Q3 2022 Amerant Bancorp Inc Earnings Call

October 21, 2022

Okay.

Good day, and thank you for standing by welcome to the.

Third quarter 2022 earnings conference call at this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded I would now like to hand, the conference over to Laura Rossi.

<unk> head of Investor Relations. Please go ahead.

Thank you Tanya and good morning, everyone and thank you for joining us to review <unk> third quarter 2022 resold them.

On today's call are Gary Slash, our chairman and Chief Executive Officer, and Carlos Garcia, Our Chief Financial Officer.

As we begin please note that discussions on todays call contain forward looking statements within the meaning of the Securities Exchange Act. In addition reference 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 for information a reconciliation of.

non-GAAP financial measures to GAAP measures I will now turn it over to our chairman and CEO Jerry flush.

Thank you Laura good morning, everyone and thank you for joining Cameron's third quarter 2022 earnings call.

I'm pleased to be here today to report on our results for the quarter.

Before we do that I'd like to acknowledge the impact hurricane in southwest Florida.

Our thoughts and prayers go out to those most affected by the storm.

At Ameren, we've been actively involved in several efforts to support impacted communities recover from this unfortunate event and we look forward to seeing everyone affected back on their feet.

From a business perspective, we are fortunate to report there have been no significant impacts identified in our Florida loan portfolio.

Moving on to the remarks of the quarter.

October 19, 2022, our board of directors approved a nine <unk> per share dividend payable on November 13th of this year as I've shared in previous calls paying dividends are an essential component of our plan to provide greater value to our shareholders.

I'll now provide a beep brief overview of our performance in the third quarter and outline the steps we took to best position ourselves for the balance of the year and beyond and then I'll hand, it over to Carlos to get into the details.

So if you turn to slide three here you can see a summary of our third quarter highlights our net income attributable to the company was $20 9 million up significantly quarter over quarter.

This increase was primarily driven by higher net interest income in the third quarter as we recorded higher average yields and balances on loans as well as on our investments. These are partially offset by the increase in higher average costs in balances on deposits <unk> advances, but as a result, the net interest net interest.

<unk> expanded to $3 six 1%, an increase of 33 basis points quarter over quarter.

Our balance sheet also grew significantly during the third quarter with total assets, reaching a historic high point at $8 7 billion compared to $8 2 billion as of the close of <unk> 20 to.

Total gross loans were $6 5 billion compared to $5 85 billion and <unk> 22, an increase of $656 million and total deposits were $6 6 billion up $385 million compared to $6 2 billion in <unk> 'twenty two.

Company's capital levels continue to be strong and well in excess in the minimum regulatory requirements to be considered well capitalized as of September 30 of this year during.

During the quarter. We also paid out the previously announced cash dividend of nine <unk> per share on August 31.

We'll turn now to slide four you can see that our core <unk> was $33 million up nearly 56% compared to the $19 4 million reported in the previous quarter. As we've consistently stated we believe this slide is essential to show the net revenue growth of the company excluding provisions.

And non routine items. So you can clearly see Atlanta core earnings power and as I noted in my remarks last quarter, there were significantly fewer non recurring items recorded this quarter compared to <unk> 22.

We can turn now to the key items on slide five.

And we can cover what happened during the third quarter. So we continue to work on reducing nonperforming loans as part of our commitment to increase our percentage of earning assets to total assets.

As of Q3, Npls declined to $18 7 million compared to $25 2 million as of <unk> 22, we intend to continue to focus on driving down npls in future periods.

We're also pleased to report that the sale of the New York City based real estate owned property closed this month so in the month of October .

Coupled with the drop in Npls this significantly reduces our non our level of nonperforming assets.

As I've stated when discussing our retail network. We continue to look for expansion into new key markets, while continuously looking for opportunities to consolidate and others. So during the third quarter, we opened our new highly of Florida location.

Received OCC approval for a new location in key Biscayne, Florida.

Market, we're very excited to do business in and look to be opened by the end of the first quarter of next year.

We closed our Pembroke Pines, Florida location as announced last quarter. Additionally, our new University place location in Houston, We'll open the October 31, while the location of replaces South Shepherd will close the same day with our current customers moving over to the new location.

And the opening of our downtown Miami location is now expected sometime in the early 2023.

Regarding our Tampa loan production office, we continue to add key business development personnel as hamper specifically in C&I and now have 14 team members with four more openings to fill.

And we also added to our business development team here in South, Florida, and we plan to continue to look to expand in both Broward County, and Palm Beach County.

We'll turn now to slide six you can see here, we've outlined key performance metrics and their change compared to last quarter. It.

It is clear our operating profitability improved from higher Outstandings and improved net interest margin.

As I, just mentioned was 361% our efficiency ratio improved to 65, 4% compared to the 86, 6% last quarter, both ROA and ROE significantly improved as you can see here from higher net income this quarter.

For consistency and transparency, we again show the three core metrics of ROA ROE and operating efficiency, excluding any onetime non routine items in the footnotes. So you can more easily see the underlying performance for the quarter.

We'll turn now to slide seven which focuses on ameren mortgage on a standalone basis.

Mortgage had net income of 800000, an increase of 400000 or 88% compared to.

Q2, primarily as a result of mortgage banking income from transactions with the bank. However on a consolidated basis, we recorded a net loss of $1 4 million for the third quarter in connection with the operations of Ameren mortgage year.

Year to date 2022, the company has purchased approximately $298 million in loans through Ameren mortgage which includes loans originated and purchased from different channels. The current pipeline shows $51 million in process are 79 and applications as of October 12 in line with the headwinds currently in play.

<unk> for the mortgage business in general.

So with that said I'll now turn things over to Carlos who will walk through our results for the quarter in more detail.

Thank you Jerry and good morning, everyone turning to slide eight I'll begin by discussing our investment portfolio.

Our third quarter investment Securities balance was $1 2 billion down compared to both the previous quarter and the third quarter of 2021 when.

When compared to the prior year duration of the investment portfolio has extended to five years due to lower prepayment speeds recorded in our mortgage backed securities portfolio in light of rising interest rates.

The strategy has focused on achieving the right balance between yield and duration.

Current market conditions provide better reward and longer duration assets.

The floating portion of our investment portfolio increased to 16% compared to 11% in the previous year.

As I did last quarter I would like to take a minute to discuss the impact of interest rate increases on the evaluation of debt securities available for sale.

As of the end of September the market value of this portfolio decreased $35 million after tax compared to the second quarter and $100 million year to date.

These changes comment directly sold of increases in interest rates consistent with our interest rate sensitivity analysis the.

The relative credit exposure of our investment portfolio is very limited.

Reason why there was no need to record a new origin temporary burden.

It's also important to comment that our tangible common equity ratio ended up seven 8% after considering the impact of changes in valuation of our portfolio.

Continuing to slide nine let's talk about the loan portfolio.

At the end of the third quarter total gross loans were $6 5 billion or 11% compared to $5 85 billion at the end of the last quarter.

This growth was driven by loan origination efforts, primarily on the CRE side and single family residential mortgage.

Additionally, the production number in mortgage was complemented with loan purchases through third parties.

Partially offsetting this increase were prepayments totaling $182 million primarily in commercial loans.

Also during the third quarter, we had $22 million from loans, where we could need it would be.

Nevertheless, if we move financing solution that we announced last quarter.

Loans held for sale as of the end of the quarter totaled $58 million compared to 121 million as of the second quarter 2022.

The third quarter loans held for sale consisted of residential mortgages loans with.

We transferred the New York City CRE loans previously accounted as loans available for sale to investment category as we now have the intent and ability to hold these onto the maturity or we'd be.

Consumer loans as of September 30 were 577 million, an increase of $20 million or three 5% quarter over quarter.

This includes approximately 497 million in higher yielding indirect loans, which continues to represent a tactical move for us to increase yields given higher cost funding costs.

During the third quarter, we purchased $91 million of consumer loans under the indirect lending program. We also launched a new fintech enabled program, which generated $6 million and consumer loans and is intended to progressively replace our indirect purchase.

Turning to slide 10, let's take a closer look to the credit quality, our credit quality remains sound and reserve coverage is strong the allowance for loan losses at the end of the third quarter was $54 million, an increase of three 2% from the $52 million at the end of the previous quarter.

There was a provision for loan losses of 3 million in the third quarter to account for the loan growth.

During the third quarter, the $2 7 million allowance associated with the COVID-19 pandemic was further reduced to $1 6 million now as the generic reserve this.

This generic reserve accounts for losses, they need to be identified in our portfolio such as those that May result from <unk>.

At this time, we havent identified any immediate significant impacts to the collateral of our portfolio.

Gordon exposure do Ian is approximately 300 meetings our team members have been in contact with the borrowers and have been making site visits as well.

Net charge offs during the third quarter totaled $1 3 million compared to the $4 million in the second quarter.

During the third quarter of 2022, the company charge of $1 7 million related to multiple consumer loans on 0.2 in connection with two commercial loans.

Nonperforming assets totaled 25 million at the end of the third quarter, a decrease of $6 $6 million or 21% compared to the second quarter, and a decrease of $68 million or 73% compared to the third quarter of 2021.

The ratio of nonperforming assets to total assets was 29 basis points down 10 basis points from the second quarter of 2022, and down 95 basis points from the third quarter of 2021.

Our nonperforming loans to total loans are down to <unk> 29, compared to <unk> 43 last quarter.

We spoke of our commitment to increase earning assets to total assets.

Gerry mentioned the nonperforming asset ratio was boarder decrease as a result of the sale of the New York.

We closed the month of October .

In the third quarter of 2022, the coverage ratio for loans compared to loan loss reserve to nonperforming loans closed at two nine times up from the $2. One times at the end of the last quarter and from one time that we recorded a year ago.

Continue to slide 11 total deposits at the end of the third quarter were $6 6 billion up $385 million from the previous quarter.

This growth was driven by customer transaction accounts, which were up $258 million or five 3% primarily for an interest bearing demand accounts.

The company obtained additional deposit sourced via large home providers during the period.

We also elected to increase broker time deposits, which were $143 million increase in order to lock lower interest rates in light of rising market rates.

The increase in total deposits was offset by a slight decrease in customer time by $11 million or one 2%, which reflects our retention efforts in this interest rate environment.

Important to highlight the domestic deposits now account for 63% of our total deposits totaling $4 2 billion as of the end of the third quarter up 444 million or 12% compared to the previous quarter.

Foreign deposits, which account for 37% of the total deposits totaled $2 4 billion slightly down by $59 million or two 4% compared to the previous quarter.

Our core deposits, which consists of total deposits excluding all the time deposits were $5 2 billion.

End of the third quarter, an increase of 253 million or 541% compared to the previous quarter.

The $5 2 billion in core deposits included $2 1 billion in interest bearing deposits, which increased 127 million versus the previous quarter.

$1 7 billion in savings and money market accounts, which increased 100 more than $100 million versus the second quarter.

One 3 billion in noninterest bearing demand deposits, which were up $20 million versus the previous Q.

Next I will discuss the net interest income and net interest margin on slide 12.

Net interest income for this reporting period was $70 million <unk>.

$11 million or 19% quarter over quarter.

This increase was driven by higher average yields on loans and investments, resulting from a total increase of 300 basis points in short term interest rates.

Average balances in floating commercial real estate and single family residential loans as well as changes in deposit rates being handled via specific allowances to manage the pressure over cost of funds.

As rates continue to increase we're disciplined and manage and decreases in our broader rates as we explained last quarter. We had just certain interest rate sensitive products and relationships to partially reflect the increases in market rates.

There is a lot of value leverage the product mix to differentiate pricing and control deposit betas.

During the third quarter.

Just on the current deposit mix, we observe a better of approximately 30 basis points.

Which help us to navigate the interest rate increases we saw during the period.

Moving to the net interest margin as Gerry mentioned, the third quarter, NIM was 361% up by 33 basis points quarter over quarter the.

The change in the net interest income underneath what's the remainder driven by an increase in the yield of our loan portfolio, which is now a five 1% an increase of 68 basis points versus the previous quarter.

As I said in Q2 the improvement in me is a reflection of our asset sensitivity position.

Moving to slide 13, you can see our balance sheet continues to be asset sensitive with about half of our loans, having floating rate structures and 58% reprice within the year, our NIM sensitivity profile to interest rate office scenarios has decreased compared to the last quarter in light of data beta assumptions.

On interest bearing deposits.

These changes are consistent with a more competitive environment for deposit gathering.

This quarter, we're showing a potential increase of approximately 6% net interest income in the up 100 scenario of 9% for the two months.

We will continue to actively manage our balance sheet to best position <unk> for the expected rise in interest rates for the remaining portion of 2022.

Moving to slide 14.

Noninterest income in the third quarter was $16 million.

Up $3 million versus the previous quarter, and 23% from the $13 million in the second quarter.

The increase was driven by positive valuation on marketable securities holdings of $1 5 million in the third quarter compared to a negative valuation of $2 six in the second quarter.

An increase of $1 8 million in fee income from client derivatives and increase of <unk> 2 million in total brokerage and advisory fees, primarily driven by higher securities trading coming from the fixed income side from our customers' portfolio.

The increase was partially offset by lower mortgage banking income of $2 3 million. The absence of net unrealized gain on derivatives valuation of 49 in the second quarter.

<unk> asset under management totaled $1 8 billion as of the end of the third quarter down $57 million or 3% from the end of the second quarter, which comes as no surprise, given the lower market valuations in equity and fixed income markets.

Turning to slide 16, third quarter, noninterest expenses was $56 million down $6 million or 10% from the second quarter as we announced on our previous earnings call. There was a significant reduction reduction in onetime expenses, we consider 2 million of non routine items. Excluding these items core earnings.

<unk> expenses were $54 million in the third quarter of 2022.

The quarter over quarter decrease was primarily driven by the absence of $3 2 million related to a no reevaluation in New York.

One 6 million impairment charge related to the closing of our banking center.

As well as lower expenses and connect in connection with the comment transition to a finance by $2 5 million lower advertising expenses by $1 2 million and severance and other compensation expenses by $8 million.

The decrease in noninterest expenses was partially offset primarily by higher salaries.

<unk> 7 million, resulting from new hires and $1 million of consulting fees in the third quarter in connection with the engagement with Empire.

The efficiency ratio was 65, 4% in the third quarter of 2022 compared to $86 six in the previous quarter and $74 two in the third quarter last year.

Core efficiency ratio decreased to $64 one in the third quarter of 2022 compared to $73 seven in the second quarter of 2020.

The improvement was driven by higher net interest income as well as lower expenses during the third quarter I will now turn the call back to Jerry for closing remarks.

Thank you Carlos and closing.

Wanted to state that we are seeing the benefits of the decisions. We've made in recent quarters as well as from the efforts of our team members and that's resulted in higher net income.

Solid net interest margin expansion strong loan and deposit growth a significant reduction in nonperforming loans and a further reduction to nonperforming assets just post quarter adds.

And continued strong capital ratios.

In summary, while we recognize there are clearly headwinds given the continued economic stress in the environment. We remained focus on prudently executing on our strategic initiatives and continuing to build our team and gaining additional market share our commitment to finishing our transformation.

And becoming the bank of choice in the markets. We serve is unwavering with.

That I'll stop and Carlos and I will look to answer any questions. You have Tonya. Please open the line for Q&A.

Certainly as a reminder to ask a question. Please press star one one on your telephone please standby, while we compile the Q&A roster.

No Matt.

And our first question will come from.

Brady Gailey of <unk> Your line is open.

Hey, Thanks, good morning, guys.

Good morning Brady.

So roughly $298 million of mortgages repurchase I think you said year to date, what was the amount repurchased just in the third quarter.

In the third quarter it was.

Probably close to the $150 million that we bought front.

But our production coming from number of mortgage plus additional sources that we got on the on the quarter.

Ethernet Ethan asset class right now that it has.

Very good balance between yield and duration as the way that we see it now.

So even if you back that out I mean loan growth was incredibly robust. So can you talk a little bit about where youre seeing the loan growth and what the outlook is for loan growth as we head into 2023.

Yeah Brady it's Gerry.

I think you know.

On the call for the second quarter.

We referenced that with the additions that we've had in the build out of Tampa.

And the continued strong performance of the business development teams, both in Texas and in here in South Florida, we have.

Pretty good pipeline headed into this quarter.

I think you saw strong loan growth in commercial real estate.

Thank you.

We gave some information about.

The changes that have happened in the different geographies, but I'd also note that we continue to see.

C&I, even with high repayment activity, we had a very strong pipeline, there as well and a good quarter of production and I think we continue to do what we said we were going to do in the past. The White label program was really going to start to kick in on equipment Finance you could see.

That we just started the white label Fintech solution that Carlos referenced.

As a replacement for indirect production. So I think all of these contributed to the growth overall during.

During the quarter.

And then to that effect.

Apologies for any of you asked the second question, which is the.

The pipeline continues to look very strong.

In all the different lines of business I think the biggest comment I'd make about that is what.

What we will record in low growth needs to be funded by deposit growth.

Strong commitment as the deposits first organization to really emphasize that as a way to continue to grow the balance sheet.

No.

While we may have several hundred million dollars that we could possibly grow in the quarter, we need to also grow the deposits at the same point in time.

Yes, okay.

And maybe just an update on the 1% ROA and 60% efficiency ratio targets. I mean, you basically you hit a one ROA and <unk>. So do you think you can keep it there.

As an update on timing I know, you've kind of targeted a 60% efficiency ratio at some point it doesn't feel like that at all.

Happen in the next couple of quarters, So maybe an update on timing on how youre thinking about that.

Yeah, No I think we can continue to be in and around a 1% return on assets on a go forward I think the strength of the balance sheet.

We expect that.

Should see some expansion in the margin again here in the fourth quarter, even with rising deposit costs.

And so thats going to help.

I think in terms of.

What happens with growth I think is really the biggest question right because.

We want to be prudent in terms of the use of the capital we achieved 11 plus percent Roe.

But at some point, we want to keep a sharp eye out on our tangible common equity ratio and make sure that what we had is going to be beneficial for future returns. So I kind of think you're.

The 60% we talk.

Awhile back that.

I've made the conscious decision to continue to add to the business development.

<unk> and I think you just heard me say it again that we continue to see opportunities to add quality people. We have some openings in Tampa, we want to continue the expansion and palm and Broward.

We're bringing on some new personnel as it relates and our our wealth business.

<unk> to look for private bankers, so theres going to be some uptick on the core expense line specifically in personnel expense too, but I think these are all the right things to be doing to build the long term value for the franchise and so as much as I'd love to hit the 60% next quarter I think we will.

<unk> continued to be.

In the low sixty's with a goal of getting there in 2023.

Okay and then finally for me just on the buyback.

Doesn't appear you guys were active in the quarter on OTC.

Has run a little under where it has been historically for you guys.

A little under 8% so should we expect buybacks from here or is that.

Not in the mix.

Yes, Brady I think we've been pretty consistent in saying you know the way we think about capital is we need to prudently use it or we need to return it.

Think right now our focus is we've got opportunities to use it and I think that the one other item in return is the consistency of paying out a dividend.

Thank you.

<unk>.

Completed two very successful buyback programs.

When you look back at what we did in the fourth quarter of last year going into the first quarter and then another.

<unk> by the end of the first quarter right now we have not asked for authorization to do more.

We think that the right thing to do is grow into that base, which is what we just didn't hear in the third quarter and continue to evaluate what we will pay out in.

From a dividend standpoint going forward.

Okay, great. Thanks, guys.

Okay. Thank you.

One moment.

Yes.

And our next question will come from Michael Rose of Raymond James Michael Your line is open.

Hey, good morning, guys. Thanks for taking my questions.

Obviously credit quality continues to be a really good story here, but the reserve ratio did come down.

Kind of a little bit can you just give us kind of your general kind of overarching thoughts on credit and maybe how some of your markets in Florida, and Texas might might.

Might be a little bit better maybe just what gives you confidence because we've seen others definitely begin to build reserves this quarter. Thanks.

Yes sure.

Thanks, Michael its Jerry in terms of.

How we feel on the reserve process, I guess first and foremost with all the improvements that we've seen right and the NPL and.

The NPA totals that gives us some confidence we did add to the reserve.

I would say that half through the provision that we did record was eaten up by charge offs in the quarter. There was definitely a little bit of an uptick and we're keeping an eye on that on that consumer indirect portfolio.

But in terms of the rest of the portfolio, we're continuing to see pretty solid performance across I think it's really important to note we haven't talked about that yet.

On this call, but we will be adopting Cecil.

And I think again, you'll see that just naturally because of the economic factors that go into those calculations youre going to see that will obviously have an adjustment.

As the Gen. One date right that comes out of equity plus there will also be a P&L adjustment that will take place for all the production we booked during the course of the year.

So I would expect and I think it's.

I think everyone should expect that our AR reserve ratios are going to go up in the fourth quarter, just because of seasonal implementation.

But in addition, we're going to obviously continue to closely monitor the portfolio.

There will be mic.

On the <unk>.

Thank you a disclosure about the the detailed range for day, one implementation, which will you will find it is.

He has decreased the range versus the previous quarter as we progress on the implementation. So now it's 15% to $20 million incremental.

Hum reserves due to day, one implementation and as Jerry mentioned there would be.

Ordered different adjustments based on the production that we have recorded over the year.

Perfect that was going to buy.

One of my follow up maybe just switching gears to the positive.

Obviously deposit costs up like everybody do you have a do you have to what's the number for interest bearing costs were at the end of September and then just more broadly just given the fact that you guys have.

He is in charge of international deposits can you just talk about any updates or changes to your deposit strategy as we move through.

Hiring short cycle. Thanks.

Yeah, Let me, let me answer that.

Second one first I think it's really important to note that the deposit growth.

The quarter Ria.

Really we had contributions from every line of business particular node.

This reflects the build that we've been doing in the private bank side.

We saw that grow very very nicely in the quarter up close to I believe it was $75 million.

And growth just in that segment alone and so.

No.

People are obviously very focused with all these rate hikes, there's lots of competitors that have our offerings.

Some pretty strong rates out there and so we're navigating through.

In an environment right now right or periods of time, where you've got national players as well as local players trying to run offers it fair.

Fairly high rates to be candid.

We will as well look for money probably around the 12 months CD range, because I think we wanted to be somewhat cautious too on the one side lost money in but at the same point in time give ourselves some flexibility given where we don't want to go too long.

Term.

And build back up that time deposit book, which I know, you're very aware of we had a.

Lot of work in 2021, where we we.

We had a lot of that shift from time deposits over to either noninterest bearing or interest bearing alternatives such as money market. So.

Carlos will give you some comments on the on the cost, which clearly I think it's safe to say deposit costs are going up for us just like they're gone up for everyone else yeah.

I guess, it's important to comment that the first stages of this interest rate increases.

At least that was our case and we believe it is the case for other institutions.

Ben allowances being provided to the different business lines due to increased interest rates on certain deposits are the ones that are more interest rate sensitive.

We believe that for now on there would be changes or adjustments on the deposit rates on the tables that they are being published.

They would be.

A more steep increase in the cost of funds our beta.

As we discussed on the call was <unk> 30 quarter over quarter, and we expect that the <unk>.

Third quarter will be probably in the $40 40 ish.

Beta so you should expect an incremental cost of funds in the case of the international side. They continue to be at a blended close to the 11 basis points.

However, we are starting also to see some pressures from certain private banking customers on the international side.

They are aware of the rates that they are paying in the local markets and there have been.

Pressure as well so.

I would say the you see the interest bearing deposits went from <unk> 62 to one to 105.

That is reflective of about 30.

Beta.

Domestic we're the ones driving most of the of the change International we're very stable for the most part, but we're starting to see signs of increases.

Very comprehensive thanks for taking my questions.

Thank you Peter and I have a great day.

One moment.

Our next question will come from Matthew.

Sorry, Matthew Olney of Stephens Your line is open.

Hey, Thanks, good morning, everybody.

Right.

I guess more of a big picture question thinking about the local markets there.

South, Florida, Tampa, I think we all read headlines about dark clouds across the country economically anything stand out in Florida that you see that could be somewhat different or is it similar or same dark clouds that we read about for most other metro markets across the country.

No.

Matt Great question, we still see really strong demand for housing you've got.

The continued inflow to the state and particularly in the two markets in which we operate so south Florida and Tampa.

Particularly here in South Florida.

Sales of continues there is still a scarcity of inventory.

I think the biggest headwind that we face which is no different than the rest of the country. It is just you know.

Whats happening with the cost of living right, whereas we're seeing higher costs pretty much across the board.

And I think that in particular, we were always a little higher cost to begin with so you know there's.

There's definitely pressure there, but in terms of.

Real slowdown I mean, we're going right into the season.

Which is very positive for hospitality.

We're seeing.

Full restaurants, we're seeing you know I can.

I assure you there is still lots of traffic so.

We're we're still pretty bullish about that.

These markets and I can also tell you Carlos Hi, Henry.

I recently visited in Houston and.

Continued to see that it looked pretty strong there as well so I do think we're very fortunate because we are in.

In hydro desirable markets, I think that will play pretty well for us.

Yes.

Okay I appreciate that and then I guess on the quarter as far as the.

The non interest income on an adjusted basis, it looks like were pretty flattish in the third quarter.

I think last quarter, you talked about a potential rebound in the <unk>. So curious about kind of what you saw in the third quarter and then as you look into the fourth quarter. What are the some of the puts and takes around around the fees.

Sure.

The dose.

We have this particular quarter the change on the derivatives income coming from customer that that was the guidance that we provided last quarter and so that continues to help during this quarter.

We believe that that demand was probably will be probably not seen coming into the into the next quarter, we always offer solutions to customers in order to hedge interest rate risk.

We've seen the demand may be lower and also remember that there.

It was a record quarter in loan production. So that also helps.

With that type of instrument.

In the case of the <unk>.

There was a surge, but it was related from the brokerage activity.

The fixed income side of customers as you can see the level of interest rates. They have now multiple options from the fixed income space to go and invest so that also created a P.

Income this quarter around.

We believe in the Q4 now that will be very active as well.

And in the case of hammer in mortgage.

Which is the other source I just described the three items that created most of the changes quarter over quarter. The risks are pretty stable in the case of <unk> mortgage is.

Fact that refi activity has decreased demand and production is lower so we should expect.

Fee income that is similar to the one that we have on that.

Third quarter of this year.

Speaking of looking forward.

Okay.

For that and then also earlier on the call you mentioned.

We should expect another step up on NII and the margin in the fourth quarter and that makes sense, given kind of balance sheet growth and integrate activity any more color on the degree.

Step up that we could see in the fourth quarter I guess in the third quarter. It looks like that the NII improved $11 million sequentially in the margin stepped up 33 bps.

My assumption would be the step up in the fourth quarter would be more moderate than that but any color you can give us.

<unk> purposes.

Yes, no that's completely the case.

Wouldn't be as steep as in the third quarter.

As you can see the policies are starting to catch up faster than we anticipated something in the $3 75 to 380 financial margin for the for the fourth quarter that includes a more.

<unk> better.

On the.

Net interest income simulation process.

Okay. That's helpful and then I guess.

Just lastly, going back to the loan growth discussion from earlier.

And looking at the slides it looks like part of the growth wasn't wasn't Texas any more color on that growth was this the the multifamily.

Family growth or the single family just any color at all.

Yes, no you just hit it it's a big part of it is multifamily growth, which we think we've got good spreads and obviously with the.

It's a more secured and with the demand, particularly for these type of units.

Thought it was a smart play for for us to make those kind of loans this quarter and they were floating rate.

Yes.

Perfect.

Okay guys. Thank you very much for taking my questions.

Thank you and have a good day.

One moment.

And our next question will come from Fred.

Freddie strict Glenn.

Janney Montgomery Scott Your line is open.

Hey, good morning, everybody.

Hey, good morning.

Just going back to deposits.

It sounds like you guys think you can continue to grow core deposits.

Do you think youll be able to stay below 100% for the loan to deposit ratio going forward or do you think you'll have to take down a little bit of additional FX youll be funding down the road.

Yeah, Hey, Matt its Gerry.

I think we've said we wanted to stay in and around the 95% range. We obviously are a little higher than that at 98 and change my sense is.

I think our team my team is.

Just tears this come out of my mouth every single day every interaction I have but it's all about deposits first.

I really like the momentum in the lines of business and the diversity of the growth that we talked about in the quarter. So I feel good that we've got a great opportunity here to continue to grow.

I think the momentum of these new additions to the teams and.

And basically in all of the teams is really going to help us a lot.

We've got to stick to funding our loan growth with deposit growth and so the way to do that is to emphasize that we've got to get the deposits in order to hit the.

The LOE targets, we want so.

That comment about the pipeline earlier, I really want us to push ourselves hard.

In order to try and do that.

If we flip above or blip stay below I mean, we could continue to see staying in this kind of range.

But I think we tried to stay between 95 to 100 is obviously our target.

<unk>.

Got it.

And then I guess along that same line.

It sounds like you should be able to get some good deposit growth for the wealth management Division.

Do you think theres some some good additional opportunity there for that to grow further.

Yeah, I think our private banking team.

<unk> has done an excellent job.

To do so we've actually.

Continue to look to add to the team.

That was the reference I was making about the growth in the counties where else.

Also looking to add or.

First private banker in the Tampa marketplace, as well and we do have someone they started with us a while back and is adding value in the Houston marketplace. So I think that coupled with.

We had a.

Excellent.

<unk>.

Our leadership side and retail and I think that's also making a really big shift to much more of a.

Our sales culture coming through the retail system and I think that Thats.

A really positive contribution.

Teams are making we've also and I think I additives in prior quarters, we've really emphasized the building Treasury management and I think that team is just.

Doing an outstanding job and we're seeing more and more new business.

Every day so.

I think again that was kind of a comment I made about the.

Investments in the decisions that we've made in the past quarters paying off.

Think where we're really starting to see that show in the numbers and I do feel good about what the team is going to be capable of doing.

All that said I do want to just reiterate there are it's.

Very aggressive offers I'd expect that the banks.

That are also looking for building out their deposit book to be Super competitive rate wise and.

So that's why I referenced before there's going to be pressure on deposit costs. There's no question about it.

But at the same point in time, given the mix of the balance sheet on the loan side and the investment side.

We're going to benefit from continued benefit from the higher rate environment right.

Got it no that all makes sense and then just one final modeling question. I think you mentioned earlier core expenses are likely to come up some in the fourth quarter.

Just as far as the magnitude should we expect something closer to $55 million is the run rate there or is it higher than that I was just kind of curious what kind of flip the magnitude of that increase would be.

Yes look I think I think theres a couple components that can have that pick up in the quarter, one is going to be how well we do.

So with the quarter itself, because there is obviously going to be incentive comp and recognize again, we're continuing to add personnel. So theres going to also be some pressure in the personnel expenses. So our expectation is youre going to see in the core expense.

A slight tick up there.

And that 55 to 56, six and a half.

I just think you have to be probably thinking along those lines. We're also.

Looking to.

The very continuing to add the people right and so we're not going to add in also.

We're gonna be prudent with the decisions, we make there, but I do think it's something you always have to take into account that.

I think we're a little bit in the we've got to continue to invest.

To support the growth ambitions that we've got.

That guidance just to be clear agenda on the core side of the expenses.

There may be.

Million or million or so related to the cost of the transformation of technology that we're making.

E Commerce, a combined total mix, yes, I think thats, a great point Carlos I think it's.

Safe to say for everyone.

We are going to have some continued we'll call it non routine items that relate in transformation.

So as much as we'd love to report that we're not going to have.

Some non routine I think youll continue to see US report, both core and earnings.

Headaches pointing.

Pointing out where we have the one timers and what Theyre from yes, definitely it's modern it's much smaller magnitude not all that noise that you saw a couple of quarters in the past.

Got it no that makes sense I appreciate the clarification guys and congrats on a great quarter.

Thank you. Thank you.

Thank you.

Yeah.

And I would now like to turn the conference back to Mr. <unk> for closing remarks.

Thank you Tanya and thank you everyone for joining our third quarter earnings call. We appreciate your interest in Ameren and your continued support have a great day.

This concludes today's conference. Thank you all for participating you may now disconnect.

The conference will begin shortly to raise your hand during Q&A you can dial one one.

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Good day and thank you for standing by welcome to the <unk> third quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Be advised that today's conference is being recorded I would now like to hand, the conference over to Laura Rossi head of Investor Relations. Please go ahead.

Thank you Tania and good morning, everyone and thank you for joining us to review Amarin Bancorp third quarter 2022 result.

Today's call are Gary Smith, our chairman and Chief Executive Officer, Carlos <unk> CEO of <unk>, our Chief Financial Officer.

We begin please note that discussions on todays call contain forward looking statements within the meaning of the Securities Exchange Act.

In addition reference will also be made to non-GAAP financial measures.

Please refer to the company's earnings release for a statement regarding forward looking statements for information a reconciliation of non-GAAP financial measures to GAAP measures.

I will now turn it over to our chairman and CEO Jerry flush.

Thank you Laura good morning, everyone and thank you for joining <unk> third quarter 2022 earnings call.

Pleased to be here today to report on our results for the quarter, but before we do that I'd like to acknowledge the impact Hurricane Ian had on southwest Florida.

Our thoughts and prayers go out to those most affected by the store at Amarin. We've been actively involved in several efforts to support impacted communities recover from this unfortunate event and we look forward to seeing everyone affected back on their feet from.

From a business perspective, we are fortunate to report there have been no significant impacts identified in our Florida loan portfolio.

Moving on to the remarks of the quarter on October 19, 2022, our board of directors approved a nine <unk> per share dividend payable on November 30 of this year as I've shared in previous calls paying dividends are an essential component of our plan to provide greater value to our shareholders I'll now.

Provide a beep brief overview of our performance in the third quarter and outline the steps we took to best position ourselves for the balance of the year and beyond and then I'll hand, it over to Carlos to get into the details.

So if you turn to slide three here you can see a summary of our third quarter highlights. Our net income attributable to the company was $20 9 million up significantly quarter over quarter. This increase was primarily driven by higher net interest income in the third quarter as we recorded higher average yields and balances on loans as.

Well as on our investments.

Partially offset by the increase in higher average costs in balances on deposits and <unk> advances, but as a result, the net interest net interest margin expanded to 361% an increase of 33 basis points quarter over quarter.

Our balance sheet also grew significantly during the third quarter with total assets, reaching a historic high point at $8 7 billion compared to $8 2 billion as of the close of <unk> 20 to <unk>.

Total gross loans were $6 5 billion compared to $5 85 billion and <unk> 22, an increase of 656 million and total deposits were $6 6 billion up $385 million compared to $6 2 billion in <unk> 'twenty to the.

The company's capital levels continue to be strong and well in excess in the minimum regulatory requirements to be considered well capitalized as of September 30. This year.

During the quarter. We also paid out the previously announced cash dividend of <unk> per share on August 31.

We'll turn now to slide four.

You can see that our core <unk> was $30 3 million up nearly 56% compared to the $19 4 million reported in the previous quarter. As we've consistently stated we believe this slide is essential to show the net revenue growth of the company, excluding provisions and non routine items.

Clearly see Atlanta core earnings power and as I noted in my remarks last quarter, there were significantly fewer nonrecurring items reported this quarter compared to <unk> 22.

We can turn now to the key items on slide five.

And we can cover what happened during the third quarter. So we continue to work on reducing nonperforming loans as part of our commitment to increase our percentage of earning assets to total assets.

As of Q3, Npls declined to $18 7 million compared to $25 2 million as of <unk> 22, we intend to continue to focus on driving gout mpls in future periods.

We're also pleased to report that the sale of the New York City based real estate owned property closed this month so in the month of October .

Coupled with the drop in Npls this significantly reduces our non our level of nonperforming assets.

We're very excited to do business and look to be opened by the end of the first quarter of next year.

We closed our Pembroke Pines, Florida location as announced last quarter. Additionally, our new University place location in Houston, while opened on October 31, while the location of replaces South Shepherd will close the same day with our current customers moving over to the new location.

And the opening of our downtown Miami location is now expected sometime in the early 2023.

Regarding our Tampa loan production office, we continue to add key business development personnel as Tampa, specifically in C&I and now have 14 team members with former openings to fill.

And we also added to our business development team here in South, Florida, and we plan to continue to look to expand in both Broward County, and Palm Beach County.

We'll turn now to slide six you can see here, we've outlined key performance metrics and they are changed compared to last quarter.

It's clear our operating profitability improved from higher Outstandings and improved net interest margin.

For consistency and transparency, we again show the three core metrics of ROA ROE and operating efficiency, excluding any onetime 90 routine items in the footnotes. So you can more easily see the underlying performance for the quarter.

We'll turn now to slide seven which focuses on ameren mortgage on a standalone basis Ameren mortgage had net income of 800000, an increase of 400000 or 88% compared to.

Year to date 2022, the company has purchased approximately $298 million in loans through Ameren mortgage which includes loans originated and purchased from different channels. The current pipeline shows $51 million in process or <unk> 79, and applications as of October 12 in line with the headwinds currently in play.

<unk> for the mortgage business in general.

So with that said I'll now turn things over to Carlos who will walk through our results for the quarter in more detail.

Thank you Jerry and good morning, everyone turning to slide eight I will begin by discussing our investment portfolio.

Our third quarter investment Securities balance was $1 3 billion down compared to both previous quarter and the third quarter of 2021 when.

<unk> strategy has focused on achieving the right balance between yield and duration.

Current market conditions provide better reward and longer duration assets.

The floating portion of our investment portfolio increased to 16% compared to 11% in the previous year.

As I did last quarter I would like to take a minute to discuss the impact of interest rate increases on the evaluation of debt securities available for sale.

As of the end of September the market value of this portfolio decreased $35 million after tax compared to the second quarter and $100 million year to date.

These changes comment directly sold of increases in interest rates on our consistent with our interest rate sensitivity analysis the.

The relative credit exposure of our investment portfolio is very limited reason why there was no need to record any other than temporary burn.

It is also important to comment that our tangible common equity ratio ended at seven 8% after considering the impact of changes in valuation of our portfolio.

Continuing to slide nine let's spoke about the loan portfolio.

At the end of the third quarter total gross loans were $6 5 billion or 11% compared to $5 85 billion at the end of the last quarter.

This growth was driven by loan origination efforts, primarily on the CRE side and single family residential mortgage.

Additionally, the production number in mortgage was complemented with loan purchases through third parties.

Partially offsetting this increase were prepayments totaling $182 million primarily in commercial loans.

Also during the third quarter, we had $22 million.

<unk> loans, where we do need it we did widen naval equipment financing solution that we announced last quarter.

Loans held for sale as of the end of the quarter totaled $58 million compared to $121 million as of the second quarter 2022.

As of the third quarter loans held for sale consisted of residential mortgages loans.

We transferred the New York City, CRE loans previously accounted as loans available for sale to investment category.

We now have the intent and ability to hold these until maturity or weeping.

Consumer loans as of September 30 were $577 million, an increase of $20 million or three 5% quarter over quarter. This includes approximately 487 million in higher yielding indirect loans, which continues to represent a tactical move for us to increase yields given higher costs.

Funding costs.

During the third quarter, we purchased $91 million of consumer loans under the indirect lending programs. We also lounge, a new fintech enabled program, which generated $6 million and consumer loans and leases tended to progressively replace our indirect purchase.

Turning to slide 10, let's take a closer look to the credit quality, our credit quality remains sound and reserve coverage is as strong.

Allowance for loan losses at the end of the third quarter was $54 million, an increase of three 2% from the $52 million at the end of the previous quarter.

There was a provision for loan losses of $3 million in the third quarter to account for the loan growth.

During the third quarter, the $2 7 million allowance associated with the COVID-19 pandemic was further reduced to $1 6 million now with a generic reserve.

This generic reserve accounts for losses pending to be identify in our portfolio such as those that May result from <unk>.

At this time, we havent identified any immediate significant impact to the collateral of our portfolio.

Gordon exposure to E&P bass is approximately $300 million our team members have been in contact with the borrowers and have been making site visits as well.

Net charge offs during the third quarter totaled $1 3 million compared to the $4 million in the second quarter.

During the third quarter of 2022, the company charge off $1 7 million related to multiple consumer loans on 0.2 in connection with two commercial loans.

Nonperforming assets totaled $25 million at the end of the third quarter, a decrease of $6 6 million or 21% compared to the second quarter, and a decrease of $68 million or 73% compared to the third quarter of 2021.

The ratio of nonperforming assets to total assets was 29 basis points down 10 basis points from the second quarter of 2022, and down 95 basis points from the third quarter of 2021 hour.

Our nonperforming loans to total loans are down to <unk> 29, compared to the <unk> 43 last quarter as a result of our commitment to increase earning assets to total assets.

As Jerry mentioned, the nonperforming asset ratio was further decrease as a result of the sale of the New York.

We closed this month of October .

Continue to slide 11 total deposits at the end of the third quarter were $6 6 billion up $385 million from the previous quarter.

This growth was driven by customer transaction accounts, which were up $258 million or five 3% primarily for an interest bearing demand accounts.

The company obtained additional deposit source via large home providers during the period.

We also elected to increase broker time deposits, which were $143 million increase in order to lock lower interest rates in light of rising market rates.

The increase in total deposits was offset by a slight decrease in customer time by $11 million or one 2%, which reflects our retention efforts in this interest rate environment.

Important to highlight the domestic deposits now account for 63% of our total deposits totaling $4 2 billion as of the end of the third quarter up $444 million or 12% compared to the previous quarter.

Foreign deposits, which account for 37% of the total deposits totaled $2 4 billion slightly down by $59 million or two 4% compared to the previous quarter.

Our core deposits, which consists of total deposits. Excluding all time deposits were $5 2 billion as of the <unk>.

End of the third quarter, an increase of $253 million, 541% compared to the previous quarter.

The $5 2 billion in core deposits included $2 1 billion in interest bearing deposits, which increased 127 million versus the previous quarter.

One 7 billion in savings and money market accounts, which increased 100 more than 100 million versus the second quarter.

$1 3 billion in noninterest bearing demand deposits, which were up $20 million versus the previous Q.

Next I will discuss the net interest income and net interest margin on slide 12.

Net interest income for this reporting period was $70 million.

$11 million or 19% quarter over quarter.

This increase was driven by higher average yields on loans and investments, resulting for a total increase of 300 basis points in short term interest rates.

Average balances in floating commercial real estate and single family residential loans as well as changes in deposit rates being handled at specific allowances to manage the pressure over cost of funds.

There is a lot of value leverage the product mix to differentiate pricing and control deposit betas.

During the third quarter.

And the current deposit mix, we observe a beta of approximately 30 basis points.

Which help us to navigate dangerous rate increases we saw during the period.

Moving to the net interest margin as Gerry mentioned, the third quarter, NIM was 361% up by 33 basis points quarter over quarter the.

The change in the net interest income underneath what's fair minded driven by the increase in the yield of our loan portfolio, which is now up five 1% an increase of 68 basis points versus the previous quarter.

As I said in Q2 the improvement in me is a reflection of our asset sensitivity position.

Moving to slide 13, you can see our balance sheet continues to be asset sensitive with about half of our loans, having floating rate structures and 58% repriced within the year.

Our NIM sensitivity profile to interest rate office scenarios has decreased compared to the last quarter in light of data beta assumptions on interest bearing deposits.

These changes are consistent with a more competitive environment for deposit gathering.

This quarter, we're showing a potential increase of approximately 6% net interest income in the up 100 scenario and 9% for the two months.

We'll continue to actively manage our balance sheet to best position our bank for the expected rise in interest rates for the remaining portion of 2022.

Moving to slide 14.

Noninterest income in the third quarter was $16 million.

Up $3 million versus the previous previous quarter.

23% from the $30 million in the second quarter.

The increase was driven by positive valuation on marketable securities holdings of $1 5 million in the third quarter compared to a negative valuation of $2 six in the second quarter.

An increase of $1 8 million in fee income from client derivatives, an increase of $42 million in total brokerage and advisory fees, primarily driven by higher securities trading coming from the fixed income side from our customers' portfolio.

The increase was partially offset by lower mortgage banking income of $2 3 million. The absence of net unrealized gain on derivatives valuation of <unk> nine in the second quarter.

Turning to slide 16, third quarter, noninterest expenses was $56 million down $6 million or 10% from the second quarter as we announced in our previous earnings call. There was a significant reduction in onetime expenses, we can see the $2 million as a non routine items. Excluding these items core earnings.

<unk> expenses were $54 million in the third quarter of 2022.

The quarter over quarter decrease was primarily driven by the absence of $3 2 million related to a no reevaluation New York.

One 6 million impairment charge related to the closing of our banking center as well as lower expenses and connect in connection with the upcoming transition to <unk> by $2 5 million lower advertising expenses by $1 2 million and severance and other compensation expenses by $8 million.

The decrease in noninterest expenses was partially offset primarily by higher salaries.

$7 million, resulting from new hires and $1 million of consulting fees in the third quarter in connection with the engagement with Empire.

The efficiency ratio was 65, 4% in the third quarter of 2022.

Break to $86 six in the previous quarter and $74 two in the third quarter last year.

Core efficiency ratio decreased to $64 one in the third quarter of 2022 compared to $73 seven in the second quarter of 2020.

Improvement was driven by higher net interest income as well as lower expenses during the third quarter.

I'll now turn the call back to Jerry for closing remarks. Thank.

Thank you Carlos in closing I, just want to state that we are seeing the benefits of the decisions. We've made in recent quarters as well as from the efforts of our team members and that's resulted in higher net income.

Net interest margin expansion strong loan and deposit growth a significant reduction in nonperforming loans and a further reduction to nonperforming assets just post quarter end.

And continued strong capital ratios.

And becoming the bank of choice in the markets. We serve is unwavering with.

That I'll stop and Carlos and I will look to answer any questions. You have Tonya. Please open the line for Q&A.

Certainly as a reminder to ask a question. Please press star one one on your telephone please standby, while we compile the Q&A roster.

No Matt.

And our first question will come from.

Brady Gailey of <unk> Your line is open.

Hey, Thanks, good morning, guys.

Good morning Brady.

So roughly $298 million of mortgages repurchase I think you said year to date, what was the amount repurchased just in the third quarter.

In the third quarter it was.

Probably close to the $150 million that we bought front.

I'm proud of our production coming from number of mortgage plus additional sources that we got on the on the quarter.

<unk> is an asset class right now that it has a very good balance between yield and duration, so where do we see it now.

So even if you back that out I mean loan growth was incredibly robust can you talk a little bit about where youre seeing the loan growth and what the outlook is for loan growth as we head into 2023.

Yes, Brady its Gerry.

I think on the call for the second quarter.

We referenced that with the additions that we've had in the build out of Tampa.

And the continued strong performance of the business development teams, both in Texas and in here in South, Florida, we have a pretty good pipeline headed into this quarter.

I think you saw strong loan growth in commercial real estate I think.

We gave some information about.

The changes that have happened in the different geographies, but I would also note that we continue to see.

C&I, even with high repayment activity, we had a very strong pipeline there as well on a good quarter of production and I think we continue to do what we said we were going to do in the past. The White label program was really going to start to kick in on equipment Finance you can see.

We just started the white label Fintech solution that Carlos referenced.

As a replacement for indirect production. So I think all of the contributed to the growth overall during.

During the quarter.

And then to that effect.

Apologies Brady you asked a second question, which is the.

The pipeline continues to look very strong.

In all of the different lines of business I think the biggest comment I'd make about that is what.

What we will record in loan growth needs to be funded by deposit growth.

Strong commitment as the deposits first organization to really emphasize that as a way to continue to grow the balance sheet.

<unk>.

While we may have several hundred million dollars that we could possibly grow in the quarter, we need to also grow the deposits at the same point in time.

Yes, okay.

And maybe just an update on the 1% ROA and 60% efficiency ratio targets. When you basically you hit a one ROA and <unk>.

You can keep it there.

Just an update on timing I know, you've kind of targeted a 60% efficiency ratio at some point it doesn't feel like that at all.

Happen in the next couple of quarters, So maybe an update on timing on how youre thinking about that.

Yes, no I think we can continue to be in and around the 1% return on assets on a go forward I think the strength of the balance sheet.

We expect that we.

Should see some expansion in the margin again here is the <unk>.

Fourth quarter, even with rising deposit costs.

And so thats going to help.

Think in terms of.

What happens with growth I think is really the biggest question right because.

We want to be prudent in terms of the use of the capital we achieved an 11% Roe.

But at some point, we want to keep a sharp eye out on our tangible common equity ratio and make sure that what we had is going to be beneficial for future returns right. So I kind of think you're sick.

60% we talk.

A while back that I've.

I made the conscious decision to continue to add to the business development.

Personnel and I think you just heard me say it again that we continue to see opportunities to add quality people. We have some openings in Tampa, we want to continue the expansion and palm and Broward.

Bringing on some new personnel as it relates and our our wealth business continue to look for private bankers, so theres going to be some uptick.

The core expense line, specifically in personnel expense too, but I think these are all the right things to be doing to build the long term value for the franchise and so as much as I'd love to hit the 60% next quarter I think we will continue to be in.

In the low <unk> with a goal of getting there in 2023.

Okay and then finally for me just on the buyback.

It doesn't appear you guys were active in the quarter on OTC.

Has run a little under where it has been historically for you guys.

A little under 8% so should we expect buybacks from here or is that not in the mix.

Yes, Brady I think we've been pretty consistent in saying you know the way we think about capital is we need to prudently use it or we need to return. It I think right now our focus is we've got opportunities to use it and I think that the one other item in return is.

The consistency of paying out a dividend.

I think we.

<unk> completed two very successful buyback programs.

When you look back at what we did in the fourth quarter of last year going into the first quarter and then another completed by the end of the first quarter right now we have not asked for authorization to do more.

We think that the right thing to do is grow into that base, which is what we just didn't hear in the third quarter and continue to evaluate what we will pay out in.

From a dividend standpoint going forward.

Okay, great. Thanks, guys.

Okay. Thank you.

One moment.

Yes.

And our next question will come from Michael Rose of Raymond James Michael Your line is open.

Hey, good morning, guys. Thanks for taking my questions.

Obviously credit quality continues to be a really good story here, but the reserve ratio did come down.

Kind of a little bit can you just give us kind of your general kind of overarching thoughts on credit and maybe how some of your markets in Florida, and Texas might might.

It might be a little bit better maybe just what gives you confidence we've seen others definitely begin to build reserves this quarter. Thanks.

Yes sure.

Thanks, Michael its Jerry in terms of.

How we feel on the reserve process, I guess first and foremost with all the improvements that we've seen right and the NPL now.

Totals.

That gives us some confidence we did add to the reserve.

I'd say that half through the provision that we did record warm.

Does.

Eaten up by charge offs in the quarter, there was definitely a little bit of an uptick and we're keeping an eye on that on that consumer indirect portfolio.

But in terms of the rest of the portfolio, we're continuing to see pretty solid performance across.

I think it's really important to note, we haven't talked about that yet.

On this call, but we will be adopting seasonal.

And I think again, you'll see that just naturally because of the economic factors that go into those calculations youre going to see that will obviously have an adjustment.

The Gen. One data that comes out of equity plus they will also be a P&L adjustment that will take place or other production we booked during the course of the year. So.

I would expect and I think it's.

I think everyone should expect that our AR reserve ratios are going to go up in the fourth quarter, just because of seasonal implementation, but in addition, we're going to obviously continue to closely monitor the portfolio.

There will be mic.

Thank you a disclosure about.

The T cell range for day, one implementation.

Which you will find it is.

He has decreased the range versus the previous quarter as we progress on the implementation. So now it's 15% to $20 million.

Incremental.

Reserves due to day, one implementation and as Jerry mentioned there would be.

Ordered different.

Adjustments based on the production that we have recorded over the year.

Perfect got it that was going to be one of my follow up maybe just switching gears to the positive.

Obviously deposit costs up like everybody do you have a you have to what's the number for interest bearing costs were at the end of September and then just more broadly just given the fact that you guys have.

He is in charge of international deposits can you just talk about any updates or changes to your deposit strategy as you move through.

Sure Michael Thanks.

Yes, let me let me answer the second one first.

Think it's really important to note that the deposit growth.

The quarter.

Really we had contributions from every line of business of particular note.

This reflects the build that we've been doing in the private bank side, we saw that grow very very nicely in the quarter up close to I believe it was $75 million.

In growth just in that segment alone and so.

<unk>.

People are obviously very focused with all these rate hikes, there's lots of competitors that have our offerings.

Some pretty strong rates out there and so we're navigating through.

In an environment right now right or periods of time, where you've got national players as well as local players.

Thing two run offers it.

Fairly high rates to be candid.

We will as well look for money probably around the 12 month CD range, because I think we want to be somewhat cautious too on the one.

<unk> lost money in but at the same point in time give ourselves some flexibility given where we don't want to go to long term.

And build back up that time deposit book, which I know you are very aware of we had.

A lot of work in 2021, where we.

Basically had a lot of that shift from time deposits over to either.

Just bearing or interest bearing alternatives such as money market. So.

Carlos will give you some comments on the on the cost, which clearly I think it's safe to say deposit costs are going up for us just like they're gone up for everyone else.

I guess, it's important to comment that on the first stages of this interest rate increases.

At least that was our case and we believe it is the case for other institutions. There has been allowances being provided to the different business lines due to increased interest rates on certain deposit the ones that are more interest rate sensitive.

We believe that for now on there would be changes or adjustments on the deposit rates on the tables that they are being published.

There would be a more steep increase in the cost of funds our beta.

As we discussed on the call was <unk> 30 quarter over quarter, and we expect that.

Third quarter will be probably in the $40 40 ish.

Beta so you should expect an incremental cost of funds in the case of the international side. They continue to be at a blended close to the 11 basis points.

However, we are starting also to see some pressures from certain private banking customers on the international side.

They are aware of the rates that they are paying in the local markets and they are having pressure.

Pressure as well so.

I would say the you see the interest bearing deposits went from <unk> 62 to one to 105.

That is reflective of about 30%.

Beta.

Domestic we're the ones driving most of the change international we're very stable for the most part, but we're starting to see signs of increases.

Very comprehensive thanks for taking my questions.

Thank you have a great day.

One moment.

Our next question will come from Matthew.

Sorry, Matthew Olney of Stephens Your line is open.

Hey, Thanks, good morning, everybody.

Good morning, Matthew.

I guess more of a big picture question thinking about the local markets there.

No.

Matt Great question, we still see really strong demand for housing you've got.

The continued inflow to the state and particularly in the two markets in which we operate so south Florida and Tampa.

Particularly here in South Florida.

Sales of continue Theres still a scarcity of inventory.

I think the biggest headwind that we face which is no different than the rest of the country is just you know what's happening with the cost of living right, whereas we're seeing higher costs pretty much across the board.

And I think that in particular, we were always.

A little higher cost to begin with so.

There's definitely pressure there, but in terms of.

Real slowdown I mean, we're going right into the season, which is very positive for hospitality.

Where we're seeing.

Full restaurants, we're seeing.

Can you assure you there is still lots of traffic so.

We're we're still pretty bullish about.

These markets and I can also tell you Carlos deny.

I recently visited in Houston.

Continued to see that it looked pretty strong there as well so I do think we're very fortunate because we are in.

In hydro desirable markets, I think that will play pretty well for us.

Yes.

Okay I appreciate that and then I guess on the quarter as far as the.

The non interest income on an adjusted basis, it looks like were pretty flattish in the third quarter.

Sure.

The dose.

We have this particular quarter the change on the derivatives income coming from customer that that was the guidance that we provided last quarter. So that continues to help during this quarter.

We believe that that demand was broadly will be probably not the seed companies into the next quarter. We all was offered this solution for customers in order to hedge interest rate risk.

We've seen the demand may be lower also remember that there.

It was a record quarter in loan production. So that also helps.

With that type of instrument.

In the case of the <unk>.

Hum.

There was a surge but was related from the brokerage activity.

The fixed income side of customers as you can see the level of interest rates. They have now multiple options on the fixed income space to go and invest so that also created a P.

Income this quarter around.

We believe in the Q4 now that will be very active as well.

And in the case of hammer in mortgage.

Which is the other source I just described the three items that created most of the changes quarter over quarter. The rest of our pretty stable in the case of them range more mortgages is the fact that refi activity has decreased a lot and production is lower so we should expect.

Yes.

Fee income that is similar to the one that we haven't.

Third quarter of this year.

At the beginning of the fourth.

Okay.

Thank you for that and then also earlier on the call you mentioned.

We should expect another step up on NII and the margin in the fourth quarter and that makes sense, given kind of balance sheet growth and interest in activity any more color on the degree.

Step up that we could see in the fourth quarter I guess in the third quarter looks like the NII improved $11 million sequentially in the margin stepped up 33 bps.

My assumption would be the step up in the fourth quarter would be more moderate than that but any color you can give us for forecasting purposes.

Yes, no that's completely the case it wouldn't be a steep at some of the on the third quarter.

As you can see the positive starting to catch up faster.

We anticipated something in the 375 to $3 80 financial margin for the for the fourth quarter that includes a more aggressive bidders.

<unk>.

Net interest income simulation process.

Okay. That's helpful. And then I guess, just lastly, going back to the loan growth discussion from earlier.

Looking at the slides it looks like part of the growth wasn't wasn't Texas.

Any more color on that growth was this the the multifamily growth or the single family just any color at all.

Yes, no you just hit it it's a big part of it is multifamily growth, which we think we've got good spreads and obviously with the.

It's a more secured and with the demand right.

Particularly.

For these type of units.

We thought it was a smart play for us.

Make those kind of loans this quarter.

Floating rate, yes, yes.

Yes.

Perfect.

Okay guys. Thank you very much for taking my questions.

Have a good day.

One moment.

Yes.

And our next question will come from Fred.

Freddie Strickland.

Janney Montgomery Scott Your line is open.

Hey, good morning, everybody.

Hey, Brian .

Just going back to deposits.

It sounds like you guys think you can continue to grow core deposits.

Do you think youll be able to stay below 100% for the loan to deposit ratio going forward or do you think youll have to take down a little bit of additional FX youll be funding down the road.

Yeah, Hey, Matt its Gerry.

I think we've said we wanted to stay in and around the 95% range. We obviously are a little higher than that at 98 and change.

My sense is.

I think our team by team is.

Just here's this come out of my mouth every single day every interaction I have but it's all about deposits first.

I really like the momentum in the lines of business.

And the diversity of the growth that we talked about in the quarter. So I feel good that we've got a great opportunity here to continue to grow.

I think the momentum of these new additions to the teams and basically in all of the teams is really going to help us a lot.

We've got to stick to funding our loan growth with deposit growth and so the way to do that is to emphasize that we've got to get the deposits in order to hit the.

The LOE targets, we want so I made that comment about the pipeline earlier, I really want us to push ourselves hard.

In order to try and do that.

If we flip above or blip stay below I mean, we could continue to see staying in this kind of range.

But I think we.

Trying to stay between 95 to 100 is obviously our target.

Yes.

Got it.

And then I guess along that same line.

It sounds like you should be able to get some good deposit growth for the wealth management Division.

Do you think there is some some good additional opportunity there for that to grow further.

Yeah, I think our private banking team.

<unk> has done an excellent job.

To do so we've actually.

Continue to look to add to the team.

That was the reference I was making about the growth in the counties were also looking to add or.

First private banker in the Tampa marketplace, as well and we do have some of that started with us a while back and is adding value in the Houston marketplace. So I think that coupled with.

We had a.

Excellent change.

Leadership side, and retail and I think that's also making a really big shift to much more of a.

Sales culture coming through the retail system, and I think that Thats.

A really positive.

Contribution.

Those teams are making.

We've also and I think I had this in prior quarters, we've really emphasized the building Treasury management and I think that team is just.

Doing an outstanding job and we're seeing more and more new business.

Every day so I.

I think again that was kind of the comment I made about.

The investments and the decisions that we've made in the past quarters paying off I think where we're really starting to see that show in the numbers and I do feel good about what the team is going to be capable of doing.

All that said I do want to just reiterate there are it's very.

That are also looking for building out their deposit book to be Super competitive rate wise and.

So that's why I had referenced before there's going to be pressure on deposit costs. There's no question about it.

But at the same point in time, given the mix of the balance sheet on the loan side and the investment side.

We're going to benefit from continued benefit from the higher rate environment.

Got it no that all makes sense.

And then just one final modeling question I think you mentioned earlier core expenses are likely to come up some in the fourth quarter.

Just as far as the magnitude should we expect something closer to $55 million is the run rate there or is it higher than that I'll, just kind of curious what the split the magnitude of that increase would be.

Yeah look I think I think theres a couple components that can have that tick up in the quarter, one is going to be how well we do.

With the quarter itself, because theres, obviously going to be incentive comp and recognize again, we're continuing to add personnel. So theres going to also be some pressure in the personnel expenses. So our expectation is youre going to see in the core expense.

A slight tick up there.

And that 55 to 56, six and a half.

So I just think you have to be probably thinking along those lines. We're also.

Looking to.

The very continuing to add the people right and so we're not going to add in also.

We're going to be prudent with the decisions, we make there, but I do think it's something you always have to take into account that.

I think we're a little bit and we've got to continue to invest to support the growth ambitions that we've got.

And the.

That guidance just to be clear is under on the core side of the expenses.

There may be.

Million millionaires.

So related to the cost of the transformation of technology that we're making that that will come as a combined total of it yes.

That's a great point, Carlos I think it's safe to say for everyone.

<unk>.

We are going to have some continued we'll call it non routine items that relate in transformation.

So as much as we'd love to report that we're not going to have.

Some non routine I think youll continue to see US report, both core and earnings <unk>.

<unk> out where we have the one timers and what they are from yes definitely it's modern it's much smaller I'll be magnified all that noise that you saw a couple of quarters in the past.

Got it no that makes sense I appreciate the clarification guys and congrats on a great quarter.

Thank you. Thank you.

Thank you.

And I would now like to turn the conference back to Mr. <unk> for closing remarks.

Thank you Tanya and thank you everyone for joining our third quarter earnings call. We appreciate your interest in Ameren and your continued support have a great day.

This concludes today's conference. Thank you all for participating you may now disconnect.

Q3 2022 Amerant Bancorp Inc Earnings Call

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