Q1 2023 Metropolitan Bank Holding Corp. Earnings Call
Uh huh.
[music].
You need assistance during your conference today.
<unk> Press Star Zero.
Yeah.
Welcome to Metropolitan commercial banks first quarter's 2023 earnings call.
Hosting the call today from Metropolitan commercial Bank, our 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 remarks following the prepared remarks.
If you'd like to ask a question at that time. Please press star one on your telephone keypad.
If at any point. Your question has been answered you may remove yourself from the queue by pressing star two.
We ask that you please pick up your handset to allow optimal sound quality.
Lastly, if you should require operator assistance, please press star zero.
During today's presentation reference will be made the company's earnings release, and investor presentation copies of which are available and she bank N y dotcom.
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.
It is now my pleasure to turn the floor over to Mark Defazio, President and Chief Executive Officer, you may begin.
Thank you.
Good morning, and welcome to Fcb's first quarter earnings call.
And thank you for accommodating our call a few days earlier than usual.
Many have heard me say for some time now that the next crisis in banking would be about liquidity.
M C b was well per pad when the recently when just recently became obvious across the industry.
With nearly 24 years now MTB has maintained a steady hand at managing liquidity and interest rate risk.
That is evident when looking at our diversified loan and deposit verticals.
The expansion of our net interest margin.
As interest rates rose dramatically off of record lows and the strength of our liquidity position currently.
Our client base and financial positions are strong and growing core deposits grew in the first quarter net of expected outflows.
Greg will take you through our key metrics around our liquidity position shortly.
<unk> current financial position did not happen by accident. We have worked very hard since our founding to build a strong and diversified funding base, which is the underpinning of our disciplined approach to margin management.
We were well positioned as rates rose dramatically in 2022, and we continue to be well positioned for the rate and volume into correct downward.
The commercial bank's performance and credit quality remained strong.
While net loan growth in the quarter was modest we remain focused on pricing in this volatile rate environment. If we cannot lend at spreads that are within our disciplined approach to margin management.
We will remain patient.
We stand ready however to support our clients as there continues to be quality opportunities across our lending verticals I am very confident that net loan growth will be strong in 2023 and beyond.
We have added a slide in our first quarter 2023, IR deck that provide additional details on our office exposure, which is modest at 7% of our total loan portfolio.
As you can see the office portfolio is well diversified geographically with loans collateralized within Manhattan office buildings, representing just 37% of the office vertical.
Substantially all of the Manhattan office loans were originated in the last 12 months.
Our global payments business continues to grow prudently with revenues up 12% in the quarter.
As a reminder, throughout global payments business M. C. B provides basic banking services, including deposit accounts and payment rail access to non bank financial service companies engaged in both retail and.
In commercial oriented activities.
MTBE does not extend credit to.
The global payments clients or to their customers.
We are excited to accelerate our entrance into the E. Five space. We have we were very fortunate to recruit a fantastic and experienced team and are confident this will be an additional pillar.
Strengthening our low cost core funding.
We are very pleased with the progress we made this quarter in exiting our crypto space.
We exited materially started years ago by not growing the business and ring fencing, the deposits, allowing for a smooth transition.
<unk> balance sheet.
And we expect to complete our exit by the end of the second quarter.
The past quarter was a very telling one for the banking industry.
I think if you look closely enough no one should be surprised at what caused the failure of a few banks.
Management teams in this industry that we're well prepared for a shock to liquidity and interest rates demonstrated resilience as a going concern.
No one gets the pleasure out of disruption, but it does give some the opportunity to stand out in my opinion. The unfortunately, the conversation regarding uninsured deposits will abate over time.
The thought that the preferred the preferred flight to safety for middle market growth companies can be money center banks is materially misplaced.
Middle market companies with revenue of $400 million less rely heavily on true commercial banks.
Money centered banks or converted thrifts coming.
Coming out of this non systemic many bank crisis in my opinion.
I believe we will see we will see the true value.
Well by well funded diversified commercial bank like MTB.
Our first quarter operating performance demonstrates the resilience and sustainability of our business.
We have effectively managed through a challenging environment and are in a strong position to support our clients with enhanced resilience and strong capital levels.
I will now turn the call over to Greg.
Thank you Mark and good morning, everyone M.
M C D reported strong first quarter results, including a return on average tangible common equity of 17, 4%.
Importantly, core deposits were up by $69 million in the quarter on the strength of new account volumes across our retail deposit franchise and that includes deposits with loan customers.
The majority of which occurred since the middle of March.
The increase in core deposits is net of a modest decline in global payment deposits from nonbank financial service companies given normal flows at the end of the quarter and.
And expected outflows from the bankruptcy trustees.
Related deposits also declined as expected to $278 million at March 31.
Included in this balance is $218 million related to the remaining active exchanges, which are subject to our announced wind down with the remaining balance largely representing commercial operating accounts for a variety of companies.
At March 31 <unk>.
Insured deposits were 71% of total deposits.
And MTBE had $3 $1 billion combined and cash on deposit with the Federal Reserve Bank of New York.
And and readily available secured funding capacity.
Which represents 208% of uninsured deposits.
Our available collateralized off balance sheet liquidity includes facilities with the FHFA FRB and securities repo facilities.
And to provide some context MTB has had actionable repurchase contracts in place for quite some time now and has active collateral monitoring and posting program supporting the FH I'll be an FRB facilities all facilities are subject to periodic testing.
As Mark has said, we have been and remain well prepared.
We did utilize fed fund purchases and to a much lesser degree FH I'll be advances during the quarter with balances a bit elevated at quarter end, reflecting the timing of normal deposit flows right at quarter end.
As we have said we will use these wholesale funding sources in advance of executing strategic core deposit initiatives.
The pace and magnitude of interest rate increases have been a headwind as it does take some time for the 175 basis points of rate increases since September 30th of last year to wait here to work their way through the financials.
Total cost of funds were up and more muted 66 basis points in the quarter and at 183 basis points remain low, particularly given where our branch light franchise.
We were able to absorb much of the cost of funds impact through the increase in loan yields.
Looking ahead, we do see the head why it went from rates abating as short term rates find their peak, we will also benefit as we execute our funding strategies, including new deposit verticals such as he'd be five.
Turning for a moment to loans, we maintained a prudent approach to lending in the quarter.
We did have robust loan origination volumes of $265 million, which was partially offset by net payoff and paydowns of $254 million, which when combined with credit metrics remained strong demonstrates the resilience of our loan portfolio.
The impact of adopting Cecil effective January 1st was as expected muted with a day one increase in the allowance for loan losses of approximately $2 $3 million.
As you know this increase went directly to retained earnings net of taxes.
Changes in the macroeconomic environment drove most of the credit provision for the first quarter.
Operating expenses continued to be well managed there were a number of discrete items in the quarter that impacted expenses comping.
Compensation and benefits did include the seasonal first quarter increase related to employer taxes of approximately $800000.
While professional fees did moderate in the quarter legal fees remained a bit elevated we.
We do see legal fees normalizing lower in the second quarter.
FDIC assessments were elevated given the higher assessment right and there was also a true up of approximately $1.5 million that is not expected to recur.
We were also able to release $2 5 million of the settlement reserve, which reflects our best estimate given discussions during the quarter.
The effective tax rate was positively impacted by discrete tax benefits that came through in the quarter related to the conversion of employee stock based awards.
And the revision to the regulatory settlement reserve going forward, we would expect the effective tax rate to be in the range of 31% to 32% excluding discrete items.
Our capital levels remained strong, particularly with a 17.4% ROA TCE this quarter, which further strengthened our capital base.
Lastly, it should be clear given the strength of our liquidity position that we do not need to sell securities. However, if hypothetically, we did sell our entire portfolio inclusive of available for sale and.
And held to maturity securities, we would remain well capitalized across all measures of regulatory capital.
I will now turn the call back to our operator for Q&A.
Thank you the floor is now open for questions.
At this time, if you have a question or comment please press star one on your telephone keypad.
If at any point. Your question has been answered you may remove yourself from the queue by pressing star two.
Again, we do ask that while you pose your question that you pick up your handset to provide optimal sound quality.
Thank you. Our first question is coming from Chris O'connell with K B W.
Good morning.
Good morning, Chris I was hoping to start off on the credit side and see if you guys could give some color around the uptick in CRE mpls.
Yeah.
Yeah sure.
Not too much color I can give there it's one particular loan that.
Is that where.
Very comfortable with.
Yeah.
Adequate collateralized and we have a.
Very strong recourse behind the loan I can't get into details we started litigation around this one particular loan but.
We have.
Very very very little risk of loss here on this one.
Okay.
Okay got it in.
Can you guys.
Give the specific reserve is assigned against that.
Again, given that were walk collateralized with a personal guarantee on it we went through the ringer, Chris but we did not put up a reserve on it just given the type of Collateralization levels.
Okay got it and can you guys give any color around maybe just the industry or the market you know in general that the loan is in or.
Or the latest LTV.
The LTV is in the low seventies, and it's an out of market deal.
Yeah, and if it's actually it's public record we started a lawsuit on it it's a foreclosure in Kansas City, Kansas and mission, Kansas is public record.
So yeah, but beyond that if the question is it is it indicative of other other credits in the portfolio now this is a bespoke ish.
Loan that issue we're working through.
Alright got it.
More broadly on the credit side.
I mean, given the current market environment. It looks like you know originations.
We are prudently downward.
And.
I guess watch.
<unk> Air.
Areas are you pulling back from or more cautious on at this point in the cycle and what are the areas or lending segments that you are most comfortable with at this point.
Well, Chris we did have over $200 million of new originations in the quarter. So that's fairly robust.
What we tried to point out as you know our portfolio is pristine and of high quality. That's why the refinancing of the portfolio is.
Very viable as many banks are concerned about rollover risk as you can see a good part of the loans came due this quarter that we chose to either.
Not refinanced because of rate rate or they would just meant to get paid off for whatever structural reason.
So we're not we're not we're not any more careful than we have been we've been very cautious about lending, it's a core competency of ours.
Yeah.
Not any more concerned today, we have elevated concerns about certain industries of course.
But.
As you saw in the office building slide in my commentary most of the office building loans that we made in.
We're in 2022 and in Manhattan.
So.
It's not that we're not concerned about the office building market, but there are really good opportunities out there to support clients today.
So.
We are going to continue to stay a well diversified company when it comes to our asset classes that we lent to yeah and I think the other dynamic too is just loan pricing Kristina. We started this conversation last quarter we've been.
Very much sticking to our disciplines around margin management. So the other part of this conversation is making sure we're getting compensated for the risk, we're taking and I think that's the other side of this equation is making sure we're getting paid on the loan spread so that's been part of the dynamic too and we've stuck to our guns.
And Mark's comments, you also made the point and we still see quality across all of our lending verticals. It's really just a matter of being patient in and being there to support our clients on the quality projects, they're working on.
Got it I appreciate the color there.
And so as you're looking at the rest of the year in your origination pipelines.
I know typically the bogies been double digit loan growth is that still the case for 2023 or or is this.
More of a tepid year.
Any color around kind of how youre thinking about loan growth for the remainder of the year.
Looking at the pipeline and looking at the opportunities in markets that are correcting like the one we're working through today opportunities do present themselves. So I would not be surprised if we end the year in mid teens net loan growth.
As if I wouldnt be surprised if we ended up with a 10% loan growth. There you know, it's all about quality.
It is going to be about quality and pricing.
So that's been a core competency for for a career never mind, just last 23 years.
Great.
And I appreciate the comments around the update on the crypto exit.
<unk> for <unk>.
And.
Any thoughts around exactly how that plays out with the flows on the balance sheet.
I mean, it's $200 million plus coming out of the deposit side.
I guess you guys have.
And cash kind of available there as well as.
The ability to incur.
Increased borrowings or bring on new deposits just.
And any thoughts around exactly kind of how that plays out on the balance sheet.
Kind of where we're where we're at from a starting point.
<unk>.
Yeah, I would for context me I'll, let you know that the majority of what's left in the crypto the gasket exchanges.
Exchanges, the $218 million related to.
F B O balances, so that will be subject to a been transfer so from a timing perspective.
Other than just flows during the quarter, which can be up or down I think that'll be a onetime event during the quarter. We would expect other funding initiatives to really start to kick in and that includes <unk> five and some others that we can probably start talking about here in the near term.
To the extent those new initiatives and just normal the existing deposit vertical flows.
You know put us in a position where we need to borrow we would borrow short term, but again when you look out over a slightly longer horizon, I think we're talking a quarter or even if not even just a month or two into the third quarter I would expect core deposits more than fill that gap and Chris If you look historically.
We had much higher crypto balances on balance sheet, even in the last 12 months and we replace them efficiently with core funding. So aqua funding is up today notwithstanding the reduction in crypto just over the last quarter. So there we have no no concerns about replacing the remaining balance.
<unk> of crypto in core funding.
Got it.
On that point could you just talk a little bit more about.
The <unk> team you brought on and just.
That overall business line.
And maybe what you see the long term.
Deposit opportunity is there.
Well I'll work backwards I, just I want to be a bit cautious on what our projections could be.
We.
Where we had stood up our own <unk>.
Group here.
He was a modest start and with the disruption at signature bank.
Fortunate to recruit the team from signature bank.
And anybody who had paid attention to signature knows that that team was and considered the best in class.
In the country.
In developing into EBIT five business. So we're fortunate to hear their working with us and why it's a natural for us and why.
We wanted to do this even on our own they are now clearly going to accelerate our market share.
Is because of our exposure to commercial real estate.
This is just another product offering.
To date, they've been here just for a couple of weeks and we've already introduced them to two very large developers.
And one deals have already been agreed to.
Which would be substantial in deposits regarding EBIT five coming through M. C. B. So it's a natural for us to again deepen relationships with we have relationships with some of the largest developers in the country and clearly because of the size of our bank, we could never provide construction financing.
For those deals, but today, we can play a meaningful role in the construction or the capital stack as it relates to very large construction loans happening around the country and we have a seat at the table with the best developers in New York and across the country. So this is a natural expansion for us.
And it came in at a very good time and and the team is a pleasure to work with.
Great and in for those deposits.
Related to that segment.
Like what do you expect there.
Those to come on that in terms of pricing.
Pricing is low, let's let's put it that way we will give you some more color.
The pricing is very low on those deposits.
Great.
And then just in general how are you guys thinking about overall deposit pricing goes.
Going forward.
And I guess post the crypto exit.
Do you guys have a sense as to maybe where a NIM range would be.
Following that exit.
Well work working backwards, where we're more focused on them and frankly more on net interest income Chris as you know and just dropping the economics to the Bottomline.
I think as we kind of worked through the transition with the rest of crypto I think you're right. If we have to go out and borrow fund short term, which I think is 50 50 at best I think but if we did I would see some modest NIM contraction, which means just a slight uptick in cost of funds as we went into the wholesale market short term.
When you look out over a couple of it to the end of the year and alongside the longer horizon just quarter on quarter I think we get back to the to the same NIM level, we're at frankly.
The question marks are really going to be around you know short.
Short term rates.
Looking at one more increase or not obviously that would be a headwind to us given we are modestly.
Liability sensitive, but again I think that'd be a modest impact I'm not really seeing any significant pressure you know rate pressure on the rest of the deposit base.
We continue to model out at a 70%.
Deposit beta on interest bearing deposits, which I think through the through the cycle. So far that's been a fairly conservative assumption I think it still is particularly as we get to the tail end here.
So hopefully that gives you some context on how we're thinking about it.
Yeah that's helpful.
And then just on the expense expense run rate going forward.
I know the professional or legal fees were a bit elevated here.
And you had the onetime Cecil.
<unk> commitment.
Within other expenses I guess, just kind of backing that out and looking ahead.
How are you guys thinking about the operating expense range.
Go forward basis.
Yeah, well two things the via.
The seasonal impact for the off balance sheet commitments that actually went to retained earnings not to not to the other expense Chris. So I know that other expenses were slightly elevated in the quarter and that's frankly, just a combination of a lot of little stuff that I think theyre just some.
Somewhat off stuff in the quarter that that settles back down, but you know we're always more focused on return on tangible common equity, which again in the quarter at $17 17, 4% was very very strong.
We're going to continue to invest in the business. That's the wildcard for US. This is just about a run rate and maintaining what we've got I would tell you that.
Our efficiency ratio would stay in a range in the mid Forty's.
For us, though where we're standing up <unk> team. We've got some other initiatives, we're standing up they're going to impact that run rate, but theyre going to as we always say theyre going to have some immediate returns to them. So.
The operating expenses that we're going to we're going to try and keep it at that efficiency ratio in that mid 40 range as we kind of work through these things because we feel like we can continue to self fund.
The investments as we worked through.
Standing up any new programs.
Got it and last one for me.
Yeah.
Given your.
Your capital position and kind of overall balance sheet liquidity.
As well as where the stocks trading on valuation have you guys considered.
A share repurchase plan.
And any color or thoughts around what.
That is being considered.
I mean, I'll start mark and filling the gaps I mean, we've absolutely considered it and had that discussion with the board over the balance of the quarter.
If we were a much more.
<unk> bank that Couldnt.
Couldnt grow loans the way, we couldn't couldn't grow organically the way we could I think we would get a lot more consideration to it. The reality is we are at an inflection point I think across the industry, we really feel confident in our business model and in our ability to continue to organically grow our businesses. So it just seems a bit counterintuitive, we appreciate and understand what.
Share prices, we think thats going to rightsize itself as we continue to execute on our business plan, but we still feel that the highest and best use of our capital is supporting the growth of our businesses, which will drive more shareholder value as we go through time.
Okay.
Great. Thanks for taking my questions.
You're welcome thank you for asking.
And we will take our next question from Alex Lau with J P. Morgan.
Hi, good morning.
Hey, Alex Good morning, Alex.
Could you talk about what you saw in terms of deposit flows in the months of March following the closing of SBB and signature where you're opening accounts given that you're in the same markets as signature or were you seeing clients move funds out to diversify for deposit insurance.
We actually unfortunately, we we were opening up accounts are starting as early as the Wednesday before.
The weekend when the announcement happened so we had opened up.
Hundreds and hundreds of accounts.
Primarily coming from signature bank, a little bit of coming from first Republic as well.
And remember in many ways, a signature and I M. C. B share a lot of the same clients as it relates to commercial real estate and commercial lending. So we already had a relationship with I would say with about 80% of the.
The clients that moved accounts over.
So so yeah, we didn't see any any from the commercial bank.
I don't I'm sure we had some but I it doesn't resonate to me that we had any major outflows from the commercial bank at all.
To Mark's point, we really started opening up the accounts I think the Wednesday was the March eight then as we kind of roll through to Friday, and then into the Monday. The 13th we saw net deposit growth really everyday as we went through that.
That following weekend and it was really frankly for us as a business as usual footing the entire time.
We clearly were sensitive to the potential impacts of the liquidity that you can't predict but we you know.
We were probably at the margin lost a couple of deposits here in there two or three pulled some corporate uninsured deposits out but that was more than.
Offset by the inflows from what we saw they can new account openings we saw so.
Again, as I kind of embedded it in my comments, but when you think about where we were beginning to middle of March versus where we ended March and you look at our retail in the deposits with retail deposits with our loan customers a lot of that growth.
Really came from March eight to the end of the month and the one other thing Alex you should you should know that during that period of time. It was an extraordinary effort.
Because the type of accounts that we were opening where real operating accounts that needed.
A whole suite of financial services, not just a reserve account or a single.
One operating account so we've now expanded and deepened our relationships substantially with a lot of clients.
Within their entire within tie their franchise from a commercial perspective, and when you go through a dislocation liquidity issue across the industry. We have you really figure out whether or not you've got a quality deposit franchise, especially on the <unk> as a commercial bank and we feel really really comfortable with the relationships. We've got and I think as you kind of see what.
Happen to our deposit base during the quarter and then particularly in March to me. It just signifies the strength of our deposit franchise, which is fantastic.
Thanks, that's great color.
As a follow up on the <unk> news are you active in adding any more talent that may be available from market disruption.
Well I mean, we're a growth company. So we're always looking.
For talent.
We we historically have.
We haven't really benefited from something like this before.
But we're always out there people are reaching out to us and of course, we would keep an open mind to it but.
It does.
Not a focus of ours.
We don't believe in poaching, but if there's a disruption or if there is an opportunity we surely consider it.
Got it and then on the Fintech related deposits being down in the quarter after growing in <unk> and <unk> you mentioned some outflows at the end of the quarter.
Confident are you in growing this segment in 2023 on a year over year basis.
Yeah, I'm very confident and I think as Greg mentioned, a good part of that is normal outflows because remember those companies are in the payment space. So.
Funds flow.
That we're very used to and we understand the as the behaviors of those deposits. So we expect.
Those deposits to come back and I think you'll you'll see I know youll see our net growth out of the <unk> deposits.
Year over year.
Thanks, and do you think you can grow noninterest bearing deposits, excluding crypto in the year or is there still some balances that are at risk of moving to higher cost of alternatives.
Yes to all of the above so we will continue to address.
Some clients that want to go into treasuries and that's there's nothing we can do with that but I think that conversation is abating quite a bit we're not having as much discussions about interest rates with clients.
Of late so that's a good thing.
Noninterest bearing accounts, we will definitely continue to grow because we're a commercial bank and we and we as we grow the loan portfolio you will be bringing on.
Noninterest bearing operating accounts so.
No doubt.
Again as you know, we're we're obsessed with net interest margin. So it's not necessarily the cost of funds, but it's about NIM to drive topline.
Net interest income so.
I think youre going to see.
Starting in the second quarter and throughout the rest of the year and of course, where we're looking well beyond 'twenty three right now 23 is sort of baked into the cake.
We're really working on 24 and 25 right now in many different ways. So.
The answer is yes to all of the above.
Thank you and on the interest bearing deposit costs for <unk> being above 3% now what are the spot rates that you're paying for interest bearing deposits.
Well, we typically don't publish rates sheath, Alex I'd, rather not get into it I think a lot of what we've done though is we are willing to pay up for incremental new deposits coming in from either existing customers or new relationships, which again were trying to say well inside of effective fed funds, when we price anything of that nature.
I think that's also been influence.
<unk> actually strike that last part I'll put a period after.
What I've said previously so I'll, just expand a little bit similar to the loan pricing.
We don't have a history of putting out like that.
Greg suggested like a rate sheet same thing on the liability side, we have we are relationship oriented.
Talking to clients all the time and I guess, you can say, we negotiate rates on a on a client by client basis or on a transaction by transaction basis actually on an account by account basis. So.
So.
It's hard to say.
There is no.
Absolute rate that is set for money market, if thats, what youre looking for.
Thanks.
And then on expenses.
Last quarter, you mentioned, there are about $2 million in legal fees expected to moderate in <unk> levels, but you also mentioned that it's still a little bit elevated what is a good run rate for the professional fees line for.
Particular thanks.
Yeah, I mean, Mike My Crystal ball is a little broken just because as we stand up some of these new programs. It it is going to add to those lines. So I think with the legacy both the Voyager bankruptcy as well as.
The work on the settlement that that's really winding down in the quarter that was probably elevated by about $1 million Alex.
So I think that as we kind of find that new normal in the second quarter, which is going to again include a bit of some new spend which I think is going to be modest if I was going to reduce error assume theres a million of this elevation in the quarter, that's probably not far off.
But we do have some legal expense associated with setting up <unk> exactly and so on so again.
Look well beyond look at results.
And look at operating leverage and where we end at the end of the quarter as far as earnings and return on tangible common equity is really at the end of the day what we.
What we strive for.
Okay.
Thank you and then on Gpus fee income saw some strong growth in the quarter to $4 9 million can you talk about the drivers of growth in the Fintech segment quarter over quarter.
And also can you grow this segment.
Three quarter for the rest of the year or is this more of a volatile.
And line item driven by volumes.
Well.
Just just address first the growth in the quarter I mean, that's really.
It's a broad based increase across the client base. So it's not one or two of our partners that are clients that are really driving that it's really much more broad based in that a lot of the fintech send that we're working with them and nonbank financial service companies are really hitting their stride. So that's a bit more broad based and then the forward look I don't know Mark if you have any thoughts yet I think.
That's exactly right.
These companies are spending a significant a significant amount of money on client acquisition strategies. So there the pipeline is full.
These companies are becoming more mature and providing retail financial services. So the grabbing more market share the market share is fairly sticky their client base is sticky.
So you're starting to see some scale there and some real estate operating efficiencies among those companies, which has to run through our franchise. So we see the benefits of it but.
At the moment I think the most important thing.
Gregg said to notice is that it's not one client it's of course that whole franchise. Many clients are buildings for scale and and we're benefiting from it as well, but we like it we like a a slow slow and modest pace of growth. There, we don't mind, taking its time.
Because that's true retail banking and its in a marathon as opposed to a hockey stick.
Approach.
Thank you and last one for me so in the G. P. G fee income line. There was about $1 3 million from the crypto related business also up in the quarter. When do you expect this amount to be reduced I know you said you're.
Finishing up deposits.
Run off by the end of <unk>, but how much do you expect of that fee income to be too cute.
I would I would expect.
Okay.
It's hard to predict it depends on the timing of when these relationships get transferred so I would imagine that would abate entirely between the second and third quarter, Yeah, I agree its not going to be a gradual wind down on the revenue side, though Alex I think I think the revenue the transaction volumes and the fees are going to be associated with the bends that hold the accounts, there's going to be at <unk>.
Switch, so whatever that revenue level that should be there.
Through the up and to the point that we actually transfer the ban.
Okay, great. Thanks for taking my questions.
You got it Alex Thank you.
Yeah.
This concludes the allotted time for questions I would like to turn the call over to Mark <unk> for any additional or closing remarks.
Thank you and I would like to have it make a few additional comments if if if you would allow.
In the current turbulent banking environment, its not surprising to see uninformed speculation and people looking to profit from the turmoil.
This has caused some significant volatility in our stock in recent weeks.
In that context, I want to reiterate a few key facts that are important about MTBE.
Crypto.
In the fall of 2017 MTB materially started its exit from banking crypto related businesses. In this process continued through 2019 in 2019, we maintained a relationship with for crypto related exchange companies and stated clearly many times.
That we would not be increasing our relationship with others.
Over the course of our relationship with Voyager MTB did not allow the use of consumer funds for corporate purposes.
Through the bankruptcy of Voyager MTB demonstrated that we clearly knew how to manage the risk associated with banking a crypto exchange.
MTB safe kept consumer funds.
Maintain the integrity of pass through FDIC insurance related to the F. B O account, representing consumer funds as well.
Once the bankruptcy stay was lifted MTB manage the efficient release of all consumer funds held at FCB.
Voyager related balances today are at zero.
And all accounts are closed FCB recouped $900000 towards reimbursement of legal fees out of $1 $2 million that we spent.
Today FCB has three.
These crypto relationships left with.
With an aggregate deposit balance of $218 million.
Winding these down and expect the related balances to be at or close to zero at the end of the second quarter.
Because we clearly understood. This business, we were able to execute an orderly exit without putting mtb's balance sheet at risk period.
Liquidity and interest rate risks MTB has demonstrated over the past two decades, just how important it is to manage interest rate risk and liquidity risk developing.
Developing diversified low cost deposit verticals enabled MCP to maintain its competitive edge in loan pricing, while insulating adequate NIM.
Through two decades of organic balance sheet growth MTB has maintained its net interest margin with positive operating leverage enabling year over year net income growth and therefore driving franchise value.
Alongside of having a steadfast discipline on liquidity and interest rate risk is having a robust readily available contingency funding plan NCP.
<unk> has developed and expanded our contingency funding plan as our balance sheet expanded we have proven that the preparedness and discipline is table stakes for sustainability and staying relevant.
In the current environment transparency is important than ever.
What I can offer to my shareholders and all stakeholders is that we will make ourselves available for questions. We are confident in the soundness and resilience of our business model and the rigor of our governance and risk management and we are happy to talk to all of our shareholders and stakeholders at any time.
Thank you for participating in this call I will now turn the call back over to the operator.
This does conclude today's conference call and webcast.
Cas archive of this call can be found at www Dot M Keybank and why Dot com. Please disconnect. Your line at this time and have a wonderful day.
Yes.
[music].
Uh huh.
[music].
Yeah.
Uh huh.
Hum.
Yeah.
Okay.
Okay.
Yeah.