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Metropolitan Bank Holding Corp. (MCB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 EPS was $1.88, up from $1.08 in Q3 and $1.28 in Q4 2023, driven by higher net interest income and lower non-interest expense as the Q3 regulatory reserve dropped out; NIM expanded to 3.66% (+4 bps QoQ, +30 bps YoY) .
  • Deposits ended 2024 at $6.0B (−4.6% QoQ, +4.3% YoY) as GPG deposits exited; loans grew to $6.0B (+2.3% QoQ, +7.3% YoY). Liquidity coverage stood at 192% of uninsured deposits at year-end .
  • Asset quality remained stable: NPLs/loans 0.54% vs 0.53% in Q3; ACL/loans 1.05% with negligible net charge-offs; CET1 ratio was 11.9% at HoldCo/12.0% at the Bank .
  • 2025 outlook: management targets full-year NIM 3.70–3.75%, loan growth 9–11%, OpEx $175–$177MM including ~$11MM one-time digital/IT, and effective tax rate 31–32%; expects mid-teens ROATCE within 12–18 months as NIM approaches ~3.75–3.8% by year-end, with ~5 bps NIM benefit per 25 bp cut .

What Went Well and What Went Wrong

What Went Well

  • Successfully exited the 22-year BaaS/GPG business while replacing deposits across core verticals and increasing NIM: “MCB demonstrated its core strengths by replacing the deposits…while increasing our NIM.” .
  • Core profitability and margin expansion: net interest income rose to $66.6MM; NIM improved to 3.66% despite late-quarter wholesale funding build; adjusted ROATCE was 12.3% in Q4 .
  • Strong liquidity and capital: liquidity coverage of 192% of uninsured deposits at year-end; total risk-based capital 13.3% HoldCo/13.0% Bank; CET1 11.9% HoldCo/12.0% Bank .

What Went Wrong

  • Non-interest income fell to $4.4MM (−$1.9MM QoQ, −$2.2MM YoY) as GPG revenue declined to $2.1MM and is modeled to zero going forward .
  • Non-interest-bearing deposits declined ~$445MM QoQ tied to GPG runoff; average wholesale funding rose, pressuring funding costs near period-end .
  • Elevated technology and regulatory costs persisted (though lower QoQ): Q4 technology costs rose YoY; 2025 OpEx includes ~$11MM one-time digital/IT and a ~$$4MM annual licensing expense increase as cap accretion ceases .

Financial Results

Core Income Statement Metrics (USD Thousands except per-share; periods ordered oldest → newest)

MetricQ4 2023Q3 2024Q4 2024
Total revenues$63,555 $71,518 $71,004
Net income$14,568 $12,266 $21,418
Diluted EPS ($)$1.28 $1.08 $1.88
Provision for credit losses$6,541 $2,691 $1,500
Non-interest income$6,561 $6,285 $4,401
Non-interest expense$37,147 $51,257 $38,161

Margins, Efficiency, Returns

MetricQ4 2023Q3 2024Q4 2024
Net Interest Margin (%)3.36% 3.62% 3.66%
Net interest spread (%)1.81% 1.93% 2.28%
Total cost of deposits (%)2.98% 3.32% 3.15%
Total cost of funds (%)3.14% 3.39% 3.25%
Efficiency ratio (%)58.4% 71.7% 53.7%
ROAE (%)9.0% 6.9% 11.8%
ROATCE (%)9.1% 7.0% 12.0%

Balance Sheet

MetricQ4 2023Q3 2024Q4 2024
Loans, net ($000)$5,566,832 $5,834,626 $5,970,803
Total deposits ($000)$5,737,292 $6,269,907 $5,982,973
Cash & equivalents ($000)$269,465 $318,478 $200,268
CET1 ratio (HoldCo)11.5% 11.9% 11.9%
CET1 ratio (Bank)11.5% 11.9% 12.0%

Non-Interest Income Breakdown

ComponentQ4 2023Q3 2024Q4 2024
Service charges on deposit accounts ($000)$1,671 $2,135 $2,177
GPG revenue ($000)$4,177 $3,500 $2,100
Other income ($000)$713 $650 $124

Asset Quality and Capital

MetricQ4 2023Q3 2024Q4 2024
NPLs/Total loans (%)0.92% 0.53% 0.54%
Allowance for credit losses ($000)$57,965 $62,493 $63,273
Net charge-offs (% avg loans, annualized)0.07% 0.01% 0.00%
Total risk-based capital (HoldCo)12.8% 13.2% 13.3%

Loan Production

PeriodLoan Production ($MM)
Q4 2023$342.5
Q3 2024$460.6
Q4 2024$309.0

Guidance Changes

MetricPeriodPrevious Guidance (Q3 call)Current Guidance (Q4 call)Change
NIM (normalized near-term)Q4 20243.45–3.50% remainder of year ~3.55% normalized Q4 (reported 3.66% incl. accretion) Clarified normalization level
NIM (full-year)FY 2025End-2025 NIM could reach ~3.75% with cuts Full-year NIM 3.70–3.75%; exit nearer ~3.80% Raised specificity; similar level
Loan growthFY 202510–12% 9–11% vs YE’24 Slightly lowered
Non-interest income growth (ex-GPG)FY 20256–8% 5–6% Lowered
Operating expensesFY 2025Flat vs 2024 ($164–$166MM ex reserve) with clean run-rate low $150s by late ’25/’26 $175–$177MM incl. ~$11MM one-time digital/IT; plan to manage ~5% run-rate growth longer term Higher near-term due to one-time
CET1 (core)Q4 2025Not specifiedAt/near core ~13% by Q4’25 New target
Tax rateFY 202531–32% 31–32% Maintained
Rate sensitivityFY 2025Beta commentary; path to 3.75% NIM ~5 bps NIM per 25 bp cut; one cut penciled in July Quantified sensitivity
GPG deposits/revenueQ1 2025GPG exit by YE’24; revenue will turn to 0 Remaining GPG deposits out within 60 days; fee income essentially 0 going forward Timing confirmed
Licensing expense accretionFY 2025Not noted~$4MM annual increase as ~$1.25MM quarterly cap accretion ends in Feb New headwind

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2/Q3)Current Period (Q4)Trend
Digital transformationOngoing; project Phoenix; costs expensed; clean OpEx run-rate targeted low $150s by late ’25/’26 ~$11MM one-time 2025 digital/IT costs; Modern Banking in Motion completion in 2025 Execution continues; near-term OpEx higher, long-term efficiencies
BaaS/GPG exitWind down proceeding; revenue to 0; deposit replacement via verticals Exit complete; deposits out early Q1; revenue modeled to 0 Completed; residuals clearing
NIM trajectoryNormalized NIM ~3.45–3.50% near-term; end-2025 ~3.75% with cuts Q4 normalized ~3.55%; FY25 3.70–3.75%; 5 bps per 25 bp cut Slightly stronger near-term; detailed sensitivity
Deposits/verticalsEB‑5, HOA, muni, 1031 strong pipelines Robust outlook; core deposits to fund loan growth; non-interest-bearing down with GPG exit Vertical growth offsets GPG runoff
Regulatory/legal$10MM reserve booked in Q3 for AG matter; remediation tapering by mid-2025 Matter resolved; reserve dropped out in Q4; lower professional fees Headwind abating
Asset qualityStable; workouts expected in 2025; no negative trends; low NPL ratio Stable; no new NPLs; no charge-offs assumed in 2025 forecast Steady with positive resolution expected
Office/SNF exposurePortfolio quality/DSCR and regional dynamics monitored Office: improving tea leaves; SNF operators optimistic; growth focused Gradual improvement; cautious optimism
OpEx outlookFY25 “flat” vs 2024 (ex reserve); clean run-rate low $150s by late ’25/’26 FY25 $175–$177MM incl. ~$11MM one-time; longer-term ~5% growth run-rate Near-term higher; longer-term disciplined growth

Management Commentary

  • “MCB reached a significant milestone and successfully exited its 22-year old BaaS business…while increasing our NIM. The other significant initiative, our investment in a franchise-wide new technology stack, is expected to be completed by year end 2025.” — Mark DeFazio, CEO .
  • “On a normalized basis, I estimate that the fourth quarter NIM was approximately 3.55%… Despite this headwind, I expect to print a first quarter NIM that is approximately 5 basis points above the normalized margin of the fourth quarter.” — Daniel Dougherty, CFO .
  • “Our planned loan growth is 9% to 11% versus year-end 2024… The full year NIM is expected to be 3.7% to 3.75%… annual noninterest expenses of $175 million to $177 million… ~$11 million one-time costs related to our digital transformation project and other new IT initiatives.” — Daniel Dougherty, CFO .
  • “We have not identified any broad-based negative trends… We have no new nonperforming credits, and we remain very confident that the workouts… will be resolved successfully in 2025.” — Mark DeFazio, CEO .

Q&A Highlights

  • Rate sensitivity: each 25 bp cut is ~5 bps NIM uplift; FY25 model assumes a single cut in July .
  • GPG exit: remaining deposits will leave within ~60 days; GPG fee income goes to zero; non-interest-bearing deposits fell with GPG runoff .
  • OpEx path: FY25 OpEx $175–$177MM includes ~$11MM one-time digital/IT; longer-term targeting ~5% OpEx growth; exit-run rate into 2026 expected below ~$165MM .
  • Credit assumptions: no charge-offs assumed in 2025 forecast; asset quality stable .
  • Market and portfolio: office occupancy trends improving with nuances by submarket; origination yields ~7.5–8% maintained amid limited competitive pressure .

Estimates Context

  • Wall Street consensus estimates from S&P Global were unavailable due to a data access limitation during retrieval (SPGI daily request limit exceeded). As a result, we cannot present EPS or revenue comparison versus consensus for Q4 2024 at this time. Values would be retrieved from S&P Global when accessible and incorporated to assess beats/misses.

Key Takeaways for Investors

  • Margin momentum and rate leverage: normalized NIM ~3.55% in Q4 with guidance to 3.7–3.75% in FY25 and ~5 bps per 25 bp cut; management expects exit NIM near ~3.8% by year-end — constructive for earnings power in a cutting cycle .
  • Deposit mix transition: GPG exit reduced non-interest-bearing balances; core verticals (EB‑5, HOA, muni, 1031/title/escrow) are expected to fund planned loan growth, mitigating funding cost headwinds over time .
  • Expense normalization path: FY25 OpEx elevated by ~$11MM one-time digital/IT; “clean” run-rate targeted into late ’25/’26 with 5% growth thereafter — watch for professional fees/IT taper and licensing expense headwind ($4MM/yr) .
  • Asset quality resilience: NPLs/loans 0.54%, minimal charge-offs, and management expects positive resolution of workouts in 2025; no new deterioration identified — supports credit cost stability .
  • Capital and liquidity strength: CET1 ~11.9–12.0%; liquidity coverage ~192% of uninsured deposits — affords flexibility to pursue growth and absorb funding shifts .
  • Loan growth pipeline: guided 9–11% FY25 vs YE’24; origination yields ~7.8%, with limited competitive pressure — supports NII growth alongside margin expansion .
  • Stock catalysts: delivery on NIM guidance amid rate cuts, tangible progress on digital transformation, and evidence of core deposit growth replacing GPG balances should be key drivers; consensus estimate comparisons will further clarify beats/misses once available.

Appendix: Additional Q4 Data Points

  • Total cost of funds: 325 bps in Q4 (down from 339 bps in Q3) reflecting rate cuts and mix shifts; cost of deposits 3.15% .
  • Efficiency ratio improved to 53.7% in Q4 from 71.7% in Q3 as regulatory reserve dropped out and revenue held flat QoQ .
  • Liquidity and capital: cash + FRB secured capacity $2.9B; total risk-based capital 13.3% (HoldCo), 13.0% (Bank) .

(All company results, guidance, and commentary cited above are sourced from MCB’s Q4 2024 8-K and press release, investor presentation, and Q4 earnings call transcript: .)