Amerant Bancorp reports third quarter 2025 results, emphasizing asset quality improvements and strategic initiatives to address rising nonperforming loans and optimize expenses.

Greetings and welcome to the Amaranth third quarter 2025 earnings conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press Star0 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Laura Rossi, Head of Investor Relations. You may begin. Thank you, Kate Good morning everyone and thank you for joining us to review Amerant Bancorp's third quarter 2025 results on today's call are Gerry Plosh, our Chairman and CEO, and Sharimar Calderon, our Senior Executive Vice President and 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, references will also be made 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 financial measures. I will now turn it over to our Chairman and CEO Jerry Plush.

Thank you Laura Good morning, everyone and thank you for joining us today to discuss Ameren's third quarter 2025 results. First, I want to thank everyone for adjusting their schedules to accommodate the rescheduling of our earnings call this quarter. We intend to establish this new timeframe as when Amerant will report going forward so our team has the appropriate time to prepare each quarter end. We greatly appreciate your understanding. So similar to the approach we implemented last quarter during today's call, I'll start with some overall comments and then Sharimar will provide commentary on results in asset quality. Then I'll provide several prepared remarks on some strategic updates in order to allow time for Q&A. You will note today that there are several new slides in the deck this quarter that we think show capital levels and asset quality quarter to quarter comparisons in an easier to follow format. So while we continue to make progress in key areas of our strategy, our primary focus this quarter was on asset quality over loan growth. I'll provide more details on this in a minute, but the increase in nonperforming asset levels must be immediately addressed and I will cover the plan here in the fourth quarter to approach achieving reduced levels in the coming quarters. Clearly the higher provision from a detailed loan by loan review kept us from achieving consensus or better overall results this quarter. We will also provide some color on progress so far here in the fourth quarter on this call. Otherwise you will see solid performance as shown by an outstanding net interest margin and higher net interest income. Sharimar will cover the other P and L items in detail shortly, but I do want to note in advance that While core expenses rose 2 million over the prior quarter, this increase was from legal expenses related to trust services and to asset quality resolution efforts as well as higher consulting expenses in connection with our AI governance, build out and ERM enhancements and we do not expect a continuation of expense at these levels in the fourth quarter. Regarding expenses, please note that in my closing remarks I'll also provide more color on our planned expense reduction initiatives already underway which will begin to be seen in the fourth quarter and throughout 2026. On the funding side, our core deposits increased while total deposits remain stable. Given the planned reduction in broker deposits we previously indicated on last quarter's call, we continue to focus on the quality of mix of deposits as a priority. International banking continues to strengthen its presence across Latin America. It is worth noting that approximately 50% of the new accounts opened during the third quarter of 2025 originated from other countries, most notably Argentina, Guatemala, Costa Rica, Bolivia and Peru. This expansion reflects the success of our business development initiatives, client relationship management and targeted marketing efforts throughout the Latin America region. Loans declined by 3.4% quarter over quarter as again our focus was on AQ over growth but our pipeline build is underway here in the fourth quarter. Approximately 288 million of the loan decline in third quarter was related to payoffs and asset quality related sales. So as I promised earlier, we'll turn back to asset quality and addressing asset quality head on was and will continue to be our top priority. third quarter was the quarter with the highest volume of annual and limited reviews along with covenant testing with over $3.5 billion in loans review. We did see continued deterioration, both classified and criticized and While we exited $35 million in non performing loans through third party refinancing, payoffs charge offs, transfers to REO and upgrades. As I previously noted, additional downgrades to NPLs were primarily driven by the receipt of borrowers, updated financials and certain covenant failures in we are all in on driving progress post quarter end and we believe we have a line of sight on several significant opportunities to do so already so for example, we just as in this past Friday received an $11.8 million full payoff which results in an $8.7 million recovery of previous charge offs $341,000 of interest income to be recorded in the fourth quarter as well as a recovery of 188,000 in legal expenses and again all of which will be recorded in fourth quarter. Our coverage of reserves over NPLs is at 0.77 times due to the increased level of NPLs. However, please note that all NPLs with balances over 1 million were individually evaluated for exposure to charge off center reserves which explains the increase in provisioning for credit losses in third quarter and in specific reserves quarter over quarter. While Sharimar will provide additional detail on this, I wanted to just put this up front and we'll go through more detail in NPLs ACL and the specifics on the provision for credit losses. Let's turn to capital and if you look at capital, all levels remain very strong. Our board declared a quarterly cash dividend of $0.09 per share reinforcing confidence in Ameren's long term outlook and capital strength. We also intend to resume share buybacks post earnings when the blackout period ends under the existing remaining authorization and 10B51 plan as we continue to execute on our strategy going forward. So with that let me turn it over to Sharimar now to cover third quarter results in detail.

Thank you Jerry and good morning everyone. Let's turn to slide three. Here you will see the highlights of our balance sheet. Total assets reached 10.4 billion as of the close of the third quarter. As we guided in the second quarter we offset lower loan originations, loan payoffs and pay downs with purchases of investment securities. Total Investment securities were 2.3 billion up by 336.8 million, all of which are highly marketable securities and were classified as available for sale. Total gross loans were down by 247.4 million to 6.9 billion, primarily driven by increased prepayments and the sale of a large substandard loan which more than offset loan production in the quarter as well as the focus on asset quality over production which delayed the business pipeline materializing. On the deposit side, total deposits were relatively flat, only down by 5.6 million to 8.3 billion, although core deposits increased by 59.4 million. Additionally, as we previously guided, we reduced broker deposits by 93.7 million and partially replaced this funding with FHLB advances which increased by 66.7 million. Broker to total deposits now stand at 6.6% of total deposits, well below our maximum of 10%. Also in the third quarter we restructured 210 million of fixed rate FHLB advances and changed the original maturity at lower interest rates. We incurred an early termination and modification penalty of 3.4 million which was deferred and is being amortized over the term of the new advances as an adjustment to the yields. The net effect is an improvement in the cost of this source of funding. Our assets under management increased 104.49 million to 3.17 billion, primarily driven by higher market valuations. As I've shared in past calls, we continue to see this as an area of opportunity for us to grow fee income going forward. Looking at the income Statement on slide 4, you will see that we had a strong net interest margin which was higher than projected at 3.92% due higher average rates for both loans and securities, lower average rates on deposits, lower average balances in interest bearing deposits, including broker deposits. NIM increases were partially offset by higher average balances in the investment securities portfolio, lower average loan balances and placements as well as higher average balances on time deposits and FHLB advances. Net interest income was $94.2 million of $3.7 million, primarily driven by higher average rates on loans and securities and lower average balances and rates on deposits. Non interest income was $17.3 million while non interest expense was $77.84 million. On a core basis, however, core noninterest income was 17.5 million while core non interest expense was 75.9 million. We had guided non interest expense for this quarter to be approximately 73 million. The variance to actual results was primarily driven by 2.4 million in expenses on professional fees as Jerry just described, and 1.4 million in higher other expenses primarily related to earnings credits which are provided to certain commercial deposits in the mortgage banking industry to help offset deposit service charges incurred. Also adding to the variance of non interest expenses were non core expenses of 2.0 million recorded during the quarter which I will describe in the next slide. Reprovision and revenue was down at 33.6 million in Q25 compared to 35.9 million in Q25 and core BB&R was 35.8 million, a decrease of 1.4 million or 3.7% compared to $37.1 million into Q25. The core PPNR impact was primarily from the higher expenses we do not project occurring again at the same level in the fourth quarter as I just referenced. A reconciliation of core PPNR and the impact on fee ratios is shown in Appendix 1 included in this presentation. Next up in slide 5 you can see Return on Assets (ROA) and Return on Equity (ROE) this quarter were 0.57% and 6.21% compared to 0.90% and 10.06% respectively and our efficiency ratio was 69.84% compared to 67.48%. These ratios were primarily impacted by the decrease in net income and the increase in expenses during the quarter respectively. This quarter we had 2 million in non routine non interest expenses which included $900,000 in losses on loan tail for sale carried at the lower of cost or fair value in connection with the sale of one substandard owner occupied loan, $500,000 in net losses on sale and valuation expense of an OREO in Houston, a single family property and $600,000 in expenses related to the downsizing of Ameren Mortgage. Turning to slide six as you can see we have added a new slide as Jerry referenced showing the quarter over quarter comparison of our capital ratios. As you can see our capital ratios are very strong and continue to reflect improvement across the board. Our CET1 was 11.54% compared to 11.24% last quarter, mainly driven by lower risk weighted assets and from net income during the quarter while partially offset by 10 million in share repurchases and 3.8 million in dividends. We paid our quarterly cash dividend of $0.09 per share of common stock on August 29, 2025 and our board of Directors just approved a quarterly dividend of $0.09 per share payable on November 28th of this year. During the third quarter we also repurchased 487,657 shares at a weighted average price of $20.51 per share compared to tangible book value of $21.56 as of June 30th. Moving on to asset quality, we added two new flights here as well this quarter. As you can See on slide 8, non performing assets increased to 140 million or 1.3% of total assets compared to 98 million or 0.9% of total assets in the prior quarter. I will cover the drivers of this increase in the next slide. Additionally, special mentioned loans total 224.4 million with the increase primarily driven by three commercial loans totaling $106 million, two CRE loans totaling $25 million and three owner occupied loans totaling $20 million. All loans have acceptable mitigants in place including adequate loan to value ratios, interest reserves, personal guarantees and other structural enhancements. These increases were partially offset by $31 million in further downgrades to classified loans and $30 million in payoffs. These increases are the result of rigorous efforts by Portfolio Management, Credit and Credit Review complemented by an independent third party firm brought in to ensure timely reviews of updated financial information and risk rating, including identification of any possible deteriorated conditions to allow us to be more proactive in expediting resolutions. Through these reviews, we covered approximately $3.5 billion in the loan portfolio through covenant testing or annual or limited financial reviews. We expect to continue to prioritize efforts on proactive credit quality measures, including continuing to use independent third party assistance. Moving on to slide 9 the increase in non performing loans was primarily driven by the downgrade of three CRE loans totaling 31 million, of which one is a single tenant property that is currently vacant and the other two which missed contractual milestones. Please note that all three loans have adequate collateral coverage and did not require reserves. Adding to the increase in non-performing loans were nine commercial loans totaling 38.9 million downgraded due to updated financials and missed projections, as well as other smaller loans totaling 7.2 million. These additions were partially offset by the payoff of two commercial loans totaling 21.2 million, charges for the quarter totaling 9.5 million, and other net reductions of 4.1 million, which include loan transfers to OREO upgrades and pay downs. In addition, substandard loans in accruing status increased by 84 million, primarily driven by two CRE loans totaling 49.5 million, one due to updated financials and the other due to missed contractual milestones. Both loans have adequate collateral coverage. Adding to the increase were 6 commercial loans totaling 37.1 million primarily due to updated financials. Important to note that the majority of these loans exhibit adequate payment performance or have other acceptable mitigants in place including adequate loan to value ratios, interest reserves, personal guarantees or other structural enhancements which support the continued accrual status. These increases were partially offset by 78.2 million from payoffs and 30.5 million in the sale of one substandard loan. In the next slide we show the drivers of the provision recorded in third quarter and impact to the allowance for credit losses. The provision for credit losses was 14.6 million in the third quarter, including the release of 700,000 in loan commitments. The provision was comprised of 7.8 million in additional specific reserves, 8.9 million to cover charge offs, 3.6 million due to credit quality and macroeconomic factors offset by releases of $2.3 million due to the reduction in loan balances and $2.7 million due to recoveries. During the third quarter of 2025, gross charge offs totaled $9.5 million related to two commercial loans totaling $4.1 million, several small business commercial loans totaling $1.8 million, one CRE loan totaling $1.3 million, indirect consumer loans totaling $1.8 million and other smaller balance loans. Lastly, the allowance for credit losses coverage ratio increased to 1.37% of total loans, up from 1.20% in the second quarter. Excluding specific reserves, the coverage ratio rose from 1.17% to 1.23% in the next slide. I'd like to provide some details on our expectations for the fourth quarter of 2025 in terms of loan growth, we currently have a pipeline for fourth quarter of approximately 350 million via organic production and 150 million VR newly launched syndications program. As we continue to focus on asset quality, we expect some of these loan production and purchases of syndications to be partially offset by reductions in criticized assets as well as payoffs and maturities. With the net loan growth for the quarter being between 125 to 175 million. This represents approximately a 2.5% increase from third quarter 2025. Regarding deposits, we expect growth to be in line with loan growth. We will evaluate a further reduction in brokered as well as other higher cost deposits. Looking at profitability, we project our net interest margin to be approximately 3.75% for the fourth quarter. We continue to project non interest income to be between 17.5 and 18 million in fourth quarter. Regarding expenses, we expect them to decrease to the range of 74 to 75 million. We expect the efficiency ratio to be in the high 60s given the lower growth from payoffs and asset quality related reductions. And finally, we project core Return on Assets (ROA) to be between the mid-80s and low-90s, although we could possibly get closer to 1% given recoveries on collections from previously charged off substandard loans like the one Gary just referenced. And with that I pass it back to Jerry for additional comments and closing remarks.

Thanks Sherry. Finally, turning to the final slide we will cover, I'd like to provide some color in the topics shown here. So first, regarding expense reduction initiatives, we've launched an expense reduction initiative with an initial goal of achieving a baseline of $2 to $3 million in savings per quarter in 2026. Again, this is a baseline and the analysis of additional opportunities are in process. There's going to be more to come on this. You'll begin to see the start of these reductions in the fourth quarter. Examples of items that we are either evaluating or already implementing include contract reviews, transferring certain tasks from third parties to in house resources, and just outright expense elimination. And again, please note, we're in the process of evaluating every opportunity by detailed line item reviews for additional reductions. So next Regarding commercial banking leadership, I've asked Mike Nursey to step into the head of Commercial banking role recently vacated by our former Chief Commercial Banking Officer. As previously announced during the third quarter via Form 8-K, Mike is a seasoned leader with over 35 years of banking experience and is well known and respected in the Florida Marketplace. We also intend to further build out our commercial teams in both Palm beach county and the Greater Tampa Market in the coming months. Also, as we just announced last week, the additional of Ángel Medina to bolster our in market leadership and business development efforts here in the Greater Miami County Marketplace and it's been well received as angel is well known and respected here as a senior leader. He just started with us this week and we anticipate that he will be a significant contributor to growth opportunities in this marketplace. Next, the heightened emphasis we're placing on reducing non performing assets. There is no question this is job one. We are realigning even more select personnel in order to drive resolution as prudently and expeditiously as possible and aligning more personnel to proactively address upcoming covenant testing and financial statement updates. We've complemented our in house reviews with a well known third party to expedite risk rating testing in the third quarter and to assess a very significant portion of the portfolio as I previously mentioned, for any signs of potential concerns. We expect to continue to invest in these reviews in the fourth quarter to ensure timely completion of the Review scheduled for fourth quarter. We've also launched an extended multi hour all hands Leadership Weekly meeting to address special assets as a working group to monitor and drive progress. We will be looking to provide a mid quarter update on progress via our investor presentation which we will file ahead of the upcoming Piper Sandler Conference in mid November. Now turning to buybacks to give you an update with respect to capital management. While we'll continue to take a prudent approach, carefully balancing the need between retaining capital support, growth initiatives or growth objectives compared with buybacks and dividends to enhance returns, we intend to utilize the 13 million remaining in our current authorized buyback program this quarter. Given where our stock is Currently trading in third quarter, we utilized the 10B51 plan to repurchase 487,000 shares for $10 million in the quarter previously noted and we intend to do the same thing here in the fourth quarter. So as we wrap up today's comments, I want to underscore the priorities we've outlined and emphasized a number of key underlying strengths here strong capital levels and outstanding net interest margin, opportunities for additional fee income from growing AUM levels, a heightened focus on driving expense discipline and most importantly, increased focus accelerating progress on asset quality. We've taken decisive steps this quarter to strengthen risk oversight and we'll continue to allocate resources and leadership focus to accelerate progress. While this quarter reflected the impact of this proactive approach to credit risk, we remain confident in the strength of our franchise and the opportunities ahead. With leadership changes in commercial banking, further strengthening of bench strength in special assets and credit, targeted growth initiatives in key markets and lines of business, and a clear plan for cost reductions and capital deployment, we are positioning Amarin for the better in the coming periods. I'd just like to thank you for your continued support as we execute on these commitments. So with that, I'll stop and Sherry and I will look to answer any questions you have. Kate, please open the line for Q and A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. If a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. Our first question comes from the line of Russ, I'm sorry, Michael Rose with Raymond James, Please go ahead with your question.

Hey, good morning everyone. Thanks for taking my questions. Maybe start off with the same Good morning. Maybe I'll just start off with the same question. I feel like I've asked the past two quarters just on kind of the lay of the land where you guys think you are on credit. I know the migration is probably as frustrating to you as it is to us, but if I go back to when you raised capital about a year ago, I think the expectations were for much stronger financial performance. And it looks like the resolution of some of these credits over the next couple quarters is certainly going to weigh on growth performance, et cetera. So Jerry, I guess the question is when do you think we kind of hit the inflection point on credit and when do you think realistically you can get back to a more sustainable, durable 1% plus? ROA, thanks. Sure appreciate the question and totally understand where you're coming from. Look, I think the third quarter was the highest peak in terms of, you know, and I referenced that it was over three and a half billion of the portfolio. Right. So you're basically over Half the portfolio was evaluated either for annual reviews, limited reviews, or covenant tests in the quarter. It is substantially lower here in the fourth quarter. And as I said, Michael, earlier, I think we've got a very good line of sight. I did give a specific example of a very significant resolution. And I believe both in special mention and in substandard, we are well on our way working through these. Look, the most challenging part, Michael, is the timing of resolution on these items. Right? That's the piece that has clearly less predictability. And you can see, look here, just three weeks, almost four weeks after quarter end, you know, we have a resolution of a material item. We've got a number of these with a good line of sight. I think with all the comments that I made around, you know, and I think Sherry shares the same belief, the bench strength that we've done, the teamwork that across the areas that's being approached on this, we're heading into having a much better line of sight and a much better path to early identification and resolution, rather than seeing the type of flow that's going through the stages that obviously we saw this quarter. And I do think, Michael, a couple other things. The expense initiatives are critical. We will give more color on that in a couple of weeks at the upcoming investor conference. You know, and as I said, I believe we are a very low baseline that we just wanted to let people know that all of that's identified and we can apply those reductions in, you know, as we look at projections going forward. And we believe there is significant additional opportunity for us. And again, I think that's just realigning priorities that, you know. And I guess the other good thing to say is you also heard in terms of there's a rebirth on the credit side. We've already had some nice outstandings booked so far in the fourth quarter. And as Sherry referenced, you're going to see the beginnings of not just organic growth coming back in, but also the launch of the syndication program, which is critical for us because, again, remember, we're not just looking to buy, we're looking to participate. And so given the size of exposures, we think that that's smart for not only growth, but also prudent risk management. Okay, I appreciate all that commentary, Sherry, just a quick one for you. The margin guide for the fourth quarter implies a step down. I'm sorry if I missed this. It's a busy morning. But what's going to specifically drive that step down from this quarter's level?

Sure, Michael. So the guidance that we gave for the fourth quarter is close to the 375. A couple of drivers into that number compared to three Q is we're not going to see a full quarter's worth of repricing on the asset side on the floating rate loans. After the rate cut that occurred in September, we now will see the full quarter showing that impact. We're also including an update in terms of an additional rate cut happening now, which will impact two out of the three months of the quarter. And then that would be offset by the repricing of our deposits. We continue to see a beta close to 40, as we did in the past. So we definitely see the assets repricing faster than the deposits. The other thing, Michael, is that within the number that you see in 3Q, we have collections on some special assets which created a higher level of the nim. So we do expect some of those things to happen in the fourth quarter as we continue to collect on those. But the guidance we're giving is more on the normalized nim.

Yeah. Hey, Michael. And I just would like to add to Sherry's comments that I think you're also going to see production, given the rate decrease that happened in September, the anticipated decrease that that will result in lower yields on new production coming in as well. And what it does not include is if there's any recoveries, as, I just referenced on that one credit, of, you know, interest income that previously had been reversed. You know, so if we have recoveries on interest income, that could obviously be a positive. And of course, as we've done previously, we'll disclose all of that as part of it. Okay. I appreciate the color. And maybe just one last one for me. And this is back to you, Jerry. You've been in the seat for a bunch of years now. I know you're not happy with the performance. I know investors aren't. But just given the health of M and A markets at this point, is there a point in time where you might want to consider strategic alternatives? Thanks. Yeah. Hey, look, Michael, I think we've stated all along we're a publicly traded organization. You know, the way we have to think about things is, you know, and I think the way the board needs to think about things is our ability to execute and drive the results. You know, obviously, if there are opportunities, it has to be weight, right? But I mean, you know, our focus right now is on getting things on the right track and getting back to the kind of returns that Sherry referenced here in the fourth quarter as a step in the right direction. We do believe we're taking all the right steps given where we are. But look, I mean, I think, you know, obviously everything has to be evaluated as it comes up. I appreciate you taking all my questions. Thanks. Certainly have a great day.

Our next question comes from the line of Russell Gunther with Stevens. Please go ahead.

Hey, good morning guys.

Morning.

Russell wanted to start on the loan growth discussion. Appreciate all the color there, Jerry. Maybe as you think about what the kind of go forward organic opportunity is and the sustainability of that kind of 125 to 175 net loan growth guidance and then maybe just more specifically on the syndication activity. I know you gave us some color as to what we would expect from a growth perspective in 4Q. How should we think about sort of the ebbs and flows participating in versus participating out? Yeah, great question. I think it depends on Russell, the opportunities that the business development, the RMs generate. You know, our head of syndications is working closely on a lot of different opportunities already with the team. Clearly, you know, we demonstrated, you know, we participated in our first big deal. I'm sure you saw the participation in the raise, acquisition financing where we were also a syndication agent. I think that was a great way to announce that we're willing and able to look at deals like that and be an active participant and also actually participate in helping get the deal syndicated. And I think that's one of the reasons why when we brought Jack on board, we were so excited to be able to attract someone with his contacts and experience. As I look at it on a go forward, I think it is again it's a great tool two ways, right? Say up front that the volume was going to be more purchased than us actively participating away. But my expectation in 26 is you'll see that become a bigger piece because part of what we're trying to do is start to get hold sizes back into the sub 30 million dollar range on deals. And we are seeing much larger opportunities. And so we think this again is a great way for us to not only help assist on the growth side, but I think prudent risk management in maintaining lower home sizes on a go forward basis.

And Russell to complement that, the way we see it is on the short term and short term. I mean now in the fourth quarter we're focused on the buy side and creating that two ways, three relationship. And then starting 2026 the efforts will be more on the sales side and making sure that when we get opportunities that come to our table, we're able to participate some portions out and have a lead there Got it.

Okay, thank you both for that. Appreciate it. And then how should we think about the size of the investment portfolio kind of alongside the net loan growth guide you guys are expecting? Yeah, look, Russell, I think, you know, and again, we gave previous guidance that in the absence of loan growth, or I should say to supplement the balance sheet, we elected to expand growth in the portfolio. I think on a go forward basis, it's pretty clear we would much rather be deploying those funds into loan growth than any continued growth in investment. So if you do see some additional growth, this would be the, in my opinion, the last period and frankly, there probably could be some contraction traction in this period. One of the scenarios we're actually looking at along the way is, you know, how much of that do we still even want to maintain here in the fourth quarter? So, you know, more to come as we, you know, continue to do analysis there. But you know, I think with the reemergence of the pipeline, the launch of the syndication program here in this quarter with, you know, something already done and under our belt, I think you'll start to see that it'll be back to the growth coming on the loan side, certainly not on the security side.

Yeah. And Russell, to that, the investment portfolio and the way the purchases were made in the last few quarters were on the fixed rate side. So valuation has been really good and it provides an opportunity for liquidity to be able to redeploy wherever we want, like from a loan perspective or to repay off some higher cost deposits.

Got it. Okay, guys, super helpful, thank you. And then just the last one for me would be a follow up on the asset quality discussion. You know, charge offs came in pretty darn close to what you had expected for this quarter. As you address sort of the inflow that occurred in 3Q, what is the outlook for realized loss content over the next couple quarters? Yeah, I mean, we'll both give some color on that. But you know, in my remarks, what we did was go through credit by credit and do the analysis. And if there was a need for either a charge off or the addition of specific reserves, they were set. You know, Russell, the one way to potentially think about it is the establishment of specifics, maybe where you might see charges. But again, it's already been reserved for. But otherwise, I think our look on charge off activity, and I'll let Sherry go ahead and answer, but on the business book, coupled with the, you know, the rest of the indirect, it would be back into the. Right.

So we're seeing something close to the 30 to 35 basis points. A portion of that is related to the amount that we still have in the indirect consumer portfolio and some small commercial loans. And then the excess out of that would be if we were to charge off some of the loans that currently have some specific reserves.

Got it. Okay, great. Thank you both for taking my questions. Thank you.

Our next question comes from the line of Stephen Scouten with Piper Sandler. Please go ahead.

Yeah, good morning, everyone. I guess maybe one more kind of follow up around credit would be. I guess my question is, can you give us any color on kind of the vintages of credits that saw maybe incremental reserves or these specific reserves you were just referencing? Trying to get a feel for if this is, you know, just lingering credit issues from the past or if these are actually maybe some issues that are on some of the faster growth that we've seen over the last couple years. Yeah, look, I think it's a mix you can look back to, you know, where it was a much lower rate environment. So let me give a good example where we've looked at credits that are either sort of going into the passwatch or special mention category. We're obviously evaluating, given the low rates they're at, what would the potential refinancing risk be right under current rates as these things are looking to mature. So, I mean, I, I think you're looking at anywhere from, you know, in the 2020-2024 range, you know, because again, you're looking at a lower rate environment in those earlier years and then obviously a higher one more recently. Got it. Okay. And I guess the follow up to that is, and maybe this is just the depth of the portfolio review. We spoke to Jerry. But what gives you confidence today that the worst could be behind us here? You know, after, I think, maybe hoping to feel that way like a year ago, around this time. And then, you know, do you keep a lid on loan growth until maybe there's greater certainty that, that these issues are kind of in the past? Yeah, look, and you know, to. I'll take the last point you made first, which is kind of where the prioritization was in 3Q, the emergence that you'll see in loan growth. I think, you know, we've, we will tell you it's much more selective in terms of, you know, industry type. You know, we're not really looking, it's more in the CNI side. It's not really looking at, you know, significant growth at all in the commercial real estate side. And I do think that again, when you look at some of that, the big piece of this would come through. As you know, we just referenced on, you know, syndication as well. Look, asset quality, I keep coming back to we've allocated more personnel. I think we've got a really proactive effort going on across the organization right now. That I think the way we're working through that is probably, you know, to your question, why I have greater confidence on resolution because the open communication and line of sight and proactively going to each of these and working through solutions is really becoming more and more evident in sort of the feeling I think we have across the organization certainly internally at this point. Okay. And maybe just last thing for me, just around expenses and the potential expense initiative. I know, sorry, you noted some of the expenses this quarter were a bit elevate. They shouldn't repeat in some of those categories. But I want to make sure I heard you right. I heard, I think Jerry, you said like 2,3 million a quarter. I'm assuming that's like 2,3 million annualized. But kind of, how do you, how do you think about, you know, where you hope the expense base to get in 2026? Is the hope to kind of keep it flat? Or do you think we could see actual net reductions in the overall expense base just kind of framing up that, that potential?

Sure. So I'm going to start first with driving from the 3Q to the 4Q expectation. As I mentioned, there were some expenses that we're not expecting to be recurring like downsizing of mortgage, some legal expenses on the trust side including surrendering the license in Cayman and some investments in governance like AI and erm. That takes us to a more, I'm going to call it the normalized level of the 74 million. But on top of that then we are expecting some additional reductions through some initiatives and this includes things like reviewing third party contracts. Do we need them, do we need them at that same level when we're working on a co source or outsource approach and we have the knowledge and skill set to do that internally, can we shift that back? And that leads us to the two and a half to three million. It would be per quarter, not annualized of what Jerry just mentioned. So with that we're still working into finalizing numbers, but we do expect a net reduction starting 2026.

Yeah, and Stephen, to add to that, the disciplined way that we are approaching it is the 2 to 3 were early identification items. The process we're going through right now is a very stringent line by line, component by component. Are There opportunities. And again, whether it's, you know, bringing anything we've done third party internally, you know, do we still need the level of help that we have? I mean it's all over the. It's every single thing is being analyzed and scrutinized and it's a team wide effort across all of the functions in the organization. At the same time, you know, the one area where we're going to continue to build out and make sure is obviously whatever we need on the risk side, you know, we're going to implement. You know, I also referenced that we have business development opportunities to expand in both Tampa and Palm Beach. There are areas of priority where we would add. So that puts heightened emphasis on us to find offsets to those. Plus to continue to look for reductions to get a greater savings than that two or three a quarter that we've established as a baseline. So as I referenced more to come, we'll probably have some additional color frankly at the upcoming conference that's in mid November that I referenced. Perfect. Well, thanks for the time. Appreciate it. Thank you.

Our next question comes from the line of Woody Lave with kbw. Please go ahead.

Hey, good morning guys. Morning, Woody. Just had another follow up on credit which is interested. Have you all used third party reviews in the past or is this really the first quarter that you've used the third party? In the third quarter of last year we had a limited review. This year it was a more considerable effort and our view is that it is designed to give some comfort on accuracy of risk rating and timeliness of risk rating. And so you know Woody, a lot of this is the scrutiny that you get by being in the regional bracket. You know, this is all part of the build that we wanted to ensure. But frankly there is a lot of opportunity for internally for the teamwork that I've referenced between the line between credit between credit review and. And being in a very proactive way about it. And this was, I do want to re reference again. This was the highest quarter. Right. For annual reviews, limited reviews and covenant testing to be done. It's basically over half the portfolio. So it's much less significant in the other three quarters of the year. Yes. So you know, I think just about 50% was reviewed in the third quarter. How much of the loan portfolio do you expect to be reviewed in the fourth quarter? Yeah, I want to say it's in the billion three to billion five range. And remember a lot of that is quarterly covenant testing. Right. You've probably gone through the bulk of annual reviews at this stage. Yep. And then when you look at, you know, I think it was 12 credits downgraded to, you know, in the broader industry, seen some weakness in the subprime consumer and especially auto. When you look at your downgrades, are you seeing any overlying trends that's impacting these borrowers or do they seem unconnected? Yeah, I don't think you see the exposure in a material way that others have. You know, again, we're not someone that had the exposure that others did to NDFIs. You know, we didn't have any impact from some of the, you know, big issues that others have reported on this quarter. We were not involved. You know, I think when you, when you look at ours, particularly, I think on the commercial real estate side, and, you know, just where there's probably construction underway, it's whether there's, you know, are they still on track timing wise and that sometimes because of delays, creates issues. You know, we also, and I had already referenced, you know, do we anticipate there could be some refinancing risk over the next 12 to 24 months? And so we've done early identification of those as well. So just examples on the commercial real estate side.

Yeah, Jerry, to complement that, I think it's important that it's not only on the industry side that we're seeing that these loans are across multiple industries, but also the drivers for these items are different, whether it's a covenant that was missed, a milestone in a construction project or a milestone in the repositioning of one. So I think it's important that there's no concentration in terms of that risk.

Got it. Do you feel like this is my last thought? Do you feel like you're being more aggressive with some of the downgrades than you have been in the past, or is the strategy been pretty consistent?

Yeah, yeah, I think we are. And what we're seeing here is that timeliness and being proactive makes a difference. The earlier we get in front of a customer and try to get to a resolution, the better outcome that we expect to have. So that's what's driving this level of reviews and the timeliness of these things that we're doing.

Got it. All right, thanks for taking my questions. Absolutely. Have a good day.

This now concludes our question and answer session. I would like to turn the floor back over to management for closing comments.

Yes. Thank you, Kate. And thank you everyone for joining us today to review Amerant's third quarter results. Hope all of you have a great day. Thank you.

Ladies and Gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.