Q1 2025 Metropolitan Bank Holding Corp Earnings Call
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Operator: [music] Welcome to the Metropolitan Commercial Bank's first quarter 2025 earnings call.
We didn't change.
Musical chairs.
Speaker Change: Please standby your program is about to begin if you need assistance during the conference today. Please press star zero.
Uh huh.
Speaker Change: Welcome to the Metropolitan commercial bank the first quarter.
Speaker Change: 2025 earnings call.
Operator: Hosting the call today for Metropolitan Commercial Bank are Mark DeFazio, President and Chief Executive Officer, and Dan Daughtry, Executive Vice President and Chief Financial Officer. Today's call is being recorded. At this time, all participants are 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 do pick up your handset to allow optimal sound quality.
Speaker Change: On the call today from Metropolitan Commercial Bank, our Mark Defazio, President and Chief Executive Officer, and Dan Docherty, Executive Vice President and Chief Financial Officer.
Speaker Change: Today's call is being recorded at this time all participants are placed in a listen only mode and the floor will be open for your questions. Following the prepared remarks if.
Speaker Change: If you would like to ask a question at that 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: We ask that you do pick up your handset to allow optimal sound quality.
Operator: Lastly, should you require operator assistance, please press star zero.
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Speaker Change: 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 and why Dot com.
Operator: During today's presentation, reference will be made to the company's earnings release and investor presentation, copies of which are available at mcbankny.com. Today's presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to the company's notices regarding forward-looking statements and non-GAAP measures that appear in the earnings release and investor presentation.
Speaker Change: 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: Please refer to the company's notices regarding forward looking statements and non-GAAP measures that appear in the earnings release and Investor presentation.
Mark Defazio: It is now my pleasure to turn the floor over to Mark DeFazio, President and Chief Executive Officer. You may begin. Thank you, Katie. Good morning, and thank you all for joining our first quarter earnings call. While we hear the word uncertainty more and more frequently in the popular press, we at MCB are well prepared to deal with whatever comes next. MCB operates from a position of strength and robust levels of liquidity, capital, and earnings. Our strength is a reflection of our staunch and enduring commitment to safe and sound banking practice. We will continue to maintain our discipline, and we are prepared to support our clients and communities throughout the ups and downs of the economy.
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: Thank you Katie good morning, and thank you all for joining our first quarter earnings call.
Speaker Change: While we hear the word uncertainty more and more frequently in the popular press we had M. C. B are well prepared to deal with whatever comes next MTB operates from a position of strength and robust levels of liquidity capital and earnings our strength is a reflection of our staunch and enduring commitment to safe and sound banking.
Speaker Change: Practices, we will continue to maintain our discipline and we are prepared to support our clients and communities throughout the ups and downs of the economy.
Mark Defazio: Our performance in the first quarter of the year was impressive. We grew loans by $308 million, or 5.1%. We are especially proud of our deposit growth of $465 million, or 7.8%. I want to point out that neither of those growth percentages are annualized. Along with outsized balance sheet growth, we were able to expand our NIM by two basis points to 3.68% from 3.66% in the prior quarter. This marks our sixth consecutive quarter of margin expansion. In March, we bought back more than 228,000 shares of MCB, or $12.9 million, which equates to more than 2% of the outstanding shares at year-end 2024.
Speaker Change: Performance in the first quarter of the year was impressive we grew loans by 308 million or five 1%.
Speaker Change: We are especially proud of our deposit growth of $465 million.
Speaker Change: Seven 8%.
Speaker Change: Want to point out that neither of those growth percentages are annualized.
Speaker Change: Along with outsized balance sheet growth, we were able to expand our NIM by two basis points to 368% from $3 six 6% in the prior quarter.
Speaker Change: This marks our sixth consecutive quarter of margin expansion.
Speaker Change: In March we bought back more than 228000 of 228000 shares of MTB were $12 9 million, which equates to more than 2% of the outstanding shares at year end 2024.
Mark Defazio: We continue to execute on the authorization. And as of mid-April, we were at the halfway point toward completion of the approved buyback. The timing has been financially fortuitous as the average price pay-to-book ratio has been just north of 80% of tangible book value at March 31. Our reported earnings per share was $1.45, and during the first quarter, we increased our tangible book value per share by more than 2.3% to $65.80. This marks our ninth consecutive quarter of book value accretion.
Speaker Change: We continued to execute on the authorization and as of mid April we were at the halfway point toward the completion of the approved buyback.
Speaker Change: The timing has been financially for two with this as the advent. The average price paid to book ratio has been just north of 80% of tangible book value at March 31.
Speaker Change: Our reported earnings per share was $1 45.
Speaker Change: And during the first quarter, we increased our tangible book value per share by more than two 3% to 65.
Speaker Change: $1.80.
Speaker Change: This marks our ninth consecutive quarter of book value accretion.
Mark Defazio: Dan will provide details on the quarterly earnings per share in a few moments. Our investment in franchise-wide new technology stack continues. As planned, we expect the full integration to be completed by the end of this year. We are confident that the new technologies will support and scale with MCB's diversified and growing commercial bank for years. As a quality remains strong, we have not identified any broad based negative trends in any loan segment, geography or sector that is impacting our portfolio. We have actively reached out to our clients to gather intelligence about current market stress and the impacts tariffs may have on their business.
Speaker Change: Dan will provide details on our quarterly earnings per share in a few moments.
Speaker Change: Our investment in franchise wide new technology stack continues as planned we expect the full integration to be completed by the end of this year. We are confident that the new technologies, New technologies will support and scale with MTBE is diversified and growing commercial bank for years to come.
Speaker Change: Asset quality remains strong we have not identified any broad based negative trends in any loan segment geography or sector that is impacting our portfolio.
Speaker Change: We have actively reached out to our clients to gather intelligence about current market stress and the impacts of tariffs may have.
Speaker Change: Their businesses so far the feedback we have received does not indicate any specific areas of concern.
Mark Defazio: So far, the feedback we have received does not indicate any specific areas of concern. First quarter provision expense of $4.5 million supported our continued loan growth, as well as a $1 million specific reserve for a $2 million unsecured line of credit. We remain confident that a meaningful portion of the loan workouts that are currently in flight will be resolved successfully in 2025. We believe that our healthy credit metrics are a direct result of MCB's pipeline, conservative underwriting, and portfolio diversity. Our performance is also supported by our exclusive focus on relationship-based commercial banking with high-quality commercial clients and sponsors in industry segments that we know well.
Speaker Change: First quarter provision expense of $4 5 million supported all continued loan growth as well as a $1 million specific reserve for a $2 million unsecured line of credit.
Speaker Change: We remain confident that a meaningful portion of the loan workouts that are currently in flight will be resolved successfully in 2025.
Speaker Change: We believe that our healthy credit metrics are a direct result of mtb's pipeline conservative underwriting and portfolio diversity.
Speaker Change: Our performance is also supported by our exclusive focus on relationship based commercial banking with high quality commercial clients and sponsors and industry segments that we know well.
Mark Defazio: We continue to carefully manage asset quality and optimize profitability while further solidifying our banking presence, not only in New York, but in several other complementary markets. We 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: We continued to carefully manage asset quality and optimized profitability, while further solidifying our banking presence not only in New York, but in several other complementary markets. We 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.
Speaker Change: Teaching opportunities to increase shareholder value.
Mark Defazio: I would like to thank our employees and our board of directors, whose dedication and efforts are the engine that drives our continued success.
Speaker Change: I would like to thank our employees and our board of directors, whose dedication and efforts are the engine that drives our continued success.
Mark Defazio: Last, but surely not least, I would like to thank our clients for their engagement, continued loyalty and support.
Speaker Change: Yes, but surely not least I would like to thank our clients for their engagement continued loyalty and support.
Dan Dougherty: I will now turn the call over to Dan Dougherty, our CFO. Thank you, Mark, and good morning, everyone. As Mark said, we started the year with a strong performance in the first quarter.
Dan Docherty: I will now turn the call over to Dan <unk>, our CFO. Thank you Mark and good morning, everyone.
Speaker Change: We as Mark said, we started the year with a strong performance in the first quarter I'll start with a few comments on the balance sheet.
Dan Dougherty: I'll start with a few comments on the balance sheet. As Mark mentioned, we grew loans by over $300 million. Total originations and draws of approximately $490 million were at a weighted average coupon, or WAC, net of fees of about 7.84%. Payoffs and paydowns totaled approximately $185 million at a WAC of $7.44. Positive Delta and the whack between new volume loans and payoffs, combined with a 40 basis point increase in renewal coupons from $693 to $731, are the primary drivers of our ability to support and grow the net interest margin. Looking forward to the second quarter, the WAC of approximately 590 million of pending maturities is 7.38%.
Speaker Change: As Mark mentioned, we grew loans by over $300 million total originations and draws of approximately $490 million were at a weighted average coupon or WAC net of fees of about $77 eight 4%.
Speaker Change: Payoffs and Paydowns totaled approximately 185 million at a whack of 74, 4%.
Speaker Change: Positive Delta in the whack between new volume loans and payoffs combined with a 40 basis point increase in renewal coupons from $6 93 to 731.
Speaker Change: The primary drivers of our our ability to support and grow the net interest margin.
Speaker Change: Looking forward to the second quarter, the WAC of approximately $590 million of pending maturities is seven 3%.
Speaker Change: Importantly, we have not loosened, our credit standards or revised our underwriting processes and any way to pursue loan growth.
Dan Dougherty: Importantly, we have not loosened our credit standards or revised our underwriting processes in any way to pursue loan growth.
Speaker Change: Next let's talk about our deposit experienced in the first quarter.
Dan Dougherty: Next, let's talk about our deposit experience in the first quarter. In the quarter, we grew deposits by about $465 million. Every deposit vertical contributed to the linked quarter growth. The top three growth contributors in rank order were municipal, EB-5, and lending customers. quarter over quarter, the cost of interest bearing deposits and the cost of deposit and the cost of total deposits declined by 32 basis points and six basis points respect respect . The decline in linked quarter deposit costs reflects the fourth quarter reductions in the Fed Fund's target rate offset noticeably by the deposit mix shift between interest sparing and DDA, which was primarily related to the GPG exit in the fourth quarter of last year.
Speaker Change: In the quarter, we grew deposits by about $465 million.
Speaker Change: Every deposit vertical contributed to the linked quarter growth.
Speaker Change: Top three growth contributors in rank order, where municipal E 85 and lending customers.
Speaker Change: Order over quarter, the cost of interest bearing deposits and the cost of deposits and the cost of total deposits declined by 32 basis points and six basis points respect risk.
Speaker Change: Respectively.
Speaker Change: The decline in linked quarter deposit costs reflects the fourth quarter reductions in the fed funds target rate.
Speaker Change: Noticeably by the deposit mix shift between interest bearing DDA, which was primarily related to the G. PG exit in the fourth quarter of last year.
Dan Dougherty: It is worth noting that the first quarter increase in deposits was also net of $35 million in GPG deposit outflows. The GPG deposit outflows are primarily related to the return of reserve balances and checks. Our NIM was 3.68% in the first quarter. You'll recall that prior period NIM guidance for the first quarter was 3.60% versus a normalized fourth quarter NIM of 3.55%. Loan and Deposit Pricing Discipline combined with the full effect of the two fourth quarter 2024 rate cuts supported the NEMO performance.
Speaker Change: It is worth noting that the first quarter increase in deposits was also net of $35 million in G. P. G deposit outflows. The G. P. G deposit outflows were primarily are primarily related to the return of reserve balances and check clearing.
Speaker Change: Our NIM was 368% in the first quarter Youll recall that prior period NIM guidance for the first quarter was three 6% versus a normalized fourth quarter NIM of $3 five 5%.
Speaker Change: Loan and deposit pricing discipline combined with the full effect of the two fourth quarter 2024 rate cuts supported the NIM outperformance.
Speaker Change: Now, let's move on to our income statement and related performance measures net income was $16 $3 million down $5 million versus the prior period diluted earnings per share was $1.45 down 40, <unk> versus the prior period.
Dan Dougherty: Now, let's move on to our income statement and related performance measures. Net income was $16.3 million, down $5 million versus the prior period. Diluted earnings per share was $1.45, down $0.43 versus the prior period. The first item of note here is that while the reported results are well below the prior period results, they are very much in line with our forecast and expectations, which of course acknowledge the exit from the balance business last year.
Speaker Change: The first item of note here is that while the reported results are well below the prior period results. They are very much in line with our forecast and expectations, which of course acknowledged the exit from the bass business last year.
Speaker Change: Notable items affecting the first quarter results include the following.
Dan Dougherty: Notable items affecting the first quarter results include the following. So, first of all, the net, our net interest income was flat quarter over quarter. There are two notable factors affecting the net interest income. The first item is the aforementioned reposition of the deposit base, repositioning of the deposit base in the fourth quarter of 2024. In that period, we offloaded approximately 600 million in deposits with an average cost of one and a half percent, thus creating an approximate one and a half to $2 million head Secondly, while quarterly loan growth was $300 million, the timing of loan cash flows resulted in average loan growth of only $175 million.
Speaker Change: Okay.
Speaker Change: So first of all the net our net interest income was flat quarter over quarter.
Speaker Change: There are two notable factors affecting the net interest income the first item is the aforementioned reposition of the deposit base repositioning of the deposit base in the fourth quarter of 2024 in that period, we offloaded approximately $600 million of deposits with an average cost of one 5% thus.
Speaker Change: Getting an approximate one and a half to $2 million headwind.
Speaker Change: Secondly, while quarterly loan growth was $300 million the timing of loan cash flows resulted in average loan growth of only $175 million.
Dan Dougherty: And we'll see how that affects the... The provisioning on that affects this. On the next item here, the provision in the first quarter was $4.5 million. The elevated provision was primarily the result of loan growth. However, we did reserve an additional $1 million versus a non-performing $2 million unsecured line of credit. And again, the headwind resulting from that provisioning was a little more than $1 million.
Speaker Change: And we'll see how that affects the.
Speaker Change: The provisioning on that FX and the next item here.
Speaker Change: The provision in the first quarter was $4 $5 million.
Speaker Change: The elevated provision was primarily the result of loan growth. However, we did reserve an additional $1 million versus a nonperforming 2 million unsecured line of credit.
Speaker Change: And again, the headwinds, resulting from that provisioning was a little more than $1 million.
Dan Dougherty: Linked quarter, non-interest income was down $763,000, primarily because of the absence of GPG fee income, offset somewhat by the one-time income recognition of about $800,000 of BAS-related programs. Now on to non-interest expense. Non-interest expense was $42.7 million, up $4.5 million versus the prior quarter. The increase versus the prior period was primarily related to a seasonal increase of approximately $1.5 million in comp and benefits, notably FICA and 401K, an increase of approximately $1.3 million in professional fees, an increase of approximately $1.2 million in other expenses, and the settlement reversal that was recognized in the fourth quarter of 2024 of approximately $500,000.
Speaker Change: Linked quarter non interest income was down $763000, primarily because of the absence of GPT fee income offset somewhat by the one time income recognition of about 800000.
Speaker Change: <unk>.
Speaker Change: <unk> related program fees.
Speaker Change: Now onto non interest expense non interest non.
Speaker Change: Noninterest expense was $42 $7 million up $4 $5 million versus the prior quarter.
Speaker Change: The increase versus the prior period was primarily related to a seasonal increase of approximately $1.5 million in comp and benefits, notably FICA and four one K and increase of approximately $3 million in professional fees, an increase of approximately $1.2 million in other expenses.
Speaker Change: And the settlement of a reversal that was recognized in the fourth quarter of 2024 or approximately $500000.
Dan Dougherty: I would say that approximately 1.5 million of the OPEX increases that I just pointed out are either seasonal in nature or one time. Notably, in the first quarter, expenses related to the Digital Transformation Project were de minimis.
Speaker Change: I would say that approximately $1 5 million of the Opex increases that I just pointed out are either seasonal in nature or one time.
Speaker Change: Notably in the first quarter expenses related to the digital transformation project were de Minimis.
Dan Dougherty: as a result. The $11 million of IT project-related expenses baked into the 2025 budget are expected to be recognized over the remaining three quarters of 2025. Finally, the effective tax rate for the quarter was approximately 30%.
Speaker Change: As a result.
Speaker Change: The $11 million of project related expenses baked into the 2025 budget are expected to be recognized over the remaining three quarters of 2025.
Speaker Change: Finally, the effective tax rate for the quarter was approximately 30%.
Dan Dougherty: I'll now provide an update to 2025 guidance, a couple of highlights there. Our planned loan growth is a bit higher than prior guidance, and I'm going to cuff that at 10 to 12%. The funding assumption is generally generic deposit growth priced at Fed funds minus 80 to 85. Again, this is a little more conservative than previous guidance as a result of our expectations for growth concentrated in relatively higher cost deposit verticals. The full year NIM is still expected to be 370 to 3.75%. Underlying the NIM forecasts is we continue to run our model with one 25 basis point rate cut in July.
Speaker Change: I'll now provide an update to 2025 guidance a couple of highlights there are planned loan growth is a bit higher than prior guidance I'm going to cover that at 10% 12%.
Speaker Change: The funding assumption is generally generic deposit growth price that fed funds minus 80% to 85 again. This is a little more conservative than previous guidance as a result of our expectations for growth concentrated at relatively higher cost deposit verticals.
Speaker Change: Full year NIM is still expected to be $3 70 to $3 75%.
Speaker Change: Underlying those forecast that NIM forecast is we continue to run our model with 125 basis point rate cut in July.
Dan Dougherty: Additional rate cuts are expected to benefit the NIM at about plus 5 bps for each 25 basis point rate cut. Of course, that depends on timing.
Speaker Change: Additional rate cuts or are expected to benefit the NIM at about plus five bps for each 25 basis point rate cut of course that depends on timing.
Dan Dougherty: And then finally, it goes without saying that our forecast does not contemplate the possibility of a material downshift in U.S. economic conditions or material changes in customer behavior. As well, the outlook for the macroeconomic variables that underlie our allowance for credit loss may result in increased provisioning in future quarters.
Speaker Change: And then finally, it goes without saying that our forecast does not contemplate the possibility of a material downward shift in U S economic conditions.
Speaker Change: Or material changes in customer behavior.
Speaker Change: As well the outlook for the macroeconomic variables that underlie our allowance for credit loss May result in increased provisioning in future quarters.
Operator: 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 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. Again, we do ask that you please pick up your handset to allow optimal sound quality while posing your questions. Thank you.
Speaker Change: I will now turn the call back to our operator for Q&A.
Speaker Change: 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.
Speaker Change: Again, we do ask that you. Please pickup your handset to allow optimal sound quality, while posing your questions.
Speaker Change: Thank you. Our first question will come from Mark Fitzgibbon with Piper Sandler Your line is open.
Mark Fitzgibbon: Our first question will come from Mark Fitzgibbon with Piper Sandler. Your line is open. Hey, guys. Good morning. Happy Tuesday. Good morning, Board of Directors. Just a couple of quick clarifications. So, Dan, on your expense numbers, I heard your comments about, you know, the $11 million being sort of expensed evenly over the remainder of the year. What is total operating expenses, including those, going to look like, say, in the second quarter? Is that sort of $41 million? Is that what you were suggesting?
Mark Fitzgibbon: Hey, guys good morning Happy Tuesday.
Speaker Change: Good morning.
Speaker Change: Just a couple of quick clarification, so Dan on your expense numbers I heard your comments about $11 billion being sort of.
Speaker Change: <unk> evenly over the remainder of the year, what is total operating expenses, including those going to look like say in the second quarter is that sort of $41 million is that what you were suggesting.
Dan Dougherty: Uh, no, I think second quarter will be closer to 45 million actually. Right, so the Just to clarify, right, there's $11 million of IT spend. We only spent a very small amount in the first quarter. These contracts that underlie that endeavor are, I think, what they call milestone contracts. So they kind of hit when something, when one bit of the project has been completed. So straight line is not a bad way to model it, but it could be much, could be lumpier than that without a question. Again, my number for 2Q is including, you know, that adjustment on the IT spend is around $44.8 million.
Speaker Change: No I think second quarter will be closer to $45 million actually alright. So the.
Speaker Change: Just to clarify right Theres, a $11 million of spend we spent a very small amount in the first quarter. These contracts that underlie that endeavor.
Speaker Change: What they call milestone contracts, so they kind of hit when something when would be the project has been completed so straight line is not a bad way to model it but it could be much could be.
Lumpier than that without a question.
Speaker Change: Again, my number for two Q.
Speaker Change: Is including.
Speaker Change: That adjusted on the it spend is about $44 8 million.
Speaker Change: Okay.
Speaker Change: Got it.
Mark Fitzgibbon: Got it.
Dan Dougherty: And then secondly, just to clarify, there isn't going to be any remaining GPG-related expense or income items going forward in your estimation, correct? No, there's a little bit of dollars left, reserve balances, et cetera, that sit here, earning nothing, until they get cleaned up. There'll be probably a sheetman involved in some of that stuff, so that takes a long time, but no fee-related income or expense.
Speaker Change: And then secondly, just to clarify that there isn't going to be any remaining GPT related expense or income items.
Speaker Change: Going forward in your your estimation correct.
Speaker Change: No. There is there is it a.
Speaker Change: A little bit of dollars left reserve balances et cetera.
That sit here, earning nothing until they get cleaned up there'll be probably a shipment involved in some of that stuff. So that takes a long time, but no no fee.
Speaker Change: <unk> related income.
Speaker Change: Income or expenses.
Mark Fitzgibbon: One question around that Gold Card program. I'm curious how you think that might have implications for your EB-5 business and how you're positioning yourself? We've had many conversations with all of the stakeholders around that industry, and most people think that it's a non-event, but we'll have to wait and see how that plays out. If anything, it could just be another product that sits alongside of EB-2 and EB-5.
Speaker Change: Okay. One question around that gold card program I'm curious.
Speaker Change: How do you think that might have implications for your <unk> business and how youre positioning yourself.
Speaker Change: We've had many conversations with all of the stakeholders around that industry and.
Speaker Change: Most people think that its a non event, but we'll have to wait and see how that plays out if anything it could just be another product that sits alongside of E. B two and <unk> five.
Mark Defazio: EB-2 and EB-5 programs that have been around for a long time are different and unique to a more working class person who can afford the costs associated with that program, as opposed to a $5 million black card entry fee. So we think it could be a good bolt on if the administration actually goes through with it as a new product, one that regional centers and developers could now take advantage of. So we think it is, as the glass half full, we don't think it would be disruptive to the core business. Okay.
Speaker Change: <unk> and <unk> programs that had been around for a long time.
Speaker Change: Are different and unique to a more working class person who can afford.
Speaker Change: The cost associated with that program as opposed to a 5 million dollar black card entry fee. So.
Speaker Change: We think it could be it could be you know a good bolt on if the administration actually goes through with it as a new product one that regional centers and developers can now take advantage of so we think it is as.
Speaker Change: The glass half full.
Speaker Change: We don't think it would be disruptive to the core business.
Speaker Change: Okay, and then on deposit growth, obviously, you had great growth this quarter I guess I'm curious any seasonal patterns in those aside from that the municipal Stephane.
Mark Fitzgibbon: And then on deposit growth, obviously you had great growth this quarter. I guess I'm curious, any seasonal patterns in those, aside from the municipal stuff we're aware of, but any seasonal patterns in the other deposit businesses we should kind of be thinking about? No, nothing seasonal at all. Not at all. Even the munis really, we don't really have a large component to that book as we sit here today. That could change through time obviously, but we tried to tease it out of there and I couldn't get it. So no, nothing seasonal in the deposit.
Speaker Change: But any seasonal patterns in the other deposit businesses, we should kind of be thinking about it.
Speaker Change: Nothing seasonal it'll not at all even the Muni is really we don't really have a large.
Speaker Change: Seasonal component to that book.
Speaker Change: As we sit here today that could change through time, obviously, but we tried to tease it out of there and I couldnt get it so no nothing seasonal in the deposit growth.
Speaker Change: Okay, and then last question.
Mark Fitzgibbon: And then the last question, Mark, I know as a growth company, you guys have not paid a dividend traditionally. I guess I'm curious, given you have such strong capital ratios, your earnings power is good. You know, has there been any discussion at the board about potentially having a small dividend with the goal of kind of broadening the shareholder base? Yeah, I think so, Mark, and I think more to come on that. You'll be hearing more about that. But we have been having a very active discussion.
Speaker Change: Mark I know as a growth company you guys have not paid a dividend traditionally.
Speaker Change: Yes, I am curious given you have such strong capital ratios. Your earnings power is good is.
Speaker Change: Has there been any discussion at the board about potentially having a small dividend.
Speaker Change: With a goal of kind of broadening the shareholder base.
Mark Fitzgibbon: Yes, I think so mark and I think more to come on that you'll be hearing more about that but we have been having very active discussions on that yes.
Speaker Change: Great. Thank you.
Mark Fitzgibbon: Great. Thank you. Thanks, Mark. Thank you once again.
Mark Fitzgibbon: Thanks Mark.
Speaker Change: Thank you once again that is star one if you would like to ask a question.
Operator: That is Star 1 if you would like to ask a question.
Inayra Bohan: Our next question will come from Inayra Bohan with Ave Group, your line is open. Happy Tuesday, guys. Happy Tuesday. Thank you.
Speaker Change: Our next question will come from <unk> <unk> with Avi Group. Your line is open.
Speaker Change: Okay.
Hockey Tuesday, guys.
Speaker Change: Okay Tuesday.
Speaker Change: Thank you.
Inayra Bohan: My first question is to do with non-owner-occupied CRE. Have you guys seen any sort of trend one way or another on customer occupancy for your non-owner occupied CRE book? No, we're fairly diversified and it's fairly stable throughout the portfolio.
Speaker Change: My first question is to deal with.
Speaker Change: Non owner occupied CRE.
Speaker Change: Have you guys seen any sort of trend one way or another on that customer occupancy is for you or not.
Speaker Change: And owner occupied CRE Doug.
Speaker Change: No, it's fairly diversified and it's fairly stable throughout the portfolio.
Speaker Change: Okay. Thank you.
Inayra Bohan: Thank you and congratulations on the deposit growth across all your verticals, but do you guys see any other opportunity or in a specific vertical or are you seeing and projecting more just across all vertical deposit growth. But we see a lot more runway with the deposit verticals we have. You can look at those industries. So we haven't really even scratched the surface on the possibilities that are within the current verticals.
Speaker Change: And congratulations on the deposit growth across all your verticals, but do you guys see any other opportunity or in a specific vertical or are you seeing and projecting more dust.
Speaker Change: Across all vertical with deposit growth.
Speaker Change: But we see a lot more runway with the deposit verticals. We have you can look at those industry. So we haven't really even scratched the surface on.
Speaker Change: The possibilities there.
Speaker Change: Within the current verticals, but.
Inayra Bohan: But as you know, MCB, we are already working on new opportunities that will, you know, bear some fruit in second half of twenty five into twenty six and twenty seven. And the other thing, keep in mind, you know, we're doing this organically. We're not purchasing teams, you know, and we are a branch like franchise as well. So, you know, so we have a lot of runway ahead of us with the industries that we are deepening ourselves into new initiatives that we talk about. We tease out every once in a while, but you'll see real contributions coming soon.
Speaker Change: As you know MTB, we already working on new opportunities that will bear.
Speaker Change: <unk> fruit in second half of 'twenty, five 'twenty six 'twenty seven and the other thing keep in mind, we're doing this organically without purchasing teams.
Speaker Change: And we are a branch light franchise as well. So so so we have a lot of runway ahead of us with the industries that we are deepening ourselves into.
Speaker Change: New initiatives that we talked about we tease out every once in a while but youll see.
Speaker Change: Real contributions coming soon and again, we're not acquiring teams, bringing on that cost of compensation and where our branch light franchise as well so it's fairly efficient strategy.
Inayra Bohan: And again, you know, we're not acquiring teams, bringing on that cost of compensation. And we're a branch like franchise as well. So it's fairly efficient strategy.
Speaker Change: Okay. Thank you and one last question for me is are you guys seeing incremental competitive pressures on loan.
Inayra Bohan: Thank you.
Inayra Bohan: And one last question for me is, are you guys seeing incremental competitive pressures on loan, on the loan or deposit side? And if so, like, what type of competition?
Speaker Change: On the loan or deposit side, and if so like what type of competition.
Mark Defazio: We don't see any competition in New York City.
Speaker Change: We don't see any competition in New York City.
Speaker Change: Okay.
Inayra Bohan: Thank you and that's it for me. Thank you.
Speaker Change: Yeah, and Milton for me.
Speaker Change: Thank you. Our next question will come from Chris O'connell with K B W. Your line is open.
Chris O'connell: Our next question will come from Chris O'Connell with KBW. Your line is open. Hey, good morning. Morning, Chris. Great quarter, and you know, in particular on the, you know, balance sheet growth, super robust. Was there, you know, you know, curious as to, you know, how the loan pipeline stands. Was there, you know, kind of a little bit of excess pull through in Q1 that may, you know, dampen Q2 a bit as the pipeline rebuilds or was it just, you know, particularly strong? No, I think it's in line with historical. We had good loan growth last year and the year before that as well, Chris.
Chris O'connell: Hey, good morning.
Speaker Change: Good morning, Chris Good morning, Chris.
Great quarter.
Speaker Change: In particular on the balance sheet growth Super robust.
Speaker Change: Was there.
Speaker Change: Just curious.
Speaker Change: Curious as to how the loan pipeline stands was there kind of a little bit of excess pull through in Q1.
Speaker Change: That may.
Speaker Change: Dampened in Q2, a bit as the pipeline rebuilds or.
Speaker Change: Suggest.
Speaker Change: Particularly strong.
Speaker Change: No I think it's in line with historical we had good loan growth last year and the year before that as well Chris. So this is in line with our guidance and the pipeline is really strong and we have a lot of deals that are close to closing. So you should see Dan just put out some higher guidance for loan growth and I think that's our base case.
Mark Defazio: So, you know, this is in line with our guidance and the pipeline is really strong. And, you know, we have a lot of deals that are close to closing. So you should see, Dan just put out some higher guidance for loan growth. And I think that's our base case for 25.
Speaker Change: So for 25.
Speaker Change: Great.
Chris O'connell: Great.
Mark Defazio: And You know, on the deposit side, as you guys, you know, had a, you know, great start kind of rebuilding, you know, post-GPG here, you know, where do you guys see, you know, the biggest opportunities within, you know, your various verticals? You know, it's hard to say which is the biggest opportunity, you know, we're diversified. And, you know, we can't rely on any one deposit vertical that creates a concentration that creates some kind of potential volatility. So, you know, we all of those deposit verticals will continue to contribute. And again, like I said, a minute ago, we have to continue driving new deposit opportunities for a branch like franchise.
Speaker Change:
Speaker Change: And.
Speaker Change: On the deposit side as you guys know.
Speaker Change: Hi.
Speaker Change: Start kind of rebuilding post TPG here, where do you guys see.
Speaker Change: Biggest opportunities within your various verticals.
Speaker Change: It's hard to say, which is the biggest opportunity.
Speaker Change: We are diversified and we can't rely on any one deposit vertical that creates a concentration that create some kind of potential volatility. So.
Speaker Change: We all of those deposit verticals will continue to contribute and again like I said a minute ago, we have to continue driving new deposit opportunities, where our branch light franchise.
Mark Defazio: So no, we expect to continue to be a core funded Got it.
Speaker Change: No we expect to continue to be a core funded institution.
Speaker Change: Got it.
Chris O'connell: And just following up on, you know, the gold card question, you know, one, you know, I know there's a few different items within that category. Do you have what the actual EB-5 related deposits are there? Gosh, give me one second. It's about $500 million right now, or $400 million. They had to really sewer up $100 million this quarter.
Speaker Change:
Speaker Change: And just following up on.
Speaker Change: The gold card.
Speaker Change: <unk>.
Speaker Change: One I know, there's a few different.
Speaker Change: Items within that category do you have with the actual <unk> five related deposits are there.
Speaker Change: Gosh.
Speaker Change: Give me one second.
Speaker Change: It's about $500 million $400 million of <unk>.
Speaker Change: Great They had a really Andrew.
Speaker Change: The $100 million this quarter I think.
Speaker Change: Okay.
Speaker Change: Yeah, and I'm just curious.
Mark Defazio: Yeah, and I'm just curious, you know, I know it's a, you know, fluid, you know, situation, but I mean, if there was an indication, you know, that that program, you know, was eventually, you know, going to go away, you know, would you start to curtail, you know, that EV5, you know, growth, you know, earlier? Or I guess, you know, how are you thinking about, like, the dynamic strategy, you know, depending on, you know, how things move from here? Well, again, it's about having diversification. You know, we demonstrated, you know, looking at GPG, which is a better example.
No it's.
Speaker Change: Fluid.
Speaker Change: Situation.
Speaker Change: I mean, if there was an indication.
Speaker Change: That that program.
Speaker Change: Was eventually going to go away.
Speaker Change:
Speaker Change: Would you start to curtail that EV five growth.
Speaker Change: Earlier or I guess, how are you thinking about like the dynamic strategy depending on.
Speaker Change: You know how things move from here.
Speaker Change: Again, it's about having diversification we demonstrated looking at G. PG, which is a better example, we had 30 prior 30 months, we had over two and a half billion of DTA sitting on our balance sheet and we did not exposed to bank. When we exited that business. We will replace the deposits grew the balance sheet.
Mark Defazio: We had, you know, in 30 prior 30 months, we had over two and a half billion of DDA sitting on our balance sheet. And we did not expose the bank when we exited that business. We we replaced the deposits, grew the balance sheet, had instability and expansion. So, you know, any one product, deposit product in this case is not going to put this bank at risk. By the way, it doesn't just go away. These are deposits that are tied to development projects around the country. So even if tomorrow, which this could not happen because the approval for EB-5 goes is it goes out through the end of 2000, congressionally goes out to the end of 2027, I believe.
Speaker Change: <unk> had NIM stability and expansion so.
Speaker Change: Any one product deposit product in this case is not going to put this bank at risk.
Speaker Change: By the way it doesn't just go away. These are deposits that are tied to development projects around the country. So even if tomorrow, which it just could not happen because the approval for AB five goes it goes out through the end of two that congressionally goes out to the end of 2027 I believe.
Mark Defazio: So these projects still have to get built. So so we're just not going to create a concentration. We don't have a history of creating concentrations of volatility here. And again, I think this administration has a lot more other things to be focused on.
Speaker Change: So these projects still have to get built.
Speaker Change: So we just not going to create a concentration we don't have a history of creating concentrations of volunteer volatility here and again.
Speaker Change: I think this administration and it has a lot more other things to be focused on so I don't know if <unk> is going to be top of mind anytime soon.
Chris O'connell: So I don't know if EB-5 is going to be top of mind anytime soon. Understood.
Speaker Change: Understood.
Speaker Change: And just on the you know I appreciate the buyback.
Chris O'connell: And just on the, you know, you know, appreciate the buyback, you know, in the update here for, for, you know, mid April, and obviously, you know, you guys are, you know, seeing great growth opportunities as well, as you kind of balance those two out.
Speaker Change: And the update here for mid April and obviously you guys are.
Speaker Change: Seeing great growth opportunities as well as you kind of balance those two out.
Speaker Change: <unk>.
Mark Defazio: You know, what's the constraining or what's the target kind of capital ratio longer term that you guys would like to, you know, Well, we're well north of 9% TCETA, right? So, I think we've got room there. I would like to keep it north of 9%, but I would not be at all opposed to approaching.
Speaker Change: What's the constraining or whats the target capital ratio longer term that you guys would like to stick around.
Speaker Change: Well, we're well north of 9% TCE to Ta right. So I think we've got room, there I would like to keep it north of 9%, but I would not be at all opposed to approaching 90%.
Speaker Change: Great.
Dan Docherty: And then Dan I think you had said.
Dan Dougherty: And then, Dan, I think you had said. that there is, you know, $1.5 million of either, you know, seasonal or one-time-ish type of things in the expenses in Q1. Can you just, you know, flesh that out a little? Yeah, so on the comp and benefit side, the FICA and 401k kind of seasonal top-ups, if you will, amounted to more than $1 million at the March We had planned to do a follow-on equity offering in the first quarter. It never happened. We charged off those legal expenses. That was about $400,000. as well, but those are the two big ones.
Dan Docherty: But there is $1.5 million.
Speaker Change: Of either.
Speaker Change: As in all our onetime ish type of things in the expenses in Q1 can you just flesh that out a little.
Speaker Change: Yeah, so on the comp and benefits side, the FICA and four O K.
Speaker Change: Seasonal top ups, if you will amounted to more than $1 million at the margin.
Speaker Change: We we had planned to do a follow on.
Speaker Change: Equity offering in the first quarter. It never happened we charged off those legal expenses that was about $400000.
Speaker Change: As well.
Speaker Change: So those are the two big ones. They kind of gets you to the $1 $5 million, but.
Dan Dougherty: They kind of get you the $1.5 million, but there's a couple, there's lots of other odds and ends in there that I could point to, but the detail's a little too gruesome, honestly.
Speaker Change: Theres, a theres lots of other odds and ends in there that I could point to but.
Speaker Change: The details a little too gruesome honestly.
Speaker Change: Okay.
Dan Dougherty: Okay, and And so, you know, when you think about the $11 million remaining here. over the rest of 2025, does it still get you to the point where? You know, I guess you're, you know, not much different or even maybe potentially lower on a core expense. quarterly run rate exiting Q4. exiting Q425. Yeah, I guess. you know, from, from, you know, first of all, everyone's kind of got $2.75 to $3 million penciled in per quarter, right? So now the first quarter, $2.75 million needs to get spread out over the remaining three quarters. So what is that, $900,000 per, $800,000 per?
Speaker Change:
Speaker Change: And.
Speaker Change: And so when you think about the $11 million remaining here.
Speaker Change: Over the rest of 2025.
Speaker Change: It still gets you to the point where.
Speaker Change: I guess your.
Speaker Change: Not much different or even maybe potentially.
Speaker Change: Lower on a core expense quarterly.
Speaker Change: Quarterly run rate exiting Q4.
Speaker Change: Exiting Q4 'twenty five.
Speaker Change: Yes, I guess.
Speaker Change: Yeah, I mean first of all we're going to take.
Speaker Change: You got a figure first of all everyone kind of get.
$2 $75 million to $3 million penciled in per quarter right. So now the first quarter to 75 million it needs to get spread out over the remaining three quarters. So what does that $900000 per.
Speaker Change: $801000 per.
Dan Dougherty: And that gets me to the $45 million in Q2. I am hopeful that we can at least maintain that going forward.
Speaker Change: And that gets me to the $45 million in Q2.
I am hopeful that we can at least maintain that going forward.
Speaker Change: Good.
Speaker Change: You'll recall I noted professional fees were a little bit elevated in the first quarter as well.
Dan Dougherty: you'll recall I noted professional fees were a little bit elevated in the first quarter as well. That, the expectation for that line item is starting to take shape with a downward trend. So yeah, I think I can certainly hold the line there and hopefully we can manage it downward slightly as well as we come into the new year.
Speaker Change: The expectation for that line item is starting to take shaped with a downward trend. So yeah, I think I can certainly hold the line there and hopefully we can manage it.
Speaker Change: Downward slightly as well as we come into the new year.
Speaker Change: Okay got it.
Dan Dougherty: Okay, got it. So, you know, backing out, I guess, the original 11 million, you know, from, from, you know, the prior, you know, indicated 175 to, you know, 177, you know, the core for 2025 is still in that 164, 166, right? Yeah, so 161, yeah, 165, one-ish. The right number, yep.
Speaker Change: <unk>.
Speaker Change: So backing out I guess, the original $11 million.
Speaker Change: From the prior indicated $1 75.
Speaker Change: 177.
Speaker Change: Core for 2025 is still in that 160 466. So it was 165 one.
Speaker Change: Fish.
Speaker Change: The right number yep.
Speaker Change: Great that's helpful.
Chris O'connell: Great, that's all.
Chris O'connell: Um All right. That's all I had for now.
Speaker Change: Alright, Thats all I had for now thank you.
Operator: Thank you. Thanks, Chris. Thank you, Chris. Thank you.
Chris O'connell: Thanks, Chris Thank you Chris.
Speaker Change: Thank you. This does conclude our Q&A I would now like to turn the program back over to Mark Defazio for any additional or closing remarks.
Operator: This does conclude our Q&A.
Mark Defazio: I would now like to turn the program back over to Mark DeFazio for any additional or closing remarks. Thank you. Last final statement, you know, our business continues to show foundational stability that our model, our business model is predicated on. MCB's business strategy, which is based on strong underwriting, market standing, positions us well to continue to show prudent growth in this volatile economic environment. We are here to support our clients. and while we are achieving the appropriate returns for our shareholders.
Mark Defazio: Thank you.
Mark Defazio: Last final statement you know our business continues to show foundational stability that our model our business model is predicated on Mtb's business strategy, which is based on strong underwriting market standing position positions us well to continue to show prudent growth in this volatile economic <unk>.
Speaker Change: <unk>, we are here to support our clients.
Speaker Change: And while we are achieving the appropriate returns for our shareholders I want to thank each and every one of you for spending the time with US today and I will now turn the call back over to the operator.
Mark Defazio: I want to thank each and every one of you for spending the time with us today. And I will now turn the call back over to the. Thank you, ladies and gentlemen.
Speaker Change: Thank you ladies and gentlemen. This concludes today's event you may now disconnect.
Operator: This concludes today's event. You may now disconnect.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Uh-huh.
Speaker Change: [music].
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