Amerant Bancorp Inc (AMTB) 2025 Q1 法說會逐字稿

Greetings and welcome to the Amerant Bancorp's first quarter 2025 results.

(Operator Instructions)

It is now my pleasure to introduce your host Laura Rossi, Head of Investor Relations at Amerant Bancorp.

She may begin.

Thank you, Brock. Good morning, everyone and thank you for joining us to review Amerant Bancorps First quarter 2025 Results.

On today's call are Jerry Plush, our Chairman and CEO, and Sharymar Calderon, our Senior Executive Vice President and CFO.

As we begin, please note that discussions on today's call contain forward-looking statements within the meaning of the Securities Exchange Act. In addition references will also be made to non-GAAP financial measures. Please refer to the Company's earnings release for a statement regarding forward-looking statements. As well as for information on reconciliation of non-GAAP financial measures to GAAP measures. I will now turn it over to our Chairman and CEO. Jerry Blush.

Thank you, Laura. Good morning, everyone.

Thank you for joining us today to discuss Amerant 's first quarter 2025 results. We're implementing a change in our approach this quarter. This change is the result of our seeking investor and analyst feedback. On the last several quarters reports, so while the debt continues to include all the slides we've consistently supplied, we'll be commenting on significantly fewer slides than in the past. We're going to focus on results on asset quality and certain strategic updates as well, including changes to our mortgage business and on some significant personnel issues.

But before we dive into the details, I want to take a moment to acknowledge both the challenges and significant achievements we delivered this quarter. Despite the uncertainty in this environment, we outperformed expectations in several key areas. Our net interest income and net interest margin were stronger than projected, driving a robust TPNR. We also saw excellent. The growth underscoring the continued clients place in us.

But more importantly, we made a prudent decision to reserve for five specific loans and also to adjust our generic reserves, reflecting our commitment to transparency and risk management. Taking decisive action is essential as we remain focused on the longer term, and we believe the steps we've taken in this school are best positions for the future. So, let's turn now to slide 3, and here you'll see that our core business demonstrated solid deposit growth. Our total assets reached $10.2 billion as the close of the first quarter and increased from $9.9 billion in the fourth quarter.

We expect to now stay above the $10 billion level and grow from there in 2025. We've been building out our infrastructure to support being a regional bank, and so, we intend to keep moving in that direction.

Total investments were $1.76 billion up compared to $1.5 billion in the fourth quarter as we opted to purchase securities to protect the net interest margin, while our low pipeline continues to grow. Of note, at least half of these securities have fixed rates, protected against a potential downward rate scenario.

Our total gross loans were down by $52 million to $7.2 billion, down from $7.3 billion in the fourth quarter, primarily driven by increased prepayments which offset loan production in the quarter, as well as some low closing sliding into the sack.

Our total deposits were up by $300 million to $8.2 billion compared to $7.9 billion in the fourth quarter, driven by grounding core deposits. In this period, it's important to note that we manage the balance sheet to not only achieve strong PPNR results and protect our men, but also to hedge the risk of a downward rate scenario.

Looking at the income statement on slide 4, you'll see we had strong pre-provision debt revenue, driven by higher than previously projected interest income and that interest mark.

Our diluted income per share for the first quarter was $0.28 compared to $0.40 in diluted income per share in the fourth quarter, with the primary difference being the higher level of provision expense, we recorded this quarter in comparison to the last. We're going to cover those details in just a few slides.

Our interest margin was flat at 3.75% on Q2 compared to 4Q, but significantly better than projected. The end of the first quarter reflects these positive impacts due to the full quarter back of the Houston franchise sale, which had a relatively higher cost above the market, a lower cost of deposits resulting from a full quarter effect of repricing deposits down after the rate got late in Quarter 2.

Lower promo rates and new deposits in the timing difference between the maturities of broken CDs and the bills of quarter end, and it was also a full period of higher yielding securities in the investment portfolio after the repositioning that we did in portfolio in late Q2 and early Q4 2024.

That just margin increases we're somewhat upset by the downward repricing of floating rate loans and the impact of securities that we purchase this quarter, and the average yield on securities is clearly lower than it is in comparison to our loan production.

Our debt was $85.9 million, now $1.7 million from the $87.6 million for two, primarily driven by lower average balances yields on loans and higher average balances on. Again, as I noted previously, we're regenerating at higher yields on new production than the loans mature.

Prediction for credit losses was $18.4 million, up $8.5 million from the $9.9 million in the fourth Quarter

This increase was primarily driven by specific reserves could provide 5 levels can be individually evaluated specific reserves and also for macroeconomic updates. Shary is going to cover this more shortly.

Non-interest income was $19.5 million which included a net gain of $2.8 million primarily from a low milk sale that was previously charged off, while non-interest expense was $71.5 million when you exclude the overall valuation we recorded of 500,000 would have been $71 million even.

Pre-provision net revenue, otherwise known as PPNR, was higher $33.9 million Q2 compared to $27.9 million.4Q and in comparison, the consensus 1Q25, $31.32 million.

Let's turn to slide 5. I'm going to cut a couple of key items here.

We paid our early cash in the $0.90 per common share of February 28, 2025, and our board just approved the end of $0.09 per share payment on May 30, 2025.

Our Assets under management increased 42.55 billion, primarily driven by net new assets, although this was partially upset by market volatility which resulted in lower market valuation. We can continue to see this is an area of opportunity for us to going forward. And as we previously announced on April 1 of 2025, the company. Redeemed $60 million in aggregate Principal amount of its 5.75% senior notes due this year.

So, we'll move down to slide 6, and here I want to provide an update on our residential mortgage business. We're implementing a strategic change in our operating model, and here's how that's what we're going to be doing.

While the mortgage business was built to create a new source of pay income in 2021 to sale conforming mortgage originations, they could then be sold into the secondary market.

This required continued investment in hiring business development personnel and technology for expansion.

Given our strategic decision late last year to double down our focus on Florida and given the required capital that would be needed to scale the national and British business that could otherwise be deployed to for bank strategic growth initiatives, we've elected to transition from being a national museum to a large swamp.

So, we're moving forward with the change to the operating model where Amerant will continue to offer mage products, one of the primary focus of originations for income for costs. It's important to know models still follow input and costs outside require if they choose to buy additional properties, but you can see, as part of this downsizing, we expect our variable costs will be lowered, and it will result in a reduction in operating costs in the third Quarter from this year.

We expect both non-interesting income and non-interesting cents to be loaned by approximately $2.5 million per quarter starting on 3 June. This should improve our operating efficiency by nearly 1% of restructures.

We'll transition this over the next 120 days, which will result in a reduced level of FTEs in the mortgage business. This will allow for the early completion of the current pipeline. So, at this point, I'll turn it over to shared marks, all the metrics, and get the correct logging greater details.

Thank you, Jerry, and good morning, everyone. I'll begin today by discussing our key performance metrics and their changes compared to last quarter on slide 7.

Starting with the ratio of non-interest-bearing deposits to total deposits, you can see that in the first quarter. It increased to 20.4% from 19.2% in the fourth quarter, a different result from a relationship focused strategy, which contributes to non-interested bearing deposit growth.

Our efficiency ratio was 67.87% in the first quarter compared to 74.91% in the fourth quarter.

4Q included a loss on security and loan so and lower for expenses than what you.

Our ROA and RA this quarter were 0.48% and 5.32%, soared to 0.67% and 7.38% respectively in the fourth quarter.

The decrease in these metrics was primarily related to the increase in provision for credit losses and the net effect of the non-routine items in each quarter.

Lastly, the coverage of the allowance for credit losses the total loans increased to 1.37% compared to 1.18% in the fourth quarter, primarily due to the specific research for credits evaluated individually and certain impacts of macroeconomic factors.

Now moving on to slide 8, which shows the drivers of the $13.3 million increase in the allowance for credit loss.

The provision for credit losses was $18.4 million in the first quarter. Excluded reserves for commitments, the provision was $17.2 million and was comprised of $13.9 million for specific reserves, $3.8 million to cover net charge off, $4.7 million due to model adjustments for macroeconomic factors, offset by releases of $4.4 million due to credit quality and other macroeconomic updates, and $900,000 due to long.

During the first quarter of 2025, there were gross charges of $5.3 million related to $2.1 million purchased consumer loans, and $3.2 million were related to certain retail and business banking loans. This was offset by $1.5 million in recovered.

Please note, in April 2025, we sold a $6.9 million participation in a QSR credit with a $4.8 million charge off. This was fully reserved as of March 31st and will be reported in the future charge off.

The provision reported this order and the related reserve and its coverage over loans reflect robust analysis in light of microeconomic and geopolitical conditions.

Turning to slide 9, you can see the roll forward of classified loans from the fourth quarter to the first quarter, showing a net increase of $39.6 million or 24% to $206.1 million, primarily due to one the loan totalling $21 million downgraded to substandard approval due to the loss of a large tenant. And 5 loans totalling $33.7 million downgraded to non-accrual based on receipt of the year in 2024 financials. Classified loans include 3 loans to $83.5 million that remain in accruing status.

Now it slide 10, we showed the roll forward as non-performing loans from the fourth quarter to the first quarter of 2025, as well as a reconciliation to what we previously disclosed in our investor update in February, and I will provide color on the main drivers of these changes.

The divergence in actual results versus original estimates previously disclosed resulted from numbers that classified an NPLs primarily based on receipts of the year in 2024 financial. Additionally, an expected payoff was delayed to 2Q.

Please note that two of our all your properties are under the letter of intent to sell. Of note, the genres that classified and NPLs were primarily in the healthcare and restaurant industries.

Turning to slide 11, we showed the whole forward of special mention loans from the 4th quarter to the first quarter and provide color on the main drivers of these changes.

Special mention loans increased by $97 million, primarily driven by 3 CRE New York City loans totaling $48.8 million.

While certain milestones were made by the borrowers, there are acceptable mitiggans in place, such as adequate loans of value, interest reserves, or other structural enhancements. The increase in special mention loans was also due to 5 commercial loans in multiple industries, totalling $48.5 million, separated based on receipt of year in 2024 financial. These increases were partially offset by $3 million in payoffs.

Turning up to slide 12, I'd like to provide some color on our expectations for the 2nd quarter of 2025.

Starting with a deposit card, as evidenced in the first quarter, we achieved net analyzed growth in our 40 pockets aligned with previous guidance of approximately 15%. This growth was net of the $185 million reduction in higher (co pockets) from municipalities.

This demonstrates the strength of our 40 pocket growth capabilities.

Also, as mentioned, post core conversion, we anticipate that our new treasury management platform and a recently implemented digital account opening tool will be key drivers in achieving this. Also important to note is that we recently awarded a new head of treasury management, which yours will comment on shortly. We continue to expect 15% annual growth by the year in 2025.

On the lending side, we continue to see borrower interest through strong banks, primarily for real estate secured loans. Commercial borrowers seem to be more cautious until market and tariff uncertainty diminishes. Therefore, while we expect loan production and growth in the 10% to 15% range by your rent, we could also see a temporary asset mix change through purchases of assets such as mortgage-backed securities purchases to offset any temporary shortfalls in funding due to the uncertainty in the macroeconomic environment and tariffs.

Looking at profitability, we project our net interest margin to be in the mid 3.60% for the second quarter. Regarding expenses, we are projecting a comparable level to 1Q in the second quarter. This reflects our continued strategic investments and expansion initiatives being offset by cost reduction due to the strategic updates in the mortgage business. While we expect the efficiency ratio to be slightly higher than 60% yet in the investment and growth, we are prioritizing our weight and continue to expect to reach 1% in the second half, contingent on any significant macroeconomic updates to be captured by the APO model in the last quarter of 2025.

Finally, with respect to capital management, our intention remains to execute a prudent approach. This involves carefully balancing the need to retain capital to support our global objective with buyacks and dividends to enhance returns, especially in light of the current uncertain environment.

And with that, I pass it back to Jerry for additional comments and strategic outlook.

Thank you, Shary. Before we move to Q&A, I'd like to cover a few slides on additions to our team, and then we'll cover strategic outlook.

So, first on slide 13, here you can see the significant strengthening we've done in our leadership team, particularly our risk management function. These strategic additions underscore our commitment to a robust and proactive risk management trademark, which we believe is imperative to long-term success. This this particular slide details the strong talent we've recently brought on board. So, first we're delighted to welcome Jeffrey Tischler as our new Chief Credit Officer. He recently started in March 2025. Jeff also joins our Executive Management Committee, reflecting the critical importance of the credit function as a direct report to me as the CEO of our organization. He brings an impressive 24 years of experience to this role, most recently serving as the EVP and Chief Credit Officer of City National Bank in California, and RBC company. His extensive background also includes 19 years of Third Bank and 2 years of Conway McKenzie. Jeff's deep expertise is already proven invaluable as we navigate the current economic landscape and continue to grow our business responsibly. Since joining us he hit the ground running, leading a focused assessment of our current credit function and credit quality overall. His experience marking at much larger regional banks has been invaluable in identifying key areas for optimization. We're already seeing opportunities emerge from this work, and we're in the process of implementing changes and capturing early ways to enhance both the efficiency and effectiveness of all of our credit processes. In addition, we're actively uplifting our special assets group to enhance our focus on effective asset management. This includes both rehabilitating returning assets where appropriate while ensuring a more efficient and effective process to the exit and capital preservation of any problem assets. We intend to add to our special asset resources and personnel with deep experience to help our team expeditiously, prudently, and proactively address prints.

Our overarching objective is to ensure hammers remain strong through this economic cycle with the ultimate aim of making credit risks a true competitive advantage for our institution.

We've also recently significantly bolstered our credit review capabilities with the appointment of Cory Bowden as our new Head of Credit review. He joined us in November of last year.

Cory brings over 25 years of experience in credit risk management, most recently as a Credit Risk Team Manager at City National Bank in California. His solid track record in ensuring rigorous credit quality review is already proving to be an asset to us. And finally, we're very pleased to have Kavitha Singh join us as our Head of Enterprise Risk Management. Starting in September of last year, she brings over 20 years of experience in risk management, most recently as the Director of Operational Risk at Bank United, and prior to that with PWC. Her expertise in developing and implementing comprehensive enterprise risk management strategies are crucial as we continue to enhance our overall risk management framework.

We're confident that Jeff Cory could be leadership and experience will be instrumental in supporting our strategic objectives and delivering sustainable value.

So, we'll turn down a slide for our team, and here we highlight some recent additions to our business development team. We're excited to welcome two seasoned leaders and be instrumental in driving our growth conditions. First, we're pleased to announce the appointment of Braden Smith as our new Chief Consumer Banking Officer.

Braden brings an exceptional 30 years of experience in this role. Many of you will recall Brady initially joined us in November of last year. In a new role here as our Chief Business Development Officer, and its impact in already bringing in numerous new business opportunities has been significant. Prior to joining us, Braden served as Vice Chairman and Head of Private Banking for WinTrust Financial Corp.

Demonstrating a proven track record of building and leading successful consumer-focused businesses and fostering deep client relationships. In this new and expanded role, Gra will leverage his extensive business development, private banking and wealth management experience to further elevate our consumer banking strategy.

Also, we're delighted to welcome Stephen Putnam as our New head of Treasury Management, also effective earlier this month. Step brings 21 years of experience in Treasury management, most recently serving as SVP and Regional Sales Team Leader at Valley National Bank. His deep understanding of the treasury management space, his proven ability to build and lead high performing teams will be critical as we want to expand our treasury management services, grow core deposit relationships, and provide even greater value to our commercial clients. These strategic additions to business development underscore our strong commitment to prudent growth to deepening client relationships across all our lives business. We're confident that their expertise and leadership will be significant drivers for our future success.

And so, now finally we'll turn to our final slide of slide 15. Here you can see our commitment to continuing to expand our presence in the product market. We continue to gain on that. So, just this month in mid April, we opened our new regional headquarters office and our new banking center in West Palm Beach. Looking ahead, we're excited to open another. Key markets with two planned openings in Miami Beach later this year and a second location in downtown Tampa in the coming months. We also remain actively engaged in identifying additional strategic locations in align with our growth objectives, and we'll hopefully be announcing another location or two here in the coming.

To support this expansion, our hiring strategy remains focused on strategically adding to our business development teams within these key markets of Miami Beach, West Palm Beach, and Tampa CP.

We're actively seeking talented individuals who can help us build and deepen client relationships in these important.

And you can also anticipate that we'll make further select additions to our credit functions. These additions will ensure we remain or maintain a robust and scalable infrastructure as we continue to critically grow the business and support initiatives in that environment.

So, before we open up for Q&A, I also want to acknowledge the ongoing discussions of potential shifts in the macroeconomic and geopolitical landscape stemming from the current administration's tariffs of negotiations. While we do not know if unpredictability will go away in the short term, we're closely monitoring these developments and how the broader economy responds to any resulting changes.

The ability and capability to plan through scenario building is key. Our team is actively analysing different scenarios that visibility for possible outcomes from changes in rates, demand for loans, and macroeconomic factors such as consumer safety, and we will adapt as appropriate, the best position our bank for the evolving economic reality. Our priority remains delivering prudent and sustained growth and value for our shareholders even with this macroeconomic background.

So, with that I'll stop here and share you out what to answer any questions.

Please open the line for 2 minutes.

Thank you.

(Operator Instructions)

Our first question today is from Russell Gunther of Stevens. Please proceed with your question.

Hi, good morning guys.

Very Russell.

Maybe just to start on the loan growth outlook if you guys could touch on the puts and takes of the lower guide, just how you're thinking about the impact of continued pay down headwinds and then balancing the tailwinds from recent commercial lender hires with headwinds for macro volatility and uncertainty, really just trying to get to the puts and takes, of the growth side and confidence in hitting double digits this year.

Yeah, Russel.

I'll start. I'm sure Shary will add some color. I think the prudent thing right now is again we saw some pullback obviously from commercial customers in the first quarter.

So what we've adjusted when you refer to the pullback on guidance is that given uncertainty as we're here in the 2nd quarter, our belief is it's better to say we're going to take a very prudent approach, right? We're going to be very selective, but as we said, loan demand remains pretty strong right now, so we still believe. That as we see some volatility here, we still believe that you're going to see, as things work their way through the sec. I'll call it maybe later in the 2nd quarter of the (332 42) that we can still get back to the higher loan average balances that we expect originally expected.

Right, and aligned to what you're saying, we continuously monitor the pipeline we see and interest on the commercial and the DRE side. But also we want to be cautious, right? Because when we looked at the prepayment behavior that occurred in the first quarter, we saw some behavior as to repayments of lines, and that's representative of a combination of the still high-rate environment, but also the uncertainty in terms of the macro factors. So, we want to make sure we're disciplined, we're selective as we move towards the pipeline that that we have at hand. So, that's the driver of the guidance we shared today.

Yeah, and Russell, I guess the other comment I'd make, I think between comments that I made, and Sherry made is our belief is, we've got the deposit machine, still cranking away and frankly with a new head of Treasury management with the efforts that we see across the board in all our lines of business.

Our view is that's why we said we're not going to back down off the, go back below the $10 billion, we're going to continue to grow and if temporarily we need to add, with that cash into as it comes in into investment securities, we're fine with doing that. So, I mean in terms of, yes, it'll be at a lower yield than some of the low production. But our view is that you're also seeing a greater proportion of the deposit production coming through and interest bearing any for deposits.

Okay, got it. I understood. I appreciate the color, and then last one for me just switching gears to asset quality and overall profitability, given the inflow of the potential problem assets this quarter, what visibility do you guys think you have in terms of migration of these levels and potential realized losses? I think the prior guide was charge offs in the 30, 35 basis point range. I like to get a sense that there's any change to that guy there. And then if you could just folding it all together from a P&L perspective, I think sure I caught you say 1% ROA in the back half of the year, but if you could just confirm, that is the expectation and the main drivers would be helpful.

Thank you guys.

Sure, Russell, let me first cover the question on the charge off side. As you can see this quarter we had close to 22 to 25 basis points on the on the charge off level. We do expect that level to go slightly up in the second quarter as we announced that we had a loan with specific reserves that we charged off the first week of April, after a sale of that asset. So, that level should be closer to the 55%, I would say. After that, we do expect to see a normalized level as we had in the first quarter, and it's the, and it's reflective of both still a portion of indirect consumer and small balance of retail and business banking loans. So that's on the charge off side. And in terms of the 1% ROA, there are a couple of things that were built into reaching that 1% ROA, and I think a contribution to that would be also the the reduction in expenses that we expect in the second half of the year related to the mortgage business. So, something that's important to clarify is. That from the income perspective when we say that we expect a drop of $2.5 million, it's related to the original projections that we had for the year. However, when we look at the first quarter and then the volume that we had on the mortgage business, we believe it's representative of what we're going to see from an income perspective. For the rest of the year. However, the offside is from the expense side where we expect a drop after we complete the plan that we have built into phases, and we get the benefit out of that expense reduction in in the full second half of the year.

Okay, very helpful, thanks for clarifying.

Thanks guys.

Sure.

The next question is from Woody Lay of KBW. Please proceed with your question.

Hey, good morning, guys.

A quick follow up on the mortgage expense outlook. Do you expect those expense savings to drop to the bottom line or are they going to be reinvested into some of these other initiatives?

No, our expectation is that it should be dropping to the bottom line.

Got it. And then just thinking about all the macro uncertainty and, the, who knows how long it could last, but you've got that throughout the year.

It does there comes a point where the macro uncertainty persists that it might impact the timeline of some of these initiatives.

Yeah, I think. You know what we're doing, Woody, is, when you refer to these initiatives, our commitment to completing those three additional branch locations and hiring the personnel, we're already way down the path on all of that, so, I mean we're definitely going to go through and complete we think those 3 markets plus obviously what we just opened in West Palm. Are going to be very significant contributors, on the business development side, particularly on the deposit gathering side, so we see those as strong positives, we haven't disclosed it this quarter like we did in our investor update, but our branch downtown in downtown Miami is approaching $150 billion in deposits. Our location in Fort Lauderdale is well north of $100 million already. We've had really good success, in terms of incremental deposit generation from the locations and again we've been really selective. We're getting great people coming in wanting to work with the organization. And you know we've been able to attract some really nice additions from a business development perspective. So, but that's, when we talk about commitments that, additional that we'll make, they would be things that wouldn't be, you wouldn't see that flowing through in 2025. They're commitments that would probably be for in the first or second quarter if you see any incremental expense from and obviously additional business coming from. If we opened any additional locations.

Got it. That, that's helpful. And then last for me wanted to touch on credit and the, increase in special mentions in the quarter just any color you can share on those 5 commercial loans, that were downgrade.

Yeah, no, well, the big thing I think in regards to all of those was updated financial information, right? There's no one, industry, they're fairly spread, I don't think that, you can say that it's a one size fits all. It's really, I think the pressure of 20 excuse me, of, continued high interest rates, high costs. But it's all different industries, this was one of the 5, on the 3 in New York City, again, I think they're just, there's an individual case with each of those. Well, I think the commentary that we've made though is with each of those, these are all, transitory. Right? This is in and out. Potentially of this Category

Yeah, there were some delays on some implementation of plans that they had shared as part of the process and while we wait for those to pick up then we're placing them on special mention to make sure we closely monitor.

Hey, Woody, I think it's really important to know too, and I think a lot of this comes back around to. You heard me talk about the emphasis we're placing on significant upgrades and risk management. I think what you saw this quarter is really reflective of us being very proactive, timely identification of any type of blips, so, again, I mean, if you read the regulatory, guidelines on what happens with a special mention, it does not necessarily mean it's going to translate into a problem asset. It means you've identified a weakness that, in a lot of cases can get remediated or it can be an early warning sign of something that is going to need extra attention and so, I think you'll see, and again, particularly with Jeff's guidance coming in from, the experience that he's had, I think that you'll see probably a lot of in and out in this category on a go forward basis. But frankly, we're following what I think is the regulatory risk rating guidelines pretty.

Pretty appropriately at this point.

All right, thanks for taking my questions.

Sure.

The next question is from Michael Rose of Raymond James. Please proceed with your question.

Hey, good morning guys, thanks for taking my questions. Just wanted to start on the buyback so, you guys bought a little bit of stock this quarter, just wanted to get a sense for the appetite here given you trade below tangible book. I know you still have some left in the, maybe the optionality of increasing that, at this. point. Thanks.

Yeah, hey, Michael, it's Jerry. We were under a 10b51 in the first quarter. We remained under one, and here in the second quarter, we've bought back, I would say she probably at a limit of about 10,000 shares depending on what happened. With trading in a given day and I think up through yesterday, probably in total we bought maybe 375,000 shares. You've got a pretty wide range of pricing obviously you saw you, the volatility of what's happened in pricing, but the really important thing about that is we, and we've talked about this with you guys and investors in the past. We did not want to introduce additional shares into the average outstanding share category, and so, we had about $8 million left and I think we pretty much have used all of that at this point.

So yeah, so.

We, Michael, to add to that, we worked under the under the 10b51 and the two quarters, so the first quarter and a portion now went into Q4, but the amount that we set for these purchases was aligned with the expectation of stock grants during the year TRY to avoid dilution, and that's the purpose of the buyback for this year.

Okay great I appreciate the the the color maybe just on on on the margin outlook, can you just talk about kind of where new loan production yields are and then on the deposit side, any sort of, maturities over the next couple quarters and, how much flexibility you have to bring, deposit cost down while you're still growing, deposits. I know some of that's going to be a treasury, so it should be lower cost but just trying to better appreciate the. The puts and takes as it relates to the the margin outlook from here.

Thanks.

Yeah.

I think the disclosure in the release was we dropped 16 basis points on the low yield side and 17 on the deposit side. I think when Shary's given guidance in the mid 3.60%, our expectations are that we can price down to continue to manage that, sort of in that range, and I think that that's, a fairly conservative approach that we've taken.

To this at this stage, yeah.

Michael, to walk you through expectations of the NIM, I think it's important to talk about the NIM in the first quarter because there are items in there that are recurring and there are items that are new in terms of the forecast. So, if we think about the impacts of the Houston franchise versus the 4th quarter, it's something that we expect to be recurring on a go forward basis. The securities portfolio repositioning provided a contribution to the margin because we now get a full quarter of a higher yield portfolio. And then as Jerry was mentioning, we did reprice our deposits pretty similar to how we saw the repricing of the loans, but we also had the impact of the asset mix change for a period for a portion of the quarter related to the securities portfolio. So, if we use that as a baseline and move towards the 2nd quarter, we now expect to see in the 2nd quarter the full quarter effect of the change in the asset mix. And then as you may recall, we're asset sensitive, so. To the extent that we have rate changes, we expect the asset size to price faster than the deposit side, although we're trying to make that closer to to a beta one, but as you can imagine with time deposits, the beta is lower than that. So, from a yield perspective, I think you asked the question of the production. Yields during the first quarter were closer to 7%, but from a go forward basis we expect yields to be from 625 to 650. And I think you also asked the yield on the securities portfolio, yes, you're right, yields on the AFS are slightly lower than the lending side, but we still got very good yields in the purchases we made in the first quarter closer to Q4, 549 or 546 if I recall correctly.

Okay, so.

625 to 650 on the one side is that just because competition starting to pick up? I think we've heard that.

I I think there's a component of competition, but I think there's also an expectation from the borrower side of a forward-looking rate environment, so they're building that in terms of expectation of pricing discussion.

Okay, helpful.

Yeah, Michael.

Michael, just let me add something though. I think what the key takeaway though of the way we're looking at things and I, and Shary's absolutely right, obviously, the loan change if there's a rate cut is instantaneous and. But one of the things we've been very actively doing is keeping what we've been raising on the deposit side short. So, if you look at our ability to, generate new deposits a lot coming from core, right? And if you're looking at what we're adding in time deposits.

The only area that we've really emphasized is 6 months. So, we've been very, I'll call it proactively managing our ability to downward reprice our liabilities.

Obviously not thinking that, we're, I should say preparing for, what we think is going to be eventful rate cuts.

And even with the drops in rates, Jerry, the retention rates over time deposits have been very strong, so we're confident that on.

The deposits.

We're able to retain deposits of the price.

Very helpful. May maybe just one final one for me, appreciate the slide on the additions to the credit side of the house and the risk side of the house, when you guys raised capital, back in September, to kind of accelerate the clean-up are you today where you thought you were going to be and I guess just holistically speaking, I think. From the outside looking in, there's probably some frustration on where metrics are on a relative basis. But is this where you want it to be at this point? And then how long do you think it will be, I know it's hard to tell the future and what inflows could look like and the volatile backdrop and everything, but is this where you expected to be at this point? Are you behind or you ahead? Just trying to get a better sense of when we can get back to, maybe some peer level, credit metrics.

Thanks

Yeah, look.

I think, in my opening remarks, I think we are continuing to be proactive and aggressively go, and rate risk rate credits reserved where we feel that we need to do so and doing that is far more prudent to be upfront, transparent in comparison with, and obviously there is no alternative in my mind.

So, Michael, to be very blunt, I wish that we could be reporting here today even, more accelerated asset resolution. Some of this stuff takes more time than, we would like it to, but, our view is still that we've got a great team that we're being very proactive in trying to move things along. There was obviously some real volatility in the marketplace. That, been a couple of things that extended into the next quarter, but our view remains the same, I did reference that we're going to add more firepower, here in mid quarter to our special asset team. And obviously with Jep on board with some of the other additions that we've made during not only just the quarter, but continue to make, we're going to continue to be very proactive and aggressively look for resolution and as many of these issues as we can.

I appreciate all the color thanks for taking my questions.

Thanks.

The next question is from Stephen Scouten of Piper Sandler. Please proceed with your question.

Hey, good morning.

Everyone. So, Jerry, I appreciated your comments about the risk rating changes and kind of feeling like you're being proactive. I guess one of my questions is with Jeff coming on here mid March, I mean, do you feel like some of these changes were a result of having new eyes on the portfolio and maybe a change in, I don't know, strategy or perception of how these things need to be rated.

Whether that conveys that they should have been downgraded earlier or not I guess how much of that do you think is the change in kind of ideology around the Credit review process?

Yeah, no, I think.

You know we, we've talked about this, Stephen, in the comments that we made today that a lot of this is we received updated 2024 financial information and so, if you kind of drop back to, and one of the things we wanted to do when the walk across in the NPL page did.

Shary covered was, look, we got a lot of updates in the month of March, and so, you might call it the 60 days versus 90-day time frame post year end, and you know the specifics that we're looking at is, hey.

In one case there was a loss of a tenant. In another case they've missed some milestones. That information happens to coincide with him coming on board, so I hear you with that, but the reality is that a lot of it is really just the timing of when things, in receipt of information post to your end.

Got it. And how frequently normally do you get updated financial statements from your customers and do in light of these updates; do you change those the timing of those requests to customers or is that even feasible to get more frequent updates from them in in light of all the uncertainty?

Yeah, look, I think it varies sometimes some are quarterly, some are semi-annual, some are full year. I think a lot of this comes back to being very proactive and know your customers, visiting your customers, getting the updates, some of it is obviously exposure driven, the bigger the exposures, the more time that we're making sure that we're proactively out and getting updates. I think it, it's a kind of it's a combination of things.

Got it.

And on the shift kind of in what you guys' thought was possible kind of mid quarter with your mid quarter update versus what actually transpired around loan growth, and you noted pay downs and repayments, but what were there any, specific large loans that pay down or any specific drivers as a pretty big delta there and kind of within that do you feel like the tariffs impact the South Florida markets maybe more than other parts of the country given its international flavour or is that not really as significant to your book of business there?

No, I think to be honest, I think it's a combination of people looking at uncertainty and pulling back. I think it's also continued high costs, right, of what you can earn on your cash versus do you repay your debt. Again, I don't think we have a one size fits all on this one, but I think it's.

We haven't really said in any one of these cases though. I also think to be candid, there's also some pruning that we did in the portfolio, I think being proactive. In making sure that, we want customers in our portfolio that, have their full relationship with our organization and we want to make sure that that's, our primary focus is, I'm not a, we're not looking to be a financing arm only.

And I think that that's also a result of you know when I refer to pruning.

That, renewals on someone who's not bringing the totality of banking to us or at least our fair share of it.

You no longer have an interest in in maintaining those kinds of relationships.

Got it. Makes sense. And then just last thing for me, I'm curious, from a strategic perspective, how the experience with the mortgage expansion.

Maybe how that affects your ideology around future expansions if you, want to just be more focused on the core bank and adding lenders versus other verticals and just kind of, I don't know, just at a high level how that makes you think about business expansion and additional verticals from here.

Yeah, I think from the mortgage business perspective we definitely see as complementary as we build the relationship approach and rather than focusing on an approach of originations to sell and have that fee income, we want to make sure we already have the infrastructure to provide that complementary product for private banking or any other retail customers, but we want to make sure we stay focused on the relationship approach.

Yeah, I guess I mean, the decision to create mortgage, the mortgage division a couple of years ago and obviously kind of paring back from there which seems like the right financial decision, but does it make you think differently about.

Strategy moving forward in terms of business expansion versus just maybe core commercial lending and I you know I guess I mean obviously didn't go how you wanted it to go with the national footprint so how that makes you think about your business.

Yes, even I think you know and again I'll emphasize I made a comment on this, I think the decision really is more around what is a better return for our organization and shareholders is to deploy capital to really build up the scale necessary to make a national origination platform worthwhile versus us, pulling back, focusing solely on footprint, primarily on private banking, but of course we will do retail in footprint originations. You can see it's a substantial reduction in expense for us as an organization, and the decision was it's a very high efficiency business. You need a lot of scale, and I think for us with the double down on Florida, this is kind of more of a natural follow on to the decision we made to just focus on Tampa St. Pete, focus on the three counties here, focus on Florida only expansion. And I think this ties in very nicely with that because I do think that we could add more people, into these other areas and, accomplish the mission that we've got set out, which is to be, the bank of choice in the markets that we're in, right? And I think that that fits better, in order to be a national player, I just think what we would have had to deploy to really scale that up. Would have just taken away from our focus of what we needed to be what we need to be focused on, a sort of job one.

Got it. That makes.

Sense. I appreciate all the time and the color here.

Thanks guys.

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

Thank you everyone for joining our First Quarter Earnings call. We appreciate your interest in Amerant and your continued support. Hope you all have a great day.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference.