Metropolitan Bank Holding (NYSE:MCB) reported a strong performance in Q4 2024, surpassing Wall Street expectations with an earnings per share (EPS) of $1.88, compared to the forecasted $1.49. This significant beat pushed the stock price up by 6.18% in after-hours trading. The company also exceeded revenue expectations, reporting $71 million against a forecast of $67.46 million.
Key Takeaways
- Metropolitan Bank's EPS beat by 26.2%, driving positive market sentiment.
- Strong growth in net interest income and a robust net interest margin outlook.
- Successful exit from BaaS business, focusing on technology integration.
- Significant deposit and loan growth, with new loans at a 7.8% average coupon.
Company Performance
Metropolitan Bank demonstrated strong financial health in Q4 2024, with a notable increase in net interest income and a strategic shift towards technology-driven operations. The bank's focus on relationship-based lending and high-quality commercial clients has bolstered its competitive position, despite a challenging market environment.
Financial Highlights
- Revenue: $71 million, up from $67.46 million forecasted
- Earnings per share: $1.88, up from $1.49 forecasted
- Net income: $21.4 million
- Adjusted ROTCE: 12.3% for Q4
Earnings vs. Forecast
Metropolitan Bank's Q4 results significantly exceeded expectations, with a 26.2% EPS surprise. This marks a strong performance compared to previous quarters, highlighting the company's operational efficiency and strategic initiatives.
Market Reaction
Following the earnings announcement, Metropolitan Bank's stock rose by 6.18%, reflecting investor confidence in the company's financial health and future prospects. The stock's performance is notable, especially given its position within its 52-week range.
Outlook & Guidance
Looking ahead, Metropolitan Bank projects a net interest margin of 3.7% to 3.75% for 2025, with loan growth expected between 9-11%. The bank anticipates a core ROTCE of 13% by Q4 2025 and is preparing for a potential 125 basis point rate cut in July. Non-interest income is expected to exceed $10.5 million in 2024.
Executive Commentary
"We are positioned very well to continue to take advantage of the dislocation in our sector," stated CEO Mark DeFazio. CFO Daniel Doherty added, "We continue to monitor and manage loan pricing in a manner that will support further NIM expansion."
Q&A
During the earnings call, analysts inquired about the bank's GPG deposit exit strategy and credit quality concerns. Executives confirmed there are no significant credit issues and emphasized their focus on margin expansion and technology investments.
Risks and Challenges
- High effective tax rate (31-32%) could impact net income.
- Potential interest rate cuts may affect net interest margins.
- Ongoing non-interest expenses projected at $175M-$177M.
- Market volatility and competitive pressures in the commercial banking sector.
- Execution risks associated with technology integration and strategic shifts.
Full transcript - Metropolitan Bank Holding (MCB) Q4 2024:
Conference Operator, Metropolitan Commercial Bank: Welcome to Metropolitan Commercial Bank's 4th Quarter and Full Year 2024 Earnings Call. Hosting the call today from Metropolitan Commercial Bank are Mark DeFazio, President and Chief Executive Officer and Daniel Doherty, Executive Vice President and Chief Financial Officer. Today's call is being recorded. At this time, all participants have been placed in a listen only mode and the floor will be open for your questions following the prepared remarks. 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. It is now my pleasure to turn the floor over to Mark DiFazio, President and Chief Executive Officer. You may begin.
Mark DeFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: Thank you. Good morning and thank you for joining our Q4 earnings call. MCB concluded the year with a very strong 4th quarter performance generating net income of $21,400,000 or $1.88 per share. Our quarterly net interest income increased 16.9% versus the 4th quarter 2023 and our annual net interest income increased 13.6% versus full year 2023. During the year, we had 2 major initiatives underway with one reaching its conclusion and the other still in full swing.
I am pleased to report that MCB successfully exited the BaaS business, which had been a complementary business to the commercial bank for the past 22 years. The exit of such a technologically integrated business took 2 years and I am pleased to report that there are only a few minor operational tasks remaining. MCB demonstrated one of its core strengths through the timely and economic replacement of the associated deposit runoff. Even as we exited the BaaS business, we increased total deposits by over $245,000,000 last year and by $705,000,000 since the end of 2022. We are confident that NCB will continue to expand its market share in its 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 BaaS business.
MCB not only managed its NIM higher during the Q4, but we continue to expect further NIM expansion through 2025. 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. We are already seeing a return on investment within our payments platform. We are confident that the new technologies will support and scale MCB's diversified and growing commercial bank for years to come.
While managing these initiatives, MCB continued its sustained growth strategy. We continue to carefully manage asset quality, optimize profitability, while further solidifying our banking presence not only in New York, but in several other complementary markets. 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. For the Q4 and full year 2024, adjusted ROTCE was 12.3% 12.2%, respectively. We remain confident that through the course of the next 12 months to 18 months, we will achieve a mid teens ROTCE supported by a robust core NIM, which should approach 3.75% or 3.8%.
Of course, these factors results are subject to market conditions that are beyond our control. Asset quality remains strong. We have not identified any broad based negative trends in any loan product segment, geography or sector that is impacting our portfolio. We have no new non performing credits, and we remain very confident that the workouts that are currently in flight will be resolved successfully in 2025. We believe that our healthy credit metrics are a direct result of MCP's pricing discipline, 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 we know well. Finally, I would like to thank all of our employees and the Board of Directors whose dedication and effort continue to provide the foundation for MCB's commitment to deliver value added services to our customers and by extension to our shareholders. Thank you. And I will now turn it over to Dan Doherty.
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: Thank you, Mark and good morning everyone. As Mark said, we finished the year with a strong performance in the Q4. Quarter over quarter the net interest margin increased by 4 basis points to 3.66%. However, similar to the Q3, that performance included an outsized amount of deferred loan fee accretion. On a normalized basis, I estimate that the 4th quarter NIM was approximately 3.55%, which compares favorably with the normalized results from the prior quarter.
I'll cover full year 2025 forward guidance for the NIM and other financial metrics a little later. For now, however, I would like to note that the 4th quarter offloading of approximately $680,000,000 of low cost GPG deposits was very much weighted toward the back end of the period. As a result, for the quarter, the average balance of wholesale funding was $350,000,000 while the December 31 balance was $450,000,000 Despite this headwind, I expect to print a 1st quarter NIM that is approximately 5 basis points above the normalized margin of the 4th quarter. Loan growth in the quarter was $137,000,000 The weighted average coupon on our new volume originations of approximately $300,000,000 was 7.8%. Looking forward, the weighted average coupon of 1st quarter maturities totaling about $605,000,000 is 6.59 percent and for the 2nd quarter, the weighted average coupon of maturities totaling about 360,000,000 dollars is 7.25%.
The portion of our maturities that are renewed has been running at approximately 90%. Our loan pipelines are currently very full as some anticipated December closings were pushed into this year. We continue to monitor and manage loan pricing in a manner that will support further NIM expansion. Primarily as a result of the completion of the GPG exit, total deposits decreased by approximately $285,000,000 in the 4th quarter. Interest bearing deposits increased by approximately $160,000,000 dollars while non interest bearing deposits declined by about $445,000,000 The municipal, EB-five and retail deposit verticals experienced the bulk of the growth in the quarter.
For the year, deposits were up more than $900,000,000 net of GPG outflows. Importantly, the outlook for growth across our deposit vertical stack, especially EB-five, HOA, muni and 1031 title escrow verticals is robust. As Mark mentioned, asset quality remains strong with no identifiable negative trends within the portfolio. The provision in the 4th quarter was aligned with loan growth. Non interest income for the Q4 was $4,400,000 The linked quarter decline of $1,900,000 was primarily related to the decline in GPG income.
GPG related revenue was approximately $2,100,000 in the quarter, a decline of $1,400,000 versus the 3rd quarter. No GPG revenue is contemplated going forward. Non interest expenses totaled $38,200,000 in the 4th quarter, a decline of about 6.2% from the 3rd quarter excluding the impact of the settlement reserve established in the 3rd quarter. Again, excluding the impact of the settlement reserve, non interest expenses increased about $4,200,000 from the Q4 of 'twenty 3. For the Q4, expenses related to the digital transformation initiative and other one time costs totaled approximately $900,000 For the year, operating expenses totaled $164,100,000 again excluding the $9,500,000 settlement reserve.
The effective tax rate for the quarter was approximately 31.7%. In our investor deck, we have a walk down of GAAP versus adjusted financial performance. We recommend you take a look at that. 2025 guidance, a couple of highlights for 2025. First of all, we're expecting to be at or near a core ROTCE of 13% by the Q4 of 2025.
Our planned loan growth is 9% to 11% versus year end 2024. The funding assumption for that loan growth is generally generic deposit growth priced at Fed Funds minus 100. The full year NIM is expected to be 3.7% to 3.75 percent and we are assuming a 125 basis point rate cut in July in that forecast. We expect non interest income grow over the $10,500,000 in 2024. Finally, we expect annual non interest expenses of $175,000,000 to $177,000,000 Allow me to walk you through the main drivers of the increased OpEx forecast.
Our non interest expense guidance for 2025 includes approximately $11,000,000 in one time costs related to our digital transformation project and other new IT initiatives slated for completion this year. The expected expense related to the modern banking motion initiative is $7,000,000 This is approximately $1,500,000 to $2,000,000 more than previous guidance because of timing, essentially work that was originally planned to be completed in 2024 that has in effect been pushed into this year. We also forecast other IT project expenses of $3,500,000 to $4,000,000 The two main initiatives driving these new one time expenses are: 1st, a major infrastructure update with a complete redesign of our network and expansion of our data centers, allowing for greater capacity and enhanced resiliency And second, data security and data governance initiatives. 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. Further, another noteworthy non interest expense item is what is in effect an increase in licensing expense.
We will see a total increase of about $4,000,000 annually as quarterly income accretion of approximately $1,250,000 from the gain on a cap that was extinguished in August 2022 will cease in February. It's noteworthy that this is an adjustment that was not contemplated in any of my previous guidance. On the comp and benefits line for 2025, the consensus for the year over year increase for comp and benefits equates to about 4.3%. Our actual experience year over year is expected to be closer to 10% as we continue to build a management team and staff that is prepared to support a much larger institution. The effective tax rate is expected to be between 31% and 32%.
At this time, I will turn the call back to our operator for questions and
Conference Operator, Metropolitan Commercial Bank: Thank you. Our first question comes from Chris O'Connell with KBW. Please go ahead.
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: So I just wanted to
Chris O'Connell, Analyst, KBW: make sure I heard right. Do you say that the new originations coming on in the 4th quarter were coming on at a 780 yields? Correct.
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: Okay, great. And we continue to monitor manage the spread towards that sort of level. So kind of expecting all else being equal that that's a reasonable kind of 7.50 to 7.75 is probably a reasonable place for forward looking originations.
Mark DeFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: Okay, great. And then as far as
Chris O'Connell, Analyst, KBW: the just because it's a little bit difficult to parcel out with the GPG exit, isolating the impact just from the rates with the Fed cuts this quarter. How are you guys thinking about the quarterly benefit from a single 25 basis point cut on the margin on a go forward basis now?
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: Each 25 basis point rate cut equates to about let's just use the 5 basis points per 25 basis point cut, might be a little more, but let's use 5 as a placeholder.
Chris O'Connell, Analyst, KBW: Okay, great. And then you guys talked about the verticals that you guys had gone on the deposit side and some new opportunities in additional verticals perhaps over the course of 2025 to help replace the recent GPG runoff over time. Can you just expand upon the opportunities that you're seeing there, maybe where the largest ones are and if there are new initiatives going on, just any color around what those might be?
Mark DeFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: 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. We're always working on new initiatives and new opportunities that are really for now at this point, 2026 and 2027. We're very confident that we will fund our loan growth through core deposits and we will replace GPG, remaining deposits in 2025 with just our existing initiatives. So more to come on new things in those sense and profiling them here.
But right now, we're focused on 2026 'twenty seven as far as new initiatives.
Chris O'Connell, Analyst, KBW: Got it. And for the deposit cost, I was wondering if you did have the interest bearing deposit spot number for December?
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: I don't have that, Chris, but I'll be happy to get that for you. I don't have a spot base. For the quarter, it's 3.15 for the quarter, but I don't have it as December.
Chris O'Connell, Analyst, KBW: All right. And then just on the expense side, the additional build over the course of 2025.
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: So should we be thinking of I guess, just trying
Chris O'Connell, Analyst, KBW: to think about where the run rate ends up as we're going into 2026? I mean, if you take off the one time expenses of $11,000,000 is that $41,000,000 on a quarterly basis kind of a good exit run rate for the expenses into 2026?
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: I'm hoping that that's a little bit high, but again you start with call it 170 5 and you back off 10, you're at 165. I think that we've got scope to go a little bit lower than that and the plan going forward is going to be very much focused on managing OpEx in totality at about a 5% in totality at about a 5% growth run rate. So that's very much once we get all these one timers behind us, that's the plan going forward.
Chris O'Connell, Analyst, KBW: Okay. That's helpful. And then last
Mark DeFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: one
Chris O'Connell, Analyst, KBW: for me is just you guys gave a little bit of color around where the ROTC is headed over time and into the back end of 'twenty five. I was just wondering what even if they're just loose type of credit assumptions perhaps are being made around there?
Mark DeFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: Credit assumptions? What do you mean?
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: We don't as Mark said, we don't detect any negative trends or credits that are deteriorating such that we expect them to go nonperforming over the course of 2025. As such, we have no credit charge off assumptions within the forecast.
Chris O'Connell, Analyst, KBW: Okay, great. Appreciate the time. Thank you.
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: Thanks, Chris. Thanks, Chris.
Conference Operator, Metropolitan Commercial Bank: Thank you. And we will take our next question from Mark Fitzgibbon with Piper Sandler. Please go ahead.
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: Hey, guys. Good morning.
Chris O'Connell, Analyst, KBW: Good morning.
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: Good morning, Mark. Dan, just
Mark Fitzgibbon, Analyst, Piper Sandler: to clarify, so the $175,000,000 to $177,000,000 of operating expenses, that includes the $11,000,000 of charges you expect to take this year related to tech investments?
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: That's correct.
Mark Fitzgibbon, Analyst, Piper Sandler: Okay, okay, great. Secondly, and it looked like you had like $92,000,000 of GPG deposits at the end of the year and obviously had a little bit of fee income in the Q4. You're saying all of those deposits will be gone in the Q1 and it'll be essentially 0 fee income?
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: That's correct. Okay, great.
Mark Fitzgibbon, Analyst, Piper Sandler: I wondered
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: I'm sorry, go ahead.
Mark Fitzgibbon, Analyst, Piper Sandler: I was
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: going to say it'd be wonderful if they stuck around because they're no cost deposits, but we are modeling them as out the door within the next 60 days basically.
Mark Fitzgibbon, Analyst, Piper Sandler: Okay. And next, I wondered if you could maybe give us an update on any major trends that you're seeing in the skilled nursing facility space, given the change in new administrations. Was it any thoughts there? Any comments on how it may impact that business?
Mark DeFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: We haven't seen or heard of any we spend a lot of time with our operators. We've been spending a lot of time with them recently talking about their performance in 2024, which has been extraordinary. Other than just feeling optimistic, generally speaking, no one's factoring in higher returns as a result of the new administration. Now it's more blocking and tackling and grabbing more market share and they're all excited about building and expanding their footprint. But nothing specifically tied to the new administration other than feeling good about it.
Mark Fitzgibbon, Analyst, Piper Sandler: Great. Thank you.
Conference Operator, Metropolitan Commercial Bank: Thank you. And we will take our next question from Fadi Strickland with Hovde Group. Please go ahead.
Chris O'Connell, Analyst, KBW: Hey, good morning. Just wanted to clarify on the margin guide. I think the way to think about that, I mean, you said the Q1 would be 5 basis points higher than the core normalized rate. So does that mean we expect the margin to go from around $360,000,000 in the Q1 towards $370,000,000 ish by the end of the year inclusive of 1 rate cut mid year, is that am I understanding that correctly?
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: All right. So two parts to the question. 1st quarter, 5 bps above normalized 4th quarter. So that gets you to the context of 3.6%. For the year, we figure 3.70% to 3.75%, which means we end the year north of that probably closer to 3.80 That's again one rate cut penciled in July.
Chris O'Connell, Analyst, KBW: Got it. And then just wanted to ask if you're seeing any different trends in occupancy, particularly in office. It seems like return to office has accelerated a little bit. I'm just curious if you're seeing that among your customers.
Mark DeFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: 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, the answer is yes, but it is different depending on the specific office building and its location. But, the key leaves are more positive now than they have been in recent quarters or recent months.
Chris O'Connell, Analyst, KBW: Got it. And just one last one for me. It seems like you've been able to get pretty good yields on new loans. But do you see anything different in terms of competitive pricing pressures, either any new insurance or anything like that that could be moving yields a little bit lower or faster?
Mark DeFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: No. We don't really see any competitive pressures at all in continuing to grow our business and it seems like a lot of banks are stuck in stagnation here trying to restructure their balance sheet. So we have a lot of wind in our sail and we continue to service commercial clients who are looking to build wealth. So no, we don't have those kind of competitive pressures.
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: I can add an anecdote there that on a weekly basis, I send out a pricing guidance to the lenders. And so far this year, I've had no one come to my office and say, we got to do something about that. So, so far so good. No obvious pressures that would cause us to tighten spreads at least for the time being.
Mark DeFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: All right, great. Thanks, Mark
Chris O'Connell, Analyst, KBW: and Dan. Appreciate taking my questions.
Daniel Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: Thank you, Fady. Thank you, Fady.
Conference Operator, Metropolitan Commercial Bank: Thank you. This concludes the allotted time for questions. I would now like to turn the call over to Mark DiFazio for any additional or closing remarks.
Mark DeFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: I just want to thank each and every one of you for your support and your continued confidence in management and the Board. After celebrating in 2024, 25 years of operating successful operating history, I'm feeling more optimistic today than ever. The opportunities are greater today than they've ever been With new technologies coming into financial services, there'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. And that's as a result of 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 create market share over the next couple of years. So thank you again and look forward to talking to each and every one of you at the next quarterly meeting.
Conference Operator, Metropolitan Commercial Bank: This does conclude today's conference call and webcast. A webcast archive of this call can be found at www.mcbankny.com. Please disconnect your line at this time and have a wonderful day.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.