Amerant Bancorp Inc.

Greetings, and welcome to the Amerit Bank Corp's 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Laura Rossi. Head of Investor Relations at Amarant Bancorp. You may begin.

Thank you, Brock. Good morning, everyone, and thank you for joining us to review Amarant Bancorp's first quarter 2021-2025 results. On today's call are Jerry Plush, our Chairman and CEO, and Charimar Calderon, our Senior Executive Vice President and CFO. As we begin, please note that discussions on today's call contain forward-looking statements within the meaning of the Securities Exchange Act. In addition, references will also be made to non-GAAP financial measures. Please refer to the company's earnings release for a statement regarding forward-looking statements, as well as for information on reconciliation of non-GAAP financial measures to GAAP measures. I will now turn it over to our Chairman and CEO, Jerry Blush.

Thank you, Laura. Good morning, everyone. results. We're implementing a change in our approach this quarter. This change is a result of our seeking investor and analyst feedback on the last several quarter's 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 additions. 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 of 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 placed in us. But more importantly, we made the 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 was essential as we remained focused on the longer term, and we believe this has taken us to our best positions for the future. So let's turn now to slide three, and here you'll see that our core business demonstrated solid deposit growth. Our 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 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. in 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 repayments, 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 manage the balance sheet to not only achieve strong P&R results and protect our men, 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 previously projected net interest income and net interest margin. Our diluted income per share for the first quarter was 28 cents compared to 40 cents in diluted income per share in the fourth quarter. comparison to last. We're 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. The end of the first quarter reflects these positive impacts due to the full quarter back of the Houston franchise sale. Lower promo rates and new deposits and the timing difference between maturities and broken CDs and the bills that flow direct. And it was also a full period of higher yielding securities in the investment program, we're calling it, after the repositioning that we did in the portfolio in late pre-Q and early pre-Q 2020. Net interest margin increases were somewhat upset by the downward repricing of floating rate loans and the impact of securities that we purchased this quarter, and the average yield on securities is clearly lower than before. comparison to our loan production. Our net interest income was $85.9 million, down $1.7 million from the $87.6 million for Q, primarily driven by lower average balances and yields on loans and higher average balances on profits. Again, as I noted previously, we're reaching a higher yield on new production than the loans mature. 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, and also for macroeconomic updates. Sherry's going to cover this more shortly. Non-interest income was $19.5 million, which included an equity of $2.8 million, primarily from a low milk sale that was previously charged off. While non-interest expense was $71.5 million, when you exclude the REO valuation we reported of $500,000, would have been $71 million even. Pre-provision debt revenue, otherwise known as PKR, was higher at $33.9 million in 1-2 compared to $27.9 million in 4-2, and in comparison with consensus, 1-2-25, $31.32 million. Let's turn to slide 5. I'm going to cover a couple of other key items here. We paid our quarterly cash to the United States for a common share of $7.28. $29.3 billion, primarily driven by net new assets, although this was partially upset by market volatility, which resulted in lower market valuation. We continue to see this as an area of opportunity for us to work in it from going forward. And as we previously announced on April 1 of 2025, the company redeemed $60 million in aggregate principal amount of its 5.75% senior notes due this year. So we'll move down to slide six, 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 we're going to do. While the mortgage business was built to create a new source of income in 2021 through the sale of conforming mortgage originations, it could then be sold into the secondary market. This has required continued investment in hiring business development personnel and technology and procurement expansion. Given our strategic decision made last year to double down on our goal in South Florida, and given the required capital that would be needed to scale a national and British business that could otherwise be employed in forward bank strategic growth initiatives, we've elected to transition from being a national reserve to a Florida global stock. So we're moving forward with a change to the operating model, where Enron will continue to offer mortgage products, one of the primary tokens of the rich nations for income for our customers. It's important to note, while we'll still follow input from customers outside of 200 issues to buy additional properties, but you can see, as part of this downsizing, we expect our variable costs to be lowered, and it will result in a reduction in operating costs in the third and the fourth purpose this year. We expect both non-interest income and uninterest once all the restructuring is completed. We'll transition this over the next 120 days, which will result in a reduced level of FTE for the mortgage business. This will allow for the early completion of the current pipeline. So at this point, I'll turn it over to Sherry to our scholar metrics and get into the current blogging record details.

Thank you, Jerry, and good morning, everyone. I'll begin today by discussing our keeper fund metrics and our changes compared to that quarter on 5-7. Starting with the ratio of non-interest-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 different result from 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 security and loan choice, and lower core expenses than 1Q. Our ROAs and ROEs 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 increased information for credit losses and the negative effect of the non-routing 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 impacts of macroeconomic factors. Now moving on to slide 8, which shows the drivers of the $13.3 million increase in the allowance for credit loss. The provision for credit losses was $18.4 million in the first quarter. 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 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 growth charges of $5.3 million related to $2.1 million purchased consumer loans, and $3.2 million were related to certain retail and business banking loans. This was offset by $1.5 million in recoveries. Please note, in April 2025, we sold a $6.9 million participation in a QSL delayed credit with a $4.8 million charge-off. This was fully reserved as of March 31st and will be reported in the future charge-offs. The provisions recorded this quarter and the later reserves and its coverage over months reflect robust analysis in light of macroeconomic and geopolitical conditions. Strengths of Flag 9. you can see the roll forward of classified loans from the fourth quarter to the third quarter, showing a net increase of $39.6 million, or 24%, to $206.1 million, primarily due to one theory loan totaling $21 million, downgraded to the standard of full, due to the loss of a large tenant, and five loans totaling $33.7 million, downgraded to NPL, based on receipt of year-end 2024 financials. Classified loans include three loans totaling $83.5 million that remain in accruing status. Now on slide 10, we show the roll forward of non-performing loans from the fourth quarter to the first quarter of 2025, as well as a reconciliation to what we previously disclosed in our investor update in February, and I will provide color on the main drivers of these changes. The Divergent International Results versus original estimates previously disclosed resulted from downgrades that classified in NCOs primarily based on receipt of year-end 2024 financials. Additionally, an impressive payoff was delayed to 2Q. Please note that two of our order properties are under letter of intent to sell. Of note, the genres that classified in MPOs were primarily in the healthcare and restaurant industries. Turning to slide 11, we show the whole forward of special mention loans from the first 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 near-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, interest reserves, or other structural enhancements. The increase in special mention loans was also due to five commercial loans in multiple industries, totaling $48.5 million, generated based on receipt of year-end 2024 financials. These increases were partially offset by $3 million in payoffs. Turning now to Select 12, I'd like to provide some color on our expectations for the second quarter of 2025, starting with the deposit side. As evidenced in the first quarter, we achieved net annualized growth in our four deposits, aligned with previous guidance of approximately 15%. This growth was net of the $185 million reduction in titers cost deposits from Unitec Outreach. This demonstrates the strength of our core deposit growth capability. Also, as mentioned post-core conversion, we anticipate that 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 a new head of treasury management, which here we will comment on shortly. We continue to expect 15% annual growth by the year 2025. On the lending side, We continue to see borrower interest through strong violence, 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-360s 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 initiative 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 APL 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 environments. And with that, I pass it back to Jerry for additional comments and strategic output.

Thank you, Sharon. 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 for the most recent. Citi National Bank in California, an RBC company. His extensive background also includes 19 years with Third Bank and two years with Conway McKenzie. Jeff's deep expertise has always 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 leads 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 and returning assets to our group. while ensuring a more efficient and effective process to the exit and capital preservation of any problem that's in. We intend to add to our special asset resources personnel with deep experience to help our team expeditiously, prudently, and proactively address created credits. Our overarching objective is to ensure Amarant remains strong through this economic cycle with the ultimate aim of making credit risk a true competitive advantage for our institutions. 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 Citi National Bank in California. His solid track record in ensuring rigorous credit quality review is already proving to be an asset to us. And finally, we're very pleased Vida Singh joined 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 Bank United and prior to that with PwC. Her expertise in developing and implementing comprehensive enterprise risk management strategies are crucial as we continue to enhance our overall risk management framework. We're confident that Jeff, Corey, and Kavita's leadership and expertise Chief Investment 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 in already bringing in numerous new business opportunities has been significant. Prior to joining us, Braden served as Vice Chairman and Head of Private Banking for Wintrust Financial Corp. through a deep client relationship. In this new and expanded role, Gray 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 a faculty member in 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 improve and grow to deepen client relationships across all our lines of business. We're confident that for our future success. And so now finally we'll turn to our final slide, slide 15. Here you can see our commitment to continue to expand our presence in the market. We continue to gain on that. So just this month in mid-April, we opened our new regional headquarters office and our new banking center in West Palm Beach. Looking ahead, we're excited to open 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, and 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 City. 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 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 discussions of potential shifts in the macroeconomic and geopolitical landscape stemming from the current administration's tariffs of negotiations. While we do not know if unpredictability will go away in the short term, we're closely monitoring these developments and how the broader economy responds to any resulting changes. The ability and capability to plan through scenario building is key. Our team is actively analyzing different scenarios to have visibility for possible outcomes from changes in rates, demand for loans, and macroeconomic factors such as consumer safety. And 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 background. So with that, I'll stop here and share and I'll look to answer any questions you have. Please open the line for Q&A.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. Our first question today is from Russell Gunther of Stevens. Please proceed with your question.

Hi, good morning, guys.

Great, Russell.

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 pay down headwinds, And then balancing the tailwinds from recent commercial lender hires with 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, Russell, I'll start. I'm sure Sherry 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. that as we see some volatility here, we still believe that you're going to see, you know, as things work their way through, I'll call it maybe more late in the second quarter, the 3-2, 4-2, 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 ERE side. But also we want to be cautious, right, because when we looked at the repayment 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 factor. 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 share today.

Yeah, and Russell, I guess the other comment I'd make, you know, I think between comments that I made and Sherry made is our belief is, you know, 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, you know, go back below the $10 billion. We're going to continue to grow. And if temporarily we need to add, you know, that cash as it comes in into investment securities, we're fine with doing that. So, I mean, in terms of, yes, it will be at a lower yield than some of the low production, but our view is that you're also seeing a greater proportionality Okay, got it.

I 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. I'd like to get a sense if there's any change to that guy there. And then, if you could, just folding it all together from a P&L perspective, I think I caught you, say, 1% ROA in the back half of the year, but if you could just confirm that is the expectation and the main drivers would be helpful. Thank you, guys.

Sure. Russell, let me first cover the question on the charge-off side. As you can see, this quarter we had close to 22 to 25 basis points on the charge-off level. We do expect that level to go slightly up in the second quarter as we announced that we had a loan with specific reserves that we charged off the first week of April. 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 FACES, second half of the year.

Okay. Very helpful. Thanks for clarifying. Thanks, guys. Sure.

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

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

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

Got it. And then just thinking about all the macro uncertainty and, you know, who knows how long it could last, but you've got that 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 what we're doing, Woody, is when you refer to these initiatives, our commitment to completing those three additional branch locations and hiring the personnel We're already way down the path on all of that. So, I mean, we're definitely going to go through and complete, we think, those 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. 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 there. you know, in terms of incremental deposit generation from the locations. And, again, we've been really selective. We're getting great people coming in wanting to work with the organization. And, you know, we've been able to attract some really nice additions from a business development perspective. So, you know, but that's, you know, when we talk about commitments that, you know, additional that we'll make, They would be things that you wouldn't see that flowing through in 2025. They're commitments that would probably be for the first to second quarter that you'd 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, I 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. 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 20, excuse me, of, you know, continued high interest rates, high costs. 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 this category.

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

Yeah. Hey, Woody, I think it's really important to note, too, you know, and I think a lot of this comes back around to, you know, 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. You know, so, you know, again, I mean, if you read the regulatory guidelines, 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, and 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 following what I think is the regular pretty appropriately at this point.

All right. Thanks for taking my questions.

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

Hey, good morning, guys. Thanks for taking my questions. Just wanted to start on the buyback. So you guys bought a little bit of... 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. Thanks.

Yeah. Hey, Michael. It's Jerry. We were under a 10B51 in the first quarter. We remained under one here in the second quarter. 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 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.

Okay. So, Michael, to add to that, we worked under the 10b-5-1 in the two quarters, so the first quarter and the portion now into Q, 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, you know, 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 those should be lower costs. 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 low-yield side and 17 on the deposit side. I think when Sherry's given guidance in the mid- that we can price down to continue to manage that sort of in that range. that we've taken to this at this stage.

Yeah, Michael, to walk you through expectations of the NIM, I think it's important to talk about the NIM in the first quarter because there are items in there that are recurring and there are items that are new in terms of the forecast. So if we think about the impacts of the Houston franchise versus the 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, where asset faster than the deposit side, although we are trying to make that closer to beta 1, 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 And I think you also asked 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 in the purchases we made in the first quarter closer to 549 or 546, if I recall correctly.

Okay, so 625 to 650 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 discussion.

Okay, helpful.

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 Sherry'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 downward reprice our liabilities, you know, obviously not thinking that, you know, I should say preparing for, you know, what we think is going to be eventual rate cuts.

And even with the drops in rates, Jerry – the retention rates over time deposit have been very strong. So we're confident that the deposit side will be able to retain deposit of favorite price.

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. You know, 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 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? Are you ahead? Just trying to get a better sense of when we can get back to, you know, maybe some peer-level, you know, credit metrics. Thanks.

Yeah, look, I think, you know, in my opening remarks, I think we are continuing to be proactive and aggressively go and 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 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 forward. I did reference that we're going to add more firepower here in mid-quarter to our special asset team. 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.

The next question is from Steven Scuton of Piper Sandler. Please proceed with your question.

Hey, good morning, everyone. So, Jerry, I appreciated your comments about the risk rating changes and kind of feeling like you're being proactive. I guess one of my questions is with Jeff coming on here mid-March, I mean, do you feel like some of these changes were a result of having new eyes on the portfolio and maybe a change in 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 a change in kind of ideology around the credit review process?

Yeah, no, I think, you know, we've talked about this, Steve, in the comments that we've 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 Sherry 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 timeframe post year end. And, you know, the specifics that we're looking at is, you know, pay, 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 from your customers and do in light of these updates do you change those the timing of those requests to customers or is that even feasible to get more you know more frequent updates from them in light of all the uncertainty yeah look i think it varies sometimes some are quarterly some are semi-annual some are full year i think a lot of this comes back

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 transpired around loan growth, and you noted paydowns, repayments, but were there any specific large loans at paydown or any specific drivers? There's 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. 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, financing arm only and I think that that's also a result okay 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 you no longer have an interest in maintaining those kind 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 maybe

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

Yeah, I think from the mortgage business perspective, we definitely see 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 mortgages, the mortgage revision 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, 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?

Yeah, Stephen, I think, you know, and again, I'll, emphasize, I made a comment on this. I think the decision really is more around what is a better return for our organization and shareholders is to deploy capital to really build up the scale necessary to make a national 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 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 up would have just taken away from our focus of what we needed to be focused on, you know, as sort of job one.

Got it. That makes sense. I appreciate all the time and the color here.

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

Thank you, everyone, for joining our first quarter earnings call. We appreciate your interest in Ameren and your continued support. Hope you all have a great day.

Ladies and gentlemen, thank you for your participation. This does conclude.