Q1 2024 Amerant Bancorp Inc Earnings Call

Participants

Laura Rossi; SVP, Head of Investor Relations & Sustainability; Amerant Bancorp Inc.

Jerry Plush; Chariman & CEO; Amerant Bancorp Inc.

Sharymar Calderon; Chief Financial Officer, Executive Vice President; Amerant Bancorp Inc

Tim Mitchell; Analyst; Raymond James & Associates, Inc.

Feddie Strickland; Analyst; Janney Montgomery Scott LLC

Russell Gunther; Analyst; Stephens Inc.

Presentation

Operator

Greetings. Welcome to the Amerant first quarter 2024 earnings conference call. (Operator Instructions) Please note this conference is being recorded.
I will now turn the conference over to your host, Laura Rossi, Head of Investor Relations. You may begin.

Laura Rossi

Thank you, Shamali, and good morning, everyone, and thank you for joining us to review Amerant Bancorp's first quarter 2024 results. On today's call are Jerry Plush, our Chairman and CEO; and Sharymar Calderon, our Executive Vice President and CFO. As we begin, please note that discussions on today's call contain forward-looking statements within the meaning of the Securities Exchange Act.
In addition, references will also be made to non-GAAP financial measures. Please refer to the Company's earnings release for a statement regarding forward-looking statements as well as for information and reconciliation of non-GAAP financial measures to GAAP measures. I will now turn it over to our Chairman and CEO, Jerry Plush.

Jerry Plush

Thank you, Laura. Good morning, everyone, and thank you for joining Amerant's first quarter 2024 earnings call. We're happy to be here today to update everyone on the continued progress we've made during this first quarter of the year.
So before we get to the slides, I'd like to make a brief comment. So as previously noted, you can clearly see the shift this quarter from transformation to execution, highlighted by our decision to exit the Houston market with the recently announced sale of our franchise there and to instead focus all of our efforts on growing our Florida franchise. \
You will also note this quarter the lack of noise in quote as many refer to it in previous periods, having numerous non-routine income and operating expense items in comparison to this first quarter of 2024 results. This quarter also clearly show organic growth from our team member efforts in growing both loans and deposits. The focus on relationship banking, the quality shift and the composition of our deposit portfolio reached another milestone with the runoff of all remaining institutional funds.
And please note advance that we will address credit in detail this morning on the call specifically, what happened in 1Q was special mention that continued perform and the elevated net charge-offs from the discontinued indirect consumer portfolio. So let's now get to the slides, and we'll turn to Slide 3.
You can see that total loans decreased by $258.5 million as we completed the sale of the previously announced $401 million multi-family loan portfolio in Houston. Otherwise, we had strong organic loan growth of $142.5 million. Our pipeline is strong for 2Q, and we've already closed on approximately $150 million in the month of April 2024.
We had organic deposit growth of $331.8 million during the first quarter, offsetting the planned reduction of $262 million we had in institutional deposits and a decrease of $86.4 million in brokered deposits. Please note that the decline in broker deposits was replaced with lower cost FHLB advances. Our assets under management increased $68.5 million to $2.36 billion, driven primarily by market valuations and net new assets.
Regarding our expansion in Florida, we officially opened our banking center in Dallas in Fort Lauderdale at first banking center in Tampa. We also opened a new regional headquarters office entail, and we announced a multiyear partnership becoming hometown banker demand. Marlin's also had a few subsequent events. Since quarter-end, some April 15, we opened our new regional headquarters office for Broward County. It's located in Plantation, Florida, and this will support our efforts to grow in this market.
Also, as announced on April 17, we entered into a definitive purchase and assumption agreement under which mid first bank based in Oklahoma City will acquire amort banks banking operations in six branches in Houston, Texas. This transaction includes approximately $576 million of deposits and $529 million in loans, and it's expected to close in the second half of 2024.
So we'll turn now to slide 4 for financial highlights of the first quarter. Looking at the income statement, diluted income per share for the first quarter was $0.31, an improvement over the prior quarter due to the impact that non-routine items had on operating results. So during the fourth quarter, the net interest margin was 3.51% in the first quarter compared to 3.72% in the fourth quarter. Note that the fourth quarter included an additional 16 basis points of interest collected from the loan principal recovery in that particular period.
The additional decrease in margin comes as a result of the timing difference between the sale of the Houston multifamily portfolio in January 2024 and the repayment of institutional deposits later in the quarter. In addition to the reduction of higher yields in direct consumer loans, credit quality events continue to be an area of focus and the reserve levels are carefully monitored to provide sufficient coverage.
Provision for credit losses was $12.4 million, down $100,000 from $12.5 million in the fourth quarter. Sherry will be covering credit in further detail later in the presentation, including an update on nonperforming loans and special mention credits. Noninterest income was $14.5 million, down $5.1 million from $19.6 million in the fourth quarter, while noninterest expense was $66.6 million also down $43.1 million from $109.7 million in the fourth quarter for two expenses included several nonroutine items.
Our total assets reached a record high of $9.82 billion as of the close of one to slightly up from $9.72 billion in the prior period. Total deposits decreased slightly by $16.6 million to $7.88 billion compared to $7.89 billion in the fourth quarter. Our total gross loans decreased by $258.5 million to $7 billion, down from $7.26 billion in 4Q.
Our total securities were $1.6 billion, up $81.6 million from the fourth quarter as we purchased fixed rate securities as part of our asset liability management actions. Given an expected decline in rates later in 2014 to 25. Cash and cash equivalents increased $337.8 million to $659.7 million at the end of the quarter. As a result of the previously mentioned Houston multifamily sale and also from organic deposit growth.
Moving on to capital, our total capital ratio as of 1Q ended at 12.5% compared to 12.12% as of 4Q. and RCET1 was 10.11% compared to 9.79%. Our tangible equity ratio was 7.28%, which includes $75.9 million in AOCI resulting from the after-tax change in the valuation of our AFS investment portfolio. Lastly, as of 1Q, our Tier one capital ratio was 10.8% compared to 10.54% as of 4Q. Also of note, is that on April 24, our Board of Directors approved a dividend of $0.09 per share payable on May 30 of 2024.
So we'll move now to slide 5, and I'll provide an overview regarding our deposit base. Total deposits at the end of the quarter were $7.9 billion, down slightly, as we mentioned before, of $16.6 million from the previously quarter. This slight decrease was driven primarily by the reduction of $262 million in institutional deposits as we used the proceeds from the Houston loan sale and a decrease of $86.4 million in brokered. The decrease was mostly offset by increases in relationship deposits of $331.8 million.
You will also note that our loan to deposit ratio decreased temporarily to 88.9% as a result of the Houston loan sale. This will eventually migrate closer to our stated target of 95% given loan demand.
We can turn now to Slide 6. And you can see here that we continue to have a well diversified deposit mix composed of domestic and international customers. Our domestic deposits, which account for 67% of our total deposits, totaled $5.3 billion at the end of the first quarter and that's down $141.4 million or 2.6% compared to the prior quarter.
International deposits, which account for 33% of total deposits totaled $2.6 billion, up $124.7 million or 5.1% compared to the previous quarter. We continue to take advantage of our infrastructure and capabilities as well as making the Amerant brand more visible through corporate events and partnerships to emphasize international deposit gathering as a source of funds given more favorable pricing while also adding diversification to our funding base.
The decrease in total deposits was driven by reductions in broker deposits in non-interest bearing deposits, partially offset by increases in interest-bearing deposits and customer CDs. Speaking, of CD's total time deposits for the quarter were $2.2 billion, a decrease of $52 million from the previous quarter due to the decrease in brokered time deposits of $69.3 million, and that was offset by an increase of $17.2 million or partially offset $17.2 million in customer CDs.
Our core deposits defined as total deposits, excluding time deposits, were $5.6 billion as of the end of the first quarter, an increase of $35.4 million or 0.6% compared to the previous quarter. The $$2.6 billion in interest-bearing deposits, and that's up $58.5 million or 2.3% versus the previous quarter. $1.6 billion in savings and money market deposits, that's up $6.5 million or 0.4% versus the previous quarter. And $1.4 billion in non-interest bearing demand deposits that's down $29.6 million or 2.1% versus the previous quarter.
So at this point, I'll turn things over to Sherry. She'll go over key metrics, other balance sheet items and results for the first quarter in more detail.

Sharymar Calderon

Thank you, Jerry, and good morning, Adam. As part of today's presentation, I will share more color on our financial position and performance.
So turning to Slide 7, I'll begin by discussing our key performance metrics and our changes compared to last quarter, noninterest-bearing deposits to total deposits decreased to 17.7% in 1Q compared to 18.1% in the previous quarter as a result of customer interest in higher yielding assets.
Net interest margin was 3.51% in the first quarter compared to 3.72% in the fourth quarter, which included 16 basis points in connection with the one-times of recovers. Our efficiency ratio was 72.03% compared to 108.30% last quarter, given the absence of material non-routine items we recorded last quarter. Our ROA and ROE were higher this quarter at 0.44% and 5.69%, respectively. Tier one capital ratio increased to 10.88% compared to 10.54% due to the balance sheet improvement as a result of the sale of the CRE multifamily loans in Houston and the income for the period.
Lastly, the coverage of the allowance for credit losses to total loans remained stable at 1.38% compared to 1.39% in the previous quarter.
Continuing on to slide 8, I'll discuss our investment portfolio. Our first quarter investment securities balance was [$1.5 billion], slightly up from the previous quarter. When compared to the prior quarter, the duration of the investment portfolio has extended to 5.2 years as the model anticipates lower MBS principal prepayments due to higher market rates. The chart on the upper right shows the expected prepayments and maturities of our investment portfolio for the next 12 months, which represents a liquidity source available to support growth and higher interest earning assets.
Moving on to the recomposition of our portfolio, you can see that the floating portion decreased to 12.9% compared to 13.3% in the fourth quarter. As Jerry mentioned before, we purchased mostly fixed rate securities during the quarter to secure higher yields and position the balance sheet for a decreasing rate environment while maintaining a high credit quality of the portfolio. It is important to note that 80% of our available-for-sale portfolio have government guarantees while the remainder are rated investment grade.
Continuing on to slide 9, let's talk about the loan portfolio. At the end of the first quarter, total gross loans were $7.01 billion, down slightly, 3.6% compared to $7.26 billion at the end of 4Q. The decrease was primarily driven by the sale of $401 million in Houston-based multifamily loans as previously disclosed. Well, we see a decrease of four basis points in the loan yield from 7.09% in 4Q to 7.5% in 1Q. There was actually an increase in the normalized yield of the portfolio when excluding the loan recovery recorded during the period and the reduction into high yielding indirect consumer portfolio.
Most notable in this slide is the reduction in our CRE portfolio following the completion of the sale of the $401 million of Houston-based multifamily loans. I will cover this portfolio in the next slide. The single-family residential portfolio was [$1.51 billion], an increase of $33.5 million compared to $1.48 billion in 4Q 2023. This amount includes loans originated during the quarter, primarily done with private banking customers and commercial clients with residential income-producing properties as collateral.
Customer loans as of 1Q 24 were $337.6 million, a decrease of $101.4 million or 23.1% quarter over quarter. This includes $106.3 million in higher yielding indirect loans purchased prior to 2022 at the tactical moves to increase yields we estimate that at current prepayment speeds, this portfolio will run off by the first quarter of 2026.
As part of the announcement regarding the sale of our Houston franchise we said we had $230 million of remaining loans that we will manage from Florida until they reach their maturity. As of today, the balance is $187 million, which are primarily larger commercial customers, of which $94 million mature in 2024 and includes $61 million in construction loans.
Moving on to Slide 10. Here we show our CRE portfolio in greater detail. We have a conservative weighted average loan-to-value of 58% and debt service coverage of 1.3 times as well as a strong sponsorship tiered profile based on AUM, net worth and years of experience for each sponsor.
As of the end of 1Q 24, we had 31% of our CRE portfolio in top tier borrowers. We have no significant tenant concentration in our CRE retail loan portfolio and the top 15 tenants represent 23% of the total major tenants include recognize national and regional grocery stores, pharmacy, food and clothing, retailers and vendors. Our underwriting methodology for theory includes sensitivity analysis for multiple risk factors like interest rate interest rates and their impact over debt service coverage ratio, vacancy and tenant retention.
Turning to slide 11, let's take a closer look at credit quality. Credit quality events continue to be an area of focus and reserve levels are carefully monitored to provide sufficient coverage. The allowance for credit losses at the end of the first quarter was $96.1 million an increase of 0.6% from $95.5 million at the close of the previous quarter.
We recorded a provision for credit losses of $12.4 million in the first quarter, which was comprised of $11.7 million to cover charge-offs, $2.4 million due to loan composition and following changes. These provision requirements were offset by $1.6 million release related to credit quality, macroeconomic factors and sector.
During the first quarter of 2024, there were net charge-offs of $11.9 million of which $8.6 million were related to purchase consumer loans, $0.6 million related to a here in New York multifamily, no sale and $3.9 million were related to multiple retail and business banking loans. This was offset by $1.3 million in recoveries.
Our nonperforming loans to total loans are down to 43 basis points compared to 47 basis points last quarter. This was primarily due to charges mentioned $1.8 million due to loan sold, $2 million due to paydowns and $1.9 million due to upgrades.
Nonperforming assets totaled $50.5 million at the end of the first quarter, a decrease of $4.1 million compared to 4Q '23, primarily due to the decrease in NPLs. The ratio of nonperforming assets to total assets was 51 basis points, down 5 basis points from the fourth quarter of 2023. In the first quarter of 2024 the coverage ratio of loan loss reserves to nonperforming loans close at 3.2 times, up from 2.8 times at the end of last quarter and down from 3.8 times at the close of the first quarter of last year.
Now moving on to Slide 12, which is a new slide we added last quarter to better show the drivers of the allowance for credit losses. At the end of the first quarter, the allowance was $96.1 million, an increase of $0.5 million or 0.6% compared to $95.5 million at the close of the fourth quarter. The drivers of the allowance movement this quarter were $3.2 million in charge-offs and were offset by $12.4 million due to provision expense and $1.3 million in recoveries.
As previously mentioned, the provision for the quarter of $12.4 million was primarily driven by incremental charge-offs of $11.7 million, primarily due to the indirect consumer portfolio. If we exclude this portfolio, the incremental charges for the quarter would have been $3.1 million.
We introduced Slide 13 this quarter to provide more color regarding special mention loans. Special mention loans increased by $58 million or 126.1%. The increase is primarily due to four commercial loans totaling [$60.8 million] that although exhibit payment performance were downgraded to special mention during the quarter due to covenant failures.
These consist of one commercial loan relationship in Florida and the health care industry totaling $32.4 million and three commercial loan relationships in Texas that are not part of the sales agreement. These Texas loans totaling $28.4 million are in the healthcare car dealer and industrial machinery manufacturing industries. Approximately 40% of these exposures are secured with real estate. These increases were offset by $2.5 million in payments.
Next, I'll discuss net interest income and net interest margin on Slide 14. Net interest income for the first quarter was $78 million, down $3.7 million or 4.5% compared to the previous quarter. The decrease was primarily driven by lower average balances on 12 loans following the sale of our Houston-based multifamily portfolio, lower average rates and securities available for sale and placement. Higher average volumes in money market accounts, and we continue to focus our efforts in relationship deposits as well as higher rates and interest bearing demand, deposits and time deposits.
The decrease in net interest income was partially offset by higher average rates and total loans, even after adjusting for the effect of the recovery in 4Q, higher average balances and securities and placements as a portion of the funds from the Houston multi-family loan sale was temporarily placed here while they are deployed in loan production and lower average rates in money-market accounts and FHLB advances.
In terms of our deposit beta, considering there was no change in Fed funds rate this quarter, there is no beta calculation for this period. However, we observed a rate of approximately 49 basis points on a cumulative basis since the beginning of the interest rate cycle, we had a combined effect of rate increases in transaction deposits and repricing of time deposits that had not reprice at current market rates. We also started the magnitude of the beta change from quarter to quarter, as well as the increasing cost of funds is compressing, which is indicative of a flattening trend or the nearing of the inflection point in future periods.
Moving on to net interest margin, we show on slide 15, the contribution to name from each of its components mentioned name for the first quarter was 3.51%, down by 21 basis points quarter over quarter. This change, however, includes 16 basis points in connection with the loan recovery recorded in 4Q. So excluding the positive impact of this line in the prior quarter, the net change in quarter over quarter is only five basis points. This small change in the mean was primarily driven by the reduced interest income resulting from the Houston multifamily sale, while still having the interest expense up into institutional deposits and our cost of funds for an extended part of the quarter.
In the short term, we expect the margin to be stable due to higher yielding low production, partially offset by the reduction of the indirect consumer loan portfolio and deposit costs, given market competition for domestic deposits and demand for higher rates. I'll provide some additional color on NIM in my final.
Moving on to interest rate sensitivity on slide 16, you can see the asset sensitivity of our balance sheet with 53% of our loans having floating rate structure in 58% repricing within one year. Also, we continue to position our portfolio for a change in risk cycle by incorporating rig floors when originating adjustable rate loans. We currently have 50% of our adjustable loan portfolio with floor rates. Additionally, you can see here is that within the variable rate loans, 36% are indexed to sulfur. Additionally, we continue to execute asset liability management strategies, including hedging interest rate risk, and we expect a downward trend in interest rates starting in the second half of 2024.
Our NIM sensitivity profile remains stable compared to the previous quarter. We also show here the sensitivity of our available-for-sale portfolio to showcase to showcase our ability to withstand additional negative valuation changes on the we should start seeing an organic improvement in AOCI as monetary policy changes and interest rates start to decrease later in the year, we will continue to actively manage our balance sheet to best position our bank for the upcoming periods.
Continuing to slide 17, noninterest income for the first quarter was $14.5 million, down by $5.1 million or 26.1% from $19.6 million in the fourth quarter of 2023. The decrease was primarily driven by the absence of the gain on the early extinguishment of FHLB advances during the fourth quarter of 2023 and lower loan level derivative income. This decrease in noninterest income was partially offset by higher additional income stemming from the restructuring of both billing policies that began in the fourth quarter of 2023 and higher mortgage banking income.
Amerant's assets under management totaled $2.36 billion as of the end of the first quarter up $68.5 million or 3% from the fourth quarter. This increase was primarily driven by market valuations and net new assets.
Turning to slide 18, first quarter noninterest expenses were $66.6 million, down $43.1 million or 39.3% from the fourth quarter. The quarter over quarter decrease was primarily driven by the absence of nonroutine items that were included in 4Q as well as lower professional and other fees compared to 4Q.
Lower occupancy and equipment expenses due to the absence of software services in the first quarter and the decrease in noninterest expense was partially offset primarily by higher salaries and employee benefits and increase in FDIC assessment base during the quarter. In terms of our team, we ended the quarter with 696 FTEs, slightly higher from 682 we had in 4Q.
Moving on to slide 19, we reported first quarter diluted income per share of $0.31 on net income of $17.1 million. As mentioned earlier, we had a decrease in non-interest expense items this quarter, which resulted in a favorable net impact of non-routine items to our diluted EPS.
I'll now give some color of our outlook for 2Q '24 and 2024 overall. Regarding growth, we estimate our balance sheet to grow between $200 million and $250 million. We foresee organic deposit growth to continue to be strong. We will use deposit growth and current liquidity to fund our loan production. We expect the NIM to be stable compared to 4Q, with results expected in the range of [3.50% and 3.55%] as we onboard loan production at higher rates, partially offset by the reduction of the indirect consumer loan portfolio and deposit costs.
Regarding noninterest income, we expect it to be in the range of $14.5 million or $15.5 million. We expect operating expenses to be closer to $68 million as we onboard new team members towards our growth plan. And finally, we expect provision for credit losses to be in or around $8 million to $12 million next quarter. And we do expect asset growth as I previously mentioned, this amount will reflect the impact of the relief as we transfer the Houston loan portfolio to held for sale following the recently announced Texas franchise.
I'll now pass it back to Jerry for closing remarks.

Jerry Plush

Thanks, Sherry. So before we move on to Q&A, I'd like to briefly comment on some of the initiatives we're working on to accelerate the execution of our growth plans here in Florida. So as we previously announced on April 17, we just entered into a letter of intent for a highly visible and accessible space for our new Palm Beach Regional Office, along with a new banking center.
We do have an executive search underway for a new central Florida market, President. We intend to open three or more banking centers over the next 24 months in the greater Tampa area. And we just opened our new Broward County regional headquarter office this week, as I just previously mentioned, we also intend to open one additional banking center in Miami for which negotiations are in process, and we're actively recruiting for additional commercial relationship bankers and private bank officers in Broward County, Johnny integrate Tampa market. During first quarter, we hired 12 team members whom had recently started or are starting in April 2024. So in summary, we remain committed to the execution of our strategic plan to drive profitable growth and to be the bank of choice in the markets we serve.
So with that, I'll stop and Sherry and I will answer any questions you have. If you would. Operator, please open the line for Q&A. Thank you.

Question and Answer Session

Operator

(Operator Instructions)
Tim Mitchell, Raymond James.

Tim Mitchell

Hey, good morning, everyone.

Jerry Plush

Good morning.

Laura Rossi

Good morning.

Tim Mitchell

I just wanted to start on the special jump in special mention loans this quarter on ship color there, Sheri, you gave in the prepared remarks, but I'd say incremental color you could give on kind of what drove the downgrade? What were the covenant breaches on and what do you think the ACL needs to? Is it sufficient right now? Or do we need to migrate that a little more north to a casting credit going forward?

Laura Rossi

Sure. So when looking at special mention and specifically the print piece up, some of them are related like of lifetime VOD financially must be received. The other one is related to metrics like the trailing 12 month leverage. But although we're seeing some deterioration there, we're also monitoring the progress and positive trend on EBITDA. So it's a mix. Some of them are information. Some of them are metrics, but in essence, we are not seeing something and per basin where we are not being an indicator right now of a further down rates.

Tim Mitchell

Awesome, thank you. And then touching on the kind of capital you're going to get from this the Houston sale that you guys announced last week? And how do we think about the capital deployment from that dimension of maybe potential bond restructuring in the slides? And do you think maybe leaning a little bit more into the buyback. Just kind of wanted to get a flavor for what you think you're going to do with that capital. And maybe is there like a CET1 level you'd like to say above after you kind of deploy those proceeds?

Jerry Plush

Yes, Sherry, from a CET1 perspective, I think we want to be certainly around the 10% level. We're happy to see that we popped back above that. I think as it relates to how we'll deploy capital, I think you know, there's a combination of things. Certainly, buybacks will be considered. We do have a program in place, authorizing us for up to $20 million. And we do need capital for growth from our expectations are we're on a really good trajectory right now on both sides of the balance sheet.
And so some of the obviously, it will be needed to because we're going to grow through plant in my expectations right now, even though I gave you guys the number for April, I mean doing $150 million in production already month to date. Should give you guys an indication that all of these additional people that we've been bringing on are driving in a lot of incremental growth. So I think you'll get to see this play out over time. But I think we want to have flexibility.
So for supported growth for buybacks, prudent buybacks, I think also for we'll always evaluate based on earnings where we are on the dividend side as well. But ultimately, it would hold steady with that, we will see consistency in earnings, social pressure.

Tim Mitchell

And then maybe just one last one for me. On the initially in the fourth quarter slides, you guys talked about 15% annualized loan growth for the year. That's the quick math on that $250 million for the quarter. That's about like 10%. Do you think maybe yes, I think you mentioned a few rate cuts you're expecting in the back half of the year. Do you expect lenders to kind of tick up through the year on interest --

Jerry Plush

Absolutely, absolutely. We do see it ticking up over the course of the year. Well, I think, again, with these additions, yes, I think again, we're factoring in the these folks, you know, if you give them 60 90 days to start hitting stride in our expectation is to get all our hiring done here between now and the end of the second quarter so that we've got and positive contributions from all the new folks we've added in the course of the year.

Tim Mitchell

Thanks for taking my questions guys.

Jerry Plush

Absolutely. Have a good day. Thank you.

Operator

Feddie Strickland, Janney Montgomery Scott.

Feddie Strickland

Hey, good morning, everybody, and I just want to make sure I'm thinking through the charge-offs. Appreciate the prepared comments on that. I mean, did you basically just see a little bit more of an acceleration of the consumer book you anticipating here? And should we think about that maybe some of the charge-offs that we thought were going to come from consumer later? I just knew when I had some of that already happened in the first quarter. So maybe there's a little less to go later on. Just trying to think about how to think through how that consumer book plays out and how much of a factor it was this quarter?

Laura Rossi

Sure, Feddie. So if we go back to the $13.1 million in charges we had this quarter and we break it down into two components, right? We had [$8.6 million] that's related to the indirect consumer. Everything else was regarding our portfolio and that's more or less than 6 basis points. But going back to the 6.6 on the indirect, if we and we look at the composition of our vintages, we're going to see that our both programs and offer vintages have already reached the peak. So you're absolutely right. We were expecting going forward, some targets did not adopt the same loss level than we experienced in the past.

Feddie Strickland

Got it. That's really helpful. And then just wanted to I wanted to talk about the commercial healthcare relationship as well and keeping a little more specific on what type of health care? Is it like a managed care? Or I was just curious exactly what on what type of healthcare it is.

Laura Rossi

Sure. So on that particular healthcare relationship, it's history. It's the surgical center of specialty health care relationships.

Feddie Strickland

Got it. And then just last piece here on just thinking through the Houston exit later in the year, and I've tried to do some preliminary look here doing some of the math myself. I mean, do you expect an overall positive impact to the margin? I mean, I know there's probably you maybe have yields come down some because you're not going to get the same yield on and short-term instruments. If you're going to get on the loans or on the flip side, I can see that the Houston footprint has a higher cost of deposits than your overall cost. So just trying to think through later in the year, whether that's a bit of a tailwind to the margin.

Laura Rossi

Sure. So the point in time when the transaction closes from a margin perspective, we do expect to see some improvement. As you were mentioning. It comes with a yield on loans, but it's partially offset by a higher cost of funds. So we do expect some improvement on the names there.
And then from an overall P&L perspective, what we can expect to see is that although we're going to be losing temporarily, some of that interest income is going to be a wash with the reduction of operating expenses. So it's kind of a plus or minus will take us to a net net effect of nothing. But the next step with that is that we will be able to redeploy into loan production here. So we with all of that factor and we do expect an improved margin.

Jerry Plush

Yeah, I think just to add to Sherry's remarks, we're getting better spreads on production. We're booking right now, obviously, we're getting higher pricing and fees on that then that existing portfolio. So that will more than compensate the funding we need to raise is higher cost than that 4%, I believe it is in Houston right now.

Feddie Strickland

Got it. And last quick question just on is the opening of these new offices in the 10s and whatnot, you've already kind of implied in that? I think you said $68 million expense guide for next quarter, and does that kind of continue to go up throughout the year or can it be relatively flat from there, negative Houston transaction?

Laura Rossi

Yeah, we're expecting the $68 million to be a normalized level throughout the year.
(Multiple Speaker)
Yes, that's factoring in the growth of our team members and everything that we have been mentioning in terms of growth.

Feddie Strickland

Got it. Thanks for the color, guys.

Laura Rossi

Thank you.

Jerry Plush

Absolutely. Thank you.

Operator

Russell Gunther, Stephens.

Russell Gunther

Hey, good morning, guys. Just had this morning. I just had a couple of follow-ups. First, on the loan growth, very clear momentum is quite strong, and we talked around maybe the 15% target year over year. Is that still good with the multifamily? Are you kind of talking about that as a overall kind of number.

Laura Rossi

So Russell, if we look at the balance, we had the fourth quarter and we compare it to our projection of growth. We could see from a 10% to 12% growth year over year if we exclude the effect of the$ 400 million if we add back debt reduction of the $400 million, we can see a number closer to the 17% growth. So I know it's a little bit of an add-back to be able to get to the number. But in overall, we are expecting growth in the next quarters to make it to talk to a 17% growth excluding that pickup.

Russell Gunther

I appreciate the clarification. That's very helpful. And again, very clear, the opportunity is strong guys and then on the expense side, so very clear guidance from a core basis going forward, can you just remind us of what the P&L save will be some expenses from the Houston exit. I think you've quantified and the number of folks leaving, it may be expensive there. But sort of all in on the noninterest expense piece.

Laura Rossi

Yes, from a P&L perspective. And just to confirm, Russell, the P&L impact in terms of Houston solely through expense savings, right? So that would be around $4.9 million to $5 million.

Russell Gunther

Okay, thanks Sherry. And then guys, last one for me. I noticed international deposits were up this quarter. I think you guys had sort of reengaged an effort to trying to grow those balances? If you could just give any update there on the dynamics this quarter and strategic focused on that on those balances?

Laura Rossi

Yeah. I mean, we continue our efforts on our international deposit gathering We and the foundation we have in commercial accounts that have a bit artificial in nature where we expect to have an international perspective and more normal level for the balance right now, but the remainder of the year?

Jerry Plush

Yeah, we're actually I think we've talked about this in the last call, really a continue to be in effect finding of how exactly we're going to expand even further there. So we'll be giving more color, you know, either by the end of the second quarter of what the in planning for the balance of the year to expand there. But we've got a number of initiatives. You see press releases and appearances and things that are going to be doing here in the month of May and June. That will give you much more color as to how we're thinking about schools to expand their.

Russell Gunther

Okay. Great. Jerry, Sherry, thank you very much for taking my questions.

Jerry Plush

Absolutely. Have a great day.

Operator

Thank you. And we have reached the end of the question-and-answer session, and I'll now turn the call back over to CEO, Jerry Plush, for closing remarks.

Jerry Plush

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

Operator

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.