MCB - Earnings call transcript Q2 2024 | Metropolitan Bank Holding Corp.

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Operator

Welcome to Metropolitan Commercial Bank's Second Quarter 2024 Earnings Call. Hosting the call today from Metropolitan Commercial Bank are Mark DeFazio, President and Chief Executive Officer; and Dan Dougherty, Executive Vice President and Chief Financial Officer. Today's call is being recorded. [Operator Instructions].

During today's presentation, reference will be made to the company's earnings release and investor presentation, copies of which are available at mcbankny.com. Today's presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to the company's notices regarding forward-looking statements and non-GAAP measures that appear in the earnings release and investor presentation. It is now my pleasure to turn the floor over to Mark DeFazio, President and Chief Executive Officer.

begin. may You

Mark DeFazio

commercial morning, second Good financial you for our all was Thank earnings and call. our core of strength quarter of quarter franchise. MCB's joining indicative you. the thank banking solid performance second

in saw balance of risk During our second while consecutive to management. the with continued I'm price grew liquidity NIM on we and maintaining sharp standards pleased sheet focus expansion. marks the a credit and This thoughtfully points our quarter, of a quarter we expansion X the basis discipline, interest quarter. report rate third NIM

bank Our remediation wind-down excellent proceeding on these the per Also, MCB impact and profitable on expansion strategy. business continuation strategic the interest remain regulatory wind-down, share X and are on continued transformation growth important income by the initiatives. and in and and $X.XX, net on major performance. strong of quarter, earnings We budget. of including of growth intentional initiatives, of the the $X.XX net expenses. Profitability of was completion focused and time we projects GPG remains our keenly reported supported credit commercial In digital the digital transformation the second focused GPG successful

Asset quality remains strong.

metrics and conservative broad-based a have is discipline, geography credit or that direct any impacting believe pricing negative sector result diversity. MCB's underwriting our identified We are not loan any healthy our that in of trends product segment, portfolio portfolio. We

well. commercial is we exceptionally segments and industry focus relationship-based sponsors that performance on commercial banking Our supported clients with high-quality by also exclusive our know in

characterized nonperforming date $XX had over to the call, at million March on call Dan now earnings the CFO, will that and and turn mentioned funded current are we Dougherty. I reporting have X interest now loans As our quarter XX totaling approximately as reserves. I were first

Daniel Dougherty

call. our and morning, joining everyone, for thanks Good earnings again,

X basis the the quarter, As margin points adding to saw Mark in basis X we increased quarter point that we quarter as fourth the point saw the interest X in increase as X.XX% increase second first mentioned, basis a net 'XX. in of that to by well

loan and main drivers ability net the repricing [indiscernible]. of repricing pricing discipline loan the expand Our -- to our are

some that see approximately of expect We of X X In throughout In September. the we additional we have In margins uplift. words, to quarter range in in the fourth scenario, updated see to in of XX rate points X.XX%. basis in remainder other forecast to to our the basis the NIM we additional forecasted cut uplift the penciled year. a single expect point X.XX% model,

increase the Focusing in we $XX in lending, noteworthy offset C&I Loan pay of more grew growth in $XX downs approximately on loan million is led by in somewhat that than loans. the an in by book quarterly It $XXX million payoffs an the growth in and million was quarter. of million our the CRE, was second in million quarter multifamily decline quarter. increase and net $XXX $XXX by loan of

GPG coupon of curtailments points basis closer the $XX average on by loan coupon per on That and XX pricing X.XX% originations the to for average related a are coupon weighted primarily deferred was which declined include as of draws. resulted on decline of to in result of approximately the loan year. weighted balance quarter focus million deposits. not X.XX%. maturities in deposits approximately quarter wind-down loan upcoming $XX continued second The on million, quarter, Our coupon XX fees, a The a X.X%. In [indiscernible] is XXXX typically economic new does in

plus. about borrower by $XXX in property we million a GPG million manager Year-to-date, decline temporary an deposits, increase $XX up in of deposits. experienced $XX partially As of are offset well, million net we

year intend we $XXX this adapting enhance what loan to our million growth competitive is guidance. We currently more equation. And on the guidance the maintain to the on our for $XXX will approximately of maintain on deposit we We side further forecast importantly, also approach full previous lower believe Accordingly, to provide which million loan conservative discipline, are year. for ability discipline an funding great continues of gathering the be some we'll relief growth our lending. XXXX, to the environment. extremely somewhat Importantly, than

trends expected quarter, As Mark the with which, in included mentioned, credit line with first generally an income in is quality sustainable. second uptick letter declines the quarter loan by fees provision deposit within the more revenue. asset The This negative strong no fees. Non-interest fees portfolio. than in mentioned, GPG the be the remains and identifiable was in offset previously as to in from was increase of increase

full year BaaS the forecast currently million we million. For total to $X to XXXX, revenue $XX

Expenses to for is the the expectation We to project income $XX.X million came digital $X.X costs million non-interest costs approximately previous slightly higher million now $X in totaled quarter. $XX XXXX expenses Noninterest the regulatory work the additional than for million an remediation reflects total million regulatory and associated report $X.X expected. Our year. totaled remediation $XX than higher related and expect it in to with second transformation million GPG our guidance. wind-down. QX

through third million GPG previously than to with remediation future the have anticipated. to $X quarter. We are further, portion significant overage the arrangements in recoup -- greater client of $X pass a expenses And that any that million made

around million to will our million. full $XXX $XXX guidance non-interest expect the run total go million. I $XXX of remains Further, For non-interest expense XXXX, the $XXX expense clean year million for forward to be rate

move that the we certainly keep subject as is this mind course, XXXX estimate through adjustment season. planning to in Of

to digital transformation budget unchanged. million million $XX $XX remains Our

underlying the $X.X in expect XXXX, was recorded the of project to June. have $X complete through to contracts. the vast we approximately To to $X expenses rate the million the XX%. The been major of We of in that effective XXXX. continue project tax quarter will has for the million executed inclusive majority date, be Approximately million

the investor be could in to expect now project, to after from rate to accessed excluding to core non-GAAP website be on regulatory of XX% digital our Q&A. we charges exit the $XX.X XX%, walk-down which forward, the $X.X effective discrete deck, reported BaaS range tax million turn for refer will a for items. Please the our totaled related Going tax. I onetime remediation and the Year-to-date, to call earnings. or earnings operator million to our back updated

Operator

[Operator Instructions].

will Alex come with Our from first JPMorgan. question Lau

Alex Lau

in and in Starting GPG terms $XXX what expectations the are year-end? through on of deposits, magnitude exit timing of million the of your deposits

Daniel Dougherty

quarter out we fourth million. out At $XXX $XXX just the had million in about to expect the go and million over this I of quarter. $XXX in June, to end go

Alex Lau

use Got replace sheet, term? deposits that these near the key these what in the what And the sources deposits leave these it. funding? as funding plan are costs with the to of you And balance associated to are

Daniel Dougherty

to Alex, lot clearly. actually verticals, our HOA on as yesterday going We've see EDX customers, -- [indiscernible] of our that, had meeting lending opportunity well. rely on are kind existing we of strategizing in a and we We a and

how So again, with my funding replacement guess. out. that, a that dependent I expect very approximately that But with mix on comes that forehand should it's the was come

Alex Lau

term near deposits? do much And borrowing it. anticipation the you in the of in expect Got wholesale outflow

Daniel Dougherty

with the necessary. but replace all we prepared is use wholesale fully are deposits, to outflow of plan to Our as

Alex Lau

demand growth the factor mentioned? start the to at all? your less it growth. you is for the largely from that slower touch Is on And then loan paydowns a year, of to loan customers from Or just the

Mark DeFazio

It's pricing. really -- It's Alex, a more is as Mark. this result of

the industry. critical across we capital especially this presentation, here, And reward believe, in not is just year are We there. risk seeing the out we're

range less. a down the were head some we a specifically looking of the bit far, estate of so $XXX do last asset of I've quality outside So for. I we opportunities. bit group we or of lot We're million heard of turned to little a pricing that because prefer real seeing perhaps commercial thing from is my deals believe the

So we're more really asset and a pricing. call conservative, today. capital it's quality I around but it wouldn't bit

Alex Lau

progress What on the the one regulatory And latest for remediation is one last me. update just process? your on

Mark DeFazio

We're of making lot a progress.

with aligned regulators. our very are We much

anticipating XXXX with come likely it to end the the of been by an or year. working an this have to them. materially improvements or enhancements end have relationship -- cost material will that We we end come expecting and We're 'XX meaningful cost and to in

Operator

question next O'Connell Christopher from come will KBW. Our with

Christopher O'Connell

can Just remaining, remind following is either so cost up on or what that the breakdown the or you GPG runoff, that's just of how of $XXX non-interest-bearing is the the deposits? on million blended within the much us just

Daniel Dougherty

balances around is remaining X.X%. on blended The cost the

Christopher O'Connell

the I'm so that bps the the into it. of entirety GPG as is the to are X the here, that X% that if at NIM X assuming -- handle And far that replacing the up of that, deposits. guide the Is year Got end assumes correct? deposits -- as

Daniel Dougherty

correct. is That

Christopher O'Connell

it. Got

borrowings to or or depending either here, temporarily we modest dip So get? a a for just kind you year-end on if in depending short-term or the fund on probably uptick NIM much have quarter how a of trajectory cuts just so Fed in results into flat that

Daniel Dougherty

a [indiscernible] It are we deposit the exactly forced timing we upside we're now, core little comfortable growth we the better deposits. the bit with headwind. to deposits pretty what extent that market To to variance creates replace new, that a it. right. Yes. into wholesale when on for the That's those a work the of plan with is call But can and produces extent blend our that

Mark DeFazio

just we the have point out, for last to been Chris, years GPG And X now. deemphasizing

materially low So more were deposits, GPG we X take have compared over the at base. entire particularly the the a point decreased ago deposit years replacing to we with look but history a million where years $XXX to last we have instability X those of while the

a is and wholesale not with stability time, expectations. is out much this in line may We of short of in a very period lift. funding heavy our NIM come but for So

Christopher O'Connell

basis but I is guys funds that true each a X XX margin. quarter, hold And we the here in it get Fed the last cut Great. still said point you about lift to think that on

Daniel Dougherty

say to X, XX, yes, X Each points in X X XX basis would X to a basis to -- results I points.

Christopher O'Connell

it. Got

if have the So correct? you guys in guidance, So X only cut they're... NIM

Daniel Dougherty

That is correct.

Christopher O'Connell

there there. be could additional, upside good [indiscernible]

Daniel Dougherty

upside already without doubt. That's there a There correct.

Christopher O'Connell

and a you have And it past been Can chunk guys had may of just you guys guys it due kind how What handle you the seeing. this good that? of about regulated. like some looks portfolio. talk are of quarter you come multifamily

color when them either as Just elsewhere. yourselves additional they performing you whether to whether they went those or loans and how came any due guys refinance were

Mark DeFazio

went they No, elsewhere.

the multifamily any mentioned the past, really we've in in haven't meaningful As way. played we space in

around these on concentration more So New in taking multifamily or refinanceable products other markets. on interested in for can asset are And that banks York stabilized take very in either that and who are in -- class.

being either refinanced refinanced the see were or with we -- So well consider us in remaining its being elsewhere to those any paid-offs. don't as pressure book ability by

Christopher O'Connell

Great. having you remains office the of conversations due X% customers the with nonperformers set or have kind in year? the come that's the of outlook on And $XXX second been to million the on certainly impressive. half that Any your

Mark DeFazio

so met normal or any be their to those expectations with loans managing I'm payoffs point what group and can sure clients will and next our conversation repaid that as consider estate no of you, those is refinancings or in refinancing milestone in now, far conversations, those a have such we materialized it's would is I as real there where tell a as and engaged they or stress not of them. either whether

and flight, our it's communication our lenders So that's in all just but sponsors. normal between

Christopher O'Connell

for clean of increases. $XXX kind just Great. into you'd to is run where million, going kind pre $XXX you or And think XXXX post shaking then basically rate annual an normal basis, out annual of be the expense that million increases merit of merit on

Daniel Dougherty

around obviously. numbers, going -- us. run XXXX again. we've That's we're the projects the But are major It's when once around projects. is expectation those in of just that's repeat here, X refine season to rate not when flight hard that I'm yes, could corner, expect. sort Again, say them planning those the we Yes. got to clean behind we that X that's the the

Christopher O'Connell

to clean some the that guys you on assuming run haven't increases XXXX. Or But I guess understand kind that But prior it the is planning yet of for number it underlying loosely growth? done -- [indiscernible] and in is Or is the rate Okay. on merit annual I actually for that? kind based XXXX? of

Daniel Dougherty

That's inclusive, Absolutely. no. No, Chris.

Operator

Piper next Our with Fitzgibbon Sandler. Mark will come question from

Mark Fitzgibbon

$XXX projects? Well, the million up with various take expenses. just that million following of for question charges this of the to expecting on that let incorporate year. by $XXX me Does all you're on assuming that clarify, start It's you're to the to expenses

Daniel Dougherty

Yes, does, it Mark.

Mark Fitzgibbon

the the think balance going sheet this you think growth maybe or then year they that they do today? where from do in to sheet have? the are the end bit size little balance up And organic I'm ends flattish curious you are Okay. What you're the at sort of with up footings, of where runoff total a

Daniel Dougherty

think a little think I We don't X.X%, I at an of see And into they'll up bit. I quarter think growth that the be we'll here. it kind closed as year-end was. additional

maybe XXX another another -- So XXX. perhaps

Mark Fitzgibbon

Okay. else? multifamily or loan the conversation causing come in that something cash Great. on having during additional What on quarter to reserves that Was with X sort curious interest And simply went them changed? was status. then back company a it matured accrual with the of or

Mark DeFazio

It's all of the above.

dispute root between mentioned, partners. was I problem that As cause a of

us. things a a got occurred. with from help few The dispute So reconciled little

execute get with plan step liquidate they -- properties. these had reserves the paid reserves to had interest and into And us of cuts rest as to to to to the how they to decide -- then and also they a 'XX. year of put had addition, meaningful up bring additional the result, up In and off a for

So these get for this now properties but happens, is a our in that's business. playing happen. is unfortunate, so unique It good yes, something And not it's did right it there action real sold.

Mark Fitzgibbon

lastly, this, this relevant ask And and but is Okay. hate it morning. to then I

impact the on with any curious, systems Just today CrowdStrike your associated situation?

Mark DeFazio

here we that. payroll. Yes. end X to our you. unfortunately, provider, postings a.m. with I a bit we -- going and were service Thank ACH impact for and key this there's in stakeholders bit a since morning, our had core of in touch was and offer with Yes,

stand. companies in country So are the on regulators any the this process world. thing the call. haven't room as just been we it's countries about going -- morning been heard other other since speak. I we're rectified across think as already now we I the reported of other earnings where this I've material We many first issues And through through many perhaps

Operator

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

Mark DeFazio

that of only the a to closing out for very I'd of say year to forward much thing and the reasons. is The second looking like XXXX I'm half lot different

corner to much very trying some strategic very are and We on forward initiatives looking to. I'm

the performance of getting celebrated morning very the about June, forward experienced day. for very XX We a of operating and very clear back performance at to and we're Have have standards that your just nice a in in We looking and here for excited to and much much to line getting all sight this out taking years decades. MCB XXXX X through into we've historical XXXX. Thank over listen support time last participate. you we're years

Operator

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

Metropolitan Bank Holding (MCB) 19 Jul 242024 Q2 Earnings call transcript