Can you talk about the drivers of growth in the fintech segment quarter-over-quarter, and also can you grow this segment every quarter for the rest of the year or is this more of a volatile line item driven by volumes?Greg Sigrist Well, just to address first the growth in the quarter, that’s really–it’s a broad-based increase across the client base, so it’s not one or two of our partners that are–you know, clients that are really driving that, it’s really much more broad-based than that. A lot of the fintechs that we’re working with and non-bank financial service companies are really hitting their stride, so that’s a bit more broad-based. Then the forward look, I don’t know, Mark – do you have any thoughts on that?Mark Defazio Yes, I think that’s exactly right.
These companies are spending a significant amount of money on client acquisition strategies, so the pipeline is full. These companies are becoming more mature in providing retail financial services, so they’re grabbing more market share. The market share is fairly sticky, their client base is sticky, so you’re starting to see some scale there and some operating efficiencies among those companies, which has to run through our franchise so we see the benefits of it.But at the moment, I think the most important thing Greg said to notice is that it’s not one client, it’s across that whole franchise. Many clients are building for scale, and we’re benefiting from it as well, but we like a slow and modest pace of growth there. We don’t mind it taking its time because that’s true retail banking, and it’s a marathon as opposed to hockey stick approach.Alex Lau Thank you, and last one from me, in that GPG fee income line, there is about $1.3 million from the crypto related business also up in the quarter.
When do you expect this amount to be reduced? I know you said you’re finishing up deposit runoff by the end of 2Q, but how much do you expect of that fee income to be in 2Q? Thanks.Mark Defazio I would expect–it’s hard to predict. It depends on the timing of when these relationships get transferred. I would imagine that would abate entirely between the second and third quarter.Greg Sigrist Yes, I agree. It’s not going to be a gradual wind down on the revenue side, though, Alex. I think the revenue, the transaction volumes and the fees are going to be associated with the bin that holds the accounts, so it’s going to be an on-off switch, so whatever that revenue level is should be there up until the point that we actually transfer the bin.Alex Lau Okay, great.
Thanks for taking my questions.Greg Sigrist You got it, Alex. Thank you.Operator This concludes the allotted time for questions. I would like to turn the call over to Mark Defazio for any additional or closing remarks.Mark Defazio Thank you. I would like to have–make a few additional comments, if you would allow.In the current turbulent banking environment, it’s not surprising to see uninformed speculation and people looking to profit from the turmoil. This has caused some significant volatility in our stock in recent weeks. In that context, I want to reiterate a few key facts that are important about MCB.Crypto – in the fall of 2017, MCB materially started its exit from banking crypto-related businesses, and this process continued through 2019.
In 2019, we maintained a relationship with four crypto-related exchange companies and stated clearly many times that we would not be increasing our relationship with others. Over the course of our relationship with Voyager, MCB did not allow the use of consumer funds for corporate purposes. Through the bankruptcy of Voyager, MCB demonstrated that we clearly knew how to manage the risk associated with banking a crypto exchange.MCB safe kept consumer funds, maintained the integrity of pass-through FDIC insurance related to the FBO account representing consumer funds as well. Once the bankruptcy stay was lifted, MCB managed the efficient release of all consumer funds held at MCB. Voyager related balances today are at zero and all accounts are closed.
MCB recouped $900,000 toward reimbursement of legal fees out of $1.2 million that we spent.Today, MCB has three of these crypto relationships left with an aggregate deposit balance of $218 million. We are winding these down and expect the related balances to be at or close to zero at the end of the second quarter. Because we clearly understood this business, we were able to execute an orderly exit without putting MCB’s balance sheet at risk, period.Liquidity and interest rate risk – MCB has demonstrated over the past two decades just how important it is to manage interest rate risk and liquidity risk. Developing diversified low cost deposit verticals enabled MCB to maintain its competitive edge in loan pricing while insulating adequate NIM.
Through two decades of organic balance sheet growth, MCB has maintained its net interest margin with positive operating leverage, enabling year-over-year net income growth and therefore driving franchise value.Alongside of having a steadfast discipline on liquidity and interest rate risk is having a robust, readily available contingency funding plan. MCB has developed and expanded our contingency funding plan as our balance sheet expanded. We have proven that the preparedness and discipline is table stakes for sustainability and staying relevant.In the current environment, transparency is more important than ever. What I can offer to my shareholders and all stakeholders is that we will make ourselves available for questions. We are confident in the soundness and resilience of our business model and the rigor of our governance and risk management, and we are happy to talk to all of our shareholders and stakeholders at any time.Thank you for participating in this call.
I will now turn the call back over to the Operator.Operator This does conclude today’s conference call and webcast. A webcast archive of this call can be found at www.mcbankny.com. Please disconnect your line at this time and have a wonderful day.
