Amerant Bancorp Inc. (AMTB) Earnings Call Transcript & Summary

Greetings, and welcome to the Amerant Bancorp's First Quarter 2025 Results. [Operator Instructions] 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. You may begin.

Thank you, Brock. Good morning, everyone, and thank you for joining us to review Amerant Bancorp'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 and 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. Good morning, everyone, and 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 deck 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 initiatives. 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 PPNR. We also saw excellent deposit growth, underscoring the continued trust clients place in us. But more importantly, we made the prudent decision to reserve for 5 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 this quarter best position us 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 in the first quarter, an increase 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 loan pipeline continues to grow. Of note, at least half of these securities have fixed rates protecting 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. 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 PPNR results and protect our NIM, 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 net revenue, driven by higher than previously projected net interest income, and net interest margin. 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're going to cover those details in just a few slides. Our net interest margin was flat at 3.75% in 1Q compared to quarter 2, but significantly better than projected. The NIM in the first quarter reflects these positive impacts due to full quarter effect of the Houston franchise sale, which had a relatively higher cost of funds than our core Florida market, a lower cost of deposits resulting from a full quarter effect of repricing deposits down after the rate cuts in late 4Q, lower promo rates for new deposits and the timing difference between the maturities of broken CDs and renewals at quarter end. And it was also a full period of higher yielding securities in the investment portfolio, after the repositioning that we did in the portfolio in late 3Q and early 4Q 2024. Net interest margin increases were somewhat offset by the downward 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 [indiscernible] 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 deposits. Again, as I noted previously, we're originating at higher yields on new production than the loans net share. Provision 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, we put for 5 loans individually evaluated specific reserves and also for macroeconomic updates. Shary's going to cover this more shortly. Noninterest 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 noninterest expense was $71.5 million, when you exclude the REO valuation we recorded of $500,000 would have been $71 million even. Pre-provision net revenue, otherwise known as PPNR was higher at $33.9 million in 1Q, compared to $27.9 million in 4Q. And in comparison to consensus 1Q '25 and $31.32 million. Let's turn to Slide 5. I'm going to cut a couple of the key items for the quarter. We paid our quarterly cash dividend at $0.09 per common share on February 28, 2025, and our Board just approved a quarterly dividend of $0.09 per share payable 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 volatility, which resulted in lower market valuations. We continue to see this as an area of opportunity for us [indiscernible] 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 now 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 is what [indiscernible]. While the mortgage business was built to create a new source of fee income in 2021 through the sale of conforming mortgage originations that could then be sold into the secondary market. This has required continued investment in hiring business development personnel and technology and footprint expansion. Given our strategic decision made last year to double down our focus on Florida and given the required capital that would be needed to scale the national bridge business that could otherwise be deployed toward bank strategic growth initiatives, we've elected to transition from being a national [indiscernible] to a Florida [indiscernible]. So we're moving forward with a change to the operating model, where Amerant will continue to offer mortgage products, one of the primary focus of originations for [indiscernible] customers. It's important to note while we'll still follow input new customers outside of Florida if they choose to buy additional properties. But you can see 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 and fourth quarters this year. We expect both noninterest income and noninterest expense to be lowered by approximately $2.5 million per quarter starting in 3Q. This should improve our operating efficiency by nearly 1% once all the restructuring is completed. 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 Sharymar to cover metrics and [indiscernible] credit quality in 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 noninterest bearing deposits to total deposits, we can see that in the first quarter. It increased to 20.4% from 19.2% in the fourth quarter, a direct result from our relationship focused strategy, which contributes to noninterest 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 sold, and lower core expenses than 1Q. Our ROA and ROE, this quarter were 0.48% and 5.32% 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 net effect of the nonroutine items in each quarter. Lastly, the coverage of the allowance for credit losses to total loans increased to 1.37% compared to 1.18% in the fourth quarter, primarily due to the specific reserves for credits evaluated individually and certain impact of macroeconomic factors. Now moving on to Slide 8, which shows the drivers of the $13.3 million increase in the allowance for credit losses. 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 reserve $3.8 million to cover net charge-offs, $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 loan growth. During the first quarter of 2025, there were gross charge-offs 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 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 2Q charge-off. The provision reported this quarter and related reserve, and its coverage over loans reflect robust analysis in light of macroeconomic 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 CRE loan totaling $21 million downgraded to substandard accrual, due to the loss of a large tenant, and 5 loans totaling $33.7 million downgraded to NPL, based on receipt of year-end 2024 financials. Classified loans include 3 loans totaling $83.5 million that remain in accruing status. Now on Slide 10, we show the roll forward of nonperforming 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 downgrades that classified in NPLs, primarily based on receipts of year-end 2024 financial. Additionally, an expected payoff was delayed to 2Q. Please note that 2 of our order properties are under letter of intent to sell. Of note, the downgrades declassified in NPL were primarily in the healthcare and restaurant industry. Turning to Slide 11, we show the roll forward of special mentioned loans from the fourth quarter to the first quarter, and provide color on the main drivers of these changes. Special mentioned loans increased by $97 million, primarily driven by 3 CRE New York City loans totaling $48.8 million. While certain milestones were missed by the borrowers, there are acceptable mitigants in place, such as adequate loans of value, entrance reserves or other structural enhancements. The increase in special mentioned loans was also due to 5 commercial loans in multiple industries totaling $48.5 million, downgraded based on receipts of year-end 2024 financials. These increases were partially offset by $3 million in payoffs. Turning now to Slide 12, I'd like to provide some color on our expectations for the second quarter of 2025. Starting with the deposit [indiscernible]. 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 municipalities. This demonstrates the strength of our core deposit growth capabilities. Also, as mentioned post core conversion, we anticipate that our new treasury management platform and our recently implemented digital account opening tools will be key drivers in achieving this. Also important to note, is that we recently awarded a new Head of Treasury Management, which Jerry 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 strong pipelines, 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 year-end, 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 investment and expansion initiatives being offset by cost reductions due to the strategic updates in the mortgage business. While we expect the efficiency ratio to be slightly higher than 60% given the investment in growth, we are prioritizing ROA 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 growth objectives, with buybacks 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 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 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, an RBC Company. His extensive background also includes 19 years of Fifth Third Bank and 2 years 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's hit the ground running, leading a focused assessment of our current credit function and credit quality overall. His experience from 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 grant 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, effective process for the exit and capital preservation of any problem assets. We intend to add to our special asset resources, with personnel with deep experience to help our team expeditiously, prudently and proactively address rated credits. Our overarching objective is to ensure Amerant remains strong through this economic cycle, with the ultimate aim of making credit risk, 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 ensuring rigorous credit quality review, is already proving to be an asset to us. And finally, we're very pleased to have Kavita 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 a Director of Operational Risk at BankUnited 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 and Kavita's leadership and experience will be instrumental in supporting our strategic objectives in delivering sustainable value. So we'll turn now to Slide 14, and here we highlight some recent additions to our business development team. We're excited to welcome 2 seasoned leaders and 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 globe. 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 its impact and 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, 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 Stephen Putnam, as our new Head of Treasury Management, also effective earlier 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, 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 to 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 on Slide 15. Here you can see our commitment, to continue to expand our presence in the commercial market. We continue to gain momentum. 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 2 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, and we'll hopefully be announcing another location or 2 here in the coming month. 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 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 principally grow the business and support initiatives led by our leadership group. 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 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 analyzing different scenarios, to have visibility for possible outcomes from changes in rates, demand for loans, and macroeconomic factors such as consumer spending that, we will adapt as appropriate to 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 backdrop. So with that, I'll stop here, and Shary and I will look to answer any questions you have. Please open the line for Q&A.

[Operator Instructions] Our first question today is from Russell Gunther of Stephens.

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 in 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 guide, and confidence in hitting double-digits this year?

Yes, Russell, 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 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 that as we see some volatility here, we still believe that you're going to see as things work their way through -- I'll call it maybe more late in the second quarter, 3Q, 4Q 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 factors. 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.

Yes and Russell, I guess the other comment I'd make, I think between comments that I made and Shary 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 of the, go back below the $10 billion. We're going to continue to grow, and if temporarily we need to add, deploy that cash into as it comes in into investment securities, we're fine with doing that. So I mean in terms of yes of goods, 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, or the non-interest bearing and in core deposits.

Okay. Got it. Understood. I appreciate the color. And then last one from 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 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 Shary, 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?

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 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 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 a 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 projections that we had for the year. However, when we look at the first quarter, and 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.

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 the -- who knows how long it could last, but you've got that throughout the year, does there comes a point, where if the macro uncertainty persists, it might impact the time line of some of these initiatives?

Yes, I think, what we're doing Woody, is when you refer to these initiatives, our commitment to completing those 3 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, 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 million in deposits. Our location in Fort Lauderdale is well north of $100 million already. We've had really, 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 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 committed commitments that would probably be for first to second quarter. If 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 from 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 downgraded?

Yes, 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 on 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.

Yes. There are some delays on some implementation of plans that they got 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.

Yes. Woody, I think it's really important to note 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 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 so again, 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, 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 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 appropriately at this point.

The next question is from Michael Rose of Raymond James.

Just wanted to start on the buybacks. 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, and maybe the optionality of increasing that at this point?

Michael, it's Jerry. We were under a 10b5-1 in the first quarter. We remained under 1. And here in the second quarter we've bought back, I would say sharing probably at a limit of about 10,000 shares, depending on what happened with trading at 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 the volatility of what's happened in pricing. But the really important thing about that is, 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.

Okay.

Michael, to add to that, we worked under the 10b5-1 in the 2 quarters. So the first quarter and a portion now in 2Q. But the amount that we set for these purchases was aligned with the expectation of stock rents 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, any sort of maturities over the next couple quarters, and how much flexibility do you have to bring deposit costs down, while you're still growing deposits? And I know some of that's going to be treasury, so there should be lower costs. But just trying to better appreciate the puts and takes as it relates to the margin outlook from here.

Yes, I think the disclosure in the release was, we dropped 16 basis points on the loan yield side and 17 on the deposit. I think when Shary's given guidance in the mid-3.60%s, 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.

Yes, 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 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 size to reprice 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 the yield on the securities portfolio. Yes, you're right. Yields to 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 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's side of forward-looking rate environment. So they're building that in terms of expectation of pricing discussion.

Okay, helpful.

Michael, just let me add something though. I think what, the key takeaway though, of the way we're looking at things 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, 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, or I should say preparing for, what we think is going to be eventual 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 deposit side, we're able to retain deposits of favorite choice.

Very helpful. Maybe just one final one from 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 cleanup, 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 are you ahead? Just trying to get a better sense, of when we can get back to, maybe some peer level, credit metrics?

Yes, 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, 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 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 and as many of these issues as we can.

The next question is from Stephen Scouten of Piper Sandler.

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?

Yes, no, I think, we've talked about this Stephen, and 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 in the walk across in the NPL page that 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 the specifics that we're looking at is, 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 get receipt of information post year-end.

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

Yes 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 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's, again, it's a combination of things.

Got it. And on the, 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 paydowns, repayments, but what were there any, specific large loans that paydown, 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 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, 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 what I referred to, pruning that renewals. On someone who's not bringing the totality of banking to us, or at least our fair share of it, we no longer have an interest in maintaining those kind of relationships.

Got it. Makes sense. And then just last thing from 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?

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.

Yes, I guess I mean, the decision to create mortgage. The mortgage division a couple 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 guess, I mean, obviously it didn't go how you wanted it to go, with the national footprint. So how does that make you think about your business [indiscernible]?

Yes, Stephen, I think, 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 platform, 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 3 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 -- what we need to be focused on, as sort of job one.

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 for it. Hope you all have a great day.

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