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DATE
Friday, Oct. 23, 2026
CALL PARTICIPANTS
- President and Chief Executive Officer - Carlos Iafigliola
- Chief Financial Officer - Sharymar Calderon Yepez
- Executive Vice President, of Investor Relations - Laura Rossi
TAKEAWAYS
- Net Income -- $25.7 million, an increase from $21.0 million in the previous quarter driven by stronger net interest income and margin expansion.
- Diluted EPS -- $0.65, representing growth from $0.53 in the second quarter of 2026.
- Net Interest Margin -- 3.77%, increasing from 3.52% in the prior quarter reflecting a lower cost of funds and benefits from loan repricing.
- Net Interest Income -- $90.5 million, up $7.9 million from the previous quarter primarily due to higher interest income on loans and investment securities.
- Total Assets -- $10.2 billion, a decrease of 0.8% compared to the second quarter driven by lower interest-bearing deposits.
- Total Gross Loans -- $7.1 billion, increasing 3% primarily through growth in single-family residential and commercial loans.
- Total Deposits -- $8.2 billion, down $109.6 million from the previous quarter due to exits by large domestic commercial fund providers.
- Efficiency Ratio -- 63.51%, improving from 68.37% as revenue growth outpaced stable operating expenses.
- Return on Average Assets -- 1.00%, reaching management's stated target for the quarter.
- Assets Under Management -- $3.45 billion, an increase of $77.9 million driven by net new assets of $76.5 million.
- Non-Performing Loans -- $149.5 million, declining 12.6% due to resolution activities and loan payoffs.
- Classified Loans -- $213.0 million, a 22% decrease from $273.1 million in the second quarter.
- Share Repurchase Program -- $50 million, authorized by the Board of Directors through Dec. 31, 2027.
- Senior Notes Offering -- $50 million, completed on Sept. 17, 2026, at a 7% interest rate to enhance holding company liquidity.
- Provision for Credit Losses -- $6.2 million, up from $4.8 million in the previous quarter reflecting higher specific reserves in the commercial portfolio.
- Noninterest Expense -- $69.1 million, remaining stable as cost-saving initiatives offset higher personnel and professional fees.
- Common Equity Tier 1 Capital Ratio -- 12.07%, increasing from 11.94% in the prior quarter due to higher net income.
- Core Deposits -- $6.3 billion, a 2% decrease driven by reductions in higher-cost interest-bearing demand and money market accounts.
- Q4 Loan Guidance -- $7.3 billion, representing expected momentum in C&I and residential lending programs.
- Q4 Deposit Guidance -- $8.5 billion, revised from previous outlooks to reflect commercial fund provider exits and international flow timing.
- Q4 NIM Guidance -- 3.65% to 3.70%, reflecting rate environment pressures and deposit repricing discipline.
- Q4 Expense Guidance -- $68 million, as the company continues progress toward its 60% efficiency ratio target.
- International Deposits -- $3.2 billion, remaining stable as a 12% increase in deposits from countries other than Venezuela offset a 3.9% decline in Venezuelan balances.
- Charge-off Guidance -- 30 basis points to 35 basis points, projected for the fourth quarter including potential write-offs of existing specific reserves.
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RISKS
- Calderon Yepez reported that "Tangible common equity declined during the quarter primarily driven by unrealized losses in the available for sale investment portfolio," which resulted from market yields rising by more than 100 basis points.
SUMMARY
Amerant Bancorp Inc. (NYSE:AMTB) reached its 1.0% return on assets target during the third quarter, driven by expanded net interest margins and disciplined expense control. Management reported that the company is moving from a phase of stabilization toward sustainable growth by optimizing its loan and deposit portfolios. Strategic initiatives focused on credit quality and operational efficiency resulted in a reduction in non-performing loans and progress toward its efficiency ratio objectives. The bank also authorized a new share repurchase program and completed a senior notes offering to enhance its liquidity and capital position.
- CEO Iafigliola stated, "This quarter represents another step forward in building a more profitable and resilient franchise."
- The bank migrated $270 million in low-cost interest-bearing deposits to non-interest-bearing demand deposits to improve its deposit mix without impacting client retention.
- Management attributed the decline in Venezuelan deposits to transactional activity and capital distributions within the economy rather than a change in business fundamentals.
- CFO Calderon Yepez noted that the company achieved its highest quarterly pre-tax pre-provision net revenue since the fourth quarter of 2022.
- The bank is prioritizing its Florida markets while refining its branch and coverage model to support granular loan growth in segments such as practice finance and logistics.
- Iafigliola stated, "With a stronger foundation now in place, our focus is increasingly shifting toward enhancing franchise value and delivering sustainable returns for our shareholders."
INDUSTRY GLOSSARY
- NII: Net interest income, the difference between the interest income earned on assets and the interest expense paid on liabilities.
- NIM: Net interest margin, a measure of the difference between interest income generated and the amount of interest paid out to lenders.
- CET1: Common Equity Tier 1 capital ratio, a core measure of a bank's financial strength.
- ACL: Allowance for credit losses, a reserve established to cover estimated credit losses in the loan portfolio.
- AUM: Assets under management and custody, assets held for clients in an agency or fiduciary capacity.
- C&I: Commercial and industrial loans made to businesses for working capital or capital expenditures.
- CRE: Commercial real estate loans secured by income-producing properties.
- DDA: Demand deposit account, a bank account from which deposited funds can be withdrawn at any time.
- PPNR: Pre-tax pre-provision net revenue, a measure of profitability before deducting credit loss provisions and income taxes.
- AFS: Available-for-sale, investment securities that a bank may sell before maturity.
Full Conference Call Transcript
Operator: Greetings, and welcome to the Amerant Third Quarter 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. it is now my pleasure to turn the call over to Laura Rossi, Executive Vice President, of Investor Relations. Laura, please go ahead.
Laura Rossi: Thank you, operator. Good morning, everyone, and thank you for joining us to review Amerant Bancorp's third quarter 26 results. On today's call are Carlos Iafigliola, our President and CEO and Sharymar Calderon, our CFO. As we begin, please note that discussions on today's call contain forward-looking statements within the meaning of the Securities Exchange Act. In addition, we will also refer to non GAAP financial measures. Please refer to the company's earnings release for a statement regarding forward-looking statements as well as for information and reconciliation of non GAAP financial measures to GAAP measures. I will now turn it over to our CEO, Carlos Iafigliola.
Carlos Iafigliola: Thank you, Laura. Good morning, everyone, and thank you for joining us today to discuss Amerant third quarter 26 results. This quarter represents another step forward in building a more profitable and resilient franchise. Our net income increased to 25.7 million or $0.65 per diluted share and our return on assets reached 1%. That progress reflects stronger net interest income and margin expansion. Disciplined expense management continued balance sheet optimization, and improving credit quality. Just as importantly, we continue advancing the strategic priorities that are moving Amerant from stabilization towards sustainable growth Following our annual board strategy session, our direction remains clear.
Deliver on our financial and credit quality commitments, continue simplifying our operating model, focus investment toward the market and capabilities where Amerant has a distinct competitive advantage and deploy capital and resources towards the most attractive opportunities. In that context, I would like to update you on the evolution of our 4 strategic initiatives during the quarter. First, transform credit. This initiative is about strengthening credit selection portfolio monitoring, and credit operating model to enable profitable growth with greater consistency and predictability and within established risk appetite. During the third quarter, the work completed early in the year began to show more clearly in our results. Non performing loans continue to decline and classified balances also moved lower.
We continue actively resolving criticized exposures while advancing workflow enhancements and automation of the credit approval process. To improve data integrity accountability, and consistency in our lending stakeholders. With the credit foundation strengthened, our focus is increasingly on pairing disciplined underwriting with growth in more granular and higher quality relationships. Second, operational efficiency. This initiative is about simplifying how we operate. Optimizing structural cost increasing capacity and creating a more scalable platform that can deliver consistent service and stronger returns. We continue disciplined expense management while improving our earnings generation buffer. This resulted in a significant improvement in the efficiency ratio narrowing the gap to the 60% we have been targeting.
We are now moving from identifying opportunities to making clear decisions across the organization. This includes reviewing team structures, client coverage, and productivity of our channels. While advancing in digitization and deploying practical AI use cases. Third, client profitability. This initiative is about managing the full relationship return. Not simply individual products and directing our people and capital toward the clients and businesses where we can create the greatest value. During the quarter, we continue strengthening referral discipline and coordination across commercial banking, private banking treasury management and wealth management.
Following the strategy session, we are taking this work further by assessing relationship based on profitability, aligned with service models and pricing with client needs and identifying targeted opportunities to cross sell single product relationships. Fourth, grow the bank. This initiative is about growing loans deposits, assets under management and fee income in the market and businesses where Amerant has differentiated capabilities. While remaining aligned with our risk appetite and return objectives. We are focused on building scale in priority verticals and client segments. Including more granular C and I residential lending, practice finance, logistics and wholesale, asset based and supply chain finance and selected CRE opportunities with experienced sponsors.
We will also continue to use our syndication to manage larger, new and existing exposures. Our international business remains a distinctive source of low cost funding and an important platform for relationship growth. We remain focused on deepening wallet share across international clients through wealth, treasury management and specialized personal and commercial lending solutions. As we continue to optimize our deposit mix by reducing higher cost deposits and selectively exiting non profitable single product relationships the overall quality and economics of our deposit franchise will continue to strengthen. With this in mind, we have migrated certain low cost interest bearing balances to DDAs.
Which improve our ratio of noninterest bearing deposits to total deposits without any impact to the retention of these accounts. In our domestic markets, we are prioritizing Florida where our brand market position and client relationships give us a clear right to win. And refining our branch and coverage model to support profitable growth. Taken together, these initiatives are producing measurable progress return on assets reached our target of 1% return on equity improved, net interest margin expanded and capital remained strong. These results are creating a new baseline for our company and reinforce our confidence that Amerant is moving in the right direction. Our strong capital position also provides us with the flexibility to continue returning value to shareholders.
Accordingly, on October 21, our Board authorized a share repurchase program for up to $50 million through 12/31/2027. Our priorities remain the same. Disciplined loan growth, continued credit improvement, greater operating efficiency, deeper and more profitable client relationships, and thoughtful capital allocation. We have more work ahead but we entered the final quarter of the year with a stronger foundation clear choices, and growing momentum. With that strategic context, I will turn it to Sharymar to walk through the quarter's financial results in more detail.
Sharymar Calderon Yepez: Thank you, Carlos, and good morning, everyone. Let's turn to Slide 4, where you will see our balance sheet highlights. Total assets were $10.2 billion as of the end of the third quarter. A decrease from $10.3 billion as of the end of the second quarter. The decrease was primarily driven by lower interest bearing deposits. Cash and cash equivalents were 361.5 million up by $60.3 million compared to $301.1 million in the second quarter, reflecting higher liquidity balances during the quarter. Total investment securities were 2.2 billion down by 382.8 million compared to $2.6 billion in the previous quarter. This was primarily driven by lower debt securities available for sale.
Total gross loans were 7.1 billion up by 207.8 million, compared to $6.9 billion in the second quarter. Growth was driven primarily by increases in single family residential and commercial loans. These were partially offset by decreases in CRE loans to non depository financial institutions, as well as owner occupied loans. Additionally, elevated payoffs partially offset loan production, including several repayments that also contributed to improved asset quality. On the deposit side, total deposits were 8.2 billion down by 109.6 million compared to $8.4 billion in the second quarter, primarily driven by decreases in interest bearing demand deposits as well as savings and money market deposits.
These were partially offset by increases in non interest bearing demand deposits and time deposits. Also relevant for this quarter, on 9/17/2026, the company completed a registered offering of $50 million 7% senior notes due in 2031. The offering added attractive long term funding in a rising rate environment while also enhancing liquidity at the holding company. We are pleased to report that our assets under management increased 77.9 million to $3.45 billion in the third quarter driven primarily by net new assets of $76.5 million This is a strong result that reflects the growing momentum in our wealth management business which we continue to view as an increasingly important source of fee income.
During the quarter, we made meaningful progress by onboarding new talent and deepening cross sell activity with commercial clients both of which contributed to our growth. This reinforces our conviction that this business can play a significant and expanding role in diversifying our income stream over time. Our relationship first model and the depth of our domestic and international client base position us well to capture that opportunity and we remain excited about deepening advisory relationships across both markets. Let's turn to Slide 5. Looking at the income statement, diluted earnings per share for the third quarter was $0.65 per share compared to $0.53 per share in the second quarter.
Net interest income was 90.5 million up $7.9 million from $82.6 million in the second quarter. The increase was primarily driven by higher interest income on loans and investment securities, combined with lower total interest expense on deposits and FHLB advances due to lower average balances and average rates. Net interest margin was 3.77% compared to 3.52% in the second quarter. The increase reflected a lower cost of funds from non interest bearing deposits and shorter term advances we took during the quarter. As well as benefits from additional interest on loan repayments previously in non accrual status that was recorded during the quarter. Provision for credit losses was 6.2 million compared to $4.8 million in the second quarter.
Reflecting higher specific reserves in the commercial portfolio, partially offset by lower collectively evaluated reserves driven by changes in portfolio composition and macroeconomic assumptions. Non interest income was 18.3 million up by 177 thousand from 18.2 million. This increase was primarily driven by higher deposit and service fees, and higher gains on the early extinguishment of FHLB advances. These were partially offset by lower loan level derivative income, and lower other non interest income during the quarter. Non interest expense was $69.1 million up by 221 thousand or 0.3% from $68.9 million in the second quarter. The increase in non interest expense was primarily driven by higher professional fees, and higher salaries and employee benefits.
These were partially offset by a decrease of $1.9 million in advertising expenses as well as an increase of $1.1 million in OREO income. Pretax pre provision net revenue reached 39.7 million, which is the highest quarterly result recorded since 4Q 22. Compared to $31.9 million in the second quarter of this year. This increase was primarily driven by higher net interest income and non interest income partially offset by the increase in non interest expense. You can also see that ROA and ROE this quarter were 1.11%, 12.9%, which are the highest quarterly results reported since 3Q 22 and 4Q 2021, respectively. Compared to 0.84%, 9.23% respectively in the prior quarter.
Our efficiency ratio was 63.51% compared to 68.37% in the second quarter. The improvement reflected stronger revenue and stable operating expenses as cost saving initiatives offset higher personnel and professional fees. Turning now to Slide 6 to discuss our capital metrics. Our CET1 increased to 12.07% from 11.94% in the prior quarter mainly driven by higher net income during the quarter while partially offset by $3.6 million in shareholder dividends and $2 million in share repurchases. Tangible common equity declined during the quarter primarily driven by unrealized losses in the available for sale investment portfolio. Market yields rose by more than 100 basis points, well beyond the single Federal Reserve rate increase. As markets priced in additional tightening.
The decline in TCE was partially offset by higher earnings and lower share repurchases. Importantly, the valuation of the AFS portfolio has significantly improved compared to quarter end as market rates have dropped since the quarter end. We paid a cash dividend of $0.09 per share of common stock on 8/28/2026 and our Board of Directors just approved a quarterly dividend of $0.09 per share payable on November 27 of this year. During the third quarter, we repurchased approximately 70.6 thousand shares at a weighted average price of $28.47 per share. Compared to tangible book value per share of $20.94. as of 9/30/2026. This represented 1.36x tangible book value and 1.32x book value.
On Slide 7, we show our well diversified deposit mix along with the composition of our loan portfolio. Total deposits for the quarter were 8.2 billion down $110 million or 1.3% compared to $8.4 billion in the previous quarter. The decrease was primarily driven by lower balances from large domestic commercial fund providers and was partially offset by higher balances in private banking deposits. International deposits were stable with a slight decline of $9.5 million or 0.3% from the previous quarter. Also, as part of our strategic diversification efforts, while deposits from customers domiciled in Venezuela decreased $96.8 million or 3.9% deposits from countries other than Venezuela increased $87.3 million or 12%.
A testament to the value of our international customer relationships. In terms of deposit mix, broker deposits remained mostly stable quarter over quarter at 497.4 million Core deposits decreased by $125.8 million or 2% driven by decreases in higher cost interest bearing demand savings and money market deposits. As Carlos mentioned, noninterest bearing demand deposits increased as we continued optimizing our deposit base. During the quarter, we migrated approximately 270 million in low-cost interest bearing deposits to noninterest bearing demand deposits without affecting client retention. This migration provides a clear view of the strength of our non interest bearing deposit base and the underlying value of these stable relationships.
Total loans were $7.1 billion up $208 million or 3% compared to $6.9 billion in the second quarter. As mentioned earlier, this increase was driven by increases in single family residential and commercial loans. These were partially offset by decreases in CRE loans to financial institutions, as well as owner occupied loans. As a reminder, we use our international funding to support domestic loan growth. As we do not currently take credit risk outside of The US. Next, on Slide 8, you can see the evolution of our net interest income. NII increased by 7.9 million from the prior quarter to $90.5 million in 3Q.
This increase was primarily driven by higher interest income on loans and investment securities, combined with lower total interest expense on deposits and FHLB advances. Due to lower average balances and rates. Net interest margin was 3.77% compared to 3.52% in the second quarter. Cost of total deposits declined to 2.07% from 2.21% in the prior quarter, and cost of funds declined to 2.23% from 2.38%. Moving to slide 9, here we show the drivers of the 25 basis point increase in net interest margin. From 3.52% in the second quarter to 3.77% in the third quarter.
Loans were the largest contributor adding 18 basis points primarily as a result of the repricing of our variable rate portfolio, the timing within the quarter when we redeployed our liquidity in yielding assets and seized upon early loan exit. Additional interest collected on NPLs that we exited during the quarter contributed an additional 6 basis points. Securities contributed 3 basis points and cost of funds added 2 basis points. These positive contributions were partially offset by a 4 basis point reduction from other earning assets. Taken together, these components reconcile the quarter over quarter expansion in net interest margin and demonstrate the benefit of our continued and disciplined loan growth efforts.
Now turning to asset quality as shown on Slide 10, nonperforming loans were down $21.6 million, or 12.6%, to 149.5 million or 1.46% of total assets. During the third quarter, criticized loans decreased primarily driven by the payoff of 3 commercial and CRE relationships partially offset by downgrades of 4 relationships across commercial, owner occupied, and CRE loans. As well as several smaller commercial and residential loans. Subsequent to quarter end, a $5 million commercial loan that was downgraded during the quarter was also paid off. Further improving our NPL to total loans and to total assets ratios. In the next slide, we provide a similar view of our classified portfolio.
During the third quarter, downgrades to classified loans were primarily driven by 4 relationships across commercial, owner occupied and CRE loans. At the same time, we continue to make progress reducing balances in this category with pay offs and pay downs totaling $80.3 million, which includes the payoff of 4 large relationships during the period. Now moving to Slide 12, we discuss special mention loans and their key characteristics. Including portfolio composition and collateral coverage. During the quarter, downgrades to special mention were primarily driven by 2 relationships and were partially offset by pay downs. Overall, third quarter results demonstrate continued progress in our credit enhancement efforts.
Non performing and overall criticized loans declined during the quarter, supported by disciplined monitoring, timely identification of emerging credit risk, and continued resolution activity through payoffs and pay downs. While we continue to closely monitor developments across the portfolio, the reductions this quarter reflect the actions we have taken to improve portfolio quality and enhance visibility over time. Now moving on to Slide 13. Here, we show the drivers of the provision recorded this quarter and the impact to the allowance for credit losses. The provision for credit losses was $6.2 million in the third quarter. The provision was driven by a $12.6 million net increase in specific reserve, primarily due to 4 commercial relationships.
2 million in requirements for charge offs and $600 thousand due to loan growth. This was partially offset by $6.4 million release, mainly attributable to changes in macroeconomic factors and $2.7 million release in reserves for contingencies. As lines of credit were funded. In addition, the bank recorded $2.5 million reserve due to recently acquired seasoned loans. During the third quarter of 26, gross charge offs totaled 3.9 million, composed mainly of 1 commercial loan and the remaining charge offs were related to indirect consumer loans and smaller commercial and consumer loans. These charge offs were partially offset by $1.9 million in recoveries.
We estimate gross charge offs to be in the range of 30 basis to 35 basis points for the fourth quarter including some possible write offs of existing specific reserves. Also recoveries may occur as our special assets team continues efforts toward resolution of previously charged off loans. Lastly, the allowance for credit losses ratio was up slightly to 1.36% from 1.27% in the second quarter, primarily due to increases in coverage of individually evaluated loans. On Slide 14, you can see our expectations for the fourth quarter of 26. We expect total loans to reach approximately $7.3 billion by the fourth quarter of 26.
Following the work completed in the first half of the year to strengthen our credit foundation, we are seeing increased momentum in loan production, including opportunities primarily through C and I lending programs, supported by residential lending, as we focus on building a more granular higher quality portfolio. On the funding side, we are revising our total deposit guidance to approximately $8.5 billion by the fourth quarter of 26. As noted earlier, exits by large commercial fund providers during the quarter are weighing on our expected domestic deposit balance at year end. We are also refining our outlook for international deposit growth to reflect the expected pace of balance formation.
The progress we saw during the quarter and the increased activity we observed among commercial and corporate clients across a range of industries in Venezuela, continues to reflect the gradual pickup in economic activity and reinforces our confidence in this As a meaningful source of growth and in our ability to capture funds across the client ecosystem. The pace of realization reflects the timing of inflows, the conversion of commercial activity into personal liquidity, and compliance and due diligence timelines that vary with the complexity of each accounts and relationship. We are revising our expectations for the net interest margin to be in the range of 3.65% to 3.70% in the fourth quarter.
Although the interest rate environment will place upward pressure on our cost of funds, we expect the repricing of the variable rate loan portfolio our deposit repricing discipline and the continued growth in lower cost deposits to provide more than an offset. From an expense perspective, we expect fourth quarter non interest expense to be approximately $68 million as we continue making progress toward a target efficiency ratio of approximately 60%. In terms of capital management, we will continue to optimize our approach by balancing capital retained to support growth with share repurchases and dividends designed to enhance shareholder returns. With that, I will pass it back to Carlos for additional comments and closing remarks.
Carlos Iafigliola: Thank you, Shary. As we move through the last quarter of the year, we remain focused on executing against our strategic priorities with discipline and purpose. Translating the strategic process we have made into measurable financial results. First, we will sustain our loan growth momentum with a continued focus on risk adjusted returns and balance sheet asset quality. The growth we pursue must be purposeful granular and consistent with our risk appetite. With capital directed toward the markets, industries and client relationships where Amerant is best positioned to create value. Second, will continue advancing on credit quality. Deepening our credit culture through consistent underwriting standards relationship based decision making and proactive portfolio of risk.
At the same time, are cultivating a high quality pipeline with greater transparency into risk adjusted returns and stronger accountability throughout the credit process. Third, will continue to realize the benefits of the efficiency initiatives we announced earlier this year. Recurring cost reductions and incremental revenue are strengthening operating leverage. We will continue simplifying processes improving productivity and aligning resources with our highest return opportunities. Fourth, we will continue advancing our relationship first approach to deepen client engagement and support lower cost deposits growth across both domestic and international markets. This means bringing the full capabilities of Amerant to our clients. Increasing share of wallet and managing relationships based on their total profitability and long term potential.
Finally, we remain committed to preserving strong capital ratios while balancing capital retained to support growth with dividends and share repurchase that return value to shareholders. We have a stronger foundation clear priorities and a disciplined execution plan. We are encouraged by the progress reflected in this quarter results and remain focused on converting that momentum into sustainable value for our shareholders. With that, Shary and I will take questions. Operator, please open the line for Q and A.
Operator: Certainly. We will now be conducting a question-and-answer session. You may press 2 if you would like to remove your question from the queue. First question is coming from Michael Rose from Raymond James. Your line is now live.
Michael Rose: Hey, good morning everyone. Thanks for taking my questions. Wanted to start on deposits. Was a little bit surprised to see the Venezuelan deposits down as much as they were just given all the progress and momentum that you have talked about, Carlos. Can you just describe kind of what happened there? And then as it relates to the fourth quarter, and the growth that you are expecting there, how much of that is coming from of the international piece versus the domestic piece? Thanks.
Carlos Iafigliola: Thank you, Michael, and good morning, everyone. I believe what you have seen during the third quarter is that the reactivation of the Venezuelan economy has needed additional CapEx and additional distributions. Between commercial and corporate accounts within the country. So the money starting to move in order to create the necessary investments within the economy to be able to support the reactivation. So, I see it more as a transaction decline more than a structural decline. We still believe is, the momentum is extremely positive. And we will continue to see a positive momentum. I am not sure if you also noticed the AUM increase. So I believe you should look into the bundle, between deposits and AUM.
So even though the deposits took a little drop during the quarter, you know, also some funds ended up in AUM as well. At the same time, as I mentioned before, the operational activity of. Nature of this account is creating this fluctuation. Shadi?
Sharymar Calderon Yepez: Yeah. Yeah. I. it is important, Carlos, to reiterate that the fundamentals of the Venezuelan and LatAm growth have not changed. When we look at balances quarter over quarter, they can reflect the natural timing of fund flows and wealth management for formation. And as Carlos mentioned, you saw that happening through the wealth management portfolio in Q3 with upside of almost $100 million So the momentum is still there. it is still strong, and we feel very confident about this growth opportunity. And regarding the expectation for the fourth quarter, we could see a mix of 60/40, 60 coming from the international side and 40 from the domestic side.
Michael Rose: that is very helpful color. I appreciate the thorough response. Maybe, Shary, just switching to the margin, the guide assumes some contraction. I assume some of that has to do with the just the decline in Venezuelan deposits this quarter. And then the notes that you issued as well. As we think about the fourth quarter, how much of the impact is from those 2 items versus just core compression? Just trying to get a better understanding of the bridge between third and fourth. Thanks.
Sharymar Calderon Yepez: Sure, Michael. So I would say actually it is an improvement versus the normalized Q3 NIM. The Q3 NIM had a portion related collections on loans that were NPL. If we take that component out and some early exits that provided some improvements to the yield, and we normalize the NIM, we actually would see some improvement in Q4. We do continue to see some pressure in cost of funds. Mean, cost have interest for higher yield short term products. But at the same time, we will have a full quarter's worth of repricing of variable rate loans We continue to expect growth on the international low cost deposits.
And we have modeled 1 rate hike happening in December It will not be a significant contribution, but it does provide for an improvement in NII. I would say that if rate hikes happen, we would get closer to the $3.70. And if rates are stable, that would take us closer to the $3.65.
Carlos Iafigliola: And, Shary, that is helpful. Yeah. There is also something to be said that the growth on international side has allowed us to lower dependency on high cost deposits. So the blended rate has definitely helped us Appreciate all that color.
Michael Rose: And if I could slip 1 more in. Carlos, she hit the 1% target. I guess the simple way to ask it is what is next? And with the efficiency expected to continue to come down to your target, how should we think about the opportunity for ROA expansion into next year? Thanks.
Carlos Iafigliola: Yes. No, thank you for the question. So as you can imagine, Q4, there is a lot of planning for 2027. We are conducting capacity analysis on the business as you know, we are coming from a period of recalibrating risk, exiting relationships that are not accretive to the bank nor the income or the risk side of the house. So we are very optimistic about the 2027. Again, I believe the 1% ROA is a new baseline. That we have in from now on. And now you know, the.
What we believe it will happen is that our operating expenses would need to reflect the impact of the hiring of more business people as we are trying to retool the whole commercial and the domestic side of the house for a steady loan growth. And that would definitely help us to achieve a better, return on asset for 2027. So we have been, you know, very active, projecting balance sheet for next year and what will be the impact. But we definitely remain, you know, committed to the 1%. So, you know, if you think the of the future, should be, definitely trying to target the 21 in the in the in the longer term. Okay.
I appreciate all the color. Thanks, everyone.
Sharymar Calderon Yepez: Thanks, Mike. Thank you.
Operator: Thank you. Next question today is coming from Russell Elliott Gunther from Stephens.
Nicholas Lorenzoni: Your line is now Hey, good morning, guys. This is Nick Lorenzoni filling in for Russell. Wood morning. I just wanted to go back on the hey. Good morning. Just wanted to go back on the deposit side. You know, NIBs were up pretty meaningful this quarter. How much how much of that was tied to new relationships versus existing customer moving balances? And should we think about that current mix as sustainable or was there anything unusual about the quarter?
Carlos Iafigliola: Well, the combination and thank you for the question. So we have analyzed, our interest bearing base over the past year or so. And we identified several accounts that were carrying a very low interest expense. And what we did was--this is a project that took us a couple of quarters to complete. We classified those as a non interest bearing evidently by dropping the rate to zero. So the change was approximately 270 million going into that category due to the reclass. But at the same time, we were able to grow $100 million into the non interest bearing category. So that is, pretty much the combination.
I believe it is a reflection of who we really are as a bank. Those are non sensitive deposits that should have been DDAs since the beginning. And due to different, you know, product characteristics over time, they were interest bearing. So, going forward, there will be an additional, migration that should be expected but at the same time, we continue to grow within that category.
Sharymar Calderon Yepez: So And we are very focused on making sure we can expand share of wallet of existing customers. that is part of the relationship first approach. But we are also making sure that we can capture new accounts In Slide 23 of our presentation, we included some information related to new accounts and you are going to see that around 1.2 thousand accounts were opened on the international side and almost the same amount on the domestic side. So we are very confident and optimistic of what we are seeing for new accounts as well as increase of existing Okay, great.
Nicholas Lorenzoni: Thank you. And lastly, just moving to expenses real quick. I know I saw 4Q is expected to be around $68 million How should we think about the 2027 expense trajectory though? Is the goal to hold that run rate flat? Or should we still expect continued investment alongside those efficiency initiatives you mentioned?
Sharymar Calderon Yepez: Yeah. I think, as we think about early 27, we can expect--we expect expenses around the call it, $69.5 million to almost $70 million So you are going to see a slight increase and that is going to be related to hiring for growth. We expect that hiring will be partially offset by continued renegotiations of contracts and cost savings initiatives that we are actively working with. So from a run rate perspective, we could be looking at something closer to the 69.5 to 70. With that said, we also see the increase on the revenue side that will help us make sure that we continue to improve the efficiency ratio through time.
Nicholas Lorenzoni: Great. I will step back. Thank you.
Carlos Iafigliola: Thank you. Thank you. You.
Operator: Next question is coming from Stephen Scouten from Piper Sandler. Your line is now live.
Stephen Scouten: Yes. Good morning, everyone. I appreciate it. Maybe just sticking on the deposits for 1 more question on my end. The international deposit growth which was impressive, can you give me a feel for with Venezuela Declining slightly, where the other geographic regions were that led to that nice growth?
Carlos Iafigliola: Yeah. The. Thank you and good morning. So the growth came from other that we typically manage under the international division. So there is a combination between Argentina and other Central American countries that our team also has a experience and has been growing over the past few years. So definitely, there is an experience that has been acquired over the course of the year. Again, we are very strategic when we attack these countries. We are not, you know, we do not just cast a net and get whatever. We are very specific, and we need to have specific knowledge to go into specific countries. So I can tell you that it is a hand.
Probably it is about 5 countries The ones that we target the most, obviously, Venezuela, being the most important.
Stephen Scouten: Okay. Great. And then I think Shary, you noted probably future deposit growth kind of similar to the existing competition. Mean, composition there is 60/40 or so. There a limit for you guys on international deposits as a concentration? Or I mean, given their advantaged cost, would you allow them to grow as much as they could? I mean, kinda talk to me about if there is any regulatory push back or BSA or anything else that would cause you to limit that growth in any way.
Carlos Iafigliola: Yeah. No. that is a great question. And what I can tell you is that Ameren, evidently by being headquarter in South Florida, This is a very international jurisdiction that is natural for, market players in this region to be exposed to international deposits. Our BSA program and our BSA team is, very consolidated and ingrained within the culture of the bank. We have a very solid BSA program, and we have been enforcing and creating technology around the controls and everything that portrays this complex jurisdictions or more I would say, that merits more due diligence jurisdictions.
So with this said, I believe we are very well prepared, and actually, we have been used as a reference by other institutions and regulatory agencies as an example of having a great AML and BSA program. So I am very comfortable with the way that we have been managing this deposits and the controls that we have in place. Okay. Great. So do not do not feel like there is any kind of internal cap that you would need to enforce on the size of the international deposits that point? Right. So there is no set cap. I believe that is important for the time being. We are 40/60. We can definitely, have room to grow.
Again, the way that we manage this is on a relative basis and at the same time, we manage large fund providers'' concentrations through ALCO. So we keep an eye on the largest exposures from the liquidity standpoint at ALCO and making sure that we have specific targets and limits for those type of exposure. So, yeah, we are. We are very judicious in the way that we see all this close.
Stephen Scouten: Got it. that is fantastic. And maybe last thing for me. Just curious around the use of the repurchase moving forward. If the movement in AOCI and where TCE is, if that impacts your maybe, willingness to be as aggressive on that repurchase or kind of how we should think about the pace and maybe constraints from any capital ratios or otherwise?
Carlos Iafigliola: So I will take 2 different approaches. Or 2 different, pieces of this explanation. So the first 1, is that we believe in the weighted average cost of capital, so we have definitely declined our weighted average cost of capital when we did the debt issuance earlier in September. So that is 1. Getting the debt at 7% combined with the other pieces of the of the capital composition definitely help us. And part of that being redeployed in the retirement of some shares is definitely accretive to existing shareholders. that is something that our Board understand and is very actively involved in those discussions.
So getting the $50 million blanket until 2027, represents the strong belief that our share still has room to go. And still represents a good opportunity at the level that we trade. So being between 1.38 to 1.45 I believe still represents a very attractive valuation. And we will keep an eye and close attention, but the fact that we are already have that approval in place will give us the flexibility to get into the market and get in some at those levels.
Sharymar Calderon Yepez: And part of that conversation is that capital is healthy and provides us the opportunity to balance both growth and the buyback program.
Stephen Scouten: Right. Fantastic. Appreciate the comprehensive, answer there. Thanks so much.
Carlos Iafigliola: You.
Operator: We reached the end of our question-and-answer session. I will turn the floor back over for any further or closing comments.
Carlos Iafigliola: Thank you everyone for connecting today and have a great day.
Operator: Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.
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