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Amerant Bancorp Inc (AMTB) Q4 2021 Earnings Call Transcript

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Amerant Bancorp Inc (NASDAQ: AMTB)
Q4 2021 Earnings Call
Jan 20, 2022, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, and thank you. Welcome to the Amerant Bancorp fourth quarter 2021 earnings conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker today, Laura Rossi, head of investor relations.

Please go ahead.

Laura Rossi -- Head of Investor Relations

Thank you, Victor. Good morning, everyone, and thank you for joining us to review Amerant Bancorp's fourth quarter 2021 results. Also on today's call are Jerry Plush, our vice-chairman, president, and chief executive officer; and Carlos Iafigliola, our executive vice president and chief financial officer. As we begin, please note that the company's press release, our discussion on today's call, and our responses to your questions contain forward-looking statements.

Amerant's business and operations are subject to a variety of risks and uncertainties, many of which are beyond its control. And consequently, actual results may differ materially from those expressed or implied. Please refer to the cautionary notices regarding forward-looking statements in the company's earnings release and presentation. For a more complete description of these and other possible risks, please refer to the company's annual report on Form 10-K for the year ended December 31st, 2020, in our quarterly report on Form 10-Q for the quarter ended June 30th, 2021, and in other filings with the SEC.

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You can access these filings on the SEC's website. Amerant has no obligation and makes no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances, or changes in expectations, except as required by law. Please also note that the company's press release, earnings presentation, and today's call include references to certain adjusted financial measures, also known as non-GAAP financial measures. Exhibit 2 and Appendix 1 of the company's press release and earnings presentation, respectively, contain a reconciliation of each non-GAAP financial measure to its most comparable GAAP financial measure.

I will now turn it over to our CEO, Jerry Plush.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Thank you, Laura, and good morning, everyone. Thank you for joining Amerant's fourth quarter 2021 earnings call. I'm pleased to be here today to report on our results for the quarter and the year and to talk about the continued progress that occurred in the fourth quarter to best position the company for success now and in future periods. We have maintained our focus on the key priorities we set earlier this year or earlier -- yes, earlier this year, excuse me, and the results reflect the good things that are coming to fruition.

While we have much more work to do in 2022, we remain committed to continue to execute on our strategy throughout next year. We're also pleased to report that our board of directors voted yesterday to approve a $0.09 per share dividend. At this time, the intention is to consider the declaration of payment of dividends on a quarterly basis and, of course, it's subject to company results. As part of our quest to provide greater value to our shareholders, we believe this demonstrates our commitment to do so.

I do want to take a minute here and thank all of my Amerant colleagues for their dedication and effort again this quarter. We have a great team, and we're excited about the strong additions to the Amerant family that happened this past quarter. They will play an essential role in our growth in 2022 and beyond. So I will now provide a brief overview of our performance in the fourth quarter and year, and then Carlos will go over the details.

So turning to Slide 3, you can see a summary of our fourth quarter highlights. We're pleased to report record results for this quarter. Of note, net income attributable to the company was 65.5 million. That's up 284% quarter over quarter.

This was primarily driven by a onetime gain on the sale of our headquarters building, higher average yields and balances on loans, and lower average balances on customer CDs and brokered time deposits also contributed to improved core results. Our total gross loans were 5.6 billion, up from 5.5 billion last quarter, even with 337 million received in loan prepayments and the sale of 49.4 million from New York City loans classified as available for sale. Our total deposits were 5.6 billion, flat to last quarter, though core deposits increased by 109.4 million this quarter compared to the third quarter. The company's capital continued to be strong and well in excess of the minimum regulatory requirements to be considered well-capitalized at December 31, 2021.

As previously announced, we completed the cleanup merger, which eliminated the shares of Class B common stock and simplified our capital structure. We also declared and have paid our first cash dividend of $0.06 per share, which was paid out here in the first quarter of 2022. As a result of these actions, there was an increase of 12% in tangible book value over the same period. Additionally, we're pleased to announce that we repurchased 27.9 million of the 50 million share buyback program that was approved in the third quarter of 2021.

In total, 893,394 shares of Class A common stock were repurchased as of December 31st, 2021. We intend to continue to be opportunistic and repurchase shares dependent, of course, on availability and pricing. So now we'll move to Slide 4. We thought it would be helpful to provide you with a reconciliation of shares as of year-end after having completed the cleanup merger and the share repurchases I just mentioned.

Here, you can see the impact each of these had in reducing the number of shares issued and outstanding, which as of December 31, 2021, totaled 35,883,320 shares of Class A common stock. Turning now to Slide 5. Our core PPNR increased to 18.9 million or 3.4%, compared to the 18.3 million we reported in the previous quarter. As we previously stated, we believe it is essential to show the net revenue growth of the company, excluding any onetime gains or losses or other nonrecurring items in order to show Amerant's core earnings power.

We'll go over key actions on Slide 6 now. Here's a number of key actions taken during the fourth quarter. We are continuing to focus on driving efficiency as well as set the stage for future growth. So our nonperforming loans decreased to 0.89% of total loans, a substantial decline compared to 3Q '21.

As part of our stated commitment to reduce the level of nonearning assets on our balance sheet, we are diligently working to further reduce this level of nonperformers here in the first quarter of 2022. We closed our Wellington branch in the fourth quarter of '21 and announced a new branch in downtown Miami, which we expect to open in the fourth quarter of next year -- of this year. The new location will be within Met Square. It's in the heart of Miami and one of the nation's fastest-growing urban centers.

The new banking center will deliver full banking services, so consumer, business banking, private banking, commercial, and wealth management will all have a presence here. Amerant Mortgage continues to expand as this quarter, we added 20 FTEs focused on the wholesale business. We also hired a terrific South Florida-based domestic private banking team to focus on large private banking relationships, including professionals, law practitioners, and medical offices, among others. We also hired a new head of procurement as part of our ongoing efforts to look for additional cost savings as well as a new head of loan syndication to enable us to onboard large business opportunities in the markets we serve and to effectively manage risk.

We executed an agreement with -- to become a strategic investor in their blockchain fund. We like the folks at -- and I'm sure this is true at a lot of well-known banks across the country that also committed to invest, we believe blockchain will eventually become the dominant operating infrastructure of the financial system. We're excited about the potential here to potentially become an early adopter of this transformational technology. As we previously announced, we entered into a multiyear outsourcing agreement with financial technology leader, FIS, to assume full responsibility over a significant number of the bank's support functions and staff, including certain back-office operations.

Effective January 1st, 80 full-time equivalents were transferred, reducing our total full-time equivalent to 683, inclusive of Amerant Mortgage. We have an estimated annual savings of approximately 12 million from this partnership while achieving greater operational efficiencies and delivering advanced solutions and services to our customers. Our new Imagine a bank campaign was launched during the fourth quarter of '21 and a significant expansion to it went live on January 3rd, 2022. There are now over 20 billboards throughout South Florida, including two high-impact boards in the Miami downtown area that are delivering more than 125 million impressions in the South Florida market.

We also continue to leverage our partnership with the Atlantic division leading Florida Panthers to drive brand awareness. Please note the front cover of this earnings deck is a great example of the Imagine a bank branding we are now using. We'll now turn to Slide 7. Here, we've outlined our key performance metrics, which continue to show improvement with the exception of the slight decrease in noninterest-bearing deposits over total deposits.

Please note that the large improvements in efficiency ratio, ROA, and ROE in the charts include the onetime gain on the sale of the headquarters building. For ease of reference, we show the same three core metrics, excluding this onetime gain and onetime -- other one-timers in the footnotes to this slide. Here, you can see the efficiency ratio was relatively flat quarter to quarter given the investment we are making in revenue producers. Regarding the efficiency ratio, please note we will continue our focus on rationalizing our cost structure to improve profitability as well as offset our reinvesting in the business.

I'll comment more on this later in the call. So if we turn to Slide 8, as we did last quarter, this focuses solely on Amerant Mortgage. Since we started taking applications, in May of 2021, AMTM has received 299 applications and closed on 109 loans totaling 52.6 million. 61 of those loans were funded in the fourth quarter totaling 32.04 million.

As we mentioned earlier, AMTM added additional experienced personnel this quarter to focus solely on its wholesale business. So with that said, I'll now turn things over to Carlos, who will walk through our results for the quarter and year in more detail.

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Thank you, Jerry, and good morning, everyone. So turning to Slide 9, I'll begin by discussing our investment portfolio. Our fourth quarter investment securities balance was 1.3 billion, out of which 240 were cash, slightly down from the 1.4 billion in the previous quarter and flat compared to the fourth quarter of 2020. When compared to the prior year, the duration of the investment portfolio was extended to 3.6 years due to the lower prepayment speeds recorded in our mortgage-backed securities portfolio.

Given the extension, we will focus our investment strategy on assets with lower duration and better repricing profile in anticipation of interest rate hikes in 2022. The floating portion of our investment portfolio reached 10.6% as of the end of the year. Continuing to Slide 10, let's talk about the loan portfolio. At the end of the fourth quarter, total gross loans were 5.6 billion, up 1.6% compared to the end of the last quarter.

The increase in total loans was primarily due to higher loan balances, which resulted from an increase in loan production despite having received 337 million in prepayments primarily from the CRE portfolio and some almost 50 million from the New York portfolio. Consumer loans as of December 2021 were 423 million, an increase of 65 million or 18% quarter over quarter. During the fourth quarter of 2021, the company purchased approximately 86 million of higher-yielding indirect consumer loans. Loans held for sale totaled 158 million as of December 21st, which includes $15 million in mortgage loans in connection with the activities of Amerant Mortgage and 143 million in loans from our New York CRE portfolio.

On Slide 11, we provide an update on the New York loan portfolio. Total loans outstanding from the former LPO have declined to 491 million in the fourth quarter of 2021 from 627 million in the third quarter 2021. During the fourth quarter, and as I just mentioned, we sold 49.4 million in loans held for sale at par. Also, in the fourth quarter, we sublet our former office in New York.

Turning to Slide 12. Let's make a closer look to the credit quality. Overall, credit quality remains sound, and reserve coverage is strong. The allowance for loan losses at the end of the fourth quarter was almost 70 million, down 16.2% from 83.4 million at the close of the previous quarter.

We released 6.5 million from the allowance for loan losses in the fourth quarter, compared to a release of 5 million in the previous one. The release was primarily driven by 6.1 million due to upgrades payouts and pay downs of nonperforming loans and special mention loans; a release of 5.4 million as a result of improved macroeconomic conditions and 0.5 million due to recoveries. All this was offset by 4.2 million in additional reserve requirements for charge-offs and 1.3 million due to loan growth. Additionally, the allowance for loan losses associated with COVID-19 pandemic decreased slightly to approximately 14 million in the fourth quarter of 2021.

Net charge-offs totaled 7 million in the fourth quarter, compared to almost 16 million in the third quarter. Charge-offs during the period were primarily due to 3.9 million in commercial loans, 1.8 million in CRE loans, and 1.4 million mainly in consumer loans, offset by 0.5 million in recoveries. In connection with the Coffee Trader relationship, we collected 4.8 million, which contributed to a release of 2.3 million in specific reserves assigned to this relationship. The current outstanding is 9.1 million with a specific reserve of 4.2 million.

Nonperforming assets totaled 59.5 million at the end of quarter, a decrease of 33 million or almost 36% compared to the third quarter and a decrease of almost 29 million or 33% compared to the fourth quarter of 2020. The ratio of nonperforming assets to total assets was 78 basis points, down 46 basis points from the third quarter of 2021 and down 35 basis points from the fourth quarter of 2020. In the fourth quarter of 2021, the coverage provided by loan loss reserve to nonperforming loans increased to 140% from 101% in the previous quarter and an increase from the 127% we reported in the fourth quarter of 2020. Continuing to Slide 13.

Total deposits at the end of the fourth quarter were 5.6 billion, consistent from the end of the third quarter. Domestic deposits totaled 3.1 billion, up 46.7 million or 1.5% compared to previous quarter, while foreign deposits totaled 2.5 billion or 43 million down compared to the previous quarter. Core deposits consist of total deposits, including time deposits, were 4.3 billion as of the end of the fourth quarter, an increase of 109 million or 2.6% compared to the previous quarter. This amount includes interest-bearing deposits of 3.1 billion and noninterest-bearing demand deposits from 1.2 billion as of the end of December.

Of note, during the fourth quarter of 2021, the company commenced a new relationship, which allows to capture municipal funds. Offsetting the increase in total deposits was a reduction of 105 million or 7.3% in time deposits. Customer CDs compared to prior quarter decreased 59 million or 5.3% as the company continues to lower CD rates and focus on increasing core deposits and emphasizing multiproduct relationships versus single product higher-cost CDs. Brokered time deposits decreased 46 million or 13.7% compared to September 2021.

We continue to deemphasize this funding source. Next, on Slide 14, I'll discuss the net interest income and net interest margin. 2021 Q4 net interest income was almost 56 million, up 7.6% quarter over quarter and up almost 15% year over year. The quarter-over-quarter increase was primarily attributed to the higher average yields, including prepayment fees and balances on loans as well as lower average balances on customer CDs and brokered time deposits.

There were no significant offset to the increase in the net interest income during the fourth quarter. Moving to the financial margin. Q4 net interest margin was 3.17%, up 23 basis points quarter over quarter and up 56 basis points year over year. The change in net interest income and NIM was primarily driven by the increase in the yield of our loan portfolio, which is now at 4.1%, an increase of 18 basis points versus the third quarter.

We continue to focus on improving our NIM by proactively seeking incremental spreads and volumes in our loan originations. Continuing to Slide 15, noninterest income. In the fourth quarter, we had $77.3 million versus 13.4 in the previous quarter. The increase during the fourth quarter was primarily due to 62 million nonrecurring gain on the sale of our company headquarters and higher income from client derivatives, brokerage, and advisory services, mortgage banking, and services fees.

There were no significant offsets to noninterest income during the fourth quarter. Amerant assets under management totaled 2.2 billion as of the end of the fourth quarter, up almost $33 million or 1.5% from the end of the third quarter, predominantly from net new assets as we continue to execute our relationship focus strategy and increased share of wallet. Turning to Slide 16. Fourth quarter noninterest expenses was 55.1 million, up 6.7 million or almost 14% from the third quarter and up 3.5% and 2.5 million year over year.

The quarter-over-quarter increase was primarily due to the following: higher consulting, legal and professional fees related to the cleanup merger, and expenses related to consulting services received from FIS; higher salaries and employee benefits due to new hires in number of mortgage and private banking teams and higher variable compensation expenses; higher occupancy and equipment costs in connection with the termination of our lease of Fort Lauderdale branch, which was closed in 2020; higher marketing expenses as multiple brand awareness initiatives were deployed during Q4. These increases were partially offset by lower depreciation and amortization expenses, which includes the effect of the sale of the company headquarter building and lower FDIC assessment and insurance expenses. We consider that 1.9 million of noninterest expenses were nonrecurring items. Core noninterest expenses was 53.2 million in the fourth quarter of 2021.

The efficiency ratio was 41.4% in the fourth quarter of 2021, compared to 74.2 in the previous quarter and 95.8 in the fourth quarter of last year. Both the quarter-over-quarter and the year-over-year improvements were primarily driven by the gain on the sale of the company headquarters. Core efficiency ratio, which adjusts for the nonrecurring items, was 75% in the fourth quarter, compared to 73% in the third quarter of 2021, and 71% in the fourth quarter of 2020. The increase was primarily driven by noninterest expenses described above, though partially offset by higher loan average yields, including prepayment fees and balances.

Moving to interest rate sensitivity on Slide 17. Our balance sheet continues to be asset-sensitive, however, less than it used to be. As of the end of December 2021, half of our loans either have floating rate structure or mature within the year. We're now looking to gain back some of that sensitivity by decreasing the duration of our investment portfolio and by focusing on assets with lower duration and better repricing profile, as I previously mentioned.

Other initiatives include increased duration of our liabilities. I will now turn back to Jerry to talk about Amerant progress and the near and long-term initiatives.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Thank you, Carlos. Here, you can see on Slides 18 and 19 that we've provided some details on what has been done in connection with each of the key initiatives during the fourth quarter. So let's start with deposits first. We continue reducing broker deposits to total deposits toward our target of 5%.

Our loan-to-deposit ratio came in just under 100%. As previously mentioned, we added an experienced banking team that will help us drive incremental deposit growth. We continue to work on enhancing a completely digital onboarding platform. And we also implemented Zelle Commercial, being one of the first community banks to implement this P2P payment platform.

And finally, we tested a new digital promotion campaign with a cash bonus for opening value checking accounts. This short-term offer raised over $9 million in new deposits. Regarding brand awareness, we placed continued emphasis being active in both public relations and social media. And of note, we just passed 10,000 followers on LinkedIn.

Our Imagine a bank campaign went live in the fourth quarter. And on January 3rd, we put up 20 billboards and two high-impact boards in the Miami downtown area, and there's examples that we can share on Slide 20. And as I noted, we continue to leverage the popularity and exposure of our Florida Panthers partnership, both at the arena as well as in our marketing efforts. Regarding the rationalization of business lines and geographies, we completed the sublease of our New York loan office space.

As I previously announced or disclosed, we closed one branch in the fourth quarter. And then we announced our new branch in downtown Miami. And Amerant Mortgage continues to add to their team. And as we noted, there are 20 additions to the wholesale team here in the fourth quarter.

Regarding the Pathway to 60, we previously mentioned the multiyear outsourcing agreement with FIS. We also onboarded our new procurement officer to drive incremental cost savings. Regarding our capital structure optimization, we completed the previously announced cleanup merger to simplify our capital structure. The board authorized on September 10th a new share repurchase program, under which the company may purchase from time to time up to 50 million of Class A stock.

We purchased -- repurchased 27.9 million through December 31st post the completion of the cleanup merger. And then on December 9th, the company declared its first cash dividend as a public company for $0.06 per share. And then finally, an update on ESG. We started to implement our diversity and inclusion program to improve and maintain an authentic inclusive culture.

We've executed on several initiatives to consider the environmental impact of our direct operations. We developed the governance structure for our ESG program, so the framework is now in place. And we still intend to share our first ESG report in the early second -- early part of the second quarter of '22. In addition, we installed charging stations for electric vehicles in our headquarters building location and we invested 3 million in green bonds.

That investment was in an energy company called NextEra, which demonstrates our commitment in all phases of the company to this important initiative. Now on Slide 20. As I noted earlier, there are some examples that you can look at on the brand awareness we're doing both at our downtown branch as well as with the Florida Panthers near downtown Miami. So before we turn to Q&A, there are a number of key actions underway in 2022.

I thought it would be helpful to share. So first, we think as a community bank, it's imperative for us to expand our SBA efforts given our build-out of our business banking area this past year as well as the additional in-branch and online capabilities we now have with Numerated. We'll provide more information as we finalize our plans during the first quarter of this year. We intend to continue to look for financial technology as a way to most efficiently attract and serve our customers.

The investments we made in Marston and Raistone, for example, will begin to show in our growth and results in 2022. We're currently evaluating other providers with the intent of enabling us to deliver existing products more effectively or adding to our current product suite. So as an example of this, we have just entered into a letter of intent with a top-notch white label provider to enable us to provide equipment financing, both to our existing customers as well as to new customers. We believe it's essential for us to have equipment finance in the commercial bank as a complementary offering to the working capital and asset-based lending we currently provide.

We intend to have representatives to generate direct business in the Houston, Tampa, and South Florida markets starting in the second quarter of this year. So speaking of Tampa, we've sublet space. We've already started with one CRE officer who has begun generating commercial real estate opportunities for us. And we're actively recruiting two C&I-focused officers to add to the team.

Adding a treasury management sales and support team there is essential and will be our next hiring priority. Regarding work underway to improve the efficiency of the company and thus the efficiency ratio, the steps we took in 2021, like the outsourcing of internal audit and the FIS initiative, will reduce costs starting in 2022 while improving quality and efficiency. We know more work is necessary to achieve our stated goals and are taking multiple steps organizationwide to control and further reduce costs where practical. The addition of our new procurement officer and placing further reliance on new technology versus cumbersome processes, they're just two of the ways we intend to pay for the additional investment in business development personnel that we'll continue to make.

And we will also look at ways to reduce unnecessary expenses. And as we did throughout 2021, we intend to update you as we continue to make progress. We're also reevaluating parts of our organization structure, where we've not made changes to date to become more efficient and more effective. Process improvement is another area of focus across the company throughout 2022.

We've also initiated work on how we report on our quarterly results. We're evaluating and reporting our results split out into two business segments: consumer and commercial. Each would show domestic and international components. We believe it's important as we grow and with our intent to expand to have razor-like focus on each of these critically important segments, which serve completely different customer bases, where we invest, why we invest, how capital is allocated to each of these segments is essential information for our board, our management, and investors to understand as we continue our transformation here at Amerant.

So as this project progresses, we'll keep you posted each quarter. Everything we are doing continues to be with an eye toward being able to profitably grow and produce the kind of consistent returns we intend to achieve for our shareholders. So with that, I'll stop, and Carlos and I will look to answer any questions you have. Victor, please open the line for Q&A.

Questions & Answers:


Operator

Sure. [Operator instructions] Our first question will come from the line of Michael Rose from Raymond James. You may begin.

Michael Rose -- Raymond James -- Analyst

Hey. Good morning, everyone. Thanks for taking my questions. It's really nice to see you guys -- good morning.

It's really nice to see you guys hit the ROE and ROFE target this quarter. As we think about moving forward with potential rate hikes and such and counterbalancing all the investments and all the other projects that you all are working on, which is obviously significant, continues along the path that you're on, how should we think about sustainability of those profitability metrics? And maybe it might be too soon, but do you have any sort of intermediate-term aspirational targets, profitability-wise, that you might be willing to share at this point? Thanks.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yes. Michael, it's Jerry. We're still committed, as we stated before, to a 60% efficiency ratio by the end of these four quarters upcoming in 2022. I think it's clear -- it should be clear that that's going to come from a combination of profitable growth.

Clearly, we've done some substantial investments in business development personnel and in technology. And we're going to continue to look for people that are revenue producers that are additive to the growth story here. And I think it's -- we're still on track, in my mind, for the achieving over one to 10 in a 60. That's what we stated and, frankly, how we laid out our plans for this year.

So by the fourth quarter, I think you'll see, which is typical for everyone in the industry, the first quarter expenses will be a little elevated, of course, because you have the restart with payroll taxes, etc.. But I think just in terms of where we'll be over the course of the year, we think the growth that we showed here in the fourth quarter is something that our intent is to execute and continue to build on that each and every quarter throughout the year so that you'll see the positive effects of that certainly by the fourth quarter.

Michael Rose -- Raymond James -- Analyst

That's really helpful, Jerry. Thank you. And then maybe just shifting back to loan growth. Obviously, very strong despite the continued runoff at the New York City LPO, which is really good to see.

Kind of as you look into your crystal ball and think about the puts and takes of what you're all trying to do, do you have any sense for what loan growth ex PPP -- you don't really have any PPP but what loan growth kind of look like as we move through the course of the year? Thanks.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yeah. No, I think we still feel that -- look, there's some repayment activity that is scheduled just based on maturities for the remaining New York portfolio, and there's definitely interest in those receivables that are there. So I mean that's a little bit of a headwind for us. But when you look at the rest of the business, the pipeline is strong.

I mean we've got a lot of strength really across the board. The private banking team, the business banking team, the CRE team, the C&I team, I mean, it's very consistent. One thing that's happened throughout the year is that the pipeline has just continued to build, and we're executing on our fair share of what's in the pipeline. Those percentages are increasing.

If we keep going down that path, I think we're in a good place for, I'll call it, something in the single digits growth over the course of the year.

Michael Rose -- Raymond James -- Analyst

All right. Very helpful. And then maybe just one final one for me. So the loan-to-deposit ratio is creeping up a little bit higher.

Obviously, there's a mix shift going on, which is very positive, I think, for franchise value longer term. At what point, though, does -- with loan growth seemingly accelerating, does that become a larger issue? And what are the strategies to grow core customer deposits? Thanks.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yeah. Great question. And I think that's one of the real positives that -- of adding the private bank capabilities in addition to all the investments we've already made in treasury management. I think you can see a big change in the company when some of the first comments we're making about expansion into Tampa is to have twice the number of C&I personnel and to add treasury sales and support almost immediately.

And so we're looking to be a self-funder in all our areas at this point. I think in terms of -- and we're going to -- obviously, you'll see and learn more about over the course of 2022 the campaigns that we'll be running both for things like business checking, for consumer checking that I think will be very complementary in terms of the growth in the core side. I think it's very safe to say with the potential of these -- the number of rate increases can be debated. But as Carlos mentioned in his comments, we're obviously also, at the same time, looking at the changes we need to make in the balance sheet to also extend duration on a fair bit of liabilities.

So as things mature throughout the year, we're also going to be doing some extension here to take advantage of the rates and keep the cost of funds on everything other than core in check as best as we can.

Michael Rose -- Raymond James -- Analyst

Very helpful. Thanks for taking my questions and good to see the continued progress.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Thank you.

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

All right [Technical difficulty] come from the line of Stephen Scouten from Piper Sandler. You may begin.

Stephen Scouten -- Piper Sandler -- Analyst

Hey. Good morning, everyone.

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Good morning, Stephen.

Stephen Scouten -- Piper Sandler -- Analyst

I'm curious, I know you Carlos noted that the asset sensitivity has declined a little bit lately. I wasn't sure what was driving that explicitly. I don't know if you could kind of give some more color on what's created some of that shift downward and if there are any specific kinds of initiatives to benefit further from higher rates in the coming year?

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Sure. So if you recall and if you compare year over year, there was a significant drop in the time deposits, and that was by design pretty much. So there was a runoff of time deposits that we consider that were a single product, based on the analysis that we produce. Therefore, we took advantage of decreased rates.

So we had the flexibility in the balance sheet to decrease time deposits. So we did it. We did it with the broker as well. So those were items that use on a renewal basis, it would have added duration to the liabilities, therefore, decreased sensitivity or, better to say, improved sensitivity to interest rate up.

So those items were primarily. And additionally to that, with the interest rate environment, duration of the investment portfolio have been increasing a little bit. So those two items I would say the drop in the duration of the liabilities and increase in duration on the investment portfolio have created that diminished profile in the interest rate sensitivity. But we're working to add it back in some sensitivity to interest rate up.

Stephen Scouten -- Piper Sandler -- Analyst

OK. Great. Very helpful.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Which, by the way, was accretive because you see the mean the way it is. That helps us with the cost of funds.

Stephen Scouten -- Piper Sandler -- Analyst

OK. Good. Thinking about some of these new additions you made the head of loan syndications. I know one of the big pushes for you guys has been making the loan book maybe look more granular and getting some higher-yielding loans.

So I'm wondering how to think about that versus that overall shift for the bank. And if we might see a little bit of a reversal if you guys are going to look to book some larger loans here with that syndication there?

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yes. Stephen, it's Jerry. Look, I think it's a must-have as part of our arsenal to have a loan syndication desk. We get presented with some larger opportunities that is not something that we can handle.

But if we can syndicate part of that out, it obviously is very, very helpful for us if it's part of our growth story. And look, the way that process works, we'll obviously, by having a desk, also potentially see paper from other institutions as well. So I think it's a win-win for us. It's something that our team is very good at unearthing opportunities.

And what we don't want to do is limit ourselves. We obviously want to manage the risk properly. And I think that that's another part of this where we don't want to have large single exposures. And so we're excited about having this area as another part of our arsenal, as I call it, for business development in 2022.

Stephen Scouten -- Piper Sandler -- Analyst

OK. Fantastic. And then maybe last thing for me. Just you guys have made some pretty significant improvement here on the nonperforming loans.

I know you said you're going to focus more on that in the first quarter. But you still have a pretty big chunk of the COVID-related reserves, I think a little over 14 million. So I'm just kind of wondering how you guys are thinking about that today and what could be the pace of potentially running those excess reserves off over time?

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yeah. Look, I think you take each quarter as it comes. We're, as we said, very, very focused on reducing the nonearning asset load off our books, trying to get every dollar into an earning asset category is critically important. And so you should expect to see us working hard to get more down this quarter.

Too early to comment further on that, but the team is all in, in trying to drive that number down substantially again. With that being said, clearly, by doing that, and I think when you think about our net charge-offs that have been happening during the quarter, it's all stuff that we had previously reserved. And so it's a harbinger of what I would say is as we work our way through, obviously, there'll be some reserves that possibly can be freed up if we don't need them in order to liquidate those positions. But so far, so good.

And clearly, I think it's a big philosophical shift for us as an organization that we're trying to -- if we have to onboard something, we're trying to resolve it as quickly and expeditiously as possible.

Stephen Scouten -- Piper Sandler -- Analyst

Got it. OK. Great. Very helpful.

Appreciate the time, guys, and congrats on the quarter.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Thanks, Stephen.

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Our next question will come from the line of Brody Preston from Stephens. You may begin.

Brody Preston -- Stephens Inc. -- Analyst

Yeah. Good morning, everyone. Can you hear me OK?

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yeah. We're ready. How are you?

Brody Preston -- Stephens Inc. -- Analyst

I'm doing well. Thank you. I hope you are as well.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yes. Thanks.

Brody Preston -- Stephens Inc. -- Analyst

I just wanted to circle back real quick, and I hopped on a bit late. I was coming from another call, so I apologize if I missed it. But you had the 337 million of prepayments that occurred from CRE. But how -- I guess, I'm looking at the loan yield, and it was up like 18 basis points, linked quarter.

But I'm wondering what the dollar amount of prepayment fees were and what that impact on quarter-over-quarter loan yields was.

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

So on the -- I can give you in terms of the NIM. It was approximately four basis points, the impact on the NIM due to prepayments. So I guess if you want to take it normalized, it would be like 313 without the special prepayment that we collected over the quarter. That would be a fair number.

Brody Preston -- Stephens Inc. -- Analyst

OK. OK. So is that like $700,000? Does that sound right?

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

More or less. That's right. That's precisely the case.

Brody Preston -- Stephens Inc. -- Analyst

So what else was it that drove the linked-quarter increase in loan yields?

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Yeah. So there was additional purchases that were done on the indirect lending program, which improves the yield of the overall loan portfolio and also the new transactions that came in, in the C&I space. So as you recall, we've always been talking about setting floors and trying to price new transactions with good spreads. So we have been passing on transactions that they don't provide a good yield and jumping in the ones that we consider they have a good credit profile and a good credit spread.

So kind of a combination between those items were the ones explaining the increase, aside of the prepayment penalties.

Brody Preston -- Stephens Inc. -- Analyst

Got it. Got it. OK. And then just maybe on the expense front.

You all added like 30-plus FTEs, the biggest chunk within the mortgage segment. And you're starting to see your mortgage revenue trajectory improved. But obviously, with all the new hires and the front-loading of expenses, the losses on that business line have increased. And so I guess I wanted to ask, could you remind me what the current number of FTEs within the mortgage business is? And do you think you've kind of reached a point of critical mass on the employee side where now it's about maintaining the employee base you have and getting the production you need to turn that into a profitable business line?

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yeah. I definitely think that we've reached the critical mass stage in terms of personnel. Bringing on this team who with lots of experience, demonstrated performance, we think, was a very opportunistic move for us. But I think in terms of we'll continue to look if we can add quality people, we will.

But I think this team is very experienced and will manage at this stage their compensation and number of FTEs carefully to make sure that their focus is really on growing the top line going forward. So I think we're in a good place where we sort of won't see these big increases that we've obviously done quarter over quarter in 2021 and really see that be flattish, if not even potentially down just depending on volumes, right?

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Right. This point that we reach a number of mortgage with 72 FTEs we consider is reflective of what their structural FTE count would be. Maybe there is very little addition that needs to be added. So the structure -- so the expenses that you see in Q1 because this new team that Jerry was mentioning was just higher in Q4.

So when you look into the Q1 Amerant Mortgage cost structure, that would be reflective of what the long term or the structural cost it would be for this company. So we believe that it reached a point in time that is already all set and with a right staff and with the right platform and infrastructure to go.

Brody Preston -- Stephens Inc. -- Analyst

Got it. And I guess as I think about the expense trajectory going forward, and I try to normalize this quarter, you're at 53.2% opex. And then you've got the efficiency plan that kicks in next quarter. And so kind of stripping that out, you're at about $50 million or so pro forma kind of setting that efficiency plan aside.

And so how should we be thinking about growth off of that 50 million number for 2022?

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

So yeah -- so for run rate on the total noninterest expenses, they would be probably in the 2.5 to 53 million approximately. That includes the impact of Amerant Mortgage as well. So all in, including the savings from the FTEs that were outsourced through FIS and including the full quarter of the new teams that were just hired, it will take us probably to the $53 million run rate --

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

For the first quarter.

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Correct. For the first quarter operating expenses.

Brody Preston -- Stephens Inc. -- Analyst

OK. Are there any seasonal items in the first quarter like incentive comp or --

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

[Inaudible]

Brody Preston -- Stephens Inc. -- Analyst

OK. And so I guess -- OK. So I guess as we think about like maybe in the second quarter, it comes down a little bit. But I guess maybe that 52.5 to 53 would be a good number to use on average throughout 2022.

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

For the run rate, yes.

Brody Preston -- Stephens Inc. -- Analyst

OK.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yeah. And I think, Brody, to the comments that I was making is there's further things that, obviously, we intend to be doing to make sure that the expense dollars are optimized. There is, as Carlos mentioned in his comments, you have to take into account the push that we're doing with marketing, obviously, to drive our business development efforts as well as we obviously have the increase on the red side that has come from the building, right? So we know by just doing those two things, it would be natural for you guys to assume a higher expense over what we've been doing in the last couple of quarters.

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

But then you will have the positive effect of the more NIM because of a nonearning asset was converted in earning assets on the fee income of the mortgage company, etc. So that's the other component of efficiency that will give you the overall picture and how do we plan to get to the 60%.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yeah. And I think the best way to think about this is we recognize there was an inflection point where we need to invest and heavily invest in certain areas in order to get the kind of top-line growth we need to support the infrastructure here. But I do want to just reiterate, in no way, shape or form should folks think of us as we're not going to continue to look for ways to make sure that every dollar is toward generating revenue, and where we can, we will continue to reduce.

Brody Preston -- Stephens Inc. -- Analyst

Understood. Understood. Then I just had two -- couple of quick last ones. I guess just on the NIM, you all have a decent percentage of the loan portfolio that's floating rate.

At the same time, you're seeing it in your cost of deposits. Those have been coming down nicely, but you still have a decent amount of higher-cost CDs. I know the CD costs kind of stalled this quarter. And so I guess just help me think about is there an opportunity as we think about rate hikes where -- are there still opportunities to reprice down the CD book at the same time that the loan book is repricing upward because of a potential rate hike?

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Yeah. There will be -- I guess the biggest repricing down was already obtained during 2021. During Q1, I particularly feel that with the recent news on inflation and bad moves or potential moves, there would be less opportunities to keep going down with the cost of funds. There may be specific opportunities in the CD portfolio to drop certain cases.

But particularly, I don't think there would be significant costs or opportunities to drop furthermore the cost of funds. Also because if you're trying to hedge your balance sheet to interest rate off and trying to increase duration, that will come along with the liabilities that will cost more and that will start to add up. But the opportunities are on the assets being repriced at a higher rate. And that was precisely our objective of having a significant portion of our loan portfolio being floating.

Brody Preston -- Stephens Inc. -- Analyst

Got it.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yeah. And I would add, that's why, Brody, there's such an emphasis on, as I was describing, the campaigns that we're going to be doing, consumer, business banking on the checking side as well as all the efforts we're doing in treasury management. With all the C&I growth that we expect to bring on, it's -- just keep in mind that we're deposits first. And so the view is that we're going to continue to focus on how much we can get in core deposit growth.

I think Carlos is spot on. We'll be opportunistic as the CD maturities continue to come through, we may elect to do some extensions on that. So while that may not be the same type of help that it's been as we've allowed that to either run off or downward reprice will certainly protect ourselves on the cost of funds better by extending in the stuff that's maturing.

Brody Preston -- Stephens Inc. -- Analyst

Got it. And then just on the securities portfolio. You guys have picked up the held-to-maturity growth. It's still only like nine or 10% of total securities at least as of the third quarter.

But has there been any thought given to maybe as you continue to grow securities, allocating more to the held-to-maturity portfolio, just as we think about rising rates and the potential for further negative impacts to [Inaudible]?

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

So we typically keep our biggest portion in AFS. There is a significant portion of the portfolio that is -- that doesn't have a credit risk component. So probably like 700 million out of the 1.1 just in securities are -- don't have a credit risk. So we may opportunistically add something, but we never go further ahead of 15 to 20% of the total portfolio going to HTM.

So we really like to keep as a secondary source of liquidity into the AFS portfolio.

Brody Preston -- Stephens Inc. -- Analyst

Got it. And is that 3.6 years effective duration is in the deck, is that a similar mix between the AFS and the HTM? Or is the AFS portion of the book shorter duration?

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

HTM tends to have a little bit of a higher duration. But since it waits, not that much. So it's reflected pretty much of what is in the AFS.

Brody Preston -- Stephens Inc. -- Analyst

Awesome. Thank you very much for taking my questions that are on. I really appreciate it.

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Sure.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Thank you. Thanks.

Operator

Our next question will come from the line of Michael Young from Truist Securities. You may begin.

Michael Young -- Truist Securities -- Analyst

Hey. Good morning. Thanks for taking my question. I apologize I did hop on a bit late, so if I ask anything that's already been covered, feel free to just pass.

But on the deposit side, I wanted to ask just on the international deposits. Those have really stabilized over the past couple of years. Just curious if you could give any additional color on if that's more related to your proactive calling efforts on those customers, stability in Venezuela, interest rates. Kind of what are the factors that are driving that? And what should we kind of expect going forward?

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yeah. Michael, good question. We attribute the vast majority of it to the improved utility of those accounts. When we introduced -- these accounts become obviously increased functionality, the ability to pay in dollars.

And so I think that's probably the single biggest factor in stabilizing. And then clearly, there continues to be some growth that happens in new customers over time, right? And I think you can see we've got some diversification coming from other international sources other than Venezuela.

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Yeah. We actually added, Michael -- we added a new -- it's not new. We have a couple of quarters that we have been publishing Exhibit 8 on our earnings release that has the contribution of other countries. And year over year, you can see that that component actually added almost 70, $75 million in other countries, which is a strategy that we have been deploying in 2021 due to specific teams that were hired in Texas that are bringing over deposits from other Latin American jurisdictions.

Michael Young -- Truist Securities -- Analyst

OK. That's really helpful. And Jerry, I think you kind of started to touch on this a bit, but I would love to just get sort of higher-level thoughts on as you achieve sort of the goals that you've laid out in this sort of more quick sprint to get there with a lot of work, a lot of heavy lifting on everyone's part to get there. On the heels of that, there's kind of this need probably to continue to reinvest for growth.

So should we expect sort of things to kind of stabilize for a period of time until sort of that revenue growth really kicks in? So should we kind of expect performance to kind of stabilize or flatline a little bit more or less for a year or two following kind of the achievement of the goals?

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yeah. No, I would expect to be reporting every quarter where we've been opportunistic to continue to add, Michael. I think we've done the majority of hiring that we've talked about. We have some RMs to add in Texas and in Tampa, as we noted on the call.

But I would tell you that I think in terms of if we can get positive operating leverage from an action, we're going to do it because the focus for the organization at this stage, again, we've got a lot of heavy lifting to do this year as it relates to the continued -- continuous improvement efforts. We talked about the transition through some of the applications as part of this FIS initiative, etc.. But at the same point in time, it's about growing the company. And I think our view right now is that we're really well-positioned to do that.

I think that was part of what's been demonstrated in the fourth quarter, overcoming the heavy level of prepayment activity that took place. And I think we feel good about the size of our pipeline and the ability of our people to execute. So I would tell you, I think our trajectory is to be one as a growth model as part of, yes, there's still some transformation efforts to take place during the course of this year. I called it sort of there's certain pockets in the company.

We just hadn't -- as with all the activity we did in 2021, we haven't really had a chance to do a few of the other areas. But our intent is to do that quickly and really be focused on growth and driving as much organic growth as we possibly can to add to that.

Michael Young -- Truist Securities -- Analyst

OK. And then just the last one for me maybe on capital kind of allocation and decisioning. The stock's up at almost 1.6 times tangible book value now. You've done a lot of sort of the capital unlocking actions maybe with the balance sheet in various different places.

So should we really think about, going forward, it's really just capital generation to support organic growth, and then maybe dividend would be a priority over buyback now? Or how do you kind of think about that at this point?

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Yeah. Look, I think it's safe to say our intent is to be consistent with the dividend. I think we've established what people could assume is trying to hit at least a 1% yield. And then I think if you look at where we are with the depth of capital that we have, clearly, we have the capacity to be able to return to shareholders.

Michael, my comments on the call were we're going to continue to be opportunistic on the stock. I think that's one of the things you have to be as it relates to share buyback. But to your point, we're getting to a valuation where it's not as simple as it was not that long ago. But our intent is we still have about a little over 20 million or so of capacity left -- our intent is to continue to use it and be opportunistic where we can.

Michael Young -- Truist Securities -- Analyst

OK. Thank you so much. Appreciate it.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Sure. Have a good one.

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

I'm not showing any further questions in the queue. I'll turn the call over to Jerry for any closing remarks.

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Sure. Thank you. Thank you, everyone, for joining us today. We greatly appreciate your interest in our company.

I think you can see we are very excited about the progress that we've made throughout 2021 for becoming a higher-performing bank. And again, to reiterate, we know we must remain focused and continue to execute on our strategy to achieve the even stronger performance that we want in 2022. So have a great day, and thank you again for your continued support and your interest in Amerant.

Operator

[Operator signoff]

Duration: 69 minutes

Call participants:

Laura Rossi -- Head of Investor Relations

Jerry Plush -- Vice-Chairman, President, and Chief Executive Officer

Carlos Iafigliola -- Executive Vice President and Chief Financial Officer

Michael Rose -- Raymond James -- Analyst

Stephen Scouten -- Piper Sandler -- Analyst

Brody Preston -- Stephens Inc. -- Analyst

Michael Young -- Truist Securities -- Analyst

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