Why Amerant is doubling down on its Florida home base

Six years ago, when Amerant Bank was spun off from a Venezuelan holding company, it had a foothold in three states.

The bank has since undergone a transformation, and the $165 million in capital it raised last week is aimed at fueling its expansion in its home state of Florida. Amerant, once known as Mercantil Bank, long ago exited New York and said in April that it’s leaving Texas.

New Amerant branches are now popping up close to its Miami-area headquarters, along with another in Tampa. If the bank’s decision to double down on Florida isn’t clear enough, Amerant now lists five of the state’s professional sports teams as partners, including the Miami Heat and the Tampa Bay Rays. Amerant Bank Arena in Sunrise hosts the Stanley Cup-winning Florida Panthers.

It’s all aimed at capitalizing on the fact that, although big and regional banks have long found Florida attractive, none of them are based in the Sunshine State.

“Where we have an advantage is, we’re nimble. We’re decisive. We can make things happen,” Amerant CEO Jerry Plush said in an interview. “Because this is all we have to focus on, right? I now don’t have to focus on multiple states, multiple regions. We can focus right here, right now, and get things accomplished.”

Even if investors agree with the plan, they remain a bit skeptical about the bank. Its stock price is down 18% this year, thanks largely to Amerant’s loan book showing more problems than others in the industry.

Amerant’s non-performing loans again ticked up slightly during the third quarter, according to preliminary figures released as part of the bank’s capital raise. But Amerant expects improvements going forward, with Plush saying the bank has a “good handle” on its borrowers’ health and that a drop in interest rates should alleviate some of their stress.

Even so, Amerant’s share price is likely to remain somewhat stuck “until the company proves out the credit side of the story,” Wood Lay, an analyst at Keefe, Bruyette & Woods wrote in a note to clients.

Other analysts are more optimistic about the bank. Russell Gunther, an analyst at Stephens, upgraded his view of the company from equal-weight to overweight after its $165 million capital raise closed. The transaction gives Amerant “ample capital to accelerate double-digit loan growth,” in addition to cleaning up its balance sheet. 

Like certain other banks, Amerant is getting rid of some bonds that it bought when interest rates were low. Rather than hanging onto bonds that only pay 3.2% interest, the company will use the fresh capital to reinvest in newer bonds that pay 4.5%, or it will put the cash toward loans, where Amerant can make significantly more in interest.

The restructuring should help Amerant’s earnings in coming quarters, said Stephen Scouten, an analyst at Piper Sandler who also upgraded the company to overweight. Investors have already priced in a fairly nasty credit picture after Amerant’s “extremely messy” results earlier this year, Scouten said, so there’s significant upside in the company’s stock as its earnings improve.

But Amerant will still have to “build credibility in the quarters ahead” and convince investors that its credit issues are indeed past their peak, Scouten said.

One part of Amerant’s strategy will be to win over more clients from bigger banks by offering more personalized service — or by poaching those larger competitors’ bankers.

“For them, if they lose two or three people, it’s not the end of the world,” Scouten said. “But for an Amerant or a bank of that size, you add two or three people in a new market like Tampa, and that can really move the needle over a couple of years.”

Amerant’s Florida-based competitors include EverBank Financial in Jacksonville, BankUnited in Miami Lakes, Seacoast Banking Corp. of Florida in Stuart and SouthState in Winter Haven. The latter recently struck a deal that would give it a large Texas footprint.

Geography doesn’t just give those banks a selling point as they try to poach clients from bigger banks. The relative scarcity of midsize Florida-based banks also means there are few targets in the state to acquire. Amerant could be a potential seller, Scouten said.

“It wouldn’t shock me if this bank was for sale in 18 months or less,” he said. 

Asked about the path ahead, Plush said he often reminds people that “you earn your independence through your execution.” And he emphasized that Amerant’s focus is on “what we can control, which is our ability to execute.” 

“The growth opportunity for us ahead is substantial, and it’s our responsibility — now that we’ve got this additional capital, we’ve completed our transformation efforts — to just execute,” Plush said. “And if we do that, everything will take care of itself.”

For now, Amerant is set to cross a key benchmark: $10 billion of assets. At that mark, banks open themselves up to supervisors from the Consumer Financial Protection Bureau and have to meet several other regulatory requirements. Amerant has been investing heavily to prepare for the additional scrutiny and “putting in all the right people, systems, processes,” Plush said.

But those costs will get “more than offset” by Amerant becoming a larger and more profitable bank, Plush said, one that can grow “multiple billions past” the $10 billion-asset mark.

Its current size puts Amerant at a “sweet spot,” Stephens’ Gunther wrote in a note to clients, letting it target clients of larger banks from outside the state “while outperforming smaller local peers with a more sophisticated product suite.” 

Amerant’s increased brand awareness will also help, he noted, pointing to the company’s newly redesigned branch network and its multi-year partnerships with professional sports teams.

That all results in Amerant “no longer being the best kept secret in south Florida,” he wrote.