AMTB - NASDAQ

Greetings, and welcome to the Amerant Bancorp Inc. First Quarter 2025 Results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Laura Rossi, Head of Investor Relations at Amerant Bancorp Inc. You may begin.

Good morning, everyone, and thank you for joining us to review Amerant Bancorp Inc.'s 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 and reconciliation of non-GAAP financial measures to GAAP measures. I will now turn it over to our Chairman and CEO, Jerry Plush.

Thank you, Laura. Morning, everyone, and thank you for joining us today to discuss Amerant Bancorp Inc.'s first quarter 2025 results. We are implementing a change in our approach this quarter. This change is a result of our seeking investor and analyst feedback on the last several quarters' reports. So while the deck continues to include all the slides we've consistently supplied, we will be commenting on significantly fewer slides than in the past. We are going to focus on results on asset quality, certain strategic updates, including changes to our mortgage business, and some significant personnel additions. But before we dive into the details, I want to take a moment to acknowledge both 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 interest margin were stronger than projected, driving a robust PPADR. We also saw excellent deposit growth, underscoring the continued trust clients placed in us. 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 this sets us in the best position for the future. So let's turn now to slide three. Here you'll see that our core business demonstrated solid deposit growth. Total assets reached $10.2 billion as of the close of the first quarter, an increase from $9.9 billion in the fourth quarter. We expect to maintain above the $10 billion level in growth from Amerant Bancorp Inc. 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 loan pipeline continues to grow. Of note, these securities have fixed rates that hedge 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 loan closings sliding into the second quarter. Our total deposits were up by $300 million to $8.2 billion compared to $7.9 billion in the fourth quarter, driven by growth in core deposits. In this period, it's important to note that we managed the balance sheet to not only achieve strong results and protect our net interest margin but also to hedge the risk of a downward rate scenario. Looking at the income statement on slide four, you'll see we had strong pre-provision net revenue driven by higher than previous expectations. 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 last. We are going to cover those details in just a few slides. Our net interest margin was flat at 3.75% compared to 4.2%, but significantly better than projected. In the first quarter, we saw less competitive pressure due to the control quarter back of the Houston franchise sale, which had a relatively higher cost of funds than our current market. A lower cost of deposits resulting from a full quarter of actively repricing deposits down after the rate hikes late in 4Q, lower promo rates for new deposits, and the timing difference between maturities and brokered CDs and the ability to book new loans. There was also a full period of higher-yielding securities in the investment portfolio after the repositioning that we did. Our net interest margin increases were somewhat offset by the slower repricing of floating rate loans and the impact of securities that we purchased this quarter, as the average yield on securities is clearly lower than it is in comparison to our loan production. Our net interest income was $85.9 million, down $1.7 million from the $87.6 million in 4Q, primarily driven by lower average balances and yields on loans and higher average balances on securities. Again, as I noted previously, we are originating at higher yields on new production than the loans that mature. Provision for credit losses was $18.4 million, up $8.5 million from the $9.9 million in 4Q. This increase was primarily driven by specific reserves we put in place for loans we continually evaluated and also for macroeconomic updates. Sharymar Calderon 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 loan sale that was previously charged off, while non-interest expense was $71.5 million. When you exclude the RDA valuation we've recorded of $500,000, it would have been $71 million even. Pre-provision net revenue, otherwise known as PPNR, was $33.9 million compared to $27.9 million in 4Q and in comparison with consensus estimates of $31.3 million. Let's turn to slide five. I'm going to highlight a couple of other key items. We paid our quarterly cash dividend of $0.09 per common share on April 28, 2025, and our board just approved the dividend of $0.09 per share to be paid on May 30, 2025. Our assets under management increased $42 million to $2.93 billion, primarily driven by net new assets, although this was partially offset by market-driven results and lower market valuations. We continue to see this as an area of opportunity for us to rapidly improve going forward. As we previously announced, on April 1, 2025, the company redeemed $6 million in aggregate principal amount of its 5.75% senior notes due this year. So we'll move now to slide six. Here, I want to provide an update on our residential mortgage business. We are implementing a strategic change in our operating model. Here's what we're going to be doing. While the mortgage business was built to create a new source of income in 2021, to excel in forming mortgage originations that could be sold in the secondary market, this required continued investment in hiring business development personnel, technology, and procurement staff. During our strategic decision last year to double down on Florida, and given the required capital that would be needed to scale a national mortgage business, which could otherwise be avoided for bank strategic growth initiatives, we've elected to transition from being a national player to a Florida-focused one. So we are moving forward with a change to the operating model where Amerant Bancorp Inc. will continue to offer mortgage products, one of the primary components of origination strategy for the bank's customers. It's important to note that while we still follow input from customers outside of Florida if they choose to buy additional properties, as part of this downsizing, we expect our variable costs to be lower, and it will result in a reduction in operating costs in the third quarter of this year. We expect both non-interest income and non-interest expense to be lower by approximately $2.5 million per quarter starting in 3Q. This should improve our operating efficiency by nearly 1% once the restructuring is complete. We'll transition this over the next 120 days, which will result in a good base level of FTEs in the mortgage business. This will allow for the early implementation of current Wi-Fi. So at this point, I'll turn it over to Sharymar Calderon to cover metrics and credit details.

Thank you, Jerry, and good morning, everyone. I'll begin today by discussing our key performance metrics and their changes compared to the last quarter on slide seven. Turning to 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 direct result of our relationship-focused strategy, which contributes to non-interest-bearing deposits. Our efficiency ratio was 67.87% in the first quarter compared to 74.91% in the fourth quarter. 4Q included a loss on securities and loan sales, and lower expenses than 1Q. Our ROA and ROE this quarter were 0.48% and 5.02%, compared 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 impact of non-routine items each quarter. Lastly, the coverage of the allowance for credit losses increased to 1.37% compared to 1.18% in the fourth quarter, primarily due to the specific reserves for credits evaluated and new data and certain impacts of macroeconomic factors. Now moving on to slide eight, 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. Excluding 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-offs, $4.7 million due to model adjustments for macroeconomic factors, offset by a negative $4.4 million due to credit quality and other macroeconomic updates, and $900,000 for other factors. During the first quarter of 2025, there were gross charge-offs of $5.3 million related to $2.1 million in purchased consumer loans, and $3.2 million were related to certain retail and business verticals. This was offset by $1.5 million in recoveries. Please note in April 2025, we sold a $6.9 million participation in a QSR-related credit with a $4.8 million charge-off. This was fully reserved as of March 31 and will be reported in the future charge-off information reported this quarter and the date of reserve and its coverage over loans. We've put robust analysis in light of macroeconomic and geopolitical conditions. Turning to slide nine, 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 CRE loan totaling $21 million, downgraded to special mention due to the loss of a large tenant, and five loans totaling $33.7 million downgraded to special mention based on receipt of year-end 2024 financials. Classified loans include three loans totaling $83.5 million that remain at great status. Now slide ten, we show the roll forward of non-performing loans as well as a reconciliation to what we previously disclosed in our investor update in February. I will provide color on the main drivers of these changes. The updated actual result versus original estimates previously disclosed resulted from downgrades as classified in NPL, primarily based on receipt of year-end 2024 financials. Additionally, an expected payoff was delayed to Q2. Please note that two of our other properties are under letter of intent to sell. Of note, the numbers that classified in NPL were primarily in the healthcare and restaurant industry. Turning to slide eleven, we showed the roll forward of special mention loans from the fourth 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 three CRE loans totaling $48.8 million. While certain loans were made by the borrowers, these are excess they are accessible made in the state, such as added funds for value, increased reserves, or other structural enhancements. The increase in special mention was also due to five commercial loans in multiple industries, totaling $48.5 million, downgraded on the basis of year-end 2024 financials. These increases were partially offset by $3 million in sales. Turning now to slide twelve, I'd like to provide some color on our expectation for the second quarter of 2025. Starting with deposits, as evidenced in the first quarter, we achieved net annualized growth in our core deposits aligned with previous guidance of approximately 15%. This growth was net of the $185 million reduction in higher-cost deposits from unit to coverage. This demonstrates the strength of our core deposit growth capability. Also, as mentioned, for conversion, we anticipate our new treasury management platform and our recently implemented digital account opening tool will be key drivers in achieving this. Also important to note is that we recently awarded an entire treasury management, which shareholders will comment on shortly. We continue to expect 15% annual growth by year-end 2025. On the lending side, we continue to see borrower interest through a strong pipeline, primarily for real estate-secured loans. Commercial borrowers seem to be more cautious until market and current uncertainty diminishes. Therefore, while we expect loan production and growth in the 10% to 15% range by year-end, we could also see a temporary asset mix change to purchase of assets such as mortgage-backed securities purchased to offset any temporary shortfall in funding due to the uncertainty in the macroeconomic environment. Looking at profitability, we project our net interest margin to be in the mid-3.60% range for the second quarter. Regarding expenses, we are projecting a comparable level to 1Q in the second quarter. This reflects our continued strategic investment and expansion initiatives being offset by cost reductions due to the strategic update in the mortgage business. While we expect the efficiency ratio to be slightly higher than 50% given the investment in growth, we are prioritizing ROAs and continue to expect to reach 1% in the second half, consistent with 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 current approach. This involves certainly balancing the need to raise capital to support our growth objective, with buybacks and dividends to one hundred turns, 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, Sharymar. Before we move to Q&A, I'd like to cover a few slides on additions to our team, and then we'll cover the strategic outlook. So first on slide thirteen, 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 framework, which we believe is imperative to long-term success. This particular slide details the strong talent we've recently brought on board. So first, we're delighted to welcome Jeff Tichler as our new Chief Credit Officer. He recently started in March 2025. Jeff also joined our executive team, 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 in his role, most recently serving as Chief Credit Officer of City National Bank in California, an RBC company. His extensive background also includes 19 years with Fifth Third Bank and two years with Conway Mackenzie. Jeff's deep expertise has already proven invaluable as we navigate the current economic landscape and continue to grow our business responsibly. Since joining us, he has hit the ground running, leading a focused assessment of our current credit function and credit quality overall. His experience in working 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 wins to enhance both the efficiency and effectiveness of all of our training processes. In addition, we're actively uplifting our special assets group to enhance our focus on effective asset management. This includes both rehabilitating and returning assets where appropriate while ensuring amortization and effective process to the exit and capital preservation of any problem assets. We intend to add to our special asset resources personnel with deep experience to help our team expeditiously, prudently, and proactively address new credits. Our overarching objective is to ensure Amerant Bancorp Inc. remains strong through this economic cycle, with the ultimate aim of making credit risk a competitive advantage. We've also recently significantly bolstered our credit review capabilities with the appointment of Corey Valdez, our new Head of Credit Review. He joined us in November of last year. Corey brings over 25 years of experience in credit risk management, most recently as a credit risk team manager at City National Bank, California. His solid track record in ensuring rigorous credit quality is already proving to be an asset. And finally, we're very pleased to have Vida Singh join us as our Head of Enterprise Risk Management, starting in September of last year. She brings 20 years of experience in risk management, most recently as a director of operational risk in banking, and prior to that with PWC. Her expertise in developing and implementing comprehensive enterprise risk management strategies is crucial as we continue to enhance our overall risk management framework. We're confident that Jeff, Corey, and Vida's leadership experience will be instrumental in supporting our strategic objectives in delivering sustainable value. So we'll turn now to slide fourteen, and here we highlight some recent additions to our business development team. We're excited to welcome two seasoned leaders who will be instrumental in driving our growth initiatives. 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 to this role. Many of you will recall Braden initially joined us in November of last year in a new role here as our Chief Business Development Officer, and his impact has already been significant in numerous new business opportunities. 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, Braden 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 Steven Putnam as our new Head of Treasury Management, also effective this month. Steve 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 and his proven ability to build and lead high-performing teams will be critical as we look 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 and deepening client relationships across all our lines of 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, slide fifteen. Here you can see our commitment to continue to expand our presence in the Florida market as we continue to gain momentum. 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 at other 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 that align with our growth objectives, so we'll hopefully be announcing another location or two here in the coming months. 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, St. Pete. We're actively seeking talented individuals who can help us build and deepen client relationships. You can also anticipate that we'll make further select additions to our credit functions. These additions will ensure we maintain a robust and scalable infrastructure as we continue to prudently grow the business and support initiatives led by our leadership. So before we open up for Q&A, I also want to acknowledge the ongoing discussion of potential shifts in the macroeconomic and geopolitical landscape stemming from the current administration's tariff negotiations. While we do not know if tariffs will go away in the short term, we're closely monitoring these developments and how the broader economy responds to any potential changes. The ability and capability to plan through scenario building is key. Our team is actively analyzing different scenarios and visibility for possible outcomes from changes in rates, demand for loans, and macroeconomic factors such as the stimulus. We will adapt as appropriate to best position our bank for the evolving economic reality. Our priority remains to deliver improved and sustained growth and value to our shareholders even with this macroeconomic backdrop. So with that, I'll stop here, and Sharymar and I will be happy to answer any questions. Please open the line for Q&A. Thank you.

If you would like to ask a question, our first question today is from Russell Gunther of Stephens. Please proceed with your question.

Hi, good morning, guys. Great. Maybe just to start on the loan growth outlook, if you guys could touch on the puts and takes of the lowered guide. Just how you're thinking about the impact of continued paydown headwinds, and then balancing the tailwinds from recent commercial lender hires, the headwinds from macro volatility and uncertainty, really just trying to get to the puts and takes of the growth guide and confidence in hitting double digits this year.

Yeah, Russ, I'll start. I'm sure Sharymar 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 second 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, as we see some volatility here, we still believe that you're going to see, you know, as things work their way through, the second quarter, I'll call it maybe more late in the second quarter, the third quarter, fourth quarter, that we can still get back to the higher loan average balances that we originally expected.

Right, Jerry. And aligned to what you're saying, we continuously monitor the pipeline. We see interest on the commercial and CRE 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 environment. So we want to make sure we're disciplined, we're selective as we move towards the pipeline 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, you know, I think between comments that I made and Sharymar made, is our belief is, you know, we've got the deposit machine still cranking away. And frankly, with the 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, you know, go back below the $10 billion. We're going to continue to grow. And if temporarily we need to add, you know, 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 is at a lower yield than some of the loan production, but our view is that you're also seeing a greater proportion of the deposit production coming through in core.

Okay. Got it. No. Understood. I appreciate the color. And then last one's 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. Like to get a sense if there's any change to that guide there. And then if you could, just folding it all together from a P&L perspective, I think, Sharymar, 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 level. We do expect that level to go slightly up in the second quarter as we announced that we had, along 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 basis points, I would say. After that, we do expect to see a normalized level as we had in the first quarter. And it's reflective of both still a portion of indirect consumer and small balance retail and business banking loans. So that's on the charge-off side. In terms of the 1% ROA, there are a couple of things that were built into reaching that 1% ROA, and I think contribution to that would be also 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 projection 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 upside 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 the full second half of the year.

Okay. Very helpful. Thanks for clarifying.

Thanks, guys.

The next question is from Woody Lay of KBW.

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 should be dropping to the bottom line.

Got it. And then just thinking about all the macro uncertainty and, you know, who knows how long it could last, but you've got initiatives throughout the year. Does there come a point where if the macro uncertainty persists, it might impact the timeline of some of these initiatives?

Yeah. I think, you know, what we're doing, Woody, is, you know, when you refer to these initiatives, you know, our commitment to completing those three additional branch locations and hiring the personnel, we're already way down the path on all of that. You know? So, I mean, we're definitely going to go through and complete, we think, those three markets plus obviously what we just opened in West Palm. Are going to be very, very significant contributors on the business development side, particularly on the deposit gathering side. So we see those as strong positives. You know, we have disclosed at this quarter like we did in our investor update. But our branch downtown in Miami is approaching $150 million in deposits. Our location in Fort Lauderdale is well north of $100 million already. You know, we've had really, really good success, you know, in terms of incremental deposit generation. Of 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, you know, but that's, you know, when we talk about commitments that, you know, additional that we'll make, there would be things that wouldn't be you wouldn't see that flowing through in 2025, their commitments that would probably be for the first to second quarter that you see any incremental expense from. And obviously additional business coming from if we opened any additional locations.

Got it. 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 five commercial loans that were downgraded.

Yeah. No. Well, you know, 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 know, you can say that it's a one size fits all. It's really, I think, the pressure of continued high interest rates, high cost, but it's all different industries. You know, this was on the five. You know, on the three in New York City, you know, again, I think they're just, you know, there's an individual case with each of those. Well, I think the commentary that we've made though is, you know, with each of those, these are all, you know, transitory. Right? This is in and out. Potentially of in 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're closely monitored.

Yeah. I think it's really important to know too, you know, and I think a lot of this comes back around to, you know, you've heard me talk about the emphasis we're placing on significant upgrades in risk management. I think what you saw this quarter is really reflective of us being very proactive, timely identification of any type of blips, you know. So, you know, 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, you know, 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, you know, I think you'll see, you know, again, particularly with Jeff's guidance coming in from, you know, 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, you know, frankly, we're fine. We're following what I think is the regulatory risk rating guidelines pretty appropriately at this point.

Alright. 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. 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 10b5-1 in the first quarter. We remained under one. And here in the second quarter, we've bought back, you know, I would say, Sharymar, 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. Got a pretty wide range of pricing. Obviously, you saw, you know, 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, you know, we had about $8 million left, and I think we pretty much have used all of that at this point.

Michael, to add to that, we worked under the 10b5-1 in the two quarters, so the first quarter and a portion now into Q2, but the amount that we set for these purchases was aligned with the expectation of stock grants during the year to avoid dilution. And that's the purpose of the buyback for this year.

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

Yeah. You know, I think the disclosure in the release was we dropped 16 basis points on the loan yield side and 17 on the deposit side. I think when Sharymar's given guidance in the mid-3.60s, our expectations are that we can price down to continue to manage that, you know, sort of in that range. And I think that that's, you know, a fairly conservative approach that we've taken to 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 impact of the Houston franchise versus the fourth 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 had 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 portion of the quarter related to the securities portfolio. So if we use that as a baseline and move towards the second quarter, we now expect to see in the second 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 side to rise faster than the deposit side. Although we are trying to make that closer to a beta of 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 6.25% to 6.50%. And I think you also asked about the yield of 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 on the purchases we made in the first quarter, closer to 5.49% or 5.46% if I recall correctly.

Okay. So 6.25% to 6.50% on the loan side. Is that just because competition is starting to pick up? I think we've heard that.

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 discussions.

Yeah. And if I could, Michael, just let me add something, though. I think what, you know, the key takeaway though of the way we're looking at things, and Sharymar's absolutely right. Obviously, you know, the loan change if there's a rate cut is instantaneous. But one of the things we've been very, very actively doing is keeping what we've been raising on the deposit side short. So if you look at our ability to, you know, 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 six months. So we've been very, I'll call it proactively managing our ability to down or reprice our liabilities, you know, obviously not thinking that, you know, we're, I should say, preparing for, you know, what we think is going to be eventual rate cuts. And even with the drops in rates, the retention rates over time you saw the tracking has been very strong. So we're confident that the people cycle were able to receive the deposit as a favorite choice.

Very helpful. 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, you know, back in September, to kind of accelerate the cleanup, are you today where you thought you were going to be? And I guess just holistically speaking, I, you know, I think, you know, from the outside looking in, there's probably some frustration on where metrics are, on a relative basis. But is this where you wanted to be at this point? And then how long do you think it will be? You know, 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? Are you ahead? Just trying to get a better sense of when we can get back to, you know, 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 reserve where we feel that we need to do so. And doing that is far more prudent to be upfront transparent in comparison with and, you know, obviously, there is no alternative in my mind. So, you know, Michael, to be very blunt, you know, I wish that we could be reporting here today even, you know, more accelerated asset resolution. Some of this stuff takes more time than, you know, we would like it to, but, you know, our view is still that we've got a great team, that we're being very proactive in trying to move things along. There is obviously some real volatility in the marketplace. You know, been a couple of things that extended into the next quarter. But, you know, our view remains the same. You know, I did reference that we're going to add more firepower, you know, here in mid-quarter to our special asset team. And, you know, obviously, with Jeff 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, very proactive and aggressively look for resolution in 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. 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, 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 this a change in kind of ideology around the credit review process?

Yeah. No. I think, you know, we've talked about this, Stephen, in the, you know, 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, you know, and one of the things we wanted to do in the walk across in the NPL page that Sharymar covered was, look, we got a lot of updates in the month of March. You know, and, you know, 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, you know, hey, you know, 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. You know, so I hear you with that, but the reality is that a lot of it is really just the timing of when things get receipt of information post year-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 the timing of those requests to customers, or is that even feasible to get more, you know, more frequent updates from them in light of all the uncertainty?

Yeah. Look. I think it varies. Some are quarterly, some are semiannual, some are full year. I think a lot of this comes back to being very proactive and knowing your customers, visiting your customers, getting the updates. Some of it is obviously exposure-driven. You know, the bigger the exposures, the more time that we're making sure that we're proactively out and getting updates. I think 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 happened. And you noted paydowns and repayments, but were there any, you know, specific large loans that paid down or any specific drivers as a pretty big delta there? And kind of within that, do you feel like the tariff impacts the South Florida markets maybe more than other parts of the country, given its international flavor, or is that not really as significant to your book of business there?

No. I think it's a, 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? 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, you know, 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. You know, I think being proactive in making sure that, you know, we want customers in our portfolio that, you know, have their full relationship with our organization. And we want to make sure that that's, you know, our primary focus because, you know, I'm not a, we're not looking to be a financing arm only. And I think that that's also the result. When I refer to pruning that, you know, renewals on someone who's not bringing the totality of banking to us or at least our fair share of it. You know, we no longer have an interest in maintaining those kinds of relationships.

Got it. Makes sense. And then just last thing for me. I'm curious, you know, from a strategic perspective, how the experience with the mortgage expansion may be how that affects your ideology around future expansions if you, you know, want to just be more focused on the core bank and adding lenders versus other verticals and just kind of don't know. You just get a high level how that makes you think about business expansion and additional verticals from here.

I think from the mortgage business perspective, we definitely see it's 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, you know, the decision to create the mortgage division a couple of years ago, and obviously kind of pairing back from there, which seems like the right financial decision, but does it make you think differently about the strategy moving forward in terms of business expansion versus just maybe core commercial lending and, and I think, you know, I guess, I mean, obviously, it didn't go how you wanted it to go with the national footprint. So how did that make you think about your business with the network and?

Yes. Steven, I think, you know, and again, I'll emphasize, I've 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 platform, origination platform, worthwhile versus us, you know, 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. 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 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, you know, into these other areas and, you know, accomplish the mission that we've got set out, which is to be, you know, the bank of choice in the markets that we're in. Right? And I think that that fits better. You know, 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 focused on, you know, is 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. Appreciate your interest in Amerant Bancorp Inc. and your continued support. Hope you all have a great day.