Release Date: January 24, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Metropolitan Bank Holding Corp (NYSE:MCB) reported a strong fourth quarter performance with a net income of $21.4 million, or $1.88 per share.
• The company successfully exited the BaaS business, which had been a part of its operations for 22 years, and managed to replace the associated deposit runoff economically.
• MCB increased total deposits by over $245 million last year and by $705 million since the end of 2022.
• The company is investing in a new technology stack, which is expected to be fully integrated by the end of the year, already showing returns within the payments platform.
• MCB maintained strong asset quality with no new nonperforming credits and expects successful resolution of current workouts in 2025.

Negative Points

• The exit from the BaaS business led to a decrease in total deposits by approximately $285 million in the fourth quarter.
• Noninterest income for the fourth quarter declined by $1.9 million, primarily due to a decrease in GPG income.
• The company anticipates $11 million in one-time costs related to its digital transformation project and other IT initiatives in 2025.
• Operating expenses are expected to increase, with a forecast of $175 to $177 million for 2025, including the one-time costs.
• The effective tax rate for the quarter was relatively high at approximately 31.7%.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Sign with MCB.

Q: Did you say that the new originations coming on in the fourth quarter were coming on at a 7.80% yield? A: Correct. We continue to manage the spread towards that level, expecting forward-looking originations to be around 7.50% to 7.75%. - Daniel Doherty, Executive Vice President and Chief Financial Officer

Q: How are you thinking about the quarterly benefit from a single 25 basis point cut on the margins? A: Each 25 basis point rate cut equates to about five basis points per 25 basis point cut on the margin. - Daniel Doherty, Executive Vice President and Chief Financial Officer

Q: Can you expand upon the opportunities you're seeing in deposit verticals to replace the recent GP G runoff? A: We have a lot of runway with existing deposit verticals and are working on new initiatives for 2026 and 2027. We are confident in funding our loan growth through core deposits and replacing GP G deposits in 2025. - Mark DeFazio, President and Chief Executive Officer

Q: Are you seeing any different trends in occupancy, particularly in office spaces? A: Yes, but it varies depending on the type of office building and its location. The trends are more positive now than in recent quarters. - Mark DeFazio, President and Chief Executive Officer

Q: Are there any competitive pricing pressures affecting yields on new loans? A: No, we don't see any competitive pressures. Many banks are restructuring their balance sheets, giving us an advantage to grow our business without tightening spreads. - Mark DeFazio, President and Chief Executive Officer

For the complete transcript of the earnings call, please refer to the full earnings call transcript.