % 9.79 % 9.87 % 9.79 %
Common equity tier I capital ratio (CET1)⁽¹⁰⁾
10.13 % 9.98 % 10.13 % 9.98 %

Asset Quality (%)
Non-performing assets / Total assets⁽¹¹⁾
0.41 % 0.65 % 0.41 % 0.65 %
Non-performing loans / Total loan portfolio^{(1) (12)}
0.56 % 0.91 % 0.56 % 0.91 %
Allowance for loan losses / Total non-performing loans ^{(12) (13)}
201.55 % 149.91 % 201.55 % 149.91 %
Allowance for loan losses / Total loan portfolio ^{(1) (13)}
1.12 % 1.36 % 1.12 % 1.36 %
Net charge-offs / Average total loan portfolio ⁽¹⁴⁾
0.04 % 0.01 % 0.04 % 0.12 %

Efficiency Indicators
Noninterest expense / Average total assets ⁽⁵⁾
2.50 % 2.41 % 2.57 % 2.36 %
Personnel expense / Average total assets⁽⁵⁾
1.66 % 1.50 % 1.64 % 1.51 %
Efficiency ratio ⁽¹⁵⁾
76.31 % 73.22 % 79.88 % 75.75 %

Adjusted Selected Consolidated Results of Operations and Other Data^{(16) (17)}

Adjusted noninterest expense $ 49,438
$ 102,245

Adjusted net income before income tax 19,387
33,158

Adjusted net income 14,142
25,831

Adjusted basic and diluted earnings per share $ 0.11
$ 0.21

Adjusted net income / Average total assets (ROA) ⁽⁵⁾
0.67 % 0.61 %
Adjusted net income / Average stockholders' equity (ROE) ⁽⁶⁾
7.56 % 6.91 %
Adjusted noninterest expense / Average total assets⁽⁵⁾
2.35 % 2.43 %
Adjusted efficiency ratio⁽¹⁸⁾
71.68 % 75.43 %



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
(in thousands, except per share amounts and percentages)
Other Financial and Operating Data (7)

Profitability Indicators (%)
Net interest income / Average total interest earning assets (NIM) (8)	2.80		%	2.83		%	2.89		%	2.74		%
Net income / Average total assets (ROA) (9)	0.60		%	0.55		%	0.64		%	0.50		%
Net income / Average stockholders' equity (ROE) (10)	5.81		%	6.13		%	6.43		%	5.63		%

Capital Indicators
Total capital ratio (11)	14.77		%	12.81		%	14.77		%	12.81		%
Tier 1 capital ratio (12)	13.93		%	11.88		%	13.93		%	11.88		%
Tier 1 leverage ratio (13)	11.15		%	9.95		%	11.15		%	9.95		%
Common equity tier 1 capital ratio (CET1) (14)	12.57		%	10.34		%	12.57		%	10.34		%
Tangible common equity ratio (15)	10.26		%	8.40		%	10.26		%	8.40		%

Asset Quality Indicators (%)
Non-performing assets / Total assets (16)	0.42		%	0.35		%	0.42		%	0.35		%
Non-performing loans / Total loans (1) (17)	0.57		%	0.48		%	0.57		%	0.48		%
Allowance for loan losses / Total non-performing loans (18)	163.42		%	233.89		%	163.42		%	233.89		%
Allowance for loan losses / Total loans (1) (18)	0.93		%	1.13		%	0.93		%	1.13		%
Net charge-offs / Average total loans (19)	0.16		%	0.14		%	0.12		%	0.10		%

Efficiency Indicators
Efficiency ratio (20)	79.38		%	75.88		%	77.64		%	78.54		%
Full-Time-Equivalent Employees (FTEs)	838			948			838			948

Adjusted Selected Consolidated Results of Operations and Other Data (21)
Adjusted noninterest expense	$	51,474		$	51,766		$	152,655		$	154,011
Adjusted net income	12,923			11,970			41,731			37,801
Adjusted earnings per common share (5)	0.30			0.28			0.98			0.89
Adjusted earnings per diluted common share (5)	0.30			0.28			0.97			0.89
Adjusted net income / Average total assets (Adjusted ROA) (9)	0.65		%	0.57		%	0.70		%	0.60		%
Adjusted net income / Average stockholders' equity (Adjusted ROE) (10)	6.30		%	6.35		%	7.09		%	6.78		%
Adjusted efficiency ratio (22)	77.48		%	75.48		%	75.21		%	75.45		%

__________________


(1)	Total gross loans are net of deferred loan fees and costs. At September 30, 2019, total loans include $1.9 million in loans held for sale. There were no loans held for sale at December 31, 2018.


(2)	During the three months ended September 30, 2019, the Company redeemed $25.0 million of its 10.60% and 10.18% trust preferred securities and related junior subordinated debentures.


(3)	The earnings per common share reflect the October 2018 reverse stock split which reduced the number of outstanding shares of each class on a 1-for-3 basis. See Note 15 to the audited consolidation financial statements included in the Form 10-K for more details on the reverse stock split.


(4)	This Non-GAAP financial information is reconciled to GAAP in “Non-GAAP Financial Measures Reconciliation” herein.

(5)

As of September 30, 2019, potential dilutive instruments included 738,138 unvested shares of restricted stock, including 736,839 shares of restricted stock issued in December 2018 in connection with the Company’s IPO and 1,299 additional shares of restricted stock issued in January 2019. As of September 30, 2019, these 738,138 unvested shares of restricted stock 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 that date, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at that date, 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 three (not shown due to rounding) and nine months ended September 30, 2019. We had no outstanding dilutive instruments as of any period prior to December 2018.


(6)	Special cash dividend of $40.0 million paid to our Former Parent in connection with the spin-off.


(7)	Operating data for the three and nine month periods ended September 30, 2019 and 2018 have been annualized.


(8)	Net interest margin is defined as net interest income divided by average interest-earning assets, which are loans, securities available for sale and held to maturity, deposits with banks and other financial assets which yield interest or similar income.


(9)	Calculated based upon the average daily balance of total assets.


(10)	Calculated based upon the average daily balance of stockholders’ equity.


(11)	Total stockholders’ equity divided by total risk-weighted assets, calculated according to the standardized regulatory capital ratio calculations.


(12)	Tier 1 capital divided by total risk-weighted assets.


(13)	Tier 1 capital divided by quarter to date average assets. Tier 1 capital is composed of Common Equity Tier 1 (CET 1) capital plus outstanding qualifying trust preferred securities of $89.1 million and $114.1 million at September 30, 2019 and 2018, respectively. In the three months ended September 30, 2019, $25.0 million in trust preferred securities were redeemed. See footnote 2.


(14)	Common Equity Tier 1 (CET 1) capital divided by total risk-weighted assets.


(15)	Tangible common equity is calculated as the ratio of common equity less goodwill and other intangibles divided by total assets less goodwill and other intangible assets. Other intangibles assets are included in other assets in the Company’s consolidated balance sheets.


(16)	Non-performing assets include all accruing loans past due 90 days or more, all nonaccrual loans, restructured loans that are considered “troubled debt restructurings” or “TDRs”, and OREO properties acquired through or in lieu of foreclosure. Non-performing assets were $32.8 million and $29.7 million as of September 30, 2019 and 2018, respectively.


(17)	Non-performing loans include all accruing loans 90 days or more past due, all nonaccrual loans and restructured loans that are considered TDRs. Non-performing loans were $32.8 million and $29.7 million as of September 30, 2019 and 2018, respectively.


(18)	Allowance for loan losses was $53.6 million and $69.5 million as of September 30, 2019 and 2018, respectively. See Note 5 to our audited consolidated financial statements in our Form 10-K and Note 4 to these unaudited interim consolidated financial statements for more details on our impairment models.


(19)	Calculated based upon the average daily balance of outstanding loan principal balance net of deferred loan fees and costs, excluding the allowance for loan losses.


(20)	Efficiency ratio is the result of noninterest expense divided by the sum of noninterest income and net interest income.


(21)	This presentation contains adjusted financial information determined by methods other than GAAP. This adjusted financial information is reconciled to GAAP in “Non-GAAP Financial Measures Reconciliation” herein.


(22)	Adjusted efficiency ratio is the efficiency ratio less the effect of restructuring and spin-off costs, described in “Non-GAAP Financial Measures Reconciliation” herein.

~~__________________~~

~~(1) Outstanding loans are net of deferred loan fees and costs, excluding~~

Non-GAAP Financial Measures Reconciliation

The following table sets forth selected financial information derived from the ~~allowance for loan losses.~~

~~(2)~~ ~~The earnings per common share reflect the pre-spin-off Exchange that changed the number of Company Shares held by MSF without changing its 100% ownership of the Company. See Note 22 of our audited~~Company’s interim unaudited consolidated financial statements, ~~and Note 1 of our interim consolidated financial statements as of and~~adjusted for ~~the six months ended June 30, 2018 for more details on the Exchange.~~

~~(3) Operating data for the three and six month periods ended June 30, 2018 and 2017 have been annualized.~~

(4) Net interest margin is defined as net interest income divided by average interest-earning assets, which are loans, investment securities, deposits with banks and other financial assets which yield interest or similar income.

~~(5) Calculated based upon the average daily balance of total assets, excluding assets under management and custody.~~

~~(6) Calculated based upon the average daily balance of stockholders’ equity.~~

~~(7) Total stockholders’ equity divided by total risk-weighted assets, calculated according to the standardized capital ratio calculations.~~

~~(8) Tier 1 capital divided by total risk-weighted assets.~~

(9) Tier 1 capital divided by quarter to date average assets. Tier 1 capital is composed of common equity tier 1 capital plus outstanding qualifying trust preferred securities of $114.1 million at June 30, 2018 and 2017.

~~(10) Common Equity Tier 1 capital divided by total risk-weighted assets.~~

(11) Non-performing assets include all non-performing loans and OREO properties acquired through or in lieu of foreclosure. Non-performing assets were $35.3 million and $55.5 million as of June 30, 2018 and 2017, respectively.

(12) Non-performing loans include all accruing loans past due by more than 90 days, and all nonaccrual loans. Non-performing loans were $34.7 million and $55.2 million as of June 30, 2018 and 2017, respectively.

(13) Allowance for loan losses was $69.9 million and $82.7 million as of June 30, 2018 and 2017, respectively. See Note 5 to our audited consolidated financial statements and Note 5 to our unaudited interim consolidated financial statements for more details on our impairment models.

~~(14) Calculated based upon the average daily balance of outstanding loan principal balance net of deferred loan fees and costs, excluding the allowance for loan losses.~~

~~(15) Efficiency ratio is the result of noninterest expense divided by the sum of noninterest income and net interest income.~~

(16) This presentation contains adjusted financial information, including adjusted noninterest expenses, adjusted net income before income taxes, and the other adjusted items shown, determined by methods other than GAAP.

~~The adjusted numbers take out the~~certain costs incurred by the Company in ~~2018~~the periods presented related to ~~the Spin-off which commenced in the last quarter of 2017~~tax deductible restructuring and ~~continued past June 30, 2018, and which are not deductible for Federal and state income tax purposes.~~non-deductible spin-off costs. The Company believes these adjusted numbers are useful to understand the Company’s performance absent ~~this event. The following table reconciles~~ these ~~non-GAAP financial measurements as of~~transactions and ~~for periods presented:~~

events.


	Three Months Ended June 30, 2018		Six Months Ended June 30, 2018		Three Months Ended September 30,					Nine Months Ended September 30,
	(in thousands, except per share amounts and percentages)

(in thousands, except per share amounts and percentages)					2019			2018		2019			2018
Total noninterest expenses	$	52,638	$	108,283	$	52,737		$	52,042	$	157,587		$	160,325
Less Spin-off costs:
Less: restructuring costs (1):
Staff reduction costs					450			—		1,357			—
Rebranding costs					813			—		3,575			—
Total restructuring costs					1,263			—		4,932			—
Less spin-off costs:
Legal fees	2,000		3,000		—			186		—			3,186
Estimated compensation to non-qualified deferred compensation plan participants due to unexpected early distribution ⁽¹⁹⁾	1,200		1,200
Additional contribution to non-qualified deferred compensation plan on behalf of participants to partially mitigate tax effects of unexpected early distribution due to spin-off (2)					—			—		—			1,200
Accounting and consulting fees	—		1,294		—			90		—			1,384
Other expenses	—		544		—			—		—			544
Total Spin-off costs	3,200		6,038
Total spin-off costs					—			276		—			6,314
Adjusted noninterest expenses	$	49,438	$	102,245	$	51,474		$	51,766	$	152,655		$	154,011

Net income					$	11,931		$	11,551	$	37,859		$	31,403
Plus after-tax restructuring costs:
Restructuring costs before income tax effect					1,263			—		4,932			—
Income tax effect					(271		)	—		(1,060		)	—
Total after-tax restructuring costs					992			—		3,872			—
Plus after-tax total spin-off costs:
Total spin-off costs before income tax effect					—			276		—			6,314
Income tax effect (3)					—			143		—			84
Total after-tax spin-off costs					—			419		—			6,398
Adjusted net income					$	12,923		$	11,970	$	41,731		$	37,801

Basic earnings per share					$	0.28		$	0.27	$	0.89		$	0.74
Plus: after tax impact of restructuring costs					0.02			—		0.09			—
Plus: after tax impact of total spin-off costs					—			0.01		—			0.15
Total adjusted basic earnings per common share					$	0.30		$	0.28	$	0.98		$	0.89

Diluted earnings per share (4)					$	0.28		$	0.27	$	0.88		$	0.74
Plus: after tax impact of restructuring costs					0.02			—		0.09			—
Plus: after tax impact of total spin-off costs					—			0.01		—			0.15
Total adjusted diluted earnings per common share					$	0.30		$	0.28	$	0.97		$	0.89

Three Months Ended June 30, 2018 Six Months Ended June 30, 2018
(in thousands, except per share amounts and percentages)

Total net income before income tax $ 16,187
$ 27,120
Plus: Total Spin-off costs 3,200
6,038
Adjusted net income before income tax $ 19,387
$ 33,158

Total net income $ 10,423
$ 19,852
Plus after-tax total Spin-off costs:
Total Spin-off costs before income tax effect 3,200
6,038
Income tax effect ⁽²⁰⁾
519
(59 )
Total after-tax Spin-off costs 3,719
5,979
Adjusted net income $ 14,142
$ 25,831
Basic and diluted income per common share $ 0.08
$ 0.16
Plus: after tax impact of total Spin-off costs 0.03
0.05
Total adjusted basic and diluted income per common share $ 0.11
$ 0.21

Net income / Average total assets (ROA) ⁽⁵⁾
0.50%
0.47%
Plus: after tax impact of total Spin-off costs 0.17%
0.14%
Adjusted net income / Average total assets (ROA) ⁽⁵⁾
0.67%
0.61%

Net income / Average stockholders' equity (ROE) ⁽⁶⁾
5.57%
5.31%
Plus: after tax impact of total Spin-off costs 1.99%
1.60%
Adjusted net income / stockholders' equity (ROE) ⁽⁶⁾
7.56%
6.91%

Noninterest expense / Average total assets ⁽⁵⁾
2.50%
2.57%
Less: impact of total Spin-off costs (0.15 )% (0.14 )%
Adjusted Noninterest expense / Average total assets ⁽⁵⁾
2.35%
2.43%

Efficiency ratio ⁽¹⁵⁾
76.31%
79.88%
Less: impact of total Spin-off costs (4.63 )% (4.45 )%
Adjusted efficiency ratio ⁽¹⁸⁾
71.68%
75.43%

~~(17) Non-GAAP financial measures~~



	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share amounts and percentages)	2019			2018			2019			2018
Net income / Average total assets (ROA)	0.60		%	0.55		%	0.64		%	0.50		%
Plus: after tax impact of restructuring costs	0.05		%	—		%	0.06		%	—		%
Plus: after tax impact of total spin-off costs	—		%	0.02		%	—		%	0.10		%
Adjusted net income / Average total assets (Adjusted ROA)	0.65		%	0.57		%	0.70		%	0.60		%

Net income / Average stockholders' equity (ROE)	5.81		%	6.13		%	6.43		%	5.63		%
Plus: after tax impact of restructuring costs	0.49		%	—		%	0.66		%	—		%
Plus: after tax impact of total spin-off costs	—		%	0.22		%	—		%	1.15		%
Adjusted net income / Stockholders' equity (Adjusted ROE)	6.30		%	6.35		%	7.09		%	6.78		%

Efficiency ratio	79.38		%	75.88		%	77.64		%	78.54		%
Less: impact of restructuring costs	(1.90		)%	—		%	(2.43		)%	—		%
Less: impact of total spin-off costs	—		%	(0.40		)%	—		%	(3.09		)%
Adjusted efficiency ratio	77.48		%	75.48		%	75.21		%	75.45		%

Stockholders' equity	$	825,751		$	727,675		$	825,751		$	727,675
Less: goodwill and other intangibles	(20,933		)	(21,078		)	(20,933		)	(21,078		)
Tangible common stockholders' equity	$	804,818		$	706,597		$	804,818		$	706,597
Total assets	$	7,864,260		$	8,435,802		$	7,864,260		$	8,435,802
Less: goodwill and other intangibles	(20,933		)	(21,078		)	(20,933		)	(21,078		)
Tangible assets	$	7,843,327		$	8,414,724		$	7,843,327		$	8,414,724
Common shares outstanding	43,205			42,489			43,205			42,489
Tangible common equity ratio	10.26		%	8.40		%	10.26		%	8.40		%
Stockholders' book value per common share	$	19.11		$	17.13		$	19.11		$	17.13
Tangible stockholders' book value per common share	$	18.63		$	16.63		$	18.63		$	16.63

_________

(1) Expenses incurred for actions designed to implement the Company’s strategy as a new independent company. These actions include, but are not ~~included as~~limited to reductions in workforce, streamlining operational processes, rolling out the Amerant brand, implementation of new technology system applications, enhanced sales tools and ~~for the three~~training, expanded product offerings and ~~six month periods ended June 30, 2017 because no Spin-off costs were incurred for those periods.~~

~~(18) Adjusted efficiency ratio is the efficiency ratio less the effect of total Spin-off costs.~~improved customer analytics to identify opportunities.

~~(19)~~(2) The ~~Spin-off~~spin-off caused an unexpected early distribution for U.S. federal income tax purposes from our deferred compensation plan. This distribution iswas taxable to plan participants as ordinary income during 2018. We ~~are~~ partially ~~compensating~~compensated plan participants, in the aggregate amount of $1.2 million, for the higher tax expense they ~~will incur~~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 period ended ~~June~~September 30, 2018 iswas approximately $952,000. As a result of the early taxable distribution to plan participants, we ~~will expense~~expensed and ~~deduct~~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 ~~exceeds~~exceeded the amount of the tax gross-up paid to plan participants.

(3)

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 permanent difference between 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.

~~(20)~~(4) ~~Calculated based upon~~As of September 30, 2019, potential dilutive instruments included 738,138 unvested shares of restricted stock, including 736,839 shares of restricted stock issued in December 2018 in connection with the ~~estimated annual effective tax rate~~Company’s IPO and 1,299 additional shares of ~~22.10%, which excludes~~restricted stock issued in January 2019. As of September 30, 2019, these 738,138 unvested shares of restricted stock were included in the ~~tax~~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 that date, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at that date, such awards resulted in higher diluted weighted average shares outstanding than basic weighted average shares outstanding, and had a dilutive effect ~~of discrete items, and the amount that resulted from the difference between permanent Spin-off costs of $5.5 million and $5.8 million for~~in per share earnings in the three (not shown due to rounding) and ~~six month periods~~nine months ended ~~June~~September 30, ~~2018 that are non-deductible for Federal and state income tax purposes and total Spin-off costs recognized in the consolidated financial statements.~~2019. We had no outstanding dilutive instruments as of any period prior to December 31, 2018.

Results of Operations - Comparison of Results of Operations for the Three and ~~Six Months~~Nine Month Periods Ended ~~June~~September 30, ~~2018~~2019 and ~~2017~~2018

Net income

The table below sets forth certain results of operations data for the three and ~~six~~nine months ended ~~June~~September 30, ~~2018~~2019 and ~~2017:~~

2018:


	Three Months Ended June 30,						Change					Six Months Ended June 30,						Change					Three Months Ended September 30,						Change					Nine Months Ended September 30,						Change
	2018			2017			2018 vs 2017					2018			2017			2018 vs 2017
	(in thousands, except per share amounts and percentages)
(in thousands, except per share amounts and percentages)																							2019			2018			2019 vs 2018					2019			2018			2019 vs 2018
Net interest income	$	53,989		$	51,441		$	2,548		4.95	%	$	106,622		$	99,792		$	6,830		6.84	%	$	52,600		$	55,633		$	(3,033	)	(5.5	)%	$	161,826		$	162,255		$	(429	)	(0.3	)%
Provision for loan losses	150			3,646			(3,496		)	(95.89	)%	150			7,743			(7,593		)	(98.06	)%
Net interest income after provision for loan losses	53,839			47,795			6,044			12.65	%	106,472			92,049			14,423			15.67	%
(Reversal of) provision for loan losses																							(1,500		)	1,600			(3,100		)	(193.8	)%	(2,850		)	1,750			(4,600		)	(262.9	)%
Net interest income after (reversal of) provision for loan losses																							54,100			54,033			67			0.1	%	164,676			160,505			4,171			2.6	%
Noninterest income	14,986			17,759			(2,773		)	(15.61	)%	28,931			31,976			(3,045		)	(9.52	)%	13,836			12,950			886			6.8	%	41,139			41,881			(742		)	(1.8	)%
Noninterest expense	52,638			50,665			1,973			3.89	%	108,283			99,813			8,470			8.49	%	52,737			52,042			695			1.3	%	157,587			160,325			(2,738		)	(1.7	)%
Net income before income tax	16,187			14,889			1,298			8.72	%	27,120			24,212			2,908			12.01	%	15,199			14,941			258			1.7	%	48,228			42,061			6,167			14.7	%
Income tax	(5,764		)	(4,499		)	(1,265		)	28.12	%	(7,268		)	(7,315		)	47			(0.64	)%	(3,268		)	(3,390		)	122			(3.6	)%	(10,369		)	(10,658		)	289			(2.7	)%
Net income	$	10,423		$	10,390		$	33		0.32	%	$	19,852		$	16,897		$	2,955		17.49	%	$	11,931		$	11,551		$	380		3.3	%	$	37,859		$	31,403		$	6,456		20.6	%
Basic and diluted earnings per share⁽¹⁾	$	0.08		$	0.08		$	—				$	0.16		$	0.13		$	0.03
Basic earnings per common share																							$	0.28		$	0.27		$	0.01		3.7	%	$	0.89		$	0.74		$	0.15		20.3	%
Diluted earnings per common share(1)																							$	0.28		$	0.27		$	0.01		3.7	%	$	0.88		$	0.74		$	0.14		18.9	%

__________________

(1)

At ~~June~~September 30, ~~2018 and 2017, we~~2019, potential dilutive instruments consist of 738,138 unvested shares of restricted stock. We had no outstanding dilutive instruments ~~issued. Consequently,~~at September 30, 2018. See Note 15 to our unaudited interim financial statements in this Form 10-Q for details on the ~~basic and diluted~~dilutive effects of the issuance of restricted stock on earnings per share ~~are equal in each of~~for the ~~periods presented.~~nine months ended September 30, 2019.

Three Months Ended ~~June~~September 30, ~~2018~~2019 and ~~2017~~2018

Net income of ~~$10.4~~$11.9 million, ~~and $0.08 basic and diluted earnings~~or $0.28 per share, in the three months ended ~~June~~September 30, ~~2018 remained relatively unchanged when~~2019 represents an increase of $0.4 million, or 3.3% compared to the same quarter of ~~2017.~~

~~During~~2018. Higher net income during the three months ended ~~June~~September 30, 2019 was mainly the result of: (i) the $1.5 million reversal of provision for loan losses in the third quarter of 2019 and (ii) higher noninterest income. These results were partially offset by: (i) higher noninterest expenses driven by rebranding expenses and staff reduction costs related to our restructuring activities and an additional compensation expense of $1.5 million in connection with the amortization of restricted stock awards granted in December 2018 and January 2019 and (ii) lower net interest income.

Net interest income declined from $55.6 million in three months ended September 30, 2018 ~~positive results~~to $52.6 million in the three months ended September 30, 2019. The decrease of $3.0 million, or 5.5%, was primarily due to higher time deposit costs and the replacement of the declining international deposits with higher cost domestic deposits. We expect that the costs of new deposits and income on loans and new variable rate investments may decrease with the expected decline in market interest rates. Changes in deposit rates may also lag the change in interest rates on our loans and investments.

Noninterest income increased $0.9 million in the three months ended September 30, 2019 compared to the same period one year ago, mainly due to the $0.9 million gain on sale of municipal bonds and floating-rate corporate securities in the third quarter of 2019 and higher income from derivative contracts sold to loan customers and fees from Treasury Management services. This was partially offset by lower income from brokerage, advisory and fiduciary activities and lower fees from administrative and transition services to our Former Parent.

Noninterest expenses increased $0.7 million, or 1.3%, in the three months ended September 30, 2019 compared to the same period one year ago, mainly as a result of higher other operating expenses driven by ~~improved credit quality~~rebranding and staff reduction expenses and higher ~~yields on interest-earning assets, were~~telecommunication and data processing expenses. This was partially offset by ~~provisions for~~lower FDIC insurance expenses, lower occupancy and equipment expenses as well as a decrease in the costs associated with salaries and employee benefits. The decrease in costs associated with salaries and employee benefits were partially offset by an additional compensation expense of $1.5 million in connection with restricted stock awards granted in December 2018 and January 2019 and higher staff reduction costs. In the ~~Spin-off totaling $3.2~~three months ended September 30, 2019 and 2018, noninterest expense included $1.3 million in restructuring costs, consisting primarily of rebranding and ~~lower noninterest income. Without Spin-off expenses,~~staff reduction costs, and $0.3 million in spin-off costs, respectively.

Adjusted net income for the quarter ended ~~June~~September 30, ~~2018 would have been $14.1~~2019 was $12.9 million, ~~or $0.11 per basic and diluted share, 36.11%~~8.0% higher than the same quarter one year ago. Adjusted net income excludes restructuring costs of $1.3 million in ~~2017 when~~the three months ended September 30, 2019, and spin-off costs of $0.3 million in the same period one year ago. See “Non-GAAP Financial Measures Reconciliation” for a reconciliation of these non-GAAP financial measures to their U.S. GAAP counterparts.

Nine Months Ended September 30, 2019 and 2018

Net income of $37.9 million, or 0.88 per diluted share, in the nine months ended September 30, 2019 represents an increase of $6.5 million, or 20.6%, compared to the same period of 2018. Higher net income during the nine months ended September 30, 2019 was mainly the result of: (i) a $2.9 million reversal of provision for loan losses in the first nine months of 2019 and (ii) no ~~such~~spin-off costs ~~had been incurred.~~during the first nine months of 2019. These results were partially offset by: (i) lower noninterest income mainly due to a decrease in brokerage advisory and fiduciary fees; (ii) an additional compensation expense of $4.4 million in connection with restricted stock awards granted in December 2018 and January 2019; (iii) staff reduction costs related to our restructuring activities, and (iv) lower net interest income.

Net interest income ~~improved~~declined from ~~$51.4~~$162.3 million in the ~~second quarter of 2017~~nine months ended September 30, 2018, to ~~$54.0~~$161.8 million in the ~~second~~nine months ended September 30, 2019, a decrease of $0.4 million, or 0.3%. This change was due primarily to higher deposit costs, mostly related to time deposits, and the shift of deposits from international to domestic.

Noninterest income decreased $0.7 million, or 1.8%, in the nine months ended September 30, 2019 compared to the same period one year ago, primarily due to lower income from brokerage, advisory and fiduciary activities, lower fees from administrative and transition services to our Former Parent (all but one of the services was terminated by May 31, 2019), lower deposit and service fees and lower gain on early extinguishment of FHLB advances. This was partially offset by a $1.9 million aggregate gain on municipal bonds and floating rate corporate securities sold in the first nine months of 2019, higher income from derivative contracts sold to loan customers and fees from Treasury Management services.

Noninterest expenses decreased $2.7 million, or 1.7%, in the nine months ended September 30, 2019 compared to the same period one year ago. This was mainly the result of lower professional and other services fees as well as lower costs associated with salaries and employee benefits primarily due to no spin-off costs in the first nine months of 2019 and lower FDIC assessments and insurance expenses. These results were partially offset by: (i) higher other operating expenses mainly due to rebranding, (ii) an additional compensation expense of $4.4 million in connection with restricted stock awards granted in December 2018 and January 2019, (iii) staff reduction costs related to our restructuring activities and (iv) higher data processing and telecommunication expenses. In the nine months ended September 30, 2019 and 2018, noninterest expense included $4.9 million in restructuring costs, consisting primarily of rebranding and staff reduction costs, and $6.3 million in spin-off costs, respectively.

Net interest income

Three Months Ended September 30, 2019 and 2018

In the third quarter of ~~2018,~~2019, we earned $52.6 million of net interest income, a decline of $3.0 million, or 5.5%, from $55.6 million in the same period of 2018. The decrease in net interest income was driven by: (i) an increase of ~~$2.5 million or 4.95%, primarily~~21 basis points in average rates paid on interest bearing liabilities due to higher cost of deposits driven by replacing some of the run-off in international deposits, which are less expensive, with domestic deposits, coupled with the higher cost of time deposits, and (ii) a 6.3% decrease in the average ~~yields~~balance of interest-earning assets driven by a reduction in the loan portfolio and investment securities balances. This was partially offset by a 10 basis points improvement in the average yield on interest-earning assets and ~~changes~~an 8.0% decrease in average interest-bearing liabilities. Net interest margin decreased 3 basis points from 2.83% in the ~~mix~~third quarter of ~~those assets.~~ 2018 to 2.80% in the same period of 2019. The decrease in the net interest margin was mainly driven by higher time deposits costs and the replacement of international deposits with higher cost domestic deposits.

Our net interest income and NIM are expected to remain pressured due to the continued run-off of our low cost international deposits and further declines in interest rates which may drive an increase in loan prepayments and the prepayment speeds of investment securities. Against this backdrop, in the third quarter of 2019, the Company took advantage of the yield curve inversion to accelerate the rate decrease on its variable-rate junior subordinated debentures through interest rate swaps, and by taking fixed-rate longer-term advances from the FHLB with callable features. Additionally, during this quarter, we reached the inflexion point for CD costs as maturing CDs are generally repricing at lower rates than the rates they previously carried. The costs of new deposits and loan income are likely to trend down with market rates in the coming months.

On July 31, 2019 and September 7, 2019, the Company redeemed all $10.0 million of its outstanding 10.18% trust preferred securities issued by its Commercebank Capital Trust III subsidiary (“Capital Trust III”), and all $15.0 million of its outstanding 10.60% trust preferred securities issued by its Commercebank Statutory Trust II subsidiary (“Statutory Trust II”). These redemptions are expected to reduce the Company’s annual pretax interest expense by approximately $2.6 million. See “—Capital Resources and Liquidity Management” for detailed information. Additionally, on August 8, 2019 the Company entered into five interest rate swap contracts with notional amounts totaling $64.2 million, that were designed as cash flow hedges, to manage the exposure of floating interest payments on all of the Company’s variable-rate junior subordinated debentures. These cash flow hedges took advantage of the inverted yield curve to reduce the Company’s interest expense. The Company will continue to explore the use of hedging activities to manage its interest rate risk.

Interest Income. Total interest income was $78.2 million in the third quarter of 2019, compared to $79.6 million for the same period of 2018. The $1.4 million, or 1.8%, decline in total interest income was primarily due to lower average balances of interest-earning assets driven by the strategic run-off of foreign financial institution loans and non-relationship shared national credits and a lower balance of investment securities. This was partially offset by higher rates on loans in the third quarter of 2019 with respect to the same period of 2018. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed information. ~~As a result of improved credit trends in certain loan portfolio segments, we recorded a provision for loan losses of only $0.2 million~~

Interest income on loans in the ~~second~~third quarter of ~~2018,~~2019 was $66.1 million compared to ~~a provision to~~$66.8 million for the ~~allowance~~comparable period of ~~$3.6 million in the same quarter of 2017.~~

~~These positive results were partially offset by an increase in noninterest expense of $2.0~~2018. The $0.7 million, or ~~3.89%~~1.0%, ~~primarily attributable to the Spin-off related expenses and higher salary and employee benefit costs and telecommunications and data processing expenses. In addition, there~~decrease was ~~a decline in noninterest income of $2.8 million, or 15.61%, mainly due to lower income from brokerage, advisory and fiduciary activities and other noninterest income.~~

~~Six Months Ended June 30, 2018 and 2017~~

Net income of $19.9 million and $0.16 basic and diluted earnings per share in the six months ended June 30, 2018 represents an improvement of $3.0 million, or 17.49% from net income of $16.9 million and $0.13 basic and diluted earnings per share reported in the same period of 2017.

This increase mainly resulted from improved credit quality and higher yields on interest-earning assets. Provisions for the costs associated with the Spin-off totaling $6.0 million and lower noninterest income in the six months ended June 30, 2018, negatively impacted the results. Without Spin-off expenses, net income for the six months ended June 30, 2018 would have been $25.8 million, or $0.21 per basic and diluted share, or 61.54% higher than the same period in 2017.

~~Net interest income improved from $99.8 million in the six months ended June 30, 2017 to $106.6 million in the six months ended June 30, 2018, an increase of $6.8 million or 6.84%,~~ primarily due to ~~higher average yields on interest-earning assets and changes in the mix of those assets. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed information. As~~ a result of improved credit trends in certain loan portfolio segments, we added provisions to the allowance for loan losses of only $0.2 million in the six months ended June 30, 2018, compared to a provision to the allowance of $7.7 million in the same period of 2017.

These positive results were partially offset by an increase in noninterest expense of $8.5 million, or 8.49%, primarily attributable to the Spin-off related expenses discussed above, higher salary and employee benefit costs and telecommunications and data processing expenses. In addition, there was a decline in noninterest income of $3.0 million, or 9.52%, mainly due to lower income from brokerage, advisory and fiduciary activities and other noninterest income.

~~Net interest income~~

~~Three Months Ended June 30, 2018 and 2017~~

In the second quarter of 2018, we earned $54.0 million of net interest income, an increase of $2.5 million, or 4.95%, from $51.4 million of net interest income earned in the same period of 2017. The increase in net interest income was due primarily to a 50 basis points improvement in the average yield on interest-earning assets, partially offset by a 0.40%6.0% decrease in the average balance of ~~interest-earning assets. In addition, average interest-bearing liabilities showed~~loans in the third quarter of 2019 over the same period in 2018, mainly as a ~~3.44% increase accompanied~~result of the strategic run-off of foreign financial institution loans and non-relationship shared national credit loans, which have not yet been fully replaced with domestic relationship C&I and CRE loans. This was partially offset by a 3713 basis point increase in average ~~rates paid. Net interest margin improved 15 basis points from 2.62% in~~yields. In the ~~second~~third quarter of ~~2017 to 2.77% in~~2019, the ~~same period of 2018.~~

~~Interest Income.~~ ~~Total interest income was $75.9 million in the second quarter of 2018 compared to $66.7 million for the same period of 2017. The $9.2 million, or 13.87%,~~ increase in ~~total interest income was primarily due to higher average balances in loans and securities held to maturity, as well as higher~~ average yields ~~earned~~reflects the Company’s continued focus on all interest-earning assets. These improvements were partially offset by a decrease in the average balance of available for sale securities during the second quarter of 2018 with respect to the same period of 2017, in part due to the use of these funds to produce higher yieldinghigher-yielding domestic relationship-based loans. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed information.

Interest income on ~~loans~~the available for sale securities portfolio decreased $0.9 million, or 8.0%, to $9.8 million in the ~~second~~third quarter of ~~2018 was $62.4 million~~2019 compared to ~~$53.8~~$10.7 million in the same period of 2018. This was due to a decline of 8.2% in the average volume of securities available for sale in the third quarter of 2019 with respect to the same quarter in

2018. The decline of 8.2% in the average volume of securities available for sale was mainly driven by sales, prepayments and maturities totaling approximately $116.4 million in the third quarter of 2019, including the sale of approximately $23.8 million of municipal bonds and $11.8 million of floating-rate corporate securities.

Interest Expense. Interest expense on interest-bearing liabilities increased $1.6 million, or 6.7%, to $25.6 million in the third quarter of 2019 compared to $24.0 million in the same period of 2018, primarily due to higher rates paid on total deposits, partially offset by lower average balances of total deposits, advances from the FHLB and junior subordinated debentures.

Interest expense on deposits increased to $17.6 million in the third quarter of 2019 compared to $15.2 million for the ~~comparable~~same period of ~~2017.~~2018. The ~~$8.7~~$2.4 million, or ~~16.10%~~15.6%, increase was primarily due to a 5428 basis point increase in the average rates paid on deposits, driven by replacing some of the run-off in international deposits, which are less expensive, with domestic deposits, coupled with the higher cost of time deposits, which, up to the third quarter of 2019, were repricing at higher levels than previously carried. Average total time deposits decreased by $115.0 million, or 4.7%, mainly as a result our strategic decision to decrease the promotional interest rates we paid. We continue to focus our efforts to retain customers with higher probabilities of renewal at lower-than-market rates. Also, we have implemented a strategy for renewing customer’s certificates of deposits (“CDs”) with lower probability of renewals through our promotions. As a result, we were able to renew approximately $290.6 million in CDs in the first nine months of 2019 at rates that were lower than the highest rates paid in our markets. Average total checking and savings account balances for the second quarter decreased year-on-year by $366.9 million, or 12.2%, primarily due to a decline of $429.2 million, or 17.0%, in the average balance of international accounts, partially offset by higher average domestic customer deposits. The decline in average international accounts includes $76.4 million, or 19.7%, in commercial accounts and $352.8 million, or 16.6%, in personal accounts. The overall decline in average commercial and personal accounts is primarily due to the continued outflow of funds of our Venezuelan customers as living conditions in their country remain challenging, and the Venezuelan economy is further dollarized.

Interest expense on FHLB advances and other borrowings decreased by $0.5 million, or 6.9%, in the third quarter of 2019 with respect to the same period of 2018. This was the result of a 4.3% decline in the average balance outstanding and a decrease of 10 basis points in the average rate paid on of these borrowings.

Interest expense on junior subordinated debentures decreased by $0.3 million, or 15.0%, in the three months ended September 30, 2019 compared to the same period last year, mainly driven by a decline of $11.2 million in the average balance outstanding in connection with the redemption of $25.9 million of junior subordinated debentures in the third quarter of 2019. See “—Capital Resources and Liquidity Management” for detailed information.

Nine Months Ended September 30, 2019 and 2018

In the nine months ended September 30, 2019, we earned $161.8 million of net interest income, a decline of $0.4 million, or 0.3%, from $162.3 million of net interest income earned in the same period of 2018. The slight decline in net interest income was due to an increase of 32 basis points in the average rates paid on interest bearing liabilities, mainly due to a higher cost of time deposits and the shift of deposits from international to domestic, and a decrease of 5.5% in the average balance of interest-earning assets. This was partially offset by a 40 basis point improvement in the average yield on interest-earning assets due to an increase in average rates and the strategic shift of the loan mix towards higher-yielding domestic relationship-based loans. Also, there was a 6.6% decrease in average interest-bearing liabilities. Net interest margin improved 15 basis points from 2.74% in the first nine months of 2018 to 2.89% in the same period of 2019, driven by higher average rates on assets and the strategic shift of the loan mix towards higher-yielding domestic relationship-based loans.

Interest Income. Total interest income was $237.7 million in the first nine months of 2019 compared to $227.5 million for the same period of 2018. The $10.3 million, or 4.5%, increase in total interest income was primarily due to higher average yields earned on interest-earning assets due to an increase in market rates since the comparable period in 2018 and the strategic shift of the loan mix towards higher-yielding domestic relationship-based loans. These improvements were partially offset by a ~~1.92% increase~~decrease in the average balance of loans inand available for sale securities during the ~~second quarter~~first nine months of ~~2018 over~~2019 with respect to the same period ~~in 2017, mainly the result~~ of ~~growth in the real estate loan portfolio.~~ 2018. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed information.

Interest income on loans in the nine months ended September 30, 2019 was $199.6 million compared to $188.9 million for the comparable period of 2018. The $10.7 million, or 5.7%, increase was primarily due to a 45 basis point increase in average yields, due to the increase in market rates and the aforementioned change in the loan portfolio mix, partially offset by a 4.6% decrease in the average balance of loans in the first nine months of 2019 over the same period in 2018. In the nine months ended September 30, 2019, the increase in average yields reflects the Company’s continued focus on higher-yielding domestic relationship-based loans. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed information.

Interest income on the available for sale securities portfolio decreased ~~$507 thousand,~~$1.2 million, or ~~4.31%~~3.7%, to ~~$11.3~~$31.0 million in the ~~second quarter of 2018~~nine months ended September 30, 2019 compared to ~~$11.8~~$32.2 million in the ~~comparable~~same period of ~~2017.~~2018. This ~~decrease is primarily attributable~~was due to a decline of ~~14.09%~~8.0% in the average volume of securities available for sale partially offset by an increase of 12 basis points in the ~~proceeds~~average yields in the first nine months of ~~which were partially reallocated~~2019 with respect to ~~fund loan production. Higher yields~~the same period in 2018. The decline of 8.0% in the average volume of securities available for sale ~~which increased an average of 29 basis points~~was mainly driven by sales, prepayments and maturities totaling approximately $430.1 million in the ~~second quarter~~first nine months of ~~2018 with respect to~~2019, including the ~~same quarter in 2017, partially compensated the effect~~sale of ~~the lower amount~~$115 million of ~~securities held.~~municipal bonds and $11.8 million of floating-rate corporate securities.

Interest Expense. Interest expense on interest-bearing liabilities increased ~~$6.7~~$10.7 million, or ~~43.99%~~16.4%, to ~~$21.9~~$75.9 million in the ~~second quarter~~first nine months of ~~2018~~2019 compared to ~~$15.2~~$65.2 million in the ~~comparable~~same period of ~~2017,~~2018, primarily due to higher ~~average~~yields on total deposits, mainly time deposits, and the shift of deposits from international to domestic, partially offset by lower average balances of total checking and saving accounts and advances from the ~~FHLB balances, and higher average interest rates on all main funding sources.~~FHLB.

Interest expense on deposits increased to ~~$13.4~~$51.2 million in the ~~second quarter of 2018~~nine months ended September 30, 2019 compared to ~~$8.5~~$40.0 million for the ~~comparable~~same period of ~~2017.~~2018. The ~~$4.9~~$11.2 million, or ~~58.19%~~28.1%, increase was primarily due to a 37 basis ~~points~~point increase in the average ~~rate~~rates paid on ~~total deposits. This resulted primarily from a 21.03% increase in average time deposit balance, and the~~deposits, partially offset by lower average total checking and saving account balances, which decreased ~~11.89%~~11.4%. ~~The increase of $412.1~~Average time deposits decreased $9.3 million, or ~~21.03%~~0.4%, mainly as a result our strategic decision to decrease the promotional interest rates we paid which led to a decline in ~~average total~~the rate of CD renewals. This was partially offset by increases due to our 2018 promotions, through which we sought longer-duration deposits due to our expectations, at that time, ~~deposit balances resulted from our promotions seeking longer-duration time deposits, in anticipation~~ of higher interest rates in the ~~future.~~future and changing customer preferences as interest rates increased. The decrease of ~~$414.8~~$351.6 million, or ~~11.89%~~11.4%, in average total checking and saving account balances is primarily the result of a decline of ~~$584.4~~$445.0 million, or ~~18.18%~~16.9%, in the average balance of international ~~accounts. This~~accounts, partially offset by higher average domestic customer deposits. The decline in average international accounts includes ~~$281.0~~$82.3 million, or ~~40.98%~~20.2%, in commercial accounts and ~~$303.3~~$362.7 million, or ~~12.00%~~16.3%, in personal accounts. The overall decline in ~~the~~average commercial ~~accounts average resulted primarily from the closure of Venezuelan customer accounts exceeding the Company’s risk thresholds. The decline in the~~and personal accounts ~~average~~ is primarily due to the continued outflow of funds of our Venezuelan ~~customers’ inability to replenish~~customers as living conditions in their country remain challenging, and the ~~dollar savings they consume.~~Venezuelan economy is further dollarized.

Interest expense on FHLB advances and other borrowings ~~increased $2.2~~declined $0.5 million, or ~~49.85%~~2.43%, in the ~~second quarter of 2018~~nine months ended September 30, 2019 with respect to the same period of ~~2017.~~2018. This iswas the result of ~~an increase of 29.93%~~a 6.7% decline in the average balance outstanding, ~~along with~~partially offset by an increase of 30 basis points in the average rate paid on of these borrowings. Advances from the FHLB are used to actively manage the Company’s funding profile, and bear fixed interest rates from 1.05% to 3.86%, and variable interest rates based on 3-month LIBOR which increased to 2.34% at June 30, 2018 from 1.30% at June 30, 2017. At June 30, 2018, $978.0 million (77.74%) of FHLB advances were fixed rate and $280.0 million (22.26%) were variable rate. The Company has designated certain interest rate swaps as cash flow hedges to manage this variable interest rate exposure.

~~Six Months Ended June 30, 2018 and 2017~~

In the six months ended June 30, 2018, we earned $106.6 million of net interest income, an increase of $6.8 million, or 6.84%, from $99.8 million of net interest income earned in the same period of 2017. The increase in net interest income was due primarily to a 50 basis point improvement in the average yield on interest-earning assets, partially offset by a 0.90% decrease in the average balance of interest-earning assets. In addition, average interest-bearing liabilities showed a 2.61% increase accompanied by a 32 basis point increase in average rates paid. Net interest margin improved 20 basis points from 2.52% in the six months ended June 30, 2017 to 2.72% in the same period of 2018.

~~Interest Income.~~ Total interest income was $147.8 million in the six months ended June 30, 2018 compared to $129.7 million for the same period of 2017. The $18.2 million, or 14.00%, increase in total interest income was primarily due to higher average balances in loans and securities held to maturity, as well as higher average yields earned on all interest-earning assets. These improvements were partially offset by a decrease in the average balance of available for sale securities during the six months ended June 30, 2018 with respect to the same period of 2017, in part due to the partial migration of funds from securities into loans.

Interest income on loans in the six months ended June 30, 2018 was $122.1 million compared to $103.9 million for the comparable period of 2017. The $18.2 million, or 17.57%, increase was primarily due to a 53 basis points increase in average yields and a 2.67% increase in the average balance of loans in the six months ended June 30, 2018 over the same period in 2017, mainly the result of growth in the real estate loan portfolio.

Interest income on the available for sale securities portfolio decreased $2.0 million, or 8.61%, to $21.5 million in the six months ended June 30, 2018 compared to $23.6 million in the comparable period of 2017. This decrease was primarily attributable to a decline of 16.12% in the average volume of securities available for sale, the proceeds of which were partially reallocated to funding higher yielding loan production. Higher yields on securities available for sale, which increased an average of 22 basis points in the six months ended June 30, 2018 compared to the same period in 2017, offset the lower amount of securities held.

~~Interest Expense.~~ Interest expense on interest-bearing liabilities increased $11.3 million, or 37.89%, to $41.2 million in the six months ended June 30, 2018 compared to $29.9 million in the comparable period of 2017, primarily due to higher average time deposits and FHLB advances, and higher average interest rates on all main funding sources, partially offset by lower average total deposits.

Interest expense on deposits increased to $24.8 million in the six months ended June 30, 2018 compared to $16.4 million for the comparable period of 2017. The $8.3 million, or 50.82%, increase was primarily due to a 31 basis point increase in the average rate paid on total deposits, reflecting a 19.82% increase in average time deposit balances, and lower average total checking and saving account balances which decreased 12.20%. The increase of $384.3 million, or 19.82%, in average total time deposit balances resulted primarily from our promotions seeking longer-duration time deposits, in anticipation of higher interest rates in the future. The decrease of $431.6 million, or 12.20%, in average total checking and saving account balances is primarily the result of a decline of $537.6 million, or 16.67%, in the average balance of international accounts. This decline includes $280.2 million, or 40.09%, in commercial accounts and $257.4 million, 10.19%, in personal accounts. The decline in the commercial accounts average resulted primarily from the closure of Venezuelan customer accounts exceeding the Company’s risk thresholds. The decline in the personal accounts average is primarily due to our Venezuelan customers’ inability to replenish the dollar savings they consume.

Interest expense on FHLB advances and other borrowings increased $3.9 million, or 45.46%, in the six months ended June 30, 2018 with respect to the same period of 2017. This is the result of an increase of 29.01% in the average balance outstanding , along with an increase of 2410 basis points in the average rate paid on these borrowings. Advances from the FHLB are used to actively manage the Company’s funding profile ~~and~~by match funding CRE loans. FHLB advances bear fixed interest rates from ~~1.05%~~1.14% to ~~3.86%~~3.23%, and variable interest rates based on 3-month LIBOR which ~~increased~~decreased to ~~2.34%~~2.09% at ~~June~~September 30, ~~2018~~2019 from ~~1.30%~~2.40% at ~~June~~September 30, ~~2017.~~2018. At ~~June~~September 30, ~~2018, $978.0~~2019, $890.0 million ~~(77.74%~~(76.1%) of FHLB advances were fixed rate and $280.0 million ~~(22.26%~~(23.9%) were variable rate. ~~The Company has designated certain interest rate swaps as cash flow hedges to manage this variable interest rate exposure.~~

Average Balance Sheet, Interest and Yield/Rate Analysis

The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the three and ~~six~~nine months ended ~~June~~September 30, ~~2018~~2019 and ~~2017.~~2018. The average balances for loans include both performing and ~~nonperforming~~non-performing balances. Interest income on loans includes the effects of discount accretion and the amortization of net deferred loan origination costs accounted for as yield adjustments. Average balances represent the daily average balances for the periods presented.


	Three Months Ended June 30,														Three Months Ended September 30,
	2018							2017							2019							2018
	Average Balances			Income/ Expense		Yield/ Rates		Average Balances			Income/ Expense		Yield/ Rates
	(in thousands, except percentages)
(in thousands, except percentages)															Average Balances			Income/ Expense		Yield/ Rates		Average Balances			Income/ Expense		Yield/ Rates
Interest-earning assets:
Loan portfolio, net ⁽¹⁾	$	5,890,459		$	62,448	4.31	%	$	5,779,708		$	53,790	3.77	%	$	5,656,469		$	66,118	4.64	%	$	6,018,655		$	66,776	4.51	%
Securities available for sale ⁽²⁾	1,662,799			11,257		2.74	%	1,935,557			11,764		2.45	%	1,496,740			9,818		2.60	%	1,631,215			10,668		2.64	%
Securities held to maturity ⁽³⁾	88,811			346		1.57	%	2,720			9		1.33	%	79,820			436		2.17	%	87,535			347		1.60	%
Federal Reserve Bank and FHLB stock	70,243			1,106		6.45	%	58,361			742		5.18	%	68,825			1,071		6.17	%	71,983			1,168		6.65	%
Deposits with banks	175,434			759		1.74	%	143,044			364		1.02	%	142,583			761		2.12	%	137,034			666		1.96	%
Total interest-earning assets	7,887,746			75,916		3.91	%	7,919,390			66,669		3.41	%	7,444,437			78,204		4.17	%	7,946,422			79,625		4.07	%
Total non-interest-earning assets less allowance for loan losses	531,294							500,212							472,967							515,712
Total assets	$	8,419,040						$	8,419,602						$	7,917,404						$	8,462,134
															��
Interest-bearing liabilities:
Checking and saving accounts -
Interest bearing DDA	$	1,417,230		$	113	0.03	%	$	1,657,285		$	84	0.02	%	$	1,141,788		$	191	0.07	%	$	1,376,015		$	211	0.06	%
Money market	1,225,452			3,086		1.01	%	1,352,299			2,168		0.64	%	1,152,700			4,109		1.41	%	1,225,380			3,460		1.13	%
Savings	431,686			18		0.02	%	479,613			19		0.02	%	354,554			16		0.02	%	414,533			17		0.02	%
Total checking and saving accounts	3,074,368			3,217		0.42	%	3,489,197			2,271		0.26	%	2,649,042			4,316		0.65	%	3,015,928			3,688		0.49	%
Time deposits	2,371,147			10,172		1.73	%	1,959,066			6,193		1.27	%	2,325,695			13,284		2.27	%	2,440,678			11,531		1.90	%
Total deposits	5,445,515			13,389		0.99	%	5,448,263			8,464		0.62	%	4,974,737			17,600		1.40	%	5,456,606			15,219		1.12	%
Securities sold under agreements to repurchase	423			2		1.90	%	43,845			564		5.25	%	378			3		3.15	%	—			—		—	%
Advances from the FHLB and other borrowings⁽⁴⁾	1,173,000			6,511		2.24	%	902,776			4,345		1.94	%	1,148,739			6,253		2.16	%	1,200,739			6,716		2.26	%
Junior subordinated debentures	118,110			2,025		7.04	%	118,110			1,855		6.43	%	106,899			1,748		6.49	%	118,110			2,057		7.15	%
Total interest-bearing liabilities	6,737,048			21,927		1.31	%	6,512,994			15,228		0.94	%	6,230,753			25,604		1.63	%	6,775,455			23,992		1.42	%
Total non-interest-bearing liabilities	933,968							1,168,207							872,488							933,045
Total liabilities	7,671,016							7,681,201							7,103,241							7,708,500
Stockholders’ equity	748,024							738,401							814,163							753,634
Total liabilities and stockholders' equity	$	8,419,040						$	8,419,602						$	7,917,404						$	8,462,134
Excess of average interest-earning assets over average interest-bearing liabilities	$	1,150,698						$	1,406,396						$	1,213,684						$	1,170,967
Net interest income				$	53,989						$	51,441						$	52,600						$	55,633
Net interest rate spread						2.60	%						2.47	%						2.54	%						2.65	%
Net interest margin ⁽⁵⁾						2.77	%						2.62	%						2.80	%						2.83	%
Ratio of average interest-earning assets to average interest-bearing liabilities	117.08		%					121.59		%					119.48		%					117.28		%

Six Months Ended June 30,
2018 2017
Average
Balances Income/
Expense Yield/
Rates Average
Balances Income/
Expense Yield/
Rates
(in thousands, except percentages)
Interest-earning assets:
Loan portfolio, net ⁽¹⁾
$ 5,902,893
$ 122,118
4.18 % $ 5,749,193
$ 103,870
3.65 %
Securities available for sale ⁽²⁾
1,669,607
21,549
2.60 % 1,990,378
23,580
2.38 %
Securities held to maturity ⁽³⁾
89,165
856
1.93 % 1,367
9
1.32 %
Federal Reserve Bank and FHLB stock 70,304
2,045
5.90 % 58,814
1,492
5.14 %
Deposits with banks 157,391
1,279
1.63 % 161,417
737
0.92 %
Total interest-earning assets 7,889,360
147,847
3.78 % 7,961,169
129,688
3.28 %
Total non-interest-earning assets less allowance for loan losses 524,074
496,791

Total assets $ 8,413,434
$ 8,457,960

Interest-bearing liabilities:
  Checking and saving accounts -
   Interest bearing DDA $ 1,446,823
$ 202
0.03 % $ 1,679,350
$ 184
0.02 %
   Money market 1,219,748
5,652
0.93 % 1,374,015
4,344
0.63 %
   Savings 438,668
36
0.02 % 483,502
37
0.02 %
Total checking and saving accounts 3,105,239
5,890
0.38 % 3,536,867
4,565
0.26 %
Time deposits 2,323,746
18,872
1.63 % 1,939,414
11,853
1.23 %
Total deposits 5,428,985
24,762
0.91 % 5,476,281
16,418
0.60 %
Securities sold under agreements to repurchase 213
2
1.89 % 46,906
1,205
5.20 %
Advances from the FHLB and other borrowings⁽⁴⁾
1,179,934
12,501
2.13 % 914,572
8,594
1.89 %
Junior subordinated debentures 118,110
3,960
6.82 % 118,110
3,679
6.33 %
Total interest-bearing liabilities 6,727,242
41,225
1.23 % 6,555,869
29,896
0.91 %
Total non-interest-bearing liabilities 938,287
1,176,969

Total liabilities 7,665,529
7,732,838

Stockholders' equity 747,905
725,122

Total liabilities and stockholders' equity $ 8,413,434
$ 8,457,960

Excess of average interest-earning assets over average interest-bearing liabilities $ 1,162,118
$ 1,405,300

Net interest income $ 106,622
$ 99,792

Net interest rate spread 2.55 % 2.37 %
Net interest margin⁽⁵⁾
2.72 % 2.52 %
Ratio of average interest-earning assets to average interest-bearing liabilities 117.27 % 121.44 %

~~__________________~~



	Nine Months Ended September 30,
	2019							2018
(in thousands, except percentages)	Average Balances			Income/ Expense		Yield/ Rates		Average Balances			Income/ Expense		Yield/ Rates
Interest-earning assets:
Loan portfolio, net (1)	$	5,668,493		$	199,641	4.71	%	$	5,941,904		$	188,894	4.26	%
Securities available for sale (2)	1,524,733			31,023		2.72	%	1,656,669			32,216		2.60	%
Securities held to maturity (3)	82,370			1,527		2.48	%	88,615			1,204		1.82	%
Federal Reserve Bank and FHLB stock	67,387			3,242		6.43	%	70,870			3,213		6.09	%
Deposits with banks	132,617			2,304		2.32	%	150,531			1,945		1.73	%
Total interest-earning assets	7,475,600			237,737		4.25	%	7,908,589			227,472		3.85	%
Total non-interest-earning assets less allowance for loan losses	473,146							515,022
Total assets	$	7,948,746						$	8,423,611

Interest-bearing liabilities:
Checking and saving accounts -
Interest bearing DDA	$	1,203,449		$	766	0.09	%	$	1,423,390		$	413	0.04	%
Money market	1,151,444			11,823		1.37	%	1,221,646			9,111		1.00	%
Savings	369,067			49		0.02	%	430,535			54		0.02	%
Total checking and saving accounts	2,723,960			12,638		0.62	%	3,075,571			9,578		0.42	%
Time deposits	2,353,866			38,577		2.19	%	2,363,152			30,403		1.72	%
Total deposits	5,077,826			51,215		1.35	%	5,438,723			39,981		0.98	%
Securities sold under agreements to repurchase	127			3		3.16	%	141			2		1.90	%
Advances from the FHLB and other borrowings (4)	1,107,531			18,750		2.26	%	1,186,945			19,217		2.16	%
Junior subordinated debentures	114,332			5,943		6.95	%	118,110			6,017		6.85	%
Total interest-bearing liabilities	6,299,816			75,911		1.61	%	6,743,919			65,217		1.29	%
Total non-interest-bearing liabilities	861,759							936,520
Total liabilities	7,161,575							7,680,439
Stockholders’ equity	787,171							743,172
Total liabilities and stockholders' equity	$	7,948,746						$	8,423,611
Excess of average interest-earning assets over average interest-bearing liabilities	$	1,175,784						$	1,164,670
Net interest income				$	161,826						$	162,255
Net interest rate spread						2.64	%						2.56	%
Net interest margin (5)						2.89	%						2.74	%
Ratio of average interest-earning assets to average interest-bearing liabilities	118.66		%					117.27		%

_____________


(1)	Average non-performing loans of ~~$34.0~~$32.5 million and ~~$57.4~~$32.7 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively, and ~~2017, respectively,~~$25.6 million and $32.7 million ~~and $62.7 million~~ for the ~~six~~nine months ended ~~June~~September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, are included in the average loan portfolio net balance.

(2)

Includes nontaxable securities with average balances of ~~$174.1~~$66.5 million and ~~$159.1~~$173.2 million for the three months ended ~~June~~September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$175.4~~$115.5 million and ~~$158.9~~$174.7 million for the ~~six~~nine months ended ~~June~~September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The tax equivalent yield for these nontaxable securities for the three months ended ~~June~~September 30, 2019 and 2018 was 3.92% and ~~2017 was 4.10% and 3.87%~~4.47%, respectively, and ~~3.83%~~4.01% and ~~3.88%~~4.01% for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. In the three and ~~2017, respectively.~~

nine month periods ended September 30, 2019 and 2018, the tax equivalent yields were calculated by assuming a 21% tax rate and dividing the actual yield by 0.79.

(3)

Includes nontaxable securities with average balances of ~~$88.8~~$79.8 million and ~~$2.7~~$87.5 million for the three months ended ~~June~~September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$88.9~~$82.4 million and ~~$1.4~~$88.5 million for the ~~six~~nine months ended ~~June~~September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The tax equivalent yield for these nontaxable securities for the three months ended ~~June~~September 30, 2019 and 2018 was 2.74% and ~~2017 was 2.00% and 2.15%~~2.02%, respectively, and ~~2.45%~~3.14% and ~~2.13%~~2.30% for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. In the three and ~~2017, respectively.~~

nine month periods ended September 30, 2019 and 2018, the tax equivalent yields were calculated by assuming a 21% tax rate and dividing the actual yield by 0.79.


(4)	The terms of the advance ~~agreement~~agreements 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, securities available for sale and held to maturity, deposits with banks and other financial assets which yield interest or similar income.

~~Provision~~

Analysis of the Allowance for Loan Losses

Set forth in the table below are the changes in the allowance for loan losses for each of the periods presented.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
(in thousands)
Balance at the beginning of the period	$	57,404		$	69,931		$	61,762		$	72,000

Charge-offs
Domestic Loans:
Real Estate
Single-family residential	(2		)	—			(89		)	(27		)
Commercial	(907		)	(526		)	(2,773		)	(3,263		)
Consumer and others	(96		)	(66		)	(415		)	(156		)
	(1,005		)	(592		)	(3,277		)	(3,446		)

International Loans (1):
Commercial	—			(1,421		)	(61		)	(1,473		)
Consumer and others	(1,661		)	(283		)	(2,961		)	(913		)
	(1,661		)	(1,704		)	(3,022		)	(2,386		)
Total Charge-offs	$	(2,666	)	$	(2,296	)	$	(6,299	)	$	(5,832	)

Recoveries
Domestic Loans:
Real Estate Loans
Commercial Real Estate (CRE)
Non-Owner occupied	$	—		$	—		$	—		$	5
Land development and construction loans	—			—			—			33
	—			—			—			38
Single-family residential	56			11			199			75
Owner occupied	—			7			2			890
	56			18			201			1,003
Commercial	58			180			238			398
Consumer and others	4			11			11			43
	118			209			450			1,444

International Loans (1):
Real Estate
Single-family residential	—			4			—			4
Commercial	132			—			360			—
Consumer and others	152			23			217			105
	284			27			577			109
Total Recoveries	$	402		$	236		$	1,027		$	1,553

Net charge-offs	(2,264		)	(2,060		)	(5,272		)	(4,279		)
(Reversal of) provision for loan losses	(1,500		)	1,600			(2,850		)	1,750
Balance at the end of the period	$	53,640		$	69,471		$	53,640		$	69,471

__________________

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
(in thousands)
Balance at the beginning of the period $ 72,118
$ 79,363
$ 72,000
$ 81,751

Charge-offs
Domestic Loans:
Real Estate
Commercial Real Estate (CRE)
Non-owner occupied —
—
—
(97 )
—
—
—
(97 )
Single-family residential (27 ) —
(27 ) (83 )
Owner occupied —
—
—
(25 )
(27 ) —
(27 ) (205 )
Commercial (2,355 ) (1,097 ) (2,737 ) (1,390 )
Consumer and others (71 ) (15 ) (90 ) (45 )
(2,453 ) (1,112 ) (2,854 ) (1,640 )

International Loans:
Commercial (52 ) (143 ) (52 ) (6,042 )
Consumer and others (230 ) (258 ) (630 ) (477 )
(282 ) (401 ) (682 ) (6,519 )
Total Charge-offs $ (2,735 ) $ (1,513 ) $ (3,536 ) $ (8,159 )

Recoveries
Domestic Loans:
Real Estate Loans
Commercial Real Estate (CRE)
Non-Owner occupied $ 4
$ 15
$ 5
$ 67
Land development and construction loans —
92
33
99
4
107
38
166
Single-family residential 60
1,064
64
1,110
Owner occupied 95
2
883
6
159
1,173
985
1,282
Commercial 174
21
218
60


(1)	Includes transactions in which the debtor or the customer is domiciled outside the U.S., even when the collateral is located in the U.S.

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
(in thousands)
Consumer and others 26
—
32
—
359
1,194
1,235
1,342

International Loans:
Real Estate
Commercial Real Estate (CRE)
Non-owner occupied —
—
—
2
—
—
—
2
Single-family residential —
1
—
3
—
1
—
5
Consumer and others 39
15
82
24
39
16
82
29
Total Recoveries $ 398
$ 1,210
$ 1,317
$ 1,371

Net charge-offs (2,337 ) (303 ) (2,219 ) (6,788 )
Provision for loan losses 150
3,646
150
7,743
Balance at the end of the period $ 69,931
$ 82,706
$ 69,931
$ 82,706

Set forth in the table below is the composition of international ~~loan~~consumer loans and overdraft charge-offs by country for each of the periods presented.

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
(in thousands)
Commercial loans:
Brazil $ 52
$ 128
$ 52
$ 6,027
Others —
15
—
15
Consumer loans and overdrafts:
Venezuela 230
258
630
477
Total charge offs $ 282
$ 401
$ 682
$ 6,519



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
(in thousands)
Venezuela	$	1,491	$	283	2,532		913
Other countries	170		—		429		—
Total charge offs	$	1,661	$	283	$	2,961	$	913

Three Months Ended September 30, 2019 and 2018

During the three months ended ~~June~~September 30, ~~2018,~~2019, charge-offs increased to $2.7 million from ~~$1.5~~$2.3 million during the same period of the prior year. ~~The~~This slight increase ~~is primarily attributed~~was mainly due to ~~a $2.3 million charge-off in 2018~~higher charge-offs related to ~~three~~ domestic commercial loans and international credit cards in the ~~retail, wholesale and telecommunications industries.~~third quarter of 2019, partially offset by a decrease in international commercial loans. Additionally, recoveries ~~decreased~~increased to ~~$398 thousand~~$0.4 million in ~~2018,~~the three months ended September 30, 2019, compared to ~~$1.2~~$0.2 million during the same period in ~~2017,~~2018. The increase in recoveries was mainly ~~attributable~~driven by a $132 thousand recovery related to one international commercial loan and a ~~$1.0 million~~$152 thousand aggregate recovery in ~~2017 related to a single-family residential real estate loan.~~international credit cards during the third quarter of 2019. As a result, the ratio of net charge-offs over the average total loan portfolio during the three months ended ~~June~~September 30, 2019 increased 2 basis points to 0.16% from a net charge-off ratio of 0.14% in the same quarter in 2018.

During the three months ended September 30, 2019 we released $1.5 million from the allowance for loan losses compared to a provision of $1.6 million during the same period last year. The release was primarily driven by lower loan balances, improved quantitative factors, primarily in CRE and domestic commercial loans and lower reserve requirements on credit cards due to better than anticipated repayments as we sunset this product. During the three months ended September 30, 2018, lower reserve requirements were mainly due to improvements in quantitative factors applied to the CRE portfolio partially covered the reserve requirements for charge-offs, non-performing loans, and portfolio growth.

Nine Months Ended September 30, 2019and2018

During the nine months ended September 30, 2019, charge-offs increased to $6.3 million from $5.8 million during the same period one year ago. In the nine months ended September 30, 2019, the increase in charge-offs was ~~3 basis points higher than~~primarily due to an aggregate of $3.0 million in charge-offs related to international credit cards, partially offset by lower charge-offs in international commercial loans. Additionally, recoveries decreased to $1.0 million in the nine months ended September 30, 2019, compared to $1.6 million during the same period in ~~2017.~~2018. The decrease in recoveries was mainly driven by a $0.8 million recovery of an owner occupied commercial real estate loan in the first quarter of 2018. As a result, the ratio of net charge-offs over the average total loan portfolio during the nine months ended September 30, 2019 increased 2 basis points to 0.12% from 0.10% in the same period in 2018.

During the ~~six~~nine months ended ~~June~~September 30, ~~2018, charge-offs decreased to $3.5~~2019 we reversed $2.9 million from ~~$8.2~~the allowance for loan losses compared to a provision of $1.8 million during the same period of the prior year. The decrease is primarily attributed to a $6.0 million charge-off in 2017 related to a loan to a primary products company in Brazil. The ratio of net charge-offs over average total loan portfolio during the six months ended June 30, 2018 improved 8 basis points, from 0.12% to 0.04% compared to the same period in 2017.

We added $150 thousand of provision for loan losses during the three and six months ended June 30, 2018. This compares to $3.6 million and $7.7 million of provisions for loan losses recorded during the same periods last year. The ~~decrease is~~release was primarily ~~attributed~~driven by lower loan balances, improved quantitative factors, primarily in CRE and domestic commercial loans and lower reserve requirements on credit cards due to better than anticipated repayments as we sunset this product. During the nine months ended September 30, 2018, lower reserve requirements were mainly due to improvements in quantitative ~~loan loss~~ factors and positive adjustments to qualitative ~~loan loss~~ factors ~~used for~~applied to the CRE portfolio, ~~segments of domestic commercial real estate~~non-performing loans, and domestic commercial loans during the period. These positive adjustments were partially offset by a $3.9 million provision for loan loss required in June 30, 2018 associated with one CRE loan. This provision resulted from an evaluation of the net realizable market value of the property securing this CRE loan. A recent appraisal indicates that the collateral securing the TDR has deteriorated further, and we are evaluating whether a further write-down may be required. Positive loan loss factors resulted from improving trends in factors associated with our real estate and commercial portfolio ~~segments.~~growth.

Noninterest Income

The table below sets forth a comparison for each of the categories of ~~non-interest~~noninterest income for the periods presented.

Three Months Ended June 30, Change
2018 2017 2018 over 2017
Amount % of non-interest income Amount % of non-interest income Amount %
(in thousands, except percentages)
Deposits and service fees $ 4,471
29.83 % $ 4,868
27.41 % $ (397 ) (8.16 )%
Brokerage, advisory and fiduciary activities 4,426
29.53 % 4,897
27.57 % (471 ) (9.62 )%
Change in cash surrender value of bank owned life insurance⁽¹⁾
1,474
9.84 % 1,242
6.99 % 232
18.68 %
Cards and trade finance servicing fees 1,173
7.83 % 1,114
6.27 % 59
5.30 %
Gain on early extinguishment of FHLB advances 882
5.89 % —
—%
882
N/M
Data processing, rental income and fees for other services to related parties 613
4.09 % $ 969
5.46 % (356 ) (36.74 )%
Securities gains, net 16
0.11 % 177
1.00 % (161 ) (90.96 )%
Other noninterest income ⁽²⁾
1,931
12.88 % 4,492
25.30 % (2,561 ) (57.01 )%
$ 14,986
100.00 % $ 17,759
100.00 % $ (2,773 ) (15.61 )%


	Six Months Ended June 30,								Change					Three Months Ended September 30,									Change
	2018				2017				2018 over 2017					2019				2018					2019 over 2018
	Amount		% of non-interest income		Amount		% of non-interest income		Amount			%		Amount		%		Amount			%		Amount			%
	(in thousands, except percentages)
(in thousands, except percentages)
Deposits and service fees	$	9,053	31.29	%	$	9,774	30.57	%	$	(721	)	(7.38	)%	$	4,366	31.6	%	$	4,269		33.0	%	$	97		2.3	%
Brokerage, advisory and fiduciary activities	8,841		30.56	%	10,158		31.77	%	(1,317		)	(12.97	)%	3,647		26.4	%	4,148			32.0	%	(501		)	(12.1	)%
Change in cash surrender value of bank owned life insurance⁽¹⁾	2,918		10.09	%	2,487		7.78	%	431			17.33	%
Change in cash surrender value of bank owned life insurance (“BOLI”)(1)														1,449		10.5	%	1,454			11.2	%	(5		)	(0.3	)%
Cards and trade finance servicing fees	2,235		7.73	%	2,185		6.83	%	50			2.29	%	1,034		7.5	%	1,145			8.8	%	(111		)	(9.7	)%
Gain on early extinguishment of FHLB advances	882		3.05	%	—		—%		882			N/M		—		—	%	—			—	%	—			—	%
Data processing, rental income and fees for other services to related parties	1,494		5.16	%	1,552		4.85	%	(58		)	(3.74	)%
Securities gains, net	16		0.06	%	155		0.48	%	(139		)	(89.68	)%
Securities gains (losses), net														906		6.6	%	(15		)	(0.1	)%	921			N/M
Data processing and fees for other services														70		0.5	%	523			4.0	%	(453		)	(86.6	)%
Other noninterest income ⁽²⁾	3,492		12.06	%	5,665		17.72	%	(2,173		)	(38.36	)%	2,364		16.9	%	1,426			11.1	%	938			65.8	%
	$	28,931	100.00	%	$	31,976	100.00	%	$	(3,045	)	(9.52	)%
Total noninterest income														$	13,836	100.0	%	$	12,950		100.0	%	$	886		6.8	%

~~__________________~~



	Nine Months Ended September 30,								Change
	2019				2018				2019 over 2018
	Amount		%		Amount		%		Amount			%
(in thousands, except percentages)
Deposits and service fees	$	12,793	31.1	%	$	13,322	31.8	%	$	(529	)	(4.0	)%
Brokerage, advisory and fiduciary activities	11,071		26.9	%	12,989		31.0	%	(1,918		)	(14.8	)%
Change in cash surrender value of bank owned life insurance (“BOLI”)(1)	4,272		10.4	%	4,372		10.4	%	(100		)	(2.3	)%
Cards and trade finance servicing fees	3,368		8.2	%	3,380		8.1	%	(12		)	(0.4	)%
Gain on early extinguishment of FHLB advances	557		1.4	%	882		2.1	%	(325		)	(36.9	)%
Securities gains, net	1,902		4.6	%	1		—	%	1,901			N/M
Data processing and fees for other services	955		2.3	%	2,017		4.8	%	(1,062		)	(52.7	)%
Other noninterest income (2)	6,221		15.1	%	4,918		11.8	%	1,303			26.5	%
Total noninterest income	$	41,139	100.0	%	$	41,881	100.0	%	$	(742	)	(1.8	)%

_________________


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

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


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

N/M Not meaningful

Three Months Ended September 30, 2019 and 2018

Total noninterest income ~~decreased $2.8~~increased $0.9 million, ~~and $3.0 million~~or 6.8%, in the ~~three and six months~~quarter ended ~~June~~September 30, ~~2018, respectively,~~2019 compared to the same ~~periods~~period of ~~2017. During these periods, there were decreases in~~2018. The increase was mainly driven by higher other noninterest income and the $0.9 million gain on sale of approximately $23.8 million of municipal bonds and $11.8 million of floating-rate corporate securities. This was partially offset by lower income from brokerage, advisory and fiduciary activities and lower fees from data processing and fees for other services, such as administrative and transition services provided to our Former Parent.

Other noninterest income increased $0.9 million in the three months ended September 30, 2019 compared to the same period last year, mainly driven by an increase of $1.1 million from derivative contracts sold to loan customers.

Brokerage, advisory and fiduciary activities decreased $0.5 million during the three months ended September 30, 2019 compared to the same period one year ago, mainly driven by lower volumes of customer trading in 2019. In February 2019, the United States placed new restrictions on the trading of Venezuelan securities not previously restricted. These restrictions have effectively eliminated our customers’ trading in those securities and has negatively affected our fee income. During 2018, the Company earned approximately $1.5 million from trading in these securities. We expect these trading restrictions to continue to limit our fixed income trading activity for the foreseeable future. The Company will continue to focus on leveraging our wealth management platform to grow this side of our domestic business.

Data processing and fees for other services declined by $0.5 million in the three months ended September 30, 2019 compared to the same period last year. This was mainly due to the phase out of transition services to the Company’s Former Parent and its affiliates.

Nine Months Ended September 30, 2019 and 2018

Total noninterest income decreased by $0.7 million in the nine months ended September 30, 2019. This was driven by lower income from brokerage, advisory and fiduciary activities, lower data processing and fees for other services to our Former Parent, lower deposit and service fees and lower gain on early extinguishment of FHLB advances. The decrease in noninterest income was partially offset by the $1.9 million aggregate gain on sale of approximately $115 million in municipal bonds and $11.8 million in floating rate corporate securities, respectively, sold in the first nine months of 2019, and an increase of $1.3 million in other noninterest income.

Brokerage, advisory and fiduciary activities decreased $1.9 million during the first nine months of 2019 compared to the first nine months of 2019, mainly due to lower customer trading volume due to the trading limitations on Venezuelan securities.

Data processing and fees for other services declined by $1.1 million in the nine months ended September 30, 2019 compared to the same period last year. This was mainly due to lower data processing fees as a result of the phase out of transition services to the Company’s Former Parent and its affiliates, the sale of our subsidiary G200 Leasing, LLC (“G200 Leasing”) to our Former Parent in the first quarter of 2018, and the resulting loss of aircraft lease income.

Deposits and service fees declined by $0.5 million during the first nine months of 2019 compared to the first nine months of 2018, mainly as a result of lower ~~volume of customer trading activities. Additionally, for the three and six months ended June 30, 2018, there were decreases~~wire transfer activity in other noninterest income primarily due to lower fee income on derivative and foreign currency exchange transactions with customers of $1.5 million and $1.6 million, respectively, and no gain on the disposition of bank properties compared to a gain of $0.9 million for the same periods a year ago. Also, included in other noninterest income and contributing to the2019. The decrease in ~~the three~~deposits and ~~six months ended June 30 2018~~service fees was lower valuation income of $0.4 million and $0.1 million, respectively, on the investment balances held in the non-qualified deferred compensation plan, compared to the same periods in 2017. Conversely, other noninterest expense for these periods includes smaller mirror debits to adjust the liability to the plan participants. Partially offsetting these results, we received $882 thousand in compensation as a result of the early termination of certain advancespartially offset by higher fees from ~~the FHLB~~Treasury Management services. Also, during the second quarter of ~~2018,~~2019, certain card interchange fees that had been previously classified as deposit and service fees were reclassified to "Cards and trade finance servicing fees" to better reflect the nature and source of these fees.

Other noninterest income increased by $1.3 million in the first nine months of 2019 compared to ~~none in~~ the ~~same period a year ago.~~

first nine months of 2018, mainly driven by an increase of of $1.7 million from derivative contracts sold to loan customers.

Noninterest Expense

The table below presents a comparison for each of the categories of noninterest expense for the periods presented.


	Three Months Ended June 30,								Change					Three Months Ended September 30,								Change
	2018				2017				2018 vs 2017					2019				2018				2019 vs 2018
	Amount		% of Total		Amount		% of Total		Amount			% of Total		Amount		% of Total		Amount		% of Total		Amount			% of Total
	(in thousands, except percentages)
(in thousands, except percentages)
Salaries and employee benefits	$	34,932	66.36	%	$	31,666	62.50	%	$	3,266		10.31	%	$	33,862	64.2	%	$	33,967	65.3	%	$	(105	)	(0.3	)%
Occupancy and equipment	4,060		7.71	%	4,052		8.00	%	8			0.20	%	3,878		7.4	%	4,044		7.8	%	(166		)	(4.1	)%
Professional and other services fees	5,387		10.23	%	2,744		5.42	%	2,643			96.32	%	4,295		8.1	%	4,268		8.2	%	27			0.6	%
FDIC assessments and insurance	1,468		2.79	%	2,180		4.30	%	(712		)	(32.66	)%
Telecommunications and data processing	3,011		5.72	%	2,417		4.77	%	594			24.58	%	3,408		6.5	%	3,043		5.9	%	365			12.0	%
Depreciation and amortization	1,945		3.70	%	2,039		4.02	%	(94		)	(4.61	)%	1,928		3.7	%	1,997		3.8	%	(69		)	(3.5	)%
FDIC assessments and insurance														597		1.1	%	1,578		3.0	%	(981		)	(62.2	)%
Other operating expenses ⁽¹⁾	1,835		3.49	%	5,567		10.99	%	(3,732		)	(67.04	)%	4,769		9.0	%	3,145		6.0	%	1,624			51.6	%
	$	52,638	100.00	%	$	50,665	100.00	%	$	1,973		3.89	%
Total noninterest expenses														$	52,737	100.0	%	$	52,042	100.0	%	$	695		1.3	%


	Six Months Ended June 30,								Change					Nine Months Ended September 30,								Change
	2018				2017				2018 vs 2017					2019				2018				2019 vs 2018
	Amount		% of Total		Amount		% of Total		Amount			% of Total		Amount		%		Amount		%		Amount			%
	(in thousands, except percentages)
(in thousands, except percentages)
Salaries and employee benefits	$	68,973	63.70	%	$	63,974	64.09	%	$	4,999		7.81	%	$	101,356	64.3	%	$	102,940	64.2	%	$	(1,584	)	(1.5	)%
Occupancy and equipment	7,775		7.18	%	8,761		8.78	%	(986		)	(11.25	)%	12,152		7.7	%	11,819		7.4	%	333			2.8	%
Professional and other services fees	11,831		10.93	%	5,401		5.41	%	6,430			119.05	%	11,693		7.4	%	16,099		10.0	%	(4,406		)	(27.4	)%
FDIC assessments and insurance	2,915		2.69	%	4,143		4.15	%	(1,228		)	(29.64	)%
Telecommunications and data processing	6,095		5.63	%	4,169		4.18	%	1,926			46.20	%	9,667		6.1	%	9,138		5.7	%	529			5.8	%
Depreciation and amortization	4,086		3.77	%	4,466		4.47	%	(380		)	(8.51	)%	5,880		3.7	%	6,083		3.8	%	(203		)	(3.3	)%
FDIC assessments and insurance														3,167		2.0	%	4,493		2.8	%	(1,326		)	(29.5	)%
Other operating expenses ⁽¹⁾	6,608		6.10	%	8,899		8.92	%	(2,291		)	(25.74	)%	13,672		8.8	%	9,753		6.1	%	3,919			40.2	%
	$	108,283	100.00	%	$	99,813	100.00	%	$	8,470		8.49	%
Total noninterest expenses														$	157,587	100.0	%	$	160,325	100.0	%	$	(2,738	)	(1.7	)%

~~__________________~~________

(1) Includes advertising, marketing, ~~expenses,~~ charitable contributions, community engagement, postage and courier expenses, provisions for possible losses on contingent loans, and debits which mirror the valuation income on the investment balances held in the non-qualified deferred compensation plan in order to adjust ~~the~~our liability to participants of the deferred compensation plan.

Three Months Ended ~~June~~September 30, ~~2018~~2019 and ~~2017~~2018

Noninterest expense increased ~~$2.0~~by $0.7 million, or ~~3.89%~~1.3%, in the three months ended ~~June~~September 30, ~~2018~~2019 compared to the same period in ~~2017. This was~~2018, primarily the result of higher ~~professional fees, along with~~other operating expenses and higher ~~salary~~telecommunication and ~~employment benefits and other~~data processing expenses. These ~~increases~~results were partially offset by lower FDIC insurance expenses, lower occupancy and equipment expenses as well as a decrease in the cost of salaries and employee benefits.

Other operating expenses increased by $1.6 million in the three months ended September 30, 2019, mainly driven by $0.8 million of restructuring expenses related to rebranding incurred in the three months ended September 30, 2019. We launched “Amerant” as our new brand across all our markets in April 2019. The launch included rebranding of all digital platforms, new signs in, and on, our branches and buildings, and a broad campaign through digital and traditional media focused on brand awareness. We expect our rebranding rollout to be substantially completed during the fourth quarter of 2019, and we expect to spend approximately $0.9 million in additional rebranding expenses for the remainder of 2019. The increase in other operating expenses in the third quarter of 2019 was also driven by no reversal of the provision for possible losses on the off-balance sheet credit exposure compared to a reversal of $0.4 million one year ago and $0.3 million in expenses related to the early redemption of trust preferred securities. See “Capital Resources and Liquidity Management” for more detail on the redemption of trust preferred securities and related junior subordinated debt.

Telecommunication and data processing expenses increased by $0.4 million in the three months ended September 30, 2019 compared to the same period last year, mainly driven by costs associated with improvements to our online banking platform.

FDIC assessments and insurance expense decreased by $1.0 million in the three months ended September 30, 2019. The decrease was primarily due to lower FDIC assessment costs due to credits received, the absence of The Financing Corporation (“FICO”) assessment and lower average balances.

Occupancy and equipment expenses decreased by $0.2 million in the third quarter of 2019 compared to the same quarter last year. This was mainly driven by compensation for business interruption at one of our branches in South Florida.

Salaries and employee benefits decreased by $0.1 million in the three months ended September 30, 2019. This was mainly driven by staff reduction cost in 2019 and 2018. These results were partially offset by $1.5 million in additional compensation costs related to the shares of restricted stock awarded in December 2018 and January 2019 and the $0.5 million in staff reduction costs related to our various restructuring activities in the third quarter of 2019. The total compensation cost related to the restricted shares is expected to be approximately $6.0 million, or $1.5 million per quarter, through 2019, declining to an estimated cost of $2.7 million in 2020 and $1.1 million in 2021. In addition, salaries and employee benefits expense during the third quarter of 2019 included an average annual cost of living adjustment of 1.8% implemented in July 2019, signaling a marked shift from the average adjustment of 3.2% granted in July 2018. This reduction is in line with the Company’s strategy to contain growth in personnel expenses, while striving to motivate and fairly compensate our workforce.

Nine Months Ended September 30, 2019 and 2018

Noninterest expense decreased by $2.7 million or 1.7%, in the nine months ended September 30, 2019, compared to the same period one year ago. This was mainly driven by lower professional and other services fees as well as a decrease in the costs associated with salaries and employee benefits and lower FDIC assessments and insurance expense, partially offset by higher other operating expenses and higher telecommunication and data processing expenses.

The ~~increase~~decrease of ~~$2.6~~$4.4 million, or 27.4%, in professional and other services fees during the ~~quarter~~nine months ended ~~June~~September 30, ~~2018~~2019 compared to the same period last year ~~is mainly~~stems from $4.6 million incurred in legal, accounting and consulting fees in connection with our spin-off from our Former Parent during the result of a $2.0 million provision for legal fees associated with the Spin-off. The Company expects to incur higher professional expenses as a standalone public company but does not expect further material professional expenses related to one-time Spin-off activities after the threenine months ended September 30, 2018.

~~The increase~~

Salaries and employee benefits decreased by $1.6 million in ~~salaries~~the nine months ended September 30, 2019, mainly driven by staff reductions in 2019 and ~~employment benefits of $3.3 million, or 10.31%, during~~2018 and the quarter ended June 30, 2018 compared to the same period last year, reflects the impact of annual salary increases stemming from inflation and performance adjustments, higher insurance benefit expenses, and a $1.2 million ~~provision for the estimated compensation to be~~ paid to participants of the non-qualified deferred compensation plan to partially mitigate ~~the effect~~tax effects of ~~the~~ unexpected early distribution for federal income tax purposes. The Spin-off caused an early distribution for U.S. federal income tax purposes from our deferred compensation plan. FTE Headcount as of June 30, 2018 was 940, up one person over the previous quarter.

~~Other operating expenses decreased $3.7 million, or 67.04%, during the quarter ended June 30, 2018 compared~~due to the ~~same period last year, mainly due~~spin-off. This decrease was partially offset by $4.4 million in additional compensation costs related to ~~a reversal~~the shares of ~~provisions for possible losses on credit commitments~~restricted stock awarded in December 2018 and January 2019 and the $1.4 million in staff reduction costs related to our various restructuring activities in the first nine months of ~~$1.0~~2019.

FDIC assessments and insurance expense decreased by $1.3 million in the second quarter of 2018, compared to an addition to provisions for possible losses on credit commitments of $0.7 million in the same quarter of 2017. The change in provisions is primarily attributed to improvements in quantitative and qualitative loss factors and positive adjustments to qualitative loan loss factors with respect to credit commitments in the portfolio segments of domestic commercial real estate and domestic commercial loans during the period. In addition, there were lower marketing expenses of $0.8 million incurred during the second quarter of 2018 compared to the same period of 2017 as there were fewer promotional campaigns in the second quarter of 2018 compared to the same period of 2017.

~~Six Months Ended June 30, 2018 and 2017~~

Noninterest expense increased $8.5 million, or 8.49%, in the six months ended June 30, 2018 compared to the same period in 2017, primarily as a result of higher professional fees, along with higher salary and employment benefits and other expenses. These increases were partially offset by a lower FDIC assessments as well as lower occupancy and equipment-related costs, and other operating expenses.

The increase of $6.4 million in professional and other services fees during the six months ended June 30, 2018 compared to the same period in 2017 was mainly the result of a $4.3 million provision for legal and consulting fees associated with the Spin-off. The Company expects to incur higher professional expenses as a standalone public company but does not expect further material professional expenses related to one-time Spin-off activities after the threenine months ended September 30, ~~2018.~~

2019. The ~~increase~~decrease was primarily due to lower FDIC assessment costs due to credits received, the absence of the FICO assessment and lower average balances. As a small institution (under $10 billion) in ~~salaries and employment benefits of $5.0 million, or 7.81%, in the six months ended June 30, 2018 compared~~assets, we received a credit due to the ~~same period last year, reflects the impact of annual salary increases stemming from inflation and performance adjustments, higher insurance benefit expenses, and~~FDIC’s Deposit Insurance Fund attaining a $1.2 million provision for the estimated compensation to be paid to participants of the non-qualified deferred compensation plan to partially mitigate the effect of the unexpected early distribution for federal income tax purposes. The Spin-off caused an early distribution for U.S. federal income tax purposes from our deferred compensation plan. FTE headcount as of June 30, 2018 was 940, a decrease of four over the previous six months.

1.38% reserve ratio.

Other operating expenses ~~decreased $2.3~~increased by $3.9 million ~~or 25.74%, during~~in the ~~six~~nine months ended ~~June~~September 30, ~~2018 compared~~2019, mainly driven by $3.6 million of restructuring expenses related to rebranding incurred in the nine months ended September 30, 2019 and $0.3 million in expenses related to the ~~same period last year,~~early redemption of trust preferred securities.

Telecommunication and data processing expenses increased by $0.5 million in the nine months ended September 30, 2019, mainly due to ~~a reversal of provisions for possible losses on credit commitments of $0.3 million in the six months ended June 30, 2018, compared~~costs associated with improvements to an addition to provisions for possible losses on credit commitments of $0.9 million in the same period of 2017. The change in provisions is primarily attributed to improvements in quantitative and qualitative loss factors and positive adjustments to qualitative loan loss factors with respect to credit commitments in the portfolio segments of domestic commercial real estate and domestic commercial loans during the period. In addition, there were lower marketing expenses of $0.5 million incurred during the six months ended June 30, 2018 in comparison to the same period last year as there were fewer promotional campaigns in the first six months of 2018 compared to the same period of 2017.

our online banking platform.

Income Taxes

The table below sets forth information related to our income taxes for the periods presented.


	Three Months Ended June 30,						Change					Six Months Ended June 30,						Change					Three Months Ended September 30,						Change					Nine Months Ended September 30,						Change
	2018			2017			2018 vs 2017					2018			2017			2018 vs 2017					2019			2018			2019 vs 2018					2019			2018			2019 vs 2018
	(in thousands, except effective tax rates and percentages)
(in thousands, except effective tax rates and percentages)
Income tax expense	$	5,764		$	4,499		$	1,265		28.12	%	$	7,268		$	7,315		$	(47	)	(0.64	)%	$	3,268		$	3,390			($122	)	(3.60	)%	$	10,369		$	10,658			($289	)	(2.71	)%
Effective income tax rate	35.61		%	30.22		%	5.39		%	17.84	%	26.80		%	30.21		%	(3.41		)%	(11.29	)%	21.50		%	22.69		%	(1.19		)%	(5.24	)%	21.50		%	25.34		%	(3.84		)%	(15.15	)%

The income tax expense for the three and nine months ended September 30, 2019 reflects the ~~lower~~ corporate federal income tax rate under the 2017 Tax Act ~~of 2017~~(the “2017 Tax Act”) which, beginning January 1, 2018, decreased the corporate federal income tax rate from 35% to 21% ~~compared to 35% in the same period last year. However, higher taxable income during~~. During the three and ~~six~~nine months ended ~~June~~September 30, 2018, ~~compared to~~ the ~~same periods last year, partially offset the positive effects~~Company had a higher tax expense mainly as a result of ~~the lower~~ tax rate for the three and six months ended June 30, 2018. In addition, the effective tax rate for these periods is significantly affected by permanent non-deductible items totaling $5.8 million for the six months ended June 30, 2018adjustments associated with spin-off costs which were not tax deductible.

As of September 30, 2019, the ~~Spin-off. Those items have been recognized as discrete items in the period.~~

~~Segment Information~~

~~The following tables summarize certain financial information for our reportable segments as~~Company’s net deferred tax asset was $5.4 million, a decline of ~~and for the periods indicated.~~

(in thousands) Personal and Commercial Banking ("PAC") Corporate LATAM Treasury Institutional Total
Three Months Ended June 30, 2018
Income Statement:
Net interest income $ 47,105
$ 1,219
$ 1,942
$ 3,723
$ 53,989
Provision for (reversal of) loan losses 824
494
(329 ) (839 ) 150
Net interest income after provision for (reversal of) loan losses 46,281
725
2,271
4,562
53,839
Noninterest income 5,708
89
3,451
5,738
14,986
Noninterest expense ⁽⁴⁾
39,329
1,468
2,832
9,009
52,638
Net income (loss) before income tax:
Banking 12,660
(654 ) 2,890
1,291
16,187
Non-banking contribution⁽¹⁾
1,197
11
—
(1,208 ) —
13,857
(643 ) 2,890
83
16,187
Income tax (expense) benefit (4,486 ) 58
84
(1,420 ) (5,764 )
Net income (loss) $ 9,371
$ (585 ) $ 2,974
$ (1,337 ) $ 10,423

(in thousands) Personal and Commercial Banking ("PAC") Corporate LATAM Treasury Institutional Total
Six Months Ended June 30, 2018
Income Statement:
Net interest income $ 93,786
$ 2,699
$ 2,898
$ 7,239
$ 106,622
(Reversal of) provision for loan losses (1,315 ) (225 ) (446 ) 2,136
150
Net interest income after (reversal of) provision for loan losses 95,101
2,924
3,344
5,103
106,472
Noninterest income 11,416
198
5,401
11,916
28,931
Noninterest expense ⁽⁴⁾
79,343
2,643
5,794
20,503
108,283
Net income (loss) before income tax:
Banking 27,174
479
2,951
(3,484 ) 27,120
Non-banking contribution⁽¹⁾
1,247
—
—
(1,247 ) —
28,421
479
2,951
(4,731 ) 27,120
Income tax (expense) benefit (6,707 ) (113 ) 396
(844 ) (7,268 )
Net income (loss) $ 21,714
$ 366
$ 3,347
$ (5,575 ) $ 19,852

As of June 30, 2018
Loans, net⁽²⁾
$ 5,826,731
$ 394,572
$ —
$ (71,685 ) $ 6,149,618
Deposits $ 5,567,424
$ 20,134
$ 737,898
$ 37,682
$ 6,363,138

(in thousands) Personal and Commercial Banking ("PAC") Corporate LATAM Treasury Institutional Total
Three Months Ended June 30, 2017
Income Statement:
Net interest income $ 43,776
$ 2,339
$ 2,268
$ 3,058
$ 51,441
Provision for (reversal of) loan losses 8,681
(1,845 ) (819 ) (2,371 ) 3,646
Net interest income after provision for (reversal of) loan losses 35,095
4,184
3,087
5,429
47,795
Noninterest income 8,062
148
2,933
6,616
17,759
Noninterest expense ⁽⁴⁾
38,618
1,135
2,445
8,467
50,665
Net income before income tax:
Banking 4,539
3,197
3,575
3,578
14,889
Non-banking contribution⁽¹⁾
1,263
24
—
(1,287 ) —
5,802
3,221
3,575
2,291
14,889
Income tax expense (2,001 ) (1,147 ) (446 ) (905 ) (4,499 )
Net income $ 3,801
$ 2,074
$ 3,129
$ 1,386
$ 10,390

(in thousands) Personal and Commercial Banking ("PAC") Corporate LATAM Treasury Institutional Total
Six Months Ended June 30, 2017
Income Statement:
Net interest income $ 85,164
$ 4,903
$ 4,593
$ 5,132
$ 99,792
Provision for (reversal of) loan losses 9,812
358
(894 ) (1,533 ) 7,743
Net interest income after provision for (reversal of) loan losses 75,352
4,545
5,487
6,665
92,049
Noninterest income 14,145
275
4,113
13,443
31,976
Noninterest expense ⁽⁴⁾
78,495
2,517
5,194
13,607
99,813
Net income before income tax:
Banking 11,002
2,303
4,406
6,501
24,212
Non-banking contribution⁽¹⁾
2,349
22
—
(2,371 ) —
13,351
2,325
4,406
4,130
24,212
Income tax expense (4,730 ) (823 ) (59 ) (1,703 ) (7,315 )
Net income $ 8,621
$ 1,502
$ 4,347
$ 2,427
$ 16,897

As of December 31, 2017
Loans, net⁽²⁾⁽³⁾
$ 5,542,545
$ 521,616
$ —
$ (64,325 ) $ 5,999,836
Deposits $ 5,454,216
$ 18,670
$ 779,969
$ 70,118
$ 6,322,973

~~_____________~~


~~(1)~~	~~Non-banking contribution reflects allocations of the net results of the Trust Company and Investment Services subsidiaries to the customers’ primary business unit.~~


~~(2)~~	Provisions for the periods presented are allocated to each applicable reportable segment. The allowance for loan losses and unearned deferred loan costs and fees are reported entirely within Institutional.


~~(3)~~	~~Balances include loans held for sale of $5,611 thousand which are allocated to PAC.~~


~~(4)~~	~~Costs related to the Spin-off have been allocated to the Institutional reportable segment.~~

~~Personal and Commercial Banking (PAC)~~

~~Three Months Ended June 30, 2018 and 2017~~

PAC reported net income of $9.4 million in the three months ended June 30, 2018, which represents a 146.54% increase from $3.8 million in the same period in 2017. This increase was primarily the result of higher net interest income together with a reduced provision for loan losses, partially offset by lower noninterest income.

Net interest income increased $3.3 million, or 7.60%, to $47.1 million during the three months ended June 30, 2018 from $43.8 million in the same period in 2017. This increase is mainly due to a $242.1 million increase in PAC’s average loan portfolio balance for the three months ended June 30, 2018 compared to the same period last year, primarily driven by increases in the commercial and commercial real estate loan portfolios.

~~For the three months ended June 30, 2018, PAC reflected a provision for loan losses of $0.8~~$10.9 million compared to ~~a provision for loan losses~~$16.3 million as of $8.7 million in the same period in 2017. The decrease is primarily attributed to improvements in quantitative loan loss factors and positive adjustments to qualitative loan loss factors used for the portfolio segments of domestic commercial real estate and domestic commercial loans during the period. These positive adjustments were partially offset by a $3.9 million provision for loan loss required in June 30, 2018 associated with one CRE loan. This provision resulted from an evaluation of the net realizable market value of the property securing this CRE loan. A recent appraisal indicates that the collateral securing the TDR has deteriorated further, and we are evaluating whether a further write-down may be required. Positive loan loss factors resulted from improving trends in factors associated with our real estate and commercial portfolio segments.

~~Noninterest income decreased $2.4 million, or 29.20% to $5.7 million in the three months ended June 30, 2018 compared to~~ ~~$8.1 million in the same period in 2017.~~December 31, 2018. This decrease was mainly ~~the result~~driven by an increase of ~~lower fee income~~$47.7 million in net unrealized holding gains on ~~derivative transactions with customers and lower other operating income from the disposition of bank property in South Florida~~available for sale securities during the ~~three~~first nine months ~~ended June 30, 2018 compared to the corresponding period in 2017.~~ of 2019.

~~Six Months Ended June 30, 2018 and 2017~~

PAC reported net income of $21.7 million for the six months ended June 30, 2018, which represents an 151.87% increase from $8.6 million in the same period in 2017. This increase is mainly the result of higher net interest income combined with a reversal of the allowance for loan losses, partially offset by lower noninterest income, higher noninterest expense and reduced non-banking contribution from Trust and Investment Services attributable to PAC customers.

Net interest income increased 10.12% to $93.8 million in the six months ended June 30, 2018 from $85.2 million in the same period in 2017. This increase is primarily due to a $276.1 million increase in PAC’s average loan portfolio balance and increased funds transfer pricing credit on PAC’s deposits for the six months ended June 30, 2018 compared to the same period a year ago. Higher average loan portfolio balances during the period were primarily driven by increases in the middle market and commercial real estate loan portfolios.

For the six months ended June 30, 2018, PAC reflected a $1.3 million reversal in the allowance for loan losses, compared to a provision for loan losses of $9.8 million in the same period in 2017. This change is primarily attributed to improvements in quantitative loan loss factors and positive adjustments to qualitative loan loss factors used for the portfolio segments of domestic commercial real estate and domestic commercial loans during the period. These positive adjustments were partially offset by a $3.9 million provision for loan loss required in June 30, 2018 associated with one CRE loan. This provision resulted from an evaluation of the net realizable market value of the property securing this CRE loan. A recent appraisal indicates that the collateral securing the TDR has deteriorated further, and we are evaluating whether a further write-down may be required. Positive loan loss factors resulted from improving trends in factors associated with our real estate and commercial portfolio segments.

Noninterest income decreased 19.29% to $11.4 million in the six months ended June 30, 2018 from $14.1 million in the same period in 2017. This decrease was mainly the result of lower fee income on derivative transactions with customers and lower other operating income from the disposition of bank property in South Florida during the six months ended June 30, 2018. In addition, there was a decrease in the volume of wire transfer activity and related fees during this period compared to the corresponding period of 2017.

Noninterest expense increased 1.08% to $79.3 million in the six months ended June 30, 2018, from $78.5 million the same period in 2017. This increase is primarily the result of higher product support expense allocations supporting PAC’s loan portfolio growth and ongoing banking center infrastructure transformation efforts.

Non-banking contribution from Trust and Investment Services attributable to PAC customers decreased 46.91% to $1.2 million in the six months ended June 30, 2018, from $2.3 million in the same period in 2017. The decrease is mainly the result of lower volume of customer brokerage activity.

~~Corporate LATAM~~

~~Three Months Ended June 30, 2018 and 2017~~

Corporate LATAM had a net loss of $585 thousand in the three months ended June 30, 2018, compared to net income of $2.1 million recorded in the same period in 2017. The decrease in net income is mainly attributable to lower net interest income together with an increase in the provision for loan losses.

The 47.88%, or $1.1 million, decline in net interest income to $1.2 million from $2.3 million in the same period a year ago, was primarily the result of a $144.2 million lower average loan portfolio balance for the three months ended June 30, 2018 compared to the same period in 2017. The $494 thousand provision for loan losses in the three months ended June 30, 2018 was mainly due to required loan loss reserve on an impaired loan identified during the period. This compares to the $1.8 million reversal of the allowance for loan losses into the provision for loan losses in the same period of 2017, which was mainly driven by lower loan portfolio average balances during that period.

~~Six Months Ended June 30, 2018 and 2017~~

Corporate LATAM reported net income of $366 thousand for the six months ended June 30, 2018. This was a decrease of $1.1 million, or 75.63%, from net income of $1.5 million in the same period in 2017. The lower net income during this period was primarily attributable to a lower net interest income which was partially mitigated by a reduction in the allowance for loan losses.

Net interest income decreased 44.95% to $2.7 million from $4.9 million in the six months ended June 30, 2018, mainly due to $132.9 million lower average loan portfolio balance during that period. The $225 thousand reversal of the allowance for loan losses during the six months ended June 30, 2018 was mainly attributed to a lower average loan portfolio balance, partially offset by a required loan loss reserve on an impaired loan identified during the three months ended June 30, 2018. This compares to a $358 thousand provision for loan loss in the same period of 2017 primarily related to charge offs of impaired loans during the first quarter of 2017.

~~Treasury~~

~~Three Months Ended June 30, 2018 and 2017~~

For the three months ended June 30, 2018, Treasury reported net income of $3.0 million, which represents a 4.95% decrease from $3.1 million for the same period in 2017. This decrease was primarily the result of lower net interest income together with higher noninterest expense, partially offset by an increase in noninterest income.

The 14.37% decrease in Treasury’s net interest income to $1.9 million in the three months ended June 30, 2018 from $2.3 million in the same period in 2017, was primarily attributable to higher interest expenses paid on longer duration FHLB advances as well as on brokered certificates of deposit. These results were partially offset by higher interest income from the investment securities portfolio and deposits with banks. In the three months ended June 30, 2018, the average balances of FHLB advances and other borrowings, and brokered certificates of deposit, were $270.2 million (29.93%) and $44.0 million (6.53%) higher than the same period in 2017.

Noninterest expense increased $387 thousand, or 15.83%, to $2.8 million in the three months ended June 30, 2018 from $2.4 million for the same period in 2017, primarily as a result of higher fees on derivative transactions.

Noninterest income increased $0.5 million, or 17.66%, to $3.5 million in the three months ended June 30, 2018 from $2.9 million in the same period in 2017. This increase is primarily due to higher income recorded in the change in cash surrender value of BOLI, and income from the early termination of short term FHLB advances.

~~Six Months Ended June 30, 2018 and 2017~~

Treasury generated net income of $3.3 million in the six months ended June 30, 2018, a $1.0 million, or 23.00%, reduction from $4.3 million in the same period in 2017. This reduction was mainly attributable to lower net interest income combined with higher noninterest expenses, partially offset by higher noninterest income.

The 36.90% reduction in net interest income to $2.9 million in the six months ended June 30, 2018 from $4.6 million in the same period in 2017 was primarily due to higher interest expenses paid on longer duration FHLB advances and brokered certificates of deposit. These changes were offset by higher interest income on the investment securities portfolio. In the six months ended June 30, 2018, the average balances of FHLB advances and other borrowings, and brokered certificates of deposit, were $265.4 million (29.01%) and $40.9 million (5.85% ) higher than the same period in 2017.

Noninterest expense increased 11.55% to $5.8 million for the six months ended June 30, 2018 from $5.2 million for the same period in 2017, primarily as a result of higher fees on derivative transactions.

Noninterest income increased 31.32% to $5.4 million for the six months ended June 30, 2018 from $4.1 million in the same period in 2017. This increase is primarily due to higher income recorded in the change in cash surrender value of BOLI, and income from the early termination of short term FHLB advances. In addition, there were higher management fees from services provided to an MSF non-US affiliate during the period.

~~Institutional~~

~~Three Months Ended June 30, 2018 and 2017~~

For the three months ended June 30, 2018, Institutional reported net loss of $1.3 million compared to net income of $1.4 million in the same period in 2017, mainly attributable to lower reversals of allowance for loan losses, lower noninterest income and higher noninterest expense, partially offset by higher net interest income.

Net interest income increased 21.75%, or $665 thousand, to $3.7 million in the three months ended June 30, 2018 from $3.1 million in the same period in 2017, primarily due to higher fund transfer pricing credit received for the Company’s capital.

For the three months ended June 30, 2018, Institutional had a credit in its provision for loan losses which was 64.61%, or $1.5 million, lower than in the same period in 2017. Any difference between the total provision for loan losses, or reversals recorded at the Company level versus the amounts allocated to reportable segments, is reflected under Institutional.

Noninterest income decreased 13.27% to $5.7 million in the three months ended June 30, 2018 from $6.6 million in the same period in 2017, primarily due to lower income from brokerage and advisory activities through our Investments Services subsidiary which is mainly the result of lower volume of customer brokerage activity. In addition, there was lower rental income recorded during the period as as result of the sale of G200 Leasing, LLC in the first quarter of 2018.

Noninterest expense increased $542 thousand, or 6.40%, to $9.0 million during the three months ended June 30, 2018, from $8.5 million in the same period in 2017. This increase is mainly the result of a $1.2 million provision for the estimated compensation to be paid to participants of the non-qualified deferred compensation plan to partially mitigate the effect of the unexpected early distribution for federal income tax purposes. The Spin-off caused an early distribution for U.S. federal income tax purposes from our deferred compensation plan. In addition, legal and consulting fees of $2.0 million associated with the Spin-off were allocated to the Institutional segment for the three months ended June 30, 2018.

~~Six Months Ended June 30, 2018 and 2017~~

Institutional had a net loss of $5.6 million in the six months ended June 30, 2018 versus net income of $2.4 million in the same period in 2017, mainly attributable to lower noninterest income, higher noninterest expense and higher provision for loan losses, partially offset by higher net interest income.

Net interest income increased 41.06%, or $2.1 million, to $7.2 million in the six months ended June 30, 2018 from $5.1 million in the same period in 2017, mainly due to the effect of lower funds transfer pricing charges for total other assets and higher fund transfer pricing credit received for the Company’s capital.

For the six months ended June 30, 2018, Institutional reported a provision for loan loss of $2.1 million compared to a credit to the provision for loan losses of $1.5 million for the same period in 2017. Any difference between the total provision for loan losses, or reversals recorded at the Company level versus the amounts allocated to reportable segments, is reflected under Institutional.

Noninterest income decreased 11.36% to $11.9 million for the six months ended June 30, 2018 from $13.4 million for the same period in 2017, primarily due to lower income from brokerage and advisory activities through our Investments Services subsidiary which is mainly the result of lower volume of customer brokerage activity. In addition, there was lower rental income recorded during the period as as result of the sale of G200 Leasing, LLC in the first quarter of 2018.

Noninterest expense increased 50.68% to $20.5 million for the six months ended June 30, 2018 from $13.6 million for the same period in 2017, primarily due to a $4.3 million provision for legal and consulting fees associated with the Spin-off, and higher operating expenses related to ongoing software services. In addition, there were higher salaries and benefits due to a $1.2 million provision for the estimated compensation to be paid to participants of the non-qualified deferred compensation plan to partially mitigate the effect of the unexpected early distribution for federal income tax purposes. The Spin-off caused an early distribution for U.S. federal income tax purposes from our deferred compensation plan.

Financial Condition - Comparison of Financial Condition as of ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017~~2018

Assets. Total assets were ~~$8.5~~$7.9 billion as of ~~June~~September 30, ~~2018, an increase~~2019, a decline of ~~$93.7~~$260.1 million, ~~from~~or 3.2%, compared to $8.1 billion as of December 31, ~~2017. This~~2018. The decrease was mainly ~~attributable to an increase~~driven by a decrease of ~~$155.4~~$160.3 million in loans held for investment net of allowance for loan ~~losses. In addition, the composition of interest-earning assets changed with respect to the previous year.~~ losses as foreign loans continued their planned decline, and $108.4 million lower total securities. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed ~~information. This is~~information, including changes in the ~~result~~composition of ~~a strategic plan to improve~~ our ~~operating results by adjusting our mix of~~ interest-earning ~~assets and liabilities consistent with our expectations that a rising interest rate environment will continue.~~assets.

Cash and Cash Equivalents. Cash and cash equivalents ~~decreased~~increased to ~~$117.2~~$101.3 million at ~~June~~September 30, ~~2018~~2019 from ~~$153.4~~$85.7 million at December 31, ~~2017.~~2018.

Cash flows provided by operating activities were ~~$26.2~~$75.9 million in the ~~six~~nine months ended ~~June~~September 30, ~~2018.~~2019. This was primarily attributed to net income ~~earned.~~in the period and the termination of interest rate swaps designated as cash flow hedges, which resulted in $8.9 million of proceeds. Net cash ~~used in~~provided by investing activities was ~~$147.6~~$300.2 million during the ~~six~~nine months ended ~~June~~September 30, ~~2018, primarily due to a net increase in loans of $174.2 million, and purchases of available for sale securities totaling $121.2 million. These disbursements were partially offset~~2019, mainly driven by maturities, sales and calls of securities available for sale and FHLB stock totaling ~~$122.8~~$430.1 million and $24.3 million, respectively, and proceeds from loan sales totaling ~~$23.8~~$259.8 million. ~~In addition, cash flows from investing activities during the six months ended June 30, 2018, include $7.5~~These proceeds were partially offset by purchases of available for sale securities and FHLB stock totaling $290.1 million ~~in net proceeds from the sale of our G200 Leasing, LLC subsidiary, which leased a corporate plane to MSF.~~and $24.3 million, respectively.

In the ~~six~~nine months ended ~~June~~September 30, ~~2018,~~2019, net cash ~~provided by~~used in financing activities was ~~$85.2~~$360.4 million. These activities included ~~$205.9 million higher time deposits and $85.0 million net additional advances borrowed from the FLHB, partially offset by $165.7~~a $232.4 million net decrease in total demand, savings and money market deposit balances, the $28.5 million repurchase of Class B common stock completed in the first quarter of 2019, the redemption of $25.9 million in junior subordinated debentures in the third quarter of 2019 and a $107.4 million decrease in time deposits. These disbursements were partially offset by $29.2 million in net proceeds from the ~~2018 Special Dividend~~issuance of ~~$40.0 million paid on March 13, 2018~~Class A common stock in the first quarter of 2019, which were used to ~~MSF.~~purchase Class B common stock.

Loans

Loans are our largest component of interest-earning assets. The table below depicts the trend of loans as a percentage of total assets and the allowance for loan losses as a percentage of total loans for the periods presented.



	September 30, 2019			December 31, 2018
(in thousands, except percentages)
Total loans, gross (1)	$	5,751,791		$	5,920,175
Total loans, gross / total assets	73.1		%	72.9		%

Allowance for loan losses	$	53,640		$	61,762
Allowance for loan losses / total loans, gross (1) (2)	0.93		%	1.04		%

Total loans, net (3)	$	5,698,151		$	5,858,413
Total loans, net / total assets	72.5		%	72.1		%

June 30, 2018 December 31, 2017
(in thousands, except percentages)
Total loans, gross $ 6,219,549
$ 6,066,225
Total loans, gross / total assets 72.91 % 71.90 %

Allowance for loan losses $ 69,931
$ 72,000
Allowance for loan losses / total loans, gross ^{(1) (2)}
1.12 % 1.19 %

~~_________________~~_______________


(1)	~~Outstanding~~ Total loans, gross are outstanding loan principal balance net of deferred loan fees and costs, excluding loans held for sale and the allowance for loan losses.


(2)	See Note 5 of our audited consolidated financial statements in the Form 10-K and Note 54 of ~~our~~these unaudited interim consolidated financial statements for more details on our impairment models.


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

The composition of our CRE loan portfolio by industry segment at September 30, 2019 and December 31, 2018 is

depicted in the following table:



(in thousands)	September 30, 2019		December 31, 2018
Retail (1)	$	1,174,830	$	1,081,142
Multifamily	942,851		909,439
Office space	460,060		441,712
Land and construction	268,312		326,644
Hospitality	193,878		166,415
Industrial and warehouse	104,894		120,086
	$	3,144,825	$	3,045,438

_________


(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 with a primary retail component, where the primary source of repayment is derived from the rental income generated from the use of the property by its tenants.

The table below summarizes the composition of our loan portfolio by type of loan as of the end of each period presented. International loans include ~~but are not limited to,~~ transactions in which the debtor or customer is domiciled outside the U.S., even when the collateral is U.S. property. All international loans are denominated and payable in U.S. Dollars.


	June 30, 2018		December 31, 2017
	(in thousands)
(in thousands)					September 30, 2019		December 31, 2018
Domestic Loans:
Real Estate Loans
Commercial real estate (CRE)
Non-owner occupied	$	1,864,645	$	1,713,104
Nonowner occupied					$	1,933,662	$	1,809,356
Multi-family residential	858,453		839,709		942,851		909,439
Land development and construction loans	402,830		406,940		268,312		326,644
	3,125,928		2,959,753		3,144,825		3,045,439
Single-family residential	371,733		360,041		410,108		398,043
Owner occupied	653,902		610,386		825,601		777,022
	4,151,563		3,930,180		4,380,534		4,220,504
Commercial loans	1,328,056		1,285,461		1,072,220		1,306,792
Loans to depository institutions and acceptances	16,500		16,443
Consumer loans and overdrafts	77,522		78,872
Loans to depository institutions and acceptances (1)					19,815		19,965
Consumer loans and overdrafts (2) (3)					77,318		73,155
Total Domestic Loans	5,573,641		5,310,956		5,549,887		5,620,416

International Loans:
Real Estate Loans
Single-family residential ⁽¹⁾	143,179		152,713
	143,179		152,713
Single-family residential (4)					117,360		135,438
Commercial loans	103,977		69,294		55,264		73,636
Loans to depository institutions and acceptances	352,364		481,183		5,000		49,000
Consumer loans and overdrafts	46,388		52,079
Consumer loans and overdrafts (3) (5)					24,280		41,685
Total International Loans	645,908		755,269		201,904		299,759
Total Loan Portfolio	$	6,219,549	$	6,066,225	$	5,751,791	$	5,920,175

__________________


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


(2)	Includes customers’ overdraft balances totaling $4.2 million and $1.0 million as of September 30, 2019 and December 31, 2018, respectively.

(3)

At September 30, 2019, domestic and international credit card balances amounted to $4.3 million and $16.5 million, respectively. 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 are requiring repayment of their balances by November 2019. We are closely monitoring the performance of the outstanding balance of our credit cards until it is completely repaid. At the end of October we curtailed charge privileges to the remaining cardholders and require repayment of their balances by January 2020.


(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.

As of ~~June~~September 30, ~~2018,~~2019, the loan portfolio ~~increased $153.3~~decreased $168.4 million, or ~~2.53%~~2.8%, to ~~$6.2~~$5.8 billion, as compared to ~~$6.1~~$5.9 billion at December 31, ~~2017. Following~~2018. As part of our business strategy, ~~loans to international customers declined by $109.4 million, or 14.48%, as of June 30, 2018, compared to December 31, 2017. The overall decline in~~ loans to international customers, primarily from Latin America, ~~was partially offset~~declined by ~~the addition~~$97.9 million, or 32.6%, as of ~~syndicated commercial loans~~September 30, 2019, compared to ~~large corporations in Europe and Canada with world-wide operations and which we believe had good credit quality.~~December 31, 2018. The domestic loan exposure ~~increased $262.7~~decreased $70.5 million, or ~~4.95%~~1.3%, as of ~~June~~September 30, ~~2018,~~2019, compared to December 31, ~~2017. This increase is mainly attributed to $166.2~~2018. The decline in total domestic loans includes net decreases of $234.6 million in Commercial loans, partially offset by net ~~increase~~increases of $99.4 million, $48.6 million, $12.1 million and $4.2 million in ~~commercial real estate~~CRE loans, ~~$11.7 million net increase in single family~~owner occupied loans, single-family residential loans ~~$43.5~~and consumer loans, respectively. In the nine months ended September 30, 2019, the decline in domestic loans was mainly driven by a reduction of $238.2 million ~~net increase in owner-occupied commercial real estate~~non-relationship SNCs.

As of September 30, 2019, syndicated loans ~~and $42.6~~that financed highly leveraged transactions were $43.0 million, ~~net increase in commercial loans.~~

or 0.7%, of total loans, compared to $207.7 million, or 3.5%, of total loans, as of December 31, 2018.

Foreign Outstanding

The table below summarizes the composition of our international loan portfolio by country of risk for the periods presented. All of our foreign loans are denominated in U.S. ~~dollars,~~Dollars, and bear fixed or variable rates of interest based upon different market benchmarks plus a spread.

June 30, 2018 December 31, 2017

Net Exposure⁽¹⁾

%
Total Assets

Net Exposure⁽¹⁾

%
Total Assets
(in thousands, except percentages)
Brazil $ 140,705
1.65 % $ 141,088
1.67 %
Venezuela ⁽²⁾
171,818
2.01 % 182,678
2.17 %
Chile 46,678
0.55 % 94,543
1.12 %
Colombia 68,110
0.8 % 63,859
0.76 %
Panama 31,139
0.36 % 51,557
0.61 %
Peru 53,424
0.63 % 70,088
0.83 %
Mexico 2,302
0.03 % 18,274
0.22 %
Costa Rica 16,500
0.19 % 43,844
0.52 %
Other ⁽³⁾
115,232
1.35 % 89,338
1.06 %
Total $ 645,908
7.57 % $ 755,269
8.95 %



	September 30, 2019				December 31, 2018
	Net Exposure (1)		% Total Assets		Net Exposure (1)		% Total Assets
(in thousands, except percentages)
Venezuela (2)	$	126,411	1.61	%	$	157,162	1.93	%
Other (3)	75,493		0.96	%	142,597		1.77	%
Total	$	201,904	2.57	%	$	299,759	3.70	%

_________________


(1)	~~Outstanding~~ Consists of outstanding principal amounts, net of collateral of cash, cash equivalents or other financial instruments totaling ~~$28.0~~$19.6 million and ~~$31.9~~$19.5 million as of ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.


(2)	Includes mortgage loans for single-family residential properties located in the U.S. totaling ~~$136.7~~$110.1 million and ~~$145.1~~$129.0 million as of ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

(3) Includes loans to borrowers in other countries which do not individually exceed one percent of total assets in any of the reported periods.

The maturities of our outstanding international loans were:

June 30, 2018 December 31, 2017
Less than 1 year 1-3 Years More than 3 years Less than 1 year 1-3 Years More than 3 years
(in thousands)
Brazil $ 134,877
$ 5,616
$ 212
$ 137,850
$ 3,019
$ 219
Venezuela⁽¹⁾
27,319
8,250
136,249
29,982
8,460
144,236
Chile 41,251
5,500
178
88,174
6,191
179
Colombia 66,330
87
2,023
60,000
1,801
2,057
Panama 10,218
20,970
171
24,967
26,590
—
Peru 53,542
—
—
70,088
—
—
Mexico 863
1,050
584
16,737
951
586
Costa Rica 16,573
—
—
43,844
—
—
Other⁽²⁾
66,972
582
46,491
83,990
1,192
4,156
Total ⁽³⁾
$ 417,945
$ 42,055
$ 185,908
$ 555,632
$ 48,204
$ 151,433



	September 30, 2019								December 31, 2018
	Less than 1 year		1-3 Years		More than 3 years		Total		Less than 1 year		1-3 Years		More than 3 years		Total
(in thousands)
Venezuela (1)	$	15,907	$	1,931	$	108,573	$	126,411	$	27,415	$	1,059	$	128,688	$	157,162
Other (2)	20,039		9,137		46,317		75,493		71,707		18,200		52,690		142,597
Total (3)	$	35,946	$	11,068	$	154,890	$	201,904	$	99,122	$	19,259	$	181,378	$	299,759

_________________

(1)

Includes mortgage loans for single-family residential properties located in the U.S. totaling ~~$136.7~~$110.1 million and ~~$145.1~~$129.0 million as of ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, 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 do not believe that the U.S. economic embargo on certain Venezuelan persons will adversely affect our Venezuelan customer relationships, generally.

(2) Includes loans to borrowers in other countries which do not individually exceed one percent of total assets in any of the reported periods.


(3)	~~Outstanding~~ Consists of outstanding principal amounts, net of cash collateral, ~~of cash,~~ cash equivalents or other financial instruments totaling ~~$28.0~~$19.6 million and ~~$31.9~~$19.5 million as of ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

During the nine months ended September 30, 2019, we continued the strategy to reduce the international commercial loan exposure. As a result, loans to international customers decreased $97.9 million, or 32.6%, in 2019 compared to the same period in 2018, mainly in companies and financial institutions in Brazil, Colombia, and other countries.

Loan Quality

Allocation of Allowance for Loan Losses

In the following table, we present the allocation of the allowance for loan losses by loan segment at the end of the periods presented. The amounts shown in this table should not be interpreted as an indication that charge-offs in future periods will occur in these amounts or percentages. These amounts represent our best estimates of losses incurred, but not yet identified, at the reported dates, derived from the most current information available to us at those dates and, therefore, do not include the impact of future events that may or may not confirm the accuracy of those estimates at the dates reported. Our allowance for loan losses is established using estimates and judgments, which consider the views of our regulators in their periodic examinations. We also show the percentage of each loan class, which includes loans in nonaccrual status.


	June 30, 2018					December 31, 2017					September 30, 2019					December 31, 2018
	Allowance			% of Loans in Each Category to Total Loans		Allowance			% of Loans in Each Category to Total Loans		Allowance			% of Loans in Each Category to Total Loans		Allowance			% of Loans in Each Category to Total Loans
	(in thousands, except percentages)
(in thousands, except percentages)
Domestic Loans
Real estate	$	28,693		49.67	%	$	31,290		48.04	%	$	22,387		54.6	%	$	22,778		51.3	%
Commercial	27,068			33.75	%	30,782			33.38	%	24,260			34.8	%	29,278			37.0	%
Financial institutions	31			0.27	%	31			0.27	%	41			0.4	%	41			0.3	%
Consumer and others ⁽¹⁾	2,015			5.92	%	60			5.86	%	1,679			6.7	%	1,985			6.3	%
	57,807			89.61	%	62,163			87.55	%	48,367			96.5	%	54,082			94.9	%

International Loans ⁽²⁾
Commercial	2,716			1.63	%	1,905			1.14	%	459			1.0	%	740			1.2	%
Financial institutions	3,286			5.71	%	4,331			7.93	%	17			0.1	%	404			0.8	%
Consumer and others ⁽¹⁾	6,122			3.05	%	3,601			3.38	%	4,797			2.4	%	6,536			3.1	%
	12,124			10.39	%	9,837			12.45	%	5,273			3.5	%	7,680			5.1	%

Total Allowance for Loan Losses	$	69,931		100.00	%	$	72,000		100.00	%	$	53,640		100.0	%	$	61,762		100.0	%
% Total Loans	1.12		%			1.19		%
% of Total Loans											0.93		%			1.04		%

__________________


(1)	~~Includes~~ Includes: (i) credit card receivables to cardholders for whom charge privileges have been stopped as of September 30, 2019; and (ii) mortgage loans for and secured by single-family residential ~~loans.~~properties located in the U.S. The total allowance for loan losses, after the charge-offs, for credit card receivables stands at $3.6 million at September 30, 2019


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

Non-Performing Assets

In the following table, we present a summary of our non-performing assets by loan class, which includes non-performing loans by portfolio segment, both domestic and international, and other real estate owned, or OREO, at the dates presented. Non-performing loans consist of (i) nonaccrual ~~loans where the accrual of interest has been discontinued;~~loans; (ii) accruing loans ~~more than~~ 90 days or more contractually past due as to interest or principal; and (iii) restructured loans that are considered ~~“trouble debt restructurings”, or “TDRs”.~~TDRs.


	June 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018
	(in thousands)
(in thousands)
Non-Accrual Loans⁽¹⁾
Domestic Loans:
Real Estate Loans
Commercial real estate (CRE)
Non-owner occupied	$	10,510	$	489
	10,510		489
Nonowner occupied					$	1,936	$	—
Multi-family residential					—		—
Single-family residential	5,069		4,277		6,540		5,198
Owner occupied	7,186		12,227		11,921		4,983
	22,765		16,993		20,397		10,181
Commercial loans	5,960		2,500		9,605		4,772
Consumer loans and overdrafts	19		9		91		11
Total Domestic	28,744		19,502		30,093		14,964

International Loans: ⁽²⁾
Real Estate Loans
Single-family residential	1,265		727		2,493		1,491
	1,265		727
Commercial loans	3,974		6,447
Consumer loans and overdrafts	23		46		25		24
Total International	5,262		7,220		2,518		1,515
Total-Non-Accrual Loans	$	34,006	$	26,722
Total Non-Accrual Loans					$	32,611	$	16,479

Past Due Accruing Loans⁽³⁾
Domestic Loans:
Real Estate Loans
Single-family residential	$	—	$	112	$	—	$	54
Commercial	27		—
Total Domestic	27		112		—		54

International Loans:
Real Estate Loans
Single-family residential	—		114		—		365
Consumer loans and overdrafts	663		—		213		884
Total International	663		114		213		1,249
Total Past Due Accruing Loans	$	690	$	226	$	213	$	1,303

Total Non-Performing Loans	34,696		26,948		$	32,824	$	17,782
Other Real Estate Owned	558		319		—		367
Total Non-Performing Assets	$	35,254	$	27,267	$	32,824	$	18,149

__________________


(1)	Includes loan modifications that met the definition of ~~trouble debt restructuring which~~TDRs that may be performing in accordance with their modified loan terms.


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


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

At ~~June~~September 30, ~~2018,~~2019, non-performing assets increased ~~$8.0~~$14.7 million, or ~~29.29%~~80.9%, compared to December 31, ~~2017.~~2018. This increase iswas mainly attributed to ~~one commercial real estate, or “CRE”,~~the deterioration of a total of $11.7 million in a multiple loan relationship to a South Florida customer in the food wholesale industry whose sales in Puerto Rico have not fully recovered from Hurricanes Irma and Maria in 2017. This relationship is comprised of four owner occupied loans totaling $4.9 million, one commercial loan ~~with carrying values of $10.4~~totaling $2.7 million, and ~~$4.5~~one CRE loan of $1.9 million, ~~respectively,~~ which had been classified special mention since June 2018. The loan relationship also includes four residential loans totaling $2.2 million. During June 2019 all the loans in the relationship were further downgraded to substandard and placed in ~~non-accrual status~~non-accrual. On July 30, 2019, the Company agreed to restructure the CRE, owner occupied and commercial loans totaling $9.5 million from this relationship. This TDR restructure consisted of extending repayment terms and adjusting future periodic payments, and the Company determined no additional impairment charges were necessary. The 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 CRE, owner occupied, commercial loans and residential loans, which total a $11.7 million impaired loan relationship as of September 30, 2019, are adequate to cover probable losses given current facts and circumstances. The Company will continue to closely monitor the performance of these loans under their modified terms.

Additionally, during the ~~period. In addition, $651 thousand~~nine months ended September 30, 2019, non-performing loans also increased due to two commercial loans totaling $3.2 million, one single family residential loan for $0.9 million, one owner occupied loan for $2.0 million and a $0.7 million CRE loan placed in ~~credit card balances became 90 days~~nonaccrual status. This increase was offset by pay downs and charge-offs, mainly due to two commercial loans totaling $1.4 million, an aggregate reduction of $2.2 million in single family residential loans and a total reduction of $0.7 million in past due during the period. These increases were partially offset by loan repayments of $3.2 million and $5.1 million on three owner-occupied commercial real estate loans, and four commercial loans, respectively.international credit cards.

We recognized no interest income on nonaccrual loans during the ~~six~~nine months ended ~~June~~September 30, ~~2018~~2019 and ~~2017.~~2018. Additional interest income that we would have recognized on these loans had they been current in accordance with their original terms in each of the ~~six month periods~~nine months ended ~~June~~September 30, 2019 and 2018 ~~and 2017~~ was ~~$707 thousand and~~ $1.1 ~~million, respectively.~~million.

The ~~following table presents the recorded investment of potential problem~~Company’s loans by ~~loan category at~~credit quality indicators are summarized in the ~~dates indicated.~~following table. We have no purchased credit-impaired loans.



	September 30, 2019								December 31, 2018
(in thousands)	Special Mention		Substandard		Doubtful		Total (1)		Special Mention		Substandard		Doubtful		Total (1)
Real Estate Loans
Commercial Real Estate (CRE)
Nonowner occupied	$	13,056	$	1,936	$	—	$	14,992	$	6,561	$	222	$	—	$	6,783
Multi-family residential	—		—		—		—		—		—		—		—
Land development and construction loans	10,184		—		—		10,184		—		—		—		—
	23,240		1,936		—		25,176		6,561		222		—		6,783
Single-family residential	—		9,033		—		9,033		—		7,108		—		7,108
Owner occupied	5,719		15,307		—		21,026		9,019		9,451		—		18,470
	28,959		26,276		—		55,235		15,580		16,781		—		32,361
Commercial loans	5,077		11,541		—		16,618		3,943		6,462		589		10,994
Consumer loans and overdrafts	—		2,400		—		2,400		—		6,062		—		6,062
	$	34,036	$	40,217	$	—	$	74,253	$	19,523	$	29,305	$	589	$	49,417

June 30, 2018 December 31, 2017
(in thousands) Special Mention Substandard Doubtful
Total ⁽¹⁾
Special Mention Substandard Doubtful
Total ⁽¹⁾
Real Estate Loans
Commercial real estate (CRE)
Non-owner occupied $ 11,695
$ 10,510
$ —
$ 22,205
$ 1,020
$ 489
$ —
$ 1,509
Single-family residential 42
6,334
—
6,376
—
5,869
—
5,869
Owner occupied 10,987
9,539
—
20,526
4,051
13,867
—
17,918
22,724
26,383
—
49,107
5,071
20,225
—
25,296
Commercial loans 5,759
8,891
2,020
16,670
6,100
14,112
—
20,212
Consumer loans and overdrafts —
5,734
—
5,734
—
4,113
—
4,113
$ 28,483
$ 41,008
$ 2,020
$ 71,511
$ 11,171
$ 38,450
$ —
$ 49,621

~~__________________~~__________

(1) There are no loans categorized as a “Loss” as of the dates presented.

At ~~June~~September 30, ~~2018, total potential problem~~2019, substandard loans increased ~~$21.9~~$10.9 million, or ~~44.11%~~37.2%, compared to December 31, ~~2017. This~~2018. The increase was mainly attributed to the deterioration of the previously discussed $11.7 million multiple loan relationship to a South Florida borrower in the food wholesale industry. Additionally, the increase is attributed to two commercial loans totaling $3.2 million, one single family residential loan ~~downgrades during the period, including~~for $0.9 million, one owner occupied loan for $2.0 million and a $0.7 million CRE loan classified substandard. This increase was offset by pay downs and charge-offs, mainly due to two commercial loans totaling $1.4 million, one owner occupied loan for $1.0 million, an aggregate reduction of $2.2 million in single family residential loans and a total reduction of $3.7 million in international credit cards.

At September 30, 2019, special mention loans increased $14.5 million, or 74.3%, compared to December 31, 2018. The increase is primarily due to a $10.2 million condo construction relationship SNC loan in New York City, four commercial loans totaling $3.9 million, three owner-occupied commercial real estate loans totaling $5.3 million, and three CRE loans totaling ~~$19.2~~$8.6 million ~~five owner-occupied real estate loans totaling $10.0 million and two commercial loans totaling $4.7 million.~~

One CRE loan with a carrying value of $10.4 million as of June 30, 2018 was downgraded to substandard and placed in non-accrual status during the quarter ended March 31, 2018. Subsequently, the Company agreed to restructure this loan by extending its maturity date and adjusting the loan’s monthly payments. As a result of the modification in May 2018, the Company determined no additional impairment charges were necessary and deemed the modification a troubled debt restructuring. In June 2018, based on market information available, the Company estimated that the fair value of the collateral, after estimated selling costs, had dropped below the carrying value of the loan; therefore a $3.9 million specific reserve was allocated to this loan. A recent appraisal indicates that the collateral securing the TDR has deteriorated further, and we are evaluating whether a further write-down may be required.

~~The remaining two CRE loans, the five owner-occupied real estate loans and the two commercial loans were~~ downgraded to special mention during the ~~quarter ended June 30, 2018.~~period. This was partially offset by the classification as substandard of special mention loans in the $11.7 million of loans to the South Florida borrower previously discussed, and one owner occupied loan for $2.0 million. These downgraded loans reflect individual loan performances which management believes do not reflect negative trends. Additionally, these downgraded loans are ~~under close monitoring~~being monitored and did not generate any additional ~~provisions.~~provisions in 2019. Finally, one owner occupied loan for $2.2 million was upgraded to passing grade during the period.

Since late 2016, and consistent with industry practice, credit cards held by Venezuelan residents with outstanding balances above the corresponding customer’s average deposit balances with the Bank are classified substandard and charging privileges are suspended. At September 30, 2019 and December 31, 2018, this resulted in approximately $2.3 million and $6.0 million, respectively, in credit card receivables classified substandard. At the beginning of 2018, the Company changed the monitoring of such credit cards and related deposit balances from quarterly to monthly. Deteriorating economic conditions in Venezuela could cause classified credit card balances, and charge offs to continue increasing.

Approximately 95% of our credit card holders are foreign, mostly Venezuelan, and the card receivables were reflecting the stresses in the Venezuela economy. 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 are requiring repayment of their balances by November 2019. All amounts deemed uncollectible were charged off during the quarter. Charge-offs during the quarter were $1.7 million, and $3.1 million in the nine months ended September 30, 2019. The ALL after the charge-offs for this product stands at $3.6 million at September 30, 2019. We are closely monitoring the performance of the outstanding balance of $20.8 million as of September 30, 2019, until it is completely repaid. At the end of October we curtailed charge privileges to the remaining cardholders and required repayment of their balances by January 2020. Concurrently, we entered into referral arrangements with recognized U.S.-based card issuers that will permit us to serve our international and domestic customers and we will earn referral fees and share interchange revenue without exposure to credit risk.

Potential problem loans, which are accruing loans classified as substandard and are less than 90 days past due, at September 30, 2019 and December 31, 2018, are as follows:



(in thousands)	September 30, 2019		December 31, 2018
Real estate loans
Commercial real estate (CRE)
Nonowner occupied	$	—	$	222
Owner occupied	3,386		4,468
	3,386		4,690
Commercial loans	1,936		2,433
Consumer loans and overdrafts (1)	2,072		5,144
	$	7,394	$	12,267

__________

(1) Includes international consumer loans of approximately $2.1 million and $5.1 million at each of the dates presented.

At September 30, 2019, total potential problem loans decreased $4.9 million, or 39.7%, compared to December 31, 2018. The decrease is mainly attributed to a $3.1 million decrease in credit cards past due and a $1.0 million owner-occupied loan repayment, as well as repayments of other smaller loans during the period.

Securities

The following table sets forth the book value and percentage of each category of securities at ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017.~~2018. The book value for securities classified as available for sale represents fair value and the book value for securities classified as held to maturity represents amortized cost.


	June 30, 2018				December 31, 2017				September 30, 2019				December 31, 2018
	Amount		%		Amount		%		Amount		%		Amount		%
	(in thousands, except percentages)
(in thousands, except percentages)
Securities held to maturity
U.S. Government sponsored enterprise debt									$	74,861	4.6	%	$	82,326	4.7	%
U.S. Government agency debt	$	2,943	0.16	%	$	3,034	0.16	%	2,750		0.2	%	2,862		0.2	%
U.S. Government sponsored enterprise debt	85,497		4.72	%	86,826		4.70	%
	$	88,440	4.88	%	$	89,860	4.86	%	$	77,611	4.8	%	$	85,188	4.9	%
Securities available for sale:
U.S. Government agency debt	$	250,837	13.84	%	$	291,385	15.78	%
U.S. Government sponsored enterprise debt	827,484		45.66	%	875,666		47.41	%	$	940,260	57.6	%	$	820,779	47.1	%
Corporate debt ⁽¹⁾	374,929		20.69	%	313,392		16.97	%	243,149		14.8	%	352,555		20.3	%
US Treasury debt	—		—	%	2,701		0.15	%
U.S. Government agency debt									226,644		13.9	%	216,985		12.5	%
Municipal bonds									50,198		3.1	%	160,212		9.2	%
Mutual funds(2)	23,108		1.28	%	23,617		1.28	%	23,957		1.5	%	23,110		1.3	%
Municipal bonds	173,307		9.56	%	180,396		9.77	%
U.S. treasury securities									994		0.1	%	—		—	%
Commercial paper									—		—	%	12,410		0.7	%
	$	1,649,665	91.03	%	$	1,687,157	91.36	%	$	1,485,202	91.0	%	$	1,586,051	91.1	%
Other securities ⁽²⁾:
Other securities (3):
FHLB stock									$	57,028	3.5	%	$	57,179	3.3	%
Federal Reserve Bank stock	$	13,050	0.72	%	$	13,010	0.70	%	13,144		0.7	%	13,010		0.7	%
FHLB stock	60,964		3.37	%	56,924		3.08	%
	$	74,014	4.09	%	$	69,934	3.78	%	$	70,172	4.2	%	$	70,189	4.0	%
	$	1,812,119	100.00	%	$	1,846,951	100.00	%	$	1,632,985	100.0	%	$	1,741,428	100.0	%

__________________

(1)

~~June~~September 30, ~~2018~~2019 includes ~~$53.4~~$12.1 million in ~~“investment grade”~~“investment-grade” quality securities issued by corporate entities from ~~Panama,~~ Europe and Japan in ~~three different sectors.~~the financial services sector. December 31, ~~2017,~~2018 includes ~~$24.3~~$36.2 million in obligations issued by corporate entities from ~~Panama,~~ Europe and ~~others~~Japan 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.~~Dollars.


(2)	Includes a publicly offered investment company which seeks current income and makes investments that qualify for Community Reinvestment Act (“CRA”) purposes.


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

The following tables set forth the book value, scheduled maturities and weighted average yields for our securities portfolio at September 30, 2019 and December 31, 2018. Similar to the table above, the book value for securities available for sale is equal to fair market value and the book value for securities held to maturity is equal to amortized cost.



September 30, 2019
(in thousands, except percentages)	Total				Less than a year				One to five years				Five to ten years				Over ten years				No maturity
(in thousands, except percentages)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Securities held to maturity
U.S. Government sponsored enterprise debt	$	74,861	2.62	%	$	—	—	%	$	—	—	%	$	—	—	%	$	74,861	2.62	%	$	—	—	%
U.S. Government agency debt	2,750		2.74	%	—		—	%	—		—	%	—		—	%	2,750		2.74	%	—		—	%
	$	77,611	2.62	%	$	—	—	%	$	—	—	%	$	—	—	%	$	77,611	2.62	%	$	—	—	%
Securities available for sale
U.S. Government sponsored enterprise debt	$	940,260	2.83	%	$	613	4.51	%	$	26,502	2.62	%	$	117,793	2.94	%	$	795,352	2.82	%	$	—	—	%
Corporate debt-domestic	231,000		3.06	%	23,800		2.37	%	151,451		3.02	%	55,749		3.46	%	—		—	%	—		—	%
U.S. Government agency debt	226,644		2.94	%	350		2.69	%	8,097		3.33	%	31,975		2.87	%	186,222		2.94	%	—		—	%
Municipal bonds	50,198		3.30	%	—		—	%	—		—	%	29,298		3.24	%	20,900		3.39	%	—		—	%
Corporate debt-foreign	12,149		3.01	%	—		—	%	12,149		3.01	%	—		—	%	—		—	%	—		—	%
Mutual funds	23,957		2.28	%	—		—	%	—		—	%	—		—	%	—		—	%	23,957		2.28	%
U.S. treasury securities	994		1.88	%	994		1.88	%	—		—	%	—		—	%	—		—	%	—		—	%
Commercial paper	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%
	$	1,485,202	2.89	%	$	25,757	2.41	%	$	198,199	2.98	%	$	234,815	3.09	%	$	1,002,474	2.85	%	$	23,957	2.28	%
Other securities
FHLB stock	$	57,028	6.36	%	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%	$	57,028	6.36	%
Federal Reserve Bank stock	13,144		6.08	%	—		—	%	—		—	%	—		—	%	—		—	%	13,144		6.08	%
	$	70,172	6.31	%	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%	$	70,172	6.31	%
	$	1,632,985	3.02	%	$	25,757	2.41	%	$	198,199	2.98	%	$	234,815	3.09	%	$	1,080,085	2.84	%	$	94,129	5.28	%



December 31, 2018
(in thousands, except percentages)	Total				Less than a year				One to five years				Five to ten years				Over ten years				No maturity
(in thousands, except percentages)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Securities held to maturity
U.S. Government sponsored enterprise debt	$	82,326	2.84	%	$	—	—	%	$	—	—	%	$	—	—	%	$	82,326	2.84	%	$	—	—	%
U.S. Government agency debt	2,862		2.73	%	—		—	%	—		—	%	—		—	%	2,862		2.73	%	—		—	%
	$	85,188	2.84	%	$	—	—	%	$	—	—	%	$	—	—	%	$	85,188	2.84	%	$	—	—	%
Securities available for sale
U.S. Government sponsored enterprise debt	$	820,779	2.70	%	$	11	5.16	%	$	29,807	2.70	%	$	86,654	2.78	%	$	704,307	2.69	%	$	—	—	%
Corporate debt-domestic	316,387		3.12	%	40,804		2.66	%	249,709		3.17	%	25,874		3.35	%	—		—	%	—		—	%
U.S. Government agency debt	216,985		2.83	%	1,081		2.70	%	10,068		2.61	%	21,113		2.71	%	184,723		2.86	%	—		—	%
Municipal bonds	160,212		3.11	%	—		—	%	—		—	%	29,397		3.02	%	130,815		3.13	%	—		—	%
Corporate debt-foreign	36,168		3.38	%	—		—	%	36,168		3.38	%	—		—	%	—		—	%	—		—	%
Mutual funds	23,110		2.32	%	—		—	%	—		—	%	—		—	%	—		—	%	23,110		2.32	%
Commercial paper	12,410		2.77	%	12,410		2.77	%	—		—	%	—		—	%	—		—	%	—		—	%
	$	1,586,051	2.85	%	$	54,306	2.69	%	$	325,752	3.13	%	$	163,038	2.90	%	$	1,019,845	2.78	%	$	23,110	2.32	%
Other securities
FHLB stock	$	57,139	6.19	%	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%	$	57,139	6.19	%
Federal Reserve Bank stock	13,050		5.69	%	—		—	%	—		—	%	—		—	%	—		—	%	13,050		5.69	%
	$	70,189	6.10	%	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%	$	70,189	6.10	%
	$	1,741,428	2.98	%	$	54,306	2.69	%	$	325,752	3.13	%	$	163,038	2.90	%	$	1,105,033	2.78	%	$	93,299	5.16	%

The investment portfolio’s average duration was 2.6 years at September 30, 2019 and 3.4 years at December 31, 2018. These estimates are computed using multiple inputs that are subject, among other things, to changes in interest rates and other factors that may affect prepayment speeds. Contractual maturities of investment securities are adjusted for anticipated prepayments of amortizing U.S. Government sponsored agency debt securities and U.S. Government sponsored enterprise debt securities, which shorten the average lives of these investments.

Liabilities

Total liabilities ~~increased $127.8~~decreased $338.4 million, or ~~1.66%~~4.6%, to ~~$7.8~~$7.0 billion at ~~June~~September 30, ~~2018~~2019 compared to ~~$7.7~~$7.4 billion at December 31, ~~2017.~~2018. This ~~increase~~ was primarily driven by ~~higher advances from~~lower total deposits and the ~~FHLB~~$25.9 million redemption of junior subordinated debentures. See “Capital Resources and ~~higher total deposits.~~Liquidity Management” for more detail on the redemption of trust preferred securities and related junior subordinated debt.

Deposits

Total deposits ~~increased $40.2~~decreased $339.8 million, or 5.6%, to ~~$6.4~~$5.7 billion at ~~June~~September 30, ~~2018~~2019 compared to ~~$6.3~~$6.0 billion at December 31, ~~2017.~~2018. In ~~2018, an increase in time deposits of $205.9 million was partially offset by~~the nine months ended September 30, 2019, decreases of ~~$35.0 million in noninterest bearing transaction accounts, $93.1~~$164.3 million in interest bearing ~~and $37.7~~deposits, $104.4 million in savings and money market ~~account~~deposit accounts and $107.4 million in time deposits~~as customers shifted their deposit preferences as interest rates increased and we promoted longer term time deposits.~~ were partially offset by a $36.2 million increase in noninterest bearing transaction accounts. These changes in deposits and the deposit mix were ~~also~~largely affected by declines in deposits from ~~Venezuela~~Venezuelan resident customers, ~~described~~as discussed below. The ~~increase~~decrease of ~~$205.9~~$107.4 million in time deposits ~~include $248.0~~includes a decline of $75.7 million in brokered time deposits and a decrease of $31.7 million in retail time ~~deposits, partially offset by a decrease of $42.1 million in brokered time~~ deposits. The ~~increase~~decrease in retail time deposits ~~reflects~~resulted from our strategic decision to decrease the ~~impact~~promotional interest rates we paid. We continue to focus our efforts to retain customers with higher probabilities of ~~successful marketing campaigns launched~~renewal at lower-than-market rates. Also, we have implemented a strategy for renewing CDs with lower probability of renewals through our promotions. These efforts led to time deposit renewals of approximately $290.6 million in the first nine months of 2019 at rates that were lower than the highest rates paid in our markets.

Deposits by Country of Domicile

The following table shows deposits by country of domicile of the depositor as of the dates presented.



(in thousands)	September 30, 2019		December 31, 2018

Deposits
Domestic (1)	$	2,999,687	$	3,001,366
Foreign:
Venezuela (2)	2,345,938		2,694,690
Others	347,223		336,630
Total foreign	2,693,161		3,031,320
Total deposits	$	5,692,848	$	6,032,686

_________________


(1)	Includes brokered deposits of $566.4 million at September 30, 2019, and $642.1 million at December 31, 2018.

(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 do not believe that the U.S. economic embargo on certain Venezuelan persons will adversely affect our Venezuelan customer relationships, generally.

Our domestic deposits have increased almost every year since 2014, while our total foreign deposits, especially deposits from Venezuelan residents, have declined during the ~~period~~same period. Most of the Venezuelan withdrawals from deposit accounts at the Bank are believed to ~~increase these~~be due to the effect of adverse economic conditions in Venezuela on our Venezuelan resident customers. Our other foreign deposits ~~which are being offered at competitive market rates.~~do not include deposits from Venezuelans.

The following table shows the amounts and percentage changes in our domestic and foreign deposits, including Venezuelan resident customer deposits, for the nine months ended September 30, 2019 and the year ended December 31, 2018.



	Nine Months Ended					Year Ended
(in thousands, except percentages)	September 30, 2019					December 31, 2018
	Amount			%		Amount			%
Deposits
Domestic	$	(1,679	)	(0.1	)%	$	178,567		6.3	%
Foreign:
Venezuela	(348,752		)	(12.9	)%	(453,221		)	(14.4	)%
Others	10,593			3.1	%	(15,633		)	(4.4	)%
Total foreign	(338,159		)	(11.2	)%	(468,854		)	(13.4	)%
Total deposits	$	(339,838	)	(5.6	)%	$	(290,287	)	(4.6	)%

(1) Domestic deposits, excluding brokered, were up $ $74.0 million, compared to December 31, 2018.

During the ~~six~~nine months ended ~~June~~September 30, ~~2018,~~2019, deposits offrom customers domiciled in Venezuela decreased by ~~$258.1~~$348.8 million, or ~~8.20%~~12.9%, to ~~$2.9~~$2.3 billion, ~~at June 30, 2018 from $3.1 billion at~~compared to December 31, ~~2017. This decrease was partially offset by an increase~~2018. In the first nine months of ~~$289.7 million,~~2019, as political and economic conditions in Venezuela remain difficult and the country's economy becomes increasingly dollarized, many of our Venezuelan resident customers withdraw their U.S. dollar deposits to fund living expenses. In August 2019, the U.S. government imposed additional sanctions on certain Venezuelan persons, which prompted Amerant to restrict and ultimately block the accounts of persons who currently work, in any capacity, for the Venezuelan government or ~~10.26%, in balances from domestic customer deposits, and~~its political subdivisions or agencies. These sanctions affected a ~~$8.6 million increase in balances from other countries. The trend of higher balances from U.S. customer deposits reflects the Company’s continued focus on increasing the~~small number of ~~U.S.~~clients.

The annualized international deposit runoff rate was 14.6% in the third quarter of 2019. As we expect this runoff to continue into the next few quarters, we remain dedicated to enhancing our core deposit products and delivery channels. For example, we launched a new online account opening platform for personal domestic customers, ~~while preserving valued foreign customer~~which enables customers to efficiently access our deposit products online. We have seen our online CDs more than double in the third quarter of 2019, compared to the third quarter of 2018. We also launched a program which rewards all Amerant employees for referring friends and family to our loan and deposit products, as well as the Amerant Relationship Rewards Program, which focuses on providing our existing customers with incremental cash rewards as they expand their relationship with us. Cross-selling deposit products to our domestic commercial borrowers, resulted in a 21.3% growth in these deposits so far this year. We are also actively working to increase our share of wallet of select high net worth international customers with whom we maintain strong long-term relationships.

The Bank uses the Federal Financial Institutions Examination Council’s ~~or FFIEC’s,~~(the “FFIEC”) Uniform Bank Performance Report ~~or UBPR~~(the “UBPR”) definition of ~~core deposits, which consists of all relationships under $250,000. Core deposits,~~“core deposits”, which exclude brokered time deposits and retail time deposits of $250,000 or more. Our core deposits were ~~$3.9~~$4.4 billion and ~~$4.1~~$4.7 billion as of ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. Core deposits represented ~~61.46%~~77.1% and ~~64.47%~~77.5% of our total deposits at those dates, respectively. The decline in core deposits since December 31, ~~2017~~2018 resulted primarily from ~~a combination of the Company closing certain foreign customer accounts and foreign~~Venezuelan resident customers drawing down their account ~~balances.~~balances as mentioned above, partially offset by increases in domestic deposits.

We utilize brokered deposits and, as of ~~June~~September 30, ~~2018,~~2019, we had ~~$737.9~~$566.4 million in brokered deposits, which ~~represent 11.60%~~represented 9.9% of our total deposits. Our September 30, 2019 brokered deposits were down $75.7 million, or 11.8%, compared to $642.1 million as of December 31, 2018. This decrease reflects the continuation of our planned decrease in brokered CDs deposits. The Company has not historically sold brokered CDs in denominations over $100,000.

Large Fund Providers

At ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017~~2018, our large fund providers, defined as third-party customer relationships with balances of over $10 million, included seven and ~~four~~six deposit relationships, respectively, with a total ~~balance~~balances of ~~$99.3~~$100.2 million and ~~$59.0~~$74.4 million, respectively. At ~~June~~September 30, ~~2018 and December 31, 2017~~2019, the total $100.2 million in relationships with balances over $10 million includes a $10.2 million relationship with a Venezuelan company. Additionally, deposits from ~~MSF~~our Former Parent or its non-U.S. affiliates at September 30, 2019 and December 31, 2018 totaled ~~$18.2~~$3.8 million and ~~$49.5~~$9.6 million, respectively. These deposits of our Former Parent and its non-U.S. affiliates are expected to continue to decline further in 2019.

Large Time Deposits by Maturity

The following table sets forth the maturities of our time deposits with individual balances equal to or greater than $100,000 as of ~~June~~September 30, ~~2018:~~2019:


	June 30, 2018				September 30, 2019
	(in thousands, except percentages)
(in thousands, except percentages)
Less than 3 months	$	242,399	17.55	%	$	265,333	19.1	%
3 to 6 months	220,788		15.98	%	224,209		16.2	%
6 to 12 months	508,117		36.78	%	505,426		36.4	%
1 to 3 years	235,377		17.04	%	180,166		13.0	%
Over 3 years	174,686		12.65	%	211,741		15.3	%
Total	$	1,381,367	100.00	%	$	1,386,875	100.0	%

Short-Term Borrowings

In addition to deposits, we use short-term borrowings, such as FHLB advances and ~~advances~~borrowings from other banks, as a source of funds to meet the daily liquidity needs of our customers and fund growth in earning assets. Short-term borrowings have maturities of 12 months or less as of the reported period-end. ~~The majority~~All of our outstanding short-term borrowings at ~~June~~September 30, ~~2018~~2019 and December 31, ~~2017 corresponded~~2018 correspond to FHLB ~~advances and, to a lesser extent, included borrowings from other banks.~~advances.

The following table sets forth information about the outstanding amounts of our short-term borrowings at the close of, and for the ~~six~~nine months ended, ~~June~~September 30, ~~2018~~2019 and for the year ended December 31, ~~2017.~~2018.


	June 30, 2018			December 31, 2017			September 30, 2019			December 31, 2018
	(in thousands, except percentages)
(in thousands, except percentages)
Outstanding at period-end	$	597,000		$	567,000		$	465,000		$	440,000
Average amount	485,333			460,708			505,556			505,417
Maximum amount outstanding at any month-end	597,000			567,000			600,000			632,000
Weighted average interest rate:
During period	1.92		%	1.43		%	2.37		%	2.10		%
End of period	2.16		%	1.43		%	2.08		%	2.52		%

Return on Equity and Assets

The following table shows annualized return on average assets, return on average equity, and average equity to average assets ratio for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
(in thousands, except percentages and per share data)
Net income $ 10,423
$ 10,390
$ 19,852
$ 16,897
Basic and diluted earnings per common share 0.08
0.08
0.16
0.13

Average total assets $ 8,419,040
$ 8,419,602
$ 8,413,434
$ 8,457,960
Average stockholders' equity 748,024
738,401
747,905
725,122
Net income / Average total assets (ROA) 0.50 % 0.49 % 0.47 % 0.40 %
Net income / Average stockholders' equity (ROE) 5.57 % 5.63 % 5.31 % 4.66 %
Average stockholders' equity / Average assets ratio 8.88 % 8.77 % 8.89 % 8.57 %

Adjusted net income ⁽¹⁾
$ 14,142
$ 10,390
$ 25,831
$ 16,897
Adjusted basic and diluted earnings per common share ⁽¹⁾
0.11
0.08
0.21
0.13

Adjusted net income / Average total assets (ROA) ⁽¹⁾
0.67 % 0.49 % 0.61 % 0.40 %
Adjusted net income / Average stockholders' equity (ROE) ⁽¹⁾
7.56 % 5.63 % 6.91 % 4.66 %



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
(in thousands, except percentages and per share data)
Net income	$	11,931		$	11,551		$	37,859		$	31,403
Basic earnings per common share	0.28			0.27			0.89			0.74
Diluted earnings per common share (1)	0.28			0.27			0.88			0.74

Average total assets	$	7,917,404		$	8,462,134		$	7,948,746		$	8,423,611
Average stockholders' equity	814,163			753,634			787,171			743,172
Net income / Average total assets (ROA)	0.60		%	0.55		%	0.64		%	0.50		%
Net income / Average stockholders' equity (ROE)	5.81		%	6.13		%	6.43		%	5.63		%
Average stockholders' equity / Average total assets ratio	10.28		%	8.91		%	9.90		%	8.82		%

Adjusted net income (2)	$	12,923		$	11,970		$	41,731		$	37,801
Adjusted earnings per common share (2)	0.30			0.28			0.98			0.89
Adjusted earnings per diluted common share (2)	0.30			0.28			0.97			0.89

Adjusted net income / Average total assets (Adjusted ROA) (2)	0.65		%	0.57		%	0.70		%	0.60		%
Adjusted net income / Average stockholders' equity (Adjusted ROE) (2)	6.30		%	6.35		%	7.09		%	6.78		%

__________________

(1)

As of September 30, 2019, potential dilutive instruments included 738,138 unvested shares of restricted stock, including 736,839 shares of restricted stock issued in December 2018 in connection with the Company’s IPO and 1,299 additional shares of restricted stock issued in January 2019. As of September 30, 2019, these 738,138 unvested shares of restricted stock 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 that date, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at that date, 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 in the three (not shown due to rounding) and nine months ended September 30, 2019. We had no outstanding dilutive instruments as of September 30, 2018.


(2)	See ~~“Financial Highlights”~~ “Selected Financial Information” for an explanation of certain non-GAAP ~~measures.~~financial measures and see “Non-GAAP Financial Measures Reconciliation” for a reconciliation of the non-GAAP financial measures to their GAAP counterparts.

~~None of our outstanding obligations are exchangeable for, or convertible into, equity securities. Consequently, our basic and diluted income per share are equal in each of the periods presented.~~

During the three and ~~six months~~nine month periods ended ~~June~~September 30, ~~2018 and 2017,~~2019, basic and diluted earnings per share increased as a result of higher net income in ~~2018~~the three and nine month periods ended September 30, 2019 compared to the same periods ~~of 2017.~~one year ago.

Capital Resources and Liquidity Management

Capital Resources.

Stockholders’ equity is influenced primarily by earnings, dividends, if any, and changes in accumulated other comprehensive income or loss (AOCI/L)AOCL) caused primarily by fluctuations in unrealized holding gains or losses, net of taxes, on available for sale ~~investment~~ securities. AOCI/LAOCL is not included for purposes of determining our capital for bank regulatory purposes.

Stockholders’ equity ~~decreased $34.1~~increased $78.3 million, or ~~4.52%~~10.5%, to ~~$719.4~~$825.8 million as of ~~June~~September 30, ~~2018 as~~2019 compared to December 31, ~~2017,~~2018, primarily due ~~to a special dividend~~to: (i) $37.9 million of ~~$40.0 million paid on March 13, 2018 to MSF prior to the record date for the Spin-off, $19.9 million~~ net income in the ~~six~~nine months ended ~~June~~September 30, ~~2018 and~~2019, (ii) a ~~$13.9~~$35.3 million increase in ~~AOCL mainly the result~~AOCI resulting primarily from a higher valuation of ~~lower~~ securities available for sale ~~valuations~~ compared to December 31, ~~2017.~~2018, and (iii) the Company’s amortization of stock-based compensation of its 2018 restricted stock award related to the IPO. The ~~lower~~higher valuation of securities ~~valuations were due primarily~~available for sale during 2019 was the primary driver of the Company’s deferred tax assets declining approximately $10.9 million, or 66.9%, to ~~increases~~$5.4 million as of September 30, 2019, as the unrealized gains and losses included in ~~market interest rates.~~AOCI are reported in stockholders’ equity on an after-tax basis.

Liquidity Management.

At ~~June~~September 30, 2019 and December 31, 2018, the Company had ~~$1.3~~$1.17 billion of outstanding advances from the FHLB and other ~~borrowings, compared to~~borrowings. At September 30, 2019 and December 31, 2018, we had an additional $1.2 billion ~~at December 31, 2017.~~available under FHLB facilities. During the ~~six~~nine months ended ~~June~~September 30, ~~2018,~~2019, the Company repaid ~~$571~~$930 million of outstanding advances and other borrowings, and ~~obtained new borrowing proceeds of $656~~borrowed $935 million from these sources. ~~Other~~There were no other borrowings as of ~~June~~September 30, ~~2018 consisted of $2.0 million of short-term Fed Funds purchased from other banks which matured in July 2018.~~ 2019.

The following table summarizes the composition of our FHLB advances ~~and other borrowings~~ by type of interest rate:

June 30
2018 December 31, 2017
(in thousands)
Advances from the FHLB and other borrowings:
Fixed rate ranging from 1.05% to 3.86% (December 31, 2017 - 0.90% to 3.86%) $ 978,000
$ 918,000
Floating rate based on 3-month LIBOR ranging from 2.26% to 2.38% (December 31, 2017 - 1.23% to 1.71%) ⁽¹⁾
280,000
255,000
$ 1,258,000
$ 1,173,000



	September 30, 2019		December 31, 2018
(in thousands)
Advances from the FHLB and other borrowings:
Fixed rate ranging from 1.14% to 3.23% (December 31, 2018 - 1.50% to 3.86%) (1)	$	890,000	$	886,000
Floating rate three-month LIBOR ranging from 2.03% to 2.56% (December 31, 2018 - 2.40% to 2.82%) (2)	280,000		280,000
	$	1,170,000	$	1,166,000

__________________


(1)	~~We have~~As of September 30, 2019, includes $200 million (fixed interest rate - 1.14%) in advances from the FHLB that are callable prior to maturity. There were no callable advances from the FHLB as of December 31, 2018.

(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. The Company recorded a credit of approximately $0.9 million against interest expense on FHLB advances in the nine months of 2019 and expects to record a credit of approximately $0.4 million in the rest of 2019.

At ~~June~~September 30, ~~2018,~~2019, advances from the FHLB ~~and other borrowings~~ had maturities through ~~2022~~2023 with interest rates ranging from ~~1.05%~~1.14% to ~~3.86%~~3.23%. We expect to continue taking FHLB funding as needed in short duration maturities.

We also maintain federal funds lines with several banks, and had $72.0 million and $35.5 million of availability under these lines at September 30, 2019 and December 31, 2018, respectively.

We are a corporation separate and apart from the Bank and, therefore, must provide for our own liquidity. Our main source of funding is dividends declared and paid to us by the Bank. Additionally, our subsidiary Amerant Florida Bancorp Inc., formerly Mercantil Florida Bancorp Inc., or ~~Mercantil~~Amerant Florida, which is an intermediate bank holding company and the obligor on our junior subordinated debt, held cash and cash equivalents of ~~$36.0~~$17.3 million as of ~~June~~September 30, ~~2018~~2019 and ~~$39.1~~$32.9 million atas of December 31, ~~2017~~2018 in funds available to service this junior subordinated debt. In the third quarter of 2019, we used $25.5 million of Amerant Florida’s cash to redeem the outstanding trust preferred securities issued by its Statutory Trust II and Capital Trust III subsidiaries, and the related junior subordinated debt issued by Amerant Florida. During the nine months ended September 30, 2019, the Bank declared and paid dividends of $25.0 million to Amerant Florida.

Redemption of Junior Subordinated Debentures

On July 31, 2019 and September 7, 2019, the Company redeemed all $10.0 million of its outstanding 10.18% trust preferred securities issued by its Capital Trust III and all $15.0 million of its outstanding 10.60% trust preferred securities issued by its Statutory Trust II, respectively. The Capital Trust III and the Statutory Trust II securities were redeemed at the contractual call price of 101.018% and 100.53%, respectively. The Company simultaneously redeemed all $10.4 million and $15.5 million junior subordinated debentures held by its Capital Trust III and Statutory Trust II subsidiaries, respectively, as part of these redemption transactions. These redemptions together reduced total cash and cash equivalents by approximately $23.8 million, financial liabilities by approximately $25.9 million and other assets by approximately $2.4 million. In addition, third quarter 2019 results included a total charge of $0.3 million for the contractual premiums paid to security holders from these redemptions. The redemption of these legacy Tier 1 capital instruments reduced the Company’s Tier 1 equity capital by a net of $23.5 million.

There are statutory and regulatory limitations that affect the ability of the Bank to pay dividends to the Company. These limitations exclude the effects of AOCI/L.AOCL. Management believes that these limitations will not affect ~~our~~the Company’s ability, and ~~Mercantil~~Amerant Florida’s ability, to meet ~~our ongoing~~their short-term cash obligations. See ~~‘Supervision~~ “Supervision and Regulation” in the ~~Information Statement.~~Form 10-K.

Regulatory Capital Requirements

Our Company’s consolidated regulatory capital amounts and ratios are presented in the following table:

Actual Required for Capital Adequacy Purposes Regulatory Minimums To be Well Capitalized
(in thousands, except percentages) Amount Ratio Amount Ratio Amount Ratio
June 30, 2018
Total capital ratio $ 899,709
12.61 % $ 570,819
8.00 % $ 713,524
10.00 %
Tier I capital ratio 832,765
11.67 % 428,114
6.00 % 570,819
8.00 %
Tier I leverage ratio 832,765
9.87 % 337,598
4.00 % 421,998
5.00 %
Common Equity Tier I 723,053
10.13 % 321,086
4.50 % 463,790
6.50 %

December 31, 2017

Total capital ratio $ 926,049
13.30 % $ 556,578
8.00 % $ 695,722
10.00 %
Tier I capital ratio 852,825
12.30 % 417,433
6.00 % 556,578
8.00 %
Tier I leverage ratio 852,825
10.20 % 335,647
4.00 % 419,559
5.00 %
Common Equity Tier I 753,545
10.70 % 313,075
4.50 % 452,220
6.50 %



	Actual				Required for Capital Adequacy Purposes				Regulatory Minimums To be Well Capitalized
(in thousands, except percentages)	Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2019
Total capital ratio	$	932,400	14.77	%	$	505,076	8.00	%	$	631,344	10.00	%
Tier 1 capital ratio	879,649		13.93	%	378,807		6.00	%	505,076		8.00	%
Tier 1 leverage ratio	879,649		11.15	%	315,642		4.00	%	394,553		5.00	%
Common Equity Tier 1	793,737		12.57	%	284,105		4.50	%	410,374		6.50	%

December 31, 2018
Total capital ratio	$	916,663	13.54	%	$	541,638	8.00	%	$	677,047	10.00	%
Tier 1 capital ratio	859,031		12.69	%	406,228		6.00	%	541,638		8.00	%
Tier 1 leverage ratio	859,031		10.34	%	332,190		4.00	%	415,238		5.00	%
Common Equity Tier 1	749,465		11.07	%	304,671		4.50	%	440,080		6.50	%

The Bank’s consolidated regulatory capital amounts and ratios are presented in the following table:

Actual Required for Capital Adequacy Purposes Regulatory Minimums to be Well Capitalized
(in thousands, except percentages) Amount Ratio Amount Ratio Amount Ratio
June 30, 2018
Total capital ratio $ 868,917
12.18 % $ 570,704
8.00 % $ 713,380
10.00 %
Tier I capital ratio 801,973
11.24 % 428,028
6.00 % 570,704
8.00 %
Tier I leverage ratio 801,973
9.55 % 335,941
4.00 % 419,926
5.00 %
Common Equity Tier I 801,973
11.24 % 321,021
4.50 % 463,697
6.50 %

December 31, 2017

Total capital ratio $ 885,855
12.70 % $ 556,446
8.00 % $ 695,557
10.00 %
Tier I capital ratio 812,631
11.70 % 417,334
6.00 % 556,446
8.00 %
Tier I leverage ratio 812,631
9.70 % 335,600
4.00 % 419,500
5.00 %
Common Equity Tier I 812,631
11.70 % 313,001
4.50 % 452,112
6.50 %



	Actual				Required for Capital Adequacy Purposes				Regulatory Minimums to be Well Capitalized
(in thousands, except percentages)	Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2019
Total capital ratio	$	906,828	14.37	%	$	504,995	8.00	%	$	631,244	10.00	%
Tier 1 capital ratio	854,077		13.53	%	378,746		6.00	%	504,995		8.00	%
Tier 1 leverage ratio	854,077		10.83	%	315,360		4.00	%	394,200		5.00	%
Common Equity Tier 1	854,077		13.53	%	284,060		4.50	%	410,309		6.50	%

December 31, 2018
Total capital ratio	$	883,746	13.05	%	$	541,564	8.00	%	$	676,955	10.00	%
Tier 1 capital ratio	826,114		12.20	%	406,173		6.00	%	541,564		8.00	%
Tier 1 leverage ratio	826,114		9.96	%	331,829		4.00	%	414,786		5.00	%
Common Equity Tier 1	826,114		12.20	%	304,630		4.50	%	440,021		6.50	%

The Basel III Capital Rules revised the definition of capital and describe the capital components and eligibility criteria for Common Equity Tier 1 capital, or “CET1”, additional Tier 1 capital and Tier 2 capital. Although trust preferred securities issued after May 19, 2010 generally do not qualify as Tier 1 capital, all outstanding series of our trust preferred securities totaling $89.1 million at September 30, 2019 ($114.1 million at December 31, 2018), are grandfathered and continue to qualify as Tier 1 capital. In three months ended September 30, 2019, the Company redeemed all $15.0 million of its outstanding 10.60% trust preferred securities issued by its Statutory Trust II, and all $10.0 million of its outstanding 10.18% trust preferred securities issued by its Capital Trust III. See “Capital Resources and Liquidity Management” for more detail on the redemption of trust preferred securities and related junior subordinated debt.

The Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Office of the Comptroller of the Currency (“OCC”), and the Federal Deposit Insurance Corporation (the “FDIC”, and collectively with the Federal Reserve and the OCC, the “Federal Banking Agencies”), published a final rule on July 22, 2019 that simplifies existing regulatory capital rules for non-advanced approaches institutions, such as the Company. Non-advanced approaches institutions will be permitted to implement the Capital Simplifications Final Rule as of its revised effective date in the quarter beginning January 1, 2020, or wait until the quarter beginning April 1, 2020. As of the date of implementation, the required deductions from regulatory capital CET1 elements for mortgage servicing assets (“MSAs”) and temporary difference deferred tax assets (“DTAs”) are only required to the extent these assets exceed 25% of CET1 capital elements, less any adjustments and deductions (the “CET1 Deduction Threshold”). MSAs and temporary difference DTAs that are not deducted from capital are assigned a 250% risk weight. Investments in the capital instruments of unconsolidated financial institutions are deducted from capital when these exceed the 25% CET1 Deduction Threshold. Minority interests in up to 10% of the parent banking organization’s CET1, Tier capital and total capital, after deductions and adjustments are permitted to be included in capital effective October 1, 2019. Also effective October 1, 2019, the final rule makes various technical amendments, including reconciling a difference in the capital rules and the bank holding company rules that permits the redemption of bank holding company common stock without prior Federal Reserve approval under the capital rules. Such redemptions remain subject to other requirements, including the Bank Holding Company Act and Federal Reserve Regulation Y. The Company currently estimates these simplified capital rules should have no material effect on the Company’s regulatory capital and ratios when effective.

The Federal Banking Agencies issued final rules on October 29, 2019 that provide simplified capital measures, including a simplified measure of capital adequacy for qualifying community banking organizations consistent with section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Growth Act”). Qualifying community banking organizations with less than $10 billion of assets that comply with and elect to use the community bank leverage ratio (“CBLR”) and that maintain a CBLR greater than 9% would be considered to be “well-capitalized” and would no longer be subject to the other generally applicable capital rules. The CBLR would be used and applied for purposes of compliance with the Federal Banking Agencies’ prompt corrective action rules, and Federal Reserve Regulation O and W compliance, as well as in calculating FDIC deposit insurance assessments. The CBLR, among other proposals, reflects the Federal banking agencies’ focus on appropriately tailoring capital requirements to an institution’s size, complexity and risk profile. The CBLR will first be available for banking organizations to use in their March 31, 2020 Call Report or Form FR Y-9C. Non-advanced approaches institutions’ will also be able to take advantage of simpler regulatory capital requirements for mortgage servicing assets, certain deferred tax assets arising from temporary differences and investments in unconsolidated financial institutions. The Company is evaluating the new rules.

Off-Balance Sheet Arrangements

The following table shows the outstanding balance of our off-balance sheet arrangements as of the end of the periods presented. Except as disclosed below, we are not involved in any other off-balance sheet contractual relationships that are reasonably likely to have a current or future material effect on our financial condition, a change in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. For more details on the Company’s off-balance sheet arrangements, see Note 16 to our audited consolidated financial statements included in the Form 10-K.


	June 30, 2018		December 31, 2017
	(in thousands)
(in thousands)					September 30, 2019		December 31, 2018
Commitments to extend credit	$	750,440	$	762,437	$	821,197	$	923,424
Credit card facilities	200,912		200,229
Credit card facilities (1)					145,866		198,500
Letters of credit	23,989		18,350		21,155		27,232
	$	975,341	$	981,016	$	988,218	$	1,149,156

__________________

(1)

In April 2019, we revised our credit card program to further strengthen credit quality. 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 are required to repay all balances by January 2020. As a result of these actions, the Company no longer carry off-balance sheet credit risk associated with its former credit card program.

Critical Accounting Policies and Estimates

For our critical accounting policies and estimates disclosure, see the ~~Information Statement~~Form 10-K where such matters are disclosed for the Company’s latest fiscal year ended December 31, ~~2017.~~2018.

Recently Issued Accounting Pronouncements. ~~Refer to Note 2 to our unaudited interim consolidated financial statements included in this Form 10-Q, for a discussion of~~There are no recently issued accounting pronouncements that have recently been adopted by us. For a description of accounting standards issued that are pending adoption, see Note 1 “Business, Basis of Presentation and Summary of Significant Accounting Policies” in the Company’s interim consolidated financial statements in this Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We believe interest rate and price risks are the most significant market risks impacting us. We monitor and evaluate these risks using sensitivity analyses to measure the ~~impact to~~effects on earnings, equity and the available for sale portfolio mark-to-market exposure, of changes in market interest rates. Exposures are managed to a set of limits previously approved by our board of directors and monitored by management.

~~For a disclosure of the quantitative and qualitative information regarding~~ There have been no material changes in our market risk exposure as ~~of December 31, 2017~~ compared to those discussed in our Form 10-K, see ~~the section titled~~ Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” ofand our quarterly report on Form 10-Q for the ~~Information Statement. There have been no significant changes in the assumptions used in monitoring market risk as of~~period ended June 30, ~~2018. The impact of other types of market risks, such as foreign currency exchange risk, is deemed immaterial.~~2019, see Part I, Item 3, “Quantitative and Qualitative Disclosures About Market Risk.”

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company, with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934, as amended)~~Act) as of the end of the period covered by this ~~report.~~Form 10-Q. Based upon that evaluation and as of the end of the period covered by this ~~report,~~Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective to allow timely decisions regarding disclosure in its reports that the Company files or submits to the ~~Securities and Exchange Commission~~SEC under the ~~Securities~~ Exchange ~~Act of 1934, as amended.~~ Act.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the period covered by this ~~report~~Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Any control system, no matter how well conceived and operated, can provide only reasonable assurance that its objectives are achieved. The design of a control system inherently has limitations, including the controls’ cost relative to their benefits. Additionally, controls can be circumvented. No cost-effective control system can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are, from time to time, in the ordinary course, engaged in litigation, and we have a small number of unresolved claims ~~pending.~~pending, including the one described in more detail below. In addition, as part of the ordinary course of business, we are parties to litigation involving claims to the ownership of funds in particular accounts, the collection of delinquent accounts, credit relationships, challenges to security interests in collateral and foreclosure interests, that are incidental to our regular business activities. While the ultimate liability with respect to these other litigation matters and claims cannot be determined at this time, we believe that potential liabilities relating to pending matters are not likely to be material to our financial position, results of operations or cash flows. Where appropriate, reserves for these various matters of litigation are established, under FASB ASC Topic 450, Contingencies, based in part upon management’s judgment and the advice of legal counsel.

A lawsuit was filed in September 2017 in Miami-Dade County Circuit Court, Florida and has been amended multiple times. The claims are against Amerant Trust and Kunde Management, LLC (“Kunde”). Kunde was established to manage trusts for the respective benefit of Gustavo Marturet Machado’s wife and his siblings. Amerant Trust is the trustee of these trusts and is Kunde’s manager. The plaintiff is a beneficiary of one trust and is an aunt of Gustavo Antonio Marturet Sr., a Company director and a sister-in-law of Mr. Gustavo Antonio Marturet Sr.’s mother, a principal Company shareholder.

This action alleges breaches of contract, fiduciary duty, accounting and unjust enrichment, and mismanagement of Kunde and seeks damages in an unspecified amount. The Company denies the claims, and believes these are barred by the statute of limitations and is defending this lawsuit vigorously. The parties began mediation on January 22, 2019, pursuant to court order, and settlement discussions are ongoing. The Company cannot reasonably estimate at this time the possible loss or range of losses, if any, that may arise from this unresolved lawsuit and the timing of any resolution of this action. The Company has incurred approximately $643 thousand in legal fees through November 05, 2019 defending this case, including recent preparations for trial. The Company expects to be reimbursed for these fees in accordance with the trust agreements and the Kunde organizational documents upon conclusion of this proceeding.

At least quarterly, we assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. For those matters where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments based on our quarterly reviews. For other matters, where a loss is not probable or the amount of the loss is not estimable, we have not accrued legal reserves, consistent with applicable accounting guidance. Based on information currently available to us, advice of counsel, and available insurance coverage, we believe that our established reserves are adequate and the liabilities arising from the legal proceedings will not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution will not exceed established reserves. As a result, the outcome of a particular matter or a combination of matters, if unfavorable, may be material to our financial position, results of operations or cash flows for a particular period, depending upon the size of the loss or our income for that particular period.

ITEM 1A. RISK FACTORS

~~In addition to the other~~For detailed information ~~set forth in this report, you should carefully consider the~~about certain risk factors ~~discussed in “Risk Factors” in the Information Statement, which~~that could materially affect our business, financial condition or future ~~results. The risks described~~results see “Risk Factors” in the ~~Information Statement~~Company’s Form 10-K. Other than below addition, there have been no material changes to the risk factors previously disclosed under Part I, Item 1A, “Risk Factors” of the Company’s Form 10-K.

An additional risk includes the following:

Recent changes to our existing credit card program may affect our credit card losses and adversely affect certain credit card relationships.

In April 2019, we revised our credit card program to further strengthen credit quality. We have stopped charge privileges to our riskiest cardholders and are ~~not~~requiring repayment of their balances by November 2019. All amounts deemed uncollectible were charged off during the ~~only risks facing~~quarter. Charge-offs during the quarter were $1.7 million, and $3.1 million in the nine months ended September 30, 2019. The ALL, after the charge-offs, for this product stands at $3.6 million at September 30, 2019. We are closely monitoring the performance of these accounts, with an outstanding balance of $20.8 million as of September 30, 2019, until they are completely repaid. At the end of October we curtailed charge privileges to the remaining cardholders and are requiring repayment of their balances by January 2020. Concurrently, we entered into referral arrangements with recognized U.S.-based card issuers which will permit us to serve our ~~Company. Additional~~international and domestic card customers.

We are making these changes to reduce and ultimately eliminate our credit exposure and losses on international cards. The discontinuance of credit cards and the repayment terms on outstanding balances may result in higher credit loss rates on existing card balances. Additionally, the implementation of new processes involves operational risks, and ~~uncertainties not currently known to us or that we currently deem to be immaterial also~~the change in our credit card strategy may ~~materially adversely affect~~disrupt, and have unintended adverse effects on, our ~~business, financial condition, and/or operating results in the future.~~deposit, loan and wealth management relationships with our existing credit card holders.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Not applicable.~~None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS



Exhibit Number	Description
~~3.1~~3.1.1	Amended and Restated Articles of Incorporation as of ~~February 5, 2018~~the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Forms S-1/A, filed on November 16, 2018).
3.1.2	Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form ~~10,~~8-K, filed ~~with the Securities and Exchange Commission~~ on June ~~15, 2018, File No. 001-38534)~~7, 2019).
3.2	Amended and Restated Bylaws of the Company, effective as of ~~February~~June 5, ~~2018~~2019 (incorporated ~~herein~~ by reference to Exhibit 3.2 to the ~~Company’s Registration Statement~~Current Report on Form ~~10,~~8-K filed ~~with the Securities and Exchange Commission~~ on June ~~15, 2018, File No. 001-38534)~~
~~10.1~~	Amendment No. 1, dated as of June 12, 2018, to the Distribution Trust Agreement by and among Mercantil Servicios Financieros, C.A., the Company and TMI Trust Company, dated as of March 12, 2018 (incorporated herein by reference to Exhibit 10.3 to the Company’s Registration Statement on Form 10, filed with the Securities and Exchange Commission on June 15, 2018, File No. 001-38534).7, 2019)
31.1	Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002, by Millar Wilson, Vice-Chairman and Chief Executive Officer.
31.2	Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002, by Alberto Peraza, Co-President and Chief Financial Officer.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002, by Millar Wilson, Vice-Chairman and Chief Executive Officer.**
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002, by Alberto Peraza, Co-President and Chief Financial Officer.**
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		~~MERCANTIL BANK HOLDING CORPORATION~~AMERANT BANCORP INC. (Registrant)

Date:	~~September 21, 2018~~November 12, 2019	By:	/s/ Millar Wilson
			Millar Wilson
			Vice-Chairman and Chief Executive Officer ~~and~~ ~~Vice-Chairman of the Board~~

Date:	~~September 21, 2018~~November 12, 2019	By:	/s/ Alberto Peraza
			Alberto Peraza
			Co-President and Chief Financial Officer

8586



	December 31, 2017
(in thousands)	As Reported		As Revised		Effect of change
Real estate loans
Commercial real estate
Non-owner occupied	$	1,745,839	$	1,713,104	$	(32,735	)
Multi-family residential	795,912		839,709		43,797
Land development and construction loans	421,285		406,940		(14,345		)
	2,963,036		2,959,753		(3,283		)
Single-family residential	515,237		512,754		(2,483		)
Owner-occupied	429,803		610,386		180,583
	3,908,076		4,082,893		174,817
Commercial loans	1,529,572		1,354,755		(174,817		)
Loans to financial institutions and acceptances	497,626		497,626		—
Consumer loans and overdrafts	130,951		130,951		—
	$	6,066,225	$	6,066,225	$	—



	December 31, 2017							December 31, 2016
(in thousands)	As Reported		As Revised		Effect of change			As Reported		As Revised		Effect of change

Real estate	$	30,246	$	31,290	$	1,044		$	31,055	$	30,713	$	(342	)
Commercial	33,731		32,687		(1,044		)	40,555		40,897		342
Financial institutions	4,362		4,362		—			5,304		5,304		—
Consumer and others	3,661		3,661		—			4,837		4,837		—
	$	72,000	$	72,000	$	—		$	81,751	$	81,751	$	—



	March 31, 2018							March 31, 2017
(in thousands)	As Reported		As Revised		Effect of change			As Reported		As Revised		Effect of change

Real estate	$	29,416	$	30,503	$	1,087		$	32,742	$	32,471	$	(271	)
Commercial	34,759		33,672		(1,087		)	36,387		36,658		271
Financial institutions	3,671		3,671		—			5,615		5,615		—
Consumer and others	4,272		4,272		—			4,619		4,619		—
	$	72,118	$	72,118	$	—		$	79,363	$	79,363	$	—



	Three Months Ended June 30, 2017
(in thousands)	Real Estate		Commercial			Financial Institutions			Consumer and Others			Total
Balances at beginning of the period	$	32,471	$	36,658		$	5,615		$	4,619		$	79,363
Provision for (reversal of) loan losses	2,262		4,760			(1,639		)	(1,737		)	3,646
Loans charged-off
Domestic	—		(1,097		)	—			(15		)	(1,112		)
International	—		(143		)	—			(258		)	(401		)
Recoveries	107		23			—			1,080			1,210
Balances at end of the period	$	34,840	$	40,201		$	3,976		$	3,689		$	82,706



(in thousands)	Personal and Commercial Banking ("PAC")			Corporate LATAM			Treasury			Institutional			Total
Three Months Ended June 30, 2018
Income Statement:
Net interest income	$	47,105		$	1,219		$	1,942		$	3,723		$	53,989
Provision for (reversal of) loan losses	824			494			(329		)	(839		)	150
Net interest income after provision for (reversal of) loan losses	46,281			725			2,271			4,562			53,839
Noninterest income	5,708			89			3,451			5,738			14,986
Noninterest expense	39,329			1,468			2,832			9,009			52,638
Net income (loss) before income tax:
Banking	12,660			(654		)	2,890			1,291			16,187
Non-banking contribution⁽¹⁾	1,197			11			—			(1,208		)	—
	13,857			(643		)	2,890			83			16,187
Income tax (expense) benefit	(4,486		)	58			84			(1,420		)	(5,764		)
Net income (loss)	$	9,371		$	(585	)	$	2,974		$	(1,337	)	$	10,423



As of December 31, 2017
Loans, net⁽²⁾⁽³⁾	$	5,542,545	$	521,616	$	—	$	(64,325	)	$	5,999,836
Deposits	$	5,454,216	$	18,670	$	779,969	$	70,118		$	6,322,973



	June 30, 2018				December 31, 2017
	Net Exposure⁽¹⁾		% Total Assets		Net Exposure⁽¹⁾		% Total Assets
	(in thousands, except percentages)
Brazil	$	140,705	1.65	%	$	141,088	1.67	%
Venezuela ⁽²⁾	171,818		2.01	%	182,678		2.17	%
Chile	46,678		0.55	%	94,543		1.12	%
Colombia	68,110		0.8	%	63,859		0.76	%
Panama	31,139		0.36	%	51,557		0.61	%
Peru	53,424		0.63	%	70,088		0.83	%
Mexico	2,302		0.03	%	18,274		0.22	%
Costa Rica	16,500		0.19	%	43,844		0.52	%
Other ⁽³⁾	115,232		1.35	%	89,338		1.06	%
Total	$	645,908	7.57	%	$	755,269	8.95	%



	June 30 2018		December 31, 2017
	(in thousands)
Advances from the FHLB and other borrowings:
Fixed rate ranging from 1.05% to 3.86% (December 31, 2017 - 0.90% to 3.86%)	$	978,000	$	918,000
Floating rate based on 3-month LIBOR ranging from 2.26% to 2.38% (December 31, 2017 - 1.23% to 1.71%) ⁽¹⁾	280,000		255,000
	$	1,258,000	$	1,173,000

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