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Exhibit 99.1

Caracas, Venezuela        

            , 2018

Dear Mercantil Servicios Financieros, C.A. Shareholder,

On December 15, 2017, our shareholders voted to approve the separation of our subsidiary, Mercantil Bank Holding Corporation, or the Company, through a spin-off. We believe that Mercantil Servicios Financieros, C.A., which we call MSF, and the Company will be better-positioned, as separate, independent companies, to capture growth opportunities by operating with greater focus on their respective businesses, strategic priorities and markets.

MSF expects to continue to offer banking, investment and insurance services in all markets where it presently operates outside of the United States.

The Company will focus on providing banking and financial services in the United States, where it has offices in South Florida, the greater Houston, Texas area and the greater New York City area.

We believe that the spin-off will simplify MSF’s and the Company’s respective businesses and regulation. It will enable each of the groups to develop and focus on their respective strategies, core competencies, markets and growth opportunities. When the spin-off is complete, we believe investors will be better able to value MSF and the Company on their respective financial, operational and risk characteristics.

MSF has placed all outstanding shares of Company class A common stock and class B common stock, collectively, the Company Shares, into a newly created Florida common law, non-discretionary, grantor trust, or the Trust, for the benefit of MSF, and its shareholders of record on April 2, 2018. The Trust facilitates the spin-off. All Company Shares will be held by the Trust until the Company’s Registration Statement on Form 10, including the accompanying information statement, has been declared effective by the United States Securities and Exchange Commission, or the SEC.

The Trust will distribute 80.1% of the outstanding Company Shares pro rata to the MSF record holders. Each MSF record holder is entitled to receive one share of Company class A common stock for each share of MSF class A common stock held as of the record date, and one share of Company class B common stock for each share of MSF, class B common stock held as of the record date. We call these the Distributed Shares. The Company Shares retained in the Trust on behalf of MSF and its shareholders, or the Retained Shares, will be held in the Trust for sale or disposition during the term of the Trust. To the extent that any MSF subsidiaries are MSF record holders of MSF shares, such shares will remain in the Trust and will be included in the 19.9% of the Retained Shares. The proceeds to MSF from such sales will support MSF’s and its subsidiaries’ businesses.

The Company intends to list, on the Nasdaq Stock Market, its class A common stock under the symbol “MBNAA” and its class B common stock under the symbol “MBNAB.”

Following the spin-off, you will own shares in both MSF and the Company. The number of MSF shares held by MSF shareholders will not change as a result of the spin-off. You do not need to take any action to receive the Company Shares to which you are entitled as a MSF shareholder. You do not need to pay MSF or the Company any consideration or surrender or exchange your MSF shares.

The spin-off is expected to be tax-free for United States income tax purposes. When the spin-off was approved, the MSF board of directors also declared a cash dividend payable to MSF shareholders on the record date, which is expected to compensate shareholders subject to Venezuela income taxes on the expected Venezuela income taxes applicable to the Distributed Shares.

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I encourage you to read the attached Information Statement, which is being made available to all MSF shareholders who held shares as of the record date. It describes the separation in detail and provides important business and financial information about the Company.

Questions may be directed to the places shown on the inside front cover of the accompanying Information Statement.

We are confident the spin-off will create two companies with greater potential for the future. We remain committed to working on your behalf to continue to build long-term shareholder value.

Sincerely,

Gustavo J. Vollmer A.

Chairman and CEO

Mercantil Servicios Financieros, C.A.

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220 Alhambra Circle, Coral Gables, Florida 33134

            , 2018

Dear Future Mercantil Bank Holding Corporation Shareholder,

On behalf of the entire team at Mercantil Bank Holding Corporation, which I refer to as we, our or the Company, we welcome you as a future Company shareholder and are pleased to provide this Information Statement describing the Company and our business.

We are a bank holding company headquartered in Coral Gables, Florida, with $8.4 billion in assets, $6.3 billion in deposits, $712.3 million in common equity and $1.7 billion assets under management or custody as of March 31, 2018. We conduct our business primarily through our wholly-owned subsidiary bank, Mercantil Bank, N.A, or the Bank, including its trust and investment services subsidiaries. The Bank, which was founded in 1979, is the fifth largest bank headquartered in Florida. We have been a wholly-owned subsidiary of Mercantil Servicios Financieros, C.A., or MSF, since 1987.

We provide individuals and businesses a comprehensive array of deposit, credit, investment, wealth management and fiduciary services, both in the United States and to select international customers. The Bank’s primary markets are South Florida, where it operates 15 banking centers in Miami-Dade, Broward and Palm Beach counties; the greater Houston, Texas area where it has seven banking centers in Harris and Montgomery counties; and the New York City area where it has a loan production office in Midtown Manhattan.

As an independent company, we expect to be able to allocate our capital more efficiently and better access the United States capital markets to expand and serve our growing markets. We anticipate that this will enable us to expand our business, improve and expand our products and services, enhance our market recognition with investors and attract, retain and incent our employees with equity awards that align the interests of our employees and shareholders.

The Company’s management and employee teams will continue after the spin-off is completed, and all of us are enthusiastic about our future. The spin-off will allow us to simplify and focus our operations to better serve our U.S. and non-U.S. customers. We will continue our strong customer service and culture.

All of our shares are in book-entry form and no certificates will be issues. We will notify our shareholders upon completion of the spin-off. No action or payment is required by you to receive Company shares.

The Company intends to list, on the Nasdaq Stock Market, its class A common stock under the symbol “MBNAA” and its class B common stock under the symbol “MBNAB.”

I encourage you to read the enclosed information statement to learn more about the spin-off, the Company and our plans. Questions may be directed to the places shown on the inside front cover of the accompanying Information Statement.

Sincerely,

Millar Wilson

Chief Executive Officer

Mercantil Bank Holding Corporation

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The information contained herein is not complete and may be changed. A Registration Statement on Form 10 relating to these securities has been filed with the United States Securities and Exchange Commission under the United States Securities Exchange Act of 1934, as amended. This preliminary information statement is not an offer to sell or a solicitation of an offer to buy any securities.

Preliminary and Subject to Completion, dated June 29, 2018

INFORMATION STATEMENT

Mercantil Bank Holding Corporation

Distribution of 60,880,929 Shares of Class A Common Stock

and

Distribution of 43,880,032 Shares of Class B Common Stock

Mercantil Bank Holding Corporation, which we refer to as we, us, our, ourselves and the Company, is furnishing this information statement in connection with the proposed distribution of 80.1% of the outstanding shares of our Class A common stock, par value $0.10 per share, or Class A common stock, and our class B common stock, par value $0.10 per share, or Class B common stock, previously held by Mercantil Servicios Financieros, C.A., which we refer to as MSF, to holders of record of MSF’s class A common stock and class B common stock. Throughout this information statement, we collectively refer to our Class A common stock and Class B common stock as Company Shares, and MSF class A common stock and MSF class B common stock as MSF common stock, or MSF Shares.

On December 15, 2017, shareholders representing approximately 85% of MSF’s class A common stock who were present or represented in a special shareholder meeting of MSF unanimously voted to approve our spin-off from MSF, which we refer to as the spin-off. We have been a wholly owned subsidiary of MSF since 1987. As part of the spin-off, MSF has placed all of its shares of our Class A common stock and Class B common stock (representing 100% of our outstanding shares) into a newly created Florida common law, non-discretionary, grantor trust, which we refer to as the Trust, for the benefit of MSF and its shareholders of record on April 2, 2018, which we refer to as the record date. The shares to be distributed to MSF shareholders of record will be held by the Trust until the Registration Statement on Form 10, or the Spin-off Registration Statement, of which this information statement is a part, has been declared effective by the U.S. Securities and Exchange Commission, which we refer to as the SEC. As soon as practical after the Spin-off Registration Statement has been declared effective, 80.1% of our outstanding shares of Class A common stock and Class B common stock will be distributed to the MSF record holders, as beneficiaries of the Trust, pro rata on the basis of one share of Class A common stock and one share of Class B common stock for each share of MSF common stock, respectively. We refer to this as the Distribution, and the Company Shares that are distributed are referred to as the Distributed Shares.

As an MSF shareholder on the record date, you are entitled to receive one share of our Class A common stock for each share of MSF class A common stock you held of record on the record date, and one share of our Class B common stock for each share of MSF class B common stock held of record on the record date.

The Trust will retain the Company Shares remaining in the Trust after the Distribution, which will represent 19.9% of our outstanding Class A and Class B common stock pending their sale or disposition on behalf of MSF. To the extent that any MSF subsidiaries are MSF record holders, their shares also will remain in the Trust and will be included in the 19.9% of the Company Shares retained by MSF as a beneficiary of the Trust. Approximately 1,435,954 shares of our Class A common stock and 1,224,245 shares of our Class B common stock will be held by MSF subsidiaries. All such shares will be held by the Trust and included in the 19.9% of Company Shares retained by MSF, and which MSF will sell or dispose of.

The Company Shares will be issued in book-entry form only, which means that no physical stock certificates will be issued. The Distribution is expected to be tax-free to MSF’s shareholders for U.S. federal income tax purposes. Under Venezuelan law, the Distribution is considered taxable income to MSF’s shareholders at a rate of 34% of MSF’s carrying value of the Company’s Class A common stock and Class B common stock. Such amounts are not subject to withholding taxes under applicable Venezuelan income tax law. At the same time as the MSF board of directors approved the Distribution, it declared a cash dividend, subject to the Distribution, in an amount believed sufficient to compensate MSF shareholders for such Venezuela income tax liability.

We are contemplating an internal reorganization, or Reorganization, involving a merger with a newly formed subsidiary of ours following the Distribution to provide cash to our smallest shareholders, and reduce the number of our shareholders and related shareholder maintenance costs. Presently, we contemplate that the Reorganization will reduce the number of our shareholders by approximately 16,000 to 17,000 persons, or approximately 80% to 85%. The Reorganization may be completed without a shareholder vote, and we do not intend to seek a shareholder vote.

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, which we refer to as the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act. Therefore, we are allowed to provide in this information statement more limited disclosures than a registrant that would not so qualify. In addition, for so long as we remain an emerging growth company, we may also take advantage of certain limited exceptions from investor protection laws such as the Sarbanes-Oxley Act of 2002, which we refer to as the Sarbanes-Oxley Act, and the Investor Protection and Securities Reform Act of 2010, for limited periods. See “Summary — Emerging Growth Company Status.”

No further vote of MSF shareholders is required in connection with the Distribution and MSF is not subject to the U.S. proxy solicitation rules. Therefore, this information statement is not soliciting your vote or proxy.

You are not required to pay for the shares of our common stock you will receive in the Distribution or to surrender or exchange any certificates of shares of MSF common stock in order to receive Company Shares in the Distribution. All outstanding MSF Shares will remain outstanding upon the Distribution. There will be no change in the number of your MSF Shares as a result of the Distribution. Upon the Distribution, you will own both MSF Shares and Company Shares.

All of the Company Shares are now held in trust for the benefit of MSF and its shareholders as of the record date. Accordingly, there is no current trading market for our common stock and trading in the Company Shares, or in any interest in the Trust is strictly prohibited. We intend to list our Class A common stock on the Nasdaq Stock Market under the symbol “MBNAA” and intend to list our Class B common stock on the Nasdaq Stock Market under the symbol “MBNAB.”

We expect that the Distribution from the Trust will occur on or about             , 2018.

In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 14.

Neither the SEC nor any state or other securities authority has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

The date of this information statement is             , 2018.

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Inquiries

MSF will notify its shareholders of record of the Distribution by notice published in two newspapers of general circulation in Venezuela, notices and hyperlinks posted on our and MSF’s websites, and electronic mail, which will include hyperlinks to our and MSF’s websites and to this information statement. We will mail copies of this information statement to MSF shareholders of record whose address of record is in the United States.

For persons that are not currently MSF Shareholders:

MBHC ProspectiveInvestors@fticonsulting.com

Questions regarding MSF Shares or Company Shares should be directed as follows:

[●]

MSF Shares:

[●]

MSF ADRs:

[●]

Company Shares:

Computershare, as the Company Transfer Agent

[●]

The Company:

[●]

In Venezuela, Company Shareholders may also contact:

[●]

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RISK FACTORS

You should carefully consider the following risk factors and all the other information contained in this information statement in evaluating us and our Company Shares.

Risks Related to Our Business

Any of the following risks could harm our business, results of operations and financial condition and the value of an investment in our stock. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.

Market conditions and economic cyclicality may adversely affect our industry.

We are exposed to downturns in the U.S. economy and market conditions generally. We believe the following, among other things, may affect us in 2018 and beyond:

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Our success depends on general and local economic conditions where we operate.

Our success depends on the economic conditions, generally, especially in the geographic markets we serve. The local economic conditions in our markets have a significant effect on our commercial, real estate and construction loans, the ability of borrowers to repay these loans and the value of the collateral securing these loans. Adverse changes in the economic conditions of the regions where our loans are originated, primarily South Florida, the greater Houston, Texas area and the greater New York City area, especially the five New York City boroughs, and secondarily in four Latin American countries with investment-grade sovereign ratings (Chile, Colombia, Mexico and Peru) and one without an investment-grade sovereign rating (Brazil) where we have trade financing and financial institution credits, could negatively affect our results of operations and our profitability. As of March 31, 2018 and December 31, 2017 we had $178.5 million and $182.7 million of consumer loans and residential mortgage loans secured by properties in the U.S. outstanding to Venezuelan persons, respectively. This exposure to Venezuelan borrowers includes $35.1 million and $37.6 million of other loans at March 31, 2018 and December 31, 2017, respectively. Further, our loan production, generally, is subject to seasonability, with the lowest volume typically in the first quarter of each year. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition.”

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

At March 31, 2018 and 2017, our nonperforming loans totaled $32.2 million and $62.1 million, respectively, or 0.54% and 1.06% of total loans, respectively. In addition, we had approximately $0.3 million and $0.4 million of OREO at March 31, 2018 and 2017, respectively. Our non-performing assets may adversely affect our net income in various ways. We do not record interest income on nonaccrual loans or OREO, and these assets require higher loan administration and other costs, thereby adversely affecting our income. Decreases in the value of these assets, or the underlying collateral, or in the related borrowers’ performance or financial condition, whether or not due to economic and market conditions beyond our control, could adversely affect our business,

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results of operations and financial condition. In addition, the resolution of nonperforming assets requires commitments of time from management, which can be detrimental to their other responsibilities. There can be no assurance that we will not experience increases in nonperforming loans, OREO and similar nonperforming assets in the future.

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

We periodically review our allowance for loan losses for adequacy considering economic conditions and trends, collateral values and credit quality indicators, including past charge-off experience and levels of past due loans and nonperforming assets. We cannot be certain that our allowance for loan losses will be adequate over time to cover credit losses in our portfolio because of unanticipated adverse changes in the economy, market conditions or events adversely affecting specific customers, industries or markets, and changes in borrower behaviors. Differences between our actual experience and assumptions and the effectiveness of our models may adversely affect our business, financial condition, including liquidity and capital, and results of operations. The Financial Accounting Standards Board, or FASB, adopted Accounting Standards Update, or ASU, No. 2016-13 “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” or CECL, on June 16, 2016, which changed the loss model to take into account current expected credit losses. This accounting pronouncement is expected to be applicable to us, as an emerging growth company, effective for our fiscal year beginning January 1, 2021, but we have not yet determined how it will affect our results of operations and financial condition.

Our valuation of securities and investments and the determination of the amount of impairments taken on our investments are subjective and, if changed, could materially adversely affect our results of operations or financial condition.

Fixed maturity securities, as well as short-term investments that are reported at estimated fair value, represent the majority of our total investments. We define fair value generally as the price that would be received in the sale of an asset or paid to transfer a liability. Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain of our securities if trading becomes less frequent or market data becomes less observable. In addition, in times of financial market disruption, certain asset classes that were in active markets with significant observable data may become illiquid. In those cases, the valuation process includes inputs that are less observable and require more subjectivity and management judgment. Valuations may result in estimated fair values which vary significantly from the amount at which the investments may ultimately be sold. Further, rapidly changing and unprecedented credit and equity market conditions could materially affect the valuation of securities in our financial statements and the period-to-period changes in estimated fair value could vary significantly. Decreases in the estimated fair value of securities we hold may have a material adverse effect on our financial condition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates.”

The determination of the amount of impairments varies by investment type and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. We reflect any changes in impairments in earnings as such evaluations are revised. However, historical trends may not be indicative of future impairments. In addition, any such future impairments or allowances could have a materially adverse effect on our earnings and financial position. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates.”

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

We had goodwill of $19.2 million on March 31, 2018 and December 31, 2017. We perform our goodwill impairment testing annually using a process, which requires the use of estimates and judgment. The estimated fair value of the reporting unit is affected by the performance of the business, which may be especially diminished by prolonged market declines. If it is determined that the goodwill has been impaired, we must write down the goodwill by the amount of the impairment, with a corresponding charge to net income. Although we have had no goodwill write-downs historically, any such write-downs could have an adverse effect on our results of operations or financial position.

Long-lived assets, including assets such as real estate, also require impairment testing. This testing is done to determine whether changes in circumstances indicate that we will be unable to recover the carrying amount of these assets. Such write-downs could have a material adverse effect on our results of operations or financial position.

Deferred income tax represents the tax effect of the timing differences between financial accounting and tax reporting. Deferred tax assets, or DTAs, are assessed periodically by management to determine whether they are realizable. Factors in management’s determination include the performance of the business, including the ability to generate future taxable income. If, based on available information, it is more likely than not that the deferred income tax asset will not be realized, then a valuation allowance must be established with a corresponding charge to net income. Such charges could have a material adverse effect on our results of operations or financial position. In addition, changes in the corporate tax rates could affect the value of our DTAs and may require a write-off of some of those assets. The 2017 Tax Act reduced the U.S. corporate income tax rate to 21% effective for periods starting January 1, 2018, from a prior rate of 35%. At March 31, 2018, we had net DTAs with a book value of $24.5 million, based on a U.S. corporate income tax rate of 21%. In December 2017 we had a remeasurement of net DTAs and recorded $9.6 million in additional tax expense and a corresponding reduction in net income as a result of the 2017 Tax Act. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Critical Accounting Policies and Estimates.”

Defaults by or deteriorating asset quality of other financial institutions could adversely affect us.

We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, central clearinghouses, commercial banks, investment banks, hedge funds and investment funds, our correspondent banks and other financial institutions, especially those in the Latin American countries where we make such loans. Many of these transactions expose us to credit risk in the event of the default of our counterparty. In addition, with respect to secured transactions, credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices insufficient to recover the full amount of the loan or derivative exposure due to us. We also may have exposure to these financial institutions in the form of unsecured debt instruments, derivatives and other securities. Further, potential action by governments and regulatory bodies in response to financial crises affecting the global banking system and financial markets, such as nationalization, conservatorship, receivership and other intervention, whether under existing legal authority or any new authority that may be created, or lack of action by governments and central banks, as well as deterioration in the banks’ creditworthiness, could adversely affect the value and/or liquidity of these instruments, securities, transactions and investments or limit our ability to trade with them. Any losses or impairments to the carrying value of these investments or other changes may materially and adversely affect our results of operations and financial condition.

In addition we maintain credit relationships with large financial institutions that we believe are of the highest quality in Brazil, Chile, Colombia, Mexico and Peru. In addition to the risks posed by relationships with U.S. counterparty financial institutions, transactions with foreign financial institutions may be subject to currency

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and exchange rate controls, regulation, inflation or deflation, and fiscal and monetary policies in the foreign countries that are significantly different than in the U.S.

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

Our businesses and earnings are affected by the fiscal, monetary and other policies and actions of various U.S. and non-U.S. governmental and regulatory authorities. Changes in these are beyond our control and are difficult to predict and, consequently, changes in these policies could have negative effects on our activities and results of operations.

Our businesses and revenue are subject to risks inherent in making loans and executing transactions with counterparties located in Latin America. Our domestic business, including loans, deposits and wealth management, services persons from or dependent upon businesses or wealth from Venezuela and other Latin American countries, and are, therefore, subject to risk inherent to those countries. These risks include, among others, effects from slow or negative growth or recessionary or worse economic conditions, inflation and hyper-inflation, currency controls and volatility, and the risk of loss from unfavorable political, legal or other developments, including social or political instability, in the countries or regions in which such counterparties operate, as well as the other risks and considerations as described further below.

Various countries or regions in which we, our counterparties or our customers operate or invest have in the past experienced severe economic disruptions particular to those countries or regions. In some cases, concerns regarding the fiscal condition of one or more countries and currency and exchange controls and other measures adopted by one country could cause other countries in the same region or beyond to experience a contraction of available credit, market and price volatility, illiquidity and reduced cross-border trading and financing activity.

Our results of operations from international activities and customers from other countries may be subject to adverse changes as a result of the above considerations, as well as possible governmental actions, including expropriation, nationalization, confiscation of assets, price controls, capital controls, exchange controls, and changes in laws and regulations. The effects of these changes could be magnified in smaller, less liquid and more volatile foreign markets.

Conducting business in countries and having customers in countries with less developed legal and regulatory regimes, or with currency controls often requires devoting significant additional resources to understanding, and monitoring changes in, local laws and regulations, as well as compliance with local laws and regulations and implementing and administering related risk policies and procedures. We can also incur higher costs, and face greater compliance risks, in structuring and operating our businesses outside the U.S. to comply with U.S. anti-corruption, anti-money laundering and other laws, regulations and sanctions. Failure to comply with such rules in our international activities could adversely affect our results of operations and regulatory relations in the U.S. and elsewhere.

Changes in the real estate markets, including the secondary market for residential mortgage loans, may adversely affect us.

The effects of the CFPB changes to mortgage and servicing rules effective at the beginning of 2014, the CFPB’s new unified Truth in Lending Act and the Real Estate Settlement Procedures Act, or RESPA, rules for closed end credit transactions secured by real property that became effective in October 2015, often called TRID rules, enforcement actions, reviews and settlements, changes in the securitization rules under the Dodd-Frank Act, including the risk retention rules that became effective December 24, 2016, and the Basel III Capital Rules (see “Supervision and Regulation — Basel III Capital Rules”) could have serious adverse effects on the mortgage markets and our mortgage operations.

The TRID rules have affected our current and proposed mortgage business and have increased our costs as a result of our compliance efforts. In addition, the CFPB’s final regulations implementing the Dodd-Frank Act, which require that lenders determine whether a consumer has the ability to repay a mortgage loan, which became effective in January 2014, have limited the secondary market for and liquidity of many mortgage loans that are not “qualified mortgages.”

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Increasing interest rates and the 2017 Tax Act’s limitations on the deductibility of residential mortgage interest and state and local property and other taxes could adversely affect consumer behaviors and the volumes of housing sales, mortgage and home equity loan originations, as well as the value and liquidity of residential property held as collateral by lenders such as the Bank, and the secondary markets for residential loans. Acquisition, construction and development loans for residential development may be similarly adversely affected.

The Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Mortgage Corporation, or Freddie Mac, have been in conservatorship since September 2008. Minimal capital at Fannie Mae and Freddie Mac, the levels of risky assets at the Federal Housing Administration, or the FHA, and its relatively low capital and reserves for losses, the current levels of home sales, and the risks of interest rates increasing materially from historically low levels, as well as the 2017 Tax Act, could also have serious adverse effects on the mortgage markets and our mortgage operations. Such adverse effects could include, among other things, price reductions in single family home values, further adversely affecting the liquidity and value of collateral securing commercial loans for residential acquisition, construction and development, as well as residential mortgage loans that we hold, mortgage loan originations and gains on sale of mortgage loans. In the event our allowance for loan losses is insufficient to cover such losses, if any, our earnings, capital and liquidity could be adversely affected.

Fannie Mae and Freddie Mac restructuring may adversely affect the mortgage markets and our sales of mortgages we originate.

Fannie Mae and Freddie Mac remain in conservatorship, and although legislation has been introduced at various times to restructure Fannie Mae and Freddie Mac to take them out of conservatorship and substantially change the way they conduct business in the future, no proposal has been enacted. Through 2017, all of Fannie Mae and Freddie Mac’s earnings above a specified capital reserve have been swept into the U.S. Department of the Treasury, or the Treasury Department, and have not been available to build Fannie Mae’s and Freddie Mac’s capital. At the end of 2017, the capital reserve was increased to $3 billion for each of Fannie Mae and Freddie Mac.

In February 2018 Fannie Mae reported that the 2017 Tax Act had reduced its DTAs, and that it had a net worth deficit of $3.7 billion as of December 31, 2017. To eliminate its net worth deficit, the Treasury Department provided Fannie Mae with $3.7 billion of capital in the first quarter of 2018. As a result, Fannie Mae reported that it had a net worth of $3.9 billion as of March 31, 2018. Freddie Mac had a net worth deficit of $312 million at December 31, 2017, and the Treasury Department provided Freddie Mac with $312 million of capital in the first quarter of 2018. As a result, Freddie Mac reported that it had a net worth of $2.2 billion as of March 31, 2018.

Since Fannie Mae and Freddie Mac dominate the residential mortgage markets, any changes in their structure and operations, as well as their respective capital, could adversely affect the primary and secondary mortgage markets, and our residential mortgage businesses, our results of operations and the returns on capital deployed in these businesses.

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

As a routine part of our business, we originate mortgage loans that we subsequently sell to investors. We do not currently originate mortgage loans for direct sale to any governmental agencies and government sponsored enterprises, or GSEs, such as Fannie Mae or Freddie Mac but expect to make such direct sales in the future. In connection with the sale of these loans to private investors and GSEs, we make customary representations and warranties, the breach of which may result in our being required to repurchase the loan or loans. Furthermore, the amount paid may be greater than the fair value of the loan or loans at the time of the repurchase. No mortgage

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loan repurchase requests have been made to us; however, if repurchase requests were made to us, we may have to establish reserves for possible repurchases, which could adversely affect our results of operations and financial condition.

Mortgage Servicing Rights, or MSRs, requirements may change and require us to incur additional costs and risks.

The CFPB adopted new residential mortgage servicing standards in January 2014 that add additional servicing requirements, increase our required servicer activities and delay foreclosures, among other things. These may adversely affect our costs to service residential mortgage loans, and together with the Basel III Capital Rules, may decrease the returns on our MSRs.

The CFPB and the bank regulators continue to bring enforcement actions and develop proposals, rules and practices that could increase the costs of providing mortgage servicing. Historically, we have not serviced mortgage loans for others. However, if we were to provide servicing in the future, regulation of mortgage servicing could make it more difficult and costly to timely realize the value of collateral securing such loans upon a borrower default.

Our concentration of CRE loans could result in further increased loan losses, and adversely affect our business, earnings, and financial condition.

CRE is cyclical and poses risks of possible loss due to concentration levels and risks of the assets being financed, which include loans for the acquisition and development of land and residential construction. The federal bank regulators released guidance in 2006 on “Concentrations in Commercial Real Estate Lending.” The guidance defines CRE loans as exposures secured by raw land, land development and construction (including 1-4 family residential construction), multi-family property, and non-farm nonresidential property, where the primary or a significant source of repayment is derived from rental income associated with the property (that is, loans for which 50% or more of the source of repayment comes from third-party, non-affiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. Loans to real-estate investment trusts, or REITs, and unsecured loans to developers that closely correlate to the inherent risks in CRE markets would also be considered CRE loans under the guidance. Loans on owner occupied CRE are generally excluded.

The Bank’s portfolio of CRE loans was 333.47% of its risk-based capital, or 48.24% of its total loans, as of March 31, 2018 compared to 317.39% of its risk-based capital, or 46.03% of its total loans, as of March 31, 2017. The banking regulators continue to scrutinize CRE lending and further addressed their concerns over CRE activity in December 2016, requiring banks with higher levels of CRE loans to implement more robust underwriting, internal controls, risk management policies and portfolio stress testing, as well as higher levels of allowances for possible losses and capital levels as a result of CRE lending growth and exposures. Lower demand for CRE, and reduced availability of, and higher costs for, CRE lending could adversely affect our CRE loans and sales of our OREO, and therefore our earnings and financial condition, including our capital and liquidity.

As of March 31, 2018, approximately 53.3% of total CRE loans were in Miami-Dade, Broward and Palm Beach counties, Florida, 17.6% were in the greater Houston, Texas area, and 24.4% were in the greater New York City area, including all five boroughs. Our CRE loans are affected by economic conditions in those markets.

Our profitability and liquidity may be affected by changes in interest rates and interest rate levels, the shape of the yield curve and economic conditions.

Our profitability depends upon net interest income, which is the difference between interest earned on assets, such as loans and investments, and interest expense on interest-bearing liabilities, such as deposits and borrowings. Net interest income will be adversely affected by market interest rates changes where the interest we

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pay on deposits and borrowings increases faster than the interest earned on loans and investments. Interest rates, and consequently our results of operations, are affected by general economic conditions (domestic and international) and fiscal and monetary policies, as well as expectations of these rates and policies, and the shape of the yield curve.

Our balance sheet is asset sensitive. Therefore, a decrease in interest rates or a flattening of the yield curve could adversely affect us, generally.

Our income is primarily driven by the spread between these rates. As a result, a steeper yield curve, meaning long-term interest rates are significantly higher than short-term interest rates, would provide the Bank with a better opportunity to increase net interest income. Conversely, a flattening U.S. yield curve could pressure our net interest margin as our cost of funds increases relative to the spread we can earn on our assets. In addition, net interest income could be affected by asymmetrical changes in the different interest rate indexes, given that not all of our assets or liabilities are priced with the same index. The Federal Reserve Normalization Policy, which is gradually increasing the Federal Reserve’s target Federal Funds rates and decreasing the Federal Reserve’s holdings of securities, may have unpredictable effects on the shape of the yield curve and longer term interest rates.

The production of mortgages and other loans and the value of collateral securing our loans, are dependent on demand within the markets we serve, as well as interest rates. Increases in interest rates generally decrease the market values of fixed-rate, interest-bearing investments and loans held, the value of mortgage and other loans produced and the value of loans sold, mortgage loan activities and the collateral securing our loans, and therefore may adversely affect our liquidity and earnings, to the extent not offset by potential increases in our net interest margin.

The 2017 Tax Act, including its fiscal stimulus, limitations on the deductibility of residential mortgage interest and business interest expenses and other changes, could have mixed effects on economic activity and reduce the demand for loans and increase competition among lenders for loans. This act could also promote inflation and higher interest rates.

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

The potential cessation of LIBOR quotes in 2021 creates substantial risks to the banking industry, including us. Unless alternative rates can be negotiated, our floating rate loans, funding and derivative obligations that specify the use of a LIBOR index, will no longer adjust and may become fixed rate instruments at the time LIBOR ceases to exist. This would adversely affect our asset/liability management and could lead to more asset and liability mismatches and interest rate risk unless LIBOR alternatives are developed. It could also cause confusion that could disrupt the capital and credit markets as a result of confusion or uncertainty.

The Federal Reserve has sponsored the Alternative Reference Rates Committee, or ARRC, which serves as a forum to coordinate and track planning as market participants currently using LIBOR consider (a) transitioning to alternative reference rates where it is deemed appropriate and (b) addressing risks in legacy contracts language given the possibility that LIBOR might stop. On April 3, 2018 the Federal Reserve began publishing three new reference rates, including the Secured Overnight Financing Rate, or SOFR. ARRC has recommended SOFR as the alternative to LIBOR. The Financial Stability Board has taken an interest in LIBOR and possible replacement indices. The International Organisation of Securities Commissions, or IOSCO, has been active in this area and is expected to call on market participants to have backup options if a reference rate, such as LIBOR, ceases publication. It cannot be predicted whether SOFR or another index or indices will become a market standard that replaces LIBOR, and if so, the effects on our customers, or our future results of operations or financial condition.

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Liquidity risks could affect operations and jeopardize our financial condition.

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, proceeds from loan repayments or sales, and other sources could have a substantial negative effect on our liquidity. Our funding sources include Federal Funds purchased, securities sold under repurchase agreements, core and non-core deposits (domestic and foreign), and short-and long-term debt. We maintain a portfolio of securities that can be used as a source of liquidity. We are also members of the Federal Home Loan Bank of Atlanta, or FHLB, and the Federal Reserve Bank of Atlanta, where we can obtain advances collateralized with eligible assets. There are other sources of liquidity available to us or the Bank should they be needed, including our ability to acquire additional non-core deposits (such as reciprocal deposit programs such as CDARs, and brokered deposits). We may be able, depending upon market conditions, to otherwise borrow money or issue and sell debt and preferred or common securities in public or private transactions. Our access to funding sources in amounts adequate to finance or capitalize our activities on terms which are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or the economy in general. Our ability to borrow or obtain funding, if needed, could also be impaired by factors that are not specific to us, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry.

The Company is an entity separate and distinct from the Bank. The Federal Reserve Act, Section 23A, limits our ability to borrow from the Bank, and the Company generally relies on dividends paid from the Bank for funds to meet its obligations, including under its outstanding trust preferred securities. The Bank’s ability to pay dividends is limited by law, and may be limited by regulatory action to preserve the Bank’s capital adequacy. Any such limitations could adversely affect the Company’s liquidity.

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

Although we have historically been able to replace maturing deposits and advances, we may not be able to replace these funds in the future if our financial condition or general market conditions change. The use of brokered deposits has been particularly important for the funding of our operations. If we are unable to issue brokered deposits, or are unable to maintain access to other funding sources, our results of operations and liquidity would be adversely affected. Our ability to accept, renew or replace brokered deposits without prior regulatory approval will be limited if the Bank does not remain well-capitalized.

Alternative funding to deposits may carry higher costs than sources currently utilized. If we are required to rely more heavily on more expensive and potentially less stable funding sources, profitability and liquidity could be adversely affected. We may determine to seek debt financing in the future to achieve our long-term business objectives. Any Company or Bank debt that is to be treated as capital for bank regulatory purposes requires prior Federal Reserve approval, which the Federal Reserve may not grant. Additional borrowings, if sought, may not be available to us, or if available, may not be on acceptable terms. The availability of additional financing will depend on a variety of factors such as market conditions, the general availability of credit, our credit ratings and our credit capacity. In addition, the Bank may seek to sell loans as an additional source of liquidity. If additional financing sources are unavailable or are not available on acceptable terms, our profitability and future prospects could be adversely affected.

Our Venezuelan deposit concentration means conditions in Venezuela could adversely affect our operations.

At March 31, 2018, 47.5% of our deposits, or approximately $3.0 billion, were from Venezuelans. The Bank’s Venezuelan deposits declined 23.9% from December 31, 2015 to March 31, 2018. These declines were due in part to actions by the Company to reduce its compliance costs and from economic conditions in Venezuela that adversely affected our Venezuelan customers wealth and use of deposits to fund living expenses. All of the Bank’s deposits are denominated in Dollars. Adverse economic conditions in Venezuela may continue to adversely affect our Venezuelan deposit base and our ability to retain and grow these relationships, as customers

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rely on their Dollar deposits to spend without being able to earn additional Dollars. Venezuela’s currency controls and its official currency exchange rates for converting Bolivars into Dollars diverge widely from open market exchange rates. According to the International Monetary Fund’s World Economic Outlook, Venezuela’s annual inflation rate is projected to exceed 13,000% in 2018 and more recent estimates are substantially higher. All of these factors greatly influence our Venezuelan customers’ access to Dollars and their ability to replenish the Dollars they consume.

Foreign deposits require additional scrutiny and higher costs to originate and maintain than domestic deposits in the U.S. The Bank has adopted strategies to manage and retain its foreign deposits consistent with U.S. anti-money laundering laws. If these strategies are unsuccessful, or economic conditions or other conditions worsen in Venezuela or our regulators restrict the Bank from taking its customers’ deposits, our volume of deposits from Venezuelan sources may decline further. A significant or sudden decline in our deposits from Venezuelan customers could adversely affect our results of operations, and financial condition, including liquidity.

Our brokered deposits and wholesale funds increase our liquidity risks, and could increase our deposit insurance costs.

Our brokered deposits at March 31, 2018 were 11.5% of total deposits. Wholesale funding, including FHLB advances and brokered deposits represented 27.2% of our funding at March 31, 2018 and increased 16.0% since 2016. The Federal Deposit Insurance Corporation, or FDIC, adjusts its deposit insurance assessments by up to 10 basis points annually for institutions that have brokered deposits exceeding 10% of total deposits where the bank also exceeds a certain risk level. More rigorous standards may also apply to banks with more than $10 billion in assets. In addition, excessive reliance on brokered deposits and wholesale funding is viewed by the regulators as potentially risky for all institutions, and may adversely affect our liquidity and the regulatory views of our liquidity. Institutions that are less than well-capitalized may be unable to raise or renew brokered deposits under the prompt corrective action rules. See “Supervision and Regulation — Capital.”

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

Although the Federal Reserve has raised the target Federal Funds rate seven times between December 2015 and June 2018, the Federal Reserve has kept interest rates low over recent years, and the Federal government continues large deficit spending. Our costs of funds may increase as a result of general economic conditions, interest rates and competitive pressures, and potential inflation resulting from government deficit spending and the effects of the 2017 Tax Act and monetary policies. Traditionally, we have obtained funds principally through deposits, including deposits from foreign persons, and borrowings from other institutional lenders. Generally, we believe deposits are a cheaper and more stable source of funds than borrowings because interest rates paid for deposits are typically lower than interest rates charged for borrowings from other institutional lenders. We expect that our future growth will depend on our ability to retain and grow a strong, low-cost deposit base from U.S. domiciled persons. Increases in interest rates could also cause consumers to shift their funds to more interest bearing instruments and to increase the competition for funds. While the Federal Reserve has stated it intends to gradually increase interest rates, interest rates could increase more or more quickly than anticipated, and the competition for deposits could increase. If customers reduce the mix of their interest bearing and noninterest bearing deposits, or move money to higher rate deposits or other interest bearing assets offered by competitors or from transaction deposits to higher interest bearing time deposits, we could lose a relatively low cost source of funds, increasing our funding costs and reducing our net interest income and net income. Additionally, any such loss of funds could result in lower loan originations and growth, which could materially and adversely affect our results of operations and financial condition, including liquidity.

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

A significant portion of our revenue from trust, brokerage and investment advisory services is dependent on business from Venezuelan customers. Economic conditions in Venezuela may adversely affect the amounts of assets we manage or custody, and the trading volumes of our Venezuelan customers, reducing fees and commissions we earn from these businesses.

Our future success is dependent on our ability to compete effectively in highly competitive markets.

The banking markets in which we do business are highly competitive and our future growth and success will depend on our ability to compete effectively in these markets. We compete for deposits, loans, and other financial services in our markets with other local, regional and national commercial banks, thrifts, credit unions, mortgage lenders, trust services providers and securities advisory and brokerage firms. Marketplace lenders operating nationwide over the internet are also growing rapidly. Many of our competitors offer products and services different from us, and have substantially greater resources, name recognition and market presence than we do, which benefits them in attracting business. In addition, larger competitors may be able to price loans and deposits more aggressively than we are able to and have broader and more diverse customer and geographic bases to draw upon. The Dodd-Frank Act allows others to branch into our markets more easily from other states. Failures of other banks with offices in our markets and small institutions wishing to sell or merge due to cost pressures, could also lead to the entrance of new, stronger competitors in our markets.

Technological changes affect our business, and we may have fewer resources than many competitors to invest in technological improvements.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services, and a growing demand for mobile and other phone and computer banking applications. In addition to allowing us to service our clients better, the effective use of technology may increase efficiency and may enable financial institutions to reduce costs and the risks associated with fraud and other operational risks. Largely unregulated “fintech” businesses have increased their participation in the lending and payments businesses, and have increased competition in these businesses. Our future success will depend, in part, upon our ability to use technology to provide products and services that meet our customers’ preferences and which create additional efficiencies in operations, while avoiding cyber-attacks and disruptions, and data breaches. We may need to make significant additional capital investments in technology, including cyber and data security, and we may not be able to effectively implement new technology-driven products and services, or such technology may prove less effective than anticipated. Many larger competitors have substantially greater resources to invest in technological improvements and, increasingly, non-banking firms are using technology to compete with traditional lenders for loans and other banking services. See “— Operational risks are inherent in our businesses.”

Our derivative instruments may expose us to certain risks.

We use the payments we receive from counterparties pursuant to derivative instruments we have entered into to offset current or future changes in cash flows of certain of our FHLB Advances. In addition, we enter into matched offsetting derivative transactions in order to manage credit exposure arising from derivative transactions with customers. We may enter into a variety of derivative instruments, including options, futures, forwards, and interest rate and credit default swaps with a number of counterparties. Amounts that we expect to collect under current and future derivatives are subject to counterparty risk. Our obligations under our products are not changed by our hedging activities and we are liable for our obligations even if our derivative counterparties do not pay us. Such defaults could have a material adverse effect on our financial condition and results of operations. Substantially all of our derivatives require us to pledge or receive collateral or make payments related to any decline in the net estimated fair value of such derivatives executed through a specific broker at a

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clearinghouse or entered into with a specific counterparty on a bilateral basis. In addition, ratings downgrades or financial difficulties of derivative counterparties may require us to utilize additional capital with respect to the impacted businesses.

Changes in accounting rules applicable to banks could adversely affect our financial conditions and results of operations.

From time to time, the FASB and the SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in us restating prior period financial statements. For example, the FASB’s new requirements under ASU No. 2016-13, or CECL, includes significant changes to the manner in which banks’ allowance for loan losses will be calculated at the effective date for such guidance for us. See Note 1 to our audited consolidated financial statements, “Allowance for Loan Losses.” Instead of using historical losses, the new guidance will require forward looking analysis with respect to expected losses over the life of loans and other instruments, and could materially affect our results of operations and financial condition.

The 2017 Tax Act may have adverse effects on certain of our customers and our businesses.

The 2017 Tax Act will benefit us by reducing the maximum U.S. corporate income tax rate on its taxable income from 35% to 21%. This benefit may be diminished by the complexity, uncertainty and possible adverse effects of this legislation on certain of our borrowers, including limitations on the deductibility of:

These changes may adversely affect borrowers’ cash flows and the values and liquidity of collateral we hold to secure our loans. Fewer borrowers may be able to meet the CFPB’s “ability to repay” standards, which include the borrower’s ability to pay taxes and assessments. Demand for loans by qualified borrowers could be reduced, and therefore competition among lenders could increase. Customer behaviors toward incurring and repaying debt could also change as a result of the 2017 Tax Act. As a result, the 2017 Tax Act could materially and adversely affect our business and results of operations, at least before taking into account our lower U.S. corporate income tax rate.

Operational risks are inherent in our businesses.

Operational risks and losses can result from internal and external fraud; gaps or weaknesses in our risk management or internal audit procedures; errors by employees or third-parties; failure to document transactions properly or to obtain proper authorization; failure to comply with applicable regulatory requirements and conduct of business rules in the various jurisdictions where we do business or have customers; failures in the models we generate and rely on; equipment failures, including those caused by natural disasters or by electrical, telecommunications or other essential utility outages; business continuity and data security system failures, including those caused by computer viruses, cyber-attacks, unforeseen problems encountered while implementing major new computer systems or, upgrades to existing systems or inadequate access to data or poor response capabilities in light of such business continuity and data security system failures; or the inadequacy or failure of systems and controls, including those of our suppliers or counterparties. Additionally, providing services outside the U.S. to non-U.S. persons, including MSF, may involve greater complexity and risks than providing such services in our primary U.S. markets. Although we have implemented risk controls and loss mitigation actions, and substantial resources are devoted to developing efficient procedures, identifying and

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rectifying weaknesses in existing procedures and training staff, there is no assurance that such actions will be effective in controlling all of the operational risks faced by us. See “— The Bank has agreed to continue to provide certain services to MSF’s subsidiaries after the spin-off, which could present additional regulatory and operational risks to us.”

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

Our enterprise risk management and internal audit program is designed to mitigate material risks and loss to us. We have developed and continue to develop risk management and internal audit policies and procedures to reflect ongoing reviews of our risks and expect to continue to do so in the future. Nonetheless, our policies and procedures may not identify every risk to which we are exposed, and our internal audit process may fail to detect such weaknesses or deficiencies in our risk management framework. Many of our methods for managing risk and exposures are based upon the use of observed historical market behavior to model or project potential future exposure. Models used by our business are based on assumptions and projections. These models may not operate properly or our inputs and assumptions may be inaccurate, or may not be adopted quickly enough to reflect changes in behavior, markets or technology. As a result, these methods may not fully predict future exposures, which can be significantly different and greater than historical measures indicate. Other risk management methods depend upon the evaluation of information regarding markets, customers, or other matters that are publicly available or otherwise accessible to us. This information may not always be accurate, complete, up-to-date or properly evaluated. Furthermore, there can be no assurance that we can effectively review and monitor all risks or that all of our employees will closely follow our risk management policies and procedures, nor can there be any assurance that our risk management policies and procedures will enable us to accurately identify all risks and limit timely our exposures based on our assessments. In addition, we may have to implement more extensive and perhaps different risk management policies and procedures under pending regulations. All of these could adversely affect our financial condition and results of operations.

Any failure to protect the confidentiality of customer information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations.

Various federal, state and foreign laws enforced by the bank regulators and other agencies, protect the privacy and security of customers’ non-public personal information. Many of our employees have access to, and routinely process sensitive personal customer information, including through information technology systems. We rely on various internal processes and controls to protect the confidentiality of client information that is accessible to, or in the possession of, us and our employees. It is possible that an employee could, intentionally or unintentionally, disclose or misappropriate confidential client information or our data could be the subject of a cybersecurity attack. Such personal data could also be compromised by third-party hackers via intrusions into our systems or those of service providers or persons we do business with such as credit bureaus, data processors and merchants who accept credit or debit cards for payment. If we fail to maintain adequate internal controls, or if our employees fail to comply with our policies and procedures, misappropriation or intentional or unintentional inappropriate disclosure or misuse of client information could occur. Such internal control inadequacies or non-compliance could materially damage our reputation, lead to civil or criminal penalties, or both, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.

Our information systems may experience interruptions and security breaches.

We rely heavily on communications and information systems, including those provided by third-party service providers, to conduct our business. Any failure, interruption, or security breach of these systems could result in failures or disruptions which could affect our customers’ privacy and our customer relationships, generally. Our systems and networks, as well as those of our third-party service providers, are subject to security risks and could be susceptible to cyber-attacks, such as denial of service attacks, hacking, terrorist activities or identity theft. Although we are not aware that we or our third-party service providers have been subject to a

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cyberattack, other financial services institutions and their service providers have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks, including use of stolen access credentials, malware, ransomware, phishing, structured query language injection attacks, and distributed denial-of-service attacks, among others. Such cyber-attacks may also be directed at disrupting the operations of public companies or their business partners, which are intended to effect unauthorized fund transfers obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyberattacks and other means. Denial of service attacks have been launched against a number of large financial services institutions, and we may be subject to these types of attacks in the future. Hacking and identity theft risks, in particular, could cause serious reputational harm. Cyber threats are rapidly evolving and we may not be able to anticipate or prevent all such attacks and could be held liable for any security breach or loss.

Despite our cybersecurity policies and procedures and our efforts to monitor and ensure the integrity of our and our service providers’ systems, we may not be able to anticipate all types of security threats, nor may we be able to implement preventive measures effective against all such security threats. The techniques used by cyber criminals change frequently, may not be recognized until launched and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments or agencies. These risks may increase in the future as the use of mobile banking and other internet-based products and services continues to grow.

Security breaches or failures may have serious adverse financial and other consequences, including significant legal and remediation costs, disruption of operations, misappropriation of confidential information, damage to systems operated by us or our third-party service providers, as well as damaging our customers and our counterparties. In addition to the immediate costs of any failure, interruption or security breach, including those at our third-party service providers, these events could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

Severe weather, natural disasters, acts of war or terrorism, theft, government expropriation or other external events could have significant effects on our business.

Severe weather and natural disasters, including hurricanes, tornados, earthquakes, fires, droughts and floods, acts of war or terrorism, theft, government expropriation, condemnation or other external events could have a significant effect on our ability to conduct business. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses. Although management has established disaster recovery and business continuity policies and procedures, the occurrence of any such event could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations. Our business is concentrated in three markets — South Florida, the greater Houston, Texas area and the greater New York City area, which may increase our risks from storms. For example, in Fall 2017, both the greater Houston, Texas area and South Florida were struck by major hurricanes within days of each other.

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

While we seek continued organic growth, we may consider the acquisition of other businesses. To the extent that we grow through acquisitions, we cannot assure you that we will be able to adequately or profitably manage this growth. Acquiring other banks, banking centers, or businesses, as well as other geographic (domestic and international) and product expansion activities, involve various risks including:

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Attractive acquisition opportunities may not be available to us in the future.

We expect that other banking and financial companies, many of which have significantly greater resources, will compete with us to acquire financial services businesses. This competition could increase prices for potential acquisitions that we believe are attractive. Also, acquisitions are subject to various regulatory approvals. If we fail to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition that we may believe is in our best interests. Additionally, regulatory approvals could contain conditions that reduce the anticipated benefits of a contemplated transaction. Among other things, our regulators consider our capital levels, liquidity, profitability, regulatory compliance, including anti-money laundering efforts, levels of goodwill and intangibles, management and integration capacity when considering acquisition and expansion proposals. Any acquisition could be dilutive to our earnings and shareholders’ equity per share of our common stock.

Litigation and regulatory investigations are increasingly common in our businesses and may result in significant financial losses and/or harm to our reputation.

We face risks of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including the risk of class action lawsuits. Plaintiffs in class action and other lawsuits against us may seek very large and/or indeterminate amounts, including punitive and treble damages. Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. We do not have any material pending litigation or regulatory matters affecting us.

A substantial legal liability or a significant federal, state or other regulatory action against us, as well as regulatory inquiries or investigations, could harm our reputation, result in material fines or penalties, result in significant legal costs, divert management resources away from our business, and otherwise have a material adverse effect on our ability to expand on our existing business, financial condition and results of operations. Even if we ultimately prevail in the litigation, regulatory action or investigation, our ability to attract new customers, retain our current customers and recruit and retain employees could be materially and adversely affected. Regulatory inquiries and litigation may also adversely affect the prices or volatility of our securities specifically, or the securities of our industry, generally.

Our associates may take excessive risks which could negatively affect our financial condition and business.

As a banking enterprise, we are in the business of accepting certain risks. The associates who conduct our business, including executive officers and other members of management, sales intermediaries, investment

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professionals, product managers, and other associates, do so in part by making decisions and choices that involve risks. We endeavor, in the design and implementation of our compensation programs and practices, to avoid giving our associates incentives to take excessive risks; however, associates may take such risks regardless of the structure of our compensation programs and practices. Similarly, although we employ controls and procedures designed to monitor associates’ business decisions and prevent them from taking excessive risks, and to prevent employee misconduct, these controls and procedures may not be effective. If our associates take excessive risks or avoid our policies and internal controls, their actions could have a material adverse effect on our reputation, financial condition and business operations.

We may be unable to attract and retain key people to support our business.

Our success depends, in large part, on our ability to attract and retain key people. We compete with other financial services companies for people primarily on the basis of compensation, support services and financial position. Intense competition exists for key employees with demonstrated ability, and we may be unable to hire or retain such employees. Effective succession planning is also important to our long-term success. The unexpected loss of services of one or more of our key personnel and failure to effectively transfer knowledge and smooth transitions involving key personnel could have material adverse effects on our business due to loss of their skills, knowledge of our business, their years of industry experience and the potential difficulty of timely finding qualified replacement employees. We do not currently anticipate any significant changes to our senior management team following the completion of the spin-off. However, there may be new positions which we may need to fill to operate as an independent public company. We may not be able to attract and retain qualified people to fill these open positions or replace or succeed members of our senior management team or other key personnel following the completion of the spin-off. Rules implementing the executive compensation provisions of the Dodd-Frank Act may limit the type and structure of compensation arrangements into which we may enter with certain of our employees and officers. In addition, proposed rules under the Dodd-Frank Act would prohibit the payment of “excessive compensation” to our executives. Our regulators may also restrict compensation through rules and practices intended to avoid risks. These restrictions could negatively affect our ability to compete with other companies in recruiting and retaining key personnel.

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

Following the spin-off, we and our subsidiaries will be regulated by several regulators, including the Federal Reserve, the Office of the Comptroller of the Currency, or OCC, the FDIC, the SEC, and the Financial Industry Regulatory Authority, Inc., or FINRA. Our success is affected by regulations affecting banks and bank holding companies, and the securities markets, and our costs of compliance could adversely affect our earnings. Banking regulations are primarily intended to protect depositors and the FDIC Deposit Insurance Fund, not shareholders. The financial services industry also is subject to frequent legislative and regulatory changes and proposed changes. In addition, the interpretations of regulations by regulators may change and statutes may be enacted with retroactive impact. From time to time, regulators raise issues during examinations of us that could, if not determined satisfactorily, have a material adverse effect on us. Compliance with applicable laws and regulations is time consuming and costly.

The current President and the majority party in both houses of Congress promote and support enacting regulatory relief for the banking industry. The nature, effects and timing of administrative and legislative change, including the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, or the 2018 Growth Act, that was enacted on May 24, 2018, cannot be predicted. The federal bank regulators and the Treasury Department, as well as the Congress and the President, are evaluating the regulation of banks, other financial services providers and the financial markets and such changes, if any, could require us to maintain more capital and liquidity, and restrict our activities, which could adversely affect our growth, profitability and financial condition. Our consumer finance products, including residential mortgage loans, are subject to CFPB regulations and evolving standards reflecting CFPB releases, rule-making and enforcement actions. If our assets grow to $10 billion or more, we will become subject to direct CFPB examination.

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

We are regulated as a bank holding company and are subject to consolidated regulatory capital requirements and liquidity requirements administered by the Federal Reserve. The Bank is subject to similar capital and liquidity requirements, administered by the OCC. The Basel III Capital Rules have increased capital requirements for banking organizations such as us. The Basel III Capital Rules include a new minimum ratio of Common Equity Tier 1 capital, or CET1, to risk-weighted assets of 4.5% and a capital conservation buffer of 2.5% of risk-weighted assets. The Basel III Capital Rules phase in over time and will become fully effective on January 1, 2019. See “Supervision and Regulation — Basel III Capital Rules” We have established capital ratio targets that align with U.S. regulatory expectations under the fully phased-in Basel III Capital Rules. Although we currently have capital ratios that exceed these minimum levels and a strategic plan to maintain these levels, we or the Bank may be unable to continue to satisfy the capital adequacy requirements for the following reasons:

Our failure to remain “well capitalized,” including meeting the Basel III Capital Rules conservation buffer, could affect customer confidence, and our:

Our ability to pay dividends to shareholders in the future is subject to profitability, capital, liquidity and regulatory requirements and these limitations may prevent us from paying dividends in the future.

Cash available to pay our expenses and dividends to our shareholders is derived primarily from dividends paid to us by the Bank. The Bank’s ability to pay dividends, as well as our ability to pay dividends to our shareholders, will continue to be subject to and limited by the results of operations of our subsidiaries and our need to maintain appropriate liquidity and capital at all levels of our business consistent with regulatory requirements and the needs of our businesses. See “Supervision and Regulation” and “Dividend Policy.”

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The Dodd-Frank Act currently restricts our future issuance of trust preferred securities and cumulative preferred securities as eligible Tier 1 risk-based capital for purposes of the regulatory capital guidelines for bank holding companies.

Bank holding companies with assets of less than $15 billion as of December 31, 2009, including us, are permitted to include trust preferred securities that were issued before May 19, 2010 as Tier 1 capital under the Dodd-Frank Act. As of March 31, 2018 and December 31, 2017, we had $118.1 million of trust preferred securities outstanding that were issued before May 19, 2010, and that have maturity dates between 2028 and 2036.

Should we determine it is advisable, or should our regulators require us, to raise additional capital, we would not be able to issue additional trust preferred securities, as only bank holding companies with assets of less than $500 million are permitted to continue to issue trust preferred securities and include them as Tier 1 capital. Instead, we would have to issue noncumulative preferred stock or common equity, which are Tier 1 capital. Subordinated notes meeting Basel III Capital Rules may be issuable as Tier 2 capital. To the extent we issue new equity or securities convertible into Company Shares, it could dilute our existing shareholders. Dividends on any preferred stock we may issue, unlike distributions paid on trust preferred securities, would not be tax deductible, and the preferred stock would have a preference in liquidation and in dividends to our common stock. See “Supervision and Regulation.”

We may need to raise additional capital in the future, but that capital may not be available when it is needed or on favorable terms.

We anticipate that our current capital resources will satisfy our capital requirements for the foreseeable future under currently effective regulatory capital rules. We may, however, need to raise additional capital to support our growth or currently unanticipated losses, or to meet the needs of the communities we serve. Our ability to raise additional capital, if needed, will depend, among other things, on conditions in the capital markets at that time, which may be limited by events outside our control, and on our financial performance. If we cannot raise additional capital on acceptable terms when needed, our ability to further expand our operations through internal growth and acquisitions could be limited.

We will be subject to heightened regulatory requirements if our total assets grow and exceed $10 billion.

As of March 31, 2018 and December 31, 2017, our total assets were $8.4 billion. Based on our current total assets and growth strategy, we anticipate our total assets may exceed $10 billion within the next five years. In addition to our current regulatory requirements, banks with $10 billion or more in total assets are:

Compliance with these additional ongoing requirements may necessitate additional personnel, the design and implementation of additional internal controls, or the incurrence of other significant expenses, any of which could have a material adverse effect on our business, financial condition or results of operations. Compliance

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with the annual DFAST requirements, part of which must be publicly disclosed, may also be misinterpreted by the market generally or our customers and, as a result, may adversely affect our stock price or our ability to retain our customers or effectively compete for new business opportunities. To ensure compliance with these heightened requirements when they become applicable to us, our regulators have requested us to comply with certain of these requirements and incur costs to prepare for compliance even before we or our Bank crosses the $10 billion in total assets mark. Our regulators may also consider our preparation for compliance with these regulatory requirements in the course of examining our operations generally or when considering any request from us or the Bank. It is unclear how these expectations may change as a result of the 2018 Growth Act.

The Federal Reserve may require us to commit capital resources to support the Bank.

As a matter of policy, the Federal Reserve, which examines us, expects a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank. The Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank. In addition, the Dodd-Frank Act amended the Federal Deposit Insurance Corporation Act to require that all companies that control a FDIC-insured depository institution serve as a source of financial strength to the depository institution. Under this requirement, we could be required to provide financial assistance to the Bank should it experience financial distress, even if further investment was not otherwise warranted. See “Supervision and Regulation.”

We may face higher risks of noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations than other financial institutions.

The U.S. Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The Federal Financial Crimes Enforcement Network, or FinCEN, was established as part of the Treasury Department to combat money laundering, is authorized to impose significant civil money penalties for violations of anti-money laundering rules. FinCEN has engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, or DOJ, Drug Enforcement Administration, and U.S. Internal Revenue Service, which we refer to as the IRS.

There is also regulatory scrutiny of compliance with the rules of the Treasury Department’s Office of Foreign Assets Control, or OFAC. OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals, including sanctions against foreign countries, regimes and individuals, terrorists, international narcotics traffickers, and those involved in the proliferation of weapons of mass destruction. Executive Orders have sanctioned the Venezuelan government and entities it owns, and certain Venezualan persons. In addition, the OCC has broad authority to bring enforcement action and to impose monetary penalties if it determines that there are deficiencies in the Bank’s compliance with anti-terrorism financing laws.

Monitoring compliance with anti-money laundering and OFAC rules is complex and expensive. The risk of noncompliance with such rules can be more acute for financial institutions like us that have a significant number of customers from, or which do business in, Latin America. As of March 31, 2018, $3.0 billion, or 47.5%, of our total deposits were from residents of Venezuela. Our total loan exposure to international markets, primarily financial institutions in Brazil, Chile, Colombia, Mexico and Peru, was $686.9 million, or 11.54%, of our total loans, at March 31, 2018.

In recent years, we have expended significant management and financial resources to further strengthen our anti-money laundering compliance program. Although we believe our anti-money laundering and OFAC compliance programs, and our current policies and procedures and staff dedicated to these activities, are

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sufficient to comply with applicable rules and regulations, we cannot guarantee that our program will prevent all attempts by customers to utilize the Bank in money laundering or financing impermissible under current sanctions and OFAC rules, or sanctions against Venezuela, and certain persons there. If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that we may acquire in the future are deficient, we would be subject to liability, including fines and formal regulatory enforcement actions, including possible cease and desist orders, restrictions on our ability to pay dividends, regulatory limitations on implementing certain aspects of our business plan, including acquisitions or banking center expansion, and require us to expend additional resources to cure any deficiency, which could materially and adversely affect us.

Risks Related to Our Spin-off from, and Continuing Relationships with, MSF

In connection with the spin-off, we expect, after a transition period, to cease using the “Mercantil” brand, which could adversely affect our business and profitability.

Since 2007, we have marketed our products and services using variations of MSF’s “Mercantil” brand name and logo.

We believe the association with MSF has provided us with greater name recognition among our customers from Latin America, including those with homes or businesses in the U.S. MSF’s reputation and financial strength has benefitted us historically. Because it will reduce any potential confusion between us and MSF following the spin-off, the use of a different name and logo may be required by our bank regulators. We expect to license the Mercantil name and brand from MSF for a transition period following the spin-off to facilitate the transition. The use of another name and logo will result in additional costs, such as signage, and may result in potential loss of customer recognition and business. See “Certain Relationships and Related Party Transactions” and “Supervision and Regulation.”

We expect to incur incremental costs as a separate, public company.

Although we maintain separate systems and conduct operations largely with our own staff separate from MSF and its other affiliates, the spin-off will require us to incur additional personnel and other expenses as a standalone public company. Such expenses include, but are not limited to, SEC reporting, additional internal controls testing and reporting, and investor relations. These initiatives will involve additional management attention and costs, including the hiring and integration of certain new employees and changes in the manner of conducting certain functions. We may be unable to make the changes required in a timely manner and without unexpected costs, including possible diversion of management from our day-to-day operations, which could have a material adverse effect on our business, results of operations and financial condition.

As a separate, public company, we expect to expend additional time and resources to comply with rules and regulations that previously did not apply to us.

As a separate, public company, the various rules and regulations of the SEC, as well as the listing standards of the Nasdaq Stock Market, where we intend to list Company Shares, will require us to implement additional corporate governance practices and adhere to a variety of reporting requirements. Compliance with these public company obligations will increase our legal and financial compliance costs and place additional demands on our finance, legal and accounting staff and on our financial, accounting and information systems.

In particular, as a separate, public company, our management will be required to conduct an annual evaluation of our internal controls over financial reporting and include a report of management on our internal controls starting with our second annual report filed with the SEC on Form 10-K. For as long as we are an emerging growth company, we will not be required to have our independent registered public accounting firm attest to the effectiveness of our internal controls over financial reporting pursuant to Auditing Standard No. 5. If

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we are unable to conclude that we have effective internal controls over financial reporting, investors could lose confidence in the reliability of our financial statements, which could adversely affect the price for our common stock.

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

Our historical consolidated financial data included in this information statement does not necessarily reflect the financial condition, results of operations or cash flows we would have achieved as a standalone company during the periods presented or those we will achieve in the future. In addition, significant increases may occur in our cost structure as a result of the spin-off, including costs related to public company reporting, investor relations and compliance with the Sarbanes-Oxley Act. Also, we anticipate incurring material expenses in connection with rebranding our business. We are engaged in a comprehensive strategic planning process to evaluate how we conduct business, including how to focus on our domestic United States business while better serving our valued foreign customers, reducing costs, and increasing core deposits, fee income, margins, and the number of services we provide per household and our profitability. As a result of these matters, among others, it may be difficult for investors to compare our future results to historical results or to evaluate our relative performance or trends in our business.

We expect to incur significant additional shareholder communication and maintenance expenses after the spin-off, unless our expense reduction measures, including the Reorganization, are completed. The Reorganization and related transactions may be subject to approvals or waivers by the Federal Reserve.

We expect to incur significant additional shareholder reporting, communication and maintenance expenses related to the approximately 20,000 shareholders we will have immediately following the spin-off. The large number of shareholders, most of whom are outside the United States, will cause these expenses to be higher than desirable. Although we will seek to reduce these expenses through electronic delivery consistent with SEC rules and shareholder consents, the Reorganization, which will reduce our total number of shareholders by approximately 16,000 to 17,000 persons, is the largest cost saving opportunity. The Reorganization may be completed without a shareholder vote, and we do not intend to seek a shareholder vote. The Reorganization may be subject to notices and approvals or waivers by the Federal Reserve, and there is no assurance that these will be received timely or in satisfactory form.

Our strategic plan and growth strategy may not be achieved as quickly or as fully as we seek.

Our strategies and plans include significant changes, which may require certain changes in our culture and personnel, as well as interacting better and on a broader relationship basis with our customers. We want to serve our customers’ needs better and more broadly, including our valued foreign customers. We will shrink our LATAM lending businesses, while seeking higher margin domestic lending opportunities in our markets. Our strategic planning is not finished. Our plans may take longer than we anticipate and the results we achieve may not be as successful as we seek, all of which could adversely affect our results of operations, liquidity and financial condition.

MSF’s planned sales of the 19.9% of our Class A common stock and Class B common stock it will hold as Retained Shares after the spin-off may adversely affect the trading price of our common stock, presents risks, and may otherwise adversely affect us.

MSF currently expects to dispose of the 19.9% of our Class A and Class B common stock held as Retained Shares in the Trust during the two years beginning March 15, 2018. We have agreed to file one or more registration statements with the SEC following the spin-off, which may include an IPO of Company Shares, to facilitate such resales in public offerings and have agreed to cooperate in any such resales at MSF’s expense. MSF may also sell those shares from time to time in other transactions, including transactions exempt from registration under the Securities Act, provided that no one buyer acquires 2% or more of our Class A common stock in a transaction with MSF.

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The disposition by MSF of its remaining ownership interest in us may be subject to various conditions, including receipt of any necessary regulatory and other approvals, and satisfactory market conditions. There is currently no market for our common stock and it is unknown whether one will develop, with or without an IPO by the Company, or be sufficiently liquid to absorb MSF’s contemplated sales outside a public offering by us that includes some or all of MSF’s Retained Shares. The existence of the Retained Shares and the intended resales of such shares could adversely affect the market prices for both classes of our common stock.

MSF operates in a hyperinflationary economy subject to currency controls and is subject to regulation by the Federal Reserve and Venezuela authorities. Accordingly, the timing and amounts of MSF’s disposition of the Retained Shares, and the prices it realizes from such sales could be affected by events beyond MSF’s or our control, which could adversely affect the Company and the market for Company Shares.

After the spin-off, certain of our directors and officers may have actual or potential conflicts of interest because of their MSF equity ownership or their positions with MSF and us.

MSF is expected to have three common directors, one of which is also a common officer, with us after the spin-off. Combined, these shared persons will beneficially own, immediately following the Distribution, approximately 16.23% and 12.36% of the total outstanding shares of our Class A and Class B common stock, respectively. These persons’ families will control additional Company Shares. These relationships and financial interests may create actual or perceived conflicts of interest when these directors and officers are faced with decisions that could have different implications for MSF and us. For example, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between MSF and us regarding the spin-off or the disposition of the Retained Shares by MSF. See “Risks Related to Ownership of Our Common Stock — Our shares will be eligible for future sale, which may cause our stock price to decline.” and “Ownership of our Stock.”

The Bank has agreed to continue to provide certain services to MSF’s subsidiaries after the spin-off, which could present additional regulatory and operational risks to us.

The Bank, the Trust Company and Investment Services have historically provided certain services to MSF’s international subsidiaries, including accounting and financial reporting, administration, operations and technology, planning and budgeting, human resources, vendor administration and management, trust administration, market risk assessment, operational risk and physical security, credit risk, loan review, technology infrastructure, treasury, and customer referral services. Pursuant to the Separation Agreement, we have agreed that the Bank will continue to provide certain of these services on a transitional basis after the spin-off, on the same terms (including pricing) in effect as of the spin-off, and which are compliant with Federal Reserve Regulation W. This contractual obligation could present future regulatory and operational risks to us, including with respect to compliance with U.S. anti-money laundering laws and Federal Reserve Regulation W. The terms of these arrangements may also be changed if the Federal Reserve or OCC view these arrangements as inappropriate, including under their policy statement on parallel-owned banking organizations.

MSF is likely to be deemed to retain “control” over us and the Bank for Federal Reserve and BHC Act purposes, which, together with the controlling shareholder base we have in common with MSF, likely will lead to restrictions and limitations upon the relationships and transactions between MSF and us, which may adversely affect our business and results of operations.

Following the spin-off, we expect that MSF will be deemed by the Federal Reserve to retain control of us due to its Retained Shares and interlocking directors and officer. This control may end when the Federal Reserve determines that sufficient Retained Shares have been sold and if the interlocking directors and officers are not deemed to have control over our management or policies. Until that time, Federal Reserve Regulation W will limit transactions between the Bank and the MSF organization similar to restrictions that have been applicable before the spin-off. In addition, other transactions and relationships between MSF, and its subsidiaries, on the

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one hand, and us and the Bank, on the other, which we or the Bank may deem desirable and in our mutual best interest, may be restricted by the Federal Reserve or the OCC under their policy statement on parallel-owned banking organizations. These restrictions could limit our operating flexibility and increase our costs, which would have a material adverse effect on our business and result of operations. See “Supervision and Regulation.”

We and the Company Shares could be affected adversely by events and regulations affecting MSF while it is deemed to “control” us following the spin-off.

The scope of the Federal Reserve’s regulation of MSF following the Distribution and during the time that MSF is deemed to “control” us is uncertain. For example, the Venezuela official exchange rate mandated for use in preparing MSF’s financial statement has previously caused MSF to be in excess of $50 billion in total assets and has enabled MSF to comply with Federal Reserve requirements as a “qualified foreign banking organization,” or QFBO. As a result of changes to Venezuela exchange rates and inflation, MSF is currently expected to lose QFBO status at the beginning of 2020. If MSF is deemed to “control” us at that time, the scope and nature of the adverse effects on us cannot be predicted, since there is little or no historical precedent for such an event. If this event occurs before MSF’s sale or disposition of sufficient Company Shares to eliminate MSF’s control of us, a forced disposition of MSF’s remaining Company Shares may result. A forced disposition could be at a time, and on prices and terms, and to persons, that could adversely affect us and our other shareholders.

A change in control of MSF while it controls us would likely adversely affect us, our business and the Company Shares.

A change in control of MSF while it controls us could adversely affect relations between MSF and us, could subject us to possible sanctions, and adversely affect market perceptions and the values of the Company Shares. The Separation Agreement and Distribution Trust Agreement, accordingly provide that upon a “change in control” of MSF, including an expropriation or takeover of MSF’s Retained Shares, beneficial ownership of such Retained Shares in the Distribution Trust will be delivered to and vest in us immediately prior to the change in control. A successful challenge to such terms could adversely affect us and the Company Shares.

We may find it desirable to include Retained Shares and/or to repurchase Company Shares from MSF, reducing proceeds to us from any IPO or other offering.

We and MSF have entered into a registration rights agreement with respect to MSF’s Retained Shares, including piggyback registration rights in the event of an IPO or other public offering. We are well capitalized, and believe that an important reason to consider an IPO is to increase market liquidity for our Class A common stock, generally, and to significantly reduce MSF’s ownership of Company Shares and eliminate its “control” of us for BHC Act purposes. We are only considering the possible public offering of Class A common stock, which is our only voting security, which the Federal Reserve scrutinizes most closely in “control” determinations under the BHC Act. If MSF cannot sell all its Class A Retained Shares in a potential IPO by us, we may find it desirable to repurchase the remaining Class A Retained Shares. Similarly, we may determine to repurchase Class B Retained Shares with proceeds from an IPO or other offering of our Class A common stock. These scenarios will reduce the proceeds of any offering to us and may require offering proceeds to be used for Retained Share repurchases, instead of our strategic growth and cost reduction initiatives. All repurchases of Retained Shares will be subject to prior notice to, and approval by, the Federal Reserve.

The exact terms of the spin-off, including the Distribution, and our relationship with MSF, are subject to change as a result of discussions with, and requirements of, our regulators, including the Federal Reserve and the OCC.

The exact terms of the spin-off, including the Distribution, and our relationship with MSF generally following the Distribution, including the interlocking directors or officers and transition services, and our

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continued “control” by MSF under the BHC Act, among other things, are subject to change as a result of ongoing discussions with, and requirements of, our regulators, including the Federal Reserve and the OCC. Furthermore, the Federal Reserve, the OCC and the other bank regulators may require us to make commitments or change conditions that could adversely affect the terms of the spin-off, our relationships with MSF or its affiliates, and MSF’s and our businesses following the spin-off.

Certain U.S. Federal Income and Other Tax Risks

We have not received a determination from the IRS as to the tax-free nature of the spin-off for U.S. federal income tax purposes, and there is a risk that they may disagree with our determination.

We have not sought or received a determination from the IRS that the Distribution will be tax-free to the shareholders of MSF who receive shares of our common stock in the Distribution. We and MSF expect to receive an opinion from Jones Day confirming that the Distribution should be tax-free for U.S. federal income tax purposes, which we refer to as the tax opinion. However, the tax opinion of Jones Day is not binding upon the IRS. If the IRS took the view that the Distribution was not tax-free for U.S. federal income tax purposes, MSF shareholders subject to U.S. income taxes could face, among potentially other risks and depending upon their individual situations, some or all of the income tax risks described below.

If the Distribution is determined to be taxable for U.S. federal income tax purposes, then our shareholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities

The receipt of the tax opinion is a condition to the Distribution that must be either satisfied or waived by MSF. The opinion will rely on certain facts and assumptions and certain representations and undertakings from us and MSF regarding the past and future conduct of our respective businesses and other matters. Notwithstanding the tax opinion, the IRS could determine on audit that the Distribution should be treated as a taxable transaction if it determines that any of these facts, assumptions, representations or undertakings relied upon to render the tax opinion are not correct or has been breached, or that the Distribution should be taxable for other reasons, including as a result of significant changes in stock or asset ownership after the spin-off. An opinion of counsel represents counsel’s best legal judgment, is not binding on the IRS or the courts, and the IRS or the courts may not agree with the opinion. In addition, the tax opinion will be based on current law, and cannot be relied upon if current law changes with retroactive effect. If the Distribution ultimately is determined to be taxable, the Distribution could be treated as a taxable dividend or capital gain to MSF shareholders for U.S. federal income tax purposes, and MSF shareholders subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities, including penalties.

We expect to agree to certain restrictions to preserve the tax-free treatment of the Distribution for U.S. federal income tax purposes, which may reduce our strategic and operating flexibility

The Separation Agreement contains various restrictions on our relationships and transactions with MSF, and our relations with our shareholders, such as certain limitations on our repurchases of Company Shares, which, in part are needed to preserve the tax-free treatment of the Distribution for U.S. federal income tax purposes.

Recipients of our common stock may be subject to Venezuelan tax obligations as a result of the Distribution

MSF has determined that the distribution of our shares to MSF shareholders will be taxable to persons subject to Venezuela income taxation, including holders in the United States that are not Venezuelan citizens. MSF has advised us that Venezuela income tax generally is computed in cases such as this as 34% of the taxable amount of the dividend decreed, which is calculated based on the value that the Company Shares that are carried on MSF’s books, or 59 Bolivars per share. Under the treaty to avoid double taxation between Venezuela and the United States, U.S. shareholders may be subject to lower taxes in Venezuela, and may be able to deduct the tax as a credit against the United States tax on income. Since your particular facts may differ, you are strongly encouraged to consult your own tax accountants or advisors to determine the Venezuela income tax

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consequences to you, and properly pay such taxes when due. Neither we nor MSF have any obligations to pay any taxes that MSF shareholders may incur in connection with the spin-off, or to otherwise withhold any amounts with respect to any such tax obligations. MSF declared aggregate cash dividends of 2.6 billion Bolivars payable at the Distribution Date to record holders of all MSF Shares as of the record date, which has been paid.

Risks Related to Ownership of Our Common Stock

The Trust does not permit the sale or transfer of any shares of our common stock or any interest therein held in the Trust prior to the Distribution.

The Trust holds 80.1% of the outstanding shares of our common stock placed in trust for the benefit of the MSF shareholders of record on the record date. The Trust holds the remaining 19.9% for the benefit of MSF that were record holders. No shares of common stock held in the Trust or any interest in such shares may be transferred, pledged, hypothecated, sold or disposed of other than in the Distribution itself. Retained Shares cannot generally be sold or disposed of for 90 days following the Distribution. The value of those shares could change significantly due to the spin-off and during the time that they are held in the Trust pending the Distribution, which will not occur until the SEC declares the Spin-off Registration Statement to be effective.

Our shares will be eligible for future sale, which may cause our stock price to decline.

Any sales of substantial amounts of our common stock in the public market, and the perception that such sales, including expected sales by MSF of the Retained Shares, may cause the market price of our common stock to decline. Upon completion of the spin-off, we will have outstanding an aggregate of 59,444,975 shares of our Class A common stock and 42,655,787 shares of our Class B common stock, not including the Retained Shares. Distributed Shares will be freely tradeable without restriction or further registration under the Securities Act upon and following the Distribution, except for shares held by our “affiliates.”

In addition, 14,767,433 shares of our Class A common stock and 10,597,370 shares of our Class B common stock will be held as Retained Shares in the Trust. MSF has advised us that it intends to sell or dispose of such Retained Shares within two years following the Distribution.

The principal shareholders of MSF, who will beneficially own approximately 37.51% of our Class A common stock and approximately 15.07% of our Class B common stock will be deemed to be our affiliates, together with our directors and executive officers. Such persons have indicated their intent not to dispose of their Company Shares until MSF is deemed by the Federal Reserve to no longer control us as a result of MSF’s ownership of our Company Shares. No market exists for our Company Shares at the time of the spin-off, and it is uncertain whether one will develop or have the depth to absorb resales by MSF or our other shareholders without adverse effects on the price or price volatility of such shares.

If we determine to make a registered offering of our Company Shares, we have granted MSF “piggyback” registration rights that would require us to include certain of its Retained Shares of our common stock on the same registration statement we use for our own offering. The sales of significant amounts of shares of our Company Shares or the perception in the market that this may occur may reduce the market price of our Company Shares.

No market exists for Company Shares. An active trading market may not develop or continue for the Company Shares, which could adversely affect the market price and market volatility of those shares.

Your ability to sell or purchase our common stock depends upon the existence of an active trading market for our common stock. Although we have applied to list our Company Shares on the Nasdaq Stock Market, our shares have not previously been publicly held or traded, there is currently no market for shares of our Class A or Class B common stock and there is no assurance that an active market will develop or be sustained following the Distribution. The concentration of ownership of Company Shares by shareholders in Venezuela and Venezuela

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currency controls and the difficulty Venezuelans establishing U.S. Dollar accounts, may limit Venezuelans’ ability to buy or sell Company Shares, and the development of an active market prior to our IPO. We intend to list shares of our Class A common stock on the Nasdaq Stock Market under the symbol “MBNAA” and intend to list shares of our Class B common stock on the Nasdaq Stock Market under the symbol “MBNAB.” If an active trading market does not develop, you may be unable to sell or purchase shares of our common stock at the volume, price and time that you desire.

Whether or not the purchase or sale prices of our common stock reflect a reasonable valuation of our common stock may depend on an active trading market developing, and thus the price you receive for a thinly-traded stock such as our common stock, may not reflect its true or intrinsic value. A limited trading market for our common stock may cause fluctuations in the market value of our common stock to be exaggerated from time to time, leading to price volatility in excess of that which would occur in a more active trading market.

Efforts to facilitate sales sought by Venezuela shareholders may be unsuccessful.

Persons in Venezuela may experience greater difficulty in buying or selling Company Shares due to currency controls and other factors. We have been investigating possible alternatives that would help our shareholders in Venezuela buy or sell their Company Shares following the Distribution. If these efforts are unsuccessful, the liquidity and market prices for our Common Shares may be adversely affected.

Persons who trade in Company Shares between the Distribution and the Reorganization, and prior to any potential IPO, may realize significantly different prices from those that may result from any Reorganization or potential IPO.

The prices which we may pay for Company Shares in the Reorganization or at which we may offer Common Shares for sale in a potential IPO, may be more or less (on an equivalent share basis) than investors could realize by selling in the market, including as a result of changes in market conditions at these various times. The price paid by us for Company Shares in any Reorganization may be based on (i) prices realized for Class A common stock in an IPO, if one occurs, (ii) volume weight average market prices or (iii) such other values we may determine is appropriate. Although we anticipate a more liquid market for Class A common stock if we conduct an IPO of Class A common stock, there is no assurance that an active market will develop or continue, or as to the effects of any IPO of Class A common stock on the market for shares of Class B common stock.

Shares of our Class B common stock may trade at a discount to shares of our Class A common stock.

Class B common stock has limited voting rights and therefore may trade less frequently and/or at a discount to voting Class A common stock. We have no current intent to issue more shares of Class B common stock, except as a result of any stock split following the Reorganization.

We expect to issue more Class A common stock in the future which may increase the market for, and liquidity of, Class A common stock compared to Class B common stock.

Federal Reserve policy requires bank holding companies’ capital to be comprised predominantly of voting common stock. Class B common stock is not voting common stock for Federal Reserve purposes, therefore we expect future issuances of Company Shares will be Class A common stock. These new issuances of Class A common stock, as well as their voting rights, may increase the market for, and liquidity of, our Class A common stock generally, as compared to the market for, and liquidity of, our Class B common stock.

Class B common stock is not convertible into or exchangeable for Class A common stock.

Holders of Class B common stock have no rights to convert or exchange Class B common stock into Class A common stock. We do not intend currently to convert Class A common stock into Class B common stock by amending our amended restated articles of incorporation or other action.

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Our dual classes of Company Shares may limit investments by investors using index-based strategies.

Certain major providers of securities indices have determined to exclude shares of companies with classes of common stock with different voting rights. These actions may limit investment in Company Shares by mutual funds, exchange traded funds, or ETFs and other investors basing their strategies on such securities indices, which could adversely affect the value and liquidity of Company Shares.

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

Our Class B common stock has no voting rights, except as required by the Florida Business Corporation Act or as a voting group or any amendment, alteration or repeal of our articles of incorporation, including any such events as a result of a merger, consolidation or otherwise that significantly and adversely affects the rights or voting powers of our Class B common stock. Generally, such shares will be entitled to one-tenth of a vote, together with our Class A common stock holders on a combined basis, on the matter of approval of our auditors for a given fiscal year, if we present such a proposal for shareholder consideration. If the matter of approval of our auditors for a given fiscal year is submitted to our common stock holders, each share of Class B common stock will be entitled to one-tenth of a vote per share. As a result, virtually all matters submitted to our stockholders will be decided by the vote of holders of our Class A common stock and the market price of our Class B common stock could be adversely affected.

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

The issuance of additional equity securities or securities convertible into equity securities would result in dilution of our existing shareholders’ equity interests. In addition, we are authorized to issue up to 400 million shares of our Class A common stock and up to 100 million shares of our Class B common stock. We are authorized to issue, without shareholder approval, up to 50 million shares of preferred stock in one or more series, which may give other shareholders dividend, conversion, voting, and liquidation rights, among other rights, that may be superior to the rights of holders of our common stock. We are authorized to issue, without shareholder approval, except as required by law or the Nasdaq Stock Market, securities convertible into either common stock or preferred stock. Furthermore, we have adopted an equity compensation program for our employees, which also could result in dilution of our existing shareholders’ equity interests.

Certain provisions of our amended and restated articles of incorporation and amended and restated bylaws, Florida law, and U.S. banking laws could have anti-takeover effects by delaying or preventing a change of control that you may favor.

Certain provisions of our amended and restated articles of incorporation and amended and restated bylaws, as well as Florida law, and the BHC Act, and Change in Bank Control Act, could delay or prevent a change of control that you may favor.

Our amended and restated articles of incorporation and amended and restated bylaws include certain provisions, that could delay a takeover or change in control of us, including:

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See “Description of Capital Stock” for a more detailed description.

The Florida Business Corporation Act contains a control-share acquisition statute that provides that a person who acquires shares in an “issuing public corporation,” as defined in the statute, in excess of certain specified thresholds generally will not have any voting rights with respect to such shares, unless such voting rights are approved by the holders of a majority of the votes of each class of securities entitled to vote separately, excluding shares held or controlled by the acquiring person.

The Florida Business Corporation Act also provides that an “affiliated transaction” between a Florida corporation with an “interested shareholder,” as those terms are defined in the statute, generally must be approved by the affirmative vote of the holders of two-thirds of the outstanding voting shares, other than the shares beneficially owned by the interested shareholder. The Florida Business Corporation Act defines an “interested shareholder” as any person who is the beneficial owner of 10% or more of the outstanding voting shares of the corporation.

Furthermore, the BHC Act and the Change in Bank Control Act impose notice, application and approvals and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect “control” of bank holding companies, such as ourselves.

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

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of some of the exemptions from reporting requirements that are afforded to emerging growth companies including, but not limited to, exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we intend to rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock prices may become more volatile. We may take advantage of these exemptions until we are no longer an emerging growth company.

Our stock price may fluctuate significantly.

We cannot predict the prices at which our Company Shares may trade after the Distribution. The market prices of our Company Shares may fluctuate widely, depending on many factors, some of which may be beyond our control, including:

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Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could also adversely affect the trading price of our Company Shares.

We, particularly as a newly independent company, face strategic risks.

As a newly independent company, and our history as part of MSF, we face strategic risk. Strategic risk is the risk to current or anticipated earnings, capital, liquidity, or franchise or enterprise value arising from adverse business decisions, poor implementation of business decisions, or lack of responsiveness to changes in the competitive landscape that is the banking and financial services industries in which we operate. We may have insufficient capital and insufficiently qualified personnel or culture to implement, as quickly as we seek, our strategy changes, including core deposit and fee income growth, improved margins, broader service to our customers, cost reductions and profitability increases.

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FORWARD-LOOKING STATEMENTS

Any statements in this information statement about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “seek,” “estimate,” “intend,” “indicate,” “designed,” “contemplate,” “plan,” “future,” “considered,” “management’s opinion,” “would,” and “should,” “could,” “continue,” “predict,” “target,” “strategies” and similar words and expressions of the future. For example, statements concerning financial condition, possible or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future management and organizational structure are all forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and assumptions, including the risks outlined under “Risk Factors” and elsewhere in this information statement, that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievement. We are not under any duty to update any of the forward-looking statements after the date of this information statement to conform these statements to actual results, unless required by law.

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DIVIDEND POLICY

We do not anticipate paying any dividends on Company Shares in the foreseeable future because we expect to retain earnings to support our business plan, including cash payable in our proposed Reorganization and the proposal purchase of the Cayman Bank, as described in this Information Statement. The declaration and payment of dividends, if any, however, will be subject to our board of directors’ discretion and will depend, among other things, upon our results of operations, financial condition, capital adequacy, cash requirements, prospects, regulatory limitations, and other factors that our board of directors may deem relevant.

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SELECTED FINANCIAL INFORMATION

The following table sets forth selected financial information derived from our unaudited interim consolidated financial statements as of March 31, 2018 and for the three months ended March 31, 2018 and 2017, and our audited consolidated financial statements as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015. The financial information as of December 31, 2015 has been derived from our audited consolidated financial statements not included herein. The unaudited selected financial information may not reflect our results of operations for our fiscal year ended, or financial condition as of, December 31, 2018, or any other period of time or date. The selected historical financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited interim consolidated financial statements and our audited consolidated financial statements and the corresponding notes included elsewhere in this information statement.

Our historical consolidated financial data included in this information statement does not necessarily reflect the financial condition, results of operations or cash flows we would have achieved as a standalone company during the periods presented or those we will achieve in the future. See “Risk Factors — Our historical consolidated financial data are not necessarily representative of the results we would have achieved as a separate company and may not be a reliable indicator of our future results.”

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NM Not Meaningful

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the “Selected Financial Information,” our audited consolidated financial statements, our unaudited interim consolidated financial statements and related notes included elsewhere in this information statement. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors” and elsewhere in this information statement, may cause actual results to differ materially from those projected in the forward looking statements.

Our historical consolidated financial data included in this information statement does not necessarily reflect the financial condition, results of operations or cash flows we would have achieved as a standalone company during the periods presented or those we will achieve in the future including as a result of changes in our strategy and our current strategic planning work, where we seek to operate as a simpler, more profitable business. See “Risk Factors — Our historical consolidated financial data are not necessarily representative of the results we would have achieved as a separate company and may not be a reliable indicator of our future results.”

Overview

Our Company

We are a bank holding company headquartered in Coral Gables, Florida. We provide individuals and businesses a comprehensive array of deposit, credit, investment, wealth management and fiduciary services, both in the United States and to select international customers. These services are offered primarily through the Bank and its subsidiaries, the Trust Company and Investment Services. The Bank’s primary markets are South Florida, where it operates 15 banking centers in Miami-Dade, Broward and Palm Beach counties; the greater Houston, Texas area where it has seven banking centers in Harris and Montgomery counties; and the New York City area where it has a loan production office in Midtown Manhattan. We are constructing an additional banking center in Katy, Texas. Our limited representative office in Brazil is being closed. Our previous representative offices in Colombia and Mexico were closed in 2016 and 2017, respectively.

We report our results of operations through four segments: Personal and Commercial Banking, Corporate LATAM, Treasury and Institutional. Our Personal and Commercial Banking segment, which we refer to as PAC, delivers the Bank’s core services and product offerings to domestic personal and commercial business customers and international customers, which are primarily personal customers. Our Corporate LATAM segment serves financial institution clients and large companies in Latin America. Our Treasury segment manages our securities portfolio, and supports Company-wide initiatives for increasing profitability of other financial assets and liabilities. Our Institutional segment is comprised of balances and results of Investment Services and the Trust Company, as well as general corporate activities not reflected in our other three segments.

Primary Factors Used to Evaluate Our Business

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

Net Interest Income. Net interest income represents interest income less interest expense. We generate interest income from interest, dividends and fees received on interest-earning assets, including loans and investment securities we own. We incur interest expense from interest paid on interest-bearing liabilities, including interest-bearing deposits, and borrowings such as junior subordinated debentures and other forms of indebtedness. Net interest income typically is the most significant contributor to our revenues and net income. To evaluate net interest income, we measure and monitor: (i) yields on our loans and other interest-earning assets; (ii) the costs of our deposits and other funding sources; (iii) our net interest spread; (iv) our net interest margin;

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and (v) our provisions for loan losses. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated by dividing net interest income for the period by average interest-earning assets. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and shareholders’ equity, also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources of funds.

Changes in market interest rates and interest we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and shareholders’ equity, usually have the largest impact on periodic changes in our net interest spread, net interest margin and net interest income. We measure net interest income before and after the provision for loan losses.

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

Our income from service fees on deposit accounts is largely impacted by the volume, growth and type of deposits we hold, which are impacted by prevailing market conditions for deposit products, our marketing efforts and other factors.

Our income from brokerage, advisory and fiduciary activities consists of brokerage commissions related to the dollar amount of customers’ trading volume of transactions, fiduciary, investment advisory fees and account administrative services generally based on a percentage of the average value of assets managed during the contractual period.

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

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

We have historically provided certain administrative services to non-U.S. affiliates under certain service agreements with arms-length terms and charges. Income from this source changes based on changes to the direct costs associated with providing the services and based on changes to the amount and scope of services provided which are reviewed periodically.

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

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

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

Salaries and employee benefits include compensation, employee benefits and employer tax expenses for our personnel.

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

Professional and other services fees include legal, accounting and consulting fees, card processing fees, and other fees related to our business operations, and include director’s fees and OCC fees.

Insurance and regulatory assessments include FDIC insurance and corporate insurance premiums.

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

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

Other operating expenses will include the incremental cost associated with servicing the large number of shareholders we will have post-spin-off.

Noninterest expenses generally increase as we grow our business and whenever necessary to implement or enhance policies and procedures for regulatory compliance.

Primary Factors Used to Evaluate Our Financial Condition

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

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

Capital. Financial institution regulators have established guidelines for minimum capital ratios for banks, thrifts and bank holding companies. In 2016, we adopted the new Basel III regulatory capital framework as approved by federal banking agencies, which is subject to a multi-year phase-in period. The adoption of this new framework modified the calculation of the various capital ratios, added a new ratio, CET1, and revised the adequately and well capitalized thresholds. In addition, Basel III establishes a new capital conservation buffer of 2.5% of risk-weighted assets, which is phased-in over a four-year period beginning January 1, 2016. Our capital ratios at March 31, 2018, December 31, 2017, 2016 and 2015 exceeded all minimum regulatory requirements to be “well-capitalized” on a current as well as fully phased-in basis.

We manage capital based upon factors that include: (i) the level and quality of capital and our overall financial condition; (ii) the trend and volume of problem assets; (iii) the adequacy of reserves; (iv) the level and quality of earnings; (v) the risk exposures in our balance sheet under various scenarios, including stressed; (vi) the levels of Tier 1 and total capital; (vii) the Tier 1 capital ratio, the total capital ratio, the Tier 1 leverage ratio, and the Common Equity Tier 1 capital ratio; and (viii) other factors.

Liquidity. Our deposit base consists primarily of personal and commercial accounts maintained by individuals and businesses in our primary markets. In recent years, we have increased our access to fully-insured time deposits under $250,000 brokered by third-party financial firms in the U.S. We manage liquidity based upon factors that include the amount of core deposit relationships as a percentage of total deposits, the level of diversification of our funding sources, the allocation and amount of our deposits among deposit types, the short-term funding sources used to fund assets, the amount of non-deposit funding used to fund assets, the availability

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of unused funding sources, off-balance sheet obligations, the availability of assets to be readily converted into cash without undue loss, the amount of cash and liquid securities we hold, the re-pricing characteristics and maturities of our assets when compared to the re-pricing characteristics of our liabilities and other factors.

Material Trends and Developments

Economic and Interest Rate Environment. The results of our operations are highly dependent on economic conditions in the markets we serve, and U.S. market interest rates. Beginning in 2007, turmoil in the financial sector resulted in a reduced level of confidence in financial markets among borrowers, lenders and depositors, as well as extreme volatility in the capital and credit markets. In response to these conditions, the Federal Reserve began decreasing short-term interest rates, with eleven consecutive decreases totaling 525 basis points between September 2007 and December 2008. Since the recession ended in 2009, the economic conditions in the U.S. and our primary market areas have improved. Economic growth has been modest, the real estate market continues to recover and unemployment rates in the U.S. and our primary markets have significantly improved.

The Federal Reserve’s Normalization Policy adopted in September 2014 included gradually raising the Federal Reserve’s target range for the Federal Funds rate to more normal levels and gradually reducing the Federal Reserve’s holdings of U.S. government and agency securities. The Federal Reserve’s target Federal Funds rate has increased seven times since December 2015 in 25 basis point increments from 0.25% to 2.00% on June 13, 2018.

General and Administrative Expenses. We expect to continue incurring increased noninterest expenses related to building out and modernizing our operational infrastructure, marketing and other administrative expenses to execute our strategic initiatives, costs associated with establishing de novo banking centers, expenses to hire additional personnel and other costs required to continue our growth.

Credit Reserves. We seek a level of loan reserves against probable losses commensurate with the credit risks inherent in our loan portfolio. These reserves are used to cover a number of factors associated with probable loan losses, including bad loans, customer defaults and renegotiated terms of a loan that incur lower than previously estimated payments. Management periodically evaluates the adequacy of these reserves to ensure that they are maintained at a reasonable level to provide for recognized and unrecognized but inherent losses in the loan portfolio.

Regulatory Environment. As a result of regulatory changes, including the Dodd-Frank Act and Basel III, as well as regulatory changes resulting from becoming a publicly traded company, we expect to be subject to more restrictive capital requirements, more stringent asset concentration and growth limitations and new and potentially heightened examination and reporting requirements. We also expect to face a more challenging environment for customer loan demand due to the increased costs that could ultimately be borne by borrowers, and to incur higher costs to comply with these new regulations. This uncertain regulatory environment could have a detrimental impact on our ability to manage our business consistent with historical practices and cause difficulty in executing our growth plan. See “Risk Factors — Risks Related to Our Business” and “Supervision and Regulation.”

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Discussion and Analysis of the Years Ended December 31, 2017, 2016 and 2015

Average Balance Sheet, Interest and Yield/Rate Analysis

The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the years ended December 31, 2017, 2016 and 2015. The average balances for loans include both performing and nonperforming balances. Interest income on loans includes the effects of discount accretion and the amortization of net deferred loan origination costs accounted for as yield adjustments. Average balances represent the daily average balances for the years presented.