Metropolitan Bank (US:MCB)2024-07-19 15:10Financial Data and Key Metrics Changes - The company reported a net interest margin (NIM) increase of four basis points to 3.44% in the second quarter, marking the third consecutive quarter of NIM expansion [3][6] - Earnings per share (EPS) for the second quarter was $1.50, which included a $0.34 net impact from the GPG wind down and digital transformation expenses [4] - Non-interest income expectations for 2024 have been slightly increased to $20 million to $22 million, with a forecast for BaaS revenue to total $9 million to $11 million [10][12] Business Line Data and Key Metrics Changes - The loan book grew by approximately $120 million in the second quarter, with significant contributions from commercial and industrial (C&I) loans and commercial real estate (CRE) loans [7] - The weighted average coupon on new loan originations was 8.81%, while the coupon on upcoming loan maturities for the remainder of 2024 is closer to 7.5% [8] - Non-interest expenses totaled $42.3 million in the second quarter, with $1.7 million related to the digital transformation project and $3.8 million for regulatory remediation [10][11] Market Data and Key Metrics Changes - Deposits declined by approximately $68 million, primarily due to a $60 million decrease in GPG deposits, although there was a $70 million increase in property manager deposits [8] - The company expects to replace the outflow of GPG deposits with core deposits, with a blended cost of remaining balances around 1.5% [23] Company Strategy and Development Direction - The company is focused on the wind down of the GPG business and the digital transformation project, both of which are on schedule and within budget [4] - A more conservative approach to loan growth has been adopted, with a revised forecast of approximately $500 million to $600 million for the full year 2024 [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the core commercial banking franchise and noted no broad-based negative trends impacting the loan portfolio [5] - The company anticipates material enhancements in regulatory remediation processes and expects significant costs associated with these to end by the end of the year [20] Other Important Information - The effective tax rate for the quarter was approximately 30%, with expectations to rise to 31% to 32% going forward [12] - The company has a digital transformation budget of $12 million to $13 million, with expectations to complete the project in 2025 [11] Q&A Session Summary Question: Expectations on GPG deposits exit - Management expects about $350 million to exit in the current quarter and $450 million in the fourth quarter [16] Question: Key sources of funding to replace deposits - The company plans to rely on existing verticals and sees opportunities in lending customers [17] Question: Loan growth factors - The slower loan growth is attributed to pricing discipline rather than a lack of demand [19] Question: Update on regulatory remediation process - Management reported good progress and alignment with regulators, expecting costs to materially decrease by year-end [20] Question: Breakdown of remaining GPG deposits - The blended cost of remaining balances is around 1.5% [23] Question: NIM guidance assumptions - The NIM guidance assumes that deposits with a 4% handle will replace the entirety of the GPG deposits [24] Question: Handling of multi-family loans - Multi-family loans that came due were refinanced elsewhere, as the company has not engaged significantly in that space [31] Question: Impact of CrowdStrike situation - There was a minor service disruption affecting ACH postings and payroll, but it has been rectified [43]