Ladies and gentlemen, thank you for standing by, and welcome to the Ameren't Bancorp 4th Quarter 2019 Earnings Conference Call. At this time, all participant lines are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Laura Rossi, Investor Relations Officer at Amarin. Please go ahead.
Thank you, operator. Good morning to everyone on the call, and thank you for joining us to review Amarin Bancorp's 4th quarter and full year 2019 results. With me this morning are Miller Wilson, Vice Chairman and Chief Executive Officer Al Faraza, 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 ks for the year ended December 31, 2019, as well as to subsequent filings with the SEC. You can access these filings on the SEC's website or through our Investor Relations website. Amarant Bancorp, Inc.
Is referred to herein as the company or Amarant. Please note that Amarant 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. 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 Appendix 1 of the company's earnings presentation for a reconciliation of each non financial measure to its most comparable GAAP financial measure. I will now turn the call over to Mr.
Wilson.
Good morning, and thank you for joining Amarant's 4th quarter and full year 2019 earnings call. Today, we'll discuss Amarant's quarterly and annual results. We will also highlight the progress we've made on our transformation. We will finish by giving some color on what we expect for 2020. I'll begin with our Q4 2019 highlights, and then Al 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 Amarant's 1st full year as a publicly traded company, we executed key elements on our previously outlined strategy, providing value to our shareholders. Net income grew 12 0.0% year over year and ROA and ROE both saw improvements during the year, driven by strong non interest income and successful operational efficiency and expense reduction initiatives. During the year, we reduced 82 full time equivalent positions as a result of our efficiency efforts.
We also prioritized relationship driven and low risk domestic loans, finalized the exit from foreign financial institution loans and non relationship secured national credits, maintained strong asset quality and optimized our funding costs. In the Q4, we saw significant growth in non interest income when compared to the prior quarter. Notably, we realized significant income from derivative sales to our borrowers and a large gain on the sale of vacant land adjacent to our Beacon operations center. On the loan side, our owner occupied and 1 to 4 residential portfolios grew in line with our relationship driven strategy. Demand for residential and small business loans grew in the 4th quarter, resulting from a higher number of applications.
While these only partially offset the prepayments in our CRE loan portfolio, they do point to strong loan demand and the expectation of favorable economic conditions in 2020. On the deposit side, we rolled out several strategies, which we will discuss later, to capture a larger portion of our customers' deposits and provide a quality best in class banking experience for our customers. We also strengthened footprint in South Florida through the opening of 2 new banking centers in the 4th quarter, 1 in Miami Lakes and the other in Boca Raton, totaling 3 new banking centers in 2019. We expect to open 1 more in the Q1 of 2020 in Delray Beach, Florida. These new locations embody Amarant's vision of the banking centers of the future, featuring smaller square footage, enhanced technology and a more focused customer service approach.
Lastly, we embarked on our digital evolution and started taking actions related to the use of technology to support our business strategies. In December 2019, we engaged Salesforce for its customer relationship management system and Ncino for its loan origination solution and started implementation early this month. These two platforms will help us improve and streamline marketing, sales, onboarding and service processes, reduce turnaround times, facilitate collaboration amongst groups and provide access to relevant information to boost relations and improve customer experience. In addition, the implementation of Nxino, in particular, will generate additional savings from platform consolidations. Moving to Slide 4.
Our net income for the quarter was down 6.6 percent over the last quarter over the same quarter last year. On an adjusted basis, the decline over the same quarter last year was 42.8% as the year ago quarter experienced add backs from restructuring and spin off costs, and this year, we had the gain on the sale of land. During this quarter, compared to the same quarter last year, the drivers of decline in net income were lower net interest income due to lower average loan balances at lower rates and higher time deposit costs, lower provision reversal, and this year, we had a gain on the sale of land. Our return on assets was 0.68 percent or 0.57% on an adjusted basis, and our diluted earnings per share was $0.31 per share or $0.26 on an adjusted basis, in line with market expectations. Al will explain the non GAAP adjustments and provide more detail on the results shortly.
Our credit and asset quality remained strong this quarter, leading to a release from the allowance of loan for loan losses of 300,000 dollars The release was mainly due to certain recoveries and releases that compensated the increase of specific reserves. And now I will turn the call over to Al, who will go over the quarter and year performance in more detail.
Thank you, Miller. Good morning, everyone. Before we move on to Slide 5, I would like to touch on the highlights in our balance sheet this quarter. On the asset side, as of December 2019, total loans decreased 3% compared to December 2018, primarily driven by the completion faster than anticipated of our strategic runoff of foreign FI and nonrelationships NIC loans throughout the year. This resulted in a total asset decline of 1.7% for the year.
On the funding side, our domestic customer deposits grew 4% year over year due to an increase as we focused on expanding our deposit gathering outside our natural footprint. We also increased our broker deposits, but expect to decrease our usage in 2020 as our online product gains momentum. Offsetting the domestic growth, our international deposits continued to decline this quarter as our Venezuelan customers continue to draw down their accounts to fund living expenses or purchase homes abroad. Our stockholders' equity increased by $87,000,000 or 11.7 percent compared to 2018, mostly due to the net income and the growth in accumulated other 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 4th quarter investment securities balance increased slightly to $1,700,000,000 from 1,600,000,000 at the end of the Q3 and stayed relatively flat when compared to the same period last year. We continue to actively manage our investment portfolio to ensure adequate liquidity, especially given the decline in foreign deposits. The increase in the investment portfolio during the quarter was primarily driven by strategic purchases oriented to protect our NIM in a declining rate scenario. Along this line, this quarter we continued to decrease our floating rate portfolio, which now comprises approximately 14% of our investment portfolio, down from 23.4% at the end of 2018. The average duration of the portfolio increased from 3.4 years at the end of 2018 to 3.8 years at December 2019 as we added 20 year U.
S. Treasuries and CMOs with prepayment protection to hedge earnings against further interest rate declines. Finally, our adoption of a new accounting standard applicable Slide 6, we can see some of the movements across our loan portfolio. During the year, total loans decreased $176,000,000 or 3%. This decline was primarily due to the completion of our strategic exit from non relationships NICS and foreign FI loans in the 1st 3 quarters of 2019, totaling $325,600,000 from year end 2018.
CRE loans declined $73,000,000 mainly on a high level of prepayments, especially in the 4th quarter. These declines were partially offset by $117,000,000 increase in owner occupied loans. It is important to mention that during the year, our domestic loans excluding the impact of the runoff of non relationship SNCs grew 3.7%, primarily from relationship loan. Compared to the Q3, total loans experienced a slight decline as CRE prepayments exceeded new production. Our residential loan portfolio experienced a higher level of applications in the second half of twenty nineteen, which led to a $12,000,000 increase in the 4th quarter.
In line with our strong commitment to our relationship focused strategy, we estimate our relationship loan production was approximately $1,200,000,000 in 2019, up approximately 14% from last year. Moving on to Slide 7. We continue to experience strong credit quality during the Q4, which drove a release of $300,000 from the allowance for loan losses this quarter. This release was largely driven by a lower loan balance and a commercial loan recovery, partially offset by loan factor adjustments and increase in the specific reserves related to the $11,900,000 impaired relationship I will elaborate on shortly. I want to quickly touch on the phase out of our credit card products, which we discussed briefly last year.
We stopped all charge privileges to existing cardholders, charged off uncollectible balances and are requiring complete repayment of remaining accounts by January 2020. At the end of 2019, the outstanding balance on credit cards totaled $11,100,000 with an allowance of $1,800,000 down from almost $34,000,000 outstanding and an allowance of $5,400,000 at the end of last year. We continue to monitor this balance closely and are reassessing the required reserve amount until the balance is completely repaid. Going forward, our international and domestic customers may still enjoy credit card products through our referral programs with some of the U. S.
Leading card issuers namely First Bank Card and American Express. Non performing assets increased $14,800,000 during the year and totaled $33,000,000 at December 31, 2019. Non performing assets to total assets were 0.41 percent, up from 0.22% at the end of 2018. This increase as mentioned last quarter is primarily due to an $11,900,000 loan relationship with a South Florida wholesale customer affected by the 2017 hurricane and 4 other unrelated loans totaling $6,700,000 placed in non accrual status. Compared to the end of Q3 of 2019 non performing assets to total assets remained flat.
Additionally, special mention loans increased by $13,500,000 during the year primarily due to the same 10,000,000 condo construction relationships SNC loan in New York we discussed last quarter, along with 9 unrelated loans totaling 17,800,000 dollars These were partially offset by $14,700,000 downgraded mainly represented by the food wholesale borrower I just mentioned and the upgrade of a $2,200,000 owner occupied loan previously classified special mention. Turning to Slide 8, You can see that our loan yield has decreased this quarter by 17 basis points compared to the prior quarter and by 27 basis points compared to the Q4 of 2018, primarily due to lower interest rates. Compounding the effect of lower interest rates was a higher rate of prepayments, particularly in our CRE portfolio, partially offset by prepayment penalties. Our investment securities yield declined by 7 basis points from the previous quarter, mainly due to the purchase of $100,000,000 in 20 year U. S.
Treasuries as a hedge for rate declines. The yield on these securities was approximately 60 basis points below the average investment portfolio yield. Year over year, the investment portfolio yield declined 21 basis points, primarily due to the repricing of floating rate instruments and SBAs. In Slide 9, we highlight Amarin's evolving wholesale funding strategy. We continue to take advantage of yield curve opportunities by replacing maturing advances and selective early termination of higher cost FHLB advances at a net cost of $1,400,000 during the year with lower fixed rate advances with callable features.
This resulted in a 40 basis point saving in funding costs in the Q4 or approximately $700,000 We expect to continue to utilize wholesale funding as needed with short durations or optionality in order to further drive down our funding cost. Moving on to Slide 10, total deposits at the end of the year were $5,800,000,000 down 4.6% compared to the close of 2018 and down 1.1% compared to the Q3 of this year. These declines result primarily from lower foreign deposits, which declined by 13.1% during 2019. The 4th quarter annualized foreign deposit runoff rate was 8.6%, down from 16% in the 3rd quarter, as we continue our efforts to gain greater share of wallet from our higher network foreign customers. Foreign deposits have fallen at a 12% compounded annual rate since 2015 as our customers draw on their accounts to fund living expenses and increasingly purchase homes abroad.
As this trend continues, we are intently focused on increasing our core domestic deposits, which despite having a higher cost, present higher growth potential and better cross selling opportunities for our other products and services. Accordingly, much like the rewards program we announced in the Q3, in the Q4, we rolled out new services and offerings that provide a better banking experience for our customers. We started providing access to Zelle, a popular digital payment platform that makes it easier for our personal banking clients to quickly send and receive small sum. We ramped up our efforts to raise online deposits outside our footprint, which has contributed $86,000,000 to our deposit base in 2019 and we expect this to continue to grow in 2020. As a result of our efforts, we closed the year with 54% in domestic deposits, up from 50% at the end of 2018.
As expected, our cost of deposits increased 19 basis points from the same quarter a year ago and 1.39 percent primarily due to this shifting mix. Turning to Slide 11, Q4 2019 net interest income was $51,300,000 down 9.7 percent compared to the Q4 of 2018 due to lower loan volumes resulting from the strategic runoff of the foreign FI and non relationship select loans as well as lower rates on both repricing and new loans. The higher cost of deposits as a result of less expensive foreign deposits being replaced by higher cost domestic deposits, including online and brokered CDs. These were partially offset by the lower cost of our wholesale funding given the early termination of more expensive HLB advances, the utilization of lower fixed rate advances with callable features and cost savings realized via the TRUPS redemptions. The NIM for the quarter was 2.74, a decrease of 21 basis points compared to the Q4 of 2018.
This decrease was due to the increased deposit costs. The low interest rate environment, which also led to higher prepayments on fixed rate loans and heightened competition on C and I loans and the higher prepayments on SBA and CMBS securities in our investment portfolio. The 2.5% decrease in net interest income and the 6 basis point decrease in the NIM we saw in the Q4 compared to the Q3 of this year is attributable to the same low rate environment, which was partially offset by a lower cost of professional funding from the strategies I mentioned and lower deposit costs, especially in relationship money market and tiered products, which costs we continue working to drive down. We continue to take actions to drive up the net interest margin such as optimizing our FHLB funding cost and have redeemed inclusive of today's redemption all of the $52,000,000 of high cost fixed rate trucks that we had. We also entered into interest rate swaps on the remaining floating rate debentures, taking advantage of the yield curve inversion to effectively fix a lower rate for 3 years.
The combined effect of the trucks optimization efforts will produce an annual pre tax interest expense reduction of approximately $5,200,000 Other actions taken include cutting rates on deposits while focusing on growing low cost demand deposits to reduce utilization of broker deposits and more actively requiring rate floors on new loan originations. Net interest income for the full year 2019 was $213,100,000 down 2.7% compared to $219,000,000 in the full year 2018. This decrease was mainly driven by higher deposit costs mostly related to time and money market deposits, partially offset by higher income on interest earning assets due to higher rates in the earlier part of the year and the $2,100,000 reduction in interest expense on our FHLB advances due to the callable structures explained earlier. Importantly, our NIM for the full year 2019 increased 7 basis points to 2.85 percent as a result of higher average rates on our interest earning assets generated in the first half of twenty nineteen and our focus on growing higher yielding domestic relationship based loans. Slide 12 shows that non interest income in the 4th quarter was $16,000,000 up 30 3% year over year and up 15% from the previous quarter.
Several factors drove this improvement, including the 4th quarter's income of $2,500,000 from the sale of derivative contracts to loan customers, a $2,800,000 gain on the sale of the vacant Beacon Land, and finally an approximately $700,000 benefit from the newly adopted accounting standard applicable for marketer Wolfe equity securities. These improvements in the 4th quarter were partially offset by $1,400,000 in net penalties on the early termination of the Federal Home Loan Bank advances during the year as we replaced expensive medium term advances with long term callable structures. Dollars 500,000 lower income from credit card fees as we continued phasing out our legacy credit card products and $500,000 less income from the discontinuation of services provided to the company's former parent and its affiliates. With a combination in the Q4 of 2019 of the previously announced acquisition of the Cayman Bank, the company no longer offers any services to its former parents or its affiliates. Non interest income in 2019 of $57,100,000 was up 6% compared to 2018.
The drivers for the year include an increase of $3,700,000 in derivative contracts sold to borrowers, the 4th quarter sale of the vacant Beacon Land, the $1,900,000 gain on the sale of municipal bonds and floating rate corporate securities from earlier this year, and the recently marketable equity securities value adjustments. Partially offset by the FHLB early retirement penalty, the decline in brokerage fees as a result of lower fixed income trading volume by our customers, lower income from the discontinuation of services to the company's former parents and its affiliates and lower wire transfer and credit card fees. Average assets under management and custody increased $223,600,000 or 14 percent to $1,820,000,000 at year end compared to $1,590,000,000 at the end of 2018, primarily due to market appreciation and the completion of the Cayman Bank purchase. Moving on to Slide 13, 4th quarter non interest expense was $51,700,000 down 5 point 3% year over year and down 1.9% from the 3rd quarter. These decreases were largely the result of lower employee salary and benefit costs as a result of our 2019 workforce streamlining efforts.
Compared to the Q3, marketing expenses were lower contributing to the decrease in the non interest expense in the period among other incremental cost savings. Partially offsetting these savings was a $2,000,000 increase in long term incentive compensation plan costs tied to the performance against strategic targets established for the year 2016 through 2019 and $1,900,000 higher professional and other service fees resulting from provision adjustments recorded in the Q4 of 2018 after the final spin off costs were determined. Non interest expense for fiscal year 2019 was down 2.6% compared to 2018. This was largely due to the same salary and benefits cost savings mentioned in addition to lower legal, accounting and consulting fees, FDIC credits and a favorable adjustment to depreciation expense on our operations center. These savings were partially offset by higher long term compensation costs and the $5,900,000 compensation expense associated with the 2018 IPO grant.
Restructuring expenses in the full year 2019 were $5,000,000 consisting of $3,600,000 in rebranding costs and $1,500,000 of staff realignment expenses. We are pleased with our progress on the implementation of our transformation strategy in 2019 and we'll continue to look further for operational efficiencies in 2020 and beyond. Turning to Slide 14, the primary purpose of this slide is to show normalized non interest expense for Q4 2018 since that quarter included significant restructuring costs. The adjusted increase of 7.8% from the same quarter last year is primarily attributed to the 1,500,000 in compensation expense associated with the 2018 IPO. The $2,000,000 in the long term incentive program adjustments previously mentioned and stock cost of living increases.
These increases were partially offset by the significant reduction in staffing during the year. Regarding other operating expenses, the increase was attributed to higher professional legal fees, including legal and marketing expenses. Adjusted non interest expense for fiscal year 2019 was $204,000,000 relatively flat compared to the year ago period as a result of the 9% headcount reduction in 2019 offsetting the other drivers I just mentioned. On Slide 15, we can see that Amyrt remains asset sensitive as over half of our portfolio loan portfolio is floating rate or matures or reprices in less than 1 year. With the potential of interest rates continuing to decline or remain low, we have taken concrete steps to reduce this sensitivity with a goal of driving our NIM higher.
One of these steps was increasing the duration of our overall investment portfolio, ending the year with 3.8 year duration, up from 2.6 years at the end of the Q3. We achieved this by the purchase of the 20 year U. S. Treasuries and U. S.
Government sponsored agencies with CFOs with prepayment protection. We estimate that an instantaneous and parallel 25 point decline in interest rates on a static balance sheet will reduce our net interest income by approximately $5,000,000 or 2.3 percent over the following 1 year period, which is slightly more than what we had in our model and have shown in prior quarters. Conversely, a 25 basis point increase would benefit our net interest income by approximately $3,000,000 I will now hand it over back to Miller to conclude our prepared remarks.
Thank you, Al. Moving to our last slide. In 2020, we expect to build on much of the momentum we achieved in 2019. Our goals remain largely unchanged, and we continue to focus on improving profitability through growing loan yields and expanding wealth management and fee based products, while driving down funding costs and maintaining strong credit quality and underwriting standards targeted growth of Amarant's core deposits and domestic loans across all our markets increasing our operational efficiency by continuing our 2019 rationalization efforts through the adoption of new technologies our capital to support future activities. Lastly, before we open the call to questions, I want to provide an update to our initial ROA target from the IPO.
As you know, we originally laid out several initiatives, which help us reach a 1% ROA by the end of 2020. We are halfway on this 2 year journey and have successfully executed on all the initiatives that were under our direct control. With today's Trucks redemption transaction, we are completing the redemption of our 3rd most expensive trust preferred security, concluding the 3 redemptions we had planned. We have made significant staff reductions, many in back office positions, and opened new banking centers with a smaller footprint and enhanced technology. We continue to improve our loan mix as we ran off international loans and shifted towards higher yielding domestic relationship based loans.
Additionally, we generated substantially higher fee income from derivatives sold to customers and treasury management products and continue to grow our wealth management business. To no one's surprise, however, our results have forecasted or even flat rates, we experienced 3 rate cuts in 2019. This significantly impacted 2019 results and will have an effect on 2020. Given the forecasted flat rate scenario and tightening credit spreads, we no longer anticipate to hit our 1% ROA target by the end of 2020. However, we still view this as a reachable medium term target as we continue to make significant progress on the diversification of our loan portfolio, fee income, deposit cost reductions and efficiency initiatives.
I want to thank the entire Amarant team for the great work each and every one has done this year. As we complete our 1st full year as a public company, 2019 was defined by important and necessary change, coupled with careful execution. I am proud of the progress we have made on our transformation strategy and look forward to another year of strong growth, generation of value for shareholders and most importantly, delivering quality best in class products and banking services to our customers. With that, we'll be happy to take any of your questions. Operator, please open the line for Q and A.
Thank you. Our first question comes from the line of Michael Young with SunTrust. Your line is now open.
Hey, good morning.
Good morning, Michael.
Thanks for the outlook there, Mueller, on the 1% ROA target. I did want to just follow-up high level on that. I think originally the guidance included around 20 to 25 basis points of ROA improvement from higher rates. So is the right way to think of the target for this year is kind of just removing that piece? Or is it actually a detriment, so we should actually think of maybe 30 basis points or so of ROA pressure from the lower rate environment?
Well, Michael, what's important to mention is and to rehash as Miller mentioned, we've achieved almost all of the other targets that we set out to the fee income, cost reductions, remixing of the portfolio. All that's missing is the rates. If you recall, when we did the ROA walk initially in the IPO, minus any rate changes, our 2 year outlook was to be soundly in the 90s in terms of and we always said back then that we felt that just a bump in the rates would just would carry us over to that one percent. And now as a result of and remember the sensitivity that we've been saying all along, our asset sensitivity that we've been saying all along has always been roughly the 25 basis point decline would translate in $4,000,000,000 to $5,000,000,000 decrease in our net interest income. So when you have the compounded effect, remember we were looking at a 2 year target.
So there were still a lot of drivers that have to be done and will continue to be executed during year 2 other than the net interest income. But if you compound the effect of that volume that we put in year 1 of the transformation and as well as the new volumes that we could be putting in year 2, that essentially is why we're having to push back that outlook. It's essentially basically the way we see it is rates. The only reason we're not meeting this is rates because we feel very comfortable with what we've achieved in all of the other elements of the ROA walk during the 1st year. And we still got another year to go on those same initiatives to make even incremental improvement in all of those other measures.
Right. And completely understand that. I mean, that was why I was just trying to hone in on the rate piece of the ROA walk because I do agree all the rest of the pieces have moved forward and progressed. But that piece, I was just trying to understand that that should be kind of how we think about the ROA target maybe more for 2020 is just kind of everything ex rates, as it was in the ROA walk initially or if rates have actually become even a detriment to kind of the benefit that there potentially was from higher rates just because rates have gone so low and inverted at times, etcetera?
Well, as I said before, our ROA walk put us soundly in the 90s. Somewhere between 90 95 basis points without the rates. So that's kind of the starting point that we should be looking at. We thought that and I know that we weren't given credit for it because obviously we can't control rates. But at that point, we said, look, this is giving us getting us very close, very close in the low 90s and just blipping rates is going to carry us the rest of the way.
But quite contrary, it's been very depressed. And keep in mind that we've had 3 rate decreases, but we also had a significant dip in rates during the year more so than the effect of just 3 rate decreases. I mean, we had an inverted yield curve for a period of time this year. So that also brought down and anything that we were booking at that time was also impacted. The rates on what we were booking during an inverted yield curve situation was also is affecting this year and will have a lasting will also affect us into the next year.
Right.
And maybe just switching over to expenses, I know there is a few benefits from lower kind of IPO grant costs next year and you guys have got the CRE CRM system up and some other systems in place. Is there kind of a step function down in expenses at any point? Or is it kind of just a slow grind lower from maybe the 4Q level throughout 2020?
Yes. If we exclude the costs of the digital project that we're embarking on right now, that we've started already, we would see a decline in our run rate. We would still see a decline of probably $1,000,000 to $2,000,000 in our run rate. Some granularity in terms of when some of those expenses come in during the quarter. So there may be some granularity within the quarters.
But all in all, we expect a lower operating expense if we exclude probably flat if we consider the important expense or the important investment that we're making in this digital evolution. But we would expect that excluding that, we would expect a reduction and we're continuing to work with it. In terms of you saw the significant reduction that we've at the end done for 2019 in terms of FTEs. We expect to remain by the end of next year, we expect to remain relatively flat in our FTEs, but there's going to be some bumps and valleys along the way because we're going to be adding some teams of lenders in Florida, we're going to be adding a team of lenders in Texas. We're adding another team to further advance on our domestic wealth management strategy.
So we expect to remain flat in terms probably flattish in terms of FTEs with some granularity within the quarters as we are successful in onboarding those teams. And certainly those teams will then help us with production with our production targets and fee income generation at the end. Okay. So should we kind of
think of starting the year in the Q1 kind of similar but maybe slightly down from the Q4 run rate? Is that kind of the right messaging?
Yes. The Q1 will certainly have that immediate drop from the amortization of the IPO grant, remember? That was like $1,500,000 dollars every quarter of this in 2019. And I believe that goes down to about $700,000 per quarter in 2020. So that right off the bat, you have a pretty significant decrease to nearly $1,000,000 in the run rate.
And then we'll have to see how successful we are and how quickly we can onboard those teams, so that may be. And also then the expenses that we incur as we implement the digital tools that Miller mentioned, we'll also have some granularity within the year and the different quarters.
Okay. Thanks.
Thank you. Our next question comes from the line of Michael Rose with Raymond James. Your line is now open.
Hey, good morning guys. How are you?
Good morning. Good morning, Michael.
Hey, just wanted to go back to expenses, Al. I think last quarter you talked about a sub $50,000,000 per quarter kind of run rate. I know there will be some puts and takes. This quarter you had another benefit from the FDIC charge reversal. And I know looking forward, obviously, the trucks costs will or excuse me, the restricted stock costs will come out.
Can you just give an update there and maybe touch on some of the hiring efforts that you have? I know you guys are actively seeking to build out the Texas market. Thanks.
Well, we expect the run rate roughly to excluding the investments in digital, we expect it to be somewhere in the area of $48,000,000 to $49,000,000 So that would be definitely a reduction in cost. In terms of the I'll let Miguel talk a little bit about the efforts to hire those teams. But generally, the focus in terms of the lending, the 2 lending teams is probably going to be to bump up our C and I our efforts to increase further C and I and probably have less reliance on CRE. But I'll let Miguel speak a little bit about that.
Hi, Michael. How are you, Miguel? Definitely, we I'm going back to maybe expanding a little on the production side and the lending teams. Last year, we dedicated the whole year to delivering products and improving through the strategy, the transformation from our end to lenders. This year, we would add some additional tools, but more for the second half of the year with CRM and the Encino platform.
And definitely, we believe that now it's time to start investing and attracting additional team because the incremental production that we have had in the last 3 years has been without increasing and as a CNI team. So we do believe that that will help a lot on the process of increasing production and maybe we can see some stabilization on the payoff side. So definitely, we are cautiously optimistic on that sense. In the case of the Texas team, we have some hiccups on the AOPO. We have some Talend acquisition that came in, but none of it didn't stay during the year.
So definitely, we're going to be doing this part of dedicating more time to the Talend acquisition and with the new tools that we're going to be having is going to be great.
Okay. So putting that all together, Al, I think what you're saying is the kind of the $50,000,000 with the technology and digitization costs is probably still the right way to think about it?
Yes. And including those teams, which are an incremental cost. That's one.
Correct. Just wanted to talk about switching the margin, if I had obviously on hold, deposit costs were essentially flat. You guys had good domestic growth, but obviously offset by the continued Venezuelan runoff. How should we think about the trajectory of margin from here? I mean, should we think about it being relatively flat given some net loan growth this year?
Just any thoughts would be helpful.
Sure. Our outlook is that if you look at the 2020 as a whole, we would expect to be probably flat to maybe a small pickup from where we are sitting now in Q4. We do expect probably Q1 to take another dip. I think there we will have essentially we'll be feeling the full effect of the more recent rate cuts which weren't really they weren't cooked in totally into the Q4 numbers. But I think after Q1, we expect that to return to an improving trend.
And I would we're probably looking at a NIM by Q4 somewhere in the 280 is kind of our outlook. So we will end somewhere on average about the same place we are today.
Okay. And what's driving that big uptick? I know part of it's going to be the trucks cost. But besides that, I mean, what else is driving that kind of $2.80,000,000 number that you're talking about?
Sure. Of course, the TRUPS, as you mentioned, but also a full quarter effect as well of a lot of the strategies that we've been implementing in treasury to try to control our institutional funding costs. We're also doing a lot of work on increasing our core deposits, our domestic core deposits. We're certainly starting to lower our rates, even our promotional rates, our bundled product rates, all those rates are starting to start coming down. We're going to also be doing a lot continue to do a lot of work on our out of footprint deposit captures online deposits, which give us an opportunity to be selective, go in and out of certain different markets that we're not physically in without the danger of contaminating our domestic the cost of our domestic base.
We also have loan growth, which we expect loan growth probably in the mid single digits and we expect as a result of the acquisition of some of these teams to also start ramping up a bit our C and I production. So that sort of mid single digit loan growth could maybe even be expanded a little bit as we're successful in getting these teams on early enough in the year.
Okay. And maybe finally for me, looks like you had some growth in your assets under management. Can you give an update there and how where we stand with the build out of kind of the domestic platform as we go forward? Thanks.
Yes. In terms of I probably should let Miguel speak in more detail about the expansion of the domestic wealth management. But there is we're making incremental progress on that. The increase in the AUMs has been essentially just market valuation. But I think it's very important.
Remember that that's still 90 plus percent foreign customers, but as well as customers actually. So the fact that you saw the decay that we had in the foreign deposits, which was 12% in year. So that shows you that the potential that our higher net worth Venezuelan customers have where the only change has really been the market appreciation. We haven't had a decline. So I think that shows the resiliency of that higher level of Venezuelan customers where we've been able to essentially keep the same amount of assets under management and they're growing.
So they're not depleting it any faster than they're growing.
And regarding the wealth management teams, we already I think that we're optimistic. We hire as the head of Broward on Palm Beach. We recruit very good talent from a top producer institution on the wealth management side. We have completed our Dade County RN. And we're in the process of hiring also the same structure for Houston.
And we're starting to see the progress, having the talent, so the C and I team and commercial team can start referring owners to this group. And we have seen a very interesting increase on relationship and share of wallet.
Hey guys, thanks for all the color. Appreciate
it. You're welcome.
Thank you. We do have a follow-up question from the line of Michael Young with SunTrust. Your line is now open.
Welcome back.
Too much coffee, Michael.
Hello?
Michael Young, your line is now open. Please unmute your line.
Thanks. Sorry, I was on mute. On the foreign deposits, saw sort of a deceleration in the runoff. But you specifically mentioned that you were seeing more of them being used for in home purchases. So should we think of sort of more seasonality around that heading into 2020, maybe with slower decay kind of in the 1st part of the year, and then accelerating into the purchase months?
Hi, Michael. We are starting to see some interesting trend on the positive side and that is a reflection on the Q4. We implemented a sale platform payments and also we're starting to provide to this group the same type of products and bundle that we gave to the domestic market during the last year. We have seen a smaller amount of accounts closing and we are implementing programs referral program for this year. So we believe that we could be on around a 9% to 10% attrition.
And definitely the team is working very hard on how to increase the share of wallet. And basically we're driving that through our wealth management group.
Okay. And I guess just holistically, maybe Al, just on the deposit costs, we've kind of gone to flat quarter over quarter. I know you guys have turned out some deposits over the last year or 2. Is there a point at which we should expect that to start really sliding lower at some point in 2020 or any way to think about that?
Yes. Michael, our domestic deposit costs are already declining. We've lowered our transactional, even our bundle like money market accounts, we've lowered the rates on those. Even the top notch customers, we've lowered the rates on those. And increasingly, we're seeing time deposits that were probably put on the books, say, a year ago, a little over a year ago.
They're coming due soon and they're going to be a significantly lower report. Let's just say, even if you look at the promotional rate that is out there, they were they're coming down from significantly higher rates before. The issue remains that 9% as Miguel mentioned, attrition in the Venezuelan deposits is kind of to a certain extent maybe masking that effect. But we are already seeing our domestic deposit costs declining. I think we hit that inflection point sometime in Q4, where our new deposit our deposit domestic deposit costs are starting to decline.
And again, we a lot of the efforts that Miguel and his team are working on to increase our commercial deposits, a lot the branches are working on more core deposits. I think that will all help us to contain any decline in the NIM or actually improve the NIM as the year goes on.
Okay. That was it for me. Thanks.
Thank you. This concludes today's question and answer session. I would now like to turn the call back to Mr. Miller Whistlin, CEO, for closing remarks.
Thank you for joining our Q4 fiscal year 2019 earnings conference call. I'm proud to say that Amarin has the right strategy in place, and we have reached important milestones in its execution over the course of 2019. Our team has already hit the ground running for 2020, and we look forward to continuing to create value for all our stakeholders. Thank you very much.