Q4 2024 Metropolitan Bank Holding Corp Earnings Call
Well.
I don't know.
Hum.
And I don't have it.
Okay.
No they don't like.
Hello.
No that's fair.
[music].
Uh huh.
[music].
No no no no no.
Yes.
Okay.
Uh huh.
[music].
Oh no no.
Oh no.
All right.
Okay.
[music].
She also gets on hold we do appreciate it.
And I ask that you please continue to standby.
[music].
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Uh-huh.
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Uh huh.
Uh huh.
Speaker Change: Yes.
[music].
Speaker Change: Yeah.
Speaker Change: Uh huh.
Speaker Change: Mhm.
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: But he said no.
Speaker Change: Hum.
Speaker Change: Hum.
Speaker Change: Got it.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: I don't remember.
Speaker Change: Oh Oh.
Speaker Change: Uh huh.
Please have your conference I D ready and a coordinator will be with you momentarily. If you require assistance. During your program. Please press star zero and a coordinator will assist you.
Speaker Change: Yes.
Speaker Change: Right.
Speaker Change: Uh huh.
Speaker Change: Uh huh.
Speaker Change: No that's fine.
Speaker Change: Yes.
Speaker Change: Uh huh.
Speaker Change: Okay.
Speaker Change: Oh.
Speaker Change: Mhm.
Speaker Change: Nope.
Speaker Change: We do appreciate your patience.
Thank you for calling please have your conference I D ready and a coordinator will be with you momentarily.
Speaker Change: Thank you.
Speaker Change: [music].
Speaker Change: Uh huh.
Speaker Change: No no go ahead.
If you require assistance during your program. Please press star Zero and a coordinator will assist you.
Speaker Change: Well all of them.
Speaker Change: Oh gosh.
Speaker Change: I'm not.
Speaker Change: Oh, Oh Oh.
Speaker Change: Oh, Oh Oh.
Speaker Change: Mhm.
Speaker Change: Mhm.
Thank you for calling please have your conference I D ready and a coordinator will be with you momentarily. If you require assistance. During your program. Please press star zero and a core.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Nader will assist you.
Speaker Change: Mhm.
[music].
Speaker Change: Yeah.
Speaker Change: Okay.
Thank you for calling please have your conference I D ready and a coordinator will be with you momentarily. If you require assistance. During your program. Please press star zero and a coordinator will assist you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Mhm.
Speaker Change: [music].
[music].
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: Yeah.
Hum.
Speaker Change: [music].
Speaker Change: Thank you for holding May have your conference I'd Err pass code.
Speaker Change: Sure.
Yeah.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Thank you May I have your last name was spelling please.
Speaker Change: Okay.
Speaker Change: Mhm mhm.
Speaker Change: Sometimes.
Speaker Change: All right.
Speaker Change: Hum.
Speaker Change: Mhm.
Speaker Change: [music].
Speaker Change: Thank you I will now place you under M. C. P Q4, two four.
Speaker Change: Yeah.
Based on our we do appreciate your patience.
Speaker Change: New technologies will support and scale Ncb's diversified and growing commercial bank for years to come.
Speaker Change: Please continue to standby.
Speaker Change: Uh huh.
Speaker Change: Okay got it.
Speaker Change: Hum.
Speaker Change: While managing these initiatives MTB continued its sustained growth strategy, we continue to carefully manage asset quality optimize profitability.
Speaker Change: Good luck.
Speaker Change: Hum.
Speaker Change: And so forth.
Speaker Change: Oh, sorry.
Speaker Change: [music].
Speaker Change: While further solidifying our banking presence not only in New York, but in several other complementary markets.
Speaker Change: Mhm mhm.
Speaker Change: [music].
Speaker Change: No no no.
Speaker Change: We still stay laser focused in 2025 and beyond working to capture additional market share through traditional channels, while positioning ourselves to take advantage of potential strategic opportunities to increase shareholder value.
Speaker Change: Uh huh.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: Okay.
Speaker Change:
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Oh no no.
Speaker Change: No.
Speaker Change: Uh-huh.
Speaker Change: For the fourth quarter and full year 2024, adjusted ROTC was 12, 3% and 12, 2%, respectively. We remain confident that through the course of the next 12 to 18 months, we will achieve a mid teens ROTC supported by a robust core NIM, which should approach.
Speaker Change: [music].
3.75, or 3.8% of course. These factors results are subject to market conditions that are beyond our control.
Speaker Change: Uh huh.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Asset quality remained strong we have not identified any broad based negative trends in any loan products segment geography or sector that is impacting our portfolio.
Speaker Change: Mhm.
Speaker Change: [music].
Speaker Change: We have no new nonperforming credits and we remain very confident that the work outs that are currently in flight will be resolved successfully in 2025.
Speaker Change: You have the choice of music.
Speaker Change: No.
Speaker Change: We believe that our healthy credit metrics are a direct result of mtb's pricing discipline conservative underwriting and portfolio diversity.
Speaker Change: [music] Act.
Speaker Change: Uh huh.
Speaker Change: Please standby your program is about to begin.
Speaker Change: Performance is also supported by our exclusive focus on relationship based commercial banking with high quality commercial clients and sponsors in industry segments, we know well <unk>.
Speaker Change: During the conference today, Please press Star zero.
Speaker Change: Right.
Speaker Change: Welcome to Metropolitan commercial banks fourth quarter, and full year 2024 earnings call.
Speaker Change: Hosting the call today from Metropolitan commercial Bank, our Mark Defazio, President and Chief Executive Officer, and Daniel Dougherty.
Speaker Change: Finally, I would like to thank all of our employees and the board of directors, whose dedication and effort continued to provide the foundation for Ncb's commitment to deliver value added services to our customers and by extension to our shareholders.
Speaker Change: <unk>, Vice President and Chief Financial Officer, today's call is being recorded.
Speaker Change: 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.
Speaker Change: Thank you and I'll now turn it over to Dan Dougherty.
Speaker Change: We would 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.
Dan Dougherty: Thank you Mark and good morning, everyone.
Speaker Change: As Mark said.
Speaker Change: We finished the year with a strong performance in the fourth quarter.
Speaker Change: I ask that you please pick up your handset to allow optimal sound quality.
Speaker Change: Quarter over quarter, the net interest margin increased by four basis points to 366%.
Speaker Change: 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 <unk> Bank and why Dot 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.
Speaker Change: Over similar to the third quarter that performance included an outside outsized amount of deferred loan fee accretion.
Speaker Change: On a normalized basis I estimate that the fourth quarter NIM was approximately $3 five 5% with which compares favorably with the normalized results from the prior quarter.
Speaker Change: Prior to the company's notices regarding forward looking statements and non-GAAP measures that appear in the earnings release and Investor presentation.
Speaker Change: I'll cover full year 2025 forward guidance for the NIM and other financial metrics a little later.
Speaker Change: It is now my pleasure to turn the floor over to Mark Defazio, President and Chief Executive Officer, you may begin.
Speaker Change: For now however, I would like to note that the fourth quarter Offloading of approximately $680 million of low cost G. P. G deposits was very much weighted towards the back end of the period.
Speaker Change: Thank you good morning, and thank you for joining our fourth quarter earnings call.
Speaker Change: Phebe concluded the year with a very strong fourth quarter performance generating net income of $21 4 million or $1 88 per share.
Speaker Change: As a result for the quarter.
Speaker Change: The average balance of wholesale funding was 350 million, while the December 31 balance was $450 million.
Speaker Change: Our quarterly net interest income increased 16, 9% versus the fourth quarter 2023, and our annual net interest income increased 13, 6% versus full year 2023.
Speaker Change: Despite this headwind I expect to print a first quarter NIM that is approximately five basis points above the normalized margin of the fourth quarter.
Speaker Change: Loan growth in the quarter was $137 million the weighted average coupon on our new volume originations of approximately 300 million was 7.8%.
Speaker Change: During the year, we had two major initiatives underway with one reaching its conclusion and the other is still in full swing.
Speaker Change: I am pleased to report that MTBE successfully exited the bass business, which had been a complementary business to the commercial bank.
Speaker Change: Looking forward the weighted average coupon of first quarter maturities totaling about $605 million is 659%.
Speaker Change: For the past 22 years.
Speaker Change: And for the second quarter, the weighted average coupon of maturities totaling about $360 million is 7.25%.
Speaker Change: The exit of such a technologically integrated business took two years and I am pleased to report that there are only a few minor operational tasks remaining.
Speaker Change: The portion of our maturities that are renewed has been running at approximately 90%.
Speaker Change: MTBE demonstrated one of its core strengths through the timely and economic replacement of the associated deposit runoff.
Speaker Change: Our loan pipeline pipelines are currently very full as some anticipated December closings were pushed into this year.
Speaker Change: Even as we exited the bass business, we increased total deposits by over $245 million last year.
Speaker Change: We continue to monitor and manage loan pricing in a manner that will support further NIM expansion.
Speaker Change: And by $705 million since the end of 2022.
Speaker Change: Primarily as a result of the completion of the G. P. G exit total deposits decreased by approximately $285 million in the fourth quarter.
Speaker Change: We are confident that MPD will continue to expand its market share and it's highly diversified deposit verticals as well as adding additional verticals that will fully replace and exceed the deposit balances that were associated with the wind down of the bass business.
Speaker Change: Interest bearing deposits increased by approximately $160 million, while noninterest bearing deposits declined by about $445 million.
Speaker Change: The municipal <unk> five in retail deposit verticals experienced the bulk of the growth in the quarter.
Speaker Change: MTBE not only manage its NIM higher during the fourth quarter, but we continue to expect further NIM expansion through 2025.
Speaker Change: For the year deposits were up more than $900 million net of J P. G outflows importantly.
Speaker Change: Importantly, the outlook for growth across our deposit vertical stack, especially E. B five HOA Muni and 10 31 title escrow verticals is robust.
Speaker Change: The second initiative, which remains in flight is our investment in our franchise wide new technology stack as planned we continue to expect the full integration to be completed by the end of this year.
Speaker Change: As Mark mentioned asset quality remains strong with no identifiable negative negative trends within the portfolio.
Speaker Change: The provision in the fourth quarter was aligned with loan growth.
Speaker Change: We are already seeing a return on investment within our payments platform. We are confident that the new technologies will support and scale ncb's diversified and growing commercial bank for years to come.
Speaker Change: Noninterest income for the fourth quarter was $4 4 million linked quarter decline of $1 9 million was primarily related to the decline in <unk> income.
Speaker Change: <unk> related revenue was approximately $2 1 million in the quarter, a decline of $1 4 million versus the third quarter New G. P. G revenue is contemplating going forward.
Speaker Change: While managing these initiatives MTB continue its sustained growth strategy, we continue to carefully manage asset quality.
Speaker Change: Optimize profitability.
Speaker Change: Noninterest expenses totaled $38 2 million in the fourth quarter, a decline of about six 2% from the third quarter, excluding the impact of the settlement reserve established in the third quarter.
Speaker Change: While further solidifying our banking presence not only in New York, but in several other complementary markets.
Speaker Change: We still stay laser focused in 2025 and beyond working to capture additional market share through traditional channels, while positioning ourselves to take advantage of potential strategic opportunities to increase shareholder value.
Speaker Change: Again, excluding the impact of the settlement reserve.
Speaker Change: Noninterest expenses increased about $4 2 million from the fourth quarter of 'twenty three.
Speaker Change: For the fourth quarter expenses related to the digital transformation initiative and other onetime costs totaled approximately 900000 for.
Speaker Change: For the fourth quarter and full year 2024, adjusted <unk> was 12, 3% and 12, 2%, respectively. We remain confident that through the course of the next 12 months to 18 months, we will achieve a mid teens ROTC supported by a robust core NIM.
Speaker Change: For the year operating expenses totaled $164 1 million again, excluding the $9 $5 million settlement reserve.
Speaker Change: The effective tax rate for the quarter was approximately 31, 7%.
Speaker Change: In our in our Investor deck, we have a walk down of GAAP versus adjusted financial performance. We recommend you take a look at that.
Which should approach $3 75, or three 8% of course. These factors results are subject to market conditions that are beyond our control.
Speaker Change: 2025 guidance.
Speaker Change: Couple of highlights for 2025.
Speaker Change: Asset quality remains strong we have not identified any broad based negative trends in any loan product segment geography sector that is impacting our portfolio.
Speaker Change: First of all we're expecting to be at or near our core ROTC of 13% by the fourth quarter of 2025.
Speaker Change: Our planned loan growth is 9% to 11% versus year end 2024.
Speaker Change: We have no new nonperforming credits and we remain very confident that the work outs that are currently in flight will be resolved successfully in 2025.
Speaker Change: The funding assumption for that loan growth is gen generally generic deposit growth priced at fed funds minus 100.
Speaker Change: We believe that our healthy credit metrics are a direct result of mtp's pricing disciplined conservative underwriting and portfolio diversity.
Speaker Change: The full year NIM is expected to be $3, 7% to 375%.
Speaker Change: We and we are assuming a 125 basis point rate cut in July in that forecast.
Speaker Change: Performance is also supported by our exclusive focus on relationship based commercial banking with high quality commercial clients and sponsors and industry segments, we know well.
Speaker Change: We expect non interest income growth of 5% to 6% over the $10 5 million in non G. P. G fee income recorded for 2024.
Speaker Change: Yes.
Speaker Change: Finally, I would like to thank all of our employees and the board of directors, whose dedication and effort continued.
Speaker Change: Finally, we expect annual noninterest expenses of $175 million to $177 million.
Speaker Change: To provide the foundation for Ncp's commitment to deliver value added services to our customers and by extension to our shareholders.
Speaker Change: Allow me to walk you through the main drivers of the increased Opex forecast.
Speaker Change: Our our noninterest expense guidance for 2025 includes approximately $11 million and onetime costs related to our digital transformation project and other new initiatives slated for completion this year.
Dan: Thank you and I'll now turn it over to Dan <unk>.
Dan: Thank you Mark and good morning, everyone.
Speaker Change: As Mark said.
Speaker Change: We finished the year with a strong performance in the fourth quarter.
Speaker Change: The expected expense related to the modern banking emotion initiative is $7 million. This is approximately one and a half to 2 million more than previous guidance because of timing essentially work that was originally planned to be completed in 24 that has an effect been pushed into this year.
Speaker Change: Quarter over quarter, the net interest margin increased by four basis points to 366%.
Speaker Change: However, similar to the third quarter that performance included an outside outsized amount of deferred loan fee accretion.
Speaker Change: On a normalized basis I estimate that the fourth quarter NIM was approximately three 5%, which compares favorably with the normalized results from the prior quarter.
Speaker Change: We also forecast other IEP project expenses of $3 $5 million to $4 million. The two main initiatives driving these new one time expenses are first a major infrastructure update with the complete redesign of our network and expansion of our data centers, allowing for greater.
Speaker Change: I'll cover full year 2025 forward guidance for the NIM and other financial metrics a little later.
Speaker Change: For now however, I would like to note that the fourth quarter Offloading of approximately $680 million of low cost <unk> deposits was very much weighted towards the back end of the period.
Speaker Change: Capacity and enhanced resiliency.
Speaker Change: Second data security and data governance initiatives.
Speaker Change: These initiatives are primarily related to the continuing implementation of state of the art security tools and a data governance framework aligned with current regulatory expectations.
Speaker Change: As a result for the quarter.
Speaker Change: The average balance of wholesale funding was $350 million, while the December 31 balance was 450 million.
Speaker Change: Despite these headwinds I expect to print a first quarter NIM that is approximately five basis points above the normalized margin of the fourth quarter.
Speaker Change: Yes.
Speaker Change: Further another noteworthy noninterest expense item is what is in effect an increase in licensing expense.
Speaker Change: We will see a total increase of about $4 million annually as quarterly income accretion income accretion of approximately 1.25 million from the gain on a cap that was extinguished in August 2022 will cease in February.
Speaker Change: Loan growth in the quarter was $137 million.
Speaker Change: The weighted average coupon on our new volume originations of approximately $300 million was seven 8% looking.
Speaker Change: Looking forward the weighted average coupon of first quarter maturities totaling about $605 million is six 5% 9%.
Speaker Change: It's noteworthy that noteworthy that discipline is an adjustment that was not contemplated in any of my previous guidance.
Speaker Change: And for the second quarter, the weighted average coupon of maturities totaling about $360 million is 725%.
Speaker Change: On the comp and benefits line for 2025, the consensus for the year over year increase for comp and benefits equates to about four 3%.
Speaker Change: The portion of our maturities that are renewed has been running at approximately 90%.
Speaker Change: Our loan pipeline pipelines are currently very full as some anticipated December closings were pushed into this year.
Speaker Change: Our actual experience year over year is expected to be closer to 10%.
Speaker Change: As we continue to build a management team and staff that is prepared to support a much larger institution.
Speaker Change: We continue to monitor and manage loan pricing in a manner that will support further NIM expansion.
Speaker Change: The effective tax rate is expected to be between 31 and 32%.
Speaker Change: Primarily as a result of the completion of the <unk> exit total deposits decreased by approximately $285 million in the fourth quarter.
Speaker Change: At this time I will turn the call back to our operator for questions and answers.
Speaker Change: The floor is now opened for questions. At this time, if you have a question or comment. Please press star one on your telephone keypad.
Speaker Change: Interest bearing deposits increased by approximately $160 million, while non interest bearing deposits declined by about $445 million.
Speaker Change: If at any point. Your question has been answered you may remove yourself from the queue by pressing star Q again, we do ask that while you're poised. Your question you pick up your handset to provide optimal sound quality.
Speaker Change: The municipal <unk> five in retail deposit verticals experienced the bulk of the growth in the quarter.
Speaker Change: For the year deposits were up more than $900 million net of GPT outflows importantly.
Speaker Change: Thank you. Our first question comes from Chris O'connell with <unk>. Please go ahead.
Speaker Change: Importantly, the outlook for growth across our deposit vertical stack, especially <unk> HOA Muni and 10 31 title escrow verticals is robust.
Speaker Change: So I just wanted to make sure I heard right do you see the new arrays originations coming on in the fourth quarter.
Yeah.
Speaker Change: As Mark mentioned asset quality remains strong with no identifiable negative trends within the portfolio.
Speaker Change: Coming out of the 780 yields.
Speaker Change: Correct.
Speaker Change: The provision in the fourth quarter was aligned with loan growth.
Speaker Change: Okay, great and were on container demand monitor manage the spreads towards that sort of level. So.
Speaker Change: Noninterest income for the fourth quarter was $4 4 million linked quarter decline of $1 9 million was primarily related to the decline in <unk> income.
Speaker Change: Kind of expecting all else being equal that that's a reasonable.
Speaker Change: 750 to 775 is probably a reasonable place for forward looking originations.
Speaker Change: <unk> related revenue was approximately $2 1 million in the quarter, a decline of $1 4 million versus the third quarter.
Okay.
Speaker Change: Okay, Great and then.
Speaker Change: New GPU revenue was contemplated going forward.
Speaker Change: As far as the.
Speaker Change: <unk>.
Speaker Change: Non interest expenses totaled $38 2 million in the fourth quarter, a decline of about six 2% from the third quarter, excluding the impact of the settlement reserve established in the third quarter.
Speaker Change: Just because it's a little bit difficult to parcel out with the <unk> exit.
Speaker Change: Isolating the impact just from the rates.
Speaker Change: With the fed cuts this quarter, yes.
Speaker Change: Again, excluding the impact of the settlement reserve noninterest expenses increased about $4 2 million from the fourth quarter of 2003.
How are you guys thinking about.
Speaker Change: For the quarter the quarterly benefit.
Speaker Change: From a single 25 basis point cut on the margin on a go forward basis now.
Speaker Change: For the fourth quarter expenses related to the digital transformation initiative and other onetime costs totaled approximately 900000.
Speaker Change: Each 25 basis point rate cut it equates to about.
This is easy.
Speaker Change: For the year operating expenses totaled $164 1 million again, excluding the $9 $5 million settlement reserve.
Speaker Change: Five basis points per 25 basis point cut.
Speaker Change: It might be a little more but let's use five as a placeholder.
Speaker Change: Okay great.
The effective tax rate for the quarter was approximately 31, 7%.
Speaker Change: And then.
Speaker Change: Guys talked about.
Speaker Change: In our in our Investor deck, we have a walk down of GAAP versus adjusted financial performance. We recommend you take a look at that.
Speaker Change: Verticals that you guys have gone on the deposit side, and some new opportunities and additional verticals, perhaps over the course of 2025 to help replace.
Speaker Change: 2025 guidance.
Speaker Change: Couple of highlights for 2025.
Speaker Change: The recent GTC run off over time.
Speaker Change: First of all we're expecting to be at or near our core ROTC up 13% by the fourth quarter of 2025.
Speaker Change: Can you just expand upon.
The opportunities that Youre seeing there maybe.
Speaker Change: Our planned loan growth is 9% to 11% versus year end 2024.
Speaker Change: They're the largest ones are and if there are new initiatives going on just any color around what those might be.
Speaker Change: The funding assumption for that loan growth is gen generally generic deposit growth priced at fed funds minus 100.
Speaker Change: Well, Chris I think we've demonstrated already that we still have a lot of runway with the existing deposit verticals across the franchise and we do a good job in our investor deck for you to take a look and see what all of them are.
Speaker Change: The full year NIM is expected to be $3, 7% to 375%.
Speaker Change: And we are assuming a 125 basis point rate cut in July in that forecast.
Speaker Change: Always.
Speaker Change: We expect non interest income growth of 5% to 6% over the $10 5 million and non GP G fee income recorded for 2024.
Speaker Change: Finally, we expect annual non interest expenses of $175 million to $177 million.
Speaker Change: Allow me to walk you through the main drivers of the increased Opex forecast.
Speaker Change: Our noninterest expense guidance for 2025 includes approximately $11 million and onetime costs related to our digital transformation project.
Speaker Change: Other new initiatives slated for completion this year.
Speaker Change: The expected expense related to the modern banking motion initiative is $7 million. This is approximately one $5 million to $2 million more than previous guidance because of training essentially work that was originally planned to be completed in 24 that hasnt been.
Speaker Change: And pushed into this year.
Speaker Change: We also forecast other project expenses of three $5 million to $4 million.
Speaker Change: The two main initiatives driving these new one time expenses are first a major infrastructure update with the complete redesign of our network and expansion of our data centers, allowing for greater capacity and enhanced resiliency.
Speaker Change: Second data security and data governance initiatives.
Speaker Change: These initiatives are primarily related to the continuing implementation of state of the art security tools and a data governance framework aligned with current regulatory expectations.
Speaker Change: No.
Speaker Change: Further another noteworthy noninterest expense item is what is in effect an increase in licensing expense.
Speaker Change: We will see a total increase of about $4 million annually as quarterly income accretion income accretion of approximately $1. Two 5 million from the gain on a cap that was extinguished in August 2022, we will see some February.
Speaker Change: It is noteworthy that noteworthy that this is an adjustment that was not contemplated in any of my previous guidance.
Speaker Change: On the comp and benefits line for 2025, the consensus for the year over year increase for comp and benefits equates to about four 3%.
Speaker Change: Our actual experience year over year is expected to be closer to 10%.
Speaker Change: As we continue to build a management team and staff that is prepared to support a much larger institution.
Speaker Change: The effective tax rate is expected to be between 31 and 32%.
Speaker Change: At this time I will turn the call back to our operator for question Vanessa.
Speaker Change: 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.
Speaker Change: If at any point. Your question has been answered you may remove yourself from the queue by pressing star Q again, we do ask that you pose your question you pick up your handset to provide optimal sound quality.
Speaker Change: Thank you. Our first question comes from Chris O'connell with <unk>. Please go ahead.
Speaker Change: So I just wanted to make sure I heard right you said that the new arrays originations coming on in the fourth quarter.
Speaker Change: Coming on at a 7% yield.
Speaker Change: Correct.
Speaker Change: Okay great.
Okay. The demand monitor manage the spreads towards that sort of level. So.
Speaker Change: Kind of expecting all else being equal that's a reasonable.
Speaker Change: 750 to 775 is probably a reasonable place for forward looking the originations.
Speaker Change: Okay.
Speaker Change: Okay, Great and then.
As far as the.
Speaker Change: <unk>.
Speaker Change: Just because it's a little bit difficult to parcel out with the <unk> exit.
Speaker Change: Isolating the impact just from their rates.
Speaker Change: With the fed cuts this quarter, how are you guys thinking about.
Speaker Change: This quarter the quarterly benefit.
Speaker Change: From a single 25 basis point cut on the margin on a go forward basis now.
Speaker Change: Each 25 basis point rate cut it equates to about.
Speaker Change: Let's just use the <unk>.
Speaker Change: Five basis points per 25 basis point cut might.
Speaker Change: It might be a little more <unk> five as a placeholder.
Okay great.
Speaker Change: And then you go.
Speaker Change: I just talked about.
Speaker Change: Verticals that you guys had gone on the deposit side, and some new opportunities and additional verticals, perhaps over the course of 2025 to help replace.
Speaker Change: The recent GTC run off over time.
Speaker Change: Can you just expand upon.
Speaker Change: The opportunities that Youre seeing there maybe.
Speaker Change: The largest ones are and if there are new initiatives going on just any color around what those might be.
Speaker Change: Chris I think we've demonstrated already that we still have a lot of runway with the existing deposit verticals across the franchise and we do a good job in our investor deck for you to take a look and see what all of them are.
Speaker Change: We're always working on new initiatives and new opportunities that are really for now at this point 2026, and 2000 2007, we're very confident that.
Speaker Change: We will fund our loan growth through core deposits and we will replace <unk>.
Speaker Change: Remaining deposits in 2025 with just our existing initiatives so more to come on new things and those sense in profiling them here, but right now we're focused on 2026 and 27 as far as new initiatives.
Speaker Change: Got it.
Speaker Change: And.
Speaker Change: For the deposit cost I was wondering if you did have the interest bearing deposit.
Speaker Change: Start.
Speaker Change: Number for December.
Chris O'connell: I don't have that Chris, but I'll be happy to get that for you.
Chris O'connell: I don't know if okay that base.
Chris O'connell: For the quarter is $3, one five for the quarter, but I don't have it in December.
Alright, and then.
Chris O'connell: Just on the expense side.
Chris O'connell: Additional.
Chris O'connell: Build over the course of.
Chris O'connell: 2020.
Chris O'connell: Five.
Chris O'connell: So should we be thinking I guess, just trying to think about.
Chris O'connell: The run rate ends up as we're going into 2026, I mean, if you take off the one.
One time expenses.
Chris O'connell: $11 million.
Chris O'connell: Is that.
Chris O'connell: On a quarterly basis kind of a good exit run rate for the expenses into 2026.
Chris O'connell: Uh huh.
Chris O'connell: I'm, hoping that that's a little bit high but again you start with call. It 170.
Chris O'connell: <unk> in the back of 10 year at $1 65.
Chris O'connell: I think that we've got.
Chris O'connell: Scope to go a little bit lower than that in the plan going forward is going to be very much focused on managing opex.
Chris O'connell: In totality at about a 5% growth run rate.
Chris O'connell: So.
Chris O'connell: That's very much.
Chris O'connell: Once we get all these one timers behind us Thats the plan going forward.
Chris O'connell: Okay.
Chris O'connell: That's helpful.
Chris O'connell: And then.
Chris O'connell: Last one for me is just you guys gauge.
Chris O'connell: A bit of color.
Chris O'connell: RPC is headed over time and into the back end.
Chris O'connell: 25, I was just wondering.
Chris O'connell: But.
Chris O'connell: Even if they are just loose take the credit assumptions.
Chris O'connell: Perhaps are being made.
Chris O'connell: Around there.
Chris O'connell: Credit assumptions of what do you mean, we don't as Mark said, we don't detect.
Chris O'connell: Detect any negative trends or credits that are deteriorating such that we expect them to go nonperforming over the course of 2021.
Chris O'connell: As such we have no credit.
Chris O'connell: Charge off assumptions within the forecast.
Chris O'connell: Okay great.
Chris O'connell: I appreciate the time thank you.
Chris O'connell: Thanks, Curt anxious.
Speaker Change: Thank you and we will take our next question from Mark Fitzgibbon with Piper Sandler. Please go ahead.
Chris O'connell: Hey, guys good morning.
Chris O'connell: Good morning, Mark.
Chris O'connell: And just to clarify so the 175 million to 177 million of operating expenses that includes the $11 million of charges you expect to take this year related to the tech investments.
Chris O'connell: That's correct.
Chris O'connell: Okay, Okay great.
Chris O'connell: Secondly, and it looked like you had like $92 million TPG deposits at the end of the year and obviously you had a little bit of fee income in the fourth quarter Youre, saying all of those deposits will be gone in the first quarter and it'll be essentially zero fee income.
Chris O'connell: That's correct.
Okay.
Chris O'connell: Great.
Chris O'connell: I wondered.
Chris O'connell: I'm sorry go ahead.
Chris O'connell: Was going to say it would be wonderful if they stuck around it because there's no cost deposits, but we are modeling them is out the door within the next 60 days basically.
Chris O'connell: Okay.
Chris O'connell: And next I wondered if you could maybe give us an update on any major trends that youre seeing in the skilled nursing facility space.
Chris O'connell: Given the change in in new administrations.
Chris O'connell: Any any thoughts there any comments on how it may impact that business.
Chris O'connell: We haven't seen or heard of any and we spent a lot of time with our operators. We've been spending a lot of time with them recently talking about their performance in 'twenty, four which has been extraordinary.
Chris O'connell: Other than just feeling optimistic generally speaking.
Chris O'connell: No one factoring in higher returns as a result of the new administration.
Chris O'connell: No, it's more blocking and tackling and grabbing more market share and they're all excited about building and expanding their footprint.
Chris O'connell: Nothing specifically tied to the new administration other than feeling good about it.
Chris O'connell: Great. Thank you.
Thank you.
Speaker Change: And we will take our next question from <unk> Strickland with Husky Group. Please go ahead.
Speaker Change: Hey, good morning.
Speaker Change: Just wanted to clarify on the margin guide the way to think about that.
Speaker Change: You said, the first quarter would be five basis points higher than the core normalized rate. So does that mean, we expect the margin to go from kind of around 360 in the first quarter towards.
Speaker Change: <unk> hundred 70 ish by the end of the year close to one rate cut mid year is that.
Speaker Change: Am I understanding that correctly.
Speaker Change: Alright, so two parts to the question first quarter five bps above normalized fourth quarter. So that gets you to the context of three 6%.
Speaker Change: For the year, we figure $3 70 to $3 75, which means we end the year north of that probably closer to 380.
Speaker Change: And Thats again, one rate cut.
Speaker Change: Penciled in July.
Speaker Change: Got it.
Speaker Change: And then just wanted to ask if you're seeing any different trends.
Speaker Change: Occupancy, particularly in office.
Speaker Change: Just it seems like return to office have accelerated a little bit I'm, just curious if youre seeing that among your customers.
Speaker Change: A little bit, but it's a broader discussion about the type of office building. If it's a class a office building is it in Midtown is it in Midtown South is it downtown so.
Speaker Change: The answer is yes.
Speaker Change: But it is different depending on the specific office building and its location, but the tea leaves are more positive now than they.
Speaker Change: They have been.
Speaker Change: In recent quarters, our recent recent months.
Speaker Change: Okay.
Speaker Change: And just one last one for me.
Speaker Change: Seems like you've been able to get pretty good yields on.
Speaker Change: The loans that you see.
Speaker Change: Anything different in terms of competitive pricing pressures.
Speaker Change: Any new entrants or anything like that that could be building.
Speaker Change: Yield a little bit lower faster.
Speaker Change: Now, we don't really see any competitive pressures at all in continuing to grow grow our business and it seems like a lot of banks are stuck in stagnation here trying to restructure their balance sheet. So.
Speaker Change: We have a lot of wind at our sale and we continue to service commercial clients, who are looking to build wealth. So no. We don't have those kind of competitive pressure I can add an anecdote there.
Speaker Change: On a weekly basis and at a pricing guidance to the lenders.
So far this year have had no one come to mono therapy, we gotta do something about that so so far so good no no obvious pressures that would cause us to tighten spreads at least it's Andy.
Speaker Change: Alright, great. Thanks, Dan appreciate taking my questions.
Speaker Change: Thank you Patty.
Speaker Change: Thank you.
Speaker Change: This concludes the allotted time for questions I would now like to turn the call over to Mark Defazio for any additional or closing remarks.
Mark Defazio: I just want to thank each and every one of you for your support and your continued confidence in management and the board.
Speaker Change: After celebrating in 2024 25 years of operating successful operating history.
Speaker Change: I'm feeling more optimistic today than ever that the opportunities are greater today than they've ever been.
Speaker Change: With new technologies coming into financial services.
Speaker Change: It's really an exciting time to be in banking and I'm glad that we're not in stagnation and we are looking to grow.
Speaker Change: And that's as a result of that.
Speaker Change: Properly managing our business over the last many years. So we are positioned very well to continue to take advantage of the dislocation in our sector and also continue to grab market share over the next couple of years. So thank you again and look forward to talking to each and every one of you and.
Speaker Change: The next quarterly meeting.
Speaker Change: Yeah.
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 and why Dot com. Please disconnect. Your line at this time and have a wonderful day.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Right.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Good morning.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Mhm.
Speaker Change:
Speaker Change: Uh huh.
Speaker Change: <unk>.
Speaker Change: Yeah.
Speaker Change: Oh.
Speaker Change: Hello.
Speaker Change: No.
Speaker Change: Uh huh.
Speaker Change: Okay.
Speaker Change: Alright.
Speaker Change: Okay.
Speaker Change: No no no.
Speaker Change: Uh huh.
Speaker Change: Okay.
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Mhm.
Speaker Change: Sure.