Q1 2024 Metropolitan Bank Holding Corp Earnings Call
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Operator: Good day, and welcome to Metropolitan Commercial Bank's first quarter 2024 earnings call. Hosting the call from Metropolitan Commercial Bank are Mark DeFazio, President and Chief Executive Officer, and Dan Dougherty, Executive Vice President and Chief Financial Officer.
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Speaker Change: Good day, and welcome to Metropolitan commercial banks first quarter 2024 earnings call.
Speaker Change: Hosting the call from Metropolitan Commercial Bank are Mark <unk>, President and Chief Executive Officer.
Daniel F. Dougherty: And Dan Dougherty.
Daniel F. Dougherty: <unk>, Vice President and Chief Financial Officer.
Operator: 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. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. We ask that you please pick up your handset to allow for optimal sound quality.
Daniel F. Dougherty: Today's call is being recorded.
Daniel F. Dougherty: At this time, all participants have been placed in a listen only mode and the floor will be opened for your questions. Following the prepared remarks if.
Daniel F. Dougherty: If you would like to ask a question at that time. Please press star one on your telephone keypad.
Daniel F. Dougherty: If at any point. Your question has been answered you may remove yourself from the queue by pressing star too.
Daniel F. Dougherty: We ask that you please pickup your handset to allow optimal sound quality.
Operator: Lastly, if you should require operator assistance, please press star zero. 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. It is now my pleasure to turn the floor over to Mark DeFazio, President and Chief Executive Officer. You may begin.
Daniel F. Dougherty: Lastly, if you should require operator assistance, please press star zero.
During today's presentation reference will be made to the company's earnings release and investor presentation copies of which are available at M. C Bank N y Dot com.
Daniel F. Dougherty: Today's presentation May include forward looking statements that are subject to risks and uncertainties that may cause actual results to differ materially.
Daniel F. Dougherty: Please refer to the company's notices regarding forward looking statements and non-GAAP measures that appear in the earnings release.
Daniel F. Dougherty: It is now my pleasure to turn the floor over to Mark Defazio, President and Chief Executive Officer, you may begin.
Mark R. DeFazio: Thank you. Good morning, and thank you for joining us on our first quarter earnings call. The first quarter of 2024 was very productive for MCB. Our first quarter results were a strong start for the company. During the quarter, we carefully grew the balance sheet while maintaining our price discipline, credit standards, and with a continued sharp focus on liquidity and interest rate risk management. We were also able to grow core deposits well in excess of our loan growth.
Mark R. DeFazio: Thank you good morning, and thank you for joining our first quarter earnings call.
Mark R. DeFazio: The first quarter of 2024 was very productive for M. C. B, our first quarter results were a strong start for the company.
Mark R. DeFazio: During the quarter, we carefully grew the balance sheet, while maintaining our price discipline credit standards and with a continued sharp focus on liquidity and interest rate risk management.
Mark R. DeFazio: We will also able to grow core deposits well in excess of our loan growth.
Mark R. DeFazio: Our two major initiatives planned for 2024, the winding down of the GPG business and the digital transformation project, have begun in earnest and are proceeding on time and on budget while we remain focused on the continuation and expansion of our profitable and disciplined commercial bank growth strategy. In the first quarter, we reported an earnings per share of $1.46, which was reported by Strong.
Mark R. DeFazio: Our two major initiatives planned for 2020 for the wind down of the G. P. G business and the digital transformation projects have begun in earnest and are proceeding on time and on budget, while we remain focused on the continuation and expansion of our profitable and disciplined commercial bank growth.
Mark R. DeFazio: Strategy in the first quarter, we reported an earnings per share of $1 46, which was reported by strong.
Mark R. DeFazio: I'm sorry, which was supported by strong growth in net interest income and continued excellent credit performance. In the meantime, the successful completion of our other initiatives remains a high priority. The economy continues to display strong fundamentals and impressive resilience. The evident strength of the economy provides us with an optimistic outlook for loan growth and credit performance. The outlook for monetary policy has changed dramatically over the last several months. Rather than expectations of significant easing throughout 2024, the market is now pricing in less than 50 basis points of easing in the back half of the year.
Mark R. DeFazio: Sorry, which was supported by strong growth in net interest income and continued excellent credit performance in the meantime, the successful completion of our other initiatives remain a high priority.
Mark R. DeFazio: The economy continues to display strong fundamentals and impressive resilience. This is evident the evidence strength of the economy provides us with an optimistic.
Mark R. DeFazio: Optimistic outlook for loan growth and credit performance.
Mark R. DeFazio: The outlook for monetary policy has changed dramatically over the last several months rather than <unk>.
Expectations of significant easing throughout 2020 for the market is now pricing in less than 50 basis points of easing in the back half of the year.
Mark R. DeFazio: I am pleased to report we saw a four basis points NIM expansion in the first quarter. Even with the change in the outlook for monetary policy, we continue to expect further margin expansion as the year progresses.
Mark R. DeFazio: I am pleased to report we saw a four basis point NIM expansion in the first quarter.
Even with the change in the outlook of monetary policy. We continue to expect further margin expansion as the year progresses.
Mark R. DeFazio: Asset quality remains strong; we have not identified any broad-based negative trends in any loan product, geography, or sector that is impacting our portfolio. We believe that our healthy credit metrics are a direct result of MCB's pricing discipline, conservative underwriting, and portfolio diversity. Also, our performance is supported by the exclusive focus on relationship-based commercial banking and high-quality commercial clients and sponsors in industry segments that we know exceptionally well. Finally, I am pleased to report that the two loans totaling approximately $21 million that were classified as non-performing loans at 1231 last year are now current, have substantial funded interest reserves, and the related workouts also include targeted and aggressive amortization requirements. I will now turn the call over to Dan Dougherty. Thank you, Mark.
Mark R. DeFazio: Asset quality remains strong we have not identified any broad based negative trends in any loan product geography or sector that is impacting our portfolio. We believe that our healthy credit metrics are a direct result of mtb's pricing disciplined conservative underwriting and portfolio diversity.
Mark R. DeFazio: Also as our performance is supported by the exclusive focus on relationship based commercial banking and.
Mark R. DeFazio: And high quality commercial clients and sponsors and industry segments that we know exceptionally well.
Mark R. DeFazio: Finally, I am pleased to report that the two loans totaling approximately $21 million that were classified as nonperforming loans at 12 31.
Mark R. DeFazio: Last year, our now current have substantial funding interest reserves and the related workouts also include targeted and aggressive amortization requirements.
Mark R. DeFazio: Throughout this year.
Mark R. DeFazio: I'll now turn the call over to Dan Dougherty. Thank you Mark good morning, and thanks again for joining our first quarter earnings call.
Daniel F. Dougherty: Good morning, and thanks again for joining our first quarter earnings call. First quarter loan growth of over $94 million was funded entirely by core deposit growth of more than $340 million, excluding additional growth in the Bass Verter.
Daniel F. Dougherty: First quarter loan growth over $94 million was funded entirely by core deposit growth of more than $340 million, excluding additional growth in the bass vertical.
Daniel F. Dougherty: As mentioned in the press release, multiple deposit verticals contributed to the core deposit growth. As a result of our deposit growth, our end-of-period and average balance of cash parked at the Fed was substantially elevated. Despite the outsized cash position and the current rate environment, we were able to increase the net interest margin by four basis points in the first quarter. Our loan pricing and re-pricing discipline was the main driver of our ability to expand the NIM. We expect to see some additional uplift in the margin throughout the remainder of the year. In our updated forecast model, we've penciled in a single 25 basis point rate cut in September.
Daniel F. Dougherty: As mentioned in the press release multiple deposit verticals contributed to the core deposit growth.
Daniel F. Dougherty: As a result of our deposit growth are our end of period and average balance of cash parked at the fed was substantially elevated despite the outsized cash position and the current rate environment, we were able to increase the net interest margin by four basis points in the first quarter.
Daniel F. Dougherty: Our loan pricing and re pricing discipline was the main driver of our ability to expand the NIM.
Daniel F. Dougherty: We expect to see some additional uplift in the margin throughout the remainder of the year.
In our updated forecast model, we have penciled in a single 25 basis point rate cut in September.
Daniel F. Dougherty: In that scenario, we expect to see approximately 5 to 10 basis points of additional uplift. Put another way, we forecast a fourth quarter NIM in the range of 3.45 to 3.5%. Focusing on lending, it is noteworthy that our quarterly loan growth was net of more than $225 million in payoffs and paydowns. Continued focus on economic loan pricing resulted in a weighted average coupon, net of deferred fees, which are typically 15 to 25 basis points per year, of 8.47% on first quarter new loan originations and draws, versus a December 23 portfolio coupon of 6.92%.
Daniel F. Dougherty: In that scenario, we expect to see approximately five to 10 basis points of additional uplift.
Daniel F. Dougherty: Put another way, we forecast fourth quarter NIM in the range of 345% to three 5%.
Daniel F. Dougherty: Focusing on lending it is noteworthy that our quarterly loan growth was net of more than $225 million in payoffs and paydowns.
Continued focus on economic loan pricing resulted in a weighted average coupon net of deferred fees, which are typically 15% to 25 basis points per year of 8.47% for the first quarter, new loan originations and draws versus.
Daniel F. Dougherty: Versus a December 'twenty three portfolio coupon of 692%.
Daniel F. Dougherty: Loan growth is expected to accelerate as the year progresses. We continue to plan for loan growth of between $600 and $800 million for the year. Our loan pipelines, especially on the C&I side, are growing after a slower than expected start to the year. Importantly, our plan assumes that we're able to fund all of that planned loan growth with deposits. As Mark mentioned, asset quality remains strong, with no identifiable negative trends in the portfolio.
Daniel F. Dougherty: Loan growth is expected to accelerate as the year progresses.
Daniel F. Dougherty: We continue to plan on loan growth of between 608 million 600, and 800 million for the year, our loan pipelines, especially on the C&I side are growing after a slower than expected start to the year.
Daniel F. Dougherty: Importantly, our plan assumes that we're able to fund all of that planned loan growth with deposits.
Daniel F. Dougherty: As Mark mentioned asset quality remains strong with no identifiable negative trends in the portfolio.
Daniel F. Dougherty: The provision in the first quarter was generally in line with the increase in loan footings, offset somewhat by improvements in the macroeconomic variables that underlie our first quarter CECL model forecast. Non-interest income increased by approximately 7% from the linked quarter, as fees associated with letter of credit activity and deposit service charges more than offset a small decline in BAS revenues. The uptick in deposit fees is expected to be sustainable, while the increase in letter of credit fees is more aligned with borrower behavior.
Daniel F. Dougherty: The provision in the first quarter was generally in line with the increase in loan footings offset somewhat by improvements in the macroeconomic variables that underlie our first quarter's seasonal model forecast.
Daniel F. Dougherty: Noninterest income increased by approximately 7% from the linked quarter as fees associated with letter of credit activity and deposit service charges more than offset a small decline in pass revenue.
Daniel F. Dougherty: The uptick in deposit fees is expected to be sustainable while the increase in letter of credit fees is more aligned with borrower behavior.
Daniel F. Dougherty: The decline in BAS revenue will accelerate as the wind-down project progresses throughout the year. We expect BAS revenue to total $8-10 million and total non-interest income to fall $19-21 million for the year, compared to non-interest expense. Non-interest expenses totaled $41.9 million in the first quarter. Importantly, expenses related to the Digital Transformation Project totaled $1.8 million, and an additional $3.1 million reflects remediation work and severance payments associated with the GPG wind down. There was also an increase in core operating expenses compared to the fourth quarter. This was primarily due to seasonally elevated employer tax. Our $12 million digital transformation budget remains unchanged, and we continue to expect to complete the project in 2025.
Daniel F. Dougherty: The decline in Vas revenue will accelerate as the wind turbine project proceeds throughout the year we.
Daniel F. Dougherty: We expect <unk> revenue to total eight to 10 million and total non interest income to foot to $19 million to $21 million for the year.
Daniel F. Dougherty: Noninterest expenses.
Daniel F. Dougherty: Noninterest expenses totaled $41 9 million in the first quarter.
Daniel F. Dougherty: Importantly expenses related to the digital transformation project totaled $1 8 million and a disk and an additional $3 1 million reflects remediation work and severance payments associated with the <unk> wind down.
Daniel F. Dougherty: There was also an increase in core operating expenses compared to the fourth quarter. This was primarily due to seasonally elevated employer tax payments.
Daniel F. Dougherty: Our $12 million digital transformation budget remains unchanged and we continue to expect to complete the project in 2025.
Daniel F. Dougherty: We currently expect about $8 to $9 million of the project to be expensed in 2024, including what has already been recorded for the first quarter. Non-interest expenses for the full year, including the digital transformation investment, are expected to total in the range of $160 to $163 million. The effective tax rate for the quarter was approximately 33%. The tax rate was negatively impacted by discrete items that came through in the quarter, primarily related to the conversion of employee stock-based awards.
Daniel F. Dougherty: We currently expect about $8 million to $9 million of the project to be Expensed in 2024, including what has already been recorded for the first quarter.
Non interest expenses for the full year, including the digital transformation investments are expected to total in the range of $160 million to $163 million.
Daniel F. Dougherty: The effective tax rate for the quarter was approximately 33%.
The tax rate was negatively impacted by discrete items that came through in the quarter primarily related to the conversion of employee stock based awards.
Daniel F. Dougherty: Going forward, we expect the effective tax rate to be in the range of 31% to 32%, excluding discrete items. Finally, please refer to the updated investor deck, which can be accessed from our website, for a walk-down from reported earnings to non-GAAP core earnings. As well, the deck now includes slides that provide details about the bank's multifamily and office loan portfolio. I will now turn the call back to our...
Daniel F. Dougherty: Going forward, we expect the effective tax rate to be in the range of 31% to 32% excluding discrete items.
Daniel F. Dougherty: Finally, please refer to the updated investor deck, which can be accessed from our website for a walk down from our reported earnings to non-GAAP core earnings as.
Daniel F. Dougherty: As well the deck now include slides that provide details about the base multifamily and office loan portfolios.
Speaker Change: I'll now turn the call back to our operator.
Operator: At this time, we will open the floor for questions. If you would like to ask a question at this 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 2. Again, we do ask that you pick up your handset to provide optimal sound quality. Thank you. Our first question will come from Mark Fitzgibbon with Piper Sandler. Please go ahead. Hey guys, good morning, nice quarter.
Speaker Change: At this time, we will open the floor for questions. If you would like to ask a question at this time. Please press star one on your telephone keypad.
Speaker Change: If at any point. Your question has been answered you may remove yourself from the queue by pressing star two.
Speaker Change: Again, we do ask that you pick up your handset to provide optimal sound quality.
Speaker Change: Thank you our first question will come from Mark Fitzgibbon with Piper Sandler. Please go ahead.
Mark Thomas Fitzgibbon: Hey, guys good morning nice quarter.
Mark Thomas Fitzgibbon: Thank you, Mark. Good morning. First question I had, just to clarify: we still should expect about $300 million of B2C deposits to run off in the second quarter, is that right?
Mark Thomas Fitzgibbon: Thank you Mark good morning.
Mark Thomas Fitzgibbon: First question I had just to clarify we still should expect about 300 million of BDC deposits running off in the second quarter or is that is that right.
Mark Thomas Fitzgibbon: Uh huh.
Daniel F. Dougherty: Approximately, yeah, it's a good estimate. Towards the end of the second quarter, especially, yes. Okay.
Mark Thomas Fitzgibbon: Approximately yes.
Mark Thomas Fitzgibbon: Good estimate towards the end of the second quarter, especially yes.
Mark R. DeFazio: Okay, and should we assume that your deposit pipelines will continue to be strong given, you know, the success you had in the first quarter?
Mark Thomas Fitzgibbon: Okay.
Mark Thomas Fitzgibbon: Should we assume that your deposit pipelines continued to be strong given the success you had in the first quarter.
Speaker Change: Yes, yes.
Mark R. DeFazio: The answer is yes, but the timing of these new relationships and deepening some of them could be a bit different. But to Dan's point, at the end of the year, we are confident that we will not only replace those deposits, but we will have funded our loan growth. So from a quarter-by-quarter basis, the timing could be slightly off, but on an annualized basis, we are still in line with our projections.
Speaker Change: Sorry, yes, the answer is yes, but it's the timing of these new relationships and deepening some of them could be a bit different but to dan's point at the ended the year. We are confident that we will not only replace those deposits, but we will have funded our loan growth so from a quarter by quarter basis, it could be and what the timing could be slight.
Speaker Change: <unk> off.
Speaker Change: But on an annualized basis, we are still in line with what.
All projections.
Mark R. DeFazio: Okay. And then in the past, you all had indicated that you were talking to some teams from neighboring banks. I haven't seen any announcements from you all. Is that still in process? Is it likely that you'll hire some of those deposit teams in the coming quarters?
Speaker Change: Okay.
Speaker Change: In the past you all had indicated that you were talking to some teams from neighboring banks.
Speaker Change: We I haven't seen any announcements from you all is that still in process is it likely that you will hire some of those deposit teams you know in coming quarters.
Mark R. DeFazio: You know, it's an interesting question. We've met with several, and none of them are really a good fit so far for a lot of different reasons, from cultural fit to pricing to loan expectations to support clients. There are a whole host of parts to that conversation. And so far, you know, we've never built this franchise based on teams for a lot of different reasons, but we did speak to several teams, but we have not made a decision on any one. But I would put a low probability on that happening in 2021.
It's interesting question.
Speaker Change: We've met with several and.
Speaker Change: And none of them are really a good fit so far.
Speaker Change: For a lot of different reasons from cultural fit.
Speaker Change: Two pricing to loan expectations to support clients. This is a whole host of.
Part of that conversation and so Fox.
Speaker Change: We have never built this franchise based on teams for a lot of different reasons and.
Speaker Change: But we did speak to several of teams and but we have not made a decision on any one.
Speaker Change: But I would put a low probability on that.
Speaker Change: That happening in 2020 four.
Mark R. DeFazio: Mark, do you think some of these teams are getting unrealistic deals from other banks, or are other banks paying too much to bring these teams on?
Speaker Change: Mark do you think some of these teams are getting unrealistic deals from other banks or other banks are paying too much to bring these teams on.
Mark R. DeFazio: Well, I don't know what they negotiated. Perhaps they're better negotiators than me. But when I look at the three biggest hurdles, all nice people, by the way, coming into the bank, but culturally, it's a very difficult fit. They're used to working in teams.
Speaker Change: Well.
Mark: I don't know what they negotiated perhaps they are better negotiated than me, but.
Mark: When I look at the three biggest hurdles. So all nice people by the way coming into the bank, but culturally.
Mark: Culturally, it's a very difficult fit they're used to working in teams. They are not integrated with the company.
Mark R. DeFazio: They're not integrated with the company. It's sort of out of character for what we've built here as a commercial bank. The kind of integration we have here, the kind of culture, not only works for our staff, but it also works for our clients. Our clients expect that kind of relationship banking. So that's the problem, number one.
Mark: It's sort of out of character for what we've built here as a commercial bank.
Mark: Kind of integration, we have yet to kind of culture not only works for our staff, but also works for our clients our clients expect that kind of relationship banking. So so that's the problem number one number two.
Mark R. DeFazio: Number two, on the way in, even if you think that the cost of those deposits is affordable today or efficient, you've got to dig in a little deeper and look at total compensation expectations. And what I found most problematic is the implication of loan expectations. A lot of these deposit teams represent a lot of real estate owners in multifamily. And although we have multifamily on the balance sheet, it will never be a primary asset class at MCB.
Mark: On the way in even if you think that the cost of those deposits are up affordable today are efficient.
Mark: You've got a deep you got to dig in a little deeper and look at total compensation expectations and what I found most problematic is the implication of loan expectations. A lot of these deposit teams represent a lot of real estate owners in multifamily and although we have multi.
Mark: Family on the balance sheet, it will never be a primary asset class at FCB.
Mark R. DeFazio: It is a low profitable business. So I don't want to set anybody up for failure or encourage them to come here. We attempt to integrate them, and then find out we can't replace the loans as they mature out of their existing banks in multifamily. So there are a few other conversation points. All nice people. I wish them well, but so far, it has not been a good fit for MCB for a lot of reasons.
Mark: It is a low profitable business. So I don't want to set anybody up for failure encourage them to come here.
Mark: We attempt to integrate them and then find out we can't replace the loans as they mature out of their existing banks in multifamily so.
Mark: There's a few other.
Mark: All the other conversation points, all nice people I wish them, well, but so far it has not been a good fit for M. C. B for a lot of reasons.
Daniel F. Dougherty: Okay, and last question. Dan, the guidance you gave was super helpful. The one thing you didn't give guidance on was the provision. Based on your projection for 600 to 800 million alone in growth and assuming no real changes to the economic model, what does that kind of spit out in terms of provisioning for the year? You should see about
Speaker Change: Okay and last question Dan The guidance you gave was super helpful. The one thing you didn't give guidance on was the provision based on your projection for 600 to 800 million of loan growth assuming no real changes to the economic model.
Speaker Change: What does that kind of spit out in terms of provisioning for the year.
Daniel F. Dougherty: We should see about 1% of growth as our provision level, so I'm, you know, thinking 6 to 8, maybe a little, maybe a little bit more, but I think 6 to 8 is a good context for the provision for the remainder of the year.
Daniel F. Dougherty: We should see about 1% of growth is our provision levels.
Thinking six to eight maybe a little maybe a little bit more but I think 60, it's good context for the provision for the remainder of the year.
Operator: Thank you. Our next question will come from Christopher O'Connell with KBW. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Mhm.
Speaker Change: Thank you. Our next question will come from Christopher O'connell with K B W. Please go ahead.
Christopher O'Connell: Morning, Chris. Good morning, Chris.
Christopher O'Connell: Hey, good morning.
Christopher O'Connell: Good morning, Chris Good morning, Chris.
Christopher O'Connell: So, just wanted to start off on the expense side, you know, appreciate the guidance there and, you know, the guidance around the digital transformation costs as well for the Guide of the 160 to 163. That includes, you know, the Core OpEx plus the digital transformation. Does that include the GPG wind down in regulatory remediation costs? Yes, it does, Chris. Okay, got it. And can you just walk us through what exactly the regulatory remediation costs relate to and how much of the GPG wind down and regulatory remediation costs remain, if any, over the course of the year?
Christopher O'Connell: So just wanted to start off on the expense side.
Christopher O'Connell: Appreciate the guidance there.
Christopher O'Connell: The guidance around the digital transformation.
Christopher O'Connell: <unk> cost as well.
Christopher O'Connell: For the.
Christopher O'Connell: Guide the 160 to 163 that includes the core Opex plus the digital transformation does that include the GP G lying down in regulatory remediation costs.
Speaker Change: Yes, it does Chris.
Chris: Okay got it.
Chris: And.
Can you just walk us through like what exactly the regulatory remediation costs related to and how much of the <unk> wind down and regulatory remediation costs.
Chris: Main if any over the course of the year.
Daniel F. Dougherty: It is really made up of legal and professional fees, and consulting fees. As you all know, we have two public consent orders out there, which are expensive to unwind and get removed. We're confident that we can satisfy expectations throughout this year.
Chris: It really is made up of legal and professional fees consulting fees. As you. All know we have two public consent to what is out there which are expensive to unwind and get removed. We're confident that we can satisfy the expectations throughout this year.
Daniel F. Dougherty: But consultants are very expensive today, and regulators expect independent validations done by third parties. You need lawyers to look at every document you send to regulators today. So it's an expensive and unfortunate expense, but we expect it to run out at the end of this year and not be in a 2025 run rate. Can't really allocate that. It's very precise in the budget for the technology integration, but regulatory expenses and legal fees, and consultant fees are somewhat of a moving target. We think we gave you the worst-case scenario in Dan's projections.
Chris: But consultants are very expensive today regulators expect independent validation is done by third parties.
Chris: You need lawyers to look at every document your centre regulators today so.
Chris: It's an expensive and unfortunate expense, but we expect it to run off at the end of this year and not and not be in a 2025 run rate can't really allocate that where it's very precise on the budget for <unk>.
Chris: For the technology.
Chris: Integration, but regulatory expenses and legal fees and consulting fees as somewhat of a moving target. We think we gave you a worst case scenario and danced projections.
Daniel F. Dougherty: Got it. And just do you have any ballpark as to the total dollar amount of those costs throughout 2024? are included in the guide.
Speaker Change: Got it and just do you have any ballpark as to like the total dollar amount of those costs throughout 2024.
Speaker Change: Not a lot in that regard.
Daniel F. Dougherty: Well, if you just back out, well, you know how much we're spending on the digital transformation, back out, take that off of the guidance Dan just gave you, gives you the ballpark of the exit fees and professional fees, the GPG exit costs, and the professional fees. But we'd rather give you a worst-case scenario than try and allocate it.
Speaker Change: Well if you just back out what you know how much we're spending in digital transformation back out take that off of what the guidance. Dan Just gave you gives you a ballpark of the.
Speaker Change: The exit fees and professional fees of <unk> exit costs and the professional fees, but it's we rather give you a worst case scenario that to try and allocate it.
Daniel F. Dougherty: I guess what I'm getting at is, you know, when you back out the digital transformation costs and, you know, the rest of these one-time costs, you know, as you're getting to 4Q24, 1Q25, do you have a sense of what the core kind of underlying expense run rate will shake out at?
Speaker Change: I guess, what I'm getting at is.
Speaker Change: When you back out the digital transformation cost and the rest of it.
Speaker Change: These one time costs.
Speaker Change: Getting to <unk> 24, <unk> 25, do you have a sense of what the core kind of underlying expense run rate will shake out at.
Daniel F. Dougherty: It's a really good question Chris, and I've been noodling on that for quite some time. I come up with around 148 to 150 as a range of core expenses by the time we get to 25. Now again, that estimate is very dependent on the timing and success of our remediation project and remediation requirements. But I think that's a good placeholder.
Speaker Change: It's a really good question, Chris and I had been noodling on that for quite some time I come up with around $1 48 to $1 50.
Speaker Change: As as a range of core expenses by by the time, we get to 25, no again that estimate is very dependent on the timing and success of our remediation project remediation requirements.
Speaker Change: But I think that's a good placeholder.
Christopher O'Connell: No, yeah, that's super helpful. Thank you.
Speaker Change: No.
Speaker Change: Very helpful. Thank you.
Christopher O'Connell: And then, you know, just, you know, as far as, you know, really appreciate the color on the multifamily and office sides of the deck. It looks to be that there are on the rent-regulated side and on the office side, you know, no non-performers right now, from what I can tell. You know, how are you guys feeling about, you know, the maturities in those two buckets over the course of, you know, 2024?
Speaker Change: And then.
Speaker Change: Just as.
Speaker Change: As far as.
Really appreciate the color on the multifamily and office slides in the deck.
Speaker Change: It looks to be that there is on the rent regulated side.
Speaker Change: And on the office side no non performers right now from what I could tell.
Speaker Change: How are you guys feeling about the maturities.
Speaker Change: In those two buckets over the course of 2024 do you guys have a good look into those borrowers in those credits.
Christopher O'Connell: Do you guys have a good look into, you know, those borrowers and those credits? You know, it looks a little bit lighter on the rent-regulated multifamily side, but about, you know, roughly a third, give or take, of the office kind of matures this year.
Speaker Change: It looks a little bit lighter on the rent regulated multifamily side, but.
Speaker Change: About roughly a third give or take of the office kind of matures this year.
Speaker Change: Yeah, I would expect that.
Speaker Change: With the exception of the credits that we want to keep and we reprice and keep it because we have a high retention rate here.
Mark R. DeFazio: Yeah, I would expect that with the exception of the credits that we want to keep and we reprice and keep them because we have a high retention rate here, the rest of them will get paid off. Of the over $200 million in the first quarter, some of it was multifamily as well, and perhaps some office. So yeah, we do not expect to be in a rollover situation where one cannot be refinanced, or we would not be interested in refinancing the credit.
Speaker Change: The rest of them will get paid off and out of the over $200 million in the first quarter. Some of it was multi.
Speaker Change: Multifamily as well and perhaps some office. So yes, we do not expect to be in a a.
Speaker Change: Rollover situation, where one cannot be refinanced or we would not be interested in refinancing the credit.
Speaker Change: I would add further that our credit team has looked at each maturing in 2024, we've already been in touch with the customers and again, we don't detect anything negative trends out there that are material nature that bring it to your attention.
Mark R. DeFazio: I would add further that our credit team has looked at each of, if it's maturing in 2024, we've already been in touch with the customers. And we, again, we don't detect any negative trends out there that are material enough to bring it to your attention.
Speaker Change: Great.
Speaker Change: And just the timing of the <unk> deposit.
Speaker Change: Roll off I know you guys covered Q2.
Speaker Change: And but just given that there was actually.
Surprisingly growth this quarter in that category.
Mark R. DeFazio: And just, you know, the timing of the GPG deposit, you know, roll off. I know you guys covered Q2, but just given that there was actually, you know, kind of surprising growth this quarter in that category, how are you guys thinking about the timing of the rest of that roll off into the back half of the year? Is it going to be more weighted toward, you know, Q3 or Q4, or is it pretty even across, you know, those two quarters?
Speaker Change: How are you guys thinking about the timing.
Speaker Change: The rest of that roll off.
Speaker Change: Into the back half of the year is it going to be more weighted towards.
Speaker Change: Q3, or Q4 or is it pretty even across those.
Speaker Change: Those two quarters.
Speaker Change: I think based on our schedule, what we what we call B to C.
Speaker Change: By the end of this summer by August that should be complete and then in the third and fourth quarter. The <unk> deposits should be complete, but I would I would I would extend the BDC to the end of the summer till August.
Mark R. DeFazio: I think based on our schedule, what we call B2C, by the end of the summer, by August, that should be complete. And then in the third and fourth quarter, the B2B deposit should be complete. But I would extend B2C to the end of the summer, to August.
Speaker Change: And was the growth this quarter.
B to C or b or.
Speaker Change: <unk>.
Speaker Change: It was a mix actually.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Great.
Speaker Change: Alright, that's all I had for now thanks for taking my questions.
Speaker Change: Thanks, Chris.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from Alex Lau with J P. Morgan. Please go ahead.
Mark R. DeFazio: Was the growth this quarter in B2C or B2B or a mix? It was a mix, actually.
Alex Lau: Hi, good morning.
Christopher O'Connell: Alright, that's all I have for now. Thanks for taking my questions.
Alex Lau: Okay, Alex Hi, Alex.
Alex Lau: Staying on the G. P D runoff schedule what are your expectations for the for the quarterly pace of reduction in G. P. G fee income and expenses for the year.
Operator: Thank you. Our next question comes from Alex Lau with J.P. Morgan. Please go ahead.
Alex Lau: So as you saw in the first quarter, we printed $4 million of fee income.
Alex Lau: Staying on the GPG runoff schedule, what are your expectations for the quarterly pace of reduction in GPG fee income and expenses for the year?
Alex Lau: I don't expect that the decline in the second quarter is going to be materially different than that but then as you get into Q3, and Q4 that it's going to accelerate rapidly.
Daniel F. Dougherty: So, you know, as you saw in the first quarter, we printed $4 million in fee income. I don't expect that the decline in the second quarter is going to be materially different from that. But then, as you get into Q3 and Q4, it's going to accelerate rapidly. Again, 8 to 10 million is my forecast for the entirety of the year, but I think that's the best way to think about it.
Alex Lau: Again $8 million to $10 million my forecast for the entirety of the year.
Speaker Change: I think that's the best way to think about it.
Speaker Change: Great. Thank you in on the <unk>.
Speaker Change: The $90 million increase in noninterest bearing deposits this quarter.
Speaker Change: Did you see that come from in terms of deposit verticals and looking ahead, where do you expect these balances to grow if any.
Daniel F. Dougherty: Great, thank you. And on the 90 million increase in non-interest-bearing deposits this quarter, where did you see that come from in terms of deposit verticals? And looking ahead, where do you expect these balances to grow, if any?
Speaker Change: There's a significant portion of that was from the bass side. So some of it was from retail but again there was a good portion on the bad side and it becomes part of the.
Daniel F. Dougherty: A significant portion of that was from the BAS side, so some of it was from retail, but again, there was a good portion on the BAS side, and it will become part of the forecasted outflows over the remainder of the year.
Forecasted outflows over the remainder of the year.
Speaker Change: Great. Thank you and then regarding the N P. A that moved to current were there any specific reserves and do you expect any releases related to these loans.
Speaker Change: Yes, we're hoping that in the in the second quarter. When we report we could release those reserves, but we wanted to season for a bit it is prudent to just let it season, there at least for a quarter, but as I said, we have substantial interest reserves now.
Daniel F. Dougherty: Great, thank you. And then regarding the NPA that moved to current, were there any specific reserves? And do you expect any releases related to these loans? Yeah, we're
Daniel F. Dougherty: Yeah, we're hoping that in the second quarter, when we report, we can release those reserves. But we want them to season for a bit. It's prudent to just let them season there at least for a quarter. But as I said, we have substantial interest reserves now that go well beyond the first quarter. So, yeah, we'll take a hard look at that. But we're expecting it to get reversed in the second quarter.
Speaker Change: That go well people well beyond the.
Speaker Change: The first quarter. So yes, we will take a hard look at that but does.
Speaker Change: We're expecting it to get reversed in the second quarter.
Speaker Change: Great. Thank you for answering my questions.
Speaker Change: Thank you Alex.
Speaker Change: Thank you. This does conclude the allotted time for questions.
Speaker Change: Now I'd like to turn the call back to Mark Defazio for any additional or closing remarks.
Mark R. DeFazio: Thank you I do not have any specific remarks, I just want to thank everyone again for their continuous support and continue.
Alex Lau: Great, thank you for answering my question.
Operator: Thank you. This does conclude. There will be a lot of time for questions. I would now like to turn the call back to Mark DeFazio for any additional or closing remarks. Thank you.
Mark R. DeFazio: Continue then to continued support of MTB and we have an exciting franchise here with a great growth story that will just continue so thank you again enjoy the rest of your day and weekend.
Mark R. DeFazio: Thank you. I do not have any specific remarks.
Speaker Change: Thanks, everyone.
Mark R. DeFazio: I just want to thank everyone again for their continued support and the continued support of MCB. We have an exciting franchise here with a great growth story that will just continue. So thank you again, and enjoy the rest of your day and weekend. Thanks, everyone. This concludes today's conference call and webcast. A webcast archive of this call can be found at www.mcbankny.com. Please disconnect your line at this time and have a wonderful day.
Speaker Change: This does conclude today's conference call and webcast a webcast archive of this call can be found at Www Dot <unk> bank in Hawaii Dot com.
Speaker Change: Disconnect. Your line at this time and have a wonderful day.
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Operator: This does conclude today's conference call and webcast. A webcast archive of this call can be found at www.mcbankny.com. Please disconnect your line at this time and have a wonderful day.
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