Metropolitan Bank Holding Corp. Q3 FY2024 earnings call

Mark DeFazio highlighted strong core financial performance, NIM expansion, balance sheet growth with price discipline, and focus on liquidity/interest rate risk. The bank reported EPS of $1.08 with charges related to digital transformation, regulatory remediation, and a settlement reserve. GPG business wind down is on track. Asset quality is strong with workouts in flight expected to resolve in 2025. Dan Dougherty discussed NIM details, loan origination/payoff impact on NIM, loan/deposit growth, stable non-interest income, and non-interest expenses impacted by settlement reserve with expected Q4 decline.

MCB delivered strong core financial performance in Q3 2024. Net interest margin increased by 18 basis points to 3.62%. Loan book grew year-to-date by ~$275 million, expected to end the year with ~$500 million growth. Deposits increased by ~$100 million in the quarter, with interest-bearing deposits up ~$200 million and non-interest-bearing deposits (related to GPG) down ~$100 million. Asset quality remained strong with no identifiable negative trends. Normalized NIM for Q3 was ~3.5%.

Expect continued loan book growth via deposit gathering initiatives. NIM expected ~3.45%-3.5% for remainder of 2024, and to reach ~3.75% by end of 2025 with further rate cuts. Loan growth target 10%-12% in 2025. Non-interest income growth 6%-8% excluding GPG. Operating expenses expected flat, full-year estimate ~$164 million-$166 million net of settlement reserve. Loan growth to end year at ~$500 million, deposits to continue growth in verticals like EB-5 HOA, municipal.

Uncertainty around monetary policy easing pace/depth. Impact of market conditions on forecasted results. Long-standing regulatory matters related to the settlement, though management confident it's behind us.

Q: About the $10 million reserve related to a state attorney general settlement.

A: It's part of a matter ongoing since March 2020, and management is confident it's behind us with no additional costs expected.

Q: CRE risk-based capital ratio.

A: Internal target is higher, regulators comfortable with portfolio, likely to stay in high 300% range.

Q: Loan growth in Q4 and loan types.

A: ~$200 million-$250 million net loan growth in Q4, primarily in C&I, health care, and commercial real estate, with origination yields between 7.5%-8%.

Q: One-time costs and expense guidance.

A: Digital transformation costs will drop out by end of 2025, leading to clean OpEx run rate in low 150s, with high-single digit expense growth.

Q: NPL resolution.

A: Kansas City matter to resolve in Q1 2025, other matters in flight with clients working to pay off, no additional charges expected.

Q: Deposit flows and rate movement.

A: ~$3.7 billion of interest-bearing deposits moved with 75%-80% beta to rate cuts, ~$2 billion of index deposits with slight differential in repricing.

Q: GPG regulatory remediation costs.

A: Reimbursed and client picking up 75% of additional costs, leading to decrease in exit-related costs.

Q: Health care portfolio and hurricanes.

A: Minor damage to health care clients in Florida, no significant impact.

Q: Digital transformation budget.

A: No increase in budget, operating cost post-transformation aligned with previous IT run rate.