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Amerant Bancorp (AMTB)
Q3Â 2019 Earnings Call
Oct 29, 2019, 9:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, ladies and gentlemen, and welcome to the Amerant Bancorp conference call. [Operator Instructions] I would now like to turn the conference over to your host, Ms. Laura Rossi, Investor Relations Officer. Please go ahead.
Laura Rossi -- Head of Investor Relations
Thank you, operator. Good morning to everyone on the call and thank you for joining us to review Amerant Bancorp's third quarter results. With me this morning are Millar Wilson, Vice Chairman and Chief Executive Officer; Al Peraza, Co-President and Chief Financial Officer and Miguel Palacios, Executive Vice President and Chief Business Officer. Before we begin, note that the company's press release comments made on today's call and responses to your questions contain forward-looking statements.
The company'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 press release.
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 31, 2018, as well as well as to subsequent filings with the SEC, which you can access these filings on the SEC's website.
Please note that 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 expectation. You should 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.
Please refer to refer to appendix One of the Company's earnings presentation for a reconciliation of its non-GAAP financial measure to its most comparable GAAP financial measure. I will now turn the call over to Mr. Wilson.
Millar Wilson -- Vice-Chairman and Chief Executive Officer, Director
Good morning and thank you for joining Amerant's Third Quarter 2019 Earnings Call. Today we will discuss Amerant's results for the first 9 months of the year and provide progress updates on some of the initiatives we have outlined previously. We will finish by giving some color on what we expect for the last quarter of 2019. I will begin with our third quarter 2019 highlights and then I will review our financial performance in greater detail. After our prepared remarks. Al, Miguel and I will address any questions.
Starting on slide 3 and slide 4, we have a summary of our performance for the quarter. In the first 9 months of the year. Amerant continued to drive forward our relationship focused strategy to create value for shareholders with net income growth of 20.6% and return on assets and return on equity, both up in the first 9 months of 2019 compared to the prior year. As a reminder, our strategy centers on prioritizing relationship driven and lower risk domestic loans while maintaining asset quality and increasing our domestic funding from core deposits.
Over the last few quarters, we have also rolled out our restructuring efforts, which include rebranding and seeking efficiencies that allow us to reduce the size of our workforce. In the third quarter we made solid progress on our strategy. Notably, our Texas and New York loans increased year-over-year and we completed our strategic run off of Foreign Financial Institution or FI loans and the exit from non-relationship shared national credits or snicks.
Also, we executed our first commercial real estate CRE loan syndication as lead agent this quarter and are excited about the opportunity this creates to service larger clients.
Additionally, we recently opened two banking centers in our core South Florida markets. One in Davie and the other in Miami Lakes. This strengthens our footprint in Broward County, which has always been a strategic goal of ours and also complements our presence in Miami-Dade County.
These new branches of the future, as we call them, will enable Amerant to continue to provide its growing customers quality banking products and services that meet their needs. Also of note, this quarter, Amerant celebrated its 40th anniversary. I couldn't be prouder of the strong independent community bank that our team has worked so hard to build.
Moving to slide 4, our net income for the quarter was up 3.3% over the same quarter last year. On an adjusted basis, excluding the restructuring and rebranding costs incurred in the most recent quarter, the improvement over the same quarter last year was 8%. Our return on assets was 0.60% or 0.65% on an adjusted basis. And our earnings per share was $0.28 per share or $0.30 on an adjusted basis, in line with market expectations.
I will explain the non-GAAP adjustments and provide more details on the results shortly Our credit and asset quality remain strong this quarter, leading to a release from the allowance for loan losses of $1.5 million, primarily due to improving quantitative factors in our CRE and domestic commercial loan portfolios. Nonperforming assets as a percentage of total assets increased by 7 basis points from the third quarter of 2018.
And now I will turn the call over to Al, who will go over the quarter in more detail.
Alberto Peraza -- Chief Financial Officer
Thank you. Millar. Good morning, everyone. Before we move on to slide 5, I would like to start by discussing the highlights in our balance sheet this quarter. On the asset side, total loans this quarter decreased 6.6% primarily driven by the completion of the strategic run off of foreign FI and the non-relationship SNC loans. This resulted in a total asset decline of 6.8%. As far as our funding, our domestic customer deposits, that is excluding brokered CDs, grew year-over-year primarily in commercial relationship accounts. However, total domestic deposits declined slightly due to the $77 million decrease in brokered CDs.
International deposits declined 40.6% year-over-year as living conditions of Venezuela continue to be challenging and increasingly goods and services are acquired with dollars.
Our stockholders' equity increased by $98 million or 30.5% compared to the third quarter of 2018. Net income contributed to $52 million of this increase with the balance attributed to comprehensive income primarily stemming from higher market valuations in our available for sale investment portfolio.
Moving on to slide 5. I'd like to review our investment portfolio. Our third quarter investment securities balance decreased slightly to $1.6 billion from $1.7 billion at the end of the second quarter and from $1.8 billion, the same period last year or 9%.
While keeping a healthy liquidity position, we continue to actively manage our investment portfolio as a source of liquidity to support the international deposit runoff. An additional source of funding came from the run-off of the non-relationship SNCs and foreign FI loans.
The decrease in the investment portfolio was primarily accomplished by the sale of municipal and corporate securities, as well as high levels of prepayments. This quarter we continue to decrease our floating rate investment securities as interest rates are expected to continue to decline. Floating rate investments comprised approximately 15% of our investment portfolio at the end of September 2019 down from almost 25% in the year ago quarter. Lower interest rates also led higher prepayment speeds in the mortgage securities portfolio, driving down the effective duration of the portfolio to 2.6 years from 3.2 years. We continue to sell municipal bonds due to the lower associated tax benefits and to purchase securities with prepayment protection.
Moving on to slide 6, we can see some of the movements and drivers of our loan portfolio previously mentioned. In the third quarter, loans decreased $406 million or 6.6% year-over-year to close at almost $5.8 billion.
We experienced year-over-year growth in the Texas and New York markets of $72 million and $46 million respectively. The growth was mainly due to a $103 million and $115 million increase in CRE and/or owner-occupied loans respectively. This growth was offset by the continued strategic exit from non-relationship SNCs and foreign FI loans.
Since September 30, 2018, we have reduced these loans by $415 million and $290 million respectively. To replace these foreign FI and non-relationship SNC loans, we continue to focus on growing our domestic relationship loans. Amerant's domestic loans, excluding the foreign FI and non-relationship SNCs, grew 6.5% over the last 12 months.
Specifically, commercial real estate, single-family residential and owner-occupied loans saw year-over-year growth of 3.4%, 11.2% and 16.3% respectively.
Total loan production from core relationship businesses this quarter was approximately $240 million. During the first 9 months of 2019, production reached approximately $943 million compared to approximately $764 million during the same period last year, evidencing our strategic transformation efforts into core relationships.
Our CRE and C&I segments continue to dominate production across our markets and Florida continues to lead followed by Texas and New York.
Higher yielding, lower-risk domestic loans now comprise 96% of Amerant's total loan portfolio in line with our broader strategy to prioritize profitability from our core relationships.
Moving on to slide 7, we continue to experience strong credit quality and the company was able to release $1.5 million from its allowance for loan losses this quarter. This release was largely driven by a lower ending loan balance this quarter as well as continued improvements in the quantitative factors of our commercial real estate and domestic commercial loan portfolios and lower reserve requirements on credit cards, due to better than anticipated repayments as we phase out our previous to prior nonperforming assets increased $3.1 million year-over-year in the latest quarter and totaled $32.8 million at September 30 of this year. Nonperforming assets to total assets were 42 basis points, up from 35 basis points at September 30 last year.
This increase is mostly due to the $12 million loan relationship with a South Florida customer whose sales in Puerto Rico have now recovered from the impact of hurricanes and which were placed in non-accrual in the previous quarter.
Additionally, special mentioned loans increased by $13 million during the quarter, primarily due to a $10 million condo construction loan in New York experiencing a longer projected sellout period. This project, which has been completed, has a very low loan-to-value and is a relationship SNC loan with a Tier 1 sponsor.
Turning to slide 8, you can see that our loan yield has decreased slightly this quarter compared to the second quarter driven by lower average yields in the commercial loan portfolio. Loan yields were still up 13 basis points compared to third quarter last year primarily due to improved loan mix and generally higher market rates on production during the first half of this year.
Our investment securities yield declined by 12 basis points from the previous quarter as a result of increased paydowns in the SBA portfolio and repricing of floating investment securities at lower rates. Year-over-year the yield of the investment portfolio is almost flat.
Looking at slide 9, I want to provide some color around Amerant's wholesale funding strategies, particularly in light of the current rates down environment. Over the past few years, we have modified our wholesale funding in an effort to decrease our NIM sensitivity to declining interest rates. We replaced maturing advances with longer-term fixed rate advances with callable options from the Federal Home Loan Bank taking advantage of the yield curve inversion. Additionally, to reduce our funding cost, we entered into interest rate swaps on our variable rate junior subordinated debentures. We will continue to utilize wholesale funding as needed with advantageous durations. We're using structures to bring down our funding costs.
Moving on to slide 10, total deposits at the end of this quarter were $5.7 billion, down 8% compared to the end of the third quarter of 2018.
This year-over-year decline was driven by international core deposits, which dropped 4% and 14.6% respectively compared to the prior quarter and one year ago. As political and economic conditions in Venezuela remain difficult and the country's economy becomes increasingly dollarized, many of our Venezuelan resident customers must withdraw the US dollar deposits to fund the expenses. Our annualized international deposit runoff rate was approximately 16% this quarter. We expect this runoff to continue and as we have commented previously, we are working hard to grow other low cost funding opportunities through improved core domestic deposit products and better delivery channels.
This quarter, to support these efforts, the Bank implemented rewards programs to drive core deposit growth. To improve our customers experience we also streamlined our online account opening process. Competitive online offerings are key to achieving our funding goals evidenced by our online CD balances having more than doubled compared to the end of the third quarter of last year.
In August, the US imposed additional sanctions on Venezuela, which prompted Amerant to block the accounts of persons who currently work in any capacity for the Venezuelan Government or its political subdivisions or agencies. These sanctions affected a small number of customers.
We believe that one of the key elements to mitigating our international deposits decline is to grow Amerant's customers share wallet and the number of domestic relationship accounts.
Domestic deposits have higher costs than international deposits, but they also have higher growth potential and present better cross-selling opportunities for Amerant's other products and services. We are delivering on our strategic goal to cross-selling deposit products to our domestic commercial borrowers, resulting in a 21% growth in these deposits so far this year.
At the end of this quarter, 53% of our deposits are domestic, up from 49% a year ago and our cost of deposits, as expected, has increased 28 basis points year-over-year to 140 due to this shift.
Compared to the second quarter of 2019, the cost of our domestic deposits began to decrease; however, the total cost of interest-bearing deposits increased 4 basis points primarily due to the replacement of the less expensive international deposits with domestic deposits.
Turning to our P&L items on slide 11, third quarter 2019 net interest income was $52.6 million, down 5.5% compared to the third quarter of 2018. This decrease was primarily due to the reduction in the loan portfolio from the strategic run off of foreign FI and non-relationship SNCs and the decline in the average balance of investment securities, which help partially fund the international deposit runoff.
Additionally, both the higher cost of time deposits, which up to this quarter were repricing at higher levels and previously carried and the replacement of the less expensive international deposits with domestic deposits contributed to a higher cost of funds. These factors were partially offset by better yields on the loan portfolio and a lower balance of average interest bearing liabilities. The net interest margin for the third quarter of this year was 2.8%, a decrease of 3 basis points compared to the third quarter of 2018, driven primarily by the higher time deposit costs and the replacement of the international deposits with the domestic deposits. Net interest income for the first 9 months of 2019 was $162 million down slightly compared to the year ago period, mainly due to the aforementioned higher time deposit costs and the shift in deposits. The net interest margin for the first 9 months of 2019 was $289 million, an increase of 15 basis points from the comparable period last year. This improvement was driven by higher average rates and a favorable shift in loan mix toward higher-yielding domestic relationship-based loans as international loans were run-off.
We're working hard to protect our NIM in a falling interest rate environment. This quarter, we redeemed $25 million of our two most expensive TruPs, which will reduce annual interest expense by $2.6 million, proactively decreased the cost of Amerant's variable rate drops by executing interest rate swaps that took advantage of the yield curve inversion.
We focused on relationship accounts to enhance demand deposit account balances and we took $200 million of Federal Home Loan Bank callable fixed rate advances the decrease our overall cost of wholesale funding.
Now turning to slide 12, non-interest income of $13.8 million was up nearly 7% from the prior year quarter. Net interest income in the third quarter included $1.3 million from derivative contracts sold to borrowing customers and $900,000 net gain on the sale of approximately 24 million of municipal bonds and 12 million of floating rate corporate securities.
These increases were partially offset by a 12% year-over-year decline in brokerage fees driven by lower fees on foreign customers trading of Venezuelan securities restricted by US sanctions.
Amerant also saw lower fee income this quarter due to the ongoing phaseout of operational support services provided to our former parent and its affiliates, as well as lower wire transfer activity and card fees.
For the first 9 months of this year, non-interest income decreased almost 2% to $41 million compared to the year ago period, driven largely by the aforementioned factors.
Non-interest income in this period included $2.7 million of fees from the road of transactions, a $1.9 million gain on the sale of municipal in floating rate securities and $600,000 gain on the early termination of home Loan Bank advances earlier this year. Amerant's total assets under management and custody increased to $1.71 billion in the third quarter, up from $1.69 billion at the end of the year ago quarter due primarily to net new assets.
Moving on to slide 13, third quarter, non-interest expense was $52.7 million, a 1.3% increase over the third quarter of last year. Third quarter 2019, non-interest expense included $800,000 of costs associated with rebranding to Amerant. $500,000 of severance costs associated with workforce reductions and $300,000 related to the early redemption of the two most expensive TruPs.
Partially offsetting these increases this quarter was an FDIC assessment credit as well as lower salaries and employee benefits. Non-interest expense for the 9 quarters ended September 30, 2019 decreased 1.7% to $157 million compared to the same period in 2018.
This decline was mainly driven by lower professional and other fees related to the spin-off in 2018, lower salaries and employee benefit cost due to staff reductions lower compensation associated with long-term cash incentive programs and lower FDIC assessments. The 9 months ended September 30, included $4.9 million of restructuring costs , including rebranding and staff reduction expenses in connection with our transformation efforts and $4.4 million of stock-based compensation expense.
All three quarters of 2019 included amortization costs of the restricted stock granted to select management and staff largely in 2018 in connection with our IPO. The total amortization for 2019 is approximately $6 million or 1.5 per quarter, declining to an estimated annual expense of $2.7 million in 2020 and $1.1 million in 2021.
We remain focused on completing our transformation efforts, which include our rebranding and optimizing our workforce. These restructuring expenses totaled $4.9 million in the first 9 months of this year and we expect to incur additional related expenses in the last quarter of this year.
On slide 14, we see the third quarter non-interest expense adjusted for the 2018 spin-off and 2019 transformation costs was $51.5 million, slightly down compared to the third quarter of last year. Adjusted non-interest expense was $152.7 million for the first 9 months of this year, down almost 1% compared to the year-ago period. Not again The first three quarters of this year include the 1.5 quarterly IPO grant amortization. We also incurred $300,000 in TruPs termination expense this quarter.
On slide 15, we see that our floating-rate loans and loans maturing in less than one year continue to keep Amerant asset sensitive. We have been taking actions to reduce our sensitivity to interest rate declines including our strategic exit from foreign FI and non-relationship SNC loans and a renewed focus on domestic commercial relationship deposits.
That said, this quarter the duration of our investment portfolio decreased to 2.6 years, driven by projected faster prepayments in mortgage securities and the sales amenities. Please note that our model results have not changed materially since last quarter and we continue to believe that an instantaneous 25 basis point decline in interest rates on a static balance sheet will reduce our net interest income by approximately $4 million or 2% over the following one year period.
Now I will hand it over back to Millar to conclude our prepared remarks.
Millar Wilson -- Vice-Chairman and Chief Executive Officer, Director
Thank you Al. Moving to our last slide, our goals remain largely unchanged and we continue to focus on our relationship-based strategy to increase core deposits, higher return lower-risk domestic loans and increasing our operational efficiency and the quality of our customer service.
While this quarter was not without its challenges, I am proud of the progress we made on our strategy including the opening of our two new banking centers in our core South Florida market.
Our strategy is working and driving value generation for our shareholders every day. With that we will be happy to take any questions. Operator, please open the line for Q&A.
Questions and Answers:
Operator
[Operator Instructions] Your first question from the line of Michael Rose with Raymond James.
Michael Rose -- Raymond James -- Analyst
Hey, good morning everyone. How are you.
Alberto Peraza -- Chief Financial Officer
Good morning.
Millar Wilson -- Vice-Chairman and Chief Executive Officer, Director
Good morning Michael.
Michael Rose -- Raymond James -- Analyst
Maybe we can just start on the deposit side, and really my question is getting back to the margin, so it's good to see the domestic cost seemed to have leveled off at least on some of the higher cost stuff. Do you think we're at a point now for the overall portfolio where deposit costs have peaked? Obviously, we're going to have some pressures on the loan and the asset side as we move forward and maybe if you can just comment on your thoughts there and then how we should think about the margin just pose [Phonetic] with some of the assets, some of the steps that you took to redeem in the TruPs and other things to reduce cost. Thanks.
Alberto Peraza -- Chief Financial Officer
Yes, sure, Michael. Good morning. Certainly, as we said, the, the cost of our domestic deposits have started -- we reset inflection point and they have started to decrease. To a certain extent, that's just the dynamics of our portfolio as deposit that had higher rates are now repricing in a declining rate environment.
We've also been doing a lot of intelligent pricing, we've been doing a lot of work in terms of not renewing our domestic deposits straight off the bat that our rate sheet but rather using some intelligence to shave some basis points off of that anywhere from 10, 15, 20 basis points off of that.
And increasingly, we're retaining a lot more of those deposits. Obviously, they have a very high -- there is always a very high acquisition cost. So the more that we can retain of those repricing deposits the better. But the big headwind that we're experiencing is the continued decline of our international deposits.
Our international deposits are very cheap in terms of the interest cost. Last year we were experiencing a 9% annual decline rate. So far this year it's been pretty steady in the mid-teens and probably for the next quarter, we would anticipate a similar decline in our -- or annualized decline in our international deposits.
And we would hope to have that start to taper off sometime next year because we are also doing a lot of -- we're working a lot of efforts to get a greater share of wallet from those customers, particularly our higher net worth international customers, which are not declining at that annualized clip of 16%.
What we find and it's not dissimilar that we were experiencing last year is that the decline comes more from our retail type of customer, the smaller balances that are essentially living off their funds. But we feel there's a lot more potential from those. So we expect that to continue to put a lot of pressure on our NIM, at least will have relief on the cost of the domestic, but the international will continue to put pressure on the overall deposit cost in the near future.
Michael Rose -- Raymond James -- Analyst
Okay, that's helpful. And then maybe just thinking about deposits now that the non-relationship SNCs and the foreign runoff of loans is essentially done. Do you think we've hit an inflection point in the loan portfolio obviously understanding that the domestic deposits sticky [Phonetic] balance sheet growth, but should we begin to start to see the balance sheet growth start to accelerate here in the next couple of quarters or at least through an inflection point. Thanks.
Miguel Palacios -- Executive Vice-President
Hi, Michael. It's Miguel. We have seen on the production side, we are on track with what we have done previous year. I think that we are 20% above in production. And nonetheless we have seen also our real estate portfolio, which is pretty good has receive a lot of pay off. We are at the point that production of 2016 and 2017 on construction loans and some reposition we're starting to see payoff.
I mentioned that in the previous call for this quarter, we believe we will see some of those still on the fourth quarter, but we have a strong pipeline, we believe we're going to continue the same production level of previous year. And we also have production of discount receivables that we might bring into the production side and we hope that if we can contain those payoffs that we will see additional growth for the last quarter of the year.
Millar Wilson -- Vice-Chairman and Chief Executive Officer, Director
As we mentioned in the remarks, Michael, we also are seeing quite a pickup in our commercial deposit generation.
Miguel Palacios -- Executive Vice-President
Yes, that is important now because we have seen a 25%, 24% increase on commercial deposits, which is mainly we are starting to see the quick wins of the strategy, the conversion of lenders to RM has starting to improve our the [Indecipherable] on our commercial as we mentioned in the past and we are also starting to deepen our focus in the new work because we didn't try before.
And when we talk about the policy, we are starting to see on the retail side for the first time. If you take out the run-off from the expensive time deposits and all the DDAs that went out of those deposits, we saw for the first time a positive increase on quarter deposits on retail for the month of September.
It has low process with the new opening of these two branches is going to help our core deposit growth and even though is not easy to see because of the attrition of international, we believe that our transformation on our new initiative is going to payback and not to mention that we also, including our new initiative to at least a slowdown the attrition or decay of the international deposits. We are working on different products and on those product we have a peer to peer product that we're testing now and we've seen this positive net inflows regarding that particular site.
Michael Rose -- Raymond James -- Analyst
So, that's very helpful color. And maybe just one more for me. Just switching gears a little bit to non-interest expenses. So I think Al last quarter you guys talked about back half of the year expenses being similar to the second quarter on an adjusted basis, even if I take out the two items called out this quarter and add back the FDIC benefit that you had realized this quarter that run rate was a little bit higher.
So I wanted to see if there were any other costs in any of the line items that may not recur in future quarters and maybe how we should think about the fourth quarter run rate. Thanks.
Alberto Peraza -- Chief Financial Officer
Yeah, well, we did have -- I'm not sure if you backed out or would back out, we did have but $300,000 also in some of the repayment costs on the 2 TruPs that we redeemed so that's something else that's affecting the third quarter. Remember, we always said it would be rather bumpy, especially the first year in our pivot but you have to keep in mind that we would expect a significant reduction starting next year in our operating expenses, especially as a result of that IPO amortization that's going to go down by the $3.3 million.
So right off the bat, that's going to bring us probably to the 50 or hopefully somewhere under the 50 quarterly mark as far as our run rate and we -- again, we are only three quarters into this pivot and a lot of the reductions that we've experienced in our staffing have been from restructuring, emerging areas, some efficiencies. But we would expect in the coming quarters as we continue to streamlining our back office or operations. That there just naturally going to be efficiencies that are going to be arising out of that.
So we would expect to probably start the year sort of with a run rate around the 50 or slightly under the 50. It's pretty clear based on what we've done in the third quarter and if we back out some of the unusual items for the third quarter and then we need to continue to improve upon that.
Michael Rose -- Raymond James -- Analyst
All right, thanks for taking my questions.
Alberto Peraza -- Chief Financial Officer
Thank you.
Operator
Your next question line of Brady Gailey with KBW.
Brady Gailey -- KBW -- Analyst
Hey, good morning guys.
Alberto Peraza -- Chief Financial Officer
Good morning Brady. How are you?
Brady Gailey -- KBW -- Analyst
Maybe one more on the expense side, is there any additional credit left from the FDIC assessment credit or was all of that realized in the third quarter.
Alberto Peraza -- Chief Financial Officer
There is more. So if the BIF says, at the target level we probably expect another quarter or two of credit, but it's got to remain there, and I guess with the benign market, I guess I don't see any bank failure -- evident bank failures out there compressing the BIF.
Brady Gailey -- KBW -- Analyst
There were two last week.
Alberto Peraza -- Chief Financial Officer
There were two last week? Were they small?
Brady Gailey -- KBW -- Analyst
Yes, small bank.
Alberto Peraza -- Chief Financial Officer
Small bank. So probably another quarter or two we hope.
Brady Gailey -- KBW -- Analyst
Okay. And then one more on loan growth.
Millar Wilson -- Vice-Chairman and Chief Executive Officer, Director
If I could just -- we talked about the run rate, but I think we also need to be aware that we do look to hiring teams where there is an opportunistic event for us and that may increase a little of these expenses. Those are things we're looking at. We haven't got anything that we could tell you just now, "Hey! We are about to hire a team here or a team there," but those are things that we are actively looking for.
Brady Gailey -- KBW -- Analyst
Alright. And then back to loan growth, as the non-relationship SNCs are gone and the Foreign Institution loans are gone, do you think that on a net basis, you should be able to achieve kind of a mid-single digit level loan growth from here or could it be higher or lower than that?
Miguel Palacios -- Executive Vice-President
I think that should be our target that we are heading and that's what it has been during these years, if you remove the effect of those the SNC and FI.
Alberto Peraza -- Chief Financial Officer
Yes, it was about -- as we mentioned it was about 6.5 I think in the last annualized increase and that's excluding anything that we may do on the side as far as receivable financing or whatever. What we're talking about mid-sixs from core lending relationships.
Miguel Palacios -- Executive Vice-President
There can always be some -- like always -- like it happened in the previous quarter. Normally you don't see in C&I pay off and we got around $60 million out of the blue of our two companies that were sold. Those are things that we don't control. But, definitely there is a lot of PVC on the CRE portfolio, which for us is good, it demonstrate the quality of our portfolio.
We do have strong expected payoff -- announced payoff coming, which are high amounts where we continue to have good production during the rest of the year.
Brady Gailey -- KBW -- Analyst
Alright, so the non-relationship SNCs are gone. What's the balance of relationship SNCs that are left at Amerant.
Millar Wilson -- Vice-Chairman and Chief Executive Officer, Director
Give us a second.
Unidentified Participant
What was that again? 560?
Miguel Palacios -- Executive Vice-President
$560 million, that include club bills and when we say those are relationship is because we also have the passes over other our transaction with them.
Brady Gailey -- KBW -- Analyst
Okay, so $560 million of SNCs and club deals. Alight then, my last question is just I know when we did the IPO, you guys were talking about, hitting a 1% ROA within the next 6 to 8 quarters, you are almost a year past that, your ROA year-to-date is running a little under 70 basis points. What's the update on when you guys think you can hit that one ROA target?
Alberto Peraza -- Chief Financial Officer
Yes, it's well, we're really only three quarters into kind of into this exercise and into the pivot and when we said out the 1%. We said that with all the drivers, the asset reallocation, the full TruPs, additional fee income etc., we would probably be roughly in the 90s. We did ranges, we would be in the '90s and at that point, we said, well, if there is any rate increases that would bump as over it from the '90s, how we -- the reality has been totally the opposite as opposed to having any rate increases or not even having rate be flat, we've had significant rate declines, both in Fed funds and in LIBOR, especially rate declines in LIBOR.
If rates would have remain flattish, we probably would have been somewhere in the '80s but that's because we also had some headwinds. We mentioned some of them, but we only we've only prepaid thus far two of the most expensive TruPs. We have the third to go.
We really exited, it;s both a good thing, but it had a little bit of an effect on the NIM. We exited the FI and the SNCs probably faster than we had anticipated. So as a result of that, we're significantly faster than we had anticipated. So as a result of that we also did some receivable financing, we did other things that were probably not as high yielding, but we really wanted to get out of those and not concentrate anymore on those sectors.
The loss of the trading commissions on the Venezuelan bonds, it was a significant headwind for us as well and more importantly the decay, the higher run off on the international deposits, we were looking at 9 -- we were look probably at nine this year and we're in the mid-teens. So, those were really significant headwinds, but had we had a flat yield curve, we probably would have been probably in the '80s or probably in the low '80s, but we still have -- we delivered on a lot of the things in a lot of the drivers that we set out to do. I mean the staffing reduction has been significant. We haven't yet seen the full effect of it in the run rate and we are doing exceptionally well in terms of domestic fee income, especially from derivatives being sold to borrowing customers. That was an increase of $1.7 million year-on-year. Year-to-date, we've done $2.7 million as opposed to $1 million year-to-date last year.
So we had some winds and we've had some headwinds as well. So in our terms of reaching the 1%, we're not at this point prepared to say when we would reach that 1%, but we still have levers that we're working on to try to get to that number. Notwithstanding that, what's going to happen later this week with rates or what continues to happen is going to be a significant, -- I think it's a moving target. I think everybody has a moving target out there, everybody should be affected similarly by the rate decline.
Brady Gailey -- KBW -- Analyst
All right, great, thanks for the color, guys.
Operator
[Operator Instructions]Your next question on line of Michael Young with SunTrust.
Michael Masters Young -- SunTrust Robinson Humphrey, Inc. -- Anayst
Hi, good morning.
Millar Wilson -- Vice-Chairman and Chief Executive Officer, Director
Good morning, Michael.
Michael Masters Young -- SunTrust Robinson Humphrey, Inc. -- Anayst
Hi, I wanted to start just on the foreign deposits again. Have you guys done any sort of analysis, I mean it sounds like you've got a pretty good view of the different accounts that are moving as the granular ones that are coming down, but have you done an analysis, maybe the estimate when this whole portfolio might sort of bottom-out or really decay, would kind of decelerate maybe?
Alberto Peraza -- Chief Financial Officer
Minus any of the efforts that we said that we're working on the greater share of wall and things of that nature. We feel that there is probably a bottom, we've, I think, said that before, in the worst case, in our opinion, I should say, would be essentially that we would still probably retain a good deal of our higher net worth customers, those not decaying at any significant pace.
So those customers roughly have $600 million to $700 million in deposits. We also have anywhere it fluctuate significantly, but let's say mid-200s in commercial -- 400 actually. I'm corrected $400 million in international commercial deposits. That also, on the bright side, if Venezuela continues to dollarize, we are starting to see a little bit of economic activity in our international deposit customers. So we see a little bit more generation of wealth out there, it's not significant yet, but it continues. So between those two, there is sort of a ball of about $1 billion in international deposits, which we would not expect to really go any further than that amount. But again, I think, in our opinion, that's kind of the worst-case scenario in terms of how low could this thing go.
Michael Masters Young -- SunTrust Robinson Humphrey, Inc. -- Anayst
Okay. So maybe the pace of decline kind of decelerate as we approach that billion level.
Alberto Peraza -- Chief Financial Officer
Yes, we will just as a result of the math, as the decline continues, the amount may be similar or may hopefully decline, but the percent of the remaining balance will also be greater. So we'll have to be careful that we explained that noise, because the rate, as you know, if we continue to have the same decline from the retail type customers, that it could become a larger and larger percentage of the remaining balance.
Michael Masters Young -- SunTrust Robinson Humphrey, Inc. -- Anayst
Sure. Yes, that makes sense. And then, can you maybe just talk about what kind of the new add-on rates are on deposits, sounds like you guys are having some success in the commercial area, but maybe just help us understand kind of the different buckets that you're getting deposits from and what the kind of costs are at this point so we know what the spread is between the foreign deposits and the new add-on deposit rates.
Miguel Palacios -- Executive Vice-President
Yes, when we talk about foreign deposits, that has been showing more quick winds, is that commercial. Normally, we see that from our commercial companies revenues between $5 million to $25 million and also in our middle market segment, we have seen a significant improvement on the partnering gathering and also in lower a lowering interest bearing accounts.
We believe that we just started the process even though we improved by 20% to 25% on those segments. We foresee to continue that improvement during next year. And also as the run-off on time deposits on the retail side touched bottom which we believe we are getting close to that and as such we are starting to see growth on core deposits with the new branch opening we believe that we should start seeing an improvement on retail too.
Michael Masters Young -- SunTrust Robinson Humphrey, Inc. -- Anayst
Is there
Alberto Peraza -- Chief Financial Officer
way to think about the blended cost of kind of all of that coming on, I mean even in just broad terms.
Michael Masters Young -- SunTrust Robinson Humphrey, Inc. -- Anayst
Just between the retail CDs and the commercial deposits, I'm just trying to get a understanding of what the differential was between the cost of the foreign deposits and kind of a new deposits?
Miguel Palacios -- Executive Vice-President
The marginal cost between the retail and the commercial could be between 1.5% and 2%.
Millar Wilson -- Vice-Chairman and Chief Executive Officer, Director
Our blended sort of our blended deposit cost in Q3 is roughly around 190s. With rate decline, repricing of the CDs and as we do better on terms of core deposits, in terms of commercial deposits and then the blended rate on our International is very similar to what it was say a year ago, is roughly in the mid '40s. However, the one that is running off, which is mostly the retail, the lower balance accounts are probably under 10 basis points.
So that's why you have kind of that significant effect that we mentioned before, where other banks deposit costs are starting to decline, our domestic are declining and will be declining, but we have that headwind of replacing deposits anywhere from a few bps to 40 bps with money in the high-ones.
Michael Masters Young -- SunTrust Robinson Humphrey, Inc. -- Anayst
Okay, that's helpful and then maybe just one last one on switching gears to expenses, you guys had originally earmarked, I think it was around $7 million to $10 million of technology expenses that you plan to make as part of kind of repositioning of the bank. Can you give us a sense of how much of that maybe is already in the run rate or how much of that still yet to come ?
Millar Wilson -- Vice-Chairman and Chief Executive Officer, Director
We have very little of that. It was more I think it was more like $10 million to $15 million that we've said that we would be spending. We've probably spent a few million of that. We've perhaps consulting some certain key areas as a result of the efforts to streamline areas, add more technology, but a very little of that is cooked into the numbers thus far.
And it's important to note that despite the fact that we have yet to make any of those investments, we were able to achieve that significant reduction in our workforce and I feel that as again we mentioned before, with additional technology, additional streamlining and the the efforts to become more of a digital bank in the coming years, that we would be able to achieve additional efficiencies.
Michael Masters Young -- SunTrust Robinson Humphrey, Inc. -- Anayst
Okay and last one for me, just on the market as a whole, particularly in Miami, are you seeing increased competition there that's making new growth challenging or credit terms being stretched at all that maybe has any more hesitant about new loan origination.
Miguel Palacios -- Executive Vice-President
Well, competition has always been tough in South Florida, particularly in Miami, yes we see a lot of new competitors, we believe that we have a strong knowledge on the market and with all of that we have been able to continue our production levels.
We will continue as I said, seen some CRE payoffs which at the end is part of the business as we try, as Miller mentioned, as we try to bring new talent. We will be able to improve our our production levels on the Broward Palm Beach, which should be our main focus in the next two years. And, but definitely with the new acquisition of community banks and and we will see a lot of pressure on deals know.
Michael Masters Young -- SunTrust Robinson Humphrey, Inc. -- Anayst
Okay, thanks.
Operator
I'm showing no further questions at this time, I would like to turn the conference back to Millar Wilson, CEO.
Millar Wilson -- Vice-Chairman and Chief Executive Officer, Director
Thank you for joining our third quarter conference call Amerant's last 40 years have been filled with numerous successes. But nothing excites me more than our potential in the coming years. Together with the rest of our management team, I'm confident in the strategy that we have in place and look forward to continued progress in the fourth quarter and beyond. Thank you very much for participating in this call. Operator?
Operator
[Operator Closing Remarks]
Duration: 54 minutes
Call participants:
Laura Rossi -- Head of Investor Relations
Millar Wilson -- Vice-Chairman and Chief Executive Officer, Director
Alberto Peraza -- Chief Financial Officer
Miguel Palacios -- Executive Vice-President
Michael Rose -- Raymond James -- Analyst
Brady Gailey -- KBW -- Analyst
Unidentified Participant
Michael Masters Young -- SunTrust Robinson Humphrey, Inc. -- Anayst
