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 ~~September 30, 2019~~March 31, 2020

¨ 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

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	33134
(Address 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: N/A

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 ¨

Indicate by check mark whether the registrant has submitted electronically 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 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,” “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 ~~November 12, 2019~~May 6, 2020
Class A Common Stock, $0.10 par value per share		~~28,988,579~~28,879,576 shares of Class A Common Stock
Class B Common Stock, $0.10 par value per share		~~14,218,596~~13,286,137 shares of Class B Common Stock

AMERANT BANCORP INC. AND SUBSIDIARIES

FORM 10-Q

~~September 30, 2019~~March 31, 2020

INDEX



		Page
PART I.	FINANCIAL INFORMATION	~~Page~~
Item 1	Financial Statements	3
	Consolidated Balance Sheets as of ~~September 30, 2019~~March 31, 2020 (Unaudited) and December 31, ~~2018~~2019	3
	Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2020 and ~~nine month periods ended September 30,~~ 2019 ~~and 2018~~ (Unaudited)	4
	Consolidated Statements of Changes in Stockholders’ Equity for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (Unaudited)	6
	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	9
	Note 1. Business, Basis of Presentation and Summary of Significant Accounting Policies	9
	Note 2. ~~Securities~~Interest Earning Deposits with Banks	1213
	Note 3. Securities	13
	Note 4. Loans	15
	Note 4.5. Allowance for Loan Losses	1718
	Note 5.6. Time Deposits	23
	Note 6.7. Advances from the Federal Home Loan Bank and Other Borrowings	23
	Note 7.8. Junior Subordinated Debentures Held by Trust Subsidiaries	24
	Note 8.9. Derivative Instruments	25
	Note 9.10. Stock-based Incentive Compensation Plan	26
	Note ~~10.~~11. Income Taxes	26
	Note ~~11.~~12. Accumulated Other Comprehensive Income ~~(Loss)~~(“AOCI”)	2627
	Note ~~12.~~13. Stockholders’ Equity	28
	Note ~~13.~~14. Commitments and Contingencies	28
	Note 15. Fair Value Measurements	29
	Note ~~14. Fair Value Measurements~~	30
	~~Note 15.~~16. Earnings Per Share	3431
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3532
	~~Forward Looking~~Cautionary Notice Regarding Forward-Looking Statements	3532
	Overview	37
	Selected Financial Data	43
	Results of Operations	4849
	Financial Condition	6260
Item 3	Quantitative and Qualitative Disclosures About Market Risk	8281
Item 4	Controls and Procedures	8281
PART II	OTHER INFORMATION
Item 1	Legal Proceedings	8382
Item 1A	Risk Factors	8482
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	8486
Item 3	Defaults Upon Senior Securities	8486
Item 4	Mine Safety Disclosures	8486
Item 5	Other Information	8486
Item 6	Exhibits	8587
	Signatures	8688

~~Table of Contents~~

Part 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Amerant Bancorp Inc. and Subsidiaries

Consolidated Balance Sheets


(in thousands, except per share data)	(Unaudited) September 30, 2019			December 31, 2018
(in thousands, except share data)							(Unaudited) March 31, 2020		December 31, 2019
Assets
Cash and due from banks	$	32,363		$	25,756		$	22,303	$	28,035
Interest earning deposits with banks	68,964			59,954			248,750		93,289
Cash and cash equivalents	101,327			85,710			271,053		121,324
Securities
Available for sale	1,485,202			1,586,051
Held to maturity	77,611			85,188
Debt securities available for sale							1,601,303		1,568,752
Debt securities held to maturity							70,336		73,876
Equity securities with readily determinable fair value not held for trading							24,225		23,848
Federal Reserve Bank and Federal Home Loan Bank stock	70,172			70,189			74,123		72,934
Securities	1,632,985			1,741,428			1,769,987		1,739,410
Loans held for sale	1,918			—
Loans held for investment, gross	5,751,791			5,920,175			5,668,327		5,744,339
Less: Allowance for loan losses	53,640			61,762			72,948		52,223
Loans held for investment, net	5,698,151			5,858,413			5,595,379		5,692,116
Bank owned life insurance	210,414			206,142			213,266		211,852
Premises and equipment, net	126,497			123,503			128,232		128,824
Deferred tax assets, net	5,392			16,310			4,933		5,480
Goodwill	19,193			19,193			19,506		19,506
Accrued interest receivable and other assets	68,383			73,648			96,454		66,887
Total assets	$	7,864,260		$	8,124,347		$	8,098,810	$	7,985,399
Liabilities and Stockholders' Equity
Deposits
Demand
Noninterest bearing	$	805,032		$	768,822		$	779,842	$	763,224
Interest bearing	1,123,767			1,288,030			1,088,033		1,098,323
Savings and money market	1,484,336			1,588,703			1,432,891		1,475,257
Time	2,279,713			2,387,131			2,541,446		2,420,339
Total deposits	5,692,848			6,032,686			5,842,212		5,757,143
Advances from the Federal Home Loan Bank and other borrowings	1,170,000			1,166,000			1,265,000		1,235,000
Junior subordinated debentures held by trust subsidiaries	92,246			118,110			64,178		92,246
Accounts payable, accrued liabilities and other liabilities	83,415			60,133			86,303		66,309
Total liabilities	7,038,509			7,376,929			7,257,693		7,150,698
Commitments and contingencies (Note 13)
Commitments and contingencies (Note 14)

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
Class A common stock, $0.10 par value, 400 million shares authorized; 28,879,576 shares issued and outstanding (2019 - 28,927,576 shares issued and outstanding)							2,888		2,893
Class B common stock, $0.10 par value, 100 million shares authorized; 13,286,137 shares issued and outstanding (2019: 17,751,053 shares issued; 14,218,596 shares outstanding)							1,329		1,775
Additional paid in capital	418,821			385,367			358,277		419,048
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		)
Treasury stock, at cost; 3,532,457 shares of Class B common stock in 2019.							—		(46,373		)
Retained earnings	431,521			393,662			447,506		444,124
Accumulated other comprehensive income (loss)	17,108			(18,164		)
Accumulated other comprehensive income							31,117		13,234
Total stockholders' equity	825,751			747,418			841,117		834,701
Total liabilities and stockholders' equity	$	7,864,260		$	8,124,347		$	8,098,810	$	7,985,399

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

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in thousands, except per share data)	2019			2018			2019			2018
(in thousands)													2020			2019
Interest income
Loans	$	66,118		$	66,776		$	199,641		$	188,894		$	59,788		$	66,722
Investment securities	11,325			12,183			35,792			36,633			11,065			12,581
Interest earning deposits with banks	761			666			2,304			1,945			462			1,004
Total interest income	78,204			79,625			237,737			227,472			71,315			80,307

Interest expense
Interest bearing demand deposits	191			211			766			413			135			274
Savings and money market deposits	4,125			3,477			11,872			9,165			3,266			3,733
Time deposits	13,284			11,531			38,577			30,403			13,484			12,553
Advances from the Federal Home Loan Bank	6,253			6,716			18,750			19,217			4,412			6,205
Junior subordinated debentures	1,748			2,057			5,943			6,017			789			2,105
Securities sold under agreements to repurchase	3			—			3			2
Total interest expense	25,604			23,992			75,911			65,217			22,086			24,870
Net interest income	52,600			55,633			161,826			162,255			49,229			55,437
(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
Provision for loan losses													22,000			—
Net interest income after provision for loan losses													27,229			55,437

Noninterest income
Deposits and service fees	4,366			4,269			12,793			13,322			4,290			4,086
Brokerage, advisory and fiduciary activities	3,647			4,148			11,071			12,989			4,133			3,688
Change in cash surrender value of bank owned life insurance	1,449			1,454			4,272			4,372			1,414			1,404
Securities gains, net													9,620			4
Cards and trade finance servicing fees	1,034			1,145			3,368			3,380			395			915
Gain on early extinguishment of advances from the Federal Home Loan Bank	—			—			557			882
Securities gains (losses), net	906			(15		)	1,902			1
(Loss) gain on early extinguishment of advances from the Federal Home Loan Bank, net													(7		)	557
Data processing and fees for other services	70			523			955			2,017			—			520
Other noninterest income	2,364			1,426			6,221			4,918			2,065			1,982
Total noninterest income	13,836			12,950			41,139			41,881			21,910			13,156

Noninterest expense
Salaries and employee benefits	33,862			33,967			101,356			102,940			29,326			33,437
Occupancy and equipment	3,878			4,044			12,152			11,819			3,803			4,042
Telecommunication and data processing													3,464			3,026
Professional and other services fees	4,295			4,268			11,693			16,099			2,954			3,444
Telecommunication and data processing	3,408			3,043			9,667			9,138
Depreciation and amortization	1,928			1,997			5,880			6,083			1,959			1,942
FDIC assessments and insurance	597			1,578			3,167			4,493			1,118			1,393
Other operating expenses	4,769			3,145			13,672			9,753			2,243			4,661
Total noninterest expenses	52,737			52,042			157,587			160,325			44,867			51,945
Net income before income tax	15,199			14,941			48,228			42,061
Income before income tax													4,272			16,648
Income tax expense	(3,268		)	(3,390		)	(10,369		)	(10,658		)	(890		)	(3,577		)
Net income	$	11,931		$	11,551		$	37,859		$	31,403		$	3,382		$	13,071

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

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Unaudited)

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



	Three Months Ended March 31,
(in thousands, except per share data)	2020			2019

Other comprehensive income, net of tax
Net unrealized holding gains on debt securities available for sale arising during the period	$	26,702		$	16,278
Net unrealized holding losses on cash flow hedges arising during the period	(1,514		)	(11		)
Reclassification adjustment for items included in net income	(7,305		)	(252		)
Other comprehensive income	17,883			16,015
Comprehensive income	$	21,265		$	29,086

Earnings Per Share (Note 16):
Basic earnings per common share	$	0.08		$	0.31
Diluted earnings per common share	$	0.08		$	0.30

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

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

~~Nine~~Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~


	Common Stock							Additional Paid in Capital			Treasury Stock				Retained Earnings				Accumulated Other Comprehensive (Loss) Income				Total Stockholders' Equity			Common Stock											Additional Paid in Capital				Treasury Stock				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total Stockholders' Equity
(in thousands, except share data)	Shares Outstanding			Issued Shares - Par Value										Shares Outstanding												Issued Shares - Par Value
(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				Class A			Class B		Class A			Class B						Additional Paid in Capital				Treasury Stock				Retained Earnings				Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2017	24,737,470	17,751,053		$	2,474	$	1,775				$	367,505							$	—			$	387,829		$	(6,133	)	$	753,450
Dividends	—	—		—		—		—			—				(40,000		)		—				(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		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			2,132,865			—		213			—			29,005					—					—				—				29,218
Repurchase of Class B common stock	—	(2,112,321	)	—		—		—			(28,465		)		—				—				(28,465		)	—			(2,112,321	)	—			—			—				(28,465		)		—					—				(28,465		)
Restricted stock issued	1,299	—		—		—		—			—				—				—				—			1,299			—		—			—			—				—				—				—				—
Stock-based compensation expense	—	—		—		—		4,449			—				—				—				4,449			—			—		—			—			1,492				—				—				—				1,492
Net income	—	—		—		—		—			—				37,859				—				37,859			—			—		—			—			—				—				13,071				—				13,071
Other comprehensive income	—	—		—		—		—			—				—				35,272				35,272			—			—		—			—			—				—				—				16,015				16,015
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
Balance at March 31, 2019																										28,985,996			14,218,596		$	2,899		$	1,775		$	415,864			$	(46,373	)		$	406,733			$	(2,149	)		$	778,749

Balance at December 31, 2019																										28,927,576			14,218,596		$	2,893		$	1,775		$	419,048			$	(46,373	)		$	444,124			$	13,234			$	834,701
Repurchase of Class B common stock																										—			(932,459	)	—			—			—				(15,239		)		—				—				(15,239		)
Treasury stock retired																										—			—		—			(446		)	(61,166		)		61,612				—				—				—
Restricted stock issued																										6,591			—		1			—			(1		)		—				—				—				—
Restricted stock surrendered																										(129	)		—		—			—			(2		)		—				—				—				(2		)
Restricted stock forfeited																										(54,462	)		—		(6		)	—			6				—				—				—				—
Stock-based compensation expense																										—			—		—			—			392				—				—				—				392
Net income																										—			—		—			—			—				—				3,382				—				3,382
Other comprehensive income																										—			—		—			—			—				—				—				17,883				17,883
Balance at March 31, 2020																										28,879,576			13,286,137		$	2,888		$	1,329		$	358,277			$	—			$	447,506			$	31,117			$	841,117

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

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
(in thousands)	2019			2018			2020			2019
Cash flows from operating activities
Net income	$	37,859		$	31,403		$	3,382		$	13,071
Adjustments to reconcile net income to net cash provided by operating activities
(Reversal of) provision for loan losses	(2,850		)	1,750
Provision for loan losses							22,000			—
Net premium amortization on securities	10,763			12,855			3,775			3,453
Depreciation and amortization	5,880			6,083			1,959			1,942
Stock-based compensation expense	4,449			—			392			1,492
Change in cash surrender value of bank owned life insurance	(4,272		)	(4,372		)	(1,414		)	(1,404		)
Deferred taxes, securities net gains or losses and others	(3,394		)	(3,143		)	(14,875		)	1,238
Loss (gain) on early extinguishment of advances from the FHLB							7			(557		)
Net changes in operating assets and liabilities:
Accrued interest receivable and other assets	16,917			2,543			(1,539		)	8,777
Accounts payable, accrued liabilities and other liabilities	10,511			(6,430		)	(10,509		)	(15,431		)
Net cash provided by operating activities	75,863			40,689			3,178			12,581

Cash flows from investing activities
Purchases of investment securities:
Available for sale	(290,059		)	(166,703		)	(197,522		)	(110,170		)
Federal Home Loan Bank stock	(24,319		)	(24,055		)	(8,538		)	(4,888		)
	(314,378		)	(190,758		)	(206,060		)	(115,058		)
Maturities, sales and calls of investment securities:
Available for sale	430,118			178,981			196,698			162,796
Held to maturity	7,182			3,335			3,382			1,205
Federal Home Loan Bank stock	24,336			16,576			7,349			9,248
	461,636			198,892			207,429			173,249
Net increase in loans	(98,478		)	(153,019		)
Net decrease in loans							61,641			22,173
Proceeds from loan portfolio sales	259,754			60,856			13,109			152,177
Net purchases of premises and equipment, and others	(8,384		)	(5,556		)
Net proceeds from sale of subsidiary	—			7,500
Net cash provided by (used in) investing activities	300,150			(82,085		)
Net purchases of premises and equipment and others							(1,321		)	(1,951		)
Net cash provided by investing activities							74,798			230,590

Cash flows from financing activities
Net decrease in demand, savings and money market accounts	(232,420		)	(266,159		)	(36,038		)	(116,499		)
Net (decrease) increase in time deposits	(107,418		)	132,689
Net increase (decrease) in time deposits							121,107			(27,999		)
Proceeds from Advances from the Federal Home Loan Bank and other borrowings	935,000			941,000			280,000			170,000
Repayments of Advances from the Federal Home Loan Bank and other borrowings	(930,447		)	(776,000		)	(250,007		)	(265,447		)
Redemption of junior subordinated debentures	(25,864		)	—			(28,068		)	—
Dividend paid	—			(40,000		)
Proceeds from common stock issued - Class A	29,218			—			—			29,218
Repurchase of common stock - Class B	(28,465		)	—			(15,239		)	(28,465		)
Net cash used in financing activities	(360,396		)	(8,470		)
Net increase (decrease) in cash and cash equivalents	15,617			(49,866		)
Common stock retired to cover tax withholding							(2		)	—
Net cash provided by (used in) financing activities							71,753			(239,192		)
Net increase in cash and cash equivalents							149,729			3,979

Cash and cash equivalents
Beginning of period	85,710			153,445			121,324			85,710
End of period	$	101,327		$	103,579		$	271,053		$	89,689

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,				Three Months Ended March 31,
(in thousands)	2019		2018		2020		2019
Supplemental disclosures of cash flow information
Cash paid:
Interest	$	74,928	$	63,987	$	21,890	$	24,086
Income taxes	6,699		18,649		295		385

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

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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 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~~three principal subsidiaries, Amerant Investments, Inc., a securities broker-dealer (“Amerant Investments”), ~~and~~ Amerant Trust, N.A, a non-depository trust company (“Amerant Trust”)., and Elant Bank & Trust (the “Cayman Bank”), a bank and trust company domiciled in the Cayman Islands acquired in November 2019.

The Company’s Class A common stock, par value $0.10 per common share, and Class B common stock, par value $0.10 per common share, 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~~The Company is managed using a single segment concept, on a consolidated basis, and management determined to that no separate current or historical reportable segment disclosures are required under generally accepted accounting principles in the United States of America (“U.S. GAAP”).

Initial Public Offering and Shares Repurchase

On December 21, 2018, the Company completed an initial public offering (the “IPO”). In March 2019, the Company repurchased the remaining shares of its Class B common stock held by Mercantil Servicios Financieros, C.A., the Company’s former parent company (“the Former Parent”). For more information about the IPO and the repurchase of Class B common stock previously held by the Former Parent, see Note 15 to our audited consolidated financial statements included in the Company’s annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on ~~April 1, 2019~~March 16, 2020 (the “Form 10-K”). In

COVID-19 Pandemic

On March ~~2019, following~~11, 2020, the ~~partial exercise~~World Health Organization recognized an outbreak of a novel strain of the ~~over-allotment option by~~coronavirus, COVID-19, as a pandemic.

On March 13, 2020, the ~~IPO’s underwriters, and completion of certain private placements of shares~~President of the ~~Company’s Class A common stock,~~Unites States of America (U.S.) declared a national state of emergency. In response to this outbreak, the governments of many states, cities and municipalities in the U.S., including the States of Florida, New York and Texas, have taken preventative or protective actions, such as imposing restrictions on business operations and advising or requiring individuals to limit or forego their time outside of their homes.

On March 16, 2020, the Company ~~repurchased~~activated its Business Continuity Plan (“BCP”) to continue to provide its products and services during the ~~remaining shares of its Class B common stock held by Mercantil Servicios Financieros, C.A., the~~COVID-19 pandemic. The Company’s ~~former parent company (“MSF” or “the Former Parent”).~~ ~~See~~ ~~Note 12~~BCP plan is framed within regulatory guidelines and subject to ~~these unaudited interim consolidated financial statements for more information about the private placements~~periodic testing and ~~the repurchase of Class B common stock previously held by MSF. No shares have been repurchased since March 2019.~~

~~Rebranding~~

~~On June 4, 2019, the Company’s stockholders approved an amendment~~independent audits. All banking centers are open to the ~~Company’s Amended~~public by drive-thru and ~~Restated Articles of Incorporation (the “Articles of Incorporation”)~~by appointment-only, under a reduced schedule (except banking centers in Texas which are operating under regular business hours), and with limited staffing. All electronic channels remain fully operational. In addition, the BCP enabled employees 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.

work remotely.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), an approximately $2.0 trillion COVID-19 response bill, to provide emergency economic relief to individuals, small businesses, mid-size companies, large corporations, hospitals and other public health facilities, and state and local governments, was enacted. The CARES Act allocated the Small Business Administration, or SBA, $350.0 billion to provide loans of up to $10.0 million per small business as defined in the CARES Act. On April 2, 2020, the Bank began participating in the SBA’s Paycheck Protection Program, or “PPP”, by providing loans to these businesses to cover payroll, rent, mortgage, healthcare, and utilities costs, among other essential expenses. On April 24, 2020, the Paycheck Protection Program and Health Care Enhancement Act, adding funding to the PPP, was enacted. As of May 1, 2020, the Company had received approval for 1,493 loan applications under the PPP totaling $197.8 million, and had funded $137.9 million.

On March 26, 2020, the Company began offering loan payment relief options to customers impacted by the COVID-19 pandemic, including interest-only and/or forbearance options. As of May 1, 2020, loans under these programs totaled $1,119 million. In accordance with accounting and regulatory guidance, loans to borrowers benefiting from these measures are not considered Troubled Debt Restructurings (“TDRs”). The Company is closely monitoring the performance of these loans under the terms of the temporary relief granted.

b) Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, they do not include all of the information and footnotes required for a fair statement of financial position, results of operations and cash flows in conformity with U.S. GAAP. These unaudited interim consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for a full year or any other period. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, ~~2018~~2019 and ~~2017~~2018 and for each of the three years in the period ended December 31, ~~2018~~2019 and the accompanying footnote disclosures for the Company, which are included in the Form 10-K.

For a complete summary of our significant accounting policies, please see Note 1 to the Company’s audited consolidated financial statements in the 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 ~~period.~~periods. Significant estimates made by management include: (i) the determination of the allowance for loan losses; (ii) the fair values of securities and the value assigned to goodwill during ~~the annual~~periodic goodwill impairment ~~test;~~tests; (iii) the cash surrender value of bank owned life insurance; and (iv) the determination of whether the amount of deferred tax assets will more likely than not be realized. Management believes that these estimates are appropriate. Actual results could differ from these estimates.

c) ~~Recently Issued Accounting Pronouncements~~

~~Issued and Not Yet Adopted~~

~~Revenue from Contracts with Customers~~

In May 2014, the 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 scope of the guidance excludes net interest income and many other revenues from financial assets. Although the Company has not finalized the evaluation, we do not expect the adoption to 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.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

~~Recognition~~

The COVID-19 outbreak has severely restricted the level of economic activity in the U.S. and ~~Measurement~~around the world since March 2020. In the U.S and several other countries, temporary closures of ~~Financial Instruments~~

~~In January 2016,~~businesses have been ordered and numerous other businesses have temporarily closed voluntarily. These actions have expanded significantly since March 31, 2020 and may continue to expand. The Company considered the ~~FASB issued changes to the guidance~~impact of COVID-19 on the ~~recognition and measurement~~significant estimates management used. The Company recorded a provision for loan losses of ~~financial instruments. The changes include, among others,~~$22.0 million during the ~~removal~~three months ended March 31, 2020 primarily as a result 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 outestimated impact of the ~~available for sale classification~~COVID-19 pandemic. Given the uncertainty regarding the spread and ~~presented separately~~severity of COVID-19 and its adverse effects on the ~~face~~U.S. and global economies, the extent to which the COVID-19 pandemic may impact the Company’s financial condition or results of ~~the consolidated balance sheet. At adoption, the Company currently expects that the cumulative unrealized loss of these securities previously recognized in AOCL will~~operations is uncertain and cannot 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 onaccurately predicted at this ~~available for sale equity investment was $0.3 million. The Company plans to adopt the new guidance during the fourth quarter of 2019.~~time.

c) Recently Issued Accounting Pronouncements

Issued and Not Yet Adopted

New Guidance on Leases

In December 2018, the ~~FASB~~Financial Accounting Standards Board (“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~~In November 2019, the FASB again amended the effective date of the new guidance on leases. Previously, the amendments and related new guidance on leases ~~are~~were effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, for private ~~companies, and~~companies. The new guidance on leases is now effective for fiscal ~~periods~~years beginning after December 15, ~~2018,~~2020 and interim periods within ~~those~~ fiscal years ~~for public companies.~~beginning after December 15, 2021. Early adoption is still permitted.

The Company has completed the process of gathering a complete inventory of ~~leases and~~its lease contracts, migrating identified lease data onto a new system, and is in the final stages of testing and ~~evaluation. We~~evaluation of results. Based on these results, 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~~its consolidated financial ~~statements.~~statements for the year ending December 31, 2021.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

Facilitation of the Effects of Reference Rate Reform on Financial Reporting


2.	~~Securities~~

~~Amortized cost~~On March 12, 2020, the FASB issued amendments to guidance applicable to contracts, hedging relationships, and ~~approximate fair values~~other transactions affected that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. These amendments provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments also allow entities to make a one-time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that are classified as held to maturity before January 1, 2020. These amendments are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply these amendments to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected, these amendments must be applied prospectively for ~~sale~~all eligible contract modifications and hedging relationships. The Company is in the process of evaluating the implications of these amendments to its current efforts for reference rate reform implementation.

New Guidance on Accounting for Credit Losses on Financial Instruments

In June 2016, the FASB issued the new guidance on accounting for current expected credit losses on financial instruments (“CECL.”) The new guidance introduces an approach based on expected losses to estimate credit losses on various financial instruments, including loans. 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.

In November 2018, the FASB issued amendments to pending new guidance on CECL to, among other things, align the implementation date for private companies’ annual financial statements with the implementation date for their interim financial statements. Prior to the issuance of these amendments, the guidance on accounting for CECL was effective for private companies for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. These amendments are ~~summarized as follows:~~

effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, for private companies.

September 30, 2019
Amortized
Cost Gross Unrealized Estimated
Fair Value
(in thousands) Gains Losses
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

December 31, 2018
Amortized
Cost Gross Unrealized Estimated
Fair Value
(in thousands) Gains Losses
U.S. government-sponsored enterprise debt securities $ 840,760
$ 2,197
$ (22,178 ) $ 820,779
Corporate debt securities 357,602
139
(5,186 ) 352,555
U.S. government agency debt securities 221,682
187
(4,884 ) 216,985
Municipal bonds 162,438
390
(2,616 ) 160,212
Mutual funds 24,266
—
(1,156 ) 23,110
Commercial paper 12,448
—
(38 ) 12,410
$ 1,619,196
$ 2,913
$ (36,058 ) $ 1,586,051

~~At September 30,~~In November 2019, the FASB amended the effective date of the new guidance on CECL. Previously, the amendments and related new guidance on CECL was effective for fiscal years beginning after December 15, 2021, and interim periods within those years, for private companies. The new guidance on CECL is now effective for fiscal years beginning after December 15, 2022 and interim periods within those years. Early adoption is still permitted. The new guidance on CECL is effective for fiscal years beginning after December 15, 2019, and interim periods within those years, for public companies.

The Company is currently assessing the impact that these changes will have on its consolidated financial statements, when adopted. As an Emerging Growth Company, or EGC, the Company currently plans to adopt the new guidance on CECL in its consolidated financial statements for the year ending December 31, ~~2018,~~2023, or earlier in the event the Company ~~had no foreign sovereign or foreign government agency debt securities.~~ceases to be an EGC.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

d) Subsequent Events

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

2. Interest Earning Deposits with Banks

At March 31, 2020 and December 31, 2019 interest earning deposits with banks are mainly comprised of deposits with the Federal Reserve of approximately $248.8 million and $93 million, respectively. At March 31, 2020 and December 31, 2019, the average interest rate on these deposits was approximately 1.08% and 2.19%, respectively. These deposits mature within one year.


3.	Securities

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



	March 31, 2020
	Amortized Cost		Gross Unrealized					Estimated Fair Value
(in thousands)	Amortized Cost		Gains		Losses			Estimated Fair Value
U.S. government-sponsored enterprise debt securities	$	844,712	$	31,188	$	(719	)	$	875,181
Corporate debt securities	333,359		2,990		(6,155		)	330,194
U.S. government agency debt securities	251,731		3,828		(2,377		)	253,182
U.S. treasury securities	73,636		3,689		—			77,325
Municipal bonds	62,203		3,218		—			65,421
	$	1,565,641	$	44,913	$	(9,251	)	$	1,601,303



	December 31, 2019
	Amortized Cost		Gross Unrealized					Estimated Fair Value
(in thousands)	Amortized Cost		Gains		Losses			Estimated Fair Value
U.S. government sponsored enterprise debt securities	$	927,205	$	9,702	$	(3,795	)	$	933,112
Corporate debt securities	247,836		5,002		(2		)	252,836
U.S. government agency debt securities	230,384		895		(2,882		)	228,397
U.S. treasury securities	106,112		1		(1,877		)	104,236
Municipal bonds	47,652		2,519		—			50,171
	$	1,559,189	$	18,119	$	(8,556	)	$	1,568,752

At March 31, 2020 and December 31, 2019, the Company had no foreign sovereign or foreign government agency debt securities. The Company had investments in foreign corporate debt securities of $13.4 million and $5.2 million at March 31, 2020 and December 31, 2019, respectively.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

In the three months ended March 31, 2020 and 2019, proceeds from sales, gross realized gains, gross realized losses of debt securities available for sale were as follows:



	Three Months Ended March 31,
(in thousands)	2020			2019
Proceeds from sales of debt securities available for sale	$	139,072		$	112,529
Gross realized gains	9,266			448
Gross realized losses	(23		)	(444		)
Realized gains, net	$	9,243		$	4

The Company’s investment in debt 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:


	September 30, 2019															March 31, 2020
	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	$	130,186	$	(636	)	$	276,102	$	(2,503	)	$	406,288	$	(3,139	)	$	24,695	$	(132	)	$	24,553	$	(587	)	$	49,248	$	(719	)
Corporate debt securities	13,967		(101		)	17,110		(109		)	31,077		(210		)	127,093		(6,155		)	—		—			127,093		(6,155		)
Municipal bonds	—		—			—		—			—		—
U.S. government agency debt securities	15,718		(46		)	124,128		(2,734		)	139,846		(2,780		)	18,602		(117		)	98,645		(2,260		)	117,247		(2,377		)
Mutual funds	—		—			23,707		(313		)	23,707		(313		)
Commercial paper	—		—			—		—			—		—
	$	159,871	$	(783	)	$	441,047	$	(5,659	)	$	600,918	$	(6,442	)	$	170,390	$	(6,404	)	$	123,198	$	(2,847	)	$	293,588	$	(9,251	)

December 31, 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 $ 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 1,449
(6 ) 94,331
(2,610 ) 95,780
(2,616 )
Mutual funds —
—
22,865
(1,156 ) 22,865
(1,156 )
Commercial paper 12,410
(38 ) —
—
12,410
(38 )
$ 412,086
$ (7,778 ) $ 935,330
$ (28,280 ) $ 1,347,416
$ (36,058 )



	December 31, 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	$	239,446	$	(1,740	)	$	180,274	$	(2,055	)	$	419,720	$	(3,795	)
Corporate debt securities	8,359		(1		)	300		(1		)	8,659		(2		)
U.S. government agency debt securities	41,300		(251		)	117,040		(2,631		)	158,340		(2,882		)
U.S. treasury securities	97,471		(1,877		)	—		—			97,471		(1,877		)
	$	386,576	$	(3,869	)	$	297,614	$	(4,687	)	$	684,190	$	(8,556	)

At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company held certain debt securities issued or guaranteed by the U.S. government and U.S. government-sponsored entities and agencies. The Company believes these issuers to present little credit risk. The Company ~~does not consider~~considers these securities ~~to be~~are not 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 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.

1314

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

Unrealized losses on ~~corporate debt securities and mutual funds at September 30, 2019,~~municipal and corporate debt securities ~~municipal bonds, mutual funds and commercial paper at December 31, 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~~considers these securities ~~to be~~are not other-than-temporarily impaired because the issuers of these debt securities are considered to be high quality, and ~~management~~generally present little credit risk. The Company 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:~~

September 30, 2019
Amortized
Cost Gross Unrealized Estimated
Fair Value
(in thousands) Gains Losses
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, 2018
Amortized
Cost Gross Unrealized Estimated
Fair Value
(in thousands) Gains Losses
Securities Held to Maturity -
U.S. government-sponsored enterprise debt securities $ 82,326
$ —
$ (3,889 ) $ 78,437
U.S. Government agency debt securities 2,862
—
(49 ) 2,813
$ 85,188
$ —
$ (3,938 ) $ 81,250

Contractual maturities of debt securities at ~~September 30, 2019~~March 31, 2020 are as follows:


	Available for Sale				Held to Maturity				Available for Sale				Held to Maturity
(in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Within 1 year	$	25,703	$	25,759	$	—	$	—	$	103,743	$	103,995	$	—	$	—
After 1 year through 5 years	196,322		198,199		—		—		167,055		166,952		—		—
After 5 years through 10 years	228,157		234,815		—		—		280,460		285,762		11,567		11,793
After 10 years	996,219		1,002,472		77,611		78,670		1,014,383		1,044,594		58,769		59,561
No contractual maturities	24,270		23,957		—		—
	$	1,470,671	$	1,485,202	$	77,611	$	78,670	$	1,565,641	$	1,601,303	$	70,336	$	71,354

Equity securities with readily available fair value not held for trading consist of mutual funds with an original cost of $24.0 million, and fair value of $24.2 million and $23.8 million as of March 31, 2020 and December 31, 2019, respectively. These equity securities have no stated maturities. During the three months ended March 31, 2020, we recognized an unrealized gain of $0.4 million related to the change in market value of these mutual funds. No gain was recognized during the three months ended March 31, 2019.


4.	Loans

The loan portfolio consists of the following loan classes:



(in thousands)	March 31, 2020		December 31, 2019
Real estate loans
Commercial real estate
Non-owner occupied	$	1,875,293	$	1,891,802
Multi-family residential	834,016		801,626
Land development and construction loans	225,179		278,688
	2,934,488		2,972,116
Single-family residential	569,340		539,102
Owner occupied	923,260		894,060
	4,427,088		4,405,278
Commercial loans	1,084,751		1,234,043
Loans to financial institutions and acceptances	16,576		16,552
Consumer loans and overdrafts	139,912		88,466
	$	5,668,327	$	5,744,339

At March 31, 2020 and December 31, 2019, loans with an outstanding principal balance of $1.5 billion and $1.6 billion, respectively, were pledged as collateral to secure advances from the FHLB.

1415

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


3.	~~Loans~~

~~The loan portfolio consists of the following loan classes:~~

(in thousands) September 30,
2019 December 31,
2018
Real estate loans
Commercial real estate
Nonowner occupied $ 1,933,662
$ 1,809,356
Multi-family residential 942,851
909,439
Land development and construction loans 268,312
326,644
3,144,825
3,045,439
Single-family residential 527,468
533,481
Owner occupied 825,601
777,022
4,497,894
4,355,942
Commercial loans 1,127,484
1,380,428
Loans to financial institutions and acceptances 24,815
68,965
Consumer loans and overdrafts 101,598
114,840
$ 5,751,791
$ 5,920,175

The amounts above include loans under syndication facilities of approximately ~~$578~~$488 million and ~~$807~~$562 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, 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 ~~$19.6~~$14.5 million and ~~$19.5~~$15.2 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively.


	September 30, 2019						March 31, 2020						December 31, 2019
(in thousands)	Venezuela		Others (1)		Total		Venezuela		Others (1)		Total		Venezuela		Others (1)		Total
Real estate loans
Single-family residential (2)	$	110,142	$	7,218	$	117,360	$	97,517	$	7,571	$	105,088	$	103,979	$	7,692	$	111,671
Commercial loans	—		55,264		55,264		—		57,348		57,348		—		43,850		43,850
Loans to financial institutions and acceptances	—		5,000		5,000		—		8		8		—		5		5
Consumer loans and overdrafts ~~(3)~~(4)	16,269		8,011		24,280		427		7,688		8,115		8,318		7,593		15,911
	$	126,411	$	75,493	$	201,904	$	97,944	$	72,615	$	170,559	$	112,297	$	59,140	$	171,437

__________________


(1)	Loans to borrowers in 1512 other countries which do not individually exceed 1% of total ~~assets.~~assets (14 countries at December 31, 2019)


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

(3)

~~Mostly~~

At December 31, 2019, Venezuela balances are mostly comprised of credit card extensions of credit to customers with deposits with the Bank. ~~In April 2019, we revised our~~The Company phased out its legacy credit card ~~program~~products to further strengthen ~~the Company’s~~its credit quality. ~~We stopped charge privileges to our riskiest cardholders and are requiring repayment~~During the first quarter of ~~their~~2020, the remaining 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~~related to the ~~remaining cardholders and require repayment~~credit card product were repaid, therefore, there are no outstanding credit card balances as of ~~their balances by January~~March 31, 2020.


(4)	Overdrafts to customers outside the United States were de minimis at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

~~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 when the cardholders’ average deposits decline below the outstanding credit 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~~March 31, 2020 and December 31, ~~2018~~2019 are summarized in the following tables:


	September 30, 2019																March 31, 2020
	Total Loans, Net of Unearned Income				Past Due								Total Loans in Nonaccrual Status		Total Loans 90 Days or More Past Due and Accruing		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								Current			30-59 Days			60-89 Days			Greater than 90 Days			Total Past Due
Real estate loans
Commercial real estate
Nonowner occupied	$	1,933,662	$	1,933,662	$	—	$	—	$	—	$	—	$	1,936	$	—
Non-owner occupied																	$	1,875,293		$	1,875,293		$	—		$	—		$	—		$	—	$	1,936	$	—
Multi-family residential	942,851		942,851		—		—		—		—		—		—		834,016			834,016			—			—			—			—		—		—
Land development and construction loans	268,312		268,312		—		—		—		—		—		—		225,179			225,179			—			—			—			—		—		—
	3,144,825		3,144,825		—		—		—		—		1,936		—		2,934,488			2,934,488			—			—			—			—		1,936		—
Single-family residential	527,468		521,399		—		2,506		3,563		6,069		9,033		—		569,340			557,717			8,438			—			3,185			11,623		7,077		5
Owner occupied	825,601		820,430		4,179		510		482		5,171		11,921		—		923,260			910,269			9,004			1,208			2,779			12,991		13,897		—
	4,497,894		4,486,654		4,179		3,016		4,045		11,240		22,890		—		4,427,088			4,402,474			17,442			1,208			5,964			24,614		22,910		5
Commercial loans	1,127,484		1,123,535		622		279		3,048		3,949		9,605		—		1,084,751			1,076,834			5,626			425			1,866			7,917		9,993		—
Loans to financial institutions and acceptances	24,815		24,815		—		—		—		—		—		—		16,576			16,576			—			—			—			—		—		—
Consumer loans and overdrafts	101,598		99,707		1,040		544		307		1,891		116		213		139,912			139,682			170			29			31			230		467		12
	$	5,751,791	$	5,734,711	$	5,841	$	3,839	$	7,400	$	17,080	$	32,611	$	213	$	5,668,327		$	5,635,566		$	23,238		$	1,662		$	7,861		$	32,761	$	33,370	$	17

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

December 31, 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
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 68,965
68,965
—
—
—
—
—
—
Consumer loans and overdrafts 114,840
113,227
474
243
896
1,613
35
884
$ 5,920,175
$ 5,899,259
$ 11,888
$ 3,801
$ 5,227
$ 20,916
$ 16,479
$ 1,303

~~At September 30, 2019 and December 31, 2018, loans with an outstanding principal balance of $1.7 billion were pledged as collateral to secure advances from the FHLB.~~


4.	~~Allowance for Loan Losses~~

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

Three Months Ended September 30, 2019
(in thousands) Real Estate Commercial Financial
Institutions Consumer
and Others Total
Balances at beginning of the period $ 21,900
$ 25,824
$ 60
$ 9,620
$ 57,404
Provision for (reversal of) loan losses 487
(388 ) (2 ) (1,597 ) (1,500 )
Loans charged-off
Domestic —
(907 ) —
(98 ) (1,005 )
International —
—
—
(1,661 ) (1,661 )
Recoveries —
190
—
212
402
Balances at end of the period $ 22,387
$ 24,719
$ 58
$ 6,476
$ 53,640



	December 31, 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
Non-owner occupied	$	1,891,802	$	1,891,801	$	1	$	—	$	—	$	1	$	1,936	$	—
Multi-family residential	801,626		801,626		—		—		—		—		—		—
Land development and construction loans	278,688		278,688		—		—		—		—		—		—
	2,972,116		2,972,115		1		—		—		1		1,936		—
Single-family residential	539,102		530,399		4,585		1,248		2,870		8,703		7,291		—
Owner occupied	894,060		888,158		1,360		1,724		2,818		5,902		14,130		—
	4,405,278		4,390,672		5,946		2,972		5,688		14,606		23,357		—
Commercial loans	1,234,043		1,226,320		4,418		608		2,697		7,723		9,149		—
Loans to financial institutions and acceptances	16,552		16,552		—		—		—		—		—		—
Consumer loans and overdrafts	88,466		88,030		215		176		45		436		416		5
	$	5,744,339	$	5,721,574	$	10,579	$	3,756	$	8,430	$	22,765	$	32,922	$	5

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


5.	Allowance for Loan Losses

The analyses by loan segment of the changes in the allowance for loan losses for the three months ended March 31, 2020 and 2019, and its allocation by impairment methodology and the related investment in loans, net as of March 31, 2020 and 2019 are summarized in the following tables:


	Nine Months Ended September 30, 2019															Three Months Ended March 31, 2020
(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	$	22,778		$	30,018		$	445		$	8,521		$	61,762		$	25,040	$	22,482		$	42	$	4,659		$	52,223
(Reversal of) provision for loan losses	(391		)	(3,065		)	(387		)	993			(2,850		)
Provision for loan losses																11,390		7,530			—		3,080			22,000
Loans charged-off
Domestic	—			(2,773		)	—			(504		)	(3,277		)	—		(1,101		)	—		(222		)	(1,323		)
International	—			(61		)	—			(2,961		)	(3,022		)	—		(34		)	—		(251		)	(285		)
Recoveries	—			600			—			427			1,027			—		185			—		148			333
Balances at end of the period	$	22,387		$	24,719		$	58		$	6,476		$	53,640		$	36,430	$	29,062		$	42	$	7,414		$	72,948

Allowance for loan losses by impairment methodology:
Individually evaluated																$	1,157	$	4,038		$	—	$	1,525		$	6,720
Collectively evaluated																35,273		25,024			42		5,889			66,228
																$	36,430	$	29,062		$	42	$	7,414		$	72,948
Investment in loans, net of unearned income:
Individually evaluated																$	1,936	$	24,232		$	—	$	7,521		$	33,689
Collectively evaluated																2,931,900		2,104,220			16,576		581,942			5,634,638
																$	2,933,836	$	2,128,452		$	16,576	$	589,463		$	5,668,327

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

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


	Three Months Ended September 30, 2018														Three Months Ended March 31, 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	$	28,693	$	29,784		$	3,317		$	8,137		$	69,931		$	22,778		$	30,018		$	445		$	8,521		$	61,762
Provision for (reversal of) loan losses	386		1,016			(482		)	680			1,600
(Reversal of) provision for loan losses															(322		)	(31		)	(339		)	692			—
Loans charged-off
Domestic	—		(526		)	—			(66		)	(592		)	—			(992		)	—			(196		)	(1,188		)
International	—		(1,421		)	—			(283		)	(1,704		)	—			(18		)	—			(406		)	(424		)
Recoveries	—		187			—			49			236			—			123			—			49			172
Balances at end of the period	$	29,079	$	29,040		$	2,835		$	8,517		$	69,471		$	22,456		$	29,100		$	106		$	8,660		$	60,322

Allowance for loan losses by impairment methodology
Individually evaluated															$	—		$	1,593		$	—		$	1,202		$	2,795
Collectively evaluated															22,456			27,507			106			7,458			57,527
															$	22,456		$	29,100		$	106		$	8,660		$	60,322
Investment in loans, net of unearned income
Individually evaluated															$	711		$	12,325		$	—		$	3,392		$	16,428
Collectively evaluated															3,016,569			2,137,165			27,985			536,291			5,718,010
															$	3,017,280		$	2,149,490		$	27,985		$	539,683		$	5,734,438

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

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



Three Months Ended March 31, (in thousands)	Real Estate		Commercial		Financial Institutions		Consumer and others		Total
2020	$	—	$	11,901	$	—	$	1,208	$	13,109
2019	$	23,475	$	126,838	$	—	$	1,864	$	152,177

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 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

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~~March 31, 2020 and December 31, ~~2018:~~2019:


	September 30, 2019												March 31, 2020
	Recorded Investment												Recorded Investment
(in thousands)	With a Valuation Allowance		Without a Valuation Allowance		Total		Year Average (1)		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
Nonowner occupied	$	1,936	$	—	$	1,936	$	975	$	1,936	$	397
Non-owner occupied													$	1,936	$	—	$	1,936	$	1,943	$	1,936	$	1,157
Multi-family residential	—		—		—		521		—		—		—		—		—		164		—		—
Land development and construction loans	—		—		—		—		—		—		—		—		—		—		—		—
	1,936		—		1,936		1,496		1,936		397		1,936		—		1,936		2,107		1,936		1,157
Single-family residential	5,764		461		6,225		5,045		6,303		1,233		4,499		2,831		7,330		6,471		7,610		1,071
Owner occupied	5,354		4,396		9,750		7,178		9,735		956		1,481		12,470		13,951		11,857		13,791		510
	13,054		4,857		17,911		13,719		17,974		2,586		7,916		15,301		23,217		20,435		23,337		2,738
Commercial loans	8,315		848		9,163		7,628		9,311		662		8,139		1,854		9,993		9,228		10,039		3,528
Consumer loans and overdrafts	94		9		103		57		100		56		470		9		479		270		537		454
	$	21,463	$	5,714	$	27,177	$	21,404	$	27,385	$	3,304	$	16,525	$	17,164	$	33,689	$	29,933	$	33,913	$	6,720

_______________


(1)	Average using trailing four quarter balances.



	December 31, 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
Non-owner occupied	$	1,936	$	—	$	1,936	$	1,459	$	1,936	$	1,161
Multi-family residential	—		—		—		342		—		—
Land development and construction loans	—		—		—		—		—		—
	1,936		—		1,936		1,801		1,936		1,161
Single-family residential	4,739		729		5,468		5,564		5,598		946
Owner occupied	6,169		7,906		14,075		9,548		13,974		501
	12,844		8,635		21,479		16,913		21,508		2,608
Commercial loans	8,415		13		8,428		8,552		8,476		1,288
Consumer loans and overdrafts	395		9		404		153		402		378
	$	21,654	$	8,657	$	30,311	$	25,618	$	30,386	$	4,274

_______________


(1)	Average using trailing four quarter balances.

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

December 31, 2018
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 $ —
$ —
$ —
$ 7,935
$ —
$ —
Multi-family residential —
717
717
724
722
—
Land development and construction loans —
—
—
—
—
—
—
717
717
8,659
722
—
Single-family residential 3,086
306
3,392
4,046
3,427
1,235
Owner occupied 169
4,427
4,596
5,524
4,601
75
3,255
5,450
8,705
18,229
8,750
1,310
Commercial loans 4,585
148
4,733
7,464
6,009
1,059
Consumer loans and overdrafts 9
11
20
15
17
4
$ 7,849
$ 5,609
$ 13,458
$ 25,708
$ 14,776
$ 2,373

~~_______________~~


~~(1)~~	~~Average using trailing four quarter balances.~~

~~The Company recognized interest income on impaired loans of $139 thousand and $11 thousand during the three months ended September 30, 2019 and~~ ~~2018, respectively, and $170 thousand and $119 thousand during the nine months ended September 30, 2019 and~~ ~~2018, respectively.~~

~~During the nine months ended September 30, 2019,~~There were no new troubled debt restructurings (“TDRs”) ~~consisted~~during the first quarter of ~~one single-family residential loan with a recorded investment~~2020. As of ~~$187 thousand, and~~March 31, 2020, TDRs mainly consist of a multiple loan relationship with a South Florida customer ~~consisting of~~including CRE, owner occupied and commercial loans totaling ~~$9.5 million as of September 30, 2019.~~$9.7 million. This ~~$9.5 million~~ TDR ~~restructure~~ consisted of extending repayment terms and adjusting future periodic payments ~~and the Company determined~~which resulted in no additional ~~impairment charges were necessary.~~reserves. Four residential loans, totaling ~~$2.2~~$2.1 million at March 31, 2020, which are included in this loan relationship, were not modified. The Company believes the specific reserves associated with ~~these loans,~~this loan relationship, which total ~~a $11.7~~$3.6 million ~~impaired loan relationship~~ at ~~September 30, 2019,~~March 31, 2020, are adequate to cover probable losses given current facts and circumstances. In the fourth quarter of 2019, this $9.7 million TDR loan relationship did not perform in accordance with the restructured terms. The Company will continue to closely monitor the performance of these loans under their modified terms. ~~During~~Since March 31, 2019, no additional TDRs subsequently defaulted under their modified terms. In addition, during the ~~nine months ended September 30, 2019, the Company had~~first quarter of 2020, there were no charge-offs against the allowance for loan losses ~~as a result of~~associated with TDR loans. ~~Since September 30, 2018, no TDRs subsequently defaulted~~

On March 26, 2020, the Company began offering loan payment relief options to customers impacted by the COVID-19 pandemic, including interest-only and/or forbearance options. Consistent with accounting and regulatory guidance, temporary modifications granted under these programs are not considered TDRs. The Company is actively monitoring these loans to permit the ~~modified~~proactive identification of negative patterns by industry and/or region and pursuing remediation efforts in a timely manner. While the economic disruption caused by the COVID-19 pandemic is expected to impact the Company's credit quality, it is difficult to estimate the potential outcome due to the uncertain duration and scope of the slowdown in U.S. economic activity. The Company will continue to closely monitor the performance of loans to borrowers in impacted sectors, and will reassess its provisions as conditions evolve. As of May 1, 2020, loans under these programs totaled $1,119 million. The Company is closely monitoring the performance of these loans under the terms of the ~~loan agreement.~~

temporary relief granted.

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

Loans by Credit ~~Risk~~ Quality Indicators

~~The Company’s investment in loans~~Loans by credit quality indicators as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 are summarized in the following tables:


	September 30, 2019												March 31, 2020
	Credit Risk Rating												Credit Risk Rating
	Nonclassified				Classified								Nonclassified				Classified
(in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Total		Pass		Special Mention		Substandard		Doubtful		Loss		Total
Real estate loans
Commercial real estate
Nonowner occupied	$	1,918,670	$	13,056	$	1,936	$	—	$	—	$	1,933,662
Non-owner occupied													$	1,872,600	$	—	$	757	$	1,936	$	—	$	1,875,293
Multi-family residential	942,851		—		—		—		—		942,851		834,016		—		—		—		—		834,016
Land development and construction loans	258,128		10,184		—		—		—		268,312		215,327		9,852		—		—		—		225,179
	3,119,649		23,240		1,936		—		—		3,144,825		2,921,943		9,852		757		1,936		—		2,934,488
Single-family residential	518,435		—		9,033		—		—		527,468		562,258		—		7,082		—		—		569,340
Owner occupied	804,575		5,719		15,307		—		—		825,601		902,065		7,190		14,005		—		—		923,260
	4,442,659		28,959		26,276		—		—		4,497,894		4,386,266		17,042		21,844		1,936		—		4,427,088
Commercial loans	1,110,866		5,077		11,541		—		—		1,127,484		1,070,062		2,587		9,459		2,643		—		1,084,751
Loans to financial institutions and acceptances	24,815		—		—		—		—		24,815		16,576		—		—		—		—		16,576
Consumer loans and overdrafts	99,198		—		2,400		—		—		101,598		139,437		—		41		434		—		139,912
	$	5,677,538	$	34,036	$	40,217	$	—	$	—	$	5,751,791	$	5,612,341	$	19,629	$	31,344	$	5,013	$	—	$	5,668,327

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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


	December 31, 2018												December 31, 2019
	Credit Risk Rating												Credit Risk Rating
	Nonclassified				Classified								Nonclassified				Classified
(in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Total		Pass		Special Mention		Substandard		Doubtful		Loss		Total
Real estate loans
Commercial real estate
Nonowner occupied	$	1,802,573	$	6,561	$	222	$	—	$	—	$	1,809,356
Non-owner occupied													$	1,879,780	$	9,324	$	762	$	1,936	$	—	$	1,891,802
Multi-family residential	909,439		—		—		—		—		909,439		801,626		—		—		—		—		801,626
Land development and construction loans	326,644		—		—		—		—		326,644		268,733		9,955		—		—		—		278,688
	3,038,656		6,561		222		—		—		3,045,439		2,950,139		19,279		762		1,936		—		2,972,116
Single-family residential	526,373		—		7,108		—		—		533,481		531,811		—		7,291		—		—		539,102
Owner occupied	758,552		9,019		9,451		—		—		777,022		871,682		8,138		14,240		—		—		894,060
	4,323,581		15,580		16,781		—		—		4,355,942		4,353,632		27,417		22,293		1,936		—		4,405,278
Commercial loans	1,369,434		3,943		6,462		589		—		1,380,428		1,217,399		5,569		8,406		2,669		—		1,234,043
Loans to financial institutions and acceptances	68,965		—		—		—		—		68,965		16,552		—		—		—		—		16,552
Consumer loans and overdrafts	108,778		—		6,062		—		—		114,840		88,042		—		67		357		—		88,466
	$	5,870,758	$	19,523	$	29,305	$	589	$	—	$	5,920,175	$	5,675,625	$	32,986	$	30,766	$	4,962	$	—	$	5,744,339


5.6.	Time Deposits

Time deposits in denominations of $100,000 or more amounted to approximately $1.5 billion and $1.4 billion at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019, respectively. Time deposits in denominations of more than $250,000 ~~or more~~ amounted to approximately ~~$739~~$796 million and ~~$718~~$733 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, brokered time deposits amounted to ~~$566~~$647 million and ~~$642~~$662 million, respectively.


6.7.	Advances from the Federal Home Loan Bank and Other Borrowings

~~The~~At March 31, 2020 and December 31, 2019, 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 September 30, 2019 December 31, 2018
(in thousands, except percentages)
2019 1.80% to 3.86% $ 195,000
$ 440,000
2020 1.50% to 2.74% 325,000
306,000
2021 1.93% to 3.08% 240,000
210,000
2022 (1) 1.14% to 2.80% 320,000
120,000
2023 and after 2.95% to 3.23% 90,000
90,000
$ 1,170,000
$ 1,166,000



			Outstanding Balance
Year of Maturity	Interest Rate	Interest Rate Type	At March 31, 2020		At December 31, 2019
			(in thousands)
2020	0.44% to 2.35%	Fixed	155,000		135,000
2020	1.73% to 2.03%	Variable	60,000		150,000
2021	1.75% to 3.08%	Fixed	210,000		210,000
2022	0.65% to 2.80%	Fixed	170,000		120,000
2023 and after (1)	0.62% to 3.23%	Fixed	670,000		620,000
			$	1,265,000	$	1,235,000

~~__________________~~


~~(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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Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

_______________


(1)	As of March 31, 2020 and December 31, 2019, include $530 million (fixed interest rates raging from 0.62% to 0.97%) in advances from the FHLB that are callable prior to maturity.

In early April 2020, the Company restructured $420.0 million of its fixed-rate FHLB advances extending their original maturities from 2021 to 2023 at lower interest rates. The Company incurred a loss of $17.0 million as a result of this restructuring which was blended into the new interest rates of these advances affecting the yields through their remaining maturities. The Company accounted for these transactions as the modification of existing debt in accordance with U.S. GAAP.

7.8.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~~statutory trust subsidiaries as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:


	September 30, 2019				December 31, 2018							March 31, 2020				December 31, 2019
(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	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	$	—	$	—	$	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	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	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	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	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	15,000		15,464		15,000		15,464		2006	3-M LIBOR + 1.78%	2036
	$	89,080	$	92,246	$	114,080	$	118,110				$	62,250	$	64,178	$	89,080	$	92,246

On January 30, 2020, the Company redeemed all $26.8 million of its outstanding 8.90% trust preferred capital securities issued by Commercebank Capital Trust I (“Capital Trust I”) at a redemption price of 100%. The Company simultaneously redeemed all junior subordinated debentures held by Capital Trust I as part of this redemption transaction. This redemption reduced total cash and cash equivalents by $27.1 million, financial liabilities by $28.1 million, other assets by $3.4 million, and other liabilities by $2.2 million. In addition, the ~~Trust Subsidiaries have~~Company recorded a charge of $0.3 million for the ~~option to defer payment~~unamortized issuance costs. This redemption reduced the Company’s Tier 1 equity capital by a net amount 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.$24.7 million.

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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.~~


8.9.	Derivative Instruments

At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the fair values of the Company’s derivative instruments were as follows:


	September 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
(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	$	90	$	—	$	9,386	$	283	$	—	$	1,773	$	301	$	—
Interest rate swaps not designated as hedging instruments:
Customers	15,456		—		1,420		—		42,280		—		11,236		527
Third party broker	—		15,456		—		1,420		—		42,280		527		11,236
	15,456		15,456		1,420		1,420		42,280		42,280		11,763		11,763
Interest rate caps not designated as hedging instruments:
Customers	—		48		—		685		—		69		—		46
Third party broker	48		—		685		—		20		—		33		—
	48		48		685		685		20		69		33		46
	$	15,594	$	15,504	$	11,491	$	2,388	$	42,300	$	44,122	$	12,097	$	11,809

~~Derivatives Designated as Hedging Instruments~~

At December 31, 2018, the Company had 16 interest rate swap contracts with total notional amounts of $280 million that were designated as cash flow hedges of floating rate interest payments on the outstanding and expected rollover of 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 on derivatives designated as hedging instruments in the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~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.

~~Table of Contents~~

~~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.2019.

Derivatives Not Designated as Hedging Instruments

Interest Rate Swaps

At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company had 2756 and ~~eight~~49 interest rate swap contracts with customers, respectively, with a total notional amount of ~~$304.2~~$406.1 million and ~~$80.4~~$405.2 million, respectively. These instruments involve the payment of fixed-rate amounts in exchange for the Company receiving variable-rate payments over the life of the contract. In addition, at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company had 2756 and ~~eight~~49 interest rate swap mirror contracts, respectively, with a third party ~~broker~~brokers with similar terms.

In 2019, the ~~third quarter of 2019, we~~Company 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 or guarantor, will receive or make payments ~~from~~from/to the counterparty if the borrower defaults on the related interest rate swap contract. As of ~~September 30,~~March 31, 2020 and December 31, 2019, wethe Company had two and three swap participation agreements, respectively, with ~~an aggregate~~total notional ~~amount~~amounts of approximately ~~$30.2 million.~~$32.0 million and $50.2 million, respectively. 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,~~March 31, 2020 and December 31, 2019, the fair value of swap participation agreements was not significant.

Interest Rate Caps

At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company had 1519 and 16 interest rate cap contracts with customers with a total notional amount of ~~$292.2~~$401.8 million and ~~$323.7~~$315.2 million, respectively. These instruments involve the Company making payments if an interest rate exceeds the agreed strike price. In addition, at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company had 1512 and 1613 interest rate cap mirror contracts, respectively, with various third party brokers with ~~similar terms.~~total notional amounts of $225.7 million and $234.1 million, respectively.

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


9.10.	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 2019 annual report on Form 10-K for more information on the 2018 Equity Plan and ~~restricted stock~~stock-based compensation 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.~~including restricted stocks and restricted stock units (“RSUs”).

~~On January 22, 2019,~~Restricted Stock Awards

The following table shows the ~~Company granted an additional 1,299 shares~~activity of restricted stock ~~to an employee who was not included~~awards 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.months ended March 31, 2020:



	Number of restricted shares		Weighted-average grant date fair value
Non-vested shares, beginning of year	495,131		$	13.48
Granted	6,591		15.17
Vested	(433	)	13.58
Forfeited	(54,462	)	13.45
Non-vested shares at March 31, 2020	446,827		$	13.51

During the three ~~and nine month periods~~months ended ~~September 30,~~March 31, 2020 and 2019, the Company recorded ~~$1.5~~$0.3 million and ~~$4.4~~$1.5 million, respectively, of compensation expense related to the restricted stock ~~awards granted in December 2018 and January 2019.~~awards. The total unamortized deferred compensation expense of ~~$5.3~~$2.9 million for all unvested restricted stock outstanding at ~~September 30, 2019~~March 31, 2020 will be recognized over a weighted average period of ~~1.6~~1.4 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.~~11.	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~~forecasted 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 ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 were 20.83% and ~~2018 were 21.50% and 25.34%~~21.49%, respectively. Effective tax rates differ from the statutory rates mainly due to the impact of ~~forecast~~forecasted 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 costs in 2018 and the~~ effect of corporate state ~~taxes for the nine months ended September 30, 2019.~~

~~11. Accumulated Other Comprehensive 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:~~

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 )
taxes.

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

12. Accumulated Other Comprehensive Income (“AOCI”):

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



	March 31, 2020							December 31, 2019
(in thousands)	Before Tax Amount		Tax Effect			Net of Tax Amount		Before Tax Amount		Tax Effect			Net of Tax Amount
Net unrealized holding gains on debt securities available for sale	$	35,662	$	(8,718	)	$	26,944	$	9,563	$	(2,338	)	$	7,225
Net unrealized holding gains on interest rate swaps designated as cash flow hedges	5,523		(1,350		)	4,173		7,953		(1,944		)	$	6,009
Total AOCI	$	41,185	$	(10,068	)	$	31,117	$	17,516	$	(4,282	)	$	13,234

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


	Three Months Ended September 30,																		Three Months Ended March 31,
	2019									2018									2020									2019
(in thousands)	Before Tax Amount			Tax Effect			Net of Tax Amount			Before Tax Amount			Tax Effect			Net of Tax Amount			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:
Net unrealized holding gains on debt securities available for sale:
Change in fair value arising during the period	$	9,087		$	(2,221	)	$	6,866		$	(6,537	)	$	1,599		$	(4,938	)	$	35,342		$	(8,640	)	$	26,702		$	21,545		$	(5,267	)	$	16,278
Reclassification adjustment for net (gains) losses included in net income	(906		)	221			(685		)	15			(4		)	11
Reclassification adjustment for net gains included in net income																			(9,243		)	2,260			(6,983		)	(4		)	1			(3		)
	8,181			(2,000		)	6,181			(6,522		)	1,595			(4,927		)	26,099			(6,380		)	19,719			21,541			(5,266		)	16,275
Net unrealized holding gains on interest rate swaps designated as cash flow hedges:
Net unrealized holding losses 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			(2,004		)	490			(1,514		)	(15		)	4			(11		)
Reclassification adjustment for net interest income included in net income	(370		)	90			(280		)	(227		)	56			(171		)	(426		)	104			(322		)	(329		)	80			(249		)
	(280		)	68			(212		)	2,210			(541		)	1,669			(2,430		)	594			(1,836		)	(344		)	84			(260		)
Total other comprehensive income (loss)	$	7,901		$	(1,932	)	$	5,969		$	(4,312	)	$	1,054		$	(3,258	)
Total other comprehensive income																			$	23,669		$	(5,786	)	$	17,883		$	21,197		$	(5,182	)	$	16,015

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

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.~~13. Stockholders’ Equity

a) Class A Common Stock

Shares of the Company’s Class A common stock issued and outstanding as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 were ~~28,985,996~~28,879,576 and ~~26,851,832,~~28,927,576, 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.

~~Table of Contents~~

~~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~~March 31, 2020 and December 31, ~~2018~~2019 were ~~17,751,053.~~13,286,137 and 17,751,053, respectively. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, there were ~~14,218,596~~13,286,137 shares and ~~16,330,917~~14,218,596 shares, respectively, of Class B common stock outstanding. As of ~~September 30, 2019 and~~March 31, 2020, the Company had no shares of common stock held as treasury stock. At December 31, ~~2018,~~2019, 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,~~February 14 and February 21, 2020, the Company repurchased ~~all~~an aggregate of ~~MSF’s 2,112,321 remaining~~932,459 shares of nonvoting Class B common stock ~~at a weighted average price of $13.48~~in two privately negotiated transactions (collectively, the “2020 Repurchase”) for $16.00 per share ~~with proceeds from the IPO over-allotment exercise and the Private Placements, representing an~~of Class B common stock. The aggregate purchase price for these transactions was approximately $15.2 million, including $0.3 million in broker fees and other expenses. The Company funded the 2020 Repurchase with available cash.

In March 2020, Company’s Board of ~~approximately $28.5 million. The aforementioned 2,112,321~~Directors authorized the cancellation of all 4,464,916 shares of Class B ~~common stock are~~Common Stock previously held inas treasury stock, ~~under the cost method.~~

~~Following this repurchase, MSF no longer owns any~~including shares ~~of the Company’s Class A common stock or Class B common stock,~~repurchased during 2018, 2019 and ~~therefore, MSF no longer has any rights to register Company shares for resale.~~

~~c) Dividends~~

On2020, effective March ~~13, 2018, the Company paid a special, one-time, cash dividend of $40.0 million to MSF, or $0.94 per common share.~~31, 2020.

~~13.~~14. Commitments and Contingencies

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

The Company occupies various 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 $1.3 million and ~~$1.5~~$1.6 million for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, ~~respectively, and $4.1 million and $4.5 million for the nine months ended September 30, 2019 and 2018,~~ respectively.

Financial instruments whose contract amount represents off-balance sheet credit risk at ~~September 30, 2019~~March 31, 2020 are generally short-term and are as follows:


(in thousands)	Approximate Contract Amount		Approximate Contract Amount
Commitments to extend credit	$	821,197	$	786,873
Credit card facilities (1)	145,866
Standby letters of credit	15,825		15,414
Commercial letters of credit	5,330		4,517
	$	988,218	$	806,804

~~__________________~~

~~(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.

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

15. Fair Value Measurements

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



	March 31, 2020
(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
Assets
Debt securities available for sale
U.S. government sponsored enterprise debt securities	$	—	$	875,181	$	—	$	875,181
Corporate debt securities	—		330,194		—		330,194
U.S. government agency debt securities	—		253,182		—		253,182
Municipal bonds	—		65,421		—		65,421
U.S treasury securities	—		77,325		—		77,325
	—		1,601,303		—		1,601,303
Equity securities with readily determinable fair values not held for trading	—		24,225		—		24,225
Bank owned life insurance	—		213,266		—		213,266
Derivative instruments	—		42,300		—		42,300
	$	—	$	1,881,094	$	—	$	1,881,094
Liabilities
Derivative instruments	$	—	$	44,122	$	—	$	44,122

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)

~~14. Fair Value Measurements~~

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

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
Assets
Securities available for sale
U.S. government sponsored enterprise debt securities $ —
$ 940,260
$ —
$ 940,260
Corporate debt securities —
243,149
—
243,149
U.S. government agency debt securities —
226,644
—
226,644
Municipal bonds —
50,198
—
50,198
Mutual funds —
23,957
—
23,957
U.S treasury securities —
994
—
994
—
1,485,202
—
1,485,202
Bank owned life insurance —
210,414
—
210,414
Derivative instruments —
15,594
—
15,594
$ —
$ 1,711,210
$ —
$ 1,711,210
Liabilities
Derivative instruments $ —
$ 15,504
$ —
$ 15,504

~~Table of Contents~~

~~Amerant Bancorp Inc. and Subsidiaries~~

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

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
Assets
Securities available for sale
U.S. government sponsored enterprise debt securities $ —
$ 820,779
$ —
$ 820,779
Corporate debt securities —
352,555
—
352,555
U.S. government agency debt securities —
216,985
—
216,985
Municipal bonds —
160,212
—
160,212
Mutual funds —
23,110
—
23,110
Commercial paper —
12,410
—
12,410
—
1,586,051
—
1,586,051
Bank owned life insurance —
206,141
—
206,141
Derivative instruments —
11,491
—
11,491
$ —
$ 1,803,683
$ —
$ 1,803,683
Liabilities
Derivative instruments $ —
$ 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 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 captured spread and prepayment speed are used to obtain the fair value for each related security.~~

~~Table of Contents~~

~~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 believes that the consistent application of this methodology allows the Company to understand and evaluate the categorization of its investment portfolio.

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.



	December 31, 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
Assets
Debt securities available for sale
U.S. government sponsored enterprise debt securities	$	—	$	933,112	$	—	$	933,112
Corporate debt securities	—		252,836		—		252,836
U.S. government agency debt securities	—		228,397		—		228,397
U.S. treasury securities	—		104,236		—		104,236
Municipal bonds	—		50,171		—		50,171
	—		1,568,752		—		1,568,752
Equity securities with readily determinable fair values not held for trading	—		23,848		—		23,848
Bank owned life insurance	—		211,852		—		211,852
Derivative instruments	—		12,097		—		12,097
	$	—	$	1,816,549	$	—	$	1,816,549

Liabilities
Derivative instruments	$	—	$	11,809	$	—	$	11,809

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

~~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 significant assets or liabilities measured at fair value on a nonrecurring basis at March 31, 2020 and December 31, ~~2018.~~

~~Loans Held for 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.2019.

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.

~~Table of Contents~~

~~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 in the 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 advances from the FHLB, 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:


	September 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
(in thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Loans	$	2,752,224	$	2,635,286	$	2,850,015	$	2,739,721	$	2,776,062	$	2,669,835	$	2,819,477	$	2,721,291
Financial liabilities:
Time deposits	1,713,322		1,729,324		1,745,025		1,740,752		1,882,048		1,910,249		1,745,735		1,759,347
Advances from the FHLB	1,170,000		1,181,775		1,166,000		1,167,213		1,265,000		1,287,674		1,235,000		1,244,515
Junior subordinated debentures	92,246		86,757		118,110		99,450		64,178		60,200		92,246		86,738

3330

Table of Contents

Amerant Bancorp Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements (Unaudited)


~~15.~~16.	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,				Three months ended March 31,
(in thousands, except per share data)	2019		2018		2019		2018		2020		2019
Numerator:
Net income available to common stockholders	$	11,931	$	11,551	$	37,859	$	31,403	$	3,382	$	13,071
Denominator:			`								`
Basic weighted average shares outstanding	42,466		42,489		42,562		42,489		42,185		42,755
Dilutive effect of share-based compensation awards	449		—		319		—		348		159
Diluted weighted average shares outstanding	42,915		42,489		42,881		42,489		42,533		42,914

Basic earnings per common share	$	0.28	$	0.27	$	0.89	$	0.74	$	0.08	$	0.31
Diluted earnings per common share	$	0.28	$	0.27	$	0.88	$	0.74	$	0.08	$	0.30

As of ~~September 30,~~March 31, 2020 and 2019, potential dilutive instruments ~~consist~~consisted of ~~738,138~~ unvested shares of restricted stock ~~including 736,839 shares of~~and restricted stock ~~issued in December 2018 in connection with~~units mainly related to the Company’s IPO in 2018, totaling 482,316 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~~786,213, respectively, 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,~~those dates, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at ~~that date,~~those dates, such awards resulted in higher diluted weighted average shares outstanding than basic weighted average shares outstanding, and had a dilutive effect in per share ~~earnings for the nine months ended September 30, 2019. As of September 30, 2018, the Company had no outstanding dilutive instruments.~~earnings.

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 Amerant Bancorp Inc.’s (the “Company,” “Amerant” “our” or “we”) results of operations and financial condition and its wholly owned subsidiaries, including its principal subsidiary, Amerant Bank, N.A. (the “Bank”). The Bank has ~~two~~three principal subsidiaries, Amerant Trust, N.A. (“Amerant Trust”), a non-depository trust company, ~~and~~ Amerant Investments, Inc., a securities broker-dealer (“Amerant Investments”), and a grand-Cayman based trust company subsidiary Elant Bank & Trust LTD. (the “Cayman Bank”).

This discussion is intended to supplement and highlight information contained in the accompanying unaudited interim 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 annual report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on ~~April 1, 2019~~March 16, 2020 (“Form 10-K”).

Cautionary Notice Regarding Forward-Looking Statements

Various of the statements made in this 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 the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). 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; the challenges and uncertainties caused by the COVID-19 pandemic; the measures we have taken in response to the COVID-19 pandemic; our participation in the Paycheck Protection Program (“PPP”); 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 objectives, expectations and intentions and other statements that are not 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,” “goals,” “outlooks,” “modeled” and other similar words and expressions of the future in this Form 10-Q. These forward-looking statements should be read together with the “Risk Factors” included in this Form 10-Q, 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 which are, in some cases, beyond the Company’s control and which could materially affect the Company’s results of operations, financial condition, cash flows, performance or future achievements or events. Currently, one of the most significant factors, is the potential adverse effect of the COVID-19 pandemic, on the financial condition, results of operations, cash flows and performance of the Company and its customers and the global economy and financial markets. The extent of the impact of COVID-19 over the Company and its customers will depend on a number of issues and future developments, which, at this time, are extremely uncertain and cannot be accurately predicted, including ~~without limitation:~~the scope, severity and duration of the pandemic, the actions taken to contain or mitigate the impact of the pandemic, and the direct and indirect effects that the pandemic and related containment measures may have, among others. You should consider many of the risks listed in this report together with those risks and uncertainties described in “Risk factors” in our Form 10-K and in our other filings with the SEC, as being heightened as a result of the ongoing COVID-19 pandemic.

Additional factors that may cause actual results to deviate significantly from current expectations include but are not limited to:

the COVID-19 pandemic has significantly impacted economic conditions globally and in the United States, could have a material adverse effect on our ~~ability~~business, financial condition and results of operation, and the ultimate impact on our business, financial condition and results of operations, will depend on future developments and other factors that are highly uncertain and will be impacted by the scope and duration of the pandemic and actions taken by governmental authorities in response;

as a participating lender in the U.S. Small Business Administration (“SBA”) PPP, the Company and the Bank are subject to ~~successfully execute~~ additional risks of litigation from the Bank’s customers or other parties regarding the Bank’s processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties;

our strategic plan ~~manage our~~and 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 condition changes, domestic and foreign, especially those affecting our Venezuelan depositors and credit card holders;~~

~~business and economic conditions, generally and especially in our primary market areas;~~strategy may not be achieved as quickly or as fully as we seek;

operational risks are inherent toin our ~~business;~~businesses;

market conditions and economic cyclicality may adversely affect our industry;

our ~~ability to successfully manage our credit risks~~profitability 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 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, including market interest rates;~~

~~the effectiveness of our enterprise risk management framework, including internal controls and disclosure controls;~~

~~fluctuations in the values of the securities held in our securities portfolio;~~

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

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

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

our derivative instruments may expose us to certain risks;

our valuation of securities and ~~costs of deposits, loan demand,~~investments and the ~~values and liquidity of loan collateral, securities, and interest-sensitive assets and liabilities, and the risks and uncertainty~~determination of the ~~amounts realizable;~~amount of impairments taken on our investments are subjective and, if changed, could materially adversely affect our results of operations or financial condition;

~~changes~~our success depends on our ability to compete effectively in ~~the availability~~highly competitive markets;

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

severe weather, natural disasters, global pandemics, acts 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 CRE;~~

~~the~~war or terrorism, theft, civil unrest, government expropriation or other external events could have significant effects of competition from a wide variety of local, regional, national and other providers of financial, investment, trust and other wealth management 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;on our business;

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

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

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

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

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

mortgage servicing rights requirements may change and ~~estimates underlying the establishment~~require us to incur additional costs and risks;

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

our concentration of ~~allowances for possible~~CRE loans could result in further increased loan losses, and ~~other asset impairments, losses, valuations~~adversely affect our business, earnings, and financial condition;

liquidity risks could affect operations and jeopardize our financial condition;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

our employees may take excessive risks which could negatively affect our financial ~~instruments (“CECL”)~~condition and ~~the changes~~business;

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

litigation and regulatory investigations are increasingly common in our ~~credit card programs;~~

~~the risks of mergers, acquisitions~~businesses and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growthmay result in significant financial losses and/or ~~expense savings~~harm to our reputation;

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

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

changes in ~~technology or products that may be more difficult, costly, or less effective than anticipated;~~accounting rules applicable to banks and financial institutions could adversely affect our financial condition and results of operations;

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

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

we will be subject to heightened regulatory requirements if our total assets grow in excess of ~~terrorism, floods, hurricanes or other catastrophic events that~~$10 billion;

the Federal Reserve may ~~affect general economic conditions, including in countries where~~ require us to commit capital resources to support the Bank;

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

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

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

we adopted a new accounting principle that requires immediate recognition in the statement of ~~recent and future legislative and regulatory changes, including~~income of unrealized changes in ~~banking,~~the fair value of equity securities, ~~tax, trade~~which includes mutual funds, increasing the volatility of our results of operations;

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

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

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

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

certain of our directors may have actual or potential conflicts of interest because of their equity ownership in Mercantil Servicios Financieros, C.A., or the ~~planned cessation~~Former Parent, or their positions with the Former Parent and us;

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

our stock price may fluctuate significantly;

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

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

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

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

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

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

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

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

our ability to ~~continue~~pay dividends 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 costs and obligations associated with being a public company;~~

~~our ability to maintain our strong reputation, particularly in light of our ongoing rebranding effort;~~

~~claims or legal actions to which we may be subject~~shareholders in the ~~normal course~~future is subject to profitability, capital, liquidity and regulatory requirements and these limitations may prevent us from paying dividends in the future;

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

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

10-K and this Form 10-Q.

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 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.~~statements, except as required by law. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, together with those risks and uncertainties described in “Risk factors” in our Form 10-K, in this Form 10-Q and in our other filings with the SEC, which are available at the SEC’s website ~~www.sec.gov~~.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. We serve customers in our United States markets and select international customers. These services are offered primarily through the Bank and its Amerant Trust, ~~and~~ Amerant Investments, and Cayman Bank subsidiaries. The Bank’s three primary markets are South Florida, where we operate 1719 banking centers in Miami-Dade, Broward and Palm Beach counties; the greater Houston, Texas area where we have eight banking centers that serve nearby areas of Harris, Montgomery, Fort Bend and Waller counties, and a loan production office (“LPO”) in Dallas, Texas which opened in early 2019, and the greater New York City area, New York, where we ~~operate loan production offices. We have no foreign offices.~~also maintain a LPO that focuses on originating commercial real estate (“CRE”) loans.

~~Rebranding~~

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 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.COVID-19 Pandemic

On ~~June 4, 2019,~~March 11, 2020, the World Health Organization recognized an outbreak of a novel strain of the coronavirus, COVID-19, as a pandemic.

On March 13, 2020, the President of the Unites States of America (U.S.) declared a national state of emergency. In response to this outbreak, the governments of many states, cities and municipalities in the U.S., including the States of Florida, New York and Texas, have taken preventative or protective actions, such as imposing restrictions on business operations and advising or requiring individuals to limit or forego their time outside of their homes.

Business Continuity Plan Activated

The health and well-being of the Company’s ~~stockholders approved an amendment to the Company’s Amended~~employees, customers, 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 oflocal communities remains paramount while the Company continues to provide the ~~Bank~~necessary services and ~~its principal subsidiaries now~~products to customers with minimal disruption.

On March 16, 2020, we activated the Company's well-established Business Continuity Plan, or BCP. The BCP has effectively ensured the Company's resilient platform continues to operate ~~under~~during these extraordinary times, and has allowed us to continue providing 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. Results of these segments were presented on a managed basis. This structure was driven, among other things, by how the Company previously managed the business, how internal reporting was prepared and analyzed, and how management made decisions.

Beginning in the second quarter of 2019, all decisions, including those relating to loan growth and 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 lending activities which had been largely allocated to the Corporate LATAM segment. As a result, management reassessed the Company’s remaining international business activities as well as 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 naturequality of products and services ~~processes, type of~~our customers ~~distribution methods,~~have come to expect. The plan is supported and complemented by a robust business continuity governance framework, life safety program and annual enterprise-wide exercise and training program. The Company’s BCP plan is framed based on industry best practices and regulatory ~~environment~~guidelines and is subject to periodic testing and independent audits. As of May 1, 2020, approximately 86% of the Company’s employees are working remotely. All banking centers are open to the public by drive-thru and by appointment-only, under a reduced schedule (except banking centers in Texas which are operating under regular business hours), and with limited staffing. All electronic channels remain fully operational.

Supporting Our Communities

Beginning on March 26, 2020 we began providing an array of tangible and meaningful support measures to support our customers and communities during the COVID-19 pandemic. These measures include waiving the Bank’s ATM fees for customers and non-customers, late payment fees on all consumer and business loans, and deposit account fees on a case-by-case basis. The Bank is also refraining from reporting negative information such as past due balances to credit bureaus, and, importantly, offering individualized loan payment assistance such as interest payment deferral and forbearance options. Additionally, in April 2020, the Bank increased its mobile check deposit limits. All of these efforts align with regulatory guidance aimed at helping customers and communities, while remaining prudent and manageable, and will continue until further notice.

CARES Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), an approximately $2.0 trillion COVID-19 response bill, to provide emergency economic relief to individuals, small businesses, mid-size companies, large corporations, hospitals and other public health facilities, and state and local governments, was enacted. The CARES Act allocated the Small Business Administration, or SBA, $350.0 billion to provide loans of up to $10.0 million per small business as defined in the CARES Act. On April 2, 2020, the Bank began participating in the SBA’s PPP, by providing loans to these businesses to cover payroll, rent, mortgage, healthcare, and utilities costs, among other essential expenses. On April 24, 2020, the Paycheck Protection Program and Health Care Enhancement Act, adding funding to the PPP, was enacted. As of May 1, 2020, the Company had received approval for 1,493 loan applications under the PPP totaling $197.8 million, and had funded $137.9 million.

Loan Loss Reserve and Mitigation Programs

The Company performed a comprehensive review of its ~~businesses. Further, management determined that it will no longer review discrete financial information related~~loan exposures by industry to ~~the remaining operating segments for purposes of assessing performance or~~identify those most susceptible to ~~allocate resources.~~

Asincreased credit risk as a result of the ~~above referenced strategic shift, assessments~~COVID-19 pandemic. The review estimated that approximately 30% of the outstanding loan portfolio as of March 31, 2020 is represented by loans to borrowers in industries, or with collateral values, that are potentially more vulnerable to the financial impact of the pandemic, and ~~determination,~~approximately 50% of which are secured with real estate collateral. The Company recorded a provision for loan losses of $22 million during the three months ended March 31, 2020 mainly as a result of the estimated deterioration of our loan portfolio caused by the COVID-19 pandemic.

The Company consistently reviews its existing credit approval practices to ensure that sound and prudent underwriting standards continue to drive the Company’s business relationships. As a result, the Company ~~is now managed as a single operating segment, on a consolidated basis. Therefore, beginning~~enhanced the monitoring of its entire loan portfolio and has proactively increased the frequency of periodic reviews and conversations with ~~the quarter ended June 30, 2019,~~loan customers in anticipation of their future needs, which aligns with our relationship-centric banking model.

On March 26, 2020, the Company ~~determined that no separate current~~ began offering loan payment relief options to customers impacted by the COVID-19 pandemic, including interest-only and/or ~~historical reportable segment disclosures~~forbearance options. As of May 1, 2020, loans under these programs totaled $1,119 million. In accordance with accounting and regulatory guidance, loans to borrowers benefiting from these measures are ~~required~~not considered Troubled Debt Restructurings (“TDRs”). The Company is closely monitoring the performance of these loans under the terms of the temporary relief granted. The following table summarizes the loan balances in these programs as of May 1, 2020:



Program Detail	Amounts
	(in millions)
90-day payment deferral; interest added to principal balance upon modification and continues to accrue each month	$	451
90-day interest payment deferral with no escrow payments	441
90-day interest payment deferral including escrow payments	197
180-day interest payment deferral	30
	$	1,119

Risks and Uncertainties

The COVID-19 outbreak has severely restricted the level of economic activity in the U.S. ~~GAAP.~~and around the world since March 2020. In the U.S and several other countries, temporary closures of businesses have been ordered and numerous other businesses have temporarily closed voluntarily. These actions have expanded significantly since March 31, 2020 and may continue to expand. Given the uncertainty regarding the spread and severity of COVID-19 and its adverse effects on the U.S. and global economies, the impact to the Company’s financial statements cannot be accurately predicted at this time. See—Risk Factors under Part II, Item 1A in this Form 10-Q.

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 ~~noninterest expenses.~~expenses, ROA and ROE.

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 advances from the Federal Home Loan Bank ~~(the “FHLB”~~(“FHLB”) and other borrowings such as repurchase agreements and junior subordinated 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, 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. NIM is calculated by dividing net interest income for the period by average interest-earning assets during that same period. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and stockholders’ equity, also fund interest-earning assets, NIM includes the benefit of these noninterest-bearing sources of funds.

Changes in market interest rates and the 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 stockholders’ equity, usually have the largest impact on periodic changes in our net interest spread, 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 revenue streams: (i) service fees on deposit 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 and fees for other services provided to ~~our~~the Company’s Former Parent and its affiliates; (vi) securities gains or losses; (vii) net gains and ~~(vii)~~losses on early extinguishment of FHLB advances; and (viii) other noninterest income.

Our income from service fees on deposit accounts is affected primarily by the volume, growth and mix of deposits we hold. ~~Fees~~These are affected by ~~the volume of customer transactions,~~ prevailing market ~~conditions, including~~pricing of deposit services, 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 our customers’ trading volume, 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 (“AUM”) accounts ~~increased $120.8~~decreased $243.5 million ~~or 7.6%,~~ to ~~$1.7 billion at September 30, 2019 from~~ $1.6 billion at March 31, 2020 from $1.8 billion at December 31, ~~2018.~~2019. The ~~Company~~decrease is ~~focused on leveraging our wealth management platform~~mainly attributable to ~~grow this side~~lower valuations resulting from the global financial impact of ~~our domestic business.~~

the COVID-19 pandemic, partially offset by account growth due to the Company’s increasingly successful sales efforts. Income from changes in the cash surrender value of our

BOLI policies ~~which is nontaxable,~~ represents the ~~amount~~amounts that may be realized under the contracts with the insurance ~~carriers.~~carriers, which are nontaxable.

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~~revised 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~~decreased as we ~~cease~~ceased to be a direct card issuer.

We have historically provided certain administrative services to ~~our~~the Former ~~Parent and its~~Parent’s non-U.S. affiliates under certain administrative ~~services~~ and transition service agreements with arms-length terms and ~~charges.~~pricing. Income from this source was generally based on the direct costs associated with providing the services plus a markup, ~~which were~~and reviewed periodically. These fees were paid by our Former Parent and its non-U.S. affiliates in U.S. Dollars. ~~During~~For the ~~nine months~~quarter ended ~~September 30,~~March 31, 2019, we were paid approximately ~~$1.0~~$0.5 million for these services. These administrative and transition services ~~have substantially~~ ended ~~with only a small portion expected to remain through the end of~~in 2019. Our Former Parent’s non-U.S. affiliates have also provided, and continue to provide, certain shareholder services to ~~us.~~us under a service agreement.

Our gains and losses on sales of securities are derived from sales from our securities portfolio and are 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,~~consists, among other ~~things:~~things of: (i) salaries and employee benefits; (ii) occupancy and equipment expenses; (iii) professional and other services fees; (iv) FDIC deposit and business insurance assessments and 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), stock-based compensation, 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 ~~directors’~~director’s fees and stock-based compensation and regulatory agency fees, such as OCC examination ~~and application~~ fees.

FDIC deposit and business insurance assessments and premiums include deposit insurance, net of any credits applied against these premiums, corporate liability and 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 include advertising, marketing (including ~~our current rebranding)~~rebranding expenses), community engagement, and other operational expenses. Other operating expenses include the incremental cost associated with servicing the large number of shareholders resulting from ~~our~~the spin-off from our Former ~~Parent completed in 2018.~~Parent.

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~~quarters of 2020 and 2019, we incurred ~~approximately~~ ~~$4.9 million~~ of restructuring expenses ~~which~~of approximately $0.4 million and $0.9 million, respectively. In the first quarter of 2020, restructuring expenses included ~~$1.4~~$0.1 million and $0.3 million of staff ~~realignment~~reduction costs and digital transformation expenses, ~~and $3.6~~respectively ($0.9 million of rebranding ~~expenses.~~costs in the first quarter of 2019).

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 risks in each category of assets. Problem assets may be categorized as classified, delinquent, nonaccrual, ~~non-performing~~nonperforming and restructured assets. We also manage the adequacy of our allowance for loan losses, or the ~~allowance,~~ALL, 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~~ALL 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 minimum capital ratios for banks 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 CET1 capital ratio; and (vii) other factors, including market conditions.

Liquidity. Our deposit base consists primarily of personal and commercial accounts maintained by individuals and businesses in our primary markets and select international core depositors. In recent years, we have increased our fully-insured brokered time deposits under $250,000, but ~~we are currently reducing these balances to focus~~remain focused on ~~relationship driven~~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 readily convertible into cash without undue loss, the characteristics and maturities of our assets when compared to the characteristics of our liabilities and other factors.

Summary Results

The summary results for the ~~third~~ quarter ~~and nine months~~ ended ~~September 30, 2019~~March 31, 2020 include the following (See “Selected Financial Information” for an explanation of non-GAAP financial measures):

~~Pretax~~Net income of ~~$15.2~~$3.4 million ~~up 1.7%~~down 74.1% from ~~$14.9 million in the third quarter of 2018. Pretax income for the nine months ended September 30, 2019 was $48.2 million, up 14.7% compared to $42.1~~$13.1 million in the same period of ~~2018.~~2019. This decrease was primarily due to a meaningful increase in the Company’s provision for loan losses in the first quarter of 2020. Operating income, which excludes provisions for loan losses or reversals, net gains on securities and income tax expense, was $16.7 million, flat from $16.6 million in the same period of 2019.

Net interest income ~~of $52.6~~(“NII”) was $49.2 million, down ~~5.5% compared to $55.6~~11.2% from $55.4 million in the ~~third~~same period of 2019. Compared to the first quarter of ~~2018 mainly due~~2019, this quarter’s lower NII is attributed to a decline in average yields on interest-earning assets, lower average ~~interest-earning assets,~~loan balances, and the replacement of lower cost international deposits with higher cost domestic ~~deposits, and higher~~ time ~~deposit costs,~~deposits, partially offset by ~~improved loan yields.~~lower professional funding costs, primarily FHLB advances, trust preferred expenses as well as transactional deposit costs. Net interest ~~income for the nine months ended September 30, 2019~~margin (“NIM”) was ~~$161.8 million, down 0.3% compared to $162.3 million~~2.65% in the ~~same period~~first quarter of ~~2018.~~2020, down from 2.96% in the first quarter of 2019.

Credit quality indicators remained ~~strong. The~~strong despite market dislocations associated with the COVID-19 pandemic. As a result of these dislocations, the Company ~~released $1.5~~increased its ALL by $22.0 million, ~~from the allowance for loan losses,~~ compared to ~~a $1.6 million~~no provision recorded in the ~~third~~first quarter of ~~2018.~~2019, mainly due to the estimated deterioration of our loan portfolio caused by the COVID-19 pandemic. The ratio of ~~allowance for loan losses (“ALL”)~~the ALL to total loans was ~~0.93%~~1.29% as of ~~September 30, 2019, down~~March 31, 2020, up from ~~1.13%~~1.05% in the same period last year. The ratio of loan charge-offs to average total loans in first quarter 2020 was 0.09%, down from the ~~third~~0.10% in the first quarter ~~2019~~of 2019. The Company did not experience any unanticipated losses in the first quarter of 2020 from exiting its former credit card programs.

Noninterest income was ~~0.16%,~~$21.9 million, up 66.5% from $13.2 million in ~~line with the low level of~~ the same period last year.

~~Noninterest income~~ The increase was ~~$13.8~~primarily driven by $9.2 million ~~up 6.8% compared to $13.0 million~~of net gains on the sale of securities recognized in the ~~same~~first quarter of 2018, notwithstanding lower fee income from our Venezuelan customers’ trading activities being curtailed earlier this year as a result of U.S. sanctions on Venezuelan government securities. Noninterest income was $41.1 million in the nine months ended September 30, 2019, down 1.8% from $41.9 in the same nine months of 2018.

2020.

Noninterest expense was ~~$52.7~~$44.9 million, ~~up 1.3% compared to $52.0~~down 13.6% from $51.9 million in the ~~same~~first quarter of ~~2018. Noninterest expense was $157.6 million in~~2019.The year-over-year decline resulted mainly from lower salaries and employee benefit expenses and the ~~nine months ended September 30, 2019, down 1.7% from $160.3 million in the same period~~absence 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 January 2019 in connection withrebranding costs incurred last year related to the Company’s ~~IPO.~~transformation efforts. Adjusted noninterest expense was ~~$51.5~~$44.5 million in the ~~third~~first quarter of ~~2019,~~2020, down ~~0.6%~~12.7% from ~~$51.8~~$51.0 million in the ~~same~~first quarter of ~~2018.~~2019. Adjusted noninterest expense ~~primarily excludes expenses associated with restructuring activities, including $1.3 million of rebranding and staff reduction expenses~~ in the ~~third~~first 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~~2020 excludes $0.4 million in ~~the same period of 2018.~~restructuring expenses.

The efficiency ratio was ~~77.6% (75.2%~~63.1% (62.6% adjusted for ~~rebranding and~~ staff reduction ~~costs) for the nine months ended September 30, 2019,~~and digital transformation expenses), compared to ~~78.5% (75.5%~~75.7% (74.4% adjusted for ~~spin-off~~rebranding costs) for the corresponding period of ~~2018.~~2019.

Stockholders’ ~~equity~~book value per common share increased to ~~$19.11, a 11.6% improvement compared to $17.13~~$19.95, up 10.7% from $18.02 a year ago. Tangible book value per common share rose to ~~$18.63, a 12.0% improvement compared to $16.63~~$19.43, up 10.8% from $17.54 a year ago.

Selected Financial Information

The following table sets forth selected financial information derived from our unaudited interim consolidated financial statements for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ and as of ~~September 30, 2019~~March 31, 2020 and our audited consolidated financial statement as of December 31, ~~2018.~~2019. These unaudited interim consolidated financial statements are not necessarily indicative of our results of operations for the year ending December 31, ~~2019~~2020 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 consolidated financial statements and the corresponding notes included in this Form 10-Q.


	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
(in thousands)
Consolidated Balance Sheets
Total assets	$	7,864,260	$	8,124,347	$	8,098,810	$	7,985,399
Total investments	1,632,985		1,741,428		1,769,987		1,739,410
Total gross loans (1)	5,753,709		5,920,175		5,668,327		5,744,339
Allowance for loan losses	53,640		61,762		72,948		52,223
Total deposits	5,692,848		6,032,686		5,842,212		5,757,143
Junior subordinated debentures (2)	92,246		118,110		64,178		92,246
Advances from the FHLB and other borrowings	1,170,000		1,166,000		1,265,000		1,235,000
Stockholders' equity	825,751		747,418		841,117		834,701
Assets under management and custody (3)					1,572,322		1,815,848


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
(in thousands, except per share amounts)
(in thousands, except percentages and per share amounts)
Consolidated Results of Operations
Net interest income	$	52,600		$	55,633		$	161,826		$	162,255		$	49,229		$	55,437
(Reversal of) provision for loan losses	(1,500		)	1,600			(2,850		)	1,750
Provision for loan losses													22,000			—
Noninterest income	13,836			12,950			41,139			41,881			21,910			13,156
Noninterest expense	52,737			52,042			157,587			160,325			44,867			51,945
Net income	11,931			11,551			37,859			31,403			3,382			13,071
Effective income tax rate	21.50		%	22.69		%	21.50		%	25.34		%	20.83		%	21.49		%

Common Share Data ~~(3)~~
Stockholders' book value per common share	$	19.11		$	17.13		$	19.11		$	17.13		$	19.95		$	18.02
Tangible stockholders' equity (book value) per common share (4)	$	18.63		$	16.63		$	18.63		$	16.63		$	19.43		$	17.54
Basic earnings per common share	$	0.28		$	0.27		$	0.89		$	0.74		$	0.08		$	0.31
Diluted earnings per common share	$	0.28		$	0.27		$	0.88		$	0.74		$	0.08		$	0.30
Basic weighted average shares outstanding	42,466			42,489			42,562			42,489			42,185			42,755
Diluted weighted average shares outstanding (5)	42,915			42,489			42,881			42,489			42,533			42,914
Cash dividend declared per common share (6)	—			—			—			$	0.94

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 %



	Three Months Ended March 31,
	2020			2019
(in thousands, except per share amounts and percentages)
Other Financial and Operating Data (6)

Profitability Indicators (%)
Net interest income / Average total interest earning assets (NIM) (7)	2.65		%	2.96		%
Net income / Average total assets (ROA) (8)	0.17		%	0.65		%
Net income / Average stockholders' equity (ROE) (9)	1.61		%	6.87		%

Capital Indicators (%)
Total capital ratio (10)	14.54		%	14.35		%
Tier 1 capital ratio (11)	13.38		%	13.48		%
Tier 1 leverage ratio (12)	10.82		%	10.83		%
Common equity tier 1 capital ratio (CET1) (13)	12.42		%	11.79		%
Tangible common equity ratio (14)	10.14		%	9.61		%

Asset Quality Indicators (%)
Non-performing assets / Total assets (15)	0.41		%	0.26		%
Non-performing loans / Total loans (1) (16)	0.59		%	0.36		%
Allowance for loan losses / Total non-performing loans (17)	218.49		%	294.01		%
Allowance for loan losses / Total loans (1) (17)	1.29		%	1.05		%
Net charge-offs / Average total loans (18)	0.09		%	0.10		%

Efficiency Indicators (% except FTE)
Noninterest expense / Average total assets	2.27		%	2.58		%
Salaries and employee benefits / Average total assets	1.48		%	1.66		%
Other operating expenses/ Average total assets (19)	0.79		%	0.92		%
Efficiency ratio (20)	63.07		%	75.73		%
Full-Time-Equivalent Employees (FTEs)	825			889

Adjusted Selected Consolidated Results of Operations and Other Data (4)
Adjusted noninterest expense	$	44,513		$	51,012
Adjusted net income	3,662			13,803
Operating income	16,652			16,644
Adjusted basic earnings per common share	0.09			0.33
Adjusted earnings per diluted common share (5)	0.09			0.32
Adjusted net income / Average total assets (Adjusted ROA) (8)	0.19		%	0.69		%
Adjusted net income / Average stockholders' equity (Adjusted ROE) (9)	1.74		%	7.25		%
Adjusted noninterest expense / Average total assets	2.25		%	2.53		%
Adjusted salaries and employee benefits / Average total assets	1.48		%	1.66		%



	Three Months Ended March 31,
	2020		2019

Adjusted other operating expenses/ Average total assets (19)	0.77	%	0.87	%
Adjusted efficiency ratio (21)	62.57	%	74.37	%

__________________


(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,~~March 31, 2020, the Company redeemed ~~$25.0~~$26.8 million of its ~~10.60% and 10.18%~~8.90% trust preferred ~~securities and related~~securities. The Company simultaneously redeemed the junior subordinated ~~debentures.~~ debentures associated with these trust preferred securities.

(3)

~~The earnings per common share reflect~~Assets held for clients in an agency or fiduciary capacity which are not assets of 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~~Company and therefore are not included in the ~~Form 10-K for more details on the reverse stock split.~~

consolidated financial statements.


(4)	This ~~Non-GAAP~~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.

~~(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.

(5 ) As of March 31, 2020 and 2019 potential dilutive instruments consisted of unvested shares of restricted stock and restricted stock units mainly related to the Company’s IPO in 2018, totaling 482,316 and 786,213, respectively. These potential dilutive instruments were included in the diluted earnings per share computation because, when the unamortized deferred compensation cost related to these shares was divided by the average market price per share at those dates, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at those dates, such awards resulted in higher diluted weighted average shares outstanding than basic weighted average shares outstanding, and had a dilutive effect in per share earnings.


(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 months ended March 31, 2020 and ~~nine~~ ~~month periods ended September 30,~~ 2019 ~~and 2018~~ have been annualized.


~~(8)~~(7)	~~Net interest margin~~NIM 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)~~(8)	Calculated based upon the average daily balance of total assets.


~~(10)~~(9)	Calculated based upon the average daily balance of stockholders’ equity.


~~(11)~~(10)	Total stockholders’ equity divided by total risk-weighted assets, calculated according to the standardized regulatory capital ratio calculations.


~~(12)~~(11)	Tier 1 capital divided by total risk-weighted assets.

~~(13)~~(12)

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~~$62.3 million and $114.1 million at ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, respectively. In the three months ended ~~September 30, 2019~~March 31, 2020~~, $25.0~~ $26.8 million in trust preferred securities were redeemed.~~See~~ ~~footnote 2.~~


~~(14)~~(13)	Common Equity Tier 1 (CET 1) capital divided by total risk-weighted assets.


~~(15)~~(14)	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)~~(15)

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~~$33.4 and ~~$29.7~~$20.5 million as of ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.


~~(17)~~(16)	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~~$33.4 million and ~~$29.7~~$20.5 million as of ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.


~~(18)~~(17)	Allowance for loan losses was ~~$53.6~~$72.9 million and ~~$69.5~~$60.3 million as of ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. See Note 5 to our audited consolidated financial statements in our Form 10-K and Note 45 to these unaudited interim consolidated financial statements for more details on our impairment models.


~~(19)~~(18)	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.


(19)	Other operating expenses is the result of total noninterest expense less salary and employee benefits.


(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.

Non-GAAP Financial Measures Reconciliation

Certain financial measures and ratios contained in this Form 10-Q, including “adjusted noninterest expense”, “adjusted net income”, “operating income”, “adjusted net income per share (basic and diluted)”, “adjusted return on assets (ROA)”, “adjusted return on equity (ROE)”, and other ratios appearing in the tables below are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (“GAAP”). The ~~following table sets forth selected~~Company refers to these financial ~~information~~measures and ratios as “non-GAAP financial measures.” The Company’s Non-GAAP financial measures are derived from the Company’s interim unaudited consolidated financial statements, adjusted for certain costs incurred by the Company in the periods presented related to tax deductible restructuring costs.

We use certain non-GAAP financial measures, including those mentioned above, both to explain our results to shareholders and ~~non-deductible spin-off costs. The Company~~the investment community and in the internal evaluation and management of our businesses. Our management believes that these ~~adjusted numbers~~non-GAAP financial measures and the information they provide are useful to ~~understand~~investors since these measures permit investors to view our performance using the same tools that our management uses to evaluate our past performance and prospects for future performance, especially in light of the additional costs we have incurred in connection with the Company’s restructuring activities that began in 2018 and continued into 2020, the one-time gain on sale of the vacant Beacon land in the fourth quarter of 2019, and the Company’s increase of its allowance for loan losses in 2020. While we believe that these non-GAAP financial measures are useful in evaluating our performance, ~~absent~~this information should be considered as supplemental and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Additionally, these ~~transactions and events.~~non-GAAP financial measures may differ from similar measures presented by other companies.

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except per share amounts and percentages)
2019 2018 2019 2018
Total noninterest expenses $ 52,737
$ 52,042
$ 157,587
$ 160,325
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 —
186
—
3,186
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 —
90
—
1,384
Other expenses —
—
—
544
Total spin-off costs —
276
—
6,314
Adjusted noninterest expenses $ 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
The following table sets forth the Company’s Non-GAAP financial measures.



	Three Months Ended March 31,
(in thousands, except per share amounts)	2020			2019
Total noninterest expenses	$	44,867		$	51,945
Less: restructuring costs (1):
Staff reduction costs	54			—
Digital transformation expenses	300			—
Rebranding costs	—			933
Total restructuring costs	354			933
Adjusted noninterest expenses	$	44,513		$	51,012

Net income	$	3,382		$	13,071
Plus after-tax restructuring costs:
Restructuring costs before income tax effect	354			933
Income tax effect	(74		)	(201		)
Total after-tax restructuring costs	280			732
Adjusted net income	$	3,662		$	13,803

Net income	$	3,382		$	13,071
Plus: income tax expense	890			3,577
Plus: provision for loan losses	22,000			—
Less: securities gains, net	9,620			4
Operating income	$	16,652		$	16,644

Basic earnings per share	$	0.08		$	0.31
Plus: after tax impact of restructuring costs	0.01			0.02
Total adjusted basic earnings per common share	$	0.09		$	0.33

Diluted earnings per share (2)	$	0.08		$	0.30
Plus: after tax impact of restructuring costs	0.01			0.02
Total adjusted diluted earnings per common share	$	0.09		$	0.32


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in thousands, except per share amounts and percentages)	2019			2018			2019			2018			2020			2019
Net income / Average total assets (ROA)	0.60		%	0.55		%	0.64		%	0.50		%	0.17		%	0.65		%
Plus: after tax impact of restructuring costs	0.05		%	—		%	0.06		%	—		%	0.02		%	0.04		%
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		%	0.19		%	0.69		%

Net income / Average stockholders' equity (ROE)	5.81		%	6.13		%	6.43		%	5.63		%	1.61		%	6.87		%
Plus: after tax impact of restructuring costs	0.49		%	—		%	0.66		%	—		%	0.13		%	0.38		%
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		%
Adjusted net income / Average stockholders' equity (Adjusted ROE)													1.74		%	7.25		%

Efficiency ratio	79.38		%	75.88		%	77.64		%	78.54		%	63.07		%	75.73		%
Less: impact of restructuring costs	(1.90		)%	—		%	(2.43		)%	—		%	(0.50		)%	(1.36		)%
Less: impact of total spin-off costs	—		%	(0.40		)%	—		%	(3.09		)%
Adjusted efficiency ratio	77.48		%	75.48		%	75.21		%	75.45		%	62.57		%	74.37		%

Noninterest expense / Average total assets													2.27		%	2.58		%
Less: impact of restructuring costs													(0.02		)%	(0.05		)%
Adjusted Noninterest expense / Average total assets													2.25		%	2.53		%

Salaries and employee benefits / Average total assets													1.48		%	1.66		%
Less: impact of restructuring costs													—		%	—		%
Adjusted salaries and employee benefits / Average total assets													1.48		%	1.66		%

Other operating expenses / Average total assets													0.79		%	0.92		%
Less: impact of restructuring costs													(0.02		)%	(0.05		)%
Adjusted other operating expenses / Average total assets													0.77		%	0.87		%

Stockholders' equity	$	825,751		$	727,675		$	825,751		$	727,675		$	841,117		$	778,749
Less: goodwill and other intangibles	(20,933		)	(21,078		)	(20,933		)	(21,078		)	(21,698		)	(21,005		)
Tangible common stockholders' equity	$	804,818		$	706,597		$	804,818		$	706,597		$	819,419		$	757,744
Total assets	$	7,864,260		$	8,435,802		$	7,864,260		$	8,435,802		$	8,098,810		$	7,902,355
Less: goodwill and other intangibles	(20,933		)	(21,078		)	(20,933		)	(21,078		)	(21,698		)	(21,005		)
Tangible assets	$	7,843,327		$	8,414,724		$	7,843,327		$	8,414,724		$	8,077,112		$	7,881,350
Common shares outstanding	43,205			42,489			43,205			42,489			42,166			43,205
Tangible common equity ratio	10.26		%	8.40		%	10.26		%	8.40		%	10.14		%	9.61		%
Stockholders' book value per common share	$	19.11		$	17.13		$	19.11		$	17.13		$	19.95		$	18.02
Tangible stockholders' book value per common share	$	18.63		$	16.63		$	18.63		$	16.63		$	19.43		$	17.54

_________

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

(2) The spin-off caused an unexpected early distribution for U.S. federal income tax purposes from our deferred compensation plan. This distribution was taxable to plan participants as ordinary income during 2018. We partially compensated plan participants, in the aggregate amount of $1.2 million, for the higher tax expense they incurred as a result of the distribution increasing the plan participants' estimated effective federal income tax rates by recording a contribution to the plan on behalf of its participants. The after tax net effect of this $1.2 million contribution for the period ended September 30, 2018 was approximately $952,000. As a result of the early taxable distribution to plan participants, we expensed and deducted for federal income tax purposes, previously deferred compensation of approximately $8.1 million, resulting in an estimated tax credit of $1.7 million, which exceeded the amount of the tax gross-up paid to plan participants.

~~(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.

~~(4)~~ As of ~~September 30,~~March 31, 2020 and 2019 potential dilutive instruments ~~included 738,138~~consisted of unvested shares of restricted stock ~~including 736,839 shares of~~and restricted stock ~~issued in December 2018 in connection with~~units mainly related to the Company’s IPO in 2018, totaling 482,316 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~~786,213, respectively. These potential dilutive instruments were included in the diluted earnings per share computation because, when the unamortized deferred compensation cost related to these shares was divided by the average market price per share at ~~that date,~~those dates, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at ~~that date,~~those dates, such awards resulted in higher diluted weighted average shares outstanding than basic weighted average shares outstanding, and had a dilutive effect in per share ~~earnings in 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 31, 2018.~~earnings.

Results of Operations - Comparison of Results of Operations for the Three Months Ended March 31, 2020 and ~~Nine Month Periods Ended September 30,~~ 2019 ~~and 2018~~

Net income

The table below sets forth certain results of operations data for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Three Months Ended September 30,						Change					Nine Months Ended September 30,						Change					Three Months Ended March 31,						Change
(in thousands, except per share amounts and percentages)	2019			2018			2019 vs 2018					2019			2018			2019 vs 2018					2020			2019			2020 vs 2019
Net interest income	$	52,600		$	55,633		$	(3,033	)	(5.5	)%	$	161,826		$	162,255		$	(429	)	(0.3	)%	$	49,229		$	55,437		$	(6,208	)	(11.2	)%
(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	%
Provision for loan losses																							22,000			—			22,000			—	%
Net interest income after provision for loan losses																							27,229			55,437			(28,208		)	(50.9	)%
Noninterest income	13,836			12,950			886			6.8	%	41,139			41,881			(742		)	(1.8	)%	21,910			13,156			8,754			66.5	%
Noninterest expense	52,737			52,042			695			1.3	%	157,587			160,325			(2,738		)	(1.7	)%	44,867			51,945			(7,078		)	(13.6	)%
Net income before income tax	15,199			14,941			258			1.7	%	48,228			42,061			6,167			14.7	%
Income before income tax																							4,272			16,648			(12,376		)	(74.3	)%
Income tax	(3,268		)	(3,390		)	122			(3.6	)%	(10,369		)	(10,658		)	289			(2.7	)%	(890		)	(3,577		)	2,687			(75.1	)%
Net income	$	11,931		$	11,551		$	380		3.3	%	$	37,859		$	31,403		$	6,456		20.6	%	$	3,382		$	13,071		$	(9,689	)	(74.1	)%
Basic earnings per common share	$	0.28		$	0.27		$	0.01		3.7	%	$	0.89		$	0.74		$	0.15		20.3	%	$	0.08		$	0.31		$	(0.23	)	(74.2	)%
Diluted earnings per common share(1)	$	0.28		$	0.27		$	0.01		3.7	%	$	0.88		$	0.74		$	0.14		18.9	%
Diluted earnings per common share (1)																							$	0.08		$	0.30		$	(0.22	)	(73.3	)%

__________________

(1)

At ~~September 30,~~March 31, 2020 and 2019,, potential dilutive instruments ~~consist~~consisted of ~~738,138~~ unvested shares of restricted ~~stock. We had no outstanding dilutive instruments at September 30, 2018.~~stock and restricted stock units totaling482,316 and 786,213, respectively, mainly related to the Company’s IPO in 2018. See Note 1516 to our unaudited interim financial statements in this Form 10-Q for details on the dilutive effects of the issuance of restricted stock and restricted stock units on earnings per share for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020. and 2019.

Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

Net income ~~of $11.9~~declined to $3.4 million, or ~~$0.28~~$0.08 per diluted earnings per share, in the three months ended ~~September 30, 2019 represents an increase of $0.4~~March 31, 2020, from $13.1 million, or ~~3.3% compared to~~$0.30 per diluted earnings per share, in the same quarter of ~~2018. Higher~~2019. The decrease of $9.7 million, or 74.1%, in net income ~~during the three months ended September 30, 2019~~ was mainly the result of: (i) the ~~$1.5~~$22.0 million ~~reversal of~~ provision for loan losses in the ~~third~~first quarter of ~~2019~~2020, primarily due to the estimated deterioration of our loan portfolio due to the COVID-19 pandemic, and (ii) ~~higher noninterest~~lower net interest income. These results were partially offset by: (i) higher noninterest ~~expenses~~income primarily driven by ~~rebranding~~$9.2 million of net gains on the sale of securities recognized in the first quarter of 2020, (ii) lower salaries and employee benefit expenses, and ~~staff reduction~~(iii) the absence of rebranding costs incurred in the first quarter of 2019 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.~~Company’s transformation efforts.

Net interest income declined ~~from $55.6 million in three months ended September 30, 2018~~ to ~~$52.6~~$49.2 million in the three months ended ~~September 30,~~March 31, 2020 from $55.4 million in the three months ended March 31, 2019. The decrease of ~~$3.0~~$6.2 million, or ~~5.5%~~11.2%, was primarily due to ~~higher time deposit costs~~a decline in average yields on interest-earning assets, lower average loan balances, and the replacement of ~~the declining~~lower cost international deposits with higher cost domestic time deposits. ~~We expect that the costs of new deposits and income on loans and new variable rate investments may decrease with the expected~~This was partially offset by a decline in ~~market~~the average rate paid on total interest ~~rates. Changes in~~bearing liabilities, primarily FHLB advances and trust preferred expenses as well as transactional deposit ~~rates may also lag the change in interest rates on our loans and investments.~~costs.

Noninterest income increased ~~$0.9~~$8.8 million in the three months ended ~~September 30, 2019~~March 31, 2020 compared to the ~~same period one year ago,~~three months ended March 31, 2019, mainly due to the ~~$0.9~~$9.2 million ~~gain~~of net gains on the sale of ~~municipal bonds and floating-rate corporate~~ securities recognized in the ~~third~~first quarter of ~~2019~~2020 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~~fees. These increases were partially offset by the absence of a $0.6 million gain on an early termination of FHLB advances recognized in the first quarter of 2019, lower credit card fee income due to the closing of the Company's credit card products in the first quarter of 2020, absence of fees ~~from administrative and transition~~associated with services previously provided to our Former ~~Parent.~~Parent and its affiliates, and lower wire transfer fees.

Noninterest expenses ~~increased $0.7~~decreased $7.1 million, or ~~1.3%~~13.6%, in the three months ended ~~September 30, 2019~~March 31, 2020 compared to the ~~same period one year ago, mainly as a result of higher other operating expenses~~three months ended March 31, 2019, primarily driven by ~~rebranding and staff reduction expenses and higher telecommunication and data processing expenses. This was partially offset by~~ 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~~mainly driven by ~~an additional~~staff reductions in 2018 and 2019, lower stock-based compensation expense, and lower other operating expenses mainly due to the absence of ~~$1.5 million~~rebranding costs in ~~connection with restricted stock awards granted in December 2018 and January 2019 and higher staff reduction costs.~~the first quarter of 2020. In the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ noninterest expense included ~~$1.3~~$0.4 million and $0.9 million, respectively, in restructuring costs, consisting primarily of ~~rebranding and~~ staff reduction costs and ~~$0.3 million~~digital transformation expenses in ~~spin-off~~the three months ended March 31, 2020, and rebranding costs ~~respectively.~~in the three months ended March 31, 2019. The Company did not implement any staffing changes related to the COVID-19 pandemic.

Adjusted net income for the quarter ended ~~September 30, 2019~~March 31, 2020 was ~~$12.9~~$3.7 million, ~~8.0% higher~~73.5% lower than the same quarter one year ago. Adjusted net income excludes restructuring costs of ~~$1.3~~$0.4 million and $0.9 million in the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and spin-off costs of $0.3~~respectively. Operating income remained relatively flat at $16.7 million from $16.6 million in the same period ~~one year ago.~~ of 2019. Operating income excludes provisions for loan losses or reversals, net gains on securities and income tax expense. 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 spin-off costs 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 declined from $162.3 million in the nine months ended September 30, 2018, to $161.8 million in the 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,~~March 31, 2020 and 2019 ~~and 2018~~

In the ~~third quarter of 2019,~~three months ended March 31, 2020, we earned ~~$52.6~~$49.2 million of net interest income, a decline of ~~$3.0~~$6.2 million, or ~~5.5%~~11.2%, from ~~$55.6~~$55.4 million in the same period of ~~2018.~~2019. The decrease in net interest income was driven by: (i) ~~an increase of 21~~a 45 basis ~~points~~point decline in the average ~~rates paid~~yield on interest-earning assets resulting from the Federal Reserve decreasing the benchmark interest ~~bearing liabilities due to higher cost of deposits driven by replacing some of~~rate three times in 2019, plus the ~~run-off in international deposits, which are less expensive, with domestic deposits, coupled with the higher cost of time deposits,~~Federal Reserve’s emergency rate cuts on March 3, 2020 and March 15, 2020, (ii) a ~~6.3%~~1.6% decrease in the average balance of interest-earning assets ~~driven by a reduction in~~mainly due to the ~~loan portfolio~~strategic run-off of foreign financial institutions and ~~investment securities balances. This was~~non-relationship syndicated national credit loans throughout the first three quarters of 2019, and (iii) higher rates on time deposits. These results were partially offset by a 10decrease of 14 basis points ~~improvement in the average yield on interest-earning assets and an 8.0% decrease~~ in average ~~interest-bearing liabilities.~~rates paid on total interest bearing liabilities, primarily driven by lower cost of transactional deposits and borrowings as well as lower interest expense due to redemptions of trust preferred securities. Net interest margin decreased 331 basis points ~~from 2.83%~~to 2.65% in the ~~third quarter of 2018 to 2.80%~~three months ended March 31, 2020 from 2.96% in the ~~same period of~~three months ended March 31, 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~~NII and NIM are expected to remain pressured as the Company's interest-earning assets price lower in a depressed interest rate environment due to the ~~continued run-off of our low cost~~COVID-19 pandemic and as the Company’s 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.~~continue to run off. Against this backdrop, ~~in the third quarter of 2019,~~ the Company ~~took advantage~~is proactively repricing deposits, leveraging opportunities for higher-yield investments (i.e., the Company has and, if market conditions are supportive, may continue to seek to enhance yield by investing in private-label CMBS, bank subordinated debt, corporate debt and other higher-yielding securities), and lower-cost wholesale funding, and seeking to reduce asset sensitivity, while working diligently to meet the banking needs of the ~~yield curve inversion to accelerate~~Company’s domestic and international clients. In early April 2020, the ~~rate decrease~~Company modified maturities on ~~its variable-rate junior subordinated debentures through interest rate swaps,~~$420.0 million fixed-rate FHLB advances, resulting in 26 bps of annual savings and ~~by taking fixed-rate longer-term advances from~~$2.4 million of savings for the ~~FHLB with callable features. Additionally, during this quarter, we reached the inflexion point for CD~~remainder of 2020. See — Capital Resources and Liquidity Management. The Company expects new funding 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~~track market rates closely in the coming ~~months.~~months as the impacts from the COVID-19 pandemic continue.

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”). On January 30, 2020, the Company redeemed all $26.8 million of its outstanding 8.90% trust preferred capital securities issued by Commercebank Capital Trust I (“Capital Trust I”). These redemptions are expected to reduce the Company’s annual pretax interest expense by approximately ~~$2.6~~$5.0 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~~$71.3 million in the ~~third quarter of 2019,~~three months ended March 31, 2020, compared to ~~$79.6~~$80.3 million for the same period of ~~2018.~~2019. The ~~$1.4~~$9.0 million, or ~~1.8%~~11.2%, decline in total interest income was primarily due to: (i) a decline in yields of interest-earning assets as result of the aforementioned Federal Reserve’s reductions to the benchmark interest rate in 2019 plus the previously mentioned emergency rate cuts in March 2020, and (ii) lower average balances of interest-earning assets driven by the strategic run-off of foreign financial institution loans and non-relationship ~~shared~~syndicated 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.~~credit loans. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed information.

Interest income on loans in the ~~third quarter of 2019~~three months ended March 31, 2020 was ~~$66.1~~$59.8 million compared to ~~$66.8~~$66.7 million for the comparable period of ~~2018.~~2019. The ~~$0.7~~$6.9 million, or ~~1.0%~~10.4%, decrease was primarily due to a ~~6.0%~~43 basis point decline in average yields, and a 2.4% decrease in the average balance of loans in the ~~third~~first quarter of ~~2019~~2020 over the same period in ~~2018,~~2019, mainly as a result of the strategic run-off of foreign financial institution loans and non-relationship ~~shared~~syndicated national credit loans, which have not yet been fully replaced with domestic relationship C&I and CRE loans. This was partially offset by a 13 basis point increase in average yields. In the third quarter of 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 ~~$0.9~~$1.3 million, or ~~8.0%~~11.7%, to ~~$9.8~~$9.5 million in the ~~third quarter of 2019~~three months ended March 31, 2020 compared to ~~$10.7~~$10.8 million in the same period of ~~2018.~~2019. This was mainly due to a 37 basis point decline ~~of 8.2%~~ in the average ~~volume of securities available for sale in~~yields. In the ~~third~~first quarter of ~~2019 with respect~~2020, we continued to see high levels of prepayments accelerate on our mortgage-related securities given the ~~same quarter~~lower interest-rate environment. To combat this, we rebalanced the portfolio by changing the duration of certain portions in

~~2018. The decline~~ favor of ~~8.2% in~~longer-duration assets. 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~~first quarter of ~~2019, including~~2020, we completed the sale of 20-year Treasury securities and replaced them with longer-duration bonds to mitigate higher expected prepayments on mortgage-related securities in a low interest rate market. Additionally, we continued to decrease our portion of floating rate investment securities as interest rates are expected to continue declining in the near future. Floating rate investments comprised approximately ~~$23.8 million~~14.6% of ~~municipal bonds and $11.8 million~~our investment portfolio at the end of ~~floating-rate corporate securities.~~March 2020, down from 16.8% in the year ago quarter.

Interest Expense. Interest expense on total interest-bearing liabilities ~~increased $1.6~~decreased $2.8 million, or ~~6.7%~~11.2%, to ~~$25.6~~$22.1 million in the ~~third quarter of 2019~~three months ended March 31, 2020 compared to ~~$24.0~~$24.9 million in the same period of ~~2018,~~2019, primarily due to lower cost of transactional deposits and borrowings as well as lower interest expense due to redemptions of trust preferred securities. This was partially offset by higher rates paid on ~~total deposits, partially offset by lower average balances of total deposits, advances from the FHLB and junior subordinated debentures.~~time deposits.

Interest expense on deposits increased to ~~$17.6~~$16.9 million in the ~~third quarter of 2019~~three months ended March 31, 2020 compared to ~~$15.2~~$16.6 million for the same period of ~~2018.~~2019. The ~~$2.4~~$0.3 million, or ~~15.6%~~2.0%, increase was primarily due to a 288 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~~mainly time ~~deposits, which, up to the third quarter of 2019, were repricing at higher levels than previously carried.~~deposits. Average total time deposits ~~decreased~~increased by ~~$115.0~~$38.7 million, or ~~4.7%~~1.6%, mainly as a result ~~our strategic decision to decrease the promotional interest rates we paid. We continue to focus~~of our efforts to ~~retain customers with higher probabilities~~capture online deposits which resulted in an increase of ~~renewal at lower-than-market rates. Also, we have implemented a strategy for renewing customer’s certificates of~~$69.0 million, or 50.2%, in online 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~~during the first ~~nine months~~quarter of ~~2019 at rates that were lower than the highest rates paid in our markets.~~2020. Average total checking and savings account balances for the ~~second~~first quarter of 2020 decreased year-on-year by ~~$366.9~~$273.9 million, or ~~12.2%~~9.8%, primarily due to a decline of ~~$429.2~~$329.3 million, or ~~17.0%~~14.3%, in the average balance of international accounts, partially offset by higher average domestic customer deposits. The decline in average international accounts includes ~~$76.4~~$20.8 million, or ~~19.7%~~5.8%, in commercial accounts and ~~$352.8~~$308.5 million, or ~~16.6%~~15.9%, in personal accounts. The overall decline in average balance of international commercial and personal accounts is primarily due to the continued ~~outflow~~utilization of ~~funds of~~deposits from our Venezuelan customers to fund everyday expenses, as ~~living~~challenging conditions in their country ~~remain challenging, and the Venezuelan economy is further dollarized.~~persist.

Interest expense on FHLB advances and other borrowings decreased by ~~$0.5~~$1.8 million, or ~~6.9%~~28.9%, in the ~~third quarter of 2019 with respect~~three months ended March 31, 2020 compared to the same period of ~~2018.~~2019. This was the result of a ~~4.3% decline in the average balance outstanding and a~~ decrease of 1080 basis points in the average rate paid on these borrowings partially offset by an increase of ~~these borrowings.~~8.6% in the average balance outstanding.

Interest expense on junior subordinated debentures decreased by ~~$0.3~~$1.3 million, or ~~15.0%~~62.5%, in the three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period last year, mainly driven by a decline of ~~$11.2~~$45.0 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~~Trust III, Statutory Trust II, and ~~Liquidity Management” for detailed information.~~Capital Trust I, previously discussed.

~~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, d~~riven 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 decrease in the average balance of loans and available for sale securities during the first nine months of 2019 with respect to the same period of 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 $1.2 million, or 3.7%, to $31.0 million in the nine months ended September 30, 2019 compared to $32.2 million in the same period of 2018. This was due to a decline of 8.0% in the average volume of securities available for sale partially offset by an increase of 12 basis points in the average yields in the first nine months of 2019 with respect to the same period in 2018. The decline of 8.0% in the average volume of securities available for sale was mainly driven by sales, prepayments and maturities totaling approximately $430.1 million in the first nine months of 2019, including the sale of $115 million of municipal bonds and $11.8 million of floating-rate corporate securities.

~~Interest Expense.~~ Interest expense on interest-bearing liabilities increased $10.7 million, or 16.4%, to $75.9 million in the first nine months of 2019 compared to $65.2 million in the same period of 2018, primarily due to higher 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.

Interest expense on deposits increased to $51.2 million in the nine months ended September 30, 2019 compared to $40.0 million for the same period of 2018. The $11.2 million, or 28.1%, increase was primarily due to a 37 basis point increase in the average rates paid on deposits, partially offset by lower average total checking and saving account balances, which decreased 11.4%. Average time deposits decreased $9.3 million, or 0.4%, mainly as a result our strategic decision to decrease the promotional interest rates we paid which led to a decline in 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, of higher interest rates in the future and changing customer preferences as interest rates increased. The decrease of $351.6 million, or 11.4%, in average total checking and saving account balances is primarily the result of a decline of $445.0 million, or 16.9%, in the average balance of international accounts, partially offset by higher average domestic customer deposits. The decline in average international accounts includes $82.3 million, or 20.2%, in commercial accounts and $362.7 million, or 16.3%, 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 declined $0.5 million, or 2.43%, in the nine months ended September 30, 2019 with respect to the same period of 2018. This was the result of a 6.7% decline in the average balance outstanding, partially offset by an increase of 10 basis points in the average rate paid on these borrowings. Advances from the FHLB are used to actively manage the Company’s funding profile by match funding CRE loans. FHLB advances bear fixed interest rates from 1.14% to 3.23%, and variable interest rates based on 3-month LIBOR which decreased to 2.09% at September 30, 2019 from 2.40% at September 30, 2018. At September 30, 2019, $890.0 million (76.1%) of FHLB advances were fixed rate and $280.0 million (23.9%) were variable rate.

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 nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019. The average balances for loans include both performing and 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 September 30,														Three Months Ended March 31,
	2019							2018							2020							2019
(in thousands, except percentages)	Average Balances			Income/ Expense		Yield/ Rates		Average Balances			Income/ Expense		Yield/ Rates		Average Balances			Income/ Expense		Yield/ Rates		Average Balances			Income/ Expense		Yield/ Rates
Interest-earning assets:
Loan portfolio, net (1)	$	5,656,469		$	66,118	4.64	%	$	6,018,655		$	66,776	4.51	%	$	5,573,627		$	59,788	4.31	%	$	5,707,891		$	66,722	4.74	%
Securities available for sale (2)	1,496,740			9,818		2.60	%	1,631,215			10,668		2.64	%
Securities held to maturity (3)	79,820			436		2.17	%	87,535			347		1.60	%
Debt securities available for sale (2)															1,549,502			9,497		2.47	%	1,532,649			10,750		2.84	%
Debt securities held to maturity (3)															72,472			400		2.22	%	84,613			586		2.81	%
Equity securities with readily determinable fair value not held for trading															24,052			131		2.19	%	23,179			139		2.43	%
Federal Reserve Bank and FHLB stock	68,825			1,071		6.17	%	71,983			1,168		6.65	%	71,192			1,037		5.86	%	67,461			1,106		6.65	%
Deposits with banks	142,583			761		2.12	%	137,034			666		1.96	%	171,848			462		1.08	%	169,811			1,004		2.40	%
Total interest-earning assets	7,444,437			78,204		4.17	%	7,946,422			79,625		4.07	%	7,462,693			71,315		3.84	%	7,585,604			80,307		4.29	%
Total non-interest-earning assets less allowance for loan losses	472,967							515,712							488,651							477,714
Total assets	$	7,917,404						$	8,462,134						$	7,951,344						$	8,063,318
	��
Interest-bearing liabilities:
Checking and saving accounts -
Interest bearing DDA	$	1,141,788		$	191	0.07	%	$	1,376,015		$	211	0.06	%	$	1,071,558		$	135	0.05	%	$	1,262,603		$	274	0.09	%
Money market	1,152,700			4,109		1.41	%	1,225,380			3,460		1.13	%	1,136,501			3,249		1.15	%	1,158,623			3,717		1.30	%
Savings	354,554			16		0.02	%	414,533			17		0.02	%	322,682			17		0.02	%	383,425			16		0.02	%
Total checking and saving accounts	2,649,042			4,316		0.65	%	3,015,928			3,688		0.49	%	2,530,741			3,401		0.54	%	2,804,651			4,007		0.58	%
Time deposits	2,325,695			13,284		2.27	%	2,440,678			11,531		1.90	%	2,461,073			13,484		2.20	%	2,422,351			12,553		2.10	%
Total deposits	4,974,737			17,600		1.40	%	5,456,606			15,219		1.12	%	4,991,814			16,885		1.36	%	5,227,002			16,560		1.28	%
Securities sold under agreements to repurchase	378			3		3.15	%	—			—		—	%
Advances from the FHLB and other borrowings (4)	1,148,739			6,253		2.16	%	1,200,739			6,716		2.26	%	1,195,714			4,412		1.48	%	1,101,356			6,205		2.28	%
Junior subordinated debentures	106,899			1,748		6.49	%	118,110			2,057		7.15	%	73,123			789		4.34	%	118,110			2,105		7.23	%
Total interest-bearing liabilities	6,230,753			25,604		1.63	%	6,775,455			23,992		1.42	%	6,260,651			22,086		1.42	%	6,446,468			24,870		1.56	%
Total non-interest-bearing liabilities	872,488							933,045							846,493							856,211
Total liabilities	7,103,241							7,708,500							7,107,144							7,302,679
Stockholders’ equity	814,163							753,634							844,200							760,639
Total liabilities and stockholders' equity	$	7,917,404						$	8,462,134						$	7,951,344						$	8,063,318
Excess of average interest-earning assets over average interest-bearing liabilities	$	1,213,684						$	1,170,967						$	1,202,042						$	1,139,136
Net interest income				$	52,600						$	55,633						$	49,229						$	55,437
Net interest rate spread						2.54	%						2.65	%						2.42	%						2.73	%
Net interest margin (5)						2.80	%						2.83	%						2.65	%						2.96	%
Ratio of average interest-earning assets to average interest-bearing liabilities	119.48		%					117.28		%					119.20		%					117.67		%

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 ~~$32.5~~$32.8 million and ~~$32.7~~$19.8 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $25.6 million and $32.7 million for the nine months ended September 30, 2019 and 2018,~~ respectively, are included in the average loan portfolio net balance.

(2)

Includes nontaxable securities with average balances of ~~$66.5~~$49.4 million and ~~$173.2~~$158.0 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $115.5 million and $174.7 million for the nine months ended September 30, 2019 and 2018,~~ respectively. The tax equivalent yield for these nontaxable securities for the three months ended ~~September 30,~~March 31, 2020 and 2019 was 3.88% and ~~2018 was 3.92% and 4.47%~~4.02%, ~~respectively, and 4.01% and 4.01% for the nine months ended September 30, 2019 and 2018,~~ respectively. In the three months ended March 31, 2020 and ~~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 ~~$79.8~~$72.5 million and ~~$87.5~~$84.6 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $82.4 million and $88.5 million for the nine months ended September 30, 2019 and 2018,~~ respectively. The tax equivalent yield for these nontaxable securities for the three months ended ~~September 30,~~March 31, 2020 and 2019 was 2.81% and ~~2018 was 2.74% and 2.02%~~3.55%, ~~respectively, and 3.14% and 2.30% for the nine months ended September 30, 2019 and 2018,~~ respectively. In the three months ended March 31, 2020 and ~~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 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.

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,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
(in thousands)
Balance at the beginning of the period	$	57,404		$	69,931		$	61,762		$	72,000		$	52,223		$	61,762

Charge-offs
Domestic Loans:
Real Estate
Real estate loans
Single-family residential	(2		)	—			(89		)	(27		)	—			(87		)
Owner occupied													(27		)	—
													(27		)	(87		)
Commercial	(907		)	(526		)	(2,773		)	(3,263		)	(1,074		)	(992		)
Consumer and others	(96		)	(66		)	(415		)	(156		)	(222		)	(109		)
	(1,005		)	(592		)	(3,277		)	(3,446		)	(1,323		)	(1,188		)

International Loans (1):
Commercial	—			(1,421		)	(61		)	(1,473		)	(34		)	(18		)
Consumer and others	(1,661		)	(283		)	(2,961		)	(913		)	(251		)	(406		)
	(1,661		)	(1,704		)	(3,022		)	(2,386		)	(285		)	(424		)
Total Charge-offs	$	(2,666	)	$	(2,296	)	$	(6,299	)	$	(5,832	)	$	(1,608	)	$	(1,612	)

Recoveries
Domestic Loans:
Real Estate Loans
Commercial Real Estate (CRE)
Non-Owner occupied	$	—		$	—		$	—		$	5
Land development and construction loans	—			—			—			33
	—			—			—			38
Real estate loans
Single-family residential	56			11			199			75			30			39
Owner occupied	—			7			2			890
	56			18			201			1,003
Commercial	58			180			238			398			61			31
Consumer and others	4			11			11			43			17			1
	118			209			450			1,444			108			71

International Loans (1):
Real Estate
Single-family residential	—			4			—			4
Commercial	132			—			360			—			124			92
Consumer and others	152			23			217			105			101			9
	284			27			577			109			225			101
Total Recoveries	$	402		$	236		$	1,027		$	1,553		$	333		$	172

Net charge-offs	(2,264		)	(2,060		)	(5,272		)	(4,279		)	(1,275		)	(1,440		)
(Reversal of) provision for loan losses	(1,500		)	1,600			(2,850		)	1,750
Provision for loan losses													22,000			—
Balance at the end of the period	$	53,640		$	69,471		$	53,640		$	69,471		$	72,948		$	60,322

__________________


(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.

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
(in thousands)
Venezuela	$	1,491	$	283	2,532		913		$	231	$	312
Other countries	170		—		429		—		20		94
Total charge offs	$	1,661	$	283	$	2,961	$	913	$	251	$	406

Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

During the three months ended ~~September 30, 2019,~~March 31, 2020, charge-offs ~~increased~~remained relatively flat at $1.6 million compared to ~~$2.7 million from $2.3 million during~~ the same period of the prior year. ~~This slight increase was mainly due to higher charge-offs~~Charge-offs during the first quarter of 2020, included $1.1 million related to ~~domestic~~4 commercial loans and ~~international~~$0.4 million related to multiple credit cards indue to the ~~third quarter~~discontinuation of ~~2019, partially offset by a decrease in international commercial loans. Additionally, recoveries increased to~~the Company’s credit card products. The aforementioned $0.4 million in credit card charge-offs had already been reserved and the ~~three months ended September 30, 2019, compared to $0.2 million~~Company did not experience any unanticipated losses during the same period in 2018. The increase in recoveries was mainly driven by a $132 thousand recovery related to one international commercial loan and a $152 thousand aggregate recovery in international credit cards during the thirdfirst quarter of ~~2019. As a result, the~~2020.The ratio of net charge-offs over the average total loan portfolio during the three months ended ~~September 30, 2019 increased 2~~March 31, 2020 decreased 1 basis ~~points~~point to ~~0.16%~~0.09% from ~~a net charge-off ratio of 0.14%~~0.10% in the same quarter in ~~2018.~~2019.

During the three months ended ~~September 30, 2019~~March 31, 2020, we ~~released $1.5 million from the allowance~~recorded a provision for loan losses of $22.0 million compared to ano provision ~~of $1.6 million~~for loan losses 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 wereincrease is 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~~a provision of $19.8 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 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 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~~2020 driven by estimated losses reflecting deterioration in the macro-economic environment as a result of the ~~ratio~~impact of ~~net charge-offs over~~COVID-19 across multiple impacted sectors. In addition, the ~~average total loan portfolio during the nine months ended September 30, 2019 increased 2 basis points to 0.12% from 0.10%~~increase in the ~~same period~~provision included $1.2 million in ~~2018.~~additional specific reserves allocated to the multi-loan relationship with a South Florida food wholesale borrower disclosed in previous quarters, and $1.0 million in additional reserves to cover the charge-offs of four commercial loans.

On March 26, 2020, the Company began offering customized loan payment relief options as a result of the impact of COVID-19, including interest payment deferral and forbearance options. Consistent with accounting and regulatory guidance, temporary modifications granted under these programs are not considered TDRs. The Company is actively monitoring these loans in order to proactively identify negative patterns by industry and/or region and pursue remediation efforts in a timely manner. While the economic disruption caused by the COVID-19 pandemic is expected to impact the Company's credit quality, it is difficult to estimate the potential outcome due to the uncertain duration and magnitude of the slowdown in U.S. and global economic activity. The Company will continue to closely monitor the performance of loans to borrowers in impacted sectors, and will reassess its provisions as conditions evolve. As of May 1, 2020, loans under these programs totaled $1,119 million. The Company is closely monitoring the performance of these loans under the terms of the temporary relief granted.

During the nine months ended September 30, 2019 we reversed $2.9 million from the allowance for loan losses compared to a provision of $1.8 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 nine months ended September 30, 2018, lower reserve requirements were mainly due to improvements in quantitative factors and positive adjustments to qualitative factors applied to the CRE portfolio, non-performing loans, and portfolio growth.

Noninterest Income

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


	Three Months Ended September 30,									Change					Three Months Ended March 31,									Change
	2019				2018					2019 over 2018					2020					2019				2020 vs 2019
	Amount		%		Amount			%		Amount			%		Amount			%		Amount		%		Amount			%
(in thousands, except percentages)
Deposits and service fees	$	4,366	31.6	%	$	4,269		33.0	%	$	97		2.3	%	$	4,290		19.6	%	$	4,086	31.1	%	$	204		5.0	%
Brokerage, advisory and fiduciary activities	3,647		26.4	%	4,148			32.0	%	(501		)	(12.1	)%	4,133			18.9	%	3,688		28.0	%	445			12.1	%
Change in cash surrender value of bank owned life insurance (“BOLI”)(1)	1,449		10.5	%	1,454			11.2	%	(5		)	(0.3	)%	1,414			6.5	%	1,404		10.7	%	10			0.7	%
Securities gains, net (2)															9,620			43.9	%	4		—	%	9,616			N/M
Cards and trade finance servicing fees	1,034		7.5	%	1,145			8.8	%	(111		)	(9.7	)%	395			1.8	%	915		7.0	%	(520		)	(56.8	)%
Gain on early extinguishment of FHLB advances	—		—	%	—			—	%	—			—	%
Securities gains (losses), net	906		6.6	%	(15		)	(0.1	)%	921			N/M
(Loss) gain on early extinguishment of FHLB advances, net															(7		)	—	%	557		4.2	%	(564		)	(101.3	)%
Data processing and fees for other services	70		0.5	%	523			4.0	%	(453		)	(86.6	)%	—			—	%	520		4.0	%	(520		)	(100.0	)%
Other noninterest income ~~(2)~~(3)	2,364		16.9	%	1,426			11.1	%	938			65.8	%	2,065			9.3	%	1,982		15.0	%	83			4.2	%
Total noninterest income	$	13,836	100.0	%	$	12,950		100.0	%	$	886		6.8	%	$	21,910		100.0	%	$	13,156	100.0	%	$	8,754		66.5	%

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 net gain on sale of securities of $9.2 million and unrealized gain on change in market value of mutual fund of $0.4 million during the three months ended March 31, 2020.


(3)	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~~Means not meaningful

Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

Total noninterest income increased ~~$0.9~~$8.8 million, or ~~6.8%~~66.5%, in the ~~quarter~~three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period of ~~2018.~~2019. The increase was mainly driven by ~~higher other noninterest income and the $0.9~~a $9.2 million net gain on the sale of ~~approximately $23.8 million~~securities, particularly on the sale of ~~municipal~~20-year Treasury securities replaced with longer-duration bonds ~~and $11.8 million of floating-rate corporate securities. This~~to mitigate higher expected prepayments on mortgage-related securities in a low interest rate market. In addition, there was ~~partially offset by lower income from~~an increase in brokerage, advisory and fiduciary activities ~~and~~in the first quarter of 2020. These increases were partially offset by the absence of a $0.6 million gain on an early termination of FHLB advances recognized in the first quarter of 2019, lower cards servicing fees, ~~from~~the absence of data processing and fees for other services ~~such as administrative and transition services~~ provided to ~~our~~the Former ~~Parent.~~Parent and its affiliates, as well as lower wire transfer fees, attributable to the implementation of Zelle® that began in the fourth quarter of 2019.

~~Other noninterest income~~Brokerage, advisory and fiduciary activities increased ~~$0.9~~$0.4 million or 12.1%, in the three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period last year, mainly ~~driven by~~due to an ~~increase~~improved allocation of ~~$1.1 million from derivative contracts sold to loan customers.~~

~~Brokerage,~~AUMs into our advisory services 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~~higher volume of customer trading ~~in 2019. In February 2019, the United States placed new restrictions on the trading~~activity as a result 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 $1.5increased market volatility.

Cards servicing fees declined $0.5 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~~or 56.8%, in the three months ended ~~September 30, 2019~~March 31, 2020 compared to the same ~~period~~quarter last ~~year. This was~~year, mainly due to the ~~phase out~~discontinuation of ~~transition services to~~ the ~~Company’s Former Parent and its affiliates.~~Company's credit card program.

~~Nine Months Ended September 30, 2019~~ ~~and 2018~~

~~Total noninterest income decreased by $0.7 million in~~In the ~~nine~~three months ended ~~September 30, 2019. This was driven by lower income from brokerage, advisory and fiduciary activities, lower~~March 31, 2020, there were no data processing and fees for other services compared 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$0.5 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~~year, as ~~a result of the phase out of transition~~ services previously provided to the Company’s Former Parent and its affiliates ~~the sale of our subsidiary G200 Leasing, LLC (“G200 Leasing”) to our Former Parent~~ended in the ~~first~~third quarter of ~~2018, and the resulting loss of aircraft lease income.~~2019.

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 wire transfer activity in 2019. The decrease in deposits and service fees was partially offset by higher fees from Treasury Management services. Also, during the second quarter of 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 the 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 September 30,								Change					Three Months Ended March 31,								Change
	2019				2018				2019 vs 2018					2020				2019				2020 vs 2019
	Amount		% of Total		Amount		% of Total		Amount			% of Total		Amount		% of Total		Amount		% of Total		Amount			% of Total
(in thousands, except percentages)
Salaries and employee benefits	$	33,862	64.2	%	$	33,967	65.3	%	$	(105	)	(0.3	)%	$	29,326	65.4	%	$	33,437	64.4	%	$	(4,111	)	(12.3	)%
Occupancy and equipment	3,878		7.4	%	4,044		7.8	%	(166		)	(4.1	)%	3,803		8.5	%	4,042		7.8	%	(239		)	(5.9	)%
Telecommunications and data processing														3,464		7.7	%	3,026		5.8	%	438			14.5	%
Professional and other services fees	4,295		8.1	%	4,268		8.2	%	27			0.6	%	2,954		6.6	%	3,444		6.6	%	(490		)	(14.2	)%
Telecommunications and data processing	3,408		6.5	%	3,043		5.9	%	365			12.0	%
Depreciation and amortization	1,928		3.7	%	1,997		3.8	%	(69		)	(3.5	)%	1,959		4.4	%	1,942		3.7	%	17			0.9	%
FDIC assessments and insurance	597		1.1	%	1,578		3.0	%	(981		)	(62.2	)%	1,118		2.5	%	1,393		2.7	%	(275		)	(19.7	)%
Other operating expenses (1)	4,769		9.0	%	3,145		6.0	%	1,624			51.6	%	2,243		4.9	%	4,661		9.0	%	(2,418		)	(51.9	)%
Total noninterest expenses	$	52,737	100.0	%	$	52,042	100.0	%	$	695		1.3	%	$	44,867	100.0	%	$	51,945	100.0	%	$	(7,078	)	(13.6	)%

_______

Nine Months Ended September 30, Change
2019 2018 2019 vs 2018
Amount % Amount % Amount %
(in thousands, except percentages)

Salaries and employee benefits $ 101,356
64.3 % $ 102,940
64.2 % $ (1,584 ) (1.5 )%
Occupancy and equipment 12,152
7.7 % 11,819
7.4 % 333
2.8 %
Professional and other services fees 11,693
7.4 % 16,099
10.0 % (4,406 ) (27.4 )%
Telecommunications and data processing 9,667
6.1 % 9,138
5.7 % 529
5.8 %
Depreciation and amortization 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) 13,672
8.8 % 9,753
6.1 % 3,919
40.2 %
Total noninterest expenses $ 157,587
100.0 % $ 160,325
100.0 % $ (2,738 ) (1.7 )%

~~________~~

~~(1)~~ Includes advertising, marketing, 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 our liability to participants of the deferred compensation plan.


(1)	Includes advertising, marketing, 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 our liability to participants of the deferred compensation plan.

Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

Noninterest expense ~~increased~~decreased by ~~$0.7~~$7.1 million, or ~~1.3%~~13.6%, in the three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period in ~~2018,~~2019, primarily ~~the result of higher~~driven by lower salaries and employee benefits, other operating expenses, professional and ~~higher telecommunication~~service fees, and ~~data processing~~FDIC assessments and insurance expenses. These ~~results~~declines were partially offset by ~~lower FDIC insurance~~higher telecommunications and data processing expenses ~~lower occupancy~~during the first quarter of 2020 compared to the same period last year.

Salaries and ~~equipment expenses as well as a decrease~~employee benefits decreased by $4.1 million or 12.3%, in the ~~cost~~three months ended March 31, 2020 compared to the same period last year. This was mainly driven by staff reductions completed in 2019 and 2018 and the decline in stock-based compensation expense during the first quarter of ~~salaries and employee benefits.~~2020. In the three months ended March 31, 2020, we recorded stock-based compensation expense of $0.3 million compared to $1.5 million in the same quarter one year ago. There were no staff reduction costs in the first quarter of 2019.

Other operating expenses ~~increased~~decreased by ~~$1.6~~$2.4 million or 51.9%, in the three months ended March 31, 2020 compared to the same period last year. This was mainly due to the absence of rebranding costs in the first quarter of 2020 compared to $0.9 million of rebranding costs in the same period last year related to the Company’s transformation efforts.

FDIC assessments and insurance expense decreased by $0.3 million in the three months ended ~~September 30, 2019, mainly driven by $0.8 million of restructuring expenses related~~March 31, 2020. The decrease was primarily due to ~~rebranding incurred~~lower FDIC assessment costs due to credits received 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 fourthfirst 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.~~2020.

Telecommunication and data processing expenses increased by $0.4 million in the three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period last year, mainly driven by ~~costs~~an increase in software services, 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 decrease of $4.4 million, or 27.4%, in professional and other services fees during the nine months ended September 30, 2019 compared to the same period last year stems from $4.6 million incurred in legal, accounting and consulting fees in connection with our spin-off from our Former Parent during the nine months ended September 30, 2018.

digital transformation.

Salaries and employee benefits decreased by $1.6 million in the nine months ended September 30, 2019, mainly driven by staff reductions in 2019 and 2018 and the $1.2 million paid to participants of the non-qualified deferred compensation plan to partially mitigate tax effects of unexpected early distribution due to the spin-off. This decrease was partially offset by $4.4 million in additional compensation costs related to the shares of 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 2019.

FDIC assessments and insurance expense decreased by $1.3 million in the nine months ended September 30, 2019. The 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 assets, we received a credit due to the FDIC’s Deposit Insurance Fund attaining a 1.38% reserve ratio.

Other operating expenses increased by $3.9 million in the nine months ended September 30, 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 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 costs associated with improvements to our online banking platform.~~

Income Taxes

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


	Three Months Ended September 30,						Change					Nine Months Ended September 30,						Change					Three Months Ended March 31,						Change
	2019			2018			2019 vs 2018					2019			2018			2019 vs 2018					2020			2019			2020 vs 2019
(in thousands, except effective tax rates and percentages)
Income tax expense	$	3,268		$	3,390			($122	)	(3.60	)%	$	10,369		$	10,658			($289	)	(2.71	)%	$	890		$	3,577			($2,687	)	(75.12	)%
Effective income tax rate	21.50		%	22.69		%	(1.19		)%	(5.24	)%	21.50		%	25.34		%	(3.84		)%	(15.15	)%	20.83		%	21.49		%	(0.66		)%	(3.07	)%

The income tax expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 reflects the corporate federal income tax rate under the 2017 Tax Act (the “2017 Tax Act”) which, beginning January 1, 2018, decreased the corporate federal income tax rate from 35% to 21%. ~~During the three and nine months ended September 30, 2018, the Company had a higher tax expense mainly as a result of tax adjustments associated with spin-off costs which were not tax deductible.~~

As of ~~September 30, 2019,~~March 31, 2020, the Company’s net deferred tax asset was ~~$5.4~~$4.9 million, a decline of ~~$10.9~~$0.5 million compared to ~~$16.3~~$5.5 million as of December 31, ~~2018.~~2019. This decrease was mainly driven by an increase of ~~$47.7~~$26.1 million in net unrealized holding gains on available for sale securities during the first ~~nine months~~quarter of ~~2019.~~2020.

Financial Condition - Comparison of Financial Condition as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019

Assets. Total assets were ~~$7.9~~$8.1 billion as of ~~September 30, 2019, a decline~~March 31, 2020, an increase of ~~$260.1~~$113.4 million, or ~~3.2%~~1.4%, compared to ~~$8.1~~$8.0 billion as of December 31, ~~2018. The decrease was mainly driven~~2019. This change includes increases of $149.7 million and $30.2 million in cash and cash equivalents and total securities, respectively, partially offset by a decrease of ~~$160.3~~$96.7 million in loans held for investment net of allowance for loan ~~losses as foreign loans continued their planned decline, and $108.4 million lower total securities.~~losses. See “—Average Balance Sheet, Interest and Yield/Rate Analysis” for detailed information, including changes in the composition of our interest-earning assets.

Cash and Cash Equivalents. Cash and cash equivalents increased to ~~$101.3~~$271.1 million at ~~September 30, 2019~~March 31, 2020 from ~~$85.7~~$121.3 million at December 31, ~~2018.~~2019. The increase of $149.7 million or 123.4% , is attributable to higher balances at the Federal Reserve as a part of preventive business measures being taken to mitigate the potential negative impact of the COVID-19 pandemic.

Cash flows provided by operating activities were ~~$75.9~~$3.2 million in the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. This was primarily attributed to net income in the ~~period and the termination of interest rate swaps designated as cash flow hedges, which resulted in $8.9 million of proceeds.~~ period.

Net cash provided by investing activities was ~~$300.2~~$74.8 million during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, mainly driven by maturities, sales and calls of securities available for sale and FHLB stock totaling ~~$430.1~~$196.7 million and ~~$24.3~~$7.3 million, respectively, a net decrease in loans of $61.6 million, and proceeds from loan portfolio sales totaling ~~$259.8~~$13.1 million. These proceeds were partially offset by purchases of available for sale securities and FHLB stock totaling ~~$290.1~~$197.5 million and ~~$24.3~~$8.5 million, respectively.

In the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, net cash ~~used in~~provided by financing activities was ~~$360.4~~$71.8 million. These activities included a ~~$232.4~~$121.1 million increase in time deposits and $30.0 million in net proceeds from FHLB advances. These proceeds were partially offset by a $36.0 million net decrease in total demand, savings and money market deposit balances, the ~~$28.5~~redemption of $28.1 million in junior subordinated debentures and the $15.2 million repurchase of shares of Class B common stock both 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 issuance of Class A common stock in the first quarter of 2019, which were used to purchase Class B common stock.2020.

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			March 31, 2020			December 31, 2019
(in thousands, except percentages)
Total loans, gross (1)	$	5,751,791		$	5,920,175		$	5,668,327		$	5,744,339
Total loans, gross / total assets	73.1		%	72.9		%	70.0		%	71.9		%

Allowance for loan losses	$	53,640		$	61,762		$	72,948		$	52,223
Allowance for loan losses / total loans, gross (1) (2)	0.93		%	1.04		%	1.29		%	0.91		%

Total loans, net (3)	$	5,698,151		$	5,858,413		$	5,595,379		$	5,692,116
Total loans, net / total assets	72.5		%	72.1		%	69.1		%	71.3		%

_______________


(1)	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 for the year ended December 31, 2019 and Note 45 of 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~~March 31, 2020 and December 31, ~~2018~~2019 is

depicted in the following table:


(in thousands)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Retail (1)	$	1,174,830	$	1,081,142	$	1,144,093	$	1,143,565
Multifamily	942,851		909,439		834,016		801,626
Office space	460,060		441,712		447,408		453,328
Land and construction	268,312		326,644		225,179		278,688
Hospitality	193,878		166,415		196,209		198,807
Industrial and warehouse	104,894		120,086		87,583		96,102
	$	3,144,825	$	3,045,438	$	2,934,488	$	2,972,116

_________


(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 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.


(in thousands)	September 30, 2019		December 31, 2018		March 31, 2020			December 31, 2019
Domestic Loans:							��
Real Estate Loans
Commercial real estate (CRE)
Nonowner occupied	$	1,933,662	$	1,809,356
Non-owner occupied					$	1,875,293		$	1,891,802
Multi-family residential	942,851		909,439		834,016			801,626
Land development and construction loans	268,312		326,644		225,179			278,688
	3,144,825		3,045,439		2,934,488			2,972,116
Single-family residential	410,108		398,043		464,252			427,431
Owner occupied	825,601		777,022		923,260			894,060
	4,380,534		4,220,504		4,322,000			4,293,607
Commercial loans	1,072,220		1,306,792		1,027,403			1,190,193
Loans to depository institutions and acceptances (1)	19,815		19,965		16,568			16,547
Consumer loans and overdrafts (2) (3)	77,318		73,155		131,797			72,555
Total Domestic Loans	5,549,887		5,620,416		5,497,768			5,572,902

International Loans:
Real Estate Loans
Single-family residential (4)	117,360		135,438		105,088			111,671
Commercial loans	55,264		73,636		57,348			43,850
Loans to depository institutions and acceptances	5,000		49,000		8			5
Consumer loans and overdrafts (3) (5)	24,280		41,685		8,115			15,911
Total International Loans	201,904		299,759		170,559			171,437
Total Loan Portfolio	$	5,751,791	$	5,920,175	$	5,668,327		$	5,744,339

__________________


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


(2)	Includes customers’ overdraft balances totaling ~~$4.2~~$0.7 million and ~~$1.0~~$1.3 million as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, respectively.

(3)

~~At September 30, 2019, domestic and international~~There were no outstanding credit card balances ~~amounted to $4.3 million and $16.5 million, respectively.~~ ~~In April~~as of March 31, 2020. At December 31, 2019, ~~we revised our~~balances were mostly comprised of credit card ~~program~~extensions of credit to customers with deposits with the Bank. The Company phased out its legacy credit card products to further strengthen ~~the Company’s~~its 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.~~


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

As of ~~September 30, 2019,~~March 31, 2020, the loan portfolio decreased ~~$168.4~~$76.0 million, or ~~2.8%~~1.3%, to ~~$5.8~~$5.7 billion, compared to ~~$5.9 billion at~~ December 31, ~~2018. As part of our business strategy, loans~~2019. Loans to international customers, primarily from Latin America, declined by ~~$97.9~~$0.9 million, or ~~32.6%~~0.5%, as of ~~September 30, 2019,~~March 31, 2020, compared to December 31, ~~2018.~~2019. The domestic loan exposure decreased ~~$70.5~~$75.1 million, or 1.3%, as of ~~September 30, 2019,~~March 31, 2020, compared to December 31, ~~2018.~~2019. The decline in total domestic loans includes net decreases of ~~$234.6~~$162.8 million and $37.6 million in Commercial and CRE loans, respectively, partially offset by net increases of ~~$99.4~~$29.2 million, ~~$48.6 million, $12.1~~$36.8 million and ~~$4.2~~$59.2 million in ~~CRE loans,~~ owner occupied loans, single-family residential loans and consumer loans, respectively. InThe increase in consumer loans includes $60 million in high-yield indirect consumer loans purchased during the ~~nine months ended September 30, 2019, the decline~~quarter. The overall decrease in domestic loans was mainly driven by seasonally lower loan activity in the first quarter of 2020 as well as a ~~reduction~~further slowdown in loan production towards the end of ~~$238.2 million non-relationship SNCs.~~the quarter as a result of the COVID-19 pandemic.

As of ~~September 30, 2019,~~March 31, 2020, syndicated loans that financed highly leveraged transactions were ~~$43.0~~$21.8 million, or ~~0.7%~~0.4%, of total loans, compared to ~~$207.7~~$35.7 million, or ~~3.5%~~0.6%, of total loans as of December 31, ~~2018.~~2019.

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, and bear fixed or variable rates of interest based upon different market benchmarks plus a spread.


	September 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	Net Exposure (1)		% Total Assets		Net Exposure (1)		% Total Assets		Net Exposure (1)		% Total Assets		Net Exposure (1)		% Total Assets
(in thousands, except percentages)
Venezuela (2)	$	126,411	1.61	%	$	157,162	1.93	%	$	97,944	1.2	%	$	112,297	1.4	%
Other (3)	75,493		0.96	%	142,597		1.77	%	72,615		0.9	%	59,140		0.7	%
Total	$	201,904	2.57	%	$	299,759	3.70	%	$	170,559	2.1	%	$	171,437	2.1	%

_________________


(1)	Consists of outstanding principal amounts, net of collateral of cash, cash equivalents or other financial instruments totaling ~~$19.6 million~~$14.5million and ~~$19.5~~$15.2 million as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively.


(2)	Includes mortgage loans for single-family residential properties located in the U.S. totaling ~~$110.1~~$97.5 million and ~~$129.0~~$104.0 million as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, 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.~~


(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:


	September 30, 2019								December 31, 2018								March 31, 2020								December 31, 2019
	Less than 1 year		1-3 Years		More than 3 years		Total		Less than 1 year		1-3 Years		More than 3 years		Total		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	$	24	$	97,920	$	—	$	97,944	$	8,141	$	3,617	$	100,539	$	112,297
Other (2)	20,039		9,137		46,317		75,493		71,707		18,200		52,690		142,597		—		72,615		—		72,615		6,146		9,282		43,712		59,140
Total (3)	$	35,946	$	11,068	$	154,890	$	201,904	$	99,122	$	19,259	$	181,378	$	299,759	$	24	$	170,535	$	—	$	170,559	$	14,287	$	12,899	$	144,251	$	171,437

_________________


(1)	Includes mortgage loans for single-family residential properties located in the U.S. totaling ~~$110.1~~$97.5 million and ~~$129.0~~$104.0 million as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. ~~Based upon the diligence we customarily perform~~

(2)

Includes loans to ~~"know our customers" for anti-money laundering, OFAC and sanctions purposes, and a review~~borrowers in other countries which do not individually exceed one percent of total assets in any 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.reported periods.

~~(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)	Consists of outstanding principal amounts, net of cash collateral, cash equivalents or other financial instruments totaling ~~$19.6~~$14.5 million and ~~$19.5~~$15.2 million as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, 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~~ALL 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~~ALL 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.


	September 30, 2019					December 31, 2018					March 31, 2020					December 31, 2019
	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)
Domestic Loans
Real estate	$	22,387		54.6	%	$	22,778		51.3	%	$	36,430		51.8	%	$	25,040		51.7	%
Commercial	24,260			34.8	%	29,278			37.0	%	28,255			36.5	%	22,132			38.1	%
Financial institutions	41			0.4	%	41			0.3	%	42			0.3	%	42			0.3	%
Consumer and others (1)	1,679			6.7	%	1,985			6.3	%	5,695			8.4	%	1,677			6.9	%
	48,367			96.5	%	54,082			94.9	%	70,422			97.0	%	48,891			97.0	%

International Loans (2)
Commercial	459			1.0	%	740			1.2	%	807			1.0	%	350			0.8	%
Financial institutions	17			0.1	%	404			0.8	%	—			—	%	—			—	%
Consumer and others (1)	4,797			2.4	%	6,536			3.1	%	1,719			2.0	%	2,982			2.2	%
	5,273			3.5	%	7,680			5.1	%	2,526			3.0	%	3,332			3.0	%

Total Allowance for Loan Losses	$	53,640		100.0	%	$	61,762		100.0	%	$	72,948		100.0	%	$	52,223		100.0	%
% of Total Loans	0.93		%			1.04		%			1.29		%			0.91		%

__________________

(1)

Includes: (i) credit card receivables to cardholders for whom charge privileges have been stopped as of ~~September 30,~~December 31, 2019; and (ii) mortgage loans for and secured by single-family residential properties located in the U.S. The total allowance for loan losses, after the charge-offs, for credit card receivables ~~stands at $3.6~~totaled $1.8 million at ~~September 30, 2019~~December 31, 2019. Outstanding credit card balances were repaid during the first quarter of 2020, therefore, there is no allowance for the credit card product as of March 31, 2020.


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

66In the three months ended March 31, 2020, the shift in the allocation of the ALL was driven by loan composition changes, primarily the purchase of domestic consumer loans and the reduction of the international credit cards, coupled with the allocation of the loan loss provisions increase due to the estimated impact of the COVID-19 pandemic among the respective impacted portfolios, mostly domestic real estate, domestic commercial and domestic consumer.

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;~~loans where the accrual of interest has been discontinued; (ii) accruing loans 90 days or more contractually past due as to interest or principal; and (iii) restructured loans that are considered TDRs.


	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
(in thousands)
Non-Accrual Loans (1)
Domestic Loans:
Real Estate Loans
Commercial real estate (CRE)
Nonowner occupied	$	1,936	$	—
Multi-family residential	—		—
Non-owner occupied					$	1,936	$	1,936
Single-family residential	6,540		5,198		5,340		5,431
Owner occupied	11,921		4,983		13,897		14,130
	20,397		10,181		21,173		21,497
Commercial loans	9,605		4,772		9,993		9,149
Consumer loans and overdrafts	91		11		443		390
Total Domestic	30,093		14,964		31,609		31,036

International Loans: (2)
Real Estate Loans
Single-family residential	2,493		1,491		1,737		1,860
Consumer loans and overdrafts	25		24		24		26
Total International	2,518		1,515		1,761		1,886
Total Non-Accrual Loans	$	32,611	$	16,479	$	33,370	$	32,922

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

International Loans:
Real Estate Loans
Single-family residential	—		365		5		—
Consumer loans and overdrafts	213		884		12		5
Total International	213		1,249		17		5
Total Past Due Accruing Loans	$	213	$	1,303	$	17	$	5

Total Non-Performing Loans	$	32,824	$	17,782	$	33,387	$	32,927
Other Real Estate Owned	—		367		42		42
Total Non-Performing Assets	$	32,824	$	18,149	$	33,429	$	32,969

__________________


(1)	Includes loan modifications that met the definition of TDRs that may be performing in accordance with their modified loan terms.As of March 31, 2020 and December 31, 2019, non-performing TDRs include $9.7 million and $9.8 million, respectively, in a multiple loan relationship to a South Florida borrower.


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


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

At ~~September 30, 2019,~~March 31, 2020, non-performing assets increased ~~$14.7~~$0.5 million, or ~~80.9%~~1.4%, compared to December 31, ~~2018. This~~2019. The increase in non-performing assets was mainly ~~attributed~~due to the ~~deterioration~~addition 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 totaling $2.7 million, and one CRE loan of $1.9 million, 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. On July 30, 2019, the Company agreed to restructure the CRE, owner occupied andthree commercial loans totaling ~~$9.5~~$2.3 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~~two single-family 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 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 nonaccrual status.$0.6 million. This increase was offset mainly by ~~pay downs and charge-offs, mainly due to two~~the charge-off of four commercial loans totaling ~~$1.4~~$1.1 million, ~~an aggregate reduction~~the paydown of ~~$2.2~~one commercial loan of $0.4 million inand three single family residential loans ~~and a total reduction of $0.7 million in past due international credit cards.~~totaling $0.6 million.

We recognized no interest income on nonaccrual loans during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019. 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 ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ was ~~$1.1~~$0.4 million.

The Company’s loans by credit quality indicators are summarized in the following table. We have no ~~purchased credit-impaired~~purchased-credit-impaired loans.


	September 30, 2019								December 31, 2018								March 31, 2020								December 31, 2019
(in thousands)	Special Mention		Substandard		Doubtful		Total (1)		Special Mention		Substandard		Doubtful		Total (1)		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
Non-owner occupied																	$	—	$	757	$	1,936	$	2,693	$	9,324	$	762	$	1,936	$	12,022
Multi-family residential	—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Land development and construction loans	10,184		—		—		10,184		—		—		—		—		9,852		—		—		9,852		9,955		—		—		9,955
	23,240		1,936		—		25,176		6,561		222		—		6,783		9,852		757		1,936		12,545		19,279		762		1,936		21,977
Single-family residential	—		9,033		—		9,033		—		7,108		—		7,108		—		7,082		—		7,082		—		7,291		—		7,291
Owner occupied	5,719		15,307		—		21,026		9,019		9,451		—		18,470		7,190		14,005		—		21,195		8,138		14,240		—		22,378
	28,959		26,276		—		55,235		15,580		16,781		—		32,361		17,042		21,844		1,936		40,822		27,417		22,293		1,936		51,646
Commercial loans	5,077		11,541		—		16,618		3,943		6,462		589		10,994		2,587		9,459		2,643		14,689		5,569		8,406		2,669		16,644
Consumer loans and overdrafts	—		2,400		—		2,400		—		6,062		—		6,062		—		41		434		475		—		67		357		424
	$	34,036	$	40,217	$	—	$	74,253	$	19,523	$	29,305	$	589	$	49,417	$	19,629	$	31,344	$	5,013	$	55,986	$	32,986	$	30,766	$	4,962	$	68,714

__________

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

At ~~September 30, 2019,~~March 31, 2020, substandard loans increased ~~$10.9~~$0.6 million, or ~~37.2%~~1.9%, compared to December 31, ~~2018.~~2019. The increase was mainly attributed to the ~~deterioration~~addition 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~~four commercial loans totaling ~~$3.2~~$2.5 million and two single-family loans totaling $0.6 million. This increase was offset mainly by the charge-off of four commercial loans totaling $1.1 million, the paydown of one commercial loan of $0.4 million and three single family residential ~~loan for $0.9~~loans totaling $0.6 million.

At March 31, 2020, special mention loans decreased $13.4 million, or 40.5%, compared to December 31, 2019. This was mainly due to the upgrade of three CRE loans totaling $9.3 million to pass, the upgrade of one owner occupied loan for ~~$2.0~~$0.9 million ~~and a $0.7~~to pass, the paydown of three commercial loans totaling $1.2 million, ~~CRE loan classified substandard. This increase was offset by pay downs and charge-offs, mainly due to~~the downgrade of two commercial loans totaling ~~$1.4~~$1.7 million to substandard and the upgrade of one ~~owner occupied~~commercial loan ~~for $1.0~~of $0.4 million ~~an aggregate reduction~~to pass. The decrease was offset by the downgrade of ~~$2.2~~one commercial loan of $0.2 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 $8.6 million downgraded to special mention during the period. ~~This was partially offset by the classification as substandard of~~All 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 being monitored and did not generate any additional provisions in 2019. Finally, one owner occupied loan for $2.2 million was upgraded to passing grade during the period.remain current.

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~~were classified substandard and charging privileges ~~are~~were suspended.

At ~~September 30, 2019 and~~ December 31, ~~2018, this resulted in~~2019, 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~~were foreign, mostly Venezuelan, and the card receivables were reflecting the stresses in the ~~Venezuela~~Venezuelan economy. In April 2019, we revised our credit card program to further strengthen the Company’s overall credit quality. We stopped charge privileges to our riskiest cardholders and ~~are requiring~~required 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,In October 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~~All amounts deemed uncollectible were charged off during 2019. At December 31, 2019, the outstanding balance and the assigned allowance for loan losses after the charge-offs was $11.1 million and $1.8 million, respectively. At December 31, 2019, there were no credit cards classified as substandard. There were no outstanding credit card balances as of March 31, 2020.

Due to the discontinuation of the credit card product, credit card charge-offs during the first quarter of 2020 totaled $0.4 million, all of which were already reserved. The Company experienced no unanticipated losses during the first quarter of 2020 as a result of the discontinuation of its credit card products.

On March 26, 2020, the Company began offering customized loan payment relief options as a result of the impact of COVID-19, including interest payment deferral and forbearance options. Consistent with ~~recognized U.S.-based card issuers that~~accounting and regulatory guidance, temporary modifications granted under these programs are not considered TDRs. The Company is actively monitoring these loans to permit the proactive identification of negative patterns by industry and/or region and pursuing remediation efforts in a timely manner. While the economic disruption caused by the COVID-19 pandemic is expected to impact the Company's credit quality, it is difficult to estimate the potential outcome due to the uncertain duration and scope of the slowdown in U.S. economic activity. The Company will ~~permit us~~continue to ~~serve our international~~closely monitor the performance of loans to borrowers in impacted sectors, and ~~domestic customers and we~~ will ~~earn referral fees and share interchange revenue without exposure to credit risk.~~

reassess its provisions as conditions evolve. As of May 1. 2020, loans under these programs totaled $1,119 million. The Company is closely monitoring the performance of these loans under the terms of the temporary relief granted.

Potential problem loans, which are accruing loans classified as substandard and are less than 90 days past due, at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, are as follows:


(in thousands)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Real estate loans
Commercial real estate (CRE)
Nonowner occupied	$	—	$	222
Non-owner occupied					$	757	$	762
Owner occupied	3,386		4,468		108		110
	3,386		4,690		865		872
Commercial loans	1,936		2,433		2,108		1,926
Consumer loans and overdrafts (1)	2,072		5,144		8		9
	$	7,394	$	12,267	$	2,981	$	2,807

__________

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

At ~~September 30, 2019,~~March 31, 2020, total potential problem loans ~~decreased $4.9~~increased $0.2 million, or ~~39.7%~~6.2%, compared to December 31, ~~2018.~~2019. The ~~decrease~~increase is mainly attributed to ~~a $3.1 million decrease in credit cards past due and a $1.0 million owner-occupied~~one commercial loan ~~repayment, as well as repayments of other smaller loans during the period.~~totaling $0.2 million.

Securities

The following table sets forth the book value and percentage of each category of securities at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. The book value for debt securities classified as available for sale and equity securities represents fair value and the book value for debt securities classified as held to maturity represents amortized cost.

September 30, 2019 December 31, 2018
Amount % Amount %
(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 2,750
0.2 % 2,862
0.2 %
$ 77,611
4.8 % $ 85,188
4.9 %
Securities available for sale:
U.S. Government sponsored enterprise debt $ 940,260
57.6 % $ 820,779
47.1 %
Corporate debt (1) 243,149
14.8 % 352,555
20.3 %
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) 23,957
1.5 % 23,110
1.3 %
U.S. treasury securities 994
0.1 % —
— %
Commercial paper —
— % 12,410
0.7 %
$ 1,485,202
91.0 % $ 1,586,051
91.1 %
Other securities (3):
FHLB stock $ 57,028
3.5 % $ 57,179
3.3 %
Federal Reserve Bank stock 13,144
0.7 % 13,010
0.7 %
$ 70,172
4.2 % $ 70,189
4.0 %
$ 1,632,985
100.0 % $ 1,741,428
100.0 %



	March 31, 2020				December 31, 2019
	Amount		%		Amount		%
(in thousands, except percentages)
Debt securities available for sale:
U.S. government agency debt	$	253,182	14.3	%	$	228,397	13.1	%
U.S. government sponsored enterprise debt	875,181		49.4	%	933,112		53.6	%
Corporate debt (1) (2)	330,194		18.7	%	252,836		14.5	%
U.S. Treasury debt	77,325		4.4	%	104,236		6.0	%
Municipal bonds	65,421		3.7	%	50,171		2.9	%
	$	1,601,303	90.5	%	$	1,568,752	90.1	%

Debt securities held to maturity (3)	$	70,336	4.0	%	$	73,876	4.3	%

Equity securities with readily determinable fair value not held for trading (4)	24,225		1.4	%	23,848		1.4	%

Other securities (5):	$	74,123	4.1	%	$	72,934	4.2	%
	$	1,769,987	100.0	%	$	1,739,410	100.0	%

__________________

(1)

~~September 30,~~March 31, 2020 and December 31, 2019 ~~includes $12.1~~include $13.4 million and $5.2 million, respectively, in “investment-grade” quality securities issued by corporate ~~entities~~entities. The securities issuers were from ~~Europe~~Canada and Japan in two different sectors at March 31, 2020, and from Japan in the financial services ~~sector.~~sector at December 31, ~~2018 includes $36.2 million in obligations issued by corporate entities from Europe and Japan in three different sectors.~~2019. The Company limits exposure to foreign investments based on cross border exposure by country, risk appetite and policy. All foreign investments are denominated in U.S. Dollars.


(2)	~~Includes a publicly offered investment company which seeks current income~~Securities from issuers in the financial services sector represent 1.8% and ~~makes investments that qualify for Community Reinvestment Act (“CRA”) purposes.~~1.3% of our total assets at March 31, 2020 and December 31, 2019, respectively.


(3)	Includes securities issued by U.S. government and U.S. government sponsored agencies.


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


(5)	Includes investments in FHLB and Federal Reserve Bank stock. 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~~March 31, 2020 and December 31, ~~2018~~2019. Similar to the table above, the book value for securities available for sale and equity securities is equal to fair market value and the book value for debt securities held to maturity is equal to amortized cost.


September 30, 2019
March 31, 2020																									March 31, 2020
(in thousands, except percentages)	Total				Less than a year				One to five years				Five to ten years				Over ten years				No maturity				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		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
Debt 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	%	$	—	—	%	$	875,181	2.74	%	$	1,889	3.65	%	$	27,399	2.53	%	$	108,743	2.76	%	$	737,150	2.74	%	$	—	—	%
Corporate debt-domestic	231,000		3.06	%	23,800		2.37	%	151,451		3.02	%	55,749		3.46	%	—		—	%	—		—	%	316,767		3.11	%	95,221		3.29	%	123,542		2.79	%	90,552		3.23	%	7,452		4.76	%	—		—	%
U.S. Government agency debt	226,644		2.94	%	350		2.69	%	8,097		3.33	%	31,975		2.87	%	186,222		2.94	%	—		—	%	253,182		2.58	%	85		3.29	%	10,027		2.35	%	31,453		2.62	%	211,617		2.58	%	—		—	%
Municipal bonds	50,198		3.30	%	—		—	%	—		—	%	29,298		3.24	%	20,900		3.39	%	—		—	%	65,421		3.11	%	—		—	%	—		—	%	46,554		3.33	%	18,867		2.57	%	—		—	%
Corporate debt-foreign	12,149		3.01	%	—		—	%	12,149		3.01	%	—		—	%	—		—	%	—		—	%	13,427		3.17	%	—		—	%	4,967		2.07	%	8,460		3.81	%	—		—	%	—		—	%
Mutual funds	23,957		2.28	%	—		—	%	—		—	%	—		—	%	—		—	%	23,957		2.28	%
U.S. treasury securities	994		1.88	%	994		1.88	%	—		—	%	—		—	%	—		—	%	—		—	%	77,325		1.57	%	6,800		1.57	%	1,017		0.56	%	—		—	%	69,508		1.59	%	—		—	%
Commercial paper	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%
																									$	1,601,303	2.75	%	$	103,995	3.18	%	$	166,952	2.69	%	$	285,762	3.02	%	$	1,044,594	2.64	%	$	—	—	%

Debt securities held to maturity																									$	70,336	2.39	%	$	—	—	%	$	—	—	%	$	11,567	2.92	%	$	58,769	2.28	%	$	—	—	%

Equity securities with readily determinable fair value not held for trading																									24,225		2.12	%	—		—		—		—		—		—		—		—		24,225		2.12	%
	$	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																									$	74,123	5.94	%	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%	$	74,123	5.94	%
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	%	$	1,769,987	2.86	%	$	103,995	3.18	%	$	166,952	2.69	%	$	297,329	3.01	%	$	1,103,363	2.62	%	$	98,348	5.00	%
	$	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
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 %



December 31, 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

Debt securities available for sale
U.S. government sponsored enterprise debt	933,112		2.76	%	2,296		3.81	%	23,781		2.51	%	113,341		2.83	%	793,694		2.75	%	—		—	%
Corporate debt-domestic	247,602		2.97		38,270		2.59		140,945		2.90		68,387		3.34		—		—		—		—
U.S. government agency debt	228,397		2.76		133		2.46		9,903		2.53		28,195		2.82		190,166		2.76		—		—
U.S. Treasury debt securities	104,236		2.07		6,765		1.61		—		—		—		—		97,471		2.10		—		—
Municipal bonds	50,171		3.29		—		—		—		—		29,371		3.23		20,800		3.38		—		—
Corporate debt-foreign	5,234		2.82		—		—		5,234		2.82		—		—		—		—		—		—
	1,568,752		2.76		47,464		2.51		179,863		2.83		239,294		3.02		1,102,131		2.71		—		—

Debt securities held to maturity	73,876		2.50	%	—		—		—		—		—		—		73,876		2.50	%	—		—
Equity securities with readily determinable fair value not held for trading	23,848		2.13	%	—		—		—		—		—		—		—		—		23,848		2.13	%

Other securities	72,934		6.02	%	—		—		—		—		—		—		—		—		72,934		6.02	%
	$	1,739,410	2.88	%	$	47,464	2.51	%	$	179,863	2.83	%	$	239,294	3.02	%	$	1,176,007	2.69	%	$	96,782	5.06	%

The investment portfolio’s average duration was ~~2.6~~3.0 years at ~~September 30, 2019~~March 31, 2020 and ~~3.4~~3.8 years at December 31, ~~2018~~2019. 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 ~~decreased $338.4~~increased $107.0 million, or ~~4.6%~~1.5%, to ~~$7.0~~$7.3 billion at ~~September 30, 2019~~March 31, 2020 compared to ~~$7.4~~$7.2 billion at December 31, ~~2018.~~2019. This was primarily driven by ~~lower~~$85.1 million in higher total deposits, mainly the result of an increase in time deposits, and a $30.0 million increase in advances from the ~~$25.9~~FHLB. This was partially offset by the $28.1 million redemption of junior subordinated ~~debentures.~~debentures in the first quarter of 2020. See “Capital Resources and Liquidity Management” for more detail on the redemption of trust preferred securities and related junior subordinated debt.

Deposits

Total deposits ~~decreased $339.8~~increased $85.1 million, or ~~5.6%~~1.5%, to ~~$5.7~~$5.84 billion at ~~September 30, 2019~~March 31, 2020 compared to ~~$6.0~~$5.76 billion at December 31, ~~2018.~~2019. In the ~~nine~~three months ended ~~September 30, 2019, decreases~~March 31, 2020, increases of ~~$164.3~~$121.1 million in ~~interest~~time deposits and $16.6 million in noninterest bearing ~~deposits, $104.4~~transaction accounts were partially offset by decreases $42.4 million in savings and money market deposit accounts and ~~$107.4~~$10.3 million in ~~time deposits were partially offset by a $36.2 million~~interest bearing deposits. The increase in ~~noninterest bearing transaction accounts. These changes in~~ deposits was driven by strong domestic deposit growth enabled by higher capture of online CDs and relationship money market deposits as a result of the ~~deposit mix were largely affected~~Company’s successful cross-selling efforts. This was partially offset by declines in deposits from Venezuelan resident customers, as discussed below. The ~~decrease of $107.4~~$121.1 million increase in time deposits includes an increase of $136.6 million in retail time deposits partially offset by a decline of ~~$75.7~~$15.5 million in brokered time ~~deposits and a decrease of $31.7 million in retail time~~ deposits. The ~~decrease~~increase in retail time deposits ~~resulted from our strategic decision~~was mainly due to ~~decrease the promotional interest rates we paid. We~~an increase of $69.0 million, or 50.2%, in online deposits compared to December 31, 2019.We continue to focus our efforts to retain customers with higher probabilities of renewal at ~~lower-than-market~~lower 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~~$71.4 million in the first ~~nine months~~quarter of ~~2019~~2020 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.~~presented and the changes during the period.


(in thousands)	September 30, 2019		December 31, 2018
									Change
(in thousands, except percentages)					March 31, 2020		December 31, 2019		Amount			%
Deposits
Domestic (1)	$	2,999,687	$	3,001,366
Domestic (1) (2)					$	3,253,972	$	3,121,827	$	132,145		4.2	%
Foreign:
Venezuela ~~(2)~~(3)	2,345,938		2,694,690		2,224,353		2,270,970		(46,617		)	(2.1	)%
Others	347,223		336,630		363,887		364,346		(459		)	(0.1	)%
Total foreign	2,693,161		3,031,320		2,588,240		2,635,316		(47,076		)	(1.8	)%
Total deposits	$	5,692,848	$	6,032,686	$	5,842,212	$	5,757,143	$	85,069		1.5	%

_________________


(1)	Includes brokered deposits of ~~$566.4~~$646.9 million and $682.4 million at ~~September 30, 2019,~~March 31, 2020 and ~~$642.1 million at~~ December 31, ~~2018.~~2019, respectively.


(2)	Domestic deposits, excluding brokered, were up $167.6 million or 6.87%, compared to December 31, 2019.

(3)

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 same period. Most of the Venezuelan withdrawals from deposit accounts at the Bank are believed to be due to the effect of adverse economic conditions in Venezuela on our Venezuelan resident customers.

Our other foreign deposits include deposits from non-Venezuelan affiliates of the Former Parent, and do not include deposits from ~~Venezuelans.~~

Venezuelan resident customers.

~~The following table shows~~

During the ~~amounts and percentage changes in our domestic and foreign deposits, including Venezuelan resident customer deposits, for the nine~~three months ended ~~September 30, 2019 and the year ended December~~March 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 nine months ended September 30, 2019,~~2020, deposits from customers domiciled in Venezuela decreased by ~~$348.8~~$46.6 million, or ~~12.9%~~2.1%, to ~~$2.3~~$2.2 billion, compared to December 31, ~~2018.~~2019. In the first ~~nine months~~quarter of ~~2019, as political and economic conditions in Venezuela remain difficult and the country's economy becomes increasingly dollarized, many of our~~2020, Amerant’s Venezuelan ~~resident~~ customers ~~withdraw their U.S. dollar~~continued to utilize 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,everyday expenses as challenging conditions in ~~any capacity, for the Venezuelan government or its political subdivisions or agencies. These sanctions affected a small number of clients.~~

their country persist. The annualized international deposit runoff rate was ~~14.6%~~7.1% in the ~~third~~first quarter of 2020 compared to an annualized rate of 8.6% during the fourth quarter of 2019. ~~As we expect this runoff~~It is encouraging that while the decline in foreign deposits continued in the first quarter of 2020, the pace of decline has slowed. This improvement is attributed to ~~continue into~~ the ~~next few quarters, we remain dedicated to enhancing our core deposit~~Company’s increased contact and sales efforts which solidified existing relationships and the expansion of Amerant’s banking products and ~~delivery channels. For example, we~~services, including Zelle® which was launched ~~a new online account opening platform for personal domestic customers, which enables customers to efficiently access our deposit products online. We have seen our online CDs more than double~~ in the ~~third~~fourth quarter of ~~2019, compared~~2019. Also, our efforts to ~~the third quarter~~capture online deposits led to an increase 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$69.0 million in these deposits ~~so far this year. We are also actively working to increase our share~~during the first quarter of ~~wallet of select high net worth international customers with whom we maintain strong long-term relationships.~~2020.

The Bank uses the Federal Financial Institutions Examination Council’s (the “FFIEC”) Uniform Bank Performance Report (the “UBPR”) definition of “core deposits”, which exclude brokered time deposits and retail time deposits of $250,000 or more. Our core deposits were $4.4 billion and ~~$4.7~~$4.3 billion as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. Core deposits represented ~~77.1%~~75.3% and ~~77.5%~~75.4% of our total deposits at those dates, respectively. The decline in core deposits since December 31, 2018 resulted primarily from Venezuelan resident customers drawing down their account balances as mentioned above, partially offset by increases in domestic deposits.

We utilize brokered deposits and, as of ~~September 30, 2019,~~March 31, 2020, we had ~~$566.4~~$646.9 million in brokered deposits, which represented ~~9.9%~~11.1% of our total ~~deposits.~~deposits at that date. Our ~~September 30, 2019~~March 31, 2020 brokered deposits were down ~~$75.7~~$35.5 million, or ~~11.8%~~5.2%, compared to ~~$642.1~~$682.4 million as of December 31, ~~2018. This decrease reflects~~2019, mainly due to the ~~continuation~~maturity of ~~our planned decrease~~$20 million in brokered ~~CDs deposits. The~~interest bearing and noninterest bearing demand deposits in January 2020.The Company has not historically sold brokered CDs in denominations over $100,000.

Large Fund Providers

At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, our large fund providers, defined as third-party customer relationships with balances of over $10 million, included seven and ~~six~~eight deposit relationships, respectively, with total balances of ~~$100.2~~$114.2 million and ~~$74.4~~$116.9 million, respectively. ~~At September 30, 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 our Former Parent or its non-U.S. affiliates at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 totaled ~~$3.8~~$6.6 million and ~~$9.6~~$7.9 million, respectively. These deposits of our Former Parent and its non-U.S. affiliates are expected to ~~continue to~~remain low or further decline ~~further~~ in ~~2019.~~2020.

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 ~~September 30, 2019:~~March 31, 2020:


	September 30, 2019				March 31, 2020
(in thousands, except percentages)
Less than 3 months	$	265,333	19.1	%	$	423,857	27.5	%
3 to 6 months	224,209		16.2	%	254,723		16.5	%
6 to 12 months	505,426		36.4	%	465,988		30.2	%
1 to 3 years	180,166		13.0	%	219,212		14.2	%
Over 3 years	211,741		15.3	%	179,591		11.6	%
Total	$	1,386,875	100.0	%	$	1,543,371	100.0	%

Short-Term Borrowings

In addition to deposits, we use short-term borrowings, such as FHLB advances and 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. All of our outstanding short-term borrowings at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 correspond to FHLB advances.

The following table sets forth information about the outstanding amounts of our short-term borrowings at the close of, and for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and for the year ended December 31, ~~2018.~~2019. There were no repurchase agreements outstanding as of March 31, 2020 and December 31, 2019.


	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
(in thousands, except percentages)
Outstanding at period-end	$	465,000		$	440,000		$	260,000		$	285,000
Average amount	505,556			505,417			240,000			478,333
Maximum amount outstanding at any month-end	600,000			632,000			300,000			600,000
Weighted average interest rate:
During period	2.37		%	2.10		%	1.66		%	2.29		%
End of period	2.08		%	2.52		%	1.29		%	1.93		%

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 September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
(in thousands, except percentages and per share data)
Net income	$	11,931		$	11,551		$	37,859		$	31,403		$	3,382		$	13,071
Basic earnings per common share	0.28			0.27			0.89			0.74			0.08			0.31
Diluted earnings per common share (1)	0.28			0.27			0.88			0.74			0.08			0.30

Average total assets	$	7,917,404		$	8,462,134		$	7,948,746		$	8,423,611		$	7,951,344		$	8,063,318
Average stockholders' equity	814,163			753,634			787,171			743,172			844,200			760,639
Net income / Average total assets (ROA)	0.60		%	0.55		%	0.64		%	0.50		%	0.17 %			0.65 %
Net income / Average stockholders' equity (ROE)	5.81		%	6.13		%	6.43		%	5.63		%	1.61 %			6.87 %
Average stockholders' equity / Average total assets ratio	10.28		%	8.91		%	9.90		%	8.82		%	10.62 %			9.43 %

Adjusted net income (2)	$	12,923		$	11,970		$	41,731		$	37,801		$	3,662		$	13,803
Adjusted earnings per common share (2)	0.30			0.28			0.98			0.89			0.09			0.33
Adjusted earnings per diluted common share (2)	0.30			0.28			0.97			0.89			0.09			0.32

Adjusted net income / Average total assets (Adjusted ROA) (2)	0.65		%	0.57		%	0.70		%	0.60		%	0.19		%	0.69		%
Adjusted net income / Average stockholders' equity (Adjusted ROE) (2)	6.30		%	6.35		%	7.09		%	6.78		%	1.74		%	7.25		%

__________________

(1)

As of ~~September 30,~~March 31, 2020 and 2019 potential dilutive instruments ~~included 738,138~~consisted of unvested shares of restricted stock ~~including 736,839 shares of~~and restricted stock ~~issued in December 2018 in connection with~~units mainly related to the Company’s IPO in 2018, totaling 482,316 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~~786,213, respectively. These potential dilutive instruments were included in the diluted earnings per share computation because, when the unamortized deferred compensation cost related to these shares was divided by the average market price per share at ~~that date,~~those dates, fewer shares would have been purchased than restricted shares assumed issued. Therefore, at ~~that date,~~those dates, such awards resulted in higher diluted weighted average shares outstanding than basic weighted average shares outstanding, and had a dilutive effect in per share ~~earnings 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.~~earnings.


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

During the three ~~and nine month periods~~months ended ~~September 30, 2019,~~March 31, 2020, basic and diluted earnings per share ~~increased~~decreased as a result of ~~higher~~lower net income in the three ~~and nine month periods~~months ended ~~September 30, 2019~~March 31, 2020 compared to the same ~~periods~~period 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/AOCL)~~(AOCI) caused primarily by fluctuations in unrealized holding gains or losses, net of taxes, on debt securities available for ~~sale securities. AOCI/AOCL~~sale. AOCI is not included for purposes of determining our capital for bank regulatory purposes.

Stockholders’ equity increased ~~$78.3~~$6.4 million, or ~~10.5%~~0.8%, to ~~$825.8~~$841.1 million as of ~~September 30, 2019~~March 31, 2020 compared to $834.7 million as of December 31, ~~2018,~~2019, primarily due to: (i) ~~$37.9~~$3.4 million of net income in the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, and (ii) a ~~$35.3~~$17.9 million increase in AOCI resulting primarily from a higher valuation of debt securities available for sale compared to December 31, ~~2018, and (iii)~~2019. These increases were partially offset by the ~~Company’s amortization~~$15.2 million repurchase of ~~stock-based compensation~~shares of ~~its 2018 restricted~~Class B common stock ~~award related to~~completed in the ~~IPO.~~first quarter of 2020. The higher valuation of debt securities available for sale during ~~2019~~the first quarter of 2020 was the primary driver of the Company’s deferred tax assets declining approximately ~~$10.9~~$0.5 million, or ~~66.9%~~10.0%, to ~~$5.4~~$4.9 million as of ~~September 30, 2019,~~March 31, 2020, as the unrealized gains and losses included in AOCI are reported in stockholders’ equity on an after-tax basis.

Class B Common Stock Repurchase. On February 14 and February 21, 2020, the Company repurchased an aggregate of 932,459 shares of its outstanding Class B Common Stock in two privately negotiated transactions for an aggregate purchase price of $15.2 million, including $0.3 million in broker fees and other expenses. These 932,459 shares of Class B common stock were recorded as treasury stock under the cost method. The Company used available cash to fund these repurchases.

Cancellation of Treasury Shares. In March 2020, Company’s Board of Directors authorized the cancellation of all 4,464,916 shares of Class B Common Stock previously held as treasury stock, including shares repurchased during 2018, 2019 and 2020, effective March 31, 2020.

Liquidity Management.

At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company had ~~$1.17~~$1.27 billion and $1.24 billion, respectively, of outstanding advances from the ~~FHLB and other borrowings.~~FHLB. At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we had an additional ~~$1.2~~$1.1 billion available under FHLB facilities. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company repaid ~~$930~~$250 million of outstanding advances and other borrowings, and borrowed ~~$935~~$280 million from these sources. There were no other borrowings as of ~~September 30,~~March 31, 2020 and December 31, 2019.

The following table summarizes the composition of our FHLB advances by type of interest rate:


	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
(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
Fixed rate ranging from 0.44% to 3.23% (December 31, 2019 - 0.71% to 3.23%) (1)					$	1,205,000	$	1,085,000
Floating rate three-month LIBOR ranging from 1.73% to 1.87% (December 31, 2019- 1.84% to 2.03%)					60,000		150,000
	$	1,170,000	$	1,166,000	$	1,265,000	$	1,235,000

__________________


(1)	As of ~~September 30,~~March 31, 2020 and December 31, 2019, includes ~~$200~~$530 million (fixed interest rate ~~- 1.14%~~raging from 0.62% to 0.97%) in advances from the FHLB that are callable prior to maturity. ~~There were no callable advances from the FHLB as of December 31, 2018.~~

~~(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 ~~September 30,~~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 is being 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 $0.4 million against interest expense on FHLB advances in the first quarter of 2020 ($0.1 million in the first quarter of 2019) and expects to record a credit of approximately $1.0 million in the rest of 2020.

In early April 2020, the Company restructured $420.0 million of its fixed-rate FHLB advances extending their original maturities from 2021 to 2023 at lower interest rates. The Company incurred a loss of $17.0 million as a result of the restructuring which was blended into the new interest rates of these advances, affecting the yields through their remaining maturities. The Company accounted for these transactions as the modification of existing debt in accordance with U.S. GAAP.

At March 31, 2020, advances from the FHLB had maturities through ~~2023~~2030 with interest rates ranging from ~~1.14%~~0.44% to 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~~$65.0 million of availability under these lines at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018, respectively.~~

2019.

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 Amerant Florida, which is an intermediate bank holding company and the obligor on our junior subordinated debt, held cash and cash equivalents of ~~$17.3~~$20.2 million as of ~~September 30, 2019~~March 31, 2020 and ~~$32.9~~$48.9 million as of December 31, ~~2018~~2019 in funds available to service ~~this~~its junior subordinated debt. In the ~~third~~first quarter of ~~2019,~~2020, we used ~~$25.5~~$27.1 million of Amerant Florida’s cash to redeem the outstanding trust preferred securities issued by its Statutory Trust ~~II and Capital Trust III subsidiaries,~~I and the related junior subordinated debt issued by Amerant Florida. ~~During~~

COVID-19 Pandemic

Our deposits and wholesale funding operations, including advances from the ~~nine~~FHLB and other short-term borrowings, have historically supplied us with a significant source of liquidity. These sources have been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our business. We evaluate our funding requirements on a regular basis to cover any potential shortfall in our ability to generate sufficient cash from operations to meet our capital requirements. We may consider funding alternatives to provide additional liquidity when necessary. There is some uncertainty surrounding the potential impact of the COVID-19 outbreak on our results of operations and cash flows. As a result, we are proactively taking steps to increase cash available on-hand, including, but not limited to, the repositioning of our investment portfolio, and seeking to extend the duration of and reduce the cost on, our long-term debt, primarily advances from the FHLB. Cash and cash equivalents increased $149.7 million or 123.4% in the three months ended ~~September 30, 2019,~~March 31, 2020 attributable to higher balances at the ~~Bank declared~~Federal Reserve. See —Cash and ~~paid dividends of $25.0~~Cash Equivalents. In addition, in early April 2020, the Company modified maturities on $420.0 million ~~to Amerant Florida.~~fixed-rate FHLB advances. See earlier discussion in this section.

Redemption of Junior Subordinated Debentures

On ~~July 31, 2019 and September 7, 2019,~~January 30, 2020, the Company redeemed all ~~$10.0~~$26.8 million of its outstanding ~~10.18%~~8.90% trust preferred capital 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~~I at ~~the contractual call~~a redemption price of ~~101.018% and 100.53%, respectively.~~100%. 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,~~I as part of ~~these~~this redemption ~~transactions. These redemptions together~~transaction. This redemption reduced total cash and cash equivalents by ~~approximately $23.8~~$27.1 million, financial liabilities by ~~approximately $25.9~~$28.1 million, other assets by $3.4 million, and other ~~assets~~liabilities by ~~approximately $2.4~~$2.2 million. In addition, ~~third quarter 2019 results included~~the Company recorded a ~~total~~ charge of $0.3 million for the ~~contractual premiums paid to security holders from these redemptions. The~~unamortized issuance costs. This redemption ~~of these legacy Tier 1 capital instruments~~ reduced the Company’s Tier 1 equity capital by a net of ~~$23.5~~$24.7 million and pretax annual interest expense by $2.4 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/AOCL.~~AOCI. Management believes that these limitations will not affect the Company’s ability, and Amerant Florida’s ability, to meet their short-term cash obligations. See “Supervision and Regulation” in the Form ~~10-K.~~10-K for the year ended December 31, 2019.

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
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 %



	Actual				Required for Capital Adequacy Purposes				Regulatory Minimums To be Well Capitalized
(in thousands, except percentages)	Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2020
Total capital ratio	$	930,003	14.54	%	$	511,741	8.00	%	$	639,676	10.00	%
Tier 1 capital ratio	855,885		13.38	%	383,806		6.00	%	511,741		8.00	%
Tier 1 leverage ratio	855,885		10.82	%	316,369		4.00	%	395,461		5.00	%
Common Equity Tier 1 (CET1)	794,742		12.42	%	287,854		4.50	%	415,790		6.50	%

December 31, 2019
Total capital ratio	$	945,310	14.78	%	$	511,760	8.00	%	$	639,699	10.00	%
Tier 1 capital ratio	891,913		13.94	%	383,820		6.00	%	511,760		8.00	%
Tier 1 leverage ratio	891,913		11.32	%	315,055		4.00	%	393,819		5.00	%
Common Equity Tier 1 (CET1)	806,050		12.60	%	287,865		4.50	%	415,805		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				Actual				Required for Capital Adequacy Purposes				Regulatory Minimums to be Well Capitalized
(in thousands, except percentages)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2019
March 31, 2020
Total capital ratio	$	906,828	14.37	%	$	504,995	8.00	%	$	631,244	10.00	%	$	867,364	13.56	%	$	511,615	8.00	%	$	639,519	10.00	%
Tier 1 capital ratio	854,077		13.53	%	378,746		6.00	%	504,995		8.00	%	793,246		12.40	%	383,711		6.00	%	511,615		8.00	%
Tier 1 leverage ratio	854,077		10.83	%	315,360		4.00	%	394,200		5.00	%	793,246		10.03	%	316,262		4.00	%	395,327		5.00	%
Common Equity Tier 1	854,077		13.53	%	284,060		4.50	%	410,309		6.50	%
Common Equity Tier 1 (CET1)													793,246		12.40	%	287,783		4.50	%	415,687		6.50	%

December 31, 2018
December 31, 2019
Total capital ratio	$	883,746	13.05	%	$	541,564	8.00	%	$	676,955	10.00	%	$	841,305	13.15	%	$	511,638	8.00	%	$	639,547	10.00	%
Tier 1 capital ratio	826,114		12.20	%	406,173		6.00	%	541,564		8.00	%	787,908		12.32	%	383,728		6.00	%	511,638		8.00	%
Tier 1 leverage ratio	826,114		9.96	%	331,829		4.00	%	414,786		5.00	%	787,908		10.01	%	314,800		4.00	%	393,500		5.00	%
Common Equity Tier 1	826,114		12.20	%	304,630		4.50	%	440,021		6.50	%
Common Equity Tier 1 (CET1)													787,908		12.32	%	287,796		4.50	%	415,706		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,~~March 31 2020, the Company redeemed all ~~$15.0~~$26.8 million of its outstanding ~~10.60%~~8.90% trust preferred capital 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.~~I. 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~~made 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~~These simplified capital rules ~~should have~~were adopted by the Company during the first quarter of 2020 and had no material effect on the Company’s regulatory capital and ~~ratios when effective.~~

ratios.

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’~~banking organizations 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~~As of March 31, 2020, the Company ~~is evaluating~~has determined to opt out of adopting the new ~~rules.~~

“community bank leverage ratio” given that the perceived benefits provided by the new regulation did not exceed the potential costs considering the Company’s current and projected size and operations.

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.~~10-K for the year ended December 31, 2019.


(in thousands)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Commitments to extend credit	$	821,197	$	923,424	$	786,873	$	820,380
Credit card facilities (1)	145,866		198,500
Letters of credit	21,155		27,232		19,931		17,414
	$	988,218	$	1,149,156	$	806,804	$	837,794

~~__________________~~

~~(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 Form 10-K where such matters are disclosed for the Company’s latest fiscal year ended December 31, ~~2018.~~2019.

Recently Issued Accounting Pronouncements. 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 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. There have been no material changes in our market risk exposure as compared to those discussed in our Form 10-K for the year ended December 31, 2019, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” ~~and our quarterly report on Form 10-Q for the period ended June 30, 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~~maintains a set 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 Exchange Act) designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Our management, with the participation of our Chief Executive Officer and our Interim Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures. Based on such evaluation, our Chief Executive Officer and Interim Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective as of the end of the period covered by this quarterly report on Form ~~10-Q. Based upon~~10-Q to ensure that ~~evaluation~~information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and asreported within the time periods specified in the rules and forms of the ~~end of the period covered by this Form 10-Q, the Company’s~~SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, ~~concluded that the Company’s disclosure controls and procedures were effective~~as appropriate, to allow timely decisions regarding ~~disclosure in its reports that the Company files or submits to the SEC under the Exchange Act.~~required disclosures.

Changes in Internal Control Over Financial Reporting

There ~~have been~~were no changes in ~~the Company’s~~our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Form 10-Q that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

~~Any control system,~~Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well ~~conceived~~designed and operated, can provide only reasonable, not absolute, assurance ~~that its objectives are achieved. The~~of achieving the desired control objectives. In addition, the design of ~~a control system inherently has limitations, including~~disclosure controls and procedures must reflect the ~~controls’ cost~~fact that there are resource constrains and that management is required to apply judgment in evaluating the benefits of possible controls and procedures 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.~~costs.

8281

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, 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 as a Managing Partner of Kunde, CV to manage ~~trusts~~Kunde, CV for the respective benefit of ~~Gustavo~~the eight siblings of the Marturet Machado’s ~~wife and his siblings. Amerant Trust is the trustee of these trusts and is Kunde’s manager.~~family. The plaintiff is a beneficiary of ~~one trust~~Kunde and is an aunt of Gustavo ~~Antonio~~ Marturet ~~Sr.,~~Medina, a Company director, and a sister-in-law of Mr. Gustavo ~~Antonio~~ Marturet ~~Sr.’s~~Medina’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~~$1 million in legal fees through ~~November 05, 2019~~March 31, 2020 defending this case, including recent preparations for trial. The Company expects to be partially 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

For detailed information about certain risk factors that could materially affect our business, financial condition or future results see “Risk Factors” in the Company’s Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2019. Other than the additional risk factors set forth 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.~~10-K for the year ended December 31, 2019.

The COVID-19 pandemic has significantly impacted economic conditions globally and in the United States, could have a material adverse effect on our business, financial condition and results of operations, and the ultimate impact on our business, financial condition and results of operations, will depend on future developments and other factors that are highly uncertain and will be impacted by the scope and duration of the pandemic and actions taken by governmental authorities in response.

An ~~additional risk includes~~outbreak of a novel strain of the ~~following:~~Coronavirus, COVID-19, was first reported in December 2019 and has since spread globally, including to every state in the United States. The World Health Organization declared COVID-19 a pandemic on March 11, 2020, and subsequently, on March 13, 2020, the United States declared a national emergency with respect to COVID-19.

~~Recent changes~~

The COVID-19 pandemic has had, and another pandemic in the future could have, a negative impact on the economy and financial markets, globally and in the United States. In many countries, including the United States, the COVID-19 pandemic has had a significant negative impact on economic activity and has contributed to significant volatility and negative pressure in financial markets. The outbreak has been rapidly evolving and, as cases of COVID-19 have continued to increase globally and in the United States, many countries, including the United States, have implemented measures aimed at containing the spread of COVID-19 including “shelter at home” orders, as well as mandating business and school closures and restricting travel.

Several states and cities across the United States, including the States of Florida, New York and Texas and cities where we have banking centers, LOPs and where our principal place of business is located, have also implemented quarantines, restrictions on travel, “shelter at home” orders, and restrictions on types of business that may continue to operate. The Company cannot predict when restrictions currently in place may be lifted, or whether restrictions that have been lifted, such as certain restrictions in Texas that have been lifted so that businesses may reopen, will not be imposed or tightened in the future if viewed as necessary due to public health concerns. As a result of the COVID-19 pandemic and the measures implemented to contain it, almost every industry has been and is being directly or indirectly impacted, including industries in which our customers operate. A number of our customers impacted by the COVID-19 pandemic have requested and been granted by the Company loan payment relief options, including interest-only and/or forbearance options. In addition, in the first quarter of 2020, the Company significantly increased its provision for loan losses primarily due to estimated losses reflecting deterioration in the macro-economic environment as a result of the impact of the COVID-19 pandemic across multiple impacted sectors.

In addition, as a result of the COVID-19 pandemic and “shelter at home” orders in the states and cities where we operate, the majority of our employees are currently working remotely. An extended period of remote work arrangements could introduce operational risks, including but not limited to cybersecurity risks, and limit our ability to provide services and products to our ~~existing credit card program may affect~~customers and, in general, manage our ~~credit card losses and adversely affect certain credit card relationships.~~business.

~~In April 2019, we revised our credit card program to further strengthen credit quality. We~~Also, the COVID-19 pandemic, or a future pandemic, could have 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 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 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 the change in our credit card strategy may disrupt, and have unintendedmaterial adverse effects on our ~~deposit,~~ability to successfully operate and on our financial condition, results of operations and cash flows due to, several factors including but not limited to the following:

• the reduced economic activity may severely impact our customers' businesses, financial condition and liquidity and may prevent one or more of our customers from meeting their obligations to us in full, or at all, or to otherwise seek modifications of such obligations;

• a decline in the credit quality of our loan portfolio leading to a need to increase our allowance for loan losses;

•a decline in the credit quality of loans used as collateral to obtain advances from the Federal Home Loan Bank may trigger a request to replace the loans used as collateral with securities and may negatively impact our liquidity ratio;

•a significant decline in the value of the collateral used to secure loans that have a related interest rate swap agreement may limit our ability to realize enough value from the collateral to cover the outstanding balance of the loan and ~~wealth management relationships~~the related swap liability;

•any impairment in value of our tangible and/or intangible assets which could be recorded as a result of weaker economic conditions;

• the reduced economic activity could develop into a local and/or global economic recession, which could adversely affect the demand for our products and services;

•the recent action of the Federal Reserve’s Federal Open Market Committee (‘‘FOMC’’) to lower the target federal funds rate, and any future action of the FOMC to lower the target federal funds rate further, may negatively affect our net interest income;

•the potential volatility in the fair value and yields of our investment portfolio;

•a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our ability to access the debt and/or equity markets in the future on attractive terms, or at all, or negatively impact our credit ratings;

• any reduction/impairment in value of the collateral used by our customers to secure their obligations with us that could be recorded as a result of weaker economic conditions; and

• the potential negative impact of a pandemic, including any preventative or protective actions that governments implement to contain it, may interfere with the ability of our employees and vendors to perform their respective responsibilities and obligations relative to the conduct of our business and, if a significant number of them are impacted, could result in a deterioration of our ability to ensure business continuity during a disruption.

The extent of the impact of COVID-19 over the Company and its customers will depend on a number of issues and future developments, which, at this time, are extremely uncertain and cannot be accurately predicted, including the scope, severity and duration of the pandemic, the actions taken to contain or mitigate the impact of the pandemic, and the direct and indirect effects that the pandemic and related containment measures may have, among others.

The COVID-19 pandemic presents material uncertainty and risk with respect to the financial condition, results of operations, cash flows and performance of the Company and the rapid development and fluidity of the situation surrounding the pandemic prevents any prediction as to its full adverse impact. Moreover, many risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2019 should be interpreted as heightened risks as a result of the impact of the COVID-19 pandemic.

As a participating lender in the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), the Company and the Bank are subject to additional risks of litigation from the Bank’s customers or other parties regarding the Bank’s processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties.

On March 27, 2020, the President signed the CARES Act, which included a $349 billion loan program administered through the SBA referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to several limitations and eligibility criteria. Since the inception of the PPP on April 2, 2020, the Bank began participating as a lender in the PPP; however, because of the short timeframe between the passing of the CARES Act and the opening of the PPP, there is some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes the Company and the Bank to risks relating to noncompliance with the PPP. On or about April 16, 2020, the SBA notified lenders that the $349 billion earmarked for the PPP was exhausted. Congress has approved additional funding for the PPP and the President signed into law the Paycheck Protection Program and Health Care Enhancement Act on April 24, 2020.

Recently, several other larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP. The Company and the Bank may be exposed to the risk of similar litigation, both from customers and non-customers that approached the Bank regarding PPP loans, regarding its process and procedures used in processing applications for the PPP. If any such litigation is filed against the Company or the Bank and is not resolved in a manner favorable to the Company or the Bank, it may result in significant financial liability or adversely affect the Company’s reputation. In addition, litigation can be costly,

regardless of the outcome. Any financial liability, litigation costs or reputational damage caused by PPP related litigation could have a material adverse impact on our business, financial condition and results of operations.

The Bank also has credit ~~card holders.~~risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the Bank, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by the Company, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company.

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

~~None.~~The following table shows Company repurchases of its Class B Common Stock for the three months ended March 31, 2020.



Period	Total number of shares purchased (1)	Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs (2)	Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (2)
January 1, 2020 - January 31, 2020	—	—	—	—
February 1, 2020 - February 29, 2020	932,459	$16.00	—	—
March 1, 2020 - March 31, 2020	—	—	—	—
Total	932,459	$16.00	—	—

(1) On February 14 and February 21, 2020, we repurchased an aggregate of 932,459 shares of our Class B Common Stock in two privately negotiated transactions (collectively, the “Repurchase”) for a cash purchase price of $16.00 per share. The aggregate purchase price for these transactions was approximately $15.2 million, including $0.3 million in broker fees and other expenses. The Company funded the Repurchase with cash on hand.

(2) We have not adopted a stock repurchase plan or program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~Not applicable.~~None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~Not applicable.~~None.

ITEM 6. EXHIBITS



Exhibit Number	Description
~~3.1.1~~10.1	~~Amended~~Separation and ~~Restated Articles~~Consulting Agreement dated as of ~~Incorporation of the Company~~March 16, 2020 (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~~Exhibit10.1 to the Company’s Current Report on Form 8-K, filed on ~~June 7, 2019)~~March 20, 2020).
~~3.2~~	~~Amended and Restated Bylaws of the Company, effective as of June 5, 2019 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on June 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~~Carlos Iafigliola, Senior Vice President, Treasury Manager and Interim 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~~Carlos Iafigliola, Senior Vice President, Treasury Manager and Interim 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
104	Cover Page Interactive Data (embedded within XBRL documents)

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.



		AMERANT BANCORP INC. (Registrant)

Date:	~~November 12, 2019~~May 8, 2020	By:	/s/ Millar Wilson
			Millar Wilson
			Vice-Chairman and Chief Executive Officer

Date:	~~November 12, 2019~~May 8, 2020	By:	/s/ ~~Alberto Peraza~~Carlos Iafigliola
			~~Alberto Peraza~~Carlos Iafigliola
			~~Co-President~~Senior Vice President, Treasury Manager and Interim Chief Financial Officer

8688



	Three Months Ended September 30, 2019
(in thousands)	Real Estate		Commercial			Financial Institutions			Consumer and Others			Total
Balances at beginning of the period	$	21,900	$	25,824		$	60		$	9,620		$	57,404
Provision for (reversal of) loan losses	487		(388		)	(2		)	(1,597		)	(1,500		)
Loans charged-off
Domestic	—		(907		)	—			(98		)	(1,005		)
International	—		—			—			(1,661		)	(1,661		)
Recoveries	—		190			—			212			402
Balances at end of the period	$	22,387	$	24,719		$	58		$	6,476		$	53,640



	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



	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	)%

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