Amerant Bancorp (NYSE:AMTB) Inc. reported a stronger-than-expected performance for the fourth quarter of 2024, with earnings per share (EPS) reaching $0.50, surpassing the forecasted $0.38. Revenue also exceeded expectations, coming in at $111.3 million compared to the projected $100.68 million. Despite these positive results, the company's stock fell sharply in premarket trading, dropping 20.62% to $17.78.
Key Takeaways
- Amerant Bancorp's Q4 2024 EPS and revenue both beat analyst forecasts.
- The stock experienced a significant decline in premarket trading despite strong earnings.
- The company continues to expand its market presence with new banking centers.
- Concerns over profitability and international exposure may weigh on investor sentiment.
Company Performance
Amerant Bancorp demonstrated robust performance in Q4 2024, with earnings and revenue both exceeding analyst expectations. The company has shown resilience in a challenging market, driven by strategic initiatives and a focus on relationship-driven growth. However, the broader market's reaction suggests lingering concerns about future profitability and external economic conditions.
Financial Highlights
- Revenue: $111.3 million, exceeding the forecast of $100.68 million
- Earnings per share: $0.50, beating the forecast of $0.38
- Net interest income increased to $81 million from Q3 2024
Earnings vs. Forecast
Amerant Bancorp's Q4 2024 EPS of $0.50 represented a significant positive surprise compared to the forecast of $0.38, a 31.6% beat. Revenue also surpassed expectations by $10.62 million, indicating strong operational execution and effective cost management.
Market Reaction
Despite the earnings beat, Amerant Bancorp's stock dropped 20.62% in premarket trading, reflecting investor concerns beyond the immediate financial results. This decline places the stock near its 52-week low, contrasting with broader positive trends in the financial sector.
Outlook & Guidance
Looking ahead, Amerant Bancorp is targeting a net interest margin in the mid-350s for Q4 and aims for a 60% efficiency ratio, 1% return on assets (ROA), and 12% return on equity (ROE) by the second half of 2025. The company plans to continue expanding its presence in Florida with new banking centers.
Executive Commentary
CEO Jerry Plosch emphasized the importance of execution moving forward, stating, "From here on out, it's all about execution." CFO Sherry Mar Calderon highlighted the company's strategic positioning for future growth, noting, "We have positioned the company to reach such levels in the second half of twenty twenty-five."
Q&A
During the earnings call, analysts inquired about the drivers of loan growth and the impact of new relationship managers. The company reported new commercial loan yields between 7.5-8% and expects a deposit beta of 40-45 basis points.
Risks and Challenges
- Profitability concerns due to recent net losses and higher-than-expected expenses.
- Exposure to international markets, which could be affected by global economic volatility.
- Execution risks associated with expansion into new markets and the integration of new banking centers.
- Potential changes in interest rates impacting net interest income and margin.
- Competition in the banking sector, particularly in the rapidly growing Florida market.
Full transcript - Amerant Bancorp Inc Class A (AMTB) Q3 2024:
Paul, Conference Call Moderator: Greetings, and welcome to the Amarin (NASDAQ:AMRN) Third Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will take place after the prepared remarks. As a reminder, this call is being recorded. I would now like to turn the call over to Laura Rossi, Head of Investor Relations and Strategy, Amarant Bank.
Thank you, Laura. You may begin.
Laura Rossi, Head of Investor Relations and Strategy, Amarin Bancorp: Thank you, Paul. Good morning, everyone, and thank you for joining us to review Amarant Bancorp's Q3 2024 results. On today's call are Jerry Plosch, our Chairman and CEO and Cheri Mar Calderon, our 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 Flush.
Jerry Plosch, Chairman and CEO, Amarin Bancorp: Thank you, Laura. Good morning, everyone, and thank you for joining us today to discuss Amarin's Q3 2024 results. But before we go through our financial results this quarter, I want to take a moment to acknowledge the devastating impact that hurricanes Helene and Milton have had on so many people and businesses. Our thoughts and prayers are with those who are affected by these storms, including our team members, customers and partners. We are committed to supporting our communities during this difficult time and we are working diligently to provide assistance and resources to those in need.
I'm pleased to report that our Tampa area facilities were spared from any significant damage. Our team members are all okay and they are back to working with our customers. So now we'll move on to quarter results. I'd like to address upfront that this quarter given our strategic decision to reposition the investment portfolio in conjunction with our successful capital raise in late September, the company recorded a substantial charge to earnings as expected, leading to the loss of $48,200,000 we recorded for the quarter. Excluding the losses from the securities repositioning, as well as the write down on other real estate owned, which we'll cover in detail shortly, our core pre provision net revenue was strong at $31,300,000 Note that results were also impacted by an elevated level of provision expense, which while comparable to the Q2 was necessary to address certain non performing loans in the quarter, again as we previously disclosed.
Otherwise, our core business demonstrated strong performance, highlighted by solid organic loan and deposit growth, continued improvement in net interest income and stability in the net interest margin. Sherry will review these components in greater detail in just a few minutes. So let's start with the balance sheet on Slide 3. And here you can see that we officially crossed the $10,000,000,000 mark as total assets reached $10,380,000,000 as of the close of the 3rd quarter, an increase over the $9,750,000,000 in the 2nd quarter. Our cash and cash and equivalents increased 361,500,000 dollars to $671,800,000 compared to just $310,300,000 in the Q2 of 'twenty four.
Our total investments remained relatively unchanged at 1,540,000,000 dollars You'll notice when Sherry covers investments in greater detail in a few minutes, the significant improvement in AOCI from 2Q 'twenty four, which resulted from the combination of improved valuations throughout the quarter and what was realized at quarter end due to the investment portfolio repositioning. Our total gross loans increased by $239,100,000 to $7,560,000,000 from the $7,320,000,000 in the 2nd quarter, all driven by organic loan growth. The loan pipeline is strong here in the Q4 as we've already closed on approximately $123,000,000 in loan production in the Q4, and we expect to end the quarter with approximately $400,000,000 to $450,000,000 in total production. Our total deposits increased by $294,900,000 to $8,111,000,000 compared to $7,820,000,000 in the 2nd quarter as organic deposit growth continues to be strong. You'll note that we increased Federal Home Loan Bank advances by $150,000,000 as we continue to position our balance sheet and execute on prudent asset liability management by adding some duration to our funding.
Our total capital ratio as of the Q3 was 12.66% compared to 11.88% at the end of the second quarter and our CET1 was 10.6% compared to 9.6%. But please note that we expect our CET1 to be at approximately 11.2% after we close on the Houston transaction in early November and that will remain above 11% in 2025 as projected earnings support growth. You'll note that our tangible equity ratio was up to 8.48 percent, which includes the AOCI I just referenced resulting from the after tax change in the valuation of our AFS investment portfolio. And then lastly, as of the Q3, our Tier 1 capital ratio was 11.31 percent compared to 10.34% as of the 2nd quarter. We'll turn now to take a look at the income statement on Slide 4.
And again, here's the diluted loss per share from the Q3 was $1.43 compared to $0.15 in diluted income per share in the Q2. This again was primarily due to the losses recorded in the securities during the quarter and the other real estate owned loss recorded as previously noted. Our net interest margin was 3.49 percent in the 3rd quarter compared to 3.56% in the 2nd quarter. The decrease in margin resulted primarily from higher average balances in NPLs along with higher average balances in interest bearing liabilities. Our net interest income, however, was $81,000,000 It was up $1,600,000 from the $79,400,000 we recorded in the 2nd quarter, and that's primarily driven by higher loan balances during the quarter.
Our provision for credit losses was $19,000,000 down slightly from $19,200,000 in the Q2. Improving credit quality continues to be a major area of focus for us and I'll cover more on this in my closing remarks. Our non interest income decreased to negative $47,700,000 primarily due to the repositioning of the securities portfolio. Our non interest income, however, excluding the securities losses was $20,800,000 Our non interest expense increased to $76,200,000 and that's inclusive of the nearly $6,000,000 in REO valuation expense. And our pre provision net revenue was a loss of $42,900,000 compared to PP and R of $25,500,000 in the Q2 of 'twenty four.
However, PP and R excluding non routine items in non interest income and expense was $31,300,000 as I previously referenced compared to the $31,000,000 we recorded in the 2nd quarter. You'll also note that both non interest income and non interest expense include a $1,600,000 impact from the unwinding of a swap in connection to the sale of a non performing loan. So if we exclude this item, both non interest income and non interest expense are more in line with what we guided to last quarter. We'll turn now to Slide 5 and I'll cover a few other items. So you'll note first that we completed our public offering of 8.6842.10 shares in Class A voting common stock at a price to the public of $19 a share.
This all occurred on September 27, 24. This also included 784,210 shares issued upon the exercise in full of the underwriters their option to purchase additional shares. So the total gross proceeds from the offering were approximately $165,000,000 and net proceeds approximately $155,800,000 We paid our quarterly cash dividend of $0.09 per common share on August 30, 2024 and our Board of Directors just approved a quarterly dividend of $0.09 per share payable on November 29, 2024. We are working on increasing our sources of liquidity and as such our borrowing capacity at the end of the quarter with either the Fed or the Federal Home Loan Bank was 1 $600,000,000 But of note, as of October 21, 2024, after the transfer of additional loan collateral, our borrowing capacity has increased to $2,600,000,000 And lastly, our assets under management increased $98,700,000 to $2,600,000,000 driven primarily by market valuations and net new assets. We believe this is a great area of opportunity for us to look to grow fee income on a go forward basis.
You're going to note on Slide 6, we reintroduced the slide we had previously to provide some details around our updated share count post transaction. So here you can see we issued approximately 8,700,000 shares, which brought total shares outstanding at the close of the 3rd quarter to 42,103,623 shares, of which approximately 3,000,000 are non voting shares. So at this point, I'm going to turn things over to Sherri to cover metrics next and get into the financials in greater detail. Sherry?
Sherry Mar Calderon, Executive Vice President and CFO, Amarin Bancorp: 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. The ratio of non interest bearing deposits to total deposits decreased slightly to 18.3% from 18.7% in the 2nd quarter. Aligned with guidance shared in our past earnings call, net interest margin was 3.49% in the 3rd quarter compared to 3.56% in the 2nd quarter. As Jerry just mentioned, this is the result of higher average balances in NPLs paired with higher average balances in interest bearing deposits and cost of funds.
Our efficiency ratio was 228.74 percent in the 3rd quarter compared to 74.21 percent in the 2nd quarter as a result of the negative $68,500,000 in non interest income related to securities losses as well as the $5,700,000 OREO valuation expense we recorded during the Q3. Our ROA and ROE this quarter were negative 1.92 percent and negative 24.98 percent compared to 0.21% and 2.68 percent respectively in the 2nd quarter. These decreases were primarily driven by the non routine items I just mentioned. Lastly, the coverage of the allowance for credit losses to total loans decreased to 1.15% compared to 1.41% in the 2nd quarter, mainly due to $35,600,000 in charge offs, of which $17,300,000 had been reserved in previous periods. Continuing on to Slide 8, I'll discuss our investment portfolio, which is one of the areas with the most significant updates this quarter.
Following the capital raise, the company executed on the previously announced investment portfolio repositioning, which resulted in proceeds of $551,000,000 and consisted of the sales of securities with an average yield of 3.2%, Including a portion of the $220,000,000 in securities previously designated as held to maturity, all securities with yields below 2.75% and all corporate debt securities, including banks of debt. Prior to quarter end, we transferred all held to maturity to held for sale and sold all subordinated debt. The remaining securities subject to the repositioning were adjusted through net realized losses to a new basis until sold in early October 2024. When compared to the prior quarter, the duration of the investment portfolio decreased to 4.9 years as the model anticipated higher prepayments due to lower rates. We expect duration to settle around 5 years once the reposition is complete assuming rates stay unchanged.
The chart on the upper right shows the expected prepayments and maturities of our investment portfolio for the next 12 months, which represents a liquidity source available to support growth in higher interest earning assets. Moving on to the rate composition of our portfolio, you can see that the floating portion increased to 14.3% compared to the Q2. We expect to continue to add fixed rate securities in 4Q as we continue positioning the balance sheet for a decreasing rate environment. Also note that as a result of the securities repositioning that started at the end of September, we have de risked our AFS portfolio, which as of quarter end had approximately 90% of government guarantees, while the remainder was rated investment grade. Once the reposition is completed, this percentage will be approximately 100%.
Continuing on to Slide 9, let's talk about the loan portfolio. At the end of the Q3, total gross loans were $7,560,000,000 up $239,100,000 or 3.3 percent compared to $7,320,000,000 at the end of 2Q. Like in prior quarters, this increase was all organic relationship driven growth. The single residential portfolio was $1,600,000,000 in the 3rd quarter, an increase of $125,400,000 compared to $1,500,000 in the 2nd quarter. This amount includes loans originated during the quarter, primarily done with private banking customers and commercial clients with residential income producing properties as collateral.
Consumer loans as of the Q3 were $278,400,000 a decrease of $18,000,000 or 6.1 percent quarter over quarter. This portfolio includes $103,900,000 in higher yielding indirect loans purchased prior to 2022 as a tactical move to increase yield. Contractually, the portfolio will mostly run off by the Q1 of 2026, although prepayment fees indicate that the run off would be during 2025. Moving on to Slide 10, here we show our CRE portfolio in greater detail. We have a conservative weighted average loan to value of 58% and debt service coverage of 1 point 3 times as well as strong sponsorship tier profile based on AUM, net worth and years of experience for a sponsor.
As of the end of the Q3, we had 29% of our CRE portfolio in top tier borrowers. We have no significant tenant concentration in our CRE retail loan portfolio as of the top 15 tenants represent 20% of the total. Major tenants include recognized national and regional grocery stores, pharmacy, food and clothing retailers and banks. Turning to Slide 11, let's take a closer look at credit quality. Here you can see the allowance for credit losses at the end of the 3rd quarter was $79,900,000 a decrease 15.4 percent from $94,400,000 at the close of the 2nd quarter.
The reserve levels provide sufficient coverage for the credit exposures. Our non performing loans to total loans are up to 152 basis points compared to 138 basis points quarter, which I will cover in detail in the next slide. Non performing assets totaled $129,400,000 at the end of the 3rd quarter, an increase of $8,300,000 compared to the 2nd quarter, primarily due to the increase in non performing loans detailed in the next slide. The ratio of non performing assets to total assets was 125 basis points, down 1 basis point from the 2nd quarter. In the Q3 of 2024, the coverage ratio of loan loss reserves to non performing loans closed at 0.7 times, down from 0.9 times at the end of the second quarter.
Now moving on to Slide 12, which shows the drivers of the allowance for credit losses. At the end of the Q3, the allowance was $79,900,000 a decrease of $14,500,000 or 15.4 percent compared to $94,400,000 at the close of the 2nd quarter. The provision for credit losses was $19,000,000 in the 3rd quarter. Excluding reserves for commitments, the provision was $17,900,000 and was comprised of $14,700,000 to cover charge offs, dollars 2,300,000 due to loan composition and growth, dollars and $900,000 due to credit quality and macroeconomic projection update. During the Q3 of 2024, there were net charges of $35,600,000 of which $17,300,000 was provisioned in the previous period, dollars 6,200,000 related to a commercial loan in Florida, dollars 3,000,000 related to purchase consumer loans, dollars 5,100,000 related to a commercial Houston based loan, of which $1,500,000 was provisioned in the prior quarter and $5,500,000 were related to multiple retail and business banking loans.
This was offset by $3,200,000 in recovery. Please note, we decided to fully charge off the aforementioned Houston based credit this quarter given longer than anticipated litigation and will book recoveries as they occur. Turning to Slide 13, we show the roll forward of special mentioned loans from the Q2 to the Q3 and provide color on the main drivers of these changes. Special mentioned loans decreased by $19,000,000 primarily driven by 3 owner occupied loans and one commercial loan totaling $18,200,000 in loans previously in special mention, which were further downgraded to substandard. Dollars 3,300,000 in payoffs and $2,900,000 in upgrades.
These decreases were partially offset by one relationship with 4 owner occupied loans in Florida totaling $5,500,000 in newly downgraded loans to special mention. Turning to Slide 14, we show the roll forward of non performing loans from the Q2 to the Q3 and provide color on the main drivers of these changes. The increase in non performing loans you see on this slide was primarily due to the $18,200,000 in down rate from special mention discussed earlier and mainly by 6 commercial loans and owner occupied loans and 2 CRE totaling $55,600,000 These increases were offset by $35,600,000 in charge offs, dollars 33,600,000 in note sales $3,200,000 in pay downs, payoffs and other smaller changes. Note sales included 1 owner occupied loan totaling $28,000,000 and 2 small real estate secured loans. All notes were sold at par.
The down rates were not concentrated in a specific industry or geography. Moving on to Slide 15, we continue to have a well diversified deposit mix composed of domestic and international customers. Domestic deposits, which account for 68 percent of our total deposits, totaled $5,600,000,000 as of the end of the 3rd quarter, up by $271,400,000 or 5.1 percent compared to the 2nd quarter. International deposits, which account for 32 percent of total deposits, totaled $2,600,000,000 also up $23,500,000 or 0.9 percent compared to the 2nd quarter. Total (EPA:TTEF) time deposits for the quarter were $2,400,000,000 an increase of $92,900,000 from the 2nd quarter due to an increase in broker time deposits of $1,600,000 as well as an increase of $91,300,000 in customer CDs.
Our core deposits defined as total deposits excluding all time deposits were $5,700,000,000 as of the end of the third quarter, an increase of $202,000,000 compared to the 2nd quarter. The $5,700,000,000 in core deposits included $2,400,000,000 in interest bearing deposits of $72,600,000 versus the 2nd quarter, dollars 1,800,000,000 in savings and money market deposits of $112,500,000 versus the 2nd quarter and $1,500,000,000 in non interest bearing demand deposits of $16,900,000 versus the 2nd quarter. Next (LON:NXT), I'll discuss net interest income and net interest margin on Slide 16. Net interest income for the Q3 was $81,000,000 up $1,600,000 or 2.1 percent compared to the Q2. The increase was primarily driven by higher average balances on total interest earning assets, primarily on loans and securities available for sale and lower average rates and deposits.
The increase in net interest income was partially offset by lower average rates on total interest earning assets, primarily on securities available for sale and deposits with banks higher average balances in money markets, FHLB advances, brokerage and deposits and customer CDs and higher average rates on FHLB advances. In terms of our deposit beta, we observed the quarterly beta of almost 0 this period as the Fed started to cut interest rates late in the quarter. As rates are expected to continue moving downward, we also expect our beta to pick up as we will be prompt to adjust interest bearing accounts to ease our cost of funding. Moving on to interest rate sensitivity on Slide 17, you can see the asset sensitivity of our balance sheet with 52% of our loans having floating rate structures and 57% repricing within a year. We continue to position our loan portfolio for a change in rate cycle by incorporating rate floors when originating adjustable rate loans.
We currently have 48% of our adjustable loan portfolio with floor rates. Additionally, you can see here that within the variable rate loans, 37% are indexed to SOFR. Our net interest income sensitivity profile to changes in interest rates is slightly higher, primarily due to higher levels of cash on the balance sheet when compared to the Q2. We also show here the sensitivity of our available for sale portfolio to changes in interest rates. We expect the repositioning of the investment portfolio to help in a breakdown scenario as we will have less floating investments and more fixed.
In terms of the impact of interest rates in AOCI, you may recall that this account was negative $108,000,000 as of the Q2. Prior to the repositioning, it had improved as a result of interest rate projections. You can see how AOCI is now down to 18,000,000 dollars resulting from the combination of the prior improvement in valuations and the repositioning of the portfolio. Additionally, you can see expected further organic improvement in AOCI if monetary policy changes and interest rates continue to decrease in 2025 as is expected. We will continue to actively manage our balance sheet to best position our bank for the upcoming periods.
Turning to Slide 18, non interest income was negative $47,700,000 as a result of the net loss recorded on the investment portfolio repositioning initiated during the quarter. Excluding non routine items, non interest income was $20,800,000 compared to non interest income of $19,400,000 in 2Q 'twenty four. The company also recorded an additional $8,300,000 pre tax loss in October due to changes in market values from quarter end to the time of the sale. Please note that the combined after tax loss of September October sales is in line with guidance we previously provided. Additionally, non interest income reflects $1,600,000 resulting from the unwinding of a swap related to the sale of a non performing loan.
This effect of $1,600,000 is reflected in both non interest income and non interest expense discussed in the next slide. The decrease in non interest income was partially offset by higher loan level derivative income due to new contracts. Turning to Slide 19, 3rd quarter non interest expenses were $76,200,000 up 2,900,000 percent from the Q2. The quarter over quarter increase was primarily driven by an increase in OREO due to a $5,700,000 valuation expense recorded during the quarter, an increase in professional fees, an increase in loan level derivative expenses primarily due to the unwinding of the swap previously mentioned and higher compensation costs due to higher average FTEs this quarter compared to Q2. The increase in non interest expense was partially offset primarily by the absence of $1,300,000 in valuation expense we had in Q2, resulting from the transfer of the Houston loans from the held for investment category to held for sale category and lower advertising expenses compared to the 2nd quarter.
In terms of our team, we ended this quarter with 7.35 FTEs, which is higher than the 7.20 we had in the 2nd quarter. We added to our business development team again this quarter as part of our growth initiatives. Moving on to Slide 20, we show the elements that contributed to the change in EPS this quarter. We reported 3rd quarter diluted loss per share of $1,430,000 on net loss of $48,200,000 compared to diluted EPS of 0.15 dollars on $5,000,000 net income in the previous quarter, which was primarily driven by the net impact of the non routine items associated with the repositioning of the investment portfolio and the OREO valuation expense. I'll now give some color of our expectations for the Q4.
We expect NIM to be slightly higher from 3Q results closer to mid-350s. Regarding core non interest income, we expect it to be approximately $17,500,000 to 18,000,000 dollars We expect operating expenses to remain at approximately $68,500,000 inclusive of new team members on boarded as part of our growth plan, offset by reduction in expenses due to the Houston franchise sale. Finally, we expect provision for credit losses to be around $8,800,000 to $9,000,000 next quarter as we do expect asset growth as I previously mentioned. So at least $5,000,000 of this amount would be related to growth in the quarter depending on asset mix with the remainder being related to macroeconomic factor updates resulting from the generic reserves model. We are focused primarily on achieving the 60% efficiency ratio, 1% ROA and 12% ROE targets we established for ourselves.
With the capital raise completed, the investment portfolio repositioned and the team in place, we have positioned the company to reach such levels in the second half of twenty twenty five. I will now pass it back to Jerry for closing remarks.
Jerry Plosch, Chairman and CEO, Amarin Bancorp: Thanks, Sherry. So before we move to Q and A, I'd like to briefly comment on where we are in a number of topics. So first, regarding the sale of our Houston franchise, we're scheduled to close on November 8, at which time the premium from the sale will be recognized as income and that will be net of final investment banking and legal expenses. We project those final expenses to be around 1,250,000 dollars And please note that a significant portion of this net gain, however, will be offset by the loss of $8,300,000 on the sale of securities that Sherry mentioned that occurred in the 1st several days of October. Next, regarding our continued expansion in Florida, we just signed a letter of intent for a second banking center in Miami Beach as well as for our 2nd Tampa region location.
This one is located in Downtown Tampa. And we just received OCC approval on the Downtown Tampa location and we will be filing our application for approval on the 2nd Miami Beach location shortly. Both would be expected to open by mid-twenty 25. We also recently announced the hiring of a new market President for Broward County. This is a key new position for the company and this position will oversee Amarin's ongoing expansion in the Broward market.
Also note that we continue to actively recruit for additional relationship officers throughout South Florida and the Greater Tampa marketplace. We also just announced an organization change to move international banking out separately from our consumer banking business to add even more focus on this important part of our business going forward. Our loan and deposit production during the Q3 was strong and the loan pipeline for 4Q, as I previously mentioned, is in line with our previous guidance of 10% plus annualized growth. I mentioned this again in my earlier comments, but as always, funding all of this projected loan growth with our deposits first focus remains our top priority. Regarding credit quality, we continue working on prudent and effective resolution of our special mention and non performing loans.
At the end of this month, we expect to have NPLs down $7,400,000 to $107,500,000 without additional charges and special mention loans will be down $15,300,000 to $61,100,000 Please note we're continuing to work diligently to have significant reductions in both special mention and non performing loans by the end of the 4th quarter. And to wrap things up and conclude, from here on out, it's all about execution. So with that, I'm going to stop here. Sherry and I will look to answer any questions you have. Paul, please open the line for Q and A.
Paul, Conference Call Moderator: Thank you. We will now be conducting a question and answer Our first question is from Russell Gunther with Stephens. Please proceed with your question.
Sherry Mar Calderon, Executive Vice President and CFO, Amarin Bancorp: I
Russell Gunther, Analyst, Stephens: wanted to first start on the loan growth expectations, I wanted to first start on the loan growth expectations, really strong result this quarter and Jerry appreciate the comments for 4Q. Could you just share with us any incremental color in terms of the drivers of growth, whether the mix is expected to be the same? And as we think out into 2025 weighing new hires, the macro environment, what type of growth rate you might expect?
Jerry Plosch, Chairman and CEO, Amarin Bancorp: Yes. No, I think it's really a function as we've talked to Russell over these last couple of calls that we've continuously added to the team. I think if you were to look at the additions we've made really across the board. So whether it's on the private bank side, the commercial real estate side, the C and I side, we've added there's been quality additions throughout. And it's pretty evenly spread when you think about the different counties.
You probably note in my comments, I try to bring up more and more specifically what will happen in Palm Beach where we've added folks or Broward where we just announced the new market president and then all the additions we've had in Tampa and it's not to minimize, we've obviously continued to add here in Miami Dade. I think you're now seeing in the production the strength and the quality of the personnel we've been adding, which is really the biggest driver, right? We add incremental people. Sherry and I've talked about this in prior calls. When you add these folks who've got great relationships, know the right sponsors, been doing the business for quite some time, it's just really a function of the incremental volume we get from each of these additions to staff.
Russell Gunther, Analyst, Stephens: I appreciate it, Jerry. Thank you. And then maybe switching gears to the margin, Shari, appreciate the guide for the coming quarter. Maybe building off the last question, if you guys could share sort of where commercial loan yields are coming on. And then as we look beyond 4Q and contemplate additional Fed easing, could you just share where you expect the margin to head in the early innings of 2025?
And what your kind of rate cut and deposit beta assumptions would assume?
Sherry Mar Calderon, Executive Vice President and CFO, Amarin Bancorp: Yes, sure, Russell. So to address the question on the NIM, more on the short term I think there are elements up and down within that NIM. We have new production coming in between 7.5% to 8% right now. We expect to have an improvement in the NIM due to the securities repositioning. We expect to have the redeployment of the NPLs into interest earning assets.
So the faster that happens, the better for the NIM. And we also have the repricing of the interest bearing liabilities as rates go down. All of that is partially offset by the repricing of the variable rate loans of course. But when we look at the contributions to the margins of those other up items, we see an expansion of the NIM to the mid-350s this quarter and somewhere between 355 and 360 for the first half of twenty twenty five.
Russell Gunther, Analyst, Stephens: Okay, great. Really helpful. Thank you, Shari. And then just last one for me, Jerry, you mentioned in the prepared remarks, you'll be stripping out international banking to focus towards to highlight the importance of that. Can you just share any incremental thoughts around the strategic initiatives there?
Jerry Plosch, Chairman and CEO, Amarin Bancorp: Yes. I think it's important to note that we've not really spoken a lot about this. And it's really going to become more and more of another source, right, so to speak, as we I think I actually use the terminology of thinking of different sources of funding as different faucets we can turn on and off. And we have very quietly behind the scenes done some very nice work on international to replace some of the attrition. There's definitely more diversification.
And the thought process is we've got a very strong group that we just felt that we need to start to talk and spend more time just focused on that. And again, it's not to take away at all from the work that's been done in the past. It's really just to place more emphasis on it as it is a strong alternate source of funding for us. And so and obviously in the prior in this last couple of quarters, it's been one of the best things for us as it relates to cost of funds and we think that that can continue to help us as we move into 2025 and beyond.
Paul, Conference Call Moderator: Thank you. Our next question is from Joe Yanchunis with Raymond (NSE:RYMD) James. Please proceed with your question.
Joe Yanchunis, Analyst, Raymond James: Good morning.
Jerry Plosch, Chairman and CEO, Amarin Bancorp: Hey, good morning.
Joe Yanchunis, Analyst, Raymond James: So I was hoping to kind of piggyback off that last question. I know you said deposit betas will pick up as rates fall, but can you put a little finer point on that? And then do you think kind of down rate betas will be more linear, more lumpy? And is that kind of any different thoughts between that on the domestic versus international customers?
Sherry Mar Calderon, Executive Vice President and CFO, Amarin Bancorp: Yes. So going into the projected betas, when we're projecting beta, especially on the short term, we're expecting it to be around, I would say, closer to the 40 to 45 basis points. And the reason for that is it has to do a lot with the composition of our interest bearing deposits. So depending on the time of the cut, we depending on the composition that we would have on time deposits versus money market that would allow us to refine that beta calculation. But what we're doing definitely is taking action quickly and making sure that we can reprice the deposits as quickly as possible even with the cut that happened in September.
For some of the accounts, we applied the same 50 basis points for some we did somewhat less than that. But there's also a factor in terms of competition and making sure that we can maintain a
Laura Rossi, Head of Investor Relations and Strategy, Amarin Bancorp: strong level of deposit as well. So
Sherry Mar Calderon, Executive Vice President and CFO, Amarin Bancorp: that's where we're seeing the beta at least in the short term. Then in regards to the international deposits, we are repricing the interest bearing liabilities on international accounts, but we also have a significant amount of non interest bearing deposits coming from international customers. So that piece would not be impacted by a downward rate trend.
Joe Yanchunis, Analyst, Raymond James: Thank you. That was very helpful. And then as alluded to in your prepared remarks, your next pickup in AUM in the quarter, do you have any near to intermediate term targets for how big you'd like to grow your brokerage advisory business? At this point, do you have a preference between growing either international or domestic AUM?
Jerry Plosch, Chairman and CEO, Amarin Bancorp: Yes. Look, I think we see opportunities on both sides. It's also one of the reasons with the additional focus on international as we think that it goes hand in hand with as you grow higher net worth customers on the international side that it's just a logical next step to see that we'll get some incremental pop from AUM. But that's not to take away at all from the fact that we're seeing a nice pickup on the domestic side. I think with the team we have in place, we're going to be talking about growth coming from both domestic and international in 2025.
Joe Yanchunis, Analyst, Raymond James: I appreciate that. And then just one last for me here. Over the past couple of weeks, we've heard a lot of management teams talk about muted loan growth as payoffs have been elevated. It appears that's not the case in South Florida given your pipeline and expected loan production. So if you could talk a little about payoffs, kind of how they've trended, where do you expect them to go and do you have any prepayment penalties?
Jerry Plosch, Chairman and CEO, Amarin Bancorp: Yes. Look, I think it depends, particularly on the asset class. We're not a big I think we're probably no different, I would say, that as it relates to whether stuff pays off like within the 1st year or so that there obviously are clauses in contracts on prepayment. But generally speaking, we just don't see that we've had a very material amount of payoffs. Frankly, the attrition that we have had has been because the focus we've had as an organization is on the full relationship as opposed to just being a single transaction on the financing side.
And so we may see some additional pickup in payoffs as rates go down, but right now we really haven't seen a significant amount.
Paul, Conference Call Moderator: I appreciate it. Thank you
Joe Yanchunis, Analyst, Raymond James: for taking my questions.
Jerry Plosch, Chairman and CEO, Amarin Bancorp: Absolutely. Have a great day.
Paul, Conference Call Moderator: Our next question is from Woody Lai with KBW. Please proceed with your question.
Woody Lai, Analyst, KBW: Hey, good morning guys.
Jerry Plosch, Chairman and CEO, Amarin Bancorp: Hey, good morning, Woody.
Woody Lai, Analyst, KBW: I wanted to start on expenses. I appreciate all the remarks you outlined on Slide 21. But just how should we think about the core expense growth rate into 2025 given you're still adding talent and adding some offices?
Jerry Plosch, Chairman and CEO, Amarin Bancorp: Yes. I think we'll team up on this one. But I think the hard part for the Q4 is you're still going to have a month 8 days of our Houston based franchise in the expenses, and you're going to see that we'll have a full quarter's worth of expense as it relates to new team members, some of the recent offices that we've opened, etcetera. But probably the best way to think about it is, and I think the rough numbers are between $2,500,000 that comes off as it relates to the run rate expense in Houston. We've been guiding towards that.
We're looking to add the incremental people, etcetera. And so when Sherry's given guidance out in that 68%, 68.5% range, we're basically backfilling with personnel here in Florida. So I think that's a pretty good run rate on a go forward basis to be thinking about.
Sherry Mar Calderon, Executive Vice President and CFO, Amarin Bancorp: Yes, I would see it as a reallocation. So the amount that will no longer be applicable on the operating expense side or FTE side would be reallocated for business growth on the Florida markets.
Woody Lai, Analyst, KBW: Got it. That's really helpful. And then I guess sort of another 2025 geared question, but it's great to hear that the credit trends are improving heading into the Q4. There's still going to some runoff in the consumer portfolio, but how are you thinking about more of a normalized charge off rate into 2025 and beyond?
Sherry Mar Calderon, Executive Vice President and CFO, Amarin Bancorp: Yes, I think the more normalized charge off level should be closer to the 30 basis points. We do expect the Q4 to still have some of that indirect consumer portfolio that you were mentioning. So that would slightly be closer to the 70 basis points or so. But a normalized level in 2025 would be closer to 30 basis points to 40 basis points.
Paul, Conference Call Moderator: Thank you. There are no further questions at this time. I would like to hand the call back over to Jerry Plush for any closing comments.
Jerry Plosch, Chairman and CEO, Amarin Bancorp: Okay, Paul. Thank you. And thank you, everyone, for joining our Q3 earnings call. We greatly appreciate your interest in Amarin and for your continued support. Have a great day.
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