All right, good morning and welcome to MCB's first Investor Day. Dan and I meet with investors all the time. We speak to them in non-deal roadshows, capital raises, just, you know, chatting, meeting with them, talking about life and MCB. This is the first time we've decided to do something like this. Actually it was perfect timing 'cause you'll hear a bit more about it, and everybody around the table is aware, we had a very successful capital raise last week. It actually this is coming at the right time. I do a lot of talking with investors all the time, and I did a lot of talking last week, obviously in discussing the opportunity. Today you get an opportunity to meet other partners of yours.
The group that you're gonna meet today are all experts in their field and are also all shareholders in MCB. They're very much aligned with you. They're not only professionals in their own right, but they're also very aligned with you, as I am, as you know, and have known for a very long time. I want to thank each and every one of you who came here in New York. We love hosting people here. We built out this space. We specifically built it in a way that we can host clients, and our clients love coming here. Happy to see investors here. In addition, you'll get a chance to ask questions. You know, I'm gonna try and sit in the background.
If you have a question for me, I'm here, I'll answer it, but it's your opportunity to meet with the subject matter experts. You have a senior management team. There's much more. You know, it says takes a village, well, this is part of the village, but there's, you know, another 300 people in and around this building and in a few other locations throughout the country that help us do what we do. This is our senior leadership team, and I think you'll enjoy their topics. The format is really simple, very casual. They'll present, you saw their slides, and then we'll pause and we'll have Q&A behind every presentation. 'Cause it may be something really top of mind that you wanna talk about and dive into.
We have a little bit of a timeline here, but we have flexibility to go over if we have to. We're hopefully there'll be some Q&A, and then at the end, we'll have lunch and continue the conversation through lunch. Then we have another meeting this afternoon with regulators. Let's enjoy the moment. They're about 7 ft away from us, so maybe 30 ft away from us, so speak low. There are many of them. They come like the village comes. All right. Anyway, I am going to make the first introduction. It's Dixana Berrios. She's our Chief Operating Officer. She will come down and start the presentation.
Good morning, thank you for joining us today. My name is Dixiana M. Berrios. I am the Chief Operating Officer at Metropolitan. I've been here about six years. I've been in commercial banking for 30 years. I oversee several departments at MCB, and that includes IT, loan, deposit, digital banking operations, merchant acquiring operations, project management, facilities, digital marketing, EB-5. I do just a few things around here on a day-to-day basis. I'm gonna focus on how we've executed our modernization program and why it matters to MCB operationally. Modern Banking in Motion represents a multi-year investment to fundamentally upgrade how the bank operates. This includes our systems, our workflows, and our ability to scale. Before getting into any details, the key theme I'd like to emphasize is disciplined execution. This was designed to modernize without being disruptive to the franchise.
Thank you. First slide. Thank you, David. We started this journey, as you can see, deliberately. The first two years were spent on architecture and vendor selection, making sure we chose the right platforms that could support our bank, not just today, but for a long-term growth. We launched the program in 2023 and executed through phased implementations across payments, lending, digital capabilities, and warehouse in 2024 and 2025. The final phase, as you can see on the slide, culminates in April 2026, in a couple of weeks, right around the corner. This will transition us away from 20-year-plus legacy systems and activates a scalable, real-time, API-enabled platform aligned with large bank capabilities. Slide 3, please. From an operating perspective, our legacy platform increasingly contained our business.
Manual onboarding, limited integrations, lack of real-time data, and frequent workarounds made it harder to scale efficiently and harder to deliver consistent customer experiences. This wasn't about convenience. It was about removing structural constraints that limited growth, efficiency, and reliability. Next slide, please. We intentionally, as you can see, chose a best-in-breed approach rather than a single vendor solution. Each platform was selected for depth in its domain and integrated through an API-first architecture. Operationally, this gives us the flexibility, avoids vendor lock-in, and allows us to upgrade components over time without destabilizing the entire platform. Next slide, please. The benefits. The benefits of modernization show up in day-to-day operations. As you can see from the slide, I've outlined some key benefits. Digitally, we've reduced friction through integrated account opening and servicing.
Operationally, we've automated workflows, including in payments and commercial lending, that a lot of those work forms previously required manual intervention. The key point across the architecture is scalability. We can continue to support growth without proportionally increasing operational complexity. Slide, please. I'll outline some of the business impacts that this modernization program has. From an investor standpoint, the impact falls into five key areas. First, revenue and growth. Better onboarding means improved cross-sell and faster product delivery. Second, efficiency and cost discipline. Reduced manual work and improved operating leverage leads to more operational efficiency. Third, a focus on risk and resiliency. That means a stronger data governance program, real-time visibility into our data, and more stable systems. Fourth, customer economics. Lower acquisition costs from frictionless account onboarding and improved retention for our customers. Finally, long-term value creation.
We've created a stabilized platform that is aligned with large bank c-capabilities but sized for our institution, but with the ability, because it's modular, to grow over time. These are expected directional benefits that scale as volume continues to migrate to the platform. I want to be clear again. This wasn't about structural improvement. This is about structural improvement, and it wasn't about short-term optimization. The value of this platform continues to build over time. Slide 7, please. Talk about our milestones. As COO, my key concern in this modernization program was around execution and risk management. We didn't want to treat this as a single conversion event. As you can see from the phased approach that we took, payments, lending, and digital platforms, as well as data warehouse, were implemented first and already operating in our environment today.
Finzly, AFS, eBankIT, Alloy, Snowflake, they're live today. They aren't pilots. They're operating in our environment as it exists today. The April 2026 date phase activates our core infrastructure. That includes Finxact, Savana, Antoine, and expanding our commercial digital platform. Critically, as you can see, this wasn't one big bang conversion. Each component has been implemented, tested, and stabilized independently, significantly reducing our execution risk. I go to the next slide, please. I'll talk a little bit about our technology infrastructure that we built to support our platform. In parallel, as we were executing on our modernization program with these new vendors, we modernized our underlying infrastructure. We underwent a data center expansion. We did a network redesign. We created new virtual servers to support our platform.
We implemented enhanced monitoring, and we also upgraded our branch network to ensure that the technology stack supported, enterprise-grade resiliency and performance. This work that we did on Project Phoenix was foundational. It ensures modernization and improves reliability, as we continue to grow. Thank you. When you step back, modernization strengthens the bank across three dimensions. It enables scalable business expansion, it improves operational efficiency through automation and real-time data, and it enhances customer experience through faster, more consistent digital journeys. Collectively, this positions the bank for sustainable growth and long-term shareholder value. In conclusion, on April 13th, 2026, the Modern Banking in Motion platform will be fully activated. From an operating perspective, this is a transition point for us. We're going from implementation now to optimization, where modernization will become how the bank runs and no longer just a project.
At that point, my focus will continue to shift from performance, efficiency, and scaling the platform to support growth. With that, I'm happy to take any questions that anyone has.
There's a question. Sorry.
Great explanation. Have some milestones that you've achieved. What about financial milestones? Are there any financial markers that we as investors, prospective investors can hold management accountable to based on the investments made in this technology and modernization efforts?
Okay.
Financial questions are great.
Yeah.
allow me to step in here. You know, we've made a large investment in the Modern Banking in Motion platform. At the end of the day, the run rate for IT spend is not expected to change. It should be pretty consistent what it was before. It should stay about the same. The key is we can scale it demonstrably, right? Within the guidance that was provided on the last earnings call, the OpEx spend included $3 million of kind of final expenses related to Modern Banking in Motion. Once those invoices have cleared, that drops out of the run rate, about $3 million. Run rate, pretty consistent through time. This isn't about saving money. This is about building a technology stack that is scalable and efficient.
It's from the teller line to the warehouse in the cloud, and everything in between. It's extremely as Dixie very nicely laid out, very up to the minute and appropriate for the bank that has gross growth aspirations such as MCB. Does that answer?
Yes.
Betty.
One quick. Just when you talked about avoiding vendor lock-in, I mean, is the implication there that you've structured the tech stack in a way that if you have a particular vendor massively increase the price, you can easily switch?
That is absolutely correct. It could be either a financial increase or that vendor can no longer handle the type of work that we want to do. We've made it very modular that we can kind of plug and play almost, the vendor stack that we need to scale the business.
You know, it's another point there just to add. That was what's really exciting about this new platform. Historically, you're stuck with a Fiserv or Jack Henry FIS, good companies, all great companies, but if they didn't support a particular line of business, they'd allow you out of the contract to go out and integrate into somewhere else. With the technology that we're seeing coming into our industry today, these non-bank financial service technology companies, you should never get stale. You'd always be able to be out in the market, Dixie and our team, looking and talking to other technology companies who are doing something slightly better. I think the way the speed in which technology is gonna change in our business is gonna be something that we've never seen before, and that doesn't even include AI.
We're talking about just basic support of your tech stack. The optionality that we have today, what we're going to have is extraordinary. You should always be real-time in assessing are you with the best-in-class for that particular area of the franchise that needs the support. Dixie, I have a question for you. As far as scale and efficiency, we're knocking on the door of $10 billion. You know, I've heard people suggest, you know, we're clearly ready from a risk management perspective and a governance perspective around hitting 10 and significantly higher than that. How big is this platform and asset size that you think you could support without any reasonable incremental increase in CapEx?
I think we could support a multi-billion dollar institution. We've tested when we went to market with these vendors, we wanted to make sure that they could handle the type of volume that a multi-billion dollar institution has. That was one of our key requirements in selecting all of these vendors. They've been able to prove that, they continue to onboard other companies that have that scale as well and that depth of transaction volume.
Well, I'll add, you know, the investment in Modern Banking in Motion in Project Phoenix was a multiyear project here at MCB to get ready for $10 billion. We feel that we've had the bandwidth and the people to easily cross the $10 billion mark, this tech stack can handle a much, much bigger bank than that.
Yes.
Like I said, it's been years on the come here. It's been 3 years plus. Conversion is April thirteenth.
Yes.
I think it is.
13th.
You know, very, you know, it's imminent. The conversion's imminent, and we're really looking forward to kind of levering the tech stack in its entirety. As Dixie said, we've got a lot of these features are already in place. A lot of these vendors are already plugged into the old architecture. We're gonna flip the switch and go to a new core. That's exciting for us.
Yes.
Any other questions?
You know, you must be seeing these in now 'cause the scalability, coming through.
Absolutely.
Even the ability to, you know, kind of plug in the different, you know, different players. Yeah, I think just, you know, any insight, you know, 'cause peers don't seem to be making this movement. You know, why is that? Why'd we go on this journey type of thing?
I think, for one, we went on the journey because we wanted to be proactive. Mark had a very clear vision of where he wanted the institution to go. We knew that we needed a technology stack that could support that could support the type of verticals we may wanna bring on in the future. That's what we decided to be proactive and do. I think a lot of institutions choose not to go down this path because, let's be honest, conversions are disruptive. A lot of people do not want to take the risk, or they don't wanna spend the time to thoroughly think through how the conversion can be less disruptive to the institution.
As you can see, again, we took over a year to really sit down with all the vendors, bring them all to the table, architect out the solution, understand all our integration points, understand all of our API connections, understand how in the future those API connections would be beneficial to the institution. We took the time, and we had, you know, the benefit of having a CEO who was on board with us really thinking through this tech stack and not just saying, "It's not worth it. We'll just go with the traditional Fiserv, and, you know, we'll maybe get a few extra improvements with the next core," but, you know. It is what it is.
We were lucky enough to have that forward-thinking train of thought that knew that in the market we were in, we wanted to compete with those large institutions that had the budgets of the Chases and the very large institutions that could have the stack of the development team on board to be able to create a customer journey that benefits their institutions. This stack that we built enables us to create those customer journeys to be competitive in the long run.
Ultimately to support the growth aspirations of the bank.
Absolutely.
You've seen what we did last year and the prior year. At the end of the show, I'm going to give you some updated guidance, which was put out last night. We really have, we think, a runway to continue growing this bank at a pace that's well above the norm out there. This tech stack is built to support that type of growth and improve our execution.
Yes, Kevin.
Employees. This is great for the customer, great for the bank, but do you feel like the employees have fully embraced it? Do you feel like they've had the adequate training and skill set in order to execute on this investment that you made?
Yes. Yes. The answer is yes. No, we were very aware of how disruptive it could be to our employee base as well. One of the things that we did was we created our own intranet site. We made it very transparent to the employees of what we were doing, how we were doing it. We continue to update that intranet site with information on when the rollouts are. We provided for our front-facing employees lots of communication stacks so that they can thoroughly explain the project to customers as well.
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Leader for AI NIST AI safety consortium contributing to the national responsible AI standards. Now, you know, I had a privilege to, you know, work for a leader that, you know, really value the AI, and the size of MCB help us to be agile and nimble and transferring the compliance and, you know, experience that, you know, I had with the, you know, larger bank, you know, the G-SIB bank . We can transfer methodology and be even more agile and, you know, flexible in our AI program. If we go to our page 17. This is, this is what I'm trying to cover in the next 16 minutes or so.
we're gonna cover six sections. Why even MCB bother, you know, hiring a chief AI officers and, you know, doing this AI program? we talk about why AI, why now, we cover our approach, which is governance first. we give you a sneak peek of our priority use cases that you see that these are like real, not just, you know, talk and on papers. we walk you through our strategic roadmap, which, you know, shows that this is not just, you know, one ad hoc use case that's a plan that, you know, we are thinking about that strategically. we talk about the AI enablement and value realizations, and we report on some of the progress that we made today. If you go to slide 18.
Why now? Why, why AI? You know, over the past five years, these are, you know, some quick stat that I just did, you know, in my early days here at MCB to see, you know, what's the MCB growth and, you know, how we can actually leverage AI to augment and take it to the next level. MCB has grown revenue at roughly about 18% CAGR, and an asset at 14% and headcount at, you know, 12%. That growth has been excellent. Just, you know, exclude AI, this is a great, you know, growth story. It also means, we are running more complex operations, with proportionally more people. That's not scalable forever.
AI gives us the lever to continue scaling without, you know, linearly adding to our, you know, OpEx and headcount. We can grow on balance sheet and it doesn't necessary that we need to grow on real estate and headcounts, leveraging AI. First, we, you know, AI gives us lever to continue scaling without, you know, linearly adding headcounts. We see three strategic pillars. First, operational efficiency. We have manual intensive processes. In credit underwriting, document generations, you know, BSA and AML program, that are ripe for automation. We have enough repetition, enough documents. It's ready for AI automation. AI let us free up our people for higher value work. Second, risk and compliance. Our regulators, which, you know, our primary regulators are Fed and, you know, NYDFS, have flagged AI as an emerging risk area.
We are getting ahead of that by strengthening our monitoring, detection capabilities through governed AI, not despite it. Third is, you know, competitive positioning. Our peer institutions are deploying AI at scale. We need to act now, but our governance-first approach gives us a durable advantage over those who moved fast and are now retrofitting controls. Let's move on to slide 19. Our governance first approach, it's very critical. I always tell that story. How you see AI. You're not deploying AI for the sake of AI. We think that, you know, whoever that banks with us, our customers, there are 3 reasons. First is trust all the way up there. Even the big banks, this is a trust business.
If everybody goes, for example, to JPMorgan Chase and withdraw their deposit, they go bankrupt next day, right? This is a trust thing. We have to be careful about that. The second reason is product offering. You know, interest rate and what we are offering to our customers. It's a value that we are providing it. The third reason is convenience and experience. How convenient is to bank with us? You know, what's your experience? You have access all the way to our senior executives. AI comes in to elevate those reasons. Without AI, we have been doing just great. I just shared you our growth story.
Now, imagine with AI, which, we get it right and, with our compliance and governance-first approach, we're gonna get elevated in that area. On the left, our governance framework. We stood up our AI working group with cross-functional representation from risk, legal, compliance, line of business, IT. Every AI use case goes through a formal intake and risk tutoring. No exceptions. We've adopted Trustworthy and Responsible AI Principles aligned to NIST's AI Risk Framework and banking regulations, and we operate under three lines of defense model with clear accountability at every stage. On the right, you see our phase approach. Horizon 1, which is 2026 and 2027, is exclusively internal and assistive AI. Employee-facing tools with no direct client impact.
This led us to deploy faster with the standard controls and build our muscles. Horizon 2, we're going to graduate after rebuilding muscles, both operationally and from risk standpoint. Across the organization, we're going to graduate to customer-facing and consequential use cases, high-risk use cases, and also high-value use cases. This phase approach means we are earning the right to scale. We don't skip steps. Let's move on to the next slide. This is a sneak peek. You know, this is not all just talks and plans on the paper. These are, you know, some use cases that are already in use, and some of them are in active development. We have five priority use cases spanning from productivities, revenue enablement, compliance, and risk management.
Microsoft 365 Copilot, a secure governed AI assistant embedded across Word, Excel, Outlook, and Teams. We are in pilot now with enterprise rollout targeting Q1 and Q2 this year. This is a high-value use case. You know, research shows, for a bank our size, you know, we can get to a few million dollars in value in annual saving bank-wide. Critically, it displays shadow AI with governed alternative. A lot of, you know, our employees, like other banks, they have the most advanced AI on their personal phone. With deploying these enterprise-governed, and managed tools, we are reducing the risk of potential personal use of AI.
Credit memo AI generation, which I was just something that I would like to say. Unlike my prior bank, which we were at the top of 9 among the 50 global bank, our people here are not just relying on Mark. Mark built a system here, that's what I like about this bank. If he leaves tomorrow, the bank just go on and run very efficiently and effectively. Just Norman and Scott and our Chief Risk Officers and our legal, they are very aggressive about AI, that actually makes me excited. Having the CEO create this role at his leadership level, it shows this is a mandate.
This is a strategic enablement. That was the main reason that I decided to go from big banks to mid-size bank because everything was set up for success and he built a system. Norman was one of my, you know, favorite partners. You know, we work on, you know, credit memo automation for our credit team. It's internally built. It auto-generates first draft credit memos from annual reviews and term sheets, and also tax return forms, freeing underwriting capacity to process more loans. In development now, pilot Q2. This is a revenue enabler. Faster loan processing means more revenue. Enhanced due diligence in our BCA, BSA program and anti-money laundering. Also internally built compiles account activity reviews for alert cases and enhanced due diligence.
Alerts are already live, full scope by, you know, Q2 2026. Over an hour per day saved per investigator across our financial crimes team. Our CoCounsel and Moody's anti-money laundering screening are already in use and approved through our governance process. CoCounsel reduce outside counsel spend by roughly $200,000 a year. Moody's also improve our BSA/AML screening inaccurate accuracy with AI-powered matching. This is just top five. We have 15+ additional use cases in pipeline across lending, compliance, operations, and client services. Let's move on to the next slide. Here's how this unfolds over three years. You know, as I said, this is not just ad hoc approach to our AI program. 2026 is our foundation year. Governance framework fully operational.
Copilot rollout at enterprise-wide. Credit memo. You know, we talked about the enhanced due diligence BSA pilots live. AI team scaling. Enterprise-wide AI training launched. Data classification framework complete. This is about getting the foundation right. 2027 is scaling and execution for our program. We expand to more governed use cases. We introduce our first digital employees, AI agents that operate under the same governance framework as our human employees. We begin Horizon Two client-facing pilots, every employee at the bank becomes AI fluent through our training program. By 2028, we reach our end state. A full AI team in place, up to 15 digital agents, client-facing AI in productions, end-to-end AI-native core workflows, 100% of our employees AI fluent. Moving on to page 22.
Let me address the economics. This is a multi-year discipline enablement program, phased, not front-loaded. The primary focus is talent. We are building an in-house AI team, not outsourcing our capabilities. This is very important. You know, we're not gonna have a heavy, internally built, AI use cases. In order for us to know what good vendor and AI solution look like, we have to build in order to know what solution is good. It's very important for us to have an internal powerhouse of our talents to help and line up businesses because, you know, as an AI team, we are enabler. Our department heads, they are in driving seat.
My first observation joining the bank, they are really ahead of what I've seen before in terms of seeing the application of AI, and we are just enabling, facilitating, the deployment of AI program. On the, on the value side, we expect meaningful value creation driven by productivity gain, risk reduction, and selective revenue enablement. The ramp follows a natural curve. Initial realization in 2026 as our first use cases go live, accelerating in 2027 as we scale, and material sustained contribution by 2028 as AI becomes embedded in our core operations. The net economics are positive by design. Value expected to exceed enablement costs as capabilities scale and mature. We are tracking this quarterly through our AI working group and reporting to the board. Let's move on to the next slide.
Let me show you what we already accomplished since standing up this program 6 months ago. On governance side, the AI working group is operational with the operating guideline RACI. RACI stand for, you know, responsible, accountable, consulted, and informed. Every stakeholder in our AI program have clear roles and responsibility in terms of monitoring deployments, managing risk, and et cetera. We stand up 4 specialized task forces. I sit on key enterprise committees, including our enterprise risk management committee and new product committee. On policies and framework, 9 trust-worthy and responsible AI principles have been approved by the board. Our AI acceptable use policy is live across the organization, and our AI vendor oversight framework is embedded and integrated into our TPRM third-party risk program.
On risk and controls, we've established an AI issue log with accountability, enhanced data classification and tagging, and launched an AI attestation process for all business units. On the pipeline, you know, 15+ use cases identified. It's actually, you know, the beauty of that, we didn't identify that. Our department heads identified that, and we consulted with them. We actually identified more than 25 use cases, but 15 are viable. You know, we vet them, you know, have consulted with them to go through for implementation. On the people side, now we have two AI scientists. You know, one of them started, you know, yesterday. Including myself, we have, you know, three AI expert in-house, helping with the building our AI program.
We sent our executive leadership through Columbia Business School AI Executive Education Program in January to ensure AI fluency at the top. It's one-of-a-kind program that, you know, no bank our side I've seen they have done that. Now our board and executive leadership, they have a really good understanding of AI risk, governance, and execution. Moving on to slide 24. Let me leave you with five takeaways. One, AI is not a concept at our bank. It's an active deployment with governance, staffing, and use case underway. Two, our governance-first approach aligned with regulatory expectations, protect the franchise while enabling innovations. It's very important for us to governance first. First is, you know, if you remember those three reason, trust is at the top.
The governance-first approach is very important for a highly regulated industry like banking. Also, it makes us exam ready when it comes to audit and examination. Third, our phased horizon model manages risk deliberately. Internal tools first, client-facing AI only after controls proved out. Four, we project multimillion-dollar cumulative net value creation over three years, and we monitor that. Every quarter, we're gonna report on our ROI and make sure that every use case meeting the business case target. If we see any deviation, we jump in and course-correct and make sure that, you know, we prioritize higher value with higher feasibility. Five, AI enables MCB to achieve meaningful productivity gains without commensurate workforce growth. We are making our operations more efficient and our people more productive. I'm gonna leave you with these five takeaways.
Thank you, and I'm happy to take any questions.
Right here. Sorry.
One here.
I'll start on the basically last thing you said about employee growth. You know, talking to some of the bigger banks out there, they obviously think they can kinda have employee shrinkage. Relative to today, where you think headcount could be by the end of 2028 when both phases are rolled out. Is it similar? Is it, you know, is everyone gonna, all 300 and whatever people, gonna be fully AI fluent, or is it gonna be smaller than today?
That's a very, you know, common questions with all the, you know, reports and everything, is coming up. MCB has averaged, you know, roughly, 16%-19% annual turnover over the past decade. It's on par with the industry. That annual attritions give us the ability to strategically reallocate backfills toward higher value. I don't think that AI really reduce work, it intensify work, you know. You know, you have, like, multiple, you know, superpower, you know, computers and agents, and you were just, "Why I'm not running them all?" Our first approach, we're gonna be cautious about understanding how this turns out. We're gonna do more with the same. Our plan is not to intentionally have some, you know, job reduction or anything like that at the moment.
We are, we are monitoring the market. We are monitoring our own performance. What I envision is we're gonna do more with the same amount of people because, you know, we're gonna grow on balance sheet. You know, we are already, seeing our $10 billion. Marching toward $25 billion. We have big ambition. Our AI and our employee, AI fluent employee can help us to do more with that. I hope that answered your question.
Ali, why don't you describe the partnership you have with our internal recruiting team and your philosophy toward hiring today?
Yes. Very good point. We are trying to expedite our AI fluency with different approach. For example, we're gonna prioritize hiring people that they are already AI savvy. We're not gonna retrain our new hires with AI. That's one approach to infiltrate AI savvy employee. And we have a curve, you know, I talked about that, you know, AI transformation. We have a target by 2028, our 100% of our staff should be AI fluent. The way that, you know, back in, you know, 2000s that you talk about digital fluency. Back then, you couldn't just work on paper sheet, an entire organization work on Excel. If you remember that the digital fluency, you know, learning Microsoft Office and everything. That's gonna be the new norm.
We're gonna expedite that process by being intentional about our hiring. Also up-skill and re-skill our existing workforce to get to that North Star.
One other one.
Go ahead.
Just on vendor diligence. Obviously, it sounds like you have the systems in place to handle it. I think a lot of banks don't, and they really struggle with AI vendor diligence. Can you talk about the timing of it? I think that's the other issue that I've seen in the marketplace, where it's just any bank assessing an AI company, it's like a year. How quickly can you do it comfortably, you know, with regulators and amongst your own committees?
First, we have a central one front door for all AI use cases. It's already implemented. Any net new vendor, we already have, you know, inherent risk questionnaire, IRQ and DDQ. We already have 10 AI screening questions. And once any of the AI flag, we have 50 DDQ questions, due diligence questions about the AI to understand. That's also changing a lot. You know, since my time at TD right now, we are seeing AI in four different categories. The first is internal build. We understand ins and outs, so we can contain and manage risk more effectively because we are building it in-house. Second is vendors that they provide AI-specific products. You know, think about like, you know, OpenAI or Claude.
Their products is AI-driven or any vendors like Glean or, you know, similar to those, they are specifically providing AI products. We have a very thorough process for that. The third is embedded AI. You already have a vendor in place like Microsoft, and they just turn on a feature of AI. We have Workday, for example. They turn on a fea-. We even govern that and make sure that we capture. We treat every embedded AI feature as a new use case. Our first approach was turn off all the AI features. If you're gonna enable that, every embedded AI, we're gonna treat them as a new AI use case. The fourth, which is emerging, and it's more challenging, which we actually think about that and have it in our process, is AI in delivery.
Think about consultants, think about outside counsel, think about auditors. They have our data. They don't provide AI services or product, but they use AI to provide services for us. We even have control for those. I've never seen such a due diligence and well-thought process, even in the GCEP bank, to think about that. We already not only thought about that, but we also execute on that. For doing that, we are now going back to our entire vendor and asking all those IRQ questions to identify that. It's gonna take us a year or so because we have, you know, a few hundred vendors. We're gonna actually go back and check everybody because everybody is starting to use AI.
Are there areas within the bank that you found that you were surprised that AI could be helpful? Like anything that you've uncovered?
Can you clarify? What do you mean by surprise?
Think of, you know, let's say, inputting, outputting forms, right? That's a good use case. Is there anything that surprised you where, hey, this is an area where we can use AI to optimize something?
There was no surprise from that sense because, you know, banking overall as an industry is a fast follower to like high tech. Most of the use cases that, you know, because the bank already had a very enhanced risk management in process. We haven't seen any surprises, but what surprises me is the level of eagerness of employee to come and bring up use cases. I've never seen that in prior life, especially in some area like risk and credit. You know, I remember that I had a conversation with our credit officer and risk officer, and they were like, "Ali, come to us last." Here was exactly different.
That actually surprises me, in a good way, to kind of the willingness because what I truly believe is your risk team, your legal team, they should be at the forefront of AI adoptions. Once they understand as a second line and the risk managers of the organization, they can guide organization through the AI adoption program in a compliant and governed way.
I'll say from when Ali came to the bank, in the lending role, you know, we were going, you know, how is a lender gonna use this? You know, you go out to see a customer, you talk about deals, how's that gonna happen? You really sitting down with him and discuss it, you know, how can we make this more efficient? With credit memos, with sizing deals. These are all things that in a sense you still have the human interaction with the client, but it is gonna improve your efficiency. That's very exciting for us.
I think the other thing to add to that is scalability that was talked about earlier. From the same, you know, I'm credit, chief credit officer. From the credit opportunity spending time with Ali, you can see how it can enhance and create efficiencies in credit to support the growth that we're planning without having to go out and hire, you know, an army of underwriters. I feel I've got the right team. With AI being integrated over time, I think that's gonna create the efficiencies we spoke about.
From a legal perspective, my legal professionals can focus less on document generation. We can use large language models to do the document generation. They can focus on not only just reviewing, revising, but then automating processes, coming up with standardization and repeatable process to increase efficiency.
With that, I'm gonna jump in and weave that whole thing together, right? When you think about the guidance that I've put out there, as Ali mentioned, he's already hired a data scientist and a machine learning expert. That's in the plan. That's in the OpEx forecast. None of the saves that were just kind of mentioned down the row there are in the plan right now. Ali and I have spoken. We've begun the dialogue about how we're going to do the math to come up with those savings, primarily spend savings. We have a framework. We'll develop it further, but as I mentioned, there's no saves in the guidance for AI.
As you heard from the chief lending officer, the chief credit officer, the legal guy, it's in the works already, there should be some saves.
Do you have any questions online?
Just, you know, you hit on the governance. You're mentioning very aligned with regulators. Just the feedback you're hearing, what are they saying?
That's a good question. I'm gonna answer in two ways. Even the regulators that have a staff, skilled staff to have a knowledge of AI, like I'm talking about OCC, type of the work, they are still learning, and they are, you know, they are catching up with the regulations that, for example, European Union's put in place. They are in learning and semi-enforcing situation right now. What we are hearing from our own regulators, you know, Feds and NYDFS is consistent across agencies. They are not telling banks not to use AI. They are just telling govern it. The expectations center on several things. First, you know, a centrally managed AI inventory.
One of the questions, they have been asking is, how you govern AI differently from your existing process and procedures, which, you know, we have a well-developed, you know, program underway. You know, I had one meeting with our Fed regulators. It's more about like, you know, learning, and they were like curious, you know, how the banks are building their programs. It was just like more informational. You know, across our Feds and NYDFS, the two specific guidelines is around the differentiation in governance. Also, we had, you know, NYDFS Part 500 in terms of our cybersecurity.
You know, deepfake, AI-generated deepfakes is one of the concerns. We have a actually program in place to mitigate that risk. Overall it's learning. They are curious. You know, their expectation is it's come up with, you know, the big, the bigger regulators, more sophisticated.
Other questions? Great.
Thank you.
Thank you.
Thank you. Just to put a fine point on a couple of things. One, as it relates to the efficiency in credit, you know, there's no plan to outsource credit decisions. I just wanna make sure anybody doesn't leave here with that. If we were a consumer-oriented bank, I'm sure that would be a different answer. We'll still be making our credit decisions. As far as the regulators are concerned, my experience, I really think that soon, maybe within 12 months, when they, when they come in, they give you a first-day letter, and you get prepared for the exam. I think AI is gonna be a placeholder in the first-day letter soon. Hopefully, you know, I want it to be. I don't want them to be a day late.
I want them to be right alongside of us, and in our introduction, our conversations with them already, they'll be more prepared.
When they really want to engage about performing an audit or a safety and soundness exam about banks, AI strategy and philosophy and governance. I'm happy we're having early conversations with them. I'm sure we're gonna have it this next couple of weeks since they're in the bank. I would imagine it to be a bit more engaging next year, not 5 years from now, next year. The last thing I'll say is, as all of you know, we put up an investor deck that I've been told over and over again, it's very transparent and appreciated by analysts and investors. I'm hoping, you know, we're gonna gain back a lot of real estate there. Money, banking, in motion will fall off, and we'll have more real estate to add.
I think we're gonna be able to truly, in the second half of this year, start to really quantify a return on investment with AI. I think we're gonna bring you along and show you the results. We need some tape. We need to analyze it. We need to be accurate about the savings and the scale, how scale and efficiency actually can generate a return on investment. I am really confident for the first time in all my years in dealing with technology and banking where I can see it, I can see that we're gonna be able to quantify it. Money, banking in motion, big investment, run rate will be same. We'll have efficiency, we'll have scale. Same processes doing a little something different. Yes, maybe employee experience, client experience a little better.
It would be really hard for me to try and pencil out a return on investment there other than the feel-good moment our clients have with their experience. Our employees like doing their same task differently. This is different. This is transformative. I really think we're gonna be able to show you, and I don't know how long we'll keep it in the deck, but hopefully in the second half of the year, we'll start to present some slides and it'll be good, an interesting conversation. The next presenter is Nick Rosenberg. He's head of our payments and now we'll talk about stuff that's a little bit closer and what we've been doing for a while.
Okay. Good morning, everybody. My name is Nick Rosenberg. I'm the Chief Business Development Officer at MCB. I've been with MCB for 25 years. I'm a chartered electrical engineer. I was introduced to MCB for a technology project back in 2000. I served here as the Chief Technology Officer from 2001 till 2018. Prior to that, I was the technology director of a design house in the U.K. I was responsible for hardware, software, worldwide manufacture of products for companies like Olympus Optical Company, British Telecom, Acer in Taiwan, Dixon's RadioShack, and others. Thank you again for coming in. I wanna start. Thank you.
I wanna start with a brief history of what we've been able to achieve in the past over two decades of differentiating and specializing in payments and bringing low-cost deposits and non-interest income to the bank via our payment settlement services. We've been integrating with and meeting the specialty needs of non-bank financial service companies to provide digital financial services. You know, how did we acquire our customer base then? Well, we were able to address unique challenges that they faced, and we can integrate and scale many different payment types. Our past performance positions as well to be competitive in the payments industry in general. Oversight and risk management is important. We've kept our eye on the ball.
We've established robust risk management processes to maintain these relationships at scale and recognizing opportunities and going after the right ones. We have the ability to evaluate and provide payment services to foreign entities as well as U.S. entities, of course. We see companies that have success in other markets, and they're looking to bring their product to the U.S. They bring experience, capital, management team, so that's where we've had success. We're looking to replicate that performance. What sectors are we going to focus on? Next slide, please. What's our target? Of course, U.S. opportunities, obviously for the most part. Also, as I said, we'll look to work with international companies that have had demonstrated success abroad.
They have the appropriate management experience and capital. They're looking to break into the U.S. market with these services. We're looking for direct relationships, not third parties. We're looking to offer them treasury, corporate account, payment processing, delivered directly to these clients. We wanna be very selective. We wanna focus on established, experienced companies, regulated industries. We're not looking to become one, come all, you know, just more focused and specialized, but higher volume. We'll go to the next slide, please. Thank you. Here's a snapshot of our prior performance, what we were able to achieve by the numbers. We settle up to 107 million transactions a year. This I pulled from a prior investor deck from 2023, so public numbers. We had $2.5 billion in DDA deposits.
We generated over $20 million in fee income annually. That's what we've been able to accomplish. We go to the next slide. That's what we did, but now what? What's, what's our plan going forward? Well, we're entertaining opportunities. We're confident that we can exceed our prior performance. Highly regulated and licensed industries, we're looking at various different opportunities that they require technology and payment solutions. They require some differentiation, understanding, innovation. Some of the industries, not limited to, but including iGaming, so that means the licensed online gambling, poker, blackjack, or the sports betting. The skill-based games, those have seen explosive growth over the last five years. They have unique payment challenges that we feel we can address. There is also online pharma and telehealth.
Over the last five years, there's been a lot of innovation and growth. You don't need to go into a pharmacy, you don't need to go to the doctor. You have unique payment requirements, oversight, etc. That presents opportunity for us. Thank you. How is this gonna help us? How is it beneficial? Why is it beneficial? Well, of course, click fees, number one, non-interest income. That drives, the click fees drives that income. Those transactions also drive low-cost, sticky low-cost deposits, GDA, which is valuable to us. Thank you. Finally, I want to talk about what we can offer, why does it give us a competitive advantage and how does it translate into deposits and income?
First of all this activity is going to pass through our core banking system, that is supported by scalable and innovative and efficient payment options powered by MCB, addressing challenges in these industries. Some of them are new, as I said. They have, we can bring these efficiencies. We've done it in the past. We have ideas here. We can bring these to the market. That gives us first-mover advantage. That gives us, you know, early market share gains. That helps us build our name, helps us drive low-cost sticky deposits. It's a large and growing payment market, very large market. We have some things that we're looking to go live with by Q4 of 2026. Thank you very much.
I appreciate your time and you coming in, and I'm happy to answer any questions as well.
How should we think about your approach, onto the future opportunities versus sort of how you've approached the business with GPG in the past?
Well, in the past, we were looking at third-party relationships, where the end customer was a customer of our customer. In this case, we're looking at direct relationships. We're still looking to solve problems in the industry, but now with direct relationships with the appropriate companies.
Licensed.
Licensed, yeah. Right. Licensed in our own industry.
Licensed.
Licensed healthcare, licensed gaming. Right. Exactly. Just the top tier being selective.
I'll jump in again, I didn't plan this, but again, there are some expenses associated. We're working with a third-party vendor to build a bespoke real-time payment solution for some of these, particularly the gaming industry. There's expenses associated with that. Those are in the run rate for OpEx going for 2026. None of the GDA, none of the fees are incorporated in the forecast. Again, we aspire to replace what we did with GPG as at, as the beginning of this journey. Nick went through the numbers. They're really important fee, a huge driver of fee income as well as low-cost deposits. It could be a very, very positive support for our outlook going forward.
Yes. I mean, the gaming industry is a over $100 billion a year just in loads per year. There's about $3 billion in expenses to the industry. Healthcare industry, I mean, we were involved with those industries through GPG. The U.S. spends 25% of their GDP on healthcare. Again, very large opportunities here that we're talking about. And they're seeing explosive growth over the last few years, yeah, Mr. Gall. I think the CAGR in the gaming, for example, I think is 80% over the last 5 years.
David, did you still have a question?
Yeah. Is it live now? Maybe what's embedded in the outlook for fees in gaming, I guess, over this couple years?
We have some clients right now in these industries that are doing corporate treasury, if you like, and some limited processing. We are building, we're all building on our payment platform to specifically serve needs that we've, that exist in the industry as well, and that would be-.
It's a fourth quarter, 2026 go live.
Right now we have onboarded a lot of clients that are going through licensing, and they're getting, going through their state licensing in the states that they're gonna organize in. We've opened up corporate accounts and payroll accounts and so on, 'cause that's a requirement in the licensing is to have a bank relationship. We're sort of important to them for a lot of reasons, 'cause it's a gating issue in licensing. You have to have a bank relationship.
Do you have the sales force in place or you need to hire more?
Oh, we do. I mean, we have it in place at the moment. The operations obviously within my group, as in the past, we leverage other departments within the bank heavily, technology, operations, legal, retail, etc. The sales force within my group is in place.
We have interesting history. Because we were in the business for 22 years, we were, I can say this with authority, we were the go-to bank in the banking-as-a-service business before they gave it a name, banking-as-a-service business. It went right off the cliff. When Nick and I decided that we're gonna exit, GPG, it was 2 years ago. It took 2 years to unwind some 60 clients. We went out there thinking that, oh, this was gonna be easy. You know, everybody knows MCB, so we started talking to these operators, you know, you name them. We talked to everybody. We traveled all over the country. We traveled out of the country, we didn't have a value proposition.
It was like, we, it was like, wow, what happened here? Like, we were the go-to. You talk about client acquisition, anybody coming to the U.S., and I can name, I can drop names, and you'll know them, they came to us. Now they were like, "DraftKings, okay, like why are you here?" We were like: I don't know. We realized that we have to define what is the value proposition of MCB 'cause they have treasury services already with their banks, but their banks aren't helping them deal with the challenges that they have. It's an incredibly liquid business, but the profit margins are really, really thin for the operators, which is strange if you think about the costs associated with placing a bet and the probability of losing.
Their gross profit margins are high, but their net profit margins are thin. We spent the last year and a half talking to operators about what does it cost to run your business? What are your pain points? They were just very interested in having that conversation as opposed to, "This is just another bank that wants to process my acquiring transactions, and I can probably lower my fees." We realized that was not the lead story. We really understand what it costs to operate a company like that today.
We understand the ecosystem from the player who's placing a bet on a Saturday football game in college down to how long it takes for DraftKings to actually receive that bet, how difficult it is to push the winnings back to the player in the afternoon to place another bet, hopefully, or take the money off the payment rails and put it back into your primary checking account. Daily reconciliation, real-time payments. We went back to the drawing board, and unfortunately, Dixie had picked one of our payment vendors for Modern Banking in Motion, and we sat with them and said, "Wait a minute." There's something here. We are now spending quite a bit of money, it's in our run rate, to build a bespoke payments platform that...
We'll announce this with a press release, hopefully, the next second quarter, to give you a little bit more detail. We'll have real first mover advantage for a while. We think, and we've tested it, so we know it works, we think we have eliminated a substantial part of their OpEx cost in real-time payments. Now, it's not simply because of the bespoke payments platform. The Federal Reserve here in the United States finally, you know, joined the twenty-first century with real-time payments. We've been very fortunate to be one of the banks who participated in real-time payments. Originating real-time payments today will be fully enabled in the second quarter to originate debits and credits. That's 24 hours a day, seven days a week.
If I place a bet on a Sunday, the operator will have that money immediately. If the operator has to push that money back to the player, they can push it back immediately, okay? We'll get into it another time, but if you, if you just understand the credit risk, the chargeback risk, ACH chargebacks, you know, we're eliminating chargebacks. 'Cause if I pull the money from your account and it doesn't go through, you're not placing the bet. Chargebacks is a huge issue today. We were shocked that big operators don't do daily reconciliation. We were reconciling $billions and billions. We're required in GPG by regulators to reconcile down to what we used to call the cardholder account. Now it's called the plays account.
We have, we think we have solved some of their real pain points that should drive free cash flow, and we understand credit really well. Substantial free cash flow. Those operators can reinvest that in client acquisition, technology, odds. I'll leave it to them. We've already had this conversation. We've shown some demos to some of the biggest operators, and they're like, "Sign me up. We need to see this." Nick is gonna choose three operators, hopefully in the next 60 days, on the outside of 60 days, to come in for testing. 'Cause we really wanna be live in the fourth quarter. We're gonna test them. You're tempted to go and get the biggest brand. May not be the right one. We'll find out.
We'll make the right decision on who we're gonna invite in to do testing. The beauty of payments is, they use the word click fees. The run rate is immediate. You have transactions running through your platform, you're earning fees. If you have transactions running through your platform, you have sticky low-cost deposits. Now it's just, now it's a function of building the pipe and having the flow. Banking one on one. Fees and flow, right? It's banking one on one. We're really excited about it, and we like the fact that we're direct to merchant, no third party. I think over the last several years, the industry lost its way in evaluating, regulators lost their way in evaluating third-party risk.
They made the decision, they went down a path. They've reversed it now. Obviously, they're not so upset about third-party relationships. we like the fact that we're gonna be direct to merchant, okay? by the way, the DraftKings are considered a merchant in this business. This is a direct to merchant. we eliminate payment processors. We eliminate Visa, Mastercard. They don't have to run over Visa, Mastercard. You know the interchange fee is there. They consider that high risk. it's a money grab for Visa, Mastercard. They could charge more because they consider it high risk. Not real high risk. People who place a bet on a Saturday afternoon are calling up later and saying, "I didn't really place that bet." You know what I mean? but they have the opportunity.
We're excited about it. We're gonna talk more about it. We're gonna show results. Really excited about that.
The value proposition, are you competing on price?
The value proposition is expanding their gross profit margin. Okay, that's fine. If we There'll be plenty of fees for us if we can deliver what we say we can deliver by eliminating some of their costs. I'm talking about not reducing their costs, eliminating some of their costs, and never mind chargeback risk, because they do have chargeback risk in some cases. Skill-based games, you know, some of you have children and adults are playing these games online. They put up their card in a wallet, and they're playing games, competing with people. You know, it's a regulatory-friendly business. I don't understand it, but some people really enjoy doing that, and I'm happy. We just want to settle the payments.
Holding on the regulatory-friendly string, it's worth noting that it's an acquiring transaction.
Yes
not an issuing transaction.
Yeah. Right.
who's our customer?
Good point. When we went GPG, we had 5,000,
$5 million.
... 5 million clients around the country with a.
Yeah
... with a debit card in their wallet.
Yeah
... and had our name on the back.
Right.
That was direct to consumer.
Right.
It's a longer discussion how the regulators view that relationship after two decades. Anyway, that's that. Here, it's an acquiring transaction. We have no relationship with the consumer. The consumer regulators are different than any safety and soundness regulator. If you ever met one, you'll know the difference. They're doing God's work in protecting consumers in their mind. We are not dealing with consumers. We are direct to merchant, which is a big difference. We defined our value proposition. We're executing on it. Again, technology, we don't mind spending. You know, we've got to spend a fair amount of money here. It's in the run rate. It's in our budget. We're not afraid of spending technology. We're not afraid.
It took us two years to get right where we are right now. You know, we're a young company still, even though we're 27 years old. Average age in this company is really young. I can't tell you what it is, but it's much younger than me. You know, they have a pathway in front of them. We're excited about this, and we're really excited about showing results starting in the second half. Really interested in 2027, but hopefully we'll be live in 2026.
In 20 years, we never competed on price. I will tell you that.
Yeah.
Value, innovation.
Yeah
... solve your problem. Somebody has an issue they can't resolve, that's what they want to talk about first. Well, if you're talking about price, there's only one way to go anyway. You know, someone talking about price doesn't have an issue that they need help with.
You know, it's actually interesting. You're going to hear from credit in a bit. We do the same thing in credit. We bring value proposition to our commercial clients, whether they run an industry, run a business, represent an industry, or pick an asset class in commercial real estate. We don't have clients that really challenge us on 50 basis points, you know, on loans, on loan yields or deposits. These are clients that we're helping, you know, in GPG. We were bringing clients from all over the world, you know, into the U.S. We established their presence here, and we can name them. When we did it, there's no debate about it. We didn't overcharge them, but it was the cost of their doing business, and it was rounding error considering what their internal rate of return targets are.
Same thing with our clients, our commercial clients. They're entrepreneurs, serial entrepreneurs who have internal rate of return targets. We're bankers. We work on 3.5% pre-tax. You know what I mean? These guys are working on levered, unlevered returns that are extraordinary. So when we bring value and help them build and sustain generational wealth, we don't argue. Any bank that's defending their deposit and they're worried about flight risk, anybody who can't win a deal on a loan for 50 bits, it's because you don't really have the relationship. You don't have a value proposition. A broker brought you the deal, and he's shopping the deal for price and proceeds. It's just not our model. Never been professionally. That's not who works here, and it surely isn't a DNA of NCP. Never has been.
You know, it makes for a less exciting business. I can tell you that. Any other questions for Nick? Yeah.
You mentioned returning to the north of $20 million number on fees eventually here. I get that this doesn't happen really fully get going until the fourth quarter. I guess when could we potentially see fees get back above that level with this fully rolling? What's the earliest opportunity for that?
I'll be able to answer that number and that watermark by the end of this year.
Okay.
You'll see meaningful fee leaves in the first quarter of 2027. We'll talk about the clients that we've signed up, and then you'll look at their volumes. Their volumes are public. You know, they're out there. We think the value proposition is so significant that an operator that chooses to work with us, and we choose to work with them, will point those transactions in our direction. That's what it is. It's just they just need to point those transactions to NCP's platform as opposed to the payment platform today. The big players out there today are Nuvei, Worldpay and Paysafe.
PaySafe.
You know, I can't wait to compete with them. All they have to do is flip a switch and point transactions to us, you know, and also, not through Visa and Mastercard as well because we use the Federal Reserve with a clearinghouse for real-time payments. We think we'll have scale. We'll be able to. We have our own numbers, and we're really modest and conservative when we presented this opportunity to the board, and we'd be very happy with that. You would all be very happy with just that. We'll see. We'll see. We're, we're cautiously optimistic that this will be similar in nature soon.
Are any of the bigger banks doing this? If so, who are they? Is there a risk that because of their larger wallet, they can leapfrog you into this business given the attractive financial metrics that are out there?
DraftKings has now been around for 18 and 19 years, the HSBCs of the world are treating them like an acquiring relationship, like any other small business. Whether HSBC has a restaurant in their building or they're settling transactions for DraftKings, it's an acquiring transaction. That's how they view it. That's where it sits. Our view is a little bit different. We'll have first mover advantage with some very long protection in a non-compete. I don't have source codes in a vault, you know what I mean, where you're gonna have first mover advantage for years. Again, the value proposition, I think we will bring to the table. We will sign five-year contracts. You know, historically, five-year contracts with extensions.
You know, what I found with these technology companies that are in banking over the last 2 decades, and our experience right now with the iGaming professionals. The serial technologists, they want to drive their business. They would love to just leave treasury somewhere else and just let it work, and payments. The fact that there's friction between the developers, the client acquisition strategy people, the people who set the odds, the people who create the websites, the designs for all the games. This is a real friction among the company because they're not profitable. They're not profitable. They need to find profitability. If we can help them find a pathway to profitability, sustainable profitability, you know, I'll bet on us in providing the service that would give them the reason to stay.
We've chatted with banks, and none of them are having a conversation on how to make the company better. They're all about, "Here's my acquiring platform. I charge you know, X cents a transaction, and you look like everybody else." That's not widening margins. That's not big. If that was our only proposition, we wouldn't be doing it. We'd be doing something else. I, I think we'll hold on to our business like we hold on to all of our customers. It's making a difference, a value proposition, a service. Service. There'll be more people in this. With real-time payments, I don't understand why people aren't in it. Every bank should be thinking about this. It's, you know, it's a, it's a good business to be in.
At least for the regionals, the super regionals.
Yeah.
Citizens are in it. Yeah. With Fed.
Yeah. Yeah. Any other questions for Nick? Okay.
Just relative to the old GPG business and some of the presentations we heard on technology, you know, the AI integration. As we think about the ramp here, is the old revenue stream kind of the initial bogey? In terms of ramping that business, some of the technology initiatives, like, does that help and coincide with that ramp? Or is it gonna be, you know, kind of slow and steady in getting maybe back some of the lost revenue?
Yeah, I think Modern Banking in Motion was actually just, you know, you had perfect timing because we were working for real-time payments in the build-out of Modern Banking in Motion with the Fed on FedNow. We need that. Without that, this model isn't as value add. As far as the bogey, yeah, we'd be very happy if we can duplicate GPG's endpoint, which is sort of what Nick recited, as a starting point. I would really be very happy about that. I'll be able to talk with some level of confidence in 2027, which is here. I mean, we're working on 2027 and 2028 now.
I mean, you know, 2026 is baked into the cake, so as far as we're concerned, we're already well into 2027, you know, mentally and in product set. Anything else? Anything online?
No further questions online.
Yeah. Okay. Thank you.
All right. Thank you very much.
All right. Our next up is James Sozomenou?
Sozomenou.
Sozomenou.
Yeah.
April Feely. The first question everyone... Yet this morning to make sure.
I've tried. He's a little busy with some other things at hand, apparently, but I'm expecting a call back.
These two professionals run our EB-5 group, and they'll talk about that option.
Thanks, Mark. Good morning. My name is April Feely. I'm Senior Vice President and Group Director of our EB-5 division here at MCB. We're actually approaching our three-year anniversary at the end of this month. Prior to joining MCB, I was with the former Signature Bank for close to 14 years, and I was directly involved in creating their EB-5 platform as well.
Good morning. I'm James Sozomenou. I'm the co-lead with April Feely. Same title, same semi-responsibility, I guess. I was with April Feely at Signature Bank, started there in I think late 2016. When that bank had its little demise, we were able to thankfully quickly transition, not just April Feely and myself, but our entire team, at that time of seven. We're back to seven. We'll go through that in a second. Thankfully, Mark and staff had approved the idea of having EB-5 here at MCB, I think maybe without an idea on exactly where to go. As fate would have it, you know, our team, which was the largest banking team at EB-5 for over a decade, became available about two weeks later.
thankfully, as April mentioned, we were able to land here and, we're approaching our 3 years.
That will bring us right into the rest of the background on our team. James and I lead a team of seven, includes ourselves. We have five other support team members that support each other. They support us. They support our clients. For the most part, our team has a long-standing reputation in the business. I've been in EB-5 since 2011. However, the rest of the team is approaching 10 years in this. We've basically built a reputation in this space that not only includes here domestically in the U.S. It also includes a lot of the stakeholders that are outside of the U.S. internationally, including any sort of migration agents, even attorneys, international banks as well, and then very various immigration firms.
I'll let James go into our high points of the last year.
Sure. Before we get started, is anyone familiar with EB-5? Has anyone ever heard of it before? Have any idea what it does?
Everybody's heard of it.
Yeah. I mean, it's been in the news a little bit more lately, over the last year or so with President Trump and his staff talking about it, the introduction of the gold card. We'll discuss that in a little bit as well. As I mentioned quickly, when we were at our former home, we were the largest escrow agents in the EB-5 space, hands down. I mean, without a question, not only was the bank name internationally known, but our names are internationally known. Coming over to MCB, while April and I were known, the bank's name was not. We're happy to say that is certainly not the case anymore. The bank is very well known internationally in the EB-5 space.
There are plenty of banks that we deal with overseas and investors overseas that when they see the MCB name attached to the project that they're looking to invest into, we've received word that it does give a level of comfort, both with the immigration attorneys and the migration agents that are working overseas in helping these people choose what project. They do like to look at what stakeholders are involved. When the MCB name is attached to a project, it has given a level of comfort to folks knowing that, "Okay, I'm sending my money to folks that I don't know. I'm sending a large sum of money overseas, but I'm sending it to a name that is known inside of the space." That's been very helpful.
We look at 2025 as a banner year for MCB within the EB-5 space. Our industry takes in roughly about $5 billion a year in investor inflow of capital. That number comes to us from our leading trade association in the industry. It's called IIUSA. It's Invest in the USA. They have data folks that just track everything alongside USCIS to get a real good understanding of how many investors are coming into the program on a yearly basis. That kicks off about a $5.4 billion expectation of funds coming into the US. We're happy to report we took in $1.5 billion of that coming into the United States, came into the projects that we are partnered with.
That represents about a 28% market share, which in a, you know, growth year after year. We started at zero. To now hold, you know, 28, 30, and, you know, in the future, growing that market share, that's a pretty big, you know, stepping stone for us. We feel that we've been able to do that. We see tremendous amount of transactions on a daily basis, both incoming and outgoing transactions with our team, you know, to the tune of about $4,500 incoming transactions alone last year, meaning $4,500 wires came through. That doesn't necessarily mean 4,500 individuals. Sometimes there's three wires per person, sometimes there's two, sometimes there's 12. That's why we have a robust team that really understands the ability to intake those funds.
Kind of going off of something that Mark had mentioned a couple moments ago about working with a bank that is specialized in their field. When him and Nick are launching this, the gaming side of it, working with a bank that understands that is absolutely true in the EB-5 space. There are a couple of others that we know very well, but the Chases, the TD Banks, the Wells Fargos, they do not get involved in this space. They'll get in their own way, to, for lack of a better way of saying, right? They'll get in their own way. You have to have a specialty and a dedication to the space in order to be able to pull off these things successfully.
We currently have a little over 100 projects that are currently on platform raising capital, which is a very large number. 60 or so independent regional centers. Regional center are the folks that are out there licensed to actually raise this capital. A lot of projects on platform, a lot of different individual relationships. Yeah, I mean, last year we saw about a growth about $190 million over the time. We're looking to just continuously grow that.
Next. A couple of projects that we had closed up last year, meaning that the funding was completed, the accounts are still open, and they're still active. However, the amount of incoming new money that came in, were two big names, two probably that you've heard of. I mean, in Big Sky, Montana, it had the Yellowstone Club, which is an uber-luxury resort. I believe that condo units go for about $30 million apiece, so this is a very, very exclusive, the athletes and the uber-wealthy of the public that are, you know, seeking these type of units. That was for $400 million. Right behind that was also a project that we had finished in Miami, The Four Seasons at The Surf Club, which is a little far north of South Beach itself.
That was for $140 million. Four Seasons is something that, you know, everybody knows. While we were, you know, closing those up and the funding was kind of wrapping up on that, it brought us into two new projects. Next slide, please, David. That we were onboarding at the same time. Basically, these are two history makers in the EB-5 industry. Infrastructure is a huge buzzword in the industry currently right now. Basically we had the largest one so far, $500 million. That one we'll be raising right up the block at the Hyatt Hotel on Park Avenue. It includes a complete redevelopment and construction of that building. It also includes stakeholders like the MTA, as there's going to be some updated access to Grand Central along with that at the base of the tower.
That was for $500 million. Right behind that, we have a CanAm offering. CanAm is one of the most well-known EB-5 regional centers in the space. They are New York-based. This is for a data center in Carson, California. It's a government-owned center. That is for $180 million.
Dave, you can just go back to that one real quick, just to, just to kinda stay on topic here. You can see that the difference in asset class here is great, right? We're talking about luxury hotel, transit authorities, all the way down to, like, data centers. EB-5 capital probably touches more things than we realize, right? Everyone's familiar with Hudson Yards, right? Right up the road. Hudson Yards raised $1 billion of EB-5. If anyone's ever used the Wi-Fi that goes through the subway system, that was EB-5 use, they used EB-5 for that. We had Four Seasons on there. They've used it multiple times over. If you've ever stayed at a Four Seasons, part of the money they used to build that building was EB-5 capital.
It's not what it used to be in years past, where it only built multifamily or residential. It has now branched into this larger area, which is this infrastructure, which April just mentioned, these two large projects. When legislation happened and Congress approved our program in 2022, under what they call the Reform and Integrity Act, they carved out, I say we, 'cause we were part of the negotiation with Congress, set-asides in the visa category. Every year, just to kinda give you a quick one-on-one on EB-5, every year, EB-5 allows for 10,000 visas to be allocated to investors.
If I'm an investor living in mainland China or India, and I have a family of three, if I make one investment, all three of my family members can come over under the EB-5 visa. Those three count against the 10,000. That's something we've been fighting for, to remove those derivatives for years. I'll get into that in the next legislative, you know, slide. It allows for, you know, families to move over under one investment. What happened under 2022's RIA discussions, this Reform Integrity Act, is there were some folks in Congress that were very for this program, and there were some folks in Congress that were very against this program. The reason so is the ones that were against it, their areas or their states never saw EB-5 investment.
It always went to New York, California, Florida, Dallas, you know, like, the major cities. It really went to there. What happened in the legislation, and we made a compromise with this, is we wanted to drive money, 'cause this really is an economic development program more than anything else. The program wants to drive money into areas that are not just the major cities, but also Middle America, these areas that normally would not see any money. What happened was we created these, well, we call them set-asides. These, there's rural. If you are building a project in what is classified under the EB-5 definition, and it's all based on unemployment numbers and economic studies and models, if you're building a project in a rural area, you're allowed 20% of the visas.
It's basically, I always use the thing, does anyone ever go to Disney or bring their kids to Disney? You have those Disney FastPass lines. A rural project puts you in a Disney FastPass line. If you get into a high-unemployment area, that's a 10% FastPass line. Now infrastructure, which has been the hardest one to really equate what is an infrastructure project, that gives you 2% separate, you know, set aside. Having these two large-scale, very reputable regional centers bringing infrastructure projects to the market is the first of its kind since this program started again, or it got reauthorized in 2022.
Dave, if you go to the last slide, I'll touch briefly on a topic that everyone's been asking about over the last year and a half or so, and that bright gold picture in the bottom right, which is the Trump Gold Card. When that was first announced in February of 2025, it was announced off the cuff by the Secretary of Commerce. No one had any idea that this was coming. It just literally came out of the blue right after I presented to the board, literally hours later, go figure. The Trump Gold Card did effectively go live in September of last year. It did not go live by congressional, any congressional approval, not through legislation. It went live through executive order.
If anyone follows politics, executive orders can be overdone by another executive order. While the Trump Gold Card is in play, there's not a single immigration attorney that I can tell you that's out in the space that is recommending the Trump Gold Card, only because there's so much uncertainty around it. From a dollars and cents perspective, it's $1 million per person, where our program is $800,000 for an entire family. When we look at. There's many more things that we can go through in terms of the visa categories and the lines. The EB-5 industry does not see the gold card as a major competitor to it whatsoever. If anything, it's just running parallel to it.
There may be some investors that decide that that might be a better path for them, and they're okay with putting out $3 million or $4 million and never getting it back. Versus maybe waiting a little longer depending on their status and where they come from, $800,000, getting it back, and all three or four of their family members can come over. While it is a thing, it's not really a thing to us. Advocacy and lobbying efforts, we spend a lot of time in D.C. We spend a lot of time on Capitol Hill meeting with congressional staff members. Occasionally, we might get a senator or congressman to sit in the meeting. It's very rare. We're meeting with staff members just to inform them on what EB-5 is, what it's doing in their areas.
Again, this is an economic development program, right? It's a job, U.S. job creation program. Immigration aside, this is to benefit the United States of America and create jobs here in areas that maybe wouldn't normally see those jobs. We're in D.C. usually 3 or 4 times a year, actively lobbying members of Congress to help us kind of push this through and get permanent reauthorization because our program is up for reauthorization in the end of September of 2027. The industry, I can tell you, is extremely confident that we'll get at least another 5-year window, if not permanent reauthorization. President Trump just permanently authorized Opportunity Zones. The thought is we'll try to piggyback a little bit off of that and get permanent reauthorization for the EB-5 program. I speak a lot.
I do a lot of speaking nationally. I haven't told Mark this yet, but we are being begged to come internationally and speak at. There's road shows constantly in China and India, different parts of Southeast Asia, Latin America. Because the name has gotten so popular, we're asked constantly like, "Oh, why don't you come do the week roadshow in China?" The answer so far has been no, but we're gonna talk later. The answer might be yes. We'll see how that goes. We understand it's a very niche business. It's a business that we think is very scalable. We have the team to scale it. If we have to, we can certainly hire more folks to handle the daily transactions.
We're potentially looking at another business development person to kind of tackle some of the folks that are in our space that we don't have yet. We think we're in a really good space. Happy to take any questions, whether about our business directly or about the program in general.
Once. just one with the high market share, the 28%. How have you been able to carve that out, and just who are your competitors?
Great question. I'll start first with the second part of that. Our competitors, there's not really many banks in this space. I'd say our largest competitor is actually a friend and ex-employee of ours when we were at Signature Bank, and they're at Customers Bank. They're involved in the space. What we're really seeing now more so than banks being involved, there is, I'll say it's one company because they were started by the same person over a couple of years span, but they're not a bank. They're a deposit solution, a deposit management solution. They really came out of the woodwork into EB-5 after Signature Bank failed because of the FDIC insurance.
People started to look into these deposit management third-party companies that will take the deposits in, farm them out to a whole bunch of banks to settle the FDIC insurance requirement. When called upon, they have to then go back and gather those funds and bring them back. Banks like us, we have the ability to do that as well. You don't need a third-party management system to do that. We have that ability inside of MCB with a relationship that the bank has to be able to offer full FDIC insurance to the folks that are out there. As far as how we've been able to gain that market share, as April mentioned, she's been in the business since 2011. I've been in it since 2016.
We've developed tremendous relationships with the regional centers, NC managers. Those are new commercial enterprises. Those are the folks that are actively out there raising capital. Immigration attorneys, we have great relationships with. They send us a lot of business. Securities attorneys, these are the folks that are actually writing the offerings, writing the PPMs, so they have direct relationships with the projects themselves. We really have this law... Fund administrators. I should mention fund administrators. Under the RIA, legislation said that we want third-party eyes watching these funds that are not related to the project whatsoever. In doing so, we have great relationships with the fund administrators who then introduce us as kind of industry leaders in the space.
Thankfully, if we do 1 project with someone, the likelihood of us doing 2, 3, 4, 5 with them is astronomically high.
Keep on going. Okay.
Thank you.
One of the sidebar synergy it turned out as a result of being in this business, we do a fair amount of construction lending in the markets that we're in. Since now we have the EB-5 team, we were able to go to the developer and say, "Hey, what about EB-5? Would you consider it?" There isn't a crane, you know, when I've tested this to make sure it's accurate. There isn't a crane that you see that does not have EB-5 under. You know, EB-5 is in that cap stack. On a number of occasions, we were able to introduce our developer, who we're providing the construction loan to this team to say, "Hey, you qualify for EB-5.
Let us do the EB-5 for you. We did the EB-5 business, and then we did the construction loan. We've done a handful of them, and so we don't lose the opportunity to introduce April and James to the commercial side of the business. You know, why not just add more value? Great. Great job. Thank you.
Thank you.
All right, the next presentation is Laura Capra, Head of our Retail group.
Thank you, Mark. Good morning.
Good morning.
As Mark said, my name is Laura Capra. I'm Executive Vice President, Head of Retail Banking. 14 years at MCB, I hate to admit it, but 40 years in the industry. Prior to joining MCB, I spent the bulk of my career at Santander, where I was responsible for deposit growth and de novo expansion in the Manhattan market. We have a sales team of 15, we run extremely efficient. The team put together has over 300 years of collective experience, we have a very seasoned, knowledgeable team. Our deposit verticals. Our deposit verticals have a proven track record for deposit growth and will continue to be a consistent driver of efficient funding for MCB. As you know, as of 12/31/2025, these verticals contributed to $1.4 billion in deposit growth.
The success of the growth is really elementary. We provide high-quality, white-glove service. The service has resulted in numerous business referrals throughout many of the deposit verticals. The team is extremely knowledgeable in these industries, extremely visible, whether it be in front of clients or at events. This has been a key to our success. In addition, we have positioned ourselves to be a trusted partner to our clients. As Mark said previously, we're not afraid of technology integrations, which has helped these clients with transactional efficiency. The cost of these deposits for Q4 of 2025, 2.75%. I think one of our competitors today had a sign in the window. They just opened a new branch. I think they were offering 4-month CD at 4.10%. These deposits are extremely attractive from pricing.
What's really exciting here is that we have just touched the surface of the potential growth in each one of these deposit verticals. Our strategically located banking centers. Our approach has always been to identify key locations where our brand is recognized, where we're well-established, and we have the ability to expand our banking services to clients who are currently residing or working in these surrounding areas. We target markets that are surrounded by many of the big money center banks, which is really twofold for us. It allows us the opportunity to recruit and hire from these big money center banks, and it gives us the opportunity to capitalize on their percentage of market share. I'll share with you a recent example of this. In November of 2025, we successfully converted our Lakewood administration office to a retail banking branch.
We've had service clients in the Lakewood market for years prior to us even establishing this office. We were very successful in recruiting a seasoned relationship manager from 1 of the big money center banks. 6 years later, this manager's relationships has consistently contributed year-over-year to deposit growth in this market. Lakewood itself, just to show some statistics, there's over 19 financial institutions with over $3.6 billion in deposits, and that was as of June 30th. Lakewood was ranked 1 of the fastest-growing municipalities in the state. All tremendous opportunities for us. That conversion of a retail branch gives us the opportunity to expand our outreach in several deposit verticals in the state of New Jersey. Municipal, charter schools, attorney, escrow accounts, all that would require the branch to be able to obtain. Florida, which would be nice to be there today.
Florida is known as our sixth borough. During COVID, we supported and followed many of our clients to Florida, and we established a loan production office in Miami. This morning, we successfully converted this office to a retail banking branch. The Florida market, this Brickell office, is surrounded by 41 financial institutions with just shy of $50 billion in deposits, and we just want a small percentage of that. That opening today allows us the opportunity to capitalize on these deposits and continue our deposit vertical expansion into the state of Florida. That allows us to capitalize on municipal, title, escrow, charter, et cetera. In April, we'll move slightly north and open up our second banking center in West Palm Beach. That market, as of June 30th, has over 22 financial institutions with $7.7 billion in deposits.
In the building that we're taking space in, we have three of the big money center banks. All tremendous opportunities for us. Lastly, on slide 45, you'll see year-over-year of our substantial growth among these deposit verticals. More important is diversification across the multiple deposit verticals. This is and will continue to be a key strategy for us and helps us reduce risks. We will continue to identify industries that are in possession of or have discretion over funds. We're working on several now that we'll be happy to share coming in the future releases. This strategy has and will continue to make MCB a core funded institution. I'll open it up to any of you.
Questions. I'll just touch on something that Laura touched on, and again, it's something that it really is one takeaway for all of you. We've demonstrated it, the numbers are in the history books. We've demonstrated to be a core funded institution for 27 years now this June. Question is, okay, can you continue to be a core funded institution? Can you continue to drive, you know, core efficient core funding to drive your loan growth? Do you have ambitions, you know, on both sides of the balance sheet? You see a strong correlation on both sides of balance sheet. It's called diversification, and some others call it optionality.
When Laura has developed all of these different lines, all these deposit verticals, the probability of execution, if you look at the industries behind each and every one of them, they're deep. We haven't scratched the surface. You know year-over-year, $1.5 billion is a rounding error for what the industries represent. We continue to work on, we continue to provide the service, satisfy our clients. Again, it all rolls back to a value proposition that we bring. The probability of each and every one of them just contributing enough. We don't need any one of them. Like we joke here all the time. In January, people have heard me say this, "I need $1 billion." Every January, we need $1 billion.
Well, if every one of them just contributed just enough, just a bit, we hit our price target, and we hit our value. We don't have to sit back and hope that just one of them lead the day, win the day. When you talk about execution risk, as shareholders, you should appreciate this. What's the probability? What's the execution risk? Our takeaway is very low, very low. On the asset side, you'll hear about that in a minute. We don't take that for granted, but, you know, we're a bank that does deals. We do a lot of business. We do a lot of loans. The question is, can you continue to fund them?
It was always there's one question that we're not asked any longer, but it is out there still, and a very legitimate question. If you have ambitious goals in deposits and loans, well, which is a not a glass half full question, but it's a fair question. Are you going in order to reach those goals, are you gonna jeopardize credit quality? Are you gonna jeopardize pricing on the loan side? Are you gonna pay up for deposits? Well, that's a trifecta of disaster. I mean, that's just a disaster, and that isn't who we are professionally, and that's not who we are. That surely isn't the history of this company, and that would not be a success story.
I think we put the foundation in place that will allow us to continue the proper approach toward managing risk and managing our interest rate and liquidity profile here at the company, and that should give you optionality and diversification is really important for the reasons I just said. It's also a service management tool. You know, on the asset side, it's a risk management tool. Scott will talk about that. On the deposit side, it's a risk management tool. If I was so concentrated in one area, you know, who knows what could be a disruptor in that for that one area that could sort of bring down my ability to fund these loans? Then what do you do? Do you do less lending? Do you pay up for deposits?
We're not ever positioned to have to answer that question. Hopefully that's a takeaway, today as well. Any questions? Any more questions? Laura, anything online?
No further questions.
Okay. Thanks, Laura.
Thank you.
Thank you. All right. We have a break in the schedule. I'll leave it up to you guys if you want a 15-minute break, or do you wanna just roll through it? Gonna roll through? Whatever.
Take a break.
Quick break? Yeah, yeah.
We can do a break.
Yeah, we're-
Great way to spend. We have the regulators right after this. All day. Let's get cracking. Let's see. Wanna get going? Let's see. I think Dave in the back, and who was sitting next to you? I think it was.
It was Steven.
Steven. Okay. All right. All right, let's get started. I'll introduce you now to the birthday boy, Scott Lublin, our Chief Lending Officer, Norman Scott, our Chief Credit Officer, and Danny Tomasino, Head of Corporate Finance. Everything lending gang.
Thank you very much. My name's Scott Lublin. I've been at the bank since 2018 in this role. I was actually at the bank once before running the real estate group from 2008 to 2013. Came here 30 days before Lehman Brothers went down, interesting times to be in banking. I was also at 2 larger regional banks, $20 billion, a $50 billion, now a $200 billion bank. That's actually a little bit of a theme. A lot of my colleagues are from larger banks. While we're a $10 million bank, we really punch above our weight class in our competition 'cause we find ourselves competing against larger banks on complicated deals.
As you can see on this chart, we grew about 13% last year. That's really, you know, pretty consistent from really the time the bank started, even before we went public. Sort of, you know, it ebbs and flows based upon market condition. We've always been a growth bank. In the past couple of years, it's been more heavily on the healthcare side, and that's various reasons why we love the space, and we'll go into that. Also, obviously, you know, the real estate market has been a slowdown, you know, with the acquisition market slowing down, and that sort of spurred activity been a lot less.
So we'll go into the numbers, but really before we go into the numbers, to me it's, you know, how do we get this growth? How are we successful? How can we grow safely? That's really the bottom line. The philosophy is the same between the real estate group, investor real estate group, and the C&I group, which Danny runs, which healthcare rolls into. Both group has about five, six lenders in it, and then they have support staff, analyst, portfolio, managers work for them, and then we have our credit partner, which Norman runs up. It's really we are very seasoned lenders, so that's we really lean on our lenders. They're the first, you know, the first role of defense that the bank has. I view myself, and I view all our lenders really as credit people.
They're looking at deals for us when they come in. They're negotiating with the client or starting our negotiation before credit gets involved. That's really a key part to understanding the risk of a company or risk of a deal. You know, in a certain sense, every building deserves a loan. We have to figure out how much that loan should be and how that fits into our parameters. I'll say one key part to our success is our relationships. We really see ourself as advisors to our clients. You know, they'll often, on a daily basis, they're calling us, they're thinking about buying a company. They're thinking about buying a retail building. They're thinking about buying a nursing home. What do we think about it? Where do you think the debt will size? What do you know about the marketplace?
We're constantly helping our clients. You know, obviously we have thousands of appraisal reports. We have contacts with sales firms. We have contacts with leasing brokers. We're constantly trying to give ourselves, our clients opinions, even if we end up not doing the deal. You know, but we want them to call us and be one of the first calls. We want to add value to them. I mean, that's a theme of the bank. You know, how can we add value to the bank? Mark mentioned that before. That's what we try to do. The reality is our clients, if they're gonna buy a building for $40 million, and they have to put a $4 million deposit down, and they have to close in 60 days, they have to know we can deliver.
You know, going back to somebody in 45 days and say, "Oh, I can't get the deal approved," you know, that's not a good phone call, and that's the end of that relationship. Really, surety of execution is really key to our business model, and that's why I think we can get a little bit extra yield. I have Mr. Dougherty constantly in my ear about, you know, getting the extra yield, and I don't think it's riskiness. I think it's, you know, getting there quickly for our client. That's a key thing. Knowing that they can sleep the night before, and we can be at the closing table. That's sort of the extra value that we bring to our clients, and it's very, very important. The other, the main ingredient is our client base.
That's really, as Mark has said before, we're as successful as our clients has been. We have seen in the past decade, in the past two decades, the amount of wealth that has been created by our clients, and they're very entrepreneurial, has been substantial. Really unbelievable. We really focus on family-owned businesses. When I mean family-owned businesses, I don't mean a mom-and-pop shop. These are very sophisticated people who own 50 nursing homes, who own 20 retail properties south of Fourteenth Street, who own thousands of, you know, apartment buildings in the Northeast, who own 1 million sq ft of retail in Long Island. Whatever it is, we believe our clients are really, you know, experts in the field. Also that they're now, they're first, second, sometimes third-generational families. That's really part of our secret sauce, and they have patient capital.
You know, they are not, you know, we don't have any, like, private equity firms who are really clients of the bank who are looking at a quick IRR. You know, they're patient capital. They work with them. They appreciate the relationship. That's really the background, which I think is very important, and we can go through, James, the next slide. You know, this is the total loan portfolio, and you've seen this in the past. It's about 50/50 between, you know, nursing homes/C&I to invest in CRE. You can see in here, the invest in CRE is very spread out. It's very spread out. It really goes two things.
It goes upon our diversity and market fluctuations that, you know, you don't want to be exposed to too much in the invest in CRE pool. We really think, you know, I've seen too many times at other banks where, you know, they say, "We're not doing retail." You know, "We'll do zero." It doesn't matter if it's a long-term client. It doesn't matter if it's a low LTV. We think that's a bad business model. We think, you know, you can pick your spots. We're constantly looking at the market. What's the riskier asset class today than yesterday? What do we think is going to be riskier tomorrow? We really believe that there's good deals in all asset classes. It's very important, and that's another point to the pricing.
Sometimes when there's scarcity in an asset class, we think we can get a little bit extra pricing. Again, is it riskier? I say it's not riskier. It's just people are very segmented in their thoughts, and they really have yes/no answers, and, you know, we don't believe that's the right way to go about it. The next one is really continuing. This is just real estate, and again, it really goes to how we diversified about all kind of types across the board. This is real estate only. Geographically. You know, we started, you know, as a New York-centric bank, but, you know, that's evolved over time as our clients have evolved. We've followed our clients more so on the health side. Right now, about exactly a third is out-of-market. That's predominantly in the healthcare space.
We do follow our real estate clients but less so. You know, it's very. You know, real estate is very specific, right? A shopping center on the northeast corner could be, you know, different than one on the southwest corner. Nursing homes is, you know, a little bit different than that, and it's not that specifically a different locale in a specific town. We do, you know, follow our clients. Then, as Laura mentioned, we have our two offices in Florida. We've always been down there with our New York clients in Southern Florida. About 4 years ago now, we opened the office down there, and we hired a local real estate lender and a local C&I lender, and they have introduced us to new clients, Florida-based clients. That's been very successful.
We're gonna open the same thing in West Palm. We have a walk before we run mentality, just like in technology and everything else we do. We were a fair amount about booked down there but, you know, Florida has had, you know, ups and downs in the past. We're constantly talking about it with our credit partners, with our board of directors. We think that's a growing market. We think it's a growing market, so we're excited about that. The next slide, really, if I had a drum, I would do a drum roll. I would take a little bit of thunder from Danny, but very exciting news. We've been working on this a while. Literally got the letter from them on Friday last week that we became officially, we're a HUD originator.
HUD does, you know, there's multifamily potential and healthcare. We think Wagah will be leading with healthcare, just like we lead with healthcare in the portfolio. As you know, we do a lot of healthcare lending. A good chance, a good chunk of that is acquisition, and they do a bridge, and they go to HUD. Traditionally, we would get paid off. We got paid off a few hundred million dollars last year.
About $150 million-$160 million a year.
Yeah. We, we think we want to capture this business. This is a fee income generational business plus a deposit play. We hired a chief underwriter that will be announced in a few weeks. You have to have a chief underwriter on staff. We got approval. Again, we think this is really filling that last part that we haven't had, and we think it's potentially, you know, another contribution to this fee income. I'll repeat what Dan's gonna say. It's not in this guidance for.
That is right.
this year. Even if I signed up a HUD deal today and all the stars aligned, it takes six months. This is really a latter part of the year and then 2027 going forward. We were at a healthcare conference last week, and we knew this was coming, and we were talking about people and a lot of our customers who we have very, very deep relationships with, are very excited. They've been talking about this for years with us. We decided to get this on our own. Some people try to sell licenses. We got our approved on our own by, you know, just being a bank and our experience in the healthcare space. That's another thing. Most banks, you can't go to 232 directly. You go to multifamily first.
We sort of got an exception, and we can do Section 232 right away. We're just very, very excited about it. We think it's gonna be a, you know, multimillion-dollar fee income a year, starting the end of the year going into 2027. Could have a lot to say.
You can stay here. You can. You can sign yourself up.
Yeah, so that's really one that's really real estate and lending overall. I wanna hand it over to Danny, who really runs our C&I and is, really known as a leader in the space in the healthcare space.
Thank you, Scott.
Good morning. My name is Danny Tomasino, SVP of C&I, which also includes healthcare. I've been with MCB now for 6 years. I have over 20 years of banking experience. Previously I was at Citibank and PNC, where I led their healthcare initiatives. This chart here is just kind of an overall picture of C&I lending. As of December thirty-first, 2025, our C&I portfolio stands at $872 million, focused squarely on middle-market businesses with revenues up to $400 million. This segment is where we see strong relationship-driven lending opportunities and attractive risk-adjusted returns. As what you've been hearing throughout the day, our C&I strategy is the same as everything else, where we really have industry specialization and diversification.
Rather than concentrating risk, we've constructed a well-balanced portfolio, as you can see from this, from the slide, across multiple verticals. That diversification reduces volatility and allows us to pivot capital towards sectors with the strongest fundamentals. We've really had a strong history of credit performance, and it's primarily driven by what, again, what Scott has said, by the strong sponsors that we have. I mean, we, you know, our collateral is strong. We have very strong personal guarantees with individuals that are high-net-worth individuals and strong sponsors. Our borrowers have durable cash flows and strong asset coverage, and again, we have deep underwriting expertise in our chosen verticals. Again, what we've said, the same thing as our deposit vertical, we're not competing purely on price.
We're competing on structure, relationship strength, and credit quality. The portfolio has demonstrated consistent growth while maintaining discipline. Even as balances fluctuate quarter to quarter, the underlying composition reflects a deliberate shift towards sectors with favorable long-term dynamics, particularly the healthcare-related segments. What I want to illustrate here is the reason why we're really focusing on the healthcare side of things. As you can see, healthcare really dominates GDP. It consistently represents anywhere between 17% and 20% of the GDP. Spending grew 7.2% in 2024 to $5.3 trillion. Skilled nursing facilities accounted for more than $220 billion of that. You know, primarily what's driving this growth in healthcare is a few factors. One is the aging population.
Another one is the advanced medical technologies, administrative complexity, and drug costs. Looking forward, CMS projects healthcare spending could reach approximately 20% of GDP by 2031. Importantly, the recent federal budget discussions have had limited impact on skilled nursing operators as policy focus is largely targeted on other sectors. This slide here is an indication of the aging population and why we're so bullish on the healthcare space, especially in the senior living side of things. You know, the long-term demographic story strongly supports the strategy that we have. The US population grew approximately 10% from 2010 to 2024, but the most important shift is the age composition. In 2010, the 65-plus population represented about 13% of the population. By 2024, it's roughly 18%.
There is definitely a shift in the aging of population. It's projected by 2050, Americans aged 65 and older are projected to increase from 61 million to 82 million, a 47% increase representing approximately 23% of the total population. This aging demographic directly drives demand for skilled nursing and residential care. There's definitely a lack of supply in the market out there, and predominantly it's due to the Certificate of Need, right? States where you need certain licenses in order to operate in certain states, which is predominantly the states that we're financing in, right? There's a very limited supply. It's extremely expensive to build new senior living facilities, so that's where we're really seeing the strength in this space and this sector.
Again, this is not a cyclical trend. It's a structural demographic shift that supports long-term occupancy and revenue visibility. This is our portfolio in healthcare, kind of just a high level. This is not something that we've just started. We've been in this space for, since, you know, 2002. What's really amazing is the fact that we have no realized losses or deferrals, which is incredible. Even during the pandemic, where there was so much gloom and doom, you know, in the industry and then negative press, you know, this segment and this sector has really held up extremely strong. We never had a deferral or anything, even during the pandemic, which is just a testament to the strength of this industry, but more importantly, the strength of our sponsors.
We really deal with the top-notch, best-in-class sponsors in this space that have, you know, over 500 beds, that are operating over 500 beds, 1,000 beds. I mean, they keep growing on a daily basis, but they really are the best in class in the industry. We take a very conservative approach. I mean, from our, you know, our portfolio in general, average LTV is 70%, which illustrates that we have a tremendous amount of equity in our loans. You know, we're extremely highly selective regarding the quality of SNF operators, like I mentioned, that we finance.
We really deal with operators that have a proven track record, not only of success in their facilities, but success in their market, and they're really the market leaders in their geographic locations. Today we have $2.8 billion in total healthcare loans, with $2.5 billion concentrated in the skilled nursing facilities. We focus on this niche again because it combines essential services, strong demand fundamentals, and really strong reimbursement support. What we've seen also is the Medicare and Medicaid has really increased their reimbursements to a lot of these facilities. The states have now started supporting the skilled nursing facilities because the alternative is much more expensive.
By not having skilled nursing facilities or not supporting skilled nursing facilities, the alternative is going into a hospital, which you're now it's gonna cost the taxpayers, it's gonna cost the insurance companies that much more. What we're seeing is a lot of the reimbursements in these states have really increased, particularly in New York. Florida has seen a tremendous amount of increase throughout the last 3 years. They we're seeing a lot of support from the government agencies. Again, like I mentioned before, we lend to Certificate of Need states, which limits the supply and stabilize occupancy and the pricing dynamics. The next slide is really just a summary of what I've been discussing, why we've been successful, why we're in this space. We have tremendous industry depth.
Myself, like I mentioned, I have over 15 years in healthcare experience, but my entire team is really well-versed in the space. You know, over 45 years in totality of experience. Norman, on the credit side, has really hired really strong underwriters in the healthcare space that have a background and have been doing it for many years. We're really well-positioned as far as not only knowledge, but overhead. We have a very diverse base of facilities. We have over 285 facilities now in our portfolio that consists of throughout the entire country. We're now financing in over 22 different states. We have great geographic diversification as well as operators. Again, we have a proven track record with no losses, no delinquencies.
As I mentioned, Medicare and Medicaid continues to be supportive of the space. One other thing that we're also doing, and this is where we're implementing more on the technology and things of that nature, we also have third-party servicers where we're monitoring all the nursing homes that we have in our portfolio on a daily basis, quite honestly, on the performance that they're doing. We're tracking everything that's happening. Our due diligence throughout the last 3 or 4 years has just been astronomically getting, improving every day. We also have, which I guess Norman would talk about more, is the third-party sites, if you wanna segue to Norman now.
I'm Norman Scott, Chief Credit Officer. I've been here four and a half years. I'm in the chief credit officer role. Previously, I was at the U.K. global bank Lloyds on the North American operations. I was the head of corporate credit there for a number of years. Over 35 years in banking, over 20 in the U.S., and over 20 in credit, specifically in credit. You know, I think it aligned, you know, Mark's vision to take the bank to the next level. As Danny alluded to, there was 15 in my credit team when I came in. We're now 30, and 50% of the original team really have been recycled into the model of MCB, of where we want to be.
I really targeted, you know, underwriters with, you know, big bank experience, you know, that really had the desire, the motivation to really take MCB to the next level, and as Danny said, targeting healthcare, specifically. Bringing in, you know, some real seasoned underwriters. I've got a very experienced team. There is, there's no key man risk there. We've got, you know, good coverage across the investor CRE, traditional C&I, which we've pulled back, deliberately, on, and on healthcare where we've grown. I've really built out that, healthcare expertise.
I think, you know, some of the transactions as, as Scott and Danny said, I think the culture here, you know, the lenders are very experienced and seasoned, and it's not about throwing a deal against the wall to see if it will stick. It's we know what the appetite is, we know what the board mandate supporting the management strategy and our credit risk appetite statement. That really starts at Scott, Danny, and the team, and it's very aligned with credit. You know, I always say we have a healthy tension. There's no conflict.
It's a healthy tension that, you know, I'm gonna be looking at it from the credit perspective, but again, we want to get involved early in the process, so we can help identify risks, credit risks, challenges, which should smooth the process so that, to Scott's point, you don't wanna get to day 45 and underwriting or saying, you know, "Here's a huge risk that we don't like there." You know, we would have those conversations way earlier in the process. We're all based here. The underwriters are beside the lenders, the portfolio managers, so there's good interaction. You can ask questions, you can jump in a room and have a call with the client. You can go and see the property.
You know, again, a lot of it is obviously in New York. The underwriters will go out and actually see the property so they can really assess it there. You know, I think that we're very much, you know, aligned on the strategy. On our approval process. You know, I think it's a disciplined approval process. We've got, you know, a lending signature, a credit signature. We've got a credit committee. You know, anything over $12.5 million will go to our credit committee. You know, as I say there, we've got, you know, Mark, myself, my deputy, Scott, and Dan as well is on the credit committee.
We have some board observers involved as well, as we transition from a board level committee. You know, I think that's been very smooth. It's working very well. We have a committee tomorrow for a couple of Danny's deals, actually, they're going to committee. I think, you know, that part is working well. There really is discipline. You know, I think our portfolio oversight, you know, again, the growth that we've seen in the four and a half years I've been here, you know, I think we've really strengthened the overall risk framework. Non-financial risk has absolutely been built out to position us as a platform, you know, for the large bank.
On the credit infrastructure, as I say, I've doubled the team in size. I think I've brought in real expertise that's helped the oversight of the portfolio. You know, we have a monthly portfolio and review meeting. The idea of that is we look at it on a regular basis, early warning signs, anything we need to know about. You know, Scott, Danny, and myself are on that with others in the team. We'll go through, are there any late payments that are coming in? Are there any risk rating concerns that we have? You know, really. We talk to each other pretty much every day, but this just gives us a formal forum and committee for doing that.
We have the quarterly, you know, asset recovery group, which is on Thursday, that's predominantly looking at the special mention and substandard. And also we'll look at our 5 watches. Is there anything we do? Memos quarterly for our 5 watches. So we've got good visibility into any early warning signs, you know, that are there. We have a very comprehensive quarterly commercial portfolio presentation to the board. You know, Scott, Danny, and I were there last week doing the 4th quarter presentation. Again, a lot of really good data, you know, information trends that the board can see. You know, and we'll take segment presentations to the board as well. We'll be directed by the board.
Are there any areas that they would like us to look at? It's very kind of interactive, you know, in that way. Monthly management reporting. We're getting that all of the time, whether it's the segment limits, making sure we're, you know, constantly in compliance with policy, with, you know, our RBC levels, our industry limits, all of that we're getting monthly reporting that we flag anything there. What my credit team will do an annual review. Again, independent from lending, credit will do an annual review, make sure we're on track. There are, you know, loans below 2 million, you know, if it's following certain indicators, it would be a very light touch.
Anything above that, we'll go in and look at it and re-risk rate it. How's performance since it was run underwritten. Very interactive between the credit and lending at that point. I think that gives us, you know, a good assurance that we've got that independent internal verification. We also do, as Danny alluded to, an independent loan reviews. We've got a third party who will come in, do a very large percentage of our portfolio. I'm, you know, we're members of the midsize banking consortium. I go with other chief credit officers. You know, you hear what's going on in other banks. This independent assessment is, you know, larger than most of the banks.
That gives us heightened oversight, which again, just gives us comfort that we that we like. They'll do this on a quarterly basis. It will be across our CRE and our C&I, and then once per year, it will do the skilled nursing facility. That was actually done last quarter, so in the fourth quarter. I just presented the report to audit committee two weeks ago. The good news is it was a very positive endorsement of everything that Danny has said on the portfolio. It's good that we have the independent credit, and then we have a third party, you know, endorsement or identifying any issues that would come out. We then have clear action plans.
If there's anything identified from there, we'll follow through with the action plans and take that through to, you know, to the end. We also have stress testing. We have a third party that will do every six monthly stress testing with multi scenarios. I'm told that this is the most conservative of all the stress tests for the banks at the third party services. You know, which is comforting. We have multi scenarios, and we're stressing the capital. You know, in all of the stress tests that we have done, the bank has remained well capitalized. The third party will come in and present with myself, the stress test output on a six monthly basis to the board.
So that's April is the next one for the second half of last year's stress test. As I said, we'll also do industry segment reviews. You know, Scott and I will talk about this and, you know, what's topical. What's, you know, office obviously is one that we've taken a couple of times in the last 24 months. But as Scott said, interestingly for office, as you'll see on our public slide that's in the investor deck, you know, all of our Manhattan exposure is 2022 and beyond because we saw there being opportunities where we could get the right structure for the right sponsor and the right pricing. You know, again, when others were pulling back, we actually did office transactions in Manhattan.
You know, again, touch wood, everything is going well in the office market, you know, is actually proving very robust in Manhattan. You know, when we look at all of our other segments, healthcare, for Danny, you know, we take that about every 12 to 18 months to the board. We have a review when the one big beautiful bill came out. Again, we didn't overreact. It was not a knee-jerk, but headlines, you know, the first day we stressed NOI. Okay. If Medicaid was to be cut, let's stress NOI. The headlines two days later, you know, we're really not focusing on skilled nursing facilities, we're going after the fraud in Medicaid.
Again, we didn't panic, but we did a methodical review. We brought in a third party to do an independent assessment of the one big beautiful bill. They came with the conclusions which were aligned with us, that skilled nursing facilities in particular weren't materially impacted by the bill. I think, you know, over the last six months or so, it's kind of proven that way. You know, I think that's a kind of whistle-stop run through of credit. You know, I think, you know, we've Very pleased with my team. Very pleased with the portfolio performance, and the oversight that we've got. With that, I think We're doing a combined Q and A, just any questions on the portfolio or credit.
I think you guys have done a good job of locking Dan out from jumping up to the table. maybe for all of you, I guess maybe any update on the credit that drove the NPAs up in the third quarter. Any updated resolution there?
I would say that, you know, that is a credit that we've been working with for about two years. You know, working through the process, working with the sponsor, working through the different strategies. You know, and within that relationship, there were five loans. We're now down to three loans. Again, we're looking at every avenue. We're very patient. We have recourse, which is key in all of these scenarios. The assets have a value as well. Working through each of these selective strategies for each of the properties, but all of the properties were linked together by recourse as well.
you know, I think that's allowed us to be thoughtful and not rush into a particular strategy. We decided in the third quarter, you know, Scott, Mark, myself, and Dan sat down and we felt, you know, we should reserve to be prudent. Absolutely. We have, again, recourse. Let's reserve for the element that's that we have the recourse on, and we will assess it as we go through each of these strategies. I think, you know, Mark, you spoke to the earnings. You know, that we expect some resolution in the first half of this year. And there are moving for each of these properties, there are moving time frames, but we're progressing.
You brought the, you know, the reserve to loan ratio went from 112 or something up to 140, almost 150. I guess this is a little bit of a hypothetical, but as we look through back half of 2026, 2027, you're growing at 15%. What's your target reserve to loan ratio if there is one? What should we think about longer term?
I'll take that one. Even though there's no room for me up there. Yeah. We popped up to 142, I think, in the 3rd quarter. Prior to that, we were running in the low 100s, right? Low 100s kind of feels about right to us, but we really do aspire to add a little bit to that through time. In my budget model, I think we gravitate towards 115 over the course of 2026. As Scott Norman spoke to about the 5 out-of-state multifamily loans, we really think we're fully reserved for those things. That it's just a matter of time. Just the legal process grinds very slowly.
We feel like we're going to get to the other side of this thing first half of this year without any significant loss beyond the reserves.
Can you just talk about the competitive environment? I know you don't sacrifice on terms and structure, but are you seeing other folks start to do that, and do you think it's going to impact certain categories more than others?
I mean, there's more banks in the market now than two years ago, certainly. You're seeing some margin compression. Even on the non-bank side. We found ourselves sometimes, you know, I use the example where, you know-
Bank A might do, you know, $8 million. We might do $9 million with structure at a little bit higher rate, and a non-bank is going to do $10 million full non-recourse at a higher rate. Those margins are compressing a little bit, and then I didn't touch, we do some AP notes with, you know, GD pieces behind us. We're seeing some margin compression, but we still think, you know, we pick our spots and we're able to get that extra yield. You know, we're only so good-looking. You know, I can't be a point outside the competition as you go with somebody else usually. We have to be in that zone, so they'll pay us a little bit. They'll pay us more for execution, Mark's at 50 basis points. You have to be in the realm.
There's more banks in there. There's more banks in the market, 100%. You're seeing it on the healthcare side.
I am. The only thing is that we've been consistent in this space-
Right
right for the last 25 years. What we see is we see a lot of banks going in and out. That's one thing that our sponsors are really, you know, cognizant of. We're there for the long run, right? Execution is there. We've been supporting their growth for 20-plus years. That's not going anywhere. You are starting to see, 'cause healthcare is a big buzzword right now, right? I mean, I think that's probably the strongest industry out there. You're seeing some more banks entering, but that's what they're doing. They're entering. We've been in the space. They, you know, East West is one of them that keeps coming in and out.
Yes, so I think you are seeing a little bit more, but it's not the consistency that we have.
Talks around broader concentrations. Clearly you guys are doing something right in the, in the healthcare vertical. As we think about growth going forward, the existing concentration that's on the book, how we should be thinking about the growth rate going forward, kind of bifurcated into the same buckets? Over time, is there a plan or a strategy to maybe level out some of the concentration that you currently have in the healthcare vertical?
I think we're going to continue as long as we see it performing. We don't see any big red flags that we'll see that. Obviously, the infusion of new capital, you know, decreased whole lot ratios. We have more runway now. I think you'll continue to see a lot of healthcare growth.
How about just on general C&I, kind of the modest decline over the last year and what you're seeing there from a growth glide path, from a competitive landscape, and just how we should think about broader C&I growth as part of the mix here?
Yeah, I mean, I think it's been strategic, right? We're picking our industries, and we're picking our verticals. We still feel like there's a lot of opportunities within the C&I space, but we're being very selective. You know, we're looking at healthcare outside of just the senior living to really also diversify our C&I portfolio. We're looking at some of their ancillary services that are being done through some of our sponsors with our senior living facilities. We're looking at different verticals within healthcare as well to diversify that space, but we're being selective. It was strategic on the kind of the decrease a little bit on the C&I space.
I think, you know, if you talk to other banks out there, C&I could be somewhat of more challenging and a little bit riskier, whereas we're taking a much more conservative approach on the healthcare side. We have the industry specialization of it. And we still think that there's a lot of runway to grow in that space.
I mean, we do see rate compression in that. We see some deals we see, we don't think the reward is worth the risk. We're seeing some other smaller to mid-sized loans in the DSOs, dental practice, medical practice. We're seeing a couple of big banks getting there at very low rates, things that we would never consider. I think we've lost one or two loans like that. It's very selective, but we're constantly meeting with our clients.
I think there's a lot of banks were pulling out of commercial real estate a couple of years ago. They were moving in to focus on C&I. That's certainly what I heard from other chief credit officers and that made it much more competitive in C&I. I think structures, as Scott said, were just more outside appetite. We just stepped back.
Might be skipping ahead a little bit, but, you know, as you look to leverage the capital that you just issued, I mean, is the additional loan growth, is that a combination of existing customers doing more or doing bigger deals? I mean, how should we think about the source of that new loan growth?
Yes. No, I mean, we probably, our growth every year is probably 75% existing customers, and then we, you know, we get that 25% new. That's going to continue. Yes, we have limits based on RBC, so that naturally goes up. I tell my lenders I have to be in love, you know, for these large deals. Naturally that goes up a little bit, but it, it's more of the same. It's more with our existing operators. It's more capacity. We have 2 deals going to committee tomorrow. One is a new relationship on the SNF side. One's an existing one that we've had probably one of our first healthcare clients 20-plus years ago.
It's a combination, but it gives us more runway, and we really think, you know, the HUD is going to give us another way to get more business on the bridge if we want. You have that big takeout. We're looking forward to it.
It was mentioned earlier just with the offices down in Florida, what do you see as the growth potential down there?
Yeah. We probably, you know, this year we probably originated, you know, $100 million down there. We can get new lenders in West Palm. They gotta get their feet wet a little bit. It's probably in that couple of hundred. That's a little deceiving because we do Florida SNF business sort of out of the New York office too, so it's even larger than that. From our originators down there, no, our originators do between, depending on which originator, $100 million and $300 million a year. We'll have another originator, so it'll be a couple hundred million, but we are very, you know, we're cautious again, we want to be very careful down there.
They're definitely seeing some softness in the market down there on the residential side, which we don't really have too much, but we'll walk before we run.
One more for me. If you could just walk through a little bit of the timeline of how everything works with the new HUD designation, like, you know, when a loan's on the books to the bridge to whenever it comes off, like how does that play out?
What do you mean by when is-
I guess what's the timeframe of when it comes off and off typically?
Typically, we've done a lot of research on this and the typical HUD loan is around seven years.
Once you close it-
Once you close it.
it stays into HUD.
It stays into HUD around 7 years, and then what ends up happening is there's usually, they'll usually, look to, refi cash out 'cause they've obviously, you know, increased the value of the facility. What we've noticed is around 7-year timeframe.
I'd say once you're in there, but to, I don't know if you're cautious to get there. On acquisitions, it's usually 2-3 years for them to get to stabilized value, and you have to have trailing 12.
Trailing 12.
Um-
Of a 145 debt service coverage. There's a whole formula based on how to get to HUD.
We look through our book, for instance, and when this person starts day 1, we have a list of loans that qualify. We're already speaking to those clients, and then we have new loans coming on that in our term sheets will say, you know, "Prepay is waived if you go to HUD via MCP," which is very common in the marketplace. That gives us more exit fees if they don't go to us. Or obviously you make more money going to HUD.
This is another differentiator for us from our competitors. This just illustrates the commitment that we have in this space.
The other bank, we've seen a couple of other banks. A lot of them have been unsuccessful. Our differentiation is that we're a major player in healthcare today. A lot of people have trouble getting business. You know, we have our existing portfolio, we have our existing client base who owns hundreds of nursing homes. We're very optimistic in the-
The press release came out, was it yesterday?
Yeah.
I must have had at least 30 or 40 emails from my clients already that they've realized that, you know, we're now becoming a lender. There's a lot of excitement buzz out there in reference to this.
Scott and Denny, why don't you talk about not only, you know, supplying enough of our bridge loans that go into HUD, your expectations. We don't do every bridge loan. We have some banks that do bridge loans. We expect those banks that don't, they don't have HUD licenses, we expect those clients to bring the HUD application to us. That's on top of-
Yeah
... a volume of what we would get.
Correct. It might not be payoffs from us. They could be at another bank, you know, who doesn't have a HUD license. Because we have these deep relationships with them, we're not the only HUD lender, we're not gonna get every deal, but we have very deep relationships. They know, you know, we want a piece of the pie.
That's where we'll compete with Graystone and Monticello, even at KeyBank, right?
Yeah. Key's in the field.
HUD shop. That to me is really even more so exciting than just taking on pipeline or existing bridge loans 'cause there's no reason why would they go to a HUD lender if they're already with us in the bridge loan for three to four years? Why not? You're signing up day one anyway in the term sheet, so why not stay with us to go to HUD? The key to the outside business is those deposits come to us.
Yeah.
Which we don't have today. See, when you go to HUD, when one of our bridge loans go to HUD through Graystone, the deposits stay. That's great. The economics are great. When we bring a HUD loan today that's already not on our balance sheet, that's new deposits that are gonna come to us and leave those other banks who don't have a HUD shop. Of course, when you sell the HUD loan. That's, I mean, that's the whole play. You sell the whole loan.
Yeah.
You sell the whole, the loans at 103, 104, whatever that number is, then you get the deposits as well. The economics here is extraordinary, especially since it's not a, it's not a capital intense. This is off balance sheet. The HUD side is off balance sheet and, you know, you don't need a lot of people to underwrite the HUD loan. The operating leverage is extraordinary.
Our operating counts are very strong. This is the strongest aspect in our lending is our deposits relating to the nursing homes. 'Cause especially once they get stabilized, whereas these things trade at like 12 caps.
Yeah.
They're borrowing and the rate is, you know, 6%, so the cash on cash is massive. We have, we have operating accounts that are, we have relationships, we have, you know, 20%, 30%, 40% deposit ratio, which is sort of unheard of on some of these C&I loans.
The other thing that's out there, I won't stress Dixie too much until after April 13th, the servicing side of this, we're gonna enter into a servicing agreement with a third party.
For now.
... we will be bringing servicing into this portfolio to HUD. I mean, that's just a fee business. We service, you know, $6 billion, $6.5 billion of loans now. We can service HUD loans. We will bring servicing
Yep.
which is a really great fee business.
Stage 2.
Stage 2. Stage 1.
Not in the forecast. Dan, any other questions? All right. Okay. Dan will bring us home.
Yeah. You know, you wonder why nothing's. We have such conviction. You know, we have such conviction, and we have some experience with this, and we have clearly we have a lot of modeling internally. You keep hearing Dan say, you know, "Nothing's in the model. Nothing's in the model." You know, because we like to overdeliver and underpromise. There's no reason to until it shows up. Trust me, we do a lot of modeling internally. We don't spend the money, and time, and effort to bring something to the market unless we're gonna see a return on investment fairly quickly.
Great. First of all, I want to say thanks to everybody, all of our guests for coming. I think the question and answers was really good, and I hope that you got all the answers you were looking for. I want to take an opportunity. There's two folks in the room, I'm looking at them right now that I want to introduce that haven't been introduced. My Chief Accounting Officer, David Bonner, and my General Counsel, Fred Erickson. Take a minute and just say hello to the you know, you explain your role here, and how long you've been here, and all that kind of good stuff.
Sure. Thanks, Dan. I've been here just 5 years. Most of my time, like it sounds like many of the people, have been spent at larger institutions. Before this, about 13 years at Morgan Stanley. I spent some time at JP Morgan and the CIT Group, which is obviously no longer around at this point. Handle the accounting and reporting. Additionally, as I just referenced earlier, my group, you know, partners with credit, but they're responsible for the CECL allowance, reserve analysis, the monthly close, all the SEC press releases, Ks, Qs, and that sort of stuff. As well as supporting Dan and Mark, you know, from the strategic initiatives from the finance side.
Thanks, Dave. Fred?
Fred Erickson, General Counsel. Been here two and a half years. Before that, about 21 years at Webster. My role here focuses on governance and litigation risk management, as well as third-party risk management, overseeing all the supplier contracts that come through the bank. And day-to-day answering questions, anything that comes up. I mean, the wildest thing you can do sometimes is pick up the phone and deal with what's on the other side. But focusing on delivering legal services and getting the right answer at the right time with the right tenor is my objective all day, every day. Thanks.
Thanks, Fred. Further, not in the room, we have a new head of HR. She's out at TE Bank, another big bank person on the team here. Finally, and really importantly, my chief risk officer's not here. He's getting ready for the regulators in about an hour. He runs that show, and he doesn't have time to sit with you, unfortunately. He's outstanding out of Flagstar, another bigger bank kind of guy. My takeaway is we've got an outstanding team here, an outstanding bench. We are built to cross the $10 billion mark without stress, without adding any additional expensive headcount here. I just hope you kind of come to the same conclusion. With that, I'll go into the deck. I don't see the page.
Anyway, you may have heard we did a follow-on offering the other day. The shoe has not been exercised. We took in about $170 million, $85 a share. Obviously, our book value per share, that's actually tangible book value per share. It goes from, goes to $74.06, up from $72.69 at December 25. As well, capital ratios increased likewise. CET1 increases from 10.7% to 13.1%, TCETA increases 8.9% to 10.7%. Our capital stack obviously much thicker. The question is, what are we gonna do with it, right? That's what's on everybody's mind here. You've heard the story from all the contributors this morning. I think on the next page, we talk about 26 year history of MCB.
We are led by Mark R. DeFazio, who most of you know, who is a very dynamic leader of this commercial bank franchise that is very unique, is a unique animal here in the metropolitan area. Our capital raise is intended purely to support organic growth. There is no plans for M&A. There is no plans for share buybacks in particular, or no balance sheet restructuring. We're not gonna do a restructuring of our securities portfolio, for instance. Organic growth is the deal. That's all I've got on that page. We've talked about everything else. The next page, which I believe is 63. Darren, 63? It's kind of a little bit backward looking, but it's important. This kind of speaks to how we've performed in the past since the IPO.
You look at every one of these bar charts, you can see the outperformance of MCD versus the broad index as well as a peer group, it's significant. Our ability to grow book value and earnings per share is demonstrated very clearly on this page. Part and parcel of that is the next page, it's the management of our net interest margin, the biggest driver of our earnings. You know, we've been through thick and thin over the last couple of years here. We've been through the mini crisis of 2023. We've been through the exit of GBG. We've been through the crypto noise that's been out there. You look at that, we came off the zero interest rate bound, we have done nothing but grow the margin throughout that horizon.
I'll get to the guidance in a moment, but our ability to manage both sides of the balance sheet price-wise is part and parcel of our ability to support and grow the margin through time. Moving forward to the fourth quarter of last year is what this slide speaks to. We exit 2025 with tremendous momentum. We, our net interest income was up 20% versus 24. Return on average assets, 15+%. ROTCE, 15+%. The NIM in the fourth quarter was 4.10%.
Again, we really closed out the year 2025 on a very strong note, and we entered 2026 just kind of with that tailwind that takes us to where we are today and what everyone wants to talk about, which is updated guidance, right? On page 66, we've got that guidance. The original guidance for 2026 was $800 million or 12% loan growth. We are increasing that loan growth to $1 billion, or about 15%. As has always been the case, we plan to fund all future loan growth with deposits. No change in that assumption. Net interest income growth for 2026, we expect to print about $365 million, which is up 20% versus 2025.
As I spoke to a moment ago, the NIM forecast that we spoke to on the earnings call last in January was 4.10% for the full year of 2026. We think we can increase that from 4.10%-4.15% as a range for the full year of 2026. As I've chimed in a couple of times, the non-interest income forecast is unchanged. We've not included anything related to HUD. We've not included anything related to AI. The guidance is unchanged, $189 million-$191 million on the OpEx line. I just jumped over non-interest expense, 5%-10% growth, no change there for non-interest income growth.
Non-interest expense, unchanged, $189 million-$191 million for the full year. It's important to realize that range includes $3 million for Modern Banking in Motion. That drops off once that project is completed in April. We are taking an additional floor in this building, and we have the new space in West Palm. Those things contribute $1 million to the run rate for the 2026 forecast. There'll be $1 million on top of that once that's all in for the year 2027. Finally, it's very important that in the OpEx line, we do have a line item for deposit fee growth. Our EB-5 deposits have some fees associated with them. Our trustee deposits have some fees associated with them.
There's a big piece of growth, $6 million in OpEx for 2026 related to growing those deposit verticals. We'll continue to grow those deposit verticals as long as they are generating appropriately priced funding for the bank. Efficiency ratio, 50% for the full year. That's down almost 6% versus the 2025 actual. Finally, the original guidance for ROTCE was 15+% by the fourth quarter of 2026. Obviously, with the new capital, that's gonna be a headwind to getting there. 13+% by the fourth quarter of 2026, and back to that 15+% by late 2027 as the capital is more fully leveraged.
You know, if you extrapolate that further, we fully expect that we can reach the 16% threshold through time as we do fully leverage the capital. The goal or the assumption set that we are using for the, for the, for what we expect to be $200 million of capital is about 6 turns, so it's about $1.2 billion. We'll expect to cross the $10 billion mark organically back half 2027 with the loan growth that I've just described. With that, I will open it up for questions.
Can you fill in on that deposit fee line a little bit more? Are those the actual fees paid to the depositors, or is that the costs of the actual, the OpEx of operating in those?
Well, it's interesting. Let's think about EB-5, right?
Yeah.
EB-5 comes in as DDA. All right. Back in the day when rates were at the zero bound, no one cared. Now, there are administrators that are kind of delivering the money, if you will, and they want to get paid. There's a fee associated with that. I believe that the cost of funds for EB-5, the vertical, is it's a high 2s or maybe a 3, very low 3 handle on that. It's still very that's with the fees, right? That's that one. The other vertical that's in there is trustee deposits. Again, it comes in as DDA, but the trustees are collecting a fee for the use of the technology platform that we invested in to be an eligible trustee deposit gathering firm, right?
We pay for that, quote, unquote, "for that technology," but ultimately it's going to a third-party vendor that's providing the technology. That's what that is. If you just look at the one of the goals of MCB is to flatten out that OpEx line, right? To really deliver operating leverage, significant operating leverage as we grow the top line and flatten out the OpEx. One of the wild cards there is how much do I grow these deposit verticals that have fees attached to them? I'll obviously bring that kind of color to the table as we go through the exercise. For 2026, no change to the OpEx forecast. It does include investments related to AI. It does include other investments related to Modern Banking in Motion, but no assumptions made about non-interest income growth.
Yeah, so again, if any other questions from the group? Do you have anything online?
Just with the guidance on, the NIM, what are you assuming for cuts and how much during 26?
Yeah. That's an interesting one. As the global situation evolves and the yield curve resets here, things are kind of changing. Within the forecast, the current forecast, we have 2 rate, 25 basis point rate cuts penciled in, one in June and one in September. Prior to the bombs, missiles flying in the Middle East, that seemed like very much aligned with the evolution of the outlook for monetary policy. However, that's really changed a lot now that the kind of concerns about inflation have resurfaced related to oil prices, et cetera. You know, for now, we leave those placeholders, you know, there. You know, to the extent monetary policy, the outlook for monetary policy changes, we'll keep that in mind.
The other thing there obviously is we get a new chair of the FOMC in May, and his aspirations were certainly to lower interest rates, one presumes. Given what's happening in the treasury market, in inflation markets, if you will, we'll see how that goes. Yes, David.
On the fee income, no, you know, no change in the 5%-10%.
Yep.
-for 26. Since you introduced the 27 ROTCE, would we expect with these products coming on in the back half that that growth rate would accelerate in 27?
Yes, absolutely. Absolutely. The, you know, the gaming initiative, the aspiration there is the replacement, if you will, of our former business GPG. You know, thinking about that NIM slide and how we have maintained that NIM, during the course of that horizon, we offloaded $2+ billion of DDA related to GPG and replaced it with interest-bearing deposits. Yet, because we have such pricing power on the asset side, we're able to grow the NIM. Again, we aspire to replace that GPG business through time. Of course, it's gonna bring in DDA, and hopefully it becomes a new-- with enough velocity that it becomes a new vertical in our DDA stack and starts to change the mix and the cost of funds while also generating significant fee income as well.
Again, HUD, same thing. As we bring on HUD business from other banks, that's gonna bring lower cost deposits to us as well as fee income. None of this is contemplated in the forecast right now. We, you know, we're moving forward on this stuff, and it really looks, we're very optimistic. Yes.
Again, just going back to trying to frame the fee income opportunity, is the sense that you guys wanna be kind of peer-like from fee income contribution to revenue, you know, fee income as a percentage of revenue, or are some of these opportunity sets large enough that you can actually be, you know, outsize that kind of 80-20 split that the broader peers kind of have in your size banks?
You know, I haven't really done that analysis, to be honest with you. I do observe that, look, when we exited GPG, we left a hole in the income statement of about $20 million, a little more than $20 million. As we contemplate and execute on that business, that's kind of where we hope to reset toward, okay? I haven't really thought of it in terms of comparing to peers, but it puts us back where we were. If you think about prior to the mini crisis in 23 and prior to the crypto episode, you know, this bank was trading at a multiple of the book that was north of 150. You know, that's our aspiration. That's where we should be trading.
Maybe just again on the payment space. I think it was said earlier that, you know, a couple of years ago, there was, I think, 5 million clients that had the debit card.
Yeah.
How do, how do the economics work in this new model? Do you need as many relationships, or are those relationships bringing in more revenue versus the old way of doing business? Just how big does it need to scale in order to generate a similar number?
Okay. Really an important question that I'll do my best to clarify if I can. We're on the other side of the transaction now. It's not gonna be 5,000 consumers. It's gonna be five merchants that we do business with. We're gonna be on the acquiring side, not the issuing side. That puts us on the right side of the trade with the regulators. We're not dealing with 5 million consumers anymore. We're dealing with merchants that do gaming in some shape or form or other on the acquiring side of every transaction. Again, driving click fee income as well as flow of low-cost deposits, low, no-cost deposits.
I'll just add one other thing there. It's actually an interesting question. I'm not sure if we'll be able to go back and correlate, we used to understand the behavior of those 5 million consumers who were actually ultimately clients of MCZ. They were point-of-sale transactions, ATM, gas station, restaurant. They were using a debit card. The average transaction amount is significantly lower than your average bet if you're wagering against a sports game or, you know, something like that. It's gonna be hard to correlate. We will not need 5 million. You know, I don't think DraftKings has 5 million clients, you know, if you look at their revenue streams, we'll be able to correlate once we have some tape on this.
We knew almost down to the penny every time one of our clients or third-party clients signed up a new consumer, what the average deposit would be and when, and the average number of transactions, and the average price per transaction. Why they're meaningful is the average volume of transactions, or average load, I should say, average load, average number of transactions, 'cause the transactions we calculated to a fee. The average load, we knew the retention of people used to save it as a savings account for them. We knew it was a percentage of every load that would just stay on the balance sheet. We had so many users, we had studied it. We'll be able to do the same thing.
Some of the guiding factors will be every time I use DraftKings, just as an example, it's easy ’cause everybody knows them. Every time they sign on a new client, what's the average bet? How often does that person place a bet? It's very seasonal, although we have a lot more sports today. We're not looking at. Although the prediction markets are chasing us ’cause they need our economic efficiency here. Nick and I are entertaining those meetings ’cause it's fascinating to talk to these people who are behind prediction markets, but it's unregulated. There's too much uncertainty. There's too much opportunity in the lane of being regulated.
We'll be able to draw, and I'm excited about adding those type of charts to our investor deck in 2027, 'cause there will be a correlation to the behavior, the client acquisition, the timing of it, the cost of it. Remember, these costs are on the, on the operator side, and the behavior of a player as opposed to someone who's a consumer and using this Revolut account as an effective digital savings account. It's hard to compare, but we will build a model, so we can see. 'Cause then we can do some forecasting, 'cause you need it for liquidity risk. If you really wanna put. We knew the behavior of these deposits so well. We knew when we could invest it and when we shouldn't. Okay. Same thing, we need to get there.
We can't get extremely excited about having a loan-to-deposit ratio down to 50% again, then just lever up the balance sheet. We won't know the behavior yet of those clients for some time. We'll get a return on those deposits, but over time, we'll be able to look in a mirror and understand the behavior of a player now as opposed to a consumer and what that looks like. We have a lot of experience in wallets. We're one of the first banks that supported a wallet, and we brought the first Venmo card to the U.S. We know when you put money in a wallet, it sits there. We know that that money is more available to Dan to invest, to lend, you know, and we don't have to worry. You don't wanna build liquidity risk.
You know, you can blow up a very good thing by putting yourself against the a headwind of liquidity or interest rate risk, which is what you saw with a lot of these thrifts, where they borrowed short and lent long, and they ended up with interest rate risk. We'll build out that deck and talk about it 'cause we're excited about learning the behavior of a... I don't even gamble, but it would be interesting to understand the behavior of someone who does digitally. Anything else? Okay. That's it. Nothing online. All right. I'm told that we had over 60 participants today, so very excited about that. I appreciate everybody online listening in. I wish you were here, but maybe we'll perhaps we'll do that next time.
I appreciate everybody coming into New York City today and hearing our story. We'll break for lunch. Lunch is in the board, it's in the Central Park, you can grab a plate, eat in there or bring it back into here and continue the conversation. Thank you.