Earnings call transcript Q4 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to Metropolitan Commercial Bank's Fourth Quarter and Full Year 2022 Earnings Call. Hosting the call today from Metropolitan Commercial Bank are Mark DeFazio, President and Chief Executive Officer; and Greg Sigrist, Executive Vice President and Chief Financial Officer.

Today's call is being recorded. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the prepared remarks. [Operator Instructions]

will presentation, to available copies reference release company's at presentation, investor and of today's be the made earnings mcbankny.com. During which are

to and may may and to differ earnings the presentation include release. regarding statements that refer are Today's forward-looking appear notices statements the forward-looking materially. Please uncertainties measures actual cause subject that company's results non-GAAP to that risks in

to my pleasure Officer. to Mark over DeFazio, now floor Executive President is It the Chief and turn

You may begin.

Mark DeFazio

welcome to and fourth Thank quarter you, morning, and call. MCB's earnings good

basis, an with and versus On million up a adjusted XX.X% net MCB XXXX. XXXX, operating had from record income adjusted in million, of in year efficiency ratio of $XX.X XX.X% $XX.X

net X.XX% margin of quarter the versus fourth prior interest in Our X.XX% year quarter.

banking-as-a-service of all our results. growth The our operating along initiatives business to commercial lines with along contributing saw bank

challenging a rising through fierce While increased for XXXX interest competition correction of industry scrutiny. was with material for asset in cost rates, a we our digital and, funds, industry, worked deposit, regulatory year increased that, the

early pivot industry we crypto well. from should away that served us crypto has the -- Our intuition

coming exposure the liquidity to-date, sustain to efficient efficiently with minimum we have Our XXXX foregone allowed deposits along growth. loan to generate into us replace

with to fully will the we announced, previously As we earnings industry minimal in exit liquidity. XXXX impact and

closure also client MCB fintech a ongoing We XXXX. and close investigation York bringing are regarding Fed the to banked to very from New the DFS in

fees implemented toward our oversight experience were that This lessons reserved MCB an was banking-as-a-service of during million of unfortunate time. forward and has run As our consumer the rate. we a move here learned MCB to a a for settlement. unprecedented There reduce a effort throughout an more with MCB's occurred and was situation business. compliance the result the improved have normalized of to professional conscious $XX joint decision settle investigation, to business

with our position we ground XXXX successfully enhanced in tremendous strong and support are a strong capital balance, to levels. resilience in clients entering On and covered XXXX

business performance the and the and Our of continues our execution along with to sustainability of employees operating demonstrate dedication MCB's XXXX in clients. strength and the

are strong We the support and have effectively a capital environment resilience our through good to levels. with clients enhanced in challenging position managed [indiscernible]

a highlights billion remained $X.X for from efficiency our or Loans X.XX% few XX%. Net on XX% $XXX.X million. very up XXXX. tangible equity income ratio Net for from revenues of improved interest to strong was Now, improved financial were to And million XX.X% increased margin to XX.X%. from in interest XX%. Total $XXX.X operations XX.X%. X.XX% And 'XX. common return at up

call the turn Sigrist. now will I over to Greg

Greg Sigrist

you, Mark, and Thank good everyone. morning,

with business per of loss MCB's $XX.X fourth as $X.XX net million scale diluted settlement income EPS inclusive was adjusted $X.XX. regulatory common a income it net $X.X core quarter share. of reported Reported the or million continued of loss to a

Turning benign to with remains increased growth. $XXX charge-offs The non-performing effectively Loan zero. environment or all loan net the loans in with quarter. loan no line quarter Commercial The of growth in the We across at from to drivers originations million a in in XXXX, linked X.X% quarter. in yields The quarter $XXX.X loan on key loan the strong growth X.X% verticals. Bank of saw million. posted was prior X.XX% with credit and provision

I on want moment do spend to deposits. a

a more leaner, sheet. We to efficient have transition balance the managed successfully

money up higher cost the by from property being managers fintech and for we As quarter. yields onboarded other in $XX deposits, retail banking-as-a-service efficient, $XXX moved evidenced outflows and in investments, into This quarter deposits, offset have from trustees deposits. strong the in with up were million treasuries bankruptcy inflows market quarter, which million or the certain fourth have core deposit clients looking lower is

Of $XXX crypto million related which XXXX. that by active As deposits subject or down institutional at year-end. deposit MCB's total in related to are $XXX were balance, million $XXX are deposits remaining in digital wind asset quarter $XXX down asset the clients, four related X% million expected, million to of to

particularly have clients deposit times, reflective efficient utilize to To advance cash initiatives. in We of strategy, Fed normal wind deposits client these balance may, support for of timing sources funds and reflects did active it's at year-end, flows of $XXX year-end. crypto FHLB on million we at the as also strategic sheet, the down, FHLB funding related part other of which advances executing core purchased around a more in advances but

execution deposits increased, While existing funding thoughtful has competition well alternatives. on on on of pricing as deposit we remain both and patient

in Our of production is linked margin X.XX% our loan quarter, loan fourth X.XX% had yields floors the quarter. in up raising prior up, new we in in have success net is interest in the evident the discipline pricing which moving from our and

The interest-earning asset basis to in points yield increased X.XX% quarter. the XX

production impact rising rates and as from new rate benefited of the overnight loan yields yields. well Asset increasing on deposits as floating loans

and a light rate September a active which model. is Given increased management, branch-light late of funds X.XX%, cost points, basis our low notable as our remains of extent but of particularly since at the XX total increases has of result by in

continue also more for but we well allow to also much positioned rate rise cuts. perspective, moved will neutral have eventual stability to extent stance NII the We rates are this an from which for do year,

while give $XXX,XXX banking-as-a-service $XXX,XXX For in in pleased Payments million, We're the $X.X up continued to the to very were million the up $X.X quarter. were down fintech were to To million. quarter of our color, more see you crypto-related revenues revenues to revenues. revenues $X.X our $XXX,XXX business, Global banking-as-a-service scaling

risk continued up teams. human our and Compensation capital, reflecting into expenses. modestly and in operating to particularly in infrastructure investment the quarter, were benefits Turning

the regulatory $X.X in carry million year, and focused million the quarter $X.X on on remained by full fees outside over Legal engagement adjusted XX.X%. legal ratio for matter with do levels -- during the back our as counsel well efficiency elevated sorry, historic low approximately fourth Despite We as fees fees, the at Voyager's proceedings. to bankruptcy legal quarter. moderate expect to quarter remained first elevated the

rate This of impact settlement tax compensation the apportionment by regulatory vesting that values refined in as date well was fair discrete the stock-based effective items impacted tax includes and reserve as of the rates. state employee came through The quarter.

forward, effective range be Going rate would excluding XX% the tax discrete in XX% items. to of we expect the to

all very levels capital significantly well above remained capital strong, Our with ratios capitalized levels.

I turn operator will now the to back for Q&A. our call

Operator

you. [Operator Instructions] Thank

Our first question Morgan. Alex is with J.P. from Lau

Alex Lau

morning. good Hi,

Mark DeFazio

morning, Good Alex.

Alex Lau

additional provide confirm I not reserve? Can you regulatory wanted on to that some can client it reserve. the you the and start how of just was going that reserves business you a client? a settlement off of fintech crypto-related And with you the how And follow-up, think as additional And top regulatory risk $XX needing million? change about forward? Thanks. approach that a on does how this color do

Mark DeFazio

Okay.

I if there just that. a miss So, anything, lot was there, follow-up with so

So, fintech specific working is was this client. not It backwards, client. a a crypto

banking-as-a-service and point. We at this no will client of XXXX. announce particular been the client the believe, is since longer some But of I client a the bank hasn't name of the summer,

I us better bank. think made this a

regulators are of pointed partners think good think ours, they I and out. I the

unemployment federal were as You got an in government under to time occurred an CARES extraordinary from of fraud that the rounding of there remember small the was reported, and it benefits. this XXXX $X when took And initiative put circumstances, a a of benefits. did unemployment through this extraordinary extraordinary government occurred error; to out a with level as part the This I regarding manage the trillion trying we virtually amount occur. actually -- March that place Act was it was this of however, the regarding

insight on two-and-a-half on and years gave several really and regulators the months, the Working actually off brought suggestions last with this, about to last over over they really how the some good I oversight. improve good our us think some talking

forward the banking-as-a-service would regulators the the I to being that And to our a and in in add practices. speaks safe done retail efficiently, only banking banking very think ability is very it think inclusive, business and working clearly is stay and grow sound scalable. way way which realize the to alongside I and a today going digitized, going and to regulators it's MCB is that is

headwind I all. think So, it's don't a at

positive. it's positive, painful, a although I think a it's

Alex Lau

Thanks, the crypto security accounts? could can sense that on talk the Thanks. of sales? potential of with the come to you rundown business the four Mark. of timing And the for deposits And moving exit, about crypto-related

Mark DeFazio

sales anticipating off over are One, come -- not on security of we've any we should planned course any our there all, be And that it at with will will the sheet. these not be that. for clients XXXX reason no four balance

They Now, a with talking we'll wind agreement have and progress to lot our place. banks. seem relationship be making in in other the to -- we them of down

could but a two-and-a-half So, that transition quarters. smooth be the two, will over accelerate, planning it next we're

Alex Lau

do How forward crypto-related exchange Mark. total there's you four Thanks, balances relationships out? those those about X% about clients? moving in what of with And think of deposits. outside about terms think those clients I moving of

Mark DeFazio

for, They're a say, they're who business they're they're We operating let's hedge funds, and their accounts accounts. some fund payroll, not running has equity exchange, corporate etcetera. raised have just operating

accounts are operating in So, just these that way. they crypto any don't real touch

Alex Lau

Thanks. the crypto-related for to Thanks, you your challenging loan growth, given exclude before you more your in pullback And relative of level Can in a historical loan about I expect Mark. talk XXXX? deposits, approaching ratio growth step deposit the environment? queue. we On more And expectations to that one the when growth deposit loan is if should XXX%. growth

Mark DeFazio

back beyond. confident deposit I -- to normal in that have a loan ratios. I'm to and will probably a much sight clear we go line of 'XX very lower

quarters. the we're the the hear We upcoming new have on that a side about initiatives, sheet, lot bringing and market balance will in of optionality which in of

think and for to lower, very will 'XX efficiently-funded come So, a bit core-funded. bit a but on could I and a bank 'XX, we be balance, be continue higher, into we

in optimistic 'XX to back I'm ratio that, will come loan deposit beyond. So, down that very and significantly

Alex Lau

I'll queue. Thank in you. step back the

Operator

from our KBW. next question Chris take of O'Connell We'll

Chris O'Connell

good Hey, morning.

Mark DeFazio

morning, Good Chris.

Chris O'Connell

circle confident final guess are to comment is the if to reserve could back adequate I on guys and settlement close And to settlement how of that wanted you kind just that, you how I reserve. regulatory be? quickly might you

Mark DeFazio

Yes.

on of regulators Difficulty] to million have in the really are to both I'm think, I finalize very, this the faith very good working in [Technical really us working are Both watermark think regulatory close. settling that this with I and and we're that $XX is I the say confident high settlement, agencies.

here at the MCB. them. with [Technical always working years We're my at never Difficulty] with career, regulators entire mind great XX contentious it's situation relationships all. We Again, had

we we they get with. So, on we'll for that's the this. put why that this point in are fine would some and some but behind we enhancements reserved like, us, of which fully kind And agreement changes

are Is think there the absolutely an good We be the possible. lower? all a is chance amount that reserve in working high fully faith, But slightly watermark. it Yes, I as I for to wanted regulators. could are it's that

Chris O'Connell

Okay, great.

in I -- as the of the elevated of it's to line you? think how the might and As run far Can this still professional rate expenses -- this talk going quarter the [indiscernible] out expense falls this also well rate legal once is just been where the a in kind and regular professional relative bit run where behind expense down as once forward, drop to you about sorry, past.

Greg Sigrist

mean, 'XX, I last split the difference over year, going legal first of when out worked with that Chris. fees. sure, the saw I of level then. the between think the fees moderate half maybe 'XX were to we a we versus you really on the Yes, to the lot We've year-and-a-half. probably where take you late we're in back touched professional through initiatives

do kind So, line that a of little to expect I moderate bit.

a growth still company though. know, we're you As

-- are to So, in will capital. comp human we benefits, still and we invest continue

very we've team think on or over a the last two. and substantial year I onboarded brought

continue to going human to invest in to You're line. in to going that We're capital. see expansion continue

in think XXXX level growth. might you I bit saw moderate in the from terms it a little of

we really I efficiency other is ratio, thing about. think key the always as talk it's just the

current going continuing focused to from that be work are ratio to very We down on levels.

getting much the an investments -- growth. out bringing we're what expense we're sure So, keep on it's those leverage the eye on on on return about making investments the investments, making overall the we of as and

Chris O'Connell

mentioned crypto you front -- the into Okay. guys right. year. what of or how about far for the as expected two? I you deposit next you as And are then, growth crypto quarter on thinking have kind All end you runoff few initiatives been if of exclude deposit things the Got this the side the guess, some a -- it. head as you

Mark DeFazio

will it be think, I robust.

always in think the crypto, we pleased all again. just whose the I in think We be so core-funded to initiatives really a be have talk the obviously, off will. you crypto been. is that client-facing with comfortable company very I'm we would the will And about you I if up, And institution. quarter, remove it then, don't have. as have But to ran working if Everybody if fill first hard. I have bucket we feeling we always really

first to core-funded continue dipped Bank. I be or this institution. into And will Loan a time years XX We that the Federal XX is in, think, we the Home

not strategy that is tend funding, want of what's we rely on this something forward. a core be long-term. It's it not but bridge good So, to to will going

Greg Sigrist

Chris, just around we to And that, client I base. a very to add mean, Yes. have active year-end, successful

So, saw flows we just some normal also year-end. around

of on. and have our think verticals Mark we're and of and touched I important executing that metrics. they're in management. initiatives is deposit on of balance that managing over other the our the margin business manage think actionable, as options to terms funding more sheet. are bring a deposit we takeaway a deposits or are that queue, We're we balance hit could on to the ratio have the existing going efficient kind We focused staying pricing on leaner, above And always discipline the loan the really year. more on our usual we've this lot strategic in be bring to And to beyond of I

-- all we're very I high-quality, prudent low loan So, with our think to or ability supporting with quality and confident growth deposits. cost low comfortable continue

Mark DeFazio

is U.S. go business, and internally should nationwide U.S. only that I on Trustee there's business, hold that sheet. a I could Chris, verticals and banks the deposits actually should balance And two should -- and the business, Trustee's developed point deposit of property really management down which not and we handful unnoticed, a

We decided much leaner, to We be that dial as we got You want. chose anytime back. up keep runoff. to those to deposits in those We much-leaner deposits replaced bring balance mind, operate we let a them. a can We can sheet.

toward efficient When we'll find that's management, back. we companies. We the it bring that have these wonderful knowledge of maintain relationships discipline we for have to with liquidity an source us and

replace not to it's and There's capital So, to we're on like those our investment an deposit of it's deposits. supply no verticals. hard really And investment. add to bring working

find the they'll way, pass. [Technical Difficulty] rate rates and by their will will spot. Those this And sweet cycle

one the We have based banks a of Trustee investment [go] actually that significant being the the hold few can advantage on as U.S. on in sheet deposits country balance (ph).

deposit mandate can anytime want, higher are can up down we that we we We mid-teens that going bring anytime want. equity. verticals where that's historically think deposit and just are where those to So, a stay. we're fill bank But we return common so likes we've that's we to loan been and ratio that's our and on tangible

Chris O'Connell

it. is of over earlier the quarters, offset in Circling whether runoff Got the and or crypto cash of couple from -- that one to of on questions the coming next the [AFS] walk back just on decision the book? is, (ph) on you you the are where what the process the Can securities me landed guys decision-making to through solely and given cash, do yields how securities.

Greg Sigrist

the to I or I we the part, month of a goes that's securities have level deposit Chris, obviously mean, a $X in principal -- of cash operating in mix. tremendous just part the see we back to $X cash it basis, side. million flows the portfolio opportunity just million think we Yes, it us. on will still We're coming of be an off available generating

an that balance advances, we growth and over touched bucket. FHLB going to a million on-balance any those moment in are bucket, to existing deposits, that that of looking continue have with fill of $XXX But million between feel able at be to example, part thinking up don't targeting on. deposits year cash sheet are growth still for continued as the GPG, quarter-on-quarter crypto the loan as verticals such time, the that of vertical. banking-as-a-service out if lot have tick and to fill initiatives and of right? replace we rush And you're $XXX We in and to using see the we at we the to to runway support we're we've

Chris O'Connell

you Okay, about any thought last buyback potential then, or there two me. guys have for discussions ones the understood. from is internally, Thank And authorization? quick you. One, a

guys just if And then, you characteristics two, book of believe that'd total CRE. book you of office X% around walk the et could for is maybe great. that cetera, us where and through be that the of it's I some But located,

Greg Sigrist

All right. Mark, I'll up and start with then the can the buyback, the I composition pick on think, side. CRE

a evaluate lot of Obviously, of we dividends and alternatives, a capital including lot things.

-- to trade book about mind. certainly this yes, or let actionable it. having book And absolutely say is, But know really reportable, anytime to value our becomes you we'll All in it. it's you your close value sort tangible hard we're have the the I you of anything conversations. think think been market, can on if I about

Mark DeFazio

with occupancies. the small the people building XX% as assets market York of As strong low markets market, in around low or the month. building actual the buildings It's occupancy those here in most the you We're strong is in low into far Class keep in -- suburban said, the the exposure, industry. building rate is not still flows, A rising we New building office office so, as have sponsorships, very City is every but in default it LTVs. cash office mind, level, coming different geographies, But but office single

However, we don't space. that really in play

of the So, ownership, very and our the building we're office the position portfolio. sponsorship comfortable with

Chris O'Connell

That's all I Appreciate had. Thanks, Great. the guys. color.

Greg Sigrist

you. Thank Chris. Okay,

Operator

turn questions. or the DeFazio allotted the to like remarks. concludes call Mark to time I additional over This closing for would any for

Mark DeFazio

a that, this a today, working we've And people bank relationship doing I move want when a we're lot regulators taken as regulatory is I continued looking the to but behind what banking-as-a-service. by of and stress we forward, quickly, a settlement, good the become with really better We're bit know well practice us. look comes back I done in continue best Just in to the were positioned forward do forward, it to past. to

And and conversation. us thank we you very much today, continuing joining the look forward for to

Operator

this This have webcast Please at does www.mcbankny.com. archive line and of A today's webcast. this wonderful be disconnect can found and conference a day. conclude call at your time,

Metropolitan Bank Holding (MCB) 20 Jan 232022 Q4 Earnings call transcript