Amerant Bancorp Inc. (NASDAQ:AMTB) Q1 2023 Earnings Call Transcript April 21, 2023
Amerant Bancorp Inc. misses on earnings expectations. Reported EPS is $0.6 EPS, expectations were $0.69.
Operator Good day and thank you for standing by. Welcome to the Amerant Bancorp, First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised, that today’s conference is being recorded.I would now like to hand the conference over to your speaker today, Laura Rossi, Head of Investor Relations and Sustainability. Please go ahead ma’am.Laura Rossi Thank you, Michelle. Good morning everyone and thank you for joining us to review Amerant Bancorp’s first quarter 2023 results. On today’s call are Jerry Plush, our Chairman and Chief Executive Officer, and Carlos Iafigliola, our Senior Executive Vice President and Chief Financial Officer.As we begin, please note the discussions on today’s call contain forward-looking statements within the meaning of the Securities Exchange Act, in addition, references will also be made to non-GAAP financial measures.
Please refer to the Company’s earnings release for a statement regarding forward-looking statements, as well as for information and reconciliation of non-GAAP financial measures to GAAP measures.I will now turn it over to our Chairman and CEO, Jerry Plush.Jerry Plush Thank you, Laura. Good morning everyone and thank you for joining Amerant’s first quarter 2023 earnings call. This morning, we will report on our results for the quarter and we’ll make some comments on quarters to come. It has certainly been quite an eventful last 30 days or so for the industry. Carlos and I will provide some color again on the results of the quarter and how well we believe Amerant is positioned for the rest of 2023 and beyond, given the actions we have been taking not just this quarter but over the past two years.But before we do that, I’m delighted to announce the promotion of Carlos Iafigliola to Chief Operating Officer.
This well-deserved promotion, which is effective immediately, is clearly the result of the significant contributions Carlos has made to Amerant, as our CFO over the past three years. In the interim, he will continue to serve as our CFO as well, until such time that we announced the successor. By Carlos taking on this new role, I will ultimately have greater bandwidth as well to help drive incremental business for the company. So please join me in wishing Carlos much success here for years to come as he takes on his new responsibilities.Also, we recently announced the new member to our Board of Directors. Ashaki Rucker, who joins us this week is a consummate professional with extensive human capital management experience. And she truly complements our current group of highly skilled, dedicated and growing number of locally based Board members.
We want our Board to eventually be in footprint and involved in the communities we serve and Ashaki joining our Board is another step in that direction.In addition, this week, we just announced two significant senior executives joining the company, who we believe will be significant contributors towards the achievement of our strategic objectives. We are pleased to welcome Juan Esterripa as our new Head of Commercial Banking and Caroline Verot Moore as our new Houston Market President. Both of whom are replacing individuals who stepped down from these respective positions.We also announced that the market presidents of Tampa and Houston will now report directly to me. We have significant opportunity for profitable growth in each of these markets, and we’re excited about our prospects.
So I’ll now provide a brief overview of our performance in the first quarter, and then I’ll hand it over to Carlos to get into the details. We’ve added a significant amount of details in our earnings presentation, including information on our liquidity management practices, and Carlos will describe specific actions we took to strengthen our liquidity position this quarter.He will also provide detail on specific one-time items and will cover new charts and information we’ve included, such as showing the impacts of valuation of our AFS portfolio, as well as the unrealized losses from our held to maturity portfolio and what that does impacting our tangible common equity ratio.While he will also go into greater detail about the following items that impacted the quarter.
I wanted to summarize these points upfront. First, we recorded a provision for credit losses of $11.7 million this quarter, of which $2.2 million was related to loan growth and $2 million reflected updated economic factors. With the balance covering charge offs that took place. The provision was higher than projections for the quarter giving unexpected charge offs late in March 2023 related to a specific transportation industry relationship. The trucks and trailers from this relationship had been fair valued, and they’re now held in other repossessed assets. Non-interest expenses were $64.7 million this quarter, of which $3.4 million were non-routine items. In addition, we elected to continue to invest in business development personnel, specifically in commercial banking and Amerant Mortgage, which resulted in higher than expected routine non-interest expense.
But please note, we intend to find efficiencies to offset these recent investments in personnel, we have made in the coming quarters. More on that in a few minutes.So let’s turn to Slide three, where you can see a summary of our first quarter highlights. Net income attributable to the company was $20.2 million, compared to $22 million in 4Q ’22. This decrease was primarily driven by lower non-interest income and higher non-interest expenses during the period, partially offset by the lower provision for credit losses in the fourth quarter, compared to the fourth quarter.As a reminder, we adopted CECL in 4Q ’22, which drove the higher 4Q provision. The higher non-interest expenses include a number of one-time items as well as the increased investment and business development personnel, as I just mentioned.
Net interest income in the first quarter was virtually unchanged when compared to the prior quarter, as we were able to offset higher average costs and balances on deposits and FHLB advances with higher average yields and balances on earning assets. As a result, the net interest margin was a strong 3.9%, just slightly below the 3.96% that we’ve reported last quarter. Our balance sheet grew during the first quarter, with total assets reaching $9.5 billion, compared to $9.1 billion as at the close of fourth quarter. It’s important to highlight that this growth includes $200 million and increased liquidity on hand that we elected to maintain in the second half of March, which Carlos will discuss in just a few minutes. Total gross loans were $7.12 billion compared to $6.92 billion last quarter, an increase of nearly $200 million and total deposits were $7.29 billion, up $242.5 million compared to the $7.04 billion last quarter.
Our capital levels continue to be strong and well in excess of minimum regulatory requirements to be considered well capitalized at March 31, 2023. More now than ever, preservation and growth and tangible book value is a top priority and we achieved that this quarter. Also of important is we have consistently classified the vast majority of our investment portfolio as available for sale. So the mark-to-market on that portfolio has always been deducted from tangible common equity. So when you see our tangible book value, these have been and continue to be reflected in a number and TVV [ph] remains a strong 7.44% as of March 31st. During the quarter, we also paid out the previously announced cash quarterly dividend of $0.09 per share on Feb 28 of 2023.
So we’ll turn now to Slide 4, where you can see the core PPNR, was a solid $37.1 million compared to the $37.8 million reported in the previous quarter. Also outlined on this slide are all the non-recurring items recorded in the quarter. As previously mentioned, including a non-recurring expenses for costs related to severance, a branch closure that we’ll cover in a minute, and conversion related one-time expenses. So we’ll turn to Slide 5 and we’ll cover some key additional actions that we took during the first quarter. So as I mentioned, we continue to add key personnel in Amerant Mortgage to our business development team here at the bank and to our digital transformation team. As also I previously mentioned, we’ve recruited two executive for existing open positions.
So we have the new Head of Commercial Banking and a new Houston Market President. Amerant Mortgage grew its national footprint with the addition of a Midwest team, adding business development personnel in the quarter to generate conforming mortgages for the sale in the secondary market. We also reorganized our International banking efforts. We wanted to simplify the structure and drive favorable cost deposit growth. So we brought the three separate groups that were previously reporting under retail private banking and commercial banking to be under one leader dedicated to solely focus on growing international deposits. We believe this is essential as it provides additional diversification for our funding base. We completed our relocation into our new highly efficient operation center in Miramar, Florida.
And we continue to make strategic investments in our bank centers in key locations. We need to complete the branch refresh to finish our common look and feel initiative that we have at all of our facilities. And our expectations, it will be completed with that no later than the end of this year. We also announced the closing of our location at FM 1960 Road in Houston, Texas in 2Q, ’23. We expect that to happen as of May 31st. And as recently announced we signed a five-year lease for our first banking center in Tampa with an estimated opening in the fourth quarter of this year. This location is situated in the West Shore business district, the most central business area in the Tampa Bay area, which is home to more than 4000 businesses both large and small, and near some of the most high-valued residential neighborhoods.
The opening of this branch transitions our Tampa operation from a loan production office to a full service bank with full banking capabilities. Since expanding into the Tampa Bay market, our team has grown significantly. We are now at 17 team members providing commercial banking, commercial real estate, treasury management, private client banking, SBA lending, and we also have in market support personnel from credit portfolio management and other client support positions. We intend to add even more resources to our team in the future to capitalize on the market opportunities available in Tampa and we now have the space to do so.Other actions include launching our new website, which provides an improved user experience with enhanced navigation and ease of access to information across all device types.
We did repurchase 22,403 shares of Class A common stock during the first quarter, under our $25 million share repurchase program. We elected to prudently pause on additional repurchases, given recent industry events impacting liquidity in this sector.Of note, the FIF conversion date moved from mid-May to mid-July in order to enable us to provide a greater digital experience for our consumers, our consumer and banking efforts and also as previously referenced, we recruited a new Board member, who officially joined our Board effective April 17, 2023.We will turn now to take a look at the key metrics on Slide 6. Here we have outlined key performance metrics and their changes compared to the last quarter. As I mentioned earlier, our net interest margin was 3.9% in the first quarter.
Our efficiency ratio was 63.7% compared to 58.4% last quarter. But the core efficiency for the first quarter was 62.47%. Both ROA and ROE were slightly lower this quarter, primarily given the one-time charges. And as we have done in the past for consistency and transparency, we show the three core metrics of ROA, ROE and operating efficiency, excluding anything that’s non-routine in the foot notes, so you can more easily understand the underlying performance in each quarter.We will turn now to cover Amerant Mortgage, which is on Slide 7. On a standalone basis, Amerant Mortgage had a negative net PPNR of $1 million in 1Q compared to a negative net PPNR of $1.5 million in 4Q. The improvement resulted from higher revenues, driven by the additions in the business development team.
Our efficiency ratio excluding activities from Amerant Mortgage improves from 63.7% to 61.5%. During the quarter, the company purchased approximately $87.4 million in loans through Amerant Mortgage and as noted on the slide, these are all related to bank customers. The current pipeline shows a growth up to $117.2 million in process of 281 applications as of April 11th with 111 of those being rate locked. We believe the team members we have added will drive increased production of conforming saleable loans into the secondary market, which will positively impact the bottom line in 2Q and future results.So with all that said, I’ll now turn things over to Carlos, who will walk through our results for the quarter in more detail. Carlos?Carlos Iafigliola Thank you, Jerry, and good morning, everyone.
Turning to Slide 8, I’ll begin by discussing our investment portfolio. Our first quarter investment securities balance was $1.3 billion comparable to the previous quarter. When compared to prior year the duration of investment portfolio has extended to almost five years, due to lower prepayment speeds and contributing to a higher yield of 3.82%.As I did last quarter, I would like to take a minute to discuss the impact of interest rate increases on the valuation of debt securities available for sale. As of the end of March, the market value of portfolio increased by $6.1 million after tax compared to $3.9 million in the fourth quarter. These changes come as a direct result of decreases in the medium and long-term interest rates and MB spreads compressing during the quarter.
78% of our AFS portfolio has government guaranteed while most of have done remain securities are rated investment grade.Our corporate debt portfolio includes approximately $128 million in subordinated debt securities issued by financial institutions. Held to maturity securities represent 18% of total investment portfolio. The current mark-to-market of HTM is $15.5 million of unrealized losses after taxes. We will discuss more details shortly.Continuing to Slide number 9, let’s talk about the loan portfolio. At the end of the first quarter total gross loans were at $7.1 billion, up 3%, compared to the $6.9 billion at the end of the previous quarter. This growth was driven by loan originations efforts primarily in specialty finance and single family residential mortgages.
Partially offsetting this increase were prepayments of approximately $97 million in commercial loans.Commercial loans include $557 million in specialty finance loans, compared to $420 million in fourth quarter 2022. Equipment financing under a white label solution, which are part of our specialty finance lending, total $47 million in the first quarter of 2023. Single family residential portfolio were $1.24 billion an increase of $83 million compared to the $1.16 billion we had in the fourth quarter of 2022. This amount includes $87 million in loans originated and purchase through Amerant Mortgage during the quarter, as Jerry referenced earlier, related to our customers mainly.Consumer loans as of the first quarter of 2023 were $550 million, a decrease of almost $27 million or 4.6% quarter-over-quarter.
This includes approximately $372 million in higher yielding indirect loans, which in previous quarters represented a tactical move for us to increase yields. We’re not buying any new production and this portfolio is set to run off over time. Loans held for sale, which were all in connection with Amerant Mortgage and therefore hedged total $65 million as of the end of the previous quarter, compared to $63 million as of the end of 2022.In line with our business focus in Tampa, we have included this market to show our progress as a percentage of the total loan portfolio, which was almost 4% as of the end of the quarter. Tampa represents a significant source of growth opportunity for us and for a full banking relationship.Turning to Slide 10, let’s take a closer look at credit quality.
Our credit quality remains sound and reserve coverage is strong. The allowance for credit losses at the end of the first quarter was $84.4 million, an increase of 1% from the $83.5 million at the close of the previous quarter. We reported a provision for credit losses of $11.7 million in the first quarter, which includes $7.5 million in additional reserve requirements for charge-offs and credit quality. $2.2 million to account for loan growth in the quarter and $2 million to reflect updated economic factors.It is important to mention that the fourth quarter 2022 provision for credit losses now reflect the disaggregated impact of CECL implementation for that specific period. Net charge-offs totaled $10.8 million in the first quarter of 2023 compared to $9.8 million in the fourth quarter of 2022.
Charge-off during the first quarter were primarily due to $6.6 million related to the equipment financing relationship that Jerry referenced before. $6.3 million in connection with indirect loans purchase, becoming 90 days past due and $1.5 million in several business banking loans. This was offset by $3.5 million in recoveries primarily $2.7 million from the coffee trader relationship charge-off last year. Non-performing assets totaled $48.7 million at the end of the first quarter, an increase of $11.1 million compared to the fourth quarter of 2022. These include an increase in repossessed assets related to the transportation relationship we just mentioned. The ratio of non-performing assets to total assets was 51 basis points up 10 basis points from the fourth quarter of 2022.
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Our non-performing loans to total loans are down to 0.31% compared to 0.54% last quarter. This is primarily due to the transfer of a property to OREO for $20 million related to a CRE New York loan already disclosed last quarter.In the first quarter of 2023, the coverage ratio for loan loss reserve to non-performing loans close at 3.8 times up from the 2.2 times at the end of the last quarter and from 1.6 times at the close of the first quarter 2022. We’re bringing on the Slide 11 from the supplemental section, discussion of our CRE portfolio to provide further detail. We have a conservative weighted average loan to value of 60% and debt service coverage of 1.5 times as well as a strong sponsorship peer profile based on a AUM net worth and years of experience for each sponsor.
As of the end of the first quarter of 2023, we have 32% of our CRE portfolio in top tier borrowers. We have no significant tenant concentration in our CRE retail loan portfolio, as the top 15 tenants represent 22% of the total. Major tenants include recognized national and regional grocery stores pharmacies, food and clothing, among others. Our underwriting methodology for CRE includes sensitivity analysis for a variety of key risk factors, like interest rates and the impact of their service coverage ratio, vacancy and tenant retention. Please note that 41% of our CRE portfolio has been hedged their interest rate caps or swaps, which in turn protects our borrowers from raising interest rate environments.On the Slide number 12, we discuss our deposit diversification and stability.
In the first quarter, we ended up $7.3 billion up $243 million from the previous quarter. You can see here we continue to have a well-diversified deposit mix composed by domestic and international customers. The growth this quarter was primarily driven by increased time deposits, which totaled $1.9 billion up $200 million or 12% compared to the previous quarter, and broker deposits, which totaled $738 million up $108 million or 17% compared to the previous quarter.Domestic deposits now account for 67% of our total deposits. Totaling $4.9 billion as of the end of the first quarter up $271 million or 6% compared to the previous quarter. Foreign deposits which account for 33% of the total deposits are primarily international deposits, $2.4 billion and down $28 million or 1.2% compared to the previous quarter.
To provide more granularity on our accounts, domestic deposits included 42,000 customers with an average account size of $116,000 while international deposits included 58,000 customers with an average account size of $41,000 per account.Our core deposits defined as total deposits, excluding all time deposits were $5.4 billion as of the end of the first quarter, an increase of $41 million or 0.8% compared to the previous quarter. The $5.4 billion in core deposits included $2.5 billion in interest bearing deposits, which increased $343 million versus the previous quarter, $1.5 million in savings and money market accounts, down $229 [ph] versus the previous quarter and $1.4 billion in non-interest bearing demand deposits of $42 million versus the previous quarter.Moving on to Slide 13.
This quarter, we have included a new table to provide further color regarding deposit composition. We believe it’s important to show our percentage of insured deposits as well as percentage of large fund providers in our depository base. We estimated that 69% of our deposits are FDA’s insurance at the end of the first quarter. Additionally, we carry $280 million in qualified public deposits, which are subject to collateral maintenance requirements by the State of Florida. Reciprocal deposits, which are 100% insured by the FDIC primarily through IntraFi networks represented $691 million and just over 120 customers as of the end of the first quarter. We are offering this alternative to our high balanced customers. Additionally, our large fund providers, which we consider to be dosed with balances above $20 million represented 15% of the total funding for Amerant.Moving to Slide 14, in light of the recent changes in liquidity conditions in the financial system, we consider important to provide additional color regarding our liquidity management practices, as well as some additional actions we have taken to mitigate the impact from recent events and strengthened our funding and capital position.Our standard liquidity management practices include: regular testing of line of credit, daily monitoring of federal reserve bank accounts and large fund providers, daily analysis of lending pipeline and deposit gathering opportunities and their impact on cash flow projections.
Targets associated with liquidity stress test scenarios, targets for deposit concentration, limits on liquidity ratios and an active collateral management of both loans and investments with lending facilities at the Federal Home Loan Bank and other market participants.As of the end of the first quarter of 2023, total advances from the FHLB were $1 billion equivalent to 11% of assets pledged with an additional $1.7 billion availability from this source. No funds were needed from any emergency funding facility or discount window from the Federal Reserve Bank during the period.Regarding additional actions taken in the later part of Q1 to increase our liquidity position we highlight: increased our cash position at the Federal Reserve Bank by $200 million borrowed from the Federal Home Loan Bank.
As of the end of Q1, we held over $485 million in cash and equivalents. And also we have diligently working with our large depositors to enroll them into ICS, Insured Cash Sweep program to ensure that all of their holdings are 100% insured by the FDIC. We increased volumes on this product by 282 million and 93 accounts during the first quarter of 2023.Turning to Slide 15, I would like to show our relative position in terms of capital ratios. As of the end of the first quarter 2023, our capital ratio — total capital ratio ended at 12.36% and our CET1 was 10.10%. Our tangible common equity, which includes $74.3 million in the AOCI resulting from the after tax change in the valuation of our AFS investment portfolio, ended at 7.44%. We would like to enhance our disclosures providing an adjusted tangible capital ratio, which includes the after tax valuation of the HTM portfolio for $15.4 million.
Such metrics ended at a strong 7.29%. And we believe this is a key differentiator factor and approval sound risk management. Given the liquidity and capital position I just discussed, we feel comfortable with our ability to hold and wait for the reversal of these unrealized losses in our investment portfolio.In terms of liquidity at the holding level, we carry $69 million in liquidity available as a holding company, which covers more than four times of our annual OpEx and debt services as of the end of Q1. The dividend we just declare will only use $3.1 million out of that cash available.Next, I will discuss the net interest income and the net interest margin on Slide 16. Net interest income for the first quarter of 2023 was $82.3 million almost unchanged compared to the previous quarter.
Our asset sensitivity position enabled us to offset the repricing the incremental cost of deposits were recorded during Q1. Also contributing to the offset where higher average balances in the loan portfolio.As rates continue to increase during this quarter, we experienced higher betas, and the combined effect of the rate increase in money market deposit as well as repricing of the time deposit portfolio that were lacked and had not repriced at current market rates. As you can see in the graph, we observe a beta of approximately 32 basis points on the cumulative basis from the beginning of the interest rate up cycle, but over 100 basis points during the current quarter.I would like to bring to your attention that two-thirds of our time deposit portfolio have already repriced at current market rates, and only a portion is left to reprice, limiting the impact of our interest expenses in the upcoming quarters.Moving into the net interest margin, as Jerry mentioned, NIM for the first quarter was 3.9% down 6 basis points quarter-over-quarter.
As I said in the fourth quarter, our ability to offset funding cost and content order decreases in NIM is a reflection of our assets sensitive position.Moving to Slide 17, I would like to take a closer look at the interest rate sensitivity analysis. You can see our balance sheet continues to be asset sensitive with 52% of our loans having floating rate structures and 55% repricing within a year. We also taken a prudent risk approach to best position our portfolio for a change in the interest rate cycle by incorporated interest rate floors when originating adjustable loans.We currently have over 80% of our adjustable loan portfolio with flow rates. Additionally, you can see how we have progressively transition to softer rates and now we have 26% of our adjustable portfolio index to this rate.
Our NIM sensitivity profile remains stable compared to the previous quarter. We added the sensitivity of our AFS portfolio to showcase our ability to withstand additional negative valuation changes. I would like to remark the organic improvements in the AOCI by $15 million for the rest of 2023 due to the expected runoff of the investment portfolio. We will continue to actively manage our balance sheet to best position our bank for the remainder of 2023. Moving to non-interest income on the Slide 18. The non-interest income ended up $19 million, down $5 million, or 21% from the 24% we’ve reported during the last quarter of 2022. The decrease was driven by higher net losses on the sale of securities, including $9.5 million in subordinated debt issued by a financial institution lower gains in derivatives with customers via valuation and volume.
The decrease was partially offset by higher net gains on early extinguishment of FHLB advances, higher mortgage banking income driven by higher gains on the sales of loans, higher deposits and service fees and higher brokerage fees resulting from the fixed income trading volumes to improve during the quarter.Amerant assets under management totaled $2.1 billion as of the end of the first quarter of 2023 up $112 million or 6% from the end of the fourth quarter, driven by $50 million in net new assets. And as we continue to see improve market valuations in some asset classes, additionally $55 million due to this concept. Moving to Slide 19, the first quarter non-interest expenses were $64.7 million up $2.5 million or 4% from the fourth quarter.
We consider $3.4 million as a non-routine item, resulting primarily from the upcoming conversion to FIS in July, in addition to the closure of a banking center in Texas, and some ordering severance expenses. Excluding these items, core non-interest expenses were $61.4 million in the first quarter of 2023. The quarter-over-quarter increases were primarily driven by higher salaries in connection with business development personnel, and Amerant Mortgage and other lines of businesses, higher consulting and other professional fees in connection with FIS conversion, higher expenses on FDIC assessment and insurance driven an increase in the balance sheet, higher impact in charges related to the closing of a branch in Houston. The increase in non-interest expenses was partially offset primarily by lower derivative expenses due to lower volume of derivative transactions, lower advertisement expenses and the absence of certain depreciation expenses.
Efficiency ratio was 63.6% in the first quarter of 2023, which was compared to the 58.4% in the previous quarter, but down from 87.3% in the same quarter of last year. Core efficiency ratio increased to 62.5% in the first quarter of 2023, compared to 61.3% in the fourth quarter of 2022. I will now turn it back to Jerry for closing remarks.Jerry Plush Thanks, Carlos. First, I’ll make a couple of brief comments regarding the second quarter. So while we anticipate continued loan growth in 2Q, we will not have loan growth exceeds the growth so the same as we did in the first quarter as we remain committed to maintain our current ratio of loans to deposits. Continuing to have a deposits first focus is job one at Amerant. So a range of $200 million to $300 million in growth for the second quarter is a likely outcome.
And just to remind you, that we have previously stated and I’ll say repeatedly, our loan-to-deposit ratio target is 95% and our intent is not to exceed 100%. And we have consistently managed between that range.We expect the margin to continue to be pressured, given substantial market competition for domestic deposits. This will likely result in a 10 basis point margin reduction from current levels, given upcoming lower costs, time deposit maturities in the second quarter and we are assuming market pricing remains comparable to current rates. As previously noted, we intend to emphasize international deposit gathering, as a source of funds giving more favorable pricing. With recent hires complementing the existing international staff, we should see stronger production here in the second quarter.
We do expect a more positive contribution from Amerant Mortgage, evidenced by the pipeline growth we are seeing from additions to the team. Again, this growth is in conforming loans, which should result in opportunities for gains on sale. And regarding non-interest expense, as I previously referenced, we intend to find offsetting efficiencies to reduce the recent additions to run rate expenses, of which the full impact should be seen in the third and the fourth quarter of this year.So in summary, while we recognize there are clearly headwinds and there is continued economic uncertainty, we continue to remain focused on prudently executing on our strong initiatives, continuing to selectively build to our team, and add where we can and gaining additional market share.
We are excited to see the progress of our two new executives and other recent hires we will make as they begin to contribute this quarter as well.So in conclusion, our commitment to becoming the bank of choice in the markets we serve remains our primary goal. So with that, I’ll stop. And Carlos and I will look to answer any questions you have. So, Michelle, if you would, please open the line for Q&A.
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Question-and-Answer Session Operator Thank you. [Operator Instructions].
And our first question comes from the line of Michael Rose with Raymond James. Your line is open. Please go ahead.Michael Rose Good morning guys. Thanks for taking my questions. Jerry, I appreciate the color there at the end on deposit growth and margin. Maybe we could just start on loan growth, which is another kind of good story this quarter.
I think you mentioned that, deposit growth should likely exceed loan growth. But I think previously you talked about 10%. Obviously, there has been a little bit of a change in the market, you are in different markets that are probably going to hold up a lot better, but end user demand likely slows. So just wondering to get a sense if 10% is still kind of in the ballpark? And if not, what are the puts and takes? Thanks.Jerry Plush Yes. So Michael, thanks for the question and good morning. I would tell you that, I still think 10% could be the outcome. However, I did want to caveat it with again, we have got to grow the deposit side. And so the emphasis on the team is to get as much share of wallet in our existing customer base and continue to expand and grow new relationships.
We think everything we are doing around IntraFi ICS as well as on the international side are going to give us real competitive advantages, just given the way we’ve added sales personnel really focused in each of those areas. So, I do think at the end of the day, if you were to look at us, sort of back from what we said at the year-end, I think we’re still on track in that relative range.Michael Rose Okay, that’s helpful. And then maybe just wanted to shift back to expenses. And I appreciate kind of all the color and kind of the puts and takes but just given those, the higher the incentive comp. I would expect some of that higher consulting costs that come out of the run rate, but you probably hired for Amerant Mortgage kind of throughout the quarter.
So just trying to get a sense for if the adjusted non-interest expense basis is a good place to start, as we think about the second quarter and the rest of the year. Thanks.Jerry Plush Let me give sort of an overview for the rest of the year and I’m sure Carlos will want to chime in too. I believe it’s our responsibility to continuously evaluate where we’re spending the dollars. And so, we think there are opportunities for efficiency that we can still get out of our expense side. And so rather than getting into the specifics, because the focus, obviously, as you can imagine, has been a lot around liquidity and the volatility in the market, we’ll shift our focus now back on, where we can become — we can basically become a little more effective and efficient, not only on the front side of the company, but on the back side.And that’s why I said, I think you’ll see that really more coming through in Q3 and Q4.
Because let’s face it, we’re almost, a third of the way through this quarter. So, I think the big thing I would tell you is the consulting expenses, you see a lot of this one time, my expectation is once we get through the conversion. Again, that’s another reason why you’ll see that stuff starts to fall off in 3Q and 4Q. Carlos, if you would just thoughts on a few…Carlos Iafigliola So, on the, speaking about the run rate and definitely this quarter around the core was $61 million. And we expected the core expenses to be closer to the $60 million approximately, but you should expect on the extraordinary items to boost this to around $62 million. That is the expectation for the upcoming quarters, so $64 million and $62 million.Jerry Plush And, so the consulting and others related to conversion will continue in this coming quarter or this quarter that we are now in.Carlos Iafigliola Correct.
Michael Rose Okay. So, drop into the second quarter, but is there additional kind of efficiencies as we move into the back half of the year, you mentioned, as you get through the FIS conversion that $60 million would actually go lower, or are you going to continue to add the headcount and things like that drive that a little bit higher?Jerry Plush Yes, Michael. Great question. Because, look, I think we’ve been saying that we’re going to continue to be opportunistic, where we see opportunities to add revenue producers deposit gatherers. What we’re not going to do is continue a big infrastructure build. I think we’ve got some things that are going to wrap up here that I think you’ll start to see a smoother course on, we’re done with a lot around again, around the conversion.And I think just in terms of where we should run.
