Good morning, ladies and gentlemen, and welcome to the Emerit Bancorp Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Laura Rossi, Investor Relations Officer. Please go ahead.
Thank you, operator. Good morning to everyone on the call, and thank you for joining us to review Amarin Bancorp's 3rd quarter results. With me this morning are Miller Wilson, Vice Chairman and Chief Executive Officer Al Paraza, 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, 2018, as well as to subsequent filings with the SEC, which you can access these filings on the SEC's website. Please note that Amyris has no obligation and makes no commitment to update or publicly release any revisions to forward looking statements in order to new information or subsequent events, circumstances or changes in expectations. 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 GAAP 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 Amarin's Q3 2019 earnings call. Today, we'll discuss Amarin's results for the 1st 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 Q3 2019 highlights, and then 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 1st 9 months of the year, Amarant 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 1st 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 4 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 Q3, we made solid progress on our strategy.
Notably, our Texas and New York loans increased year over year, and we completed our strategic runoff of foreign financial institution or FI loans and the exit from non relationship shared national credits or SNICs. Also, we executed our 1st 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 2 banking centers in our 4 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 Amarant to continue to provide its growing customers quality banking products and services that meet their needs.
Also of note, this quarter, Amarin 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 dollars per share or $0.30 on an adjusted basis, in line with market expectations. Ali will explain the non GAAP adjustments and provide more details on the results shortly. Our credit and asset quality remained strong this quarter, leading to a release from the allowance for loan losses of $1,500,000 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 Q3 of 2018. And now, we'll turn the call over to Al, who will go over the quarter in more detail.
Thank you, Miller. 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 runoff of foreign FI and non relationship SMIC 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 $77,000,000 decrease in broker CDs. International deposits declined 14.6 percent year over year as living conditions in Venezuela continue to be challenging and increasingly goods and services are acquired with dollars. Our stockholders' equity increased by $98,000,000 or 13.5% compared to the Q3 of 2018. Net income contributed $52,000,000 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 3rd quarter investment securities balance decreased slightly to $1,600,000,000 from $1,700,000,000 at the end of the Q2 and from $1,800,000,000 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 runoff of the non relationships Nixon foreign FI loans. The decrease in the investment portfolio primarily accomplished by the sale of municipal and corporate securities as well as high levels of prepayments.
This quarter, we continued to decrease our floating rate investment securities as interest rates are expected to continue to decline. Floating rate investments comprised approximately 15% 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 3rd quarter, loans decreased $406,000,000 or 6.6 percent year over year to close at almost $5,800,000,000 We experienced year over year growth in the Texas and New York markets of $72,000,000 $46,000,000 respectively. The growth was mainly due to $103,000,000 $115,000,000 increase in CRE and owner occupied loans respectively. This growth was offset by the continued strategic exit from non relationship SNICs and foreign FI loans. Since September 30, 2018, we have reduced these loans by 415,000,000 dollars 2990000000,000,000 respectively. To replace these foreign FI and non relationship SNC loans, we continue to focus on growing our domestic relationship loans.
Ameren't domestic loans excluding the foreign 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 240,000,000 During the 1st 9 months of 2019, production reached approximately 943,000,000 dollars compared to approximately $764,000,000 during the same period last year, evidencing our strategic transformation efforts into core relationships. Our CRE and C and 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 Amarin'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 $1,500,000 from 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 products. Non performing assets increased 3 point $1,000,000 year over year in the latest quarter and totaled $32,800,000 at September 30 this year. Nonperforming assets to total due to the $12,000,000 loan relationship with a South Florida customer whose sales in Puerto Rico have not recovered from the impact of hurricanes and which were placed in non accrual in the previous quarter. Additionally, special mention loans increased by $13,000,000 during the quarter, primarily due to a $10,000,000 condo construction loan in New York experiencing a longer projected sell out period.
This project, which has been completed has a very low loan to value and is a relationship SMIC 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 2nd quarter, driven by lower average yields in the commercial loan portfolio. Loan yields were still up 13 basis points compared to Q3 last year, primarily due to improved loan mix and generally higher market rates 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 pay downs 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 wanted to provide some color around Amarin'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 costs, we entered into interest rate swaps on our variable rate junior subordinated debt or trucks. We will continue to utilize wholesale funding as needed with advantageous durations for using structures that bring down our funding cost.
Moving on to Slide 10, total deposits at the end of this quarter were $5,700,000,000 down 8% compared to the end of the Q3 of 2018. This year over year decline was driven by international deposits, which dropped 4% and 14.6% respectively compared to the prior quarter and 1 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 U. S. Dollar deposits to fund living 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 Q3 of last year. In August, the U. S. Imposed additional sanctions on Venezuela, which prompted Amarin 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 deposit decline is to grow Amarin's customers, share of 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 Amyrid's other products and services. We are delivering on our strategic goal to cross sell 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 Q2 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 and L items on Slide 11. 3rd quarter 2019 net interest income was 52 point $6,000,000 down 5.5% compared to the Q3 of 2018. This decrease was primarily due to the reduction in the loan portfolio from the strategic runoff of 1FI and non relationship SNCs and the decline in the average balance of investment securities, which helped partially fund the international deposit runoff.
Additionally, both the higher cost of time deposits, which up to this quarter were repricing at higher levels than 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 Q3 of this year was 2.8%, a decrease of 3 basis points compared to the Q3 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 $162,000,000 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 1st 9 months of 2019 was 2.89, 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 towards 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 $25,000,000 of our 2 most expensive trucks, which will reduce annual interest expense by $2,600,000 proactively decreased the cost of Amarin'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 $200,000,000 of Federal Home Loan Bank callable fixed rate advances that decrease our overall cost of wholesale funding. Now turning to Slide 12, non interest income of $13,800,000 was up nearly 7% from the prior year quarter.
Non interest income in the 3rd quarter included $1,300,000 from derivative contracts sold to borrowing customers and a $900,000 net gain on sale of approximately $24,000,000 of municipal bonds and $12,000,000 of floating rate corporate securities. These increases were partially securities restricted by U. S. Sanctions. Amarin also saw lower fee income this quarter due to the ongoing phase out of operational support services provided to our former parent and its affiliates, as well as lower wire transfer activity and card fees.
For the 1st 9 months of this year, non interest income decreased almost 2% to $41,000,000 compared to the year ago period, driven largely by the aforementioned factors. Non interest income in this period included $2,700,000 of fees from derivative transactions, a $1,900,000 gain on the sale of municipal and floating rate securities and a $600,000 gain on the early termination of Federal Home Loan Bank advances earlier this year. Amherst total assets under management and custody increased to $1,710,000,000 in the 2nd quarter in the 3rd quarter, up from 1 point $69,000,000,000 at the end of the year ago quarter due primarily to net new assets. Moving on to Slide 13. 3rd quarter non interest expense was $52,700,000 a 1.3% increase over the Q3 of last year.
Q3 2019 non interest expense included $800,000 of costs associated with rebranding to Amerant, dollars 500,000 of severance costs associated with workforce reductions and $300,000 related to the early redemption of the 2 most expensive trucks. 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 percent to $157,000,000 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 $4,900,000 of restructuring costs, including rebranding and staff reduction expenses in connection with our transformation efforts and $4,400,000 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 $6,000,000 or 1.5 per quarter, declining to an estimated annual expense of $2,700,000 in 20.20 $1,100,000 in 2021. We remain focused on completing our transformation efforts, which include our rebranding and optimizing our workforce. These restructuring expenses totaled $4,900,000 in the 1st 9 months of this year and we expect to incur additional related expense adjusted for the 2018 spin off and 2019 transformation costs was $51,500,000 slightly down compared to the Q3 of last year. Adjusted non interest expense was $152,700,000 for the 1st 9 months of this year, down almost 1% compared to the year ago period.
Note again that the 1st 3 quarters of this year includes the 1.5 quarterly IPO grant amortization. We also incurred 300,000 in truck's termination expense this quarter. On Slide 15, we see that our floating rate loans and loans maturing in less than 1 year continue to keep Amarin asset sensitive. We have been taking actions to reduce our sensitivity to interest rate decline, including our strategic exit from foreign FI and non relationship snook 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 of
munis. 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 $4,000,000 or 2% over the following 1 year period. Now I will hand it over back to Miller to conclude our prepared remarks.
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 has not was not without its challenges, I am proud of the progress we made on our strategy, including the opening of our 2 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 and A.
Your first question comes from the line of Michael Ross with Raymond James.
Hey, good morning, everyone. How are you?
Good morning, Michael.
Maybe we could just start on the deposit side and really my question is getting back to the margin. So it's good to see the domestic costs seem 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 thoughts there and how we should think about the margin juxtaposed with some of the assets, some of the the steps that you took to redeem the troughs and other things to reduce costs?
Thanks.
Yes, sure, Michael. Good morning. Certainly, as we said, the cost of our domestic deposits have started we reset the production point and they have started to decrease. To a certain extent, that's just the dynamics of our portfolio as deposits that were 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 at 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's 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 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. 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 on 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 we'll 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.
Okay, that's helpful. Then maybe just thinking about deposits now that the nonrelationships next 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 deposit is the key to 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 at an inflection point?
Thanks. Hi, Michael, this is Miguel. We have seen them on the production side. We are on track on 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 received a lot of payoff. We are at the point that production of 2019 of 2016 2017 on construction loans and reposition, we're starting to see payoff. I mentioned that in the previous call for this quarter, and we believe we will see some of those still on the Q4, but we have a strong pipeline. We believe we're going to continue the same production level of previous year. And we also have order production of discount receivable 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. As we mentioned in the remarks, Michael, we also are seeing quite a pickup in our commercial deposit generation.
Yes, that is important now because we have been seeing a 20%, let's say 20 5%, 24% increase on commercial deposits, which is mainly we're starting to see the quick wins of the strategy, The conversion of lenders to RM has started to improve our deposit carrying on our commercial, as we mentioned in the past. And we are also starting to deepen our focus in the new verticals that we didn't try before. And when we talk about the positive, we're starting to see on the retail side for the first time, if you take out the runoff on the expense signed deposits and all the DDAs that went off out of those deposits, we saw for the first time a positive increase on core deposits on retail for the month of September. It's a slow process. With the new opening of these two branches, it's going to help our core deposit growth.
And even though it's not easy to see because of the attrition of international, we believe that our transformation on our new initiatives is going to pay back. And not to mention that we're also including a new initiative to at least slow down the accretion or decay of the international deposits. We're working on different products. On those products, we have a peer to peer product that we're testing now, and we're seeing positive net inflows regarding that particular side.
That's very helpful color. And maybe just one more for me, switching gears a little bit to non interest expenses. So I think Al, last quarter you guys had talked about back half of the year expenses being similar to the Q2 on an adjusted basis. Even if I take out the two items called out this quarter and add back the FDIC benefit that you 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 4th quarter run rate?
Thanks.
Yes. Well, we did have not sure if you backed out or would back out. We did have about $300,000 also in some of the repayment costs on the 2 trucks that we redeemed. So that's something else that's affecting the Q3.
I mean, remember,
we always said it would be rather bumpy, especially the 1st 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 $3,300,000 So right off the bat, that's going to bring it probably to the 50 or hopefully somewhere under the 50 quarterly mark as far as our run rate. And we again, we were only 3 quarters into this pivot and a lot of the reductions that we've experienced in merging areas, some efficiencies. But we would expect in the coming quarters as we continue to streamlining our back office, our operations, that there's 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 Q3 and if we back up some of the unusual items from the Q3. And then we need to continue to improve upon that.
Your next question is from the line of Brady Gailey with KBW.
Good morning, Brady. How are you? 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 3rd quarter?
There's more. So if the BIF stays at the target level, we probably expect another quarter or 2 of credits, but it's got to remain there. And I guess with a benign market, I guess I don't see any bank failure eminent bank failures out there depressing the BIF. There were 2 last week. There were 2 last week?
Yes. But they're small.
Small banks.
Small banks. So probably another quarter or 2, we hope.
Okay. And then one more on loan growth. Great.
If I could just we've talked about the run rate, but I think we also need to be aware that we do look to hiring teams in where there's an opportunistic event for us and that may increase a little these expenses. But those are things we're looking at. We haven't got anything that we could tell you just now. Hey, we're about to hire a team here or a team there, but those are things that we are actively looking for.
All right. And then back to lung growth, as the nonrelationships NICs 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?
I think that that should be a target that we're heading at. And that's what has been during this year if you remove the effect of the SNC on FI.
Yes. It was about as we mentioned, it was about 6.5 percent, 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. We're talking about mid-6s from core lending relationships.
And like always, like it happened in the previous quarter, we normally you don't see in C and I a payoff. And we got around $60,000,000 out of the blue for about 2 companies that were sold. Those are things that we don't control. But definitely, there is a lot of activity on the CRE portfolio, which for us is good. It demonstrated quality of our portfolio.
We do have some expected payoff announced payoff coming, which are high amounts where we continue to have good production during the rest of the year.
All right. And so the non relationship SNCs are gone. What's the balance of relationship SNCs that are left at Amarin?
Give us a second. 560.
560.
What was that again? 560,
that include club deals. And when we say those are relationship, it's because we also have the process of our Atara transaction with them.
Okay. So $560,000,000 of SNCs and club deals left. All right. And 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. We're 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?
Yes. Well, we're really only 3 quarters into kind of into this exercise and into the pivot. And when we set out the 1%, we said that with all the drivers, the asset reallocation, the full troughs, additional fee income, etcetera, we would be reaching we would probably be in roughly in the 90s. We gave ranges. We would be in the 90s.
And at that point, we said, well, if there's any rate increases that would bump us over it from the 90s. Had 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 remained flattish, we probably would have been somewhere in the 80s, but that's because we also had some headwinds. We've mentioned some of them, but I mean we've only prepaid thus far 2 of the most expensive trucks.
We have the 3rd to go. We really exited 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 or 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 looking probably at 9 this year and we're in the mid teens.
So those were really significant headwinds, but have 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 and 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 1,700,000 dollars year on year. Year to date, we've done $2,700,000 as opposed to $1,000,000 year to date last year. So we had some wins and we've had some headwinds as well. So in 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 could continue 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 is going to be affected similarly by the rate decline.
All right, great. Thanks for the color, guys.
Your next question comes from the line of Michael Young with SunTrust.
Hey, good morning.
Good morning, Michael.
Hey, Al, 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 into the granular ones that are coming down. But have you done an analysis maybe to estimate when this whole portfolio might sort of bottom out or the rate of decay would kind of decelerate maybe?
Yes. Minus any of the efforts that we said that we're working on, the greater share of wallet and things of that nature. We feel that there's probably a bottom. We've, I think, said that before. The worst case, in our opinion, I should say, would be essentially that we would still probably retain a good deal of our higher network customers.
Those aren't decaying at any significant pace. So those customers roughly have $600,000,000 $700,000,000 in deposits. We also have anywhere it fluctuates significantly, but let's say mid-200s in commercial 400, actually, I'm corrected, 400,000,000 in international commercial deposits. That also on the bright side, if Venezuela continues to dollarize, we're starting to see a little bit of economic activity in our deposit international deposit customers. So we see a little bit more generation of wealth in terms of there.
It's not significant yet, but as it continues. So between those two, there's sort of a ball of about $1,000,000,000 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.
Okay. So maybe the pace of decline kind of decelerates as we approach that $1,000,000,000
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 explain that noise because the rate if we continue to have the same decline from the retail type customers, that's going to become a larger and larger percentage of the remaining balance.
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?
Yes. When we talk about foreign deposits, there have been showing more quick wins. It's not commercial. Normally, we see that from our commercial companies, revenues between $5,000,000 to $25,000,000 and also in our middle market segment. We have seen a significant improvement on depositoring gathering and also in 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 runoff on time deposits on the retail side touch bottom, which we believe we're getting close to that. And as we are starting to see a growth on core deposits with the new branch opening, we believe that we should start seeing an improvement on retail too.
Is there a way to think about the blended costs of all that coming on, I mean, even in just broad terms? Just between the retail CDs and the commercial deposits, I'm just trying to get an understanding of what the differential is between the cost of the foreign deposits and kind of the new deposits.
The marginal cost between the retail and the commercial would be between 1.5% 2%.
Our blended sort of our blended deposit costs, Q3 is roughly around 190s, 190s. That's our But as the rate with the rate decline, repricing of the CDs and as we do better on core deposits, in 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 one.
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 $7,000,000 to $10,000,000 of technology expenses that you plan to make as part of the 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's still yet to come?
We have very little of that. It was more I think it was more like $10,000,000 to 15,000,000 dollars that we said that we would be spending. We've probably spent a few million of that. We've had some consulting in some certain key areas as a result of the efforts to streamline areas, add more technology. But very little of that is cooked in to 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 efforts to become more of a digital bank in the coming years that we would be able to achieve additional efficiencies.
Okay. And last one for me just on the market as a whole, particularly in Miami. Are you seeing increased competition there making new growth challenging or credit terms being stretched at all that make you guys any more hesitant about new loan origination?
Well, competition has always been tough in South Florida, particularly in market. And with all of that, we have been able to continue our production levels. We will continue, as I said, seeing some CRE payoff, 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, I will say, our production levels on the Broward Palm Beach, which should be our main focus on the next 2 years. But definitely, with the new acquisition of community banks and we will see a lot of pressure on deals.
Okay. Thanks.
And I'm showing no further questions at this time. I would like to turn the conference back to Miller Wilson, CEO.
Thank you for joining our Q3 conference call. Amarin'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 am confident in the strategy that we have in place and look forward to continued progress in the Q4 and beyond. Thank you very much for participating in this call. Operator?
Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.