Metropolitan Bank Holding Corp. Q2 FY2025 earnings call

• Balance sheet growth: Outstanding loans increased by $271 million and core deposits by $342 million. NIM expanded to 3.83% from 3.68% in the prior quarter.
• Share repurchases: Successfully completed a $50 million share repurchase program in May 2025, announced a second $50 million program. Also announced the first common stock dividend as a publicly traded company.
• Technology investment: New technology staff integration expected to be completed by the end of the first quarter 2026.
• Asset quality: Excellent with no broad-based negative trends identified in any loan segment, geography, or sector.
• Provision expense: $6.4 million provision due to loan growth and macroeconomic factors, plus $2.4 million reserve for a single non-approval loan.

In the second quarter, outstanding loans increased by $271 million or 4.3%, and core deposits were up $342 million or 5.3%. NIM expanded by 15 basis points to 3.83%, marking the seventh consecutive quarter of margin expansion. Reported earnings per share for the second quarter was $1.76, a 21% increase from the first quarter. Tangible book value per share increased by more than 4% to $68.44, achieving the tenth consecutive quarter of book value accretion. Loan portfolio grew by approximately $570 million, with total originations and draws at a weighted average coupon of 7.72%, and deposits grew by about $340 million. Net interest income increased $6.7 million, about 10% quarter over quarter, driven by an increase in average loans and a decline in the cost of funds. The loan loss provision was $6.4 million, up from $4.5 million in the prior period, due to loan growth and negative changes in macroeconomic factors underpinning the CECL model, plus a $2.4 million reserve for a single non-performing loan.

• Loan growth: Projected to achieve more than 12% loan growth for the year.
• NIM: Annual NIM expected to be approximately 3.80%, 5 basis points higher than previous target, including one 25 basis point rate cut in October.
• Book value: Tangible book value per share increased by more than 4%.
• Share repurchase: Second $50 million share repurchase program announced.
• Dividend: First common stock dividend declared.

• Uncertainty from tariff headlines and market fluctuations.
• Macroeconomic factors impacting the CECL model leading to higher provision expenses.
• Potential impact of regulatory changes on specific loan portfolios, such as skilled nursing loans.

Q: About capital raising near term, Mark responded likely no near-term capital raising but reevaluating opportunities.

A: Mark R. DeFazio: Yeah. Likely, you're correct there, Mark. But, you know, we're reevaluating opportunities all the time. But the answer is likely yes.

Q: Plans for fee-based revenues, Mark responded focused on replacing fee income from exited GPG business with strategic opportunities.

A: Mark R. DeFazio: Oh, absolutely. It's top of mind. You recall, we had significant fee income coming out of our GPG business, which we exited last year. So we are very focused on replacing, you know, the low-cost deposits that we had with GPG alongside of the non-interest income. So we have a few strategic opportunities that we're working on more to come in 2026, but we're very confident we can replace that.

Q: Loan mix evolution, Mark responded mix will be balanced between C&I and CRE.

A: Mark R. DeFazio: No. That's just timing of closings. I think you'll see at the end of the year pretty much a very healthy mix, a very balanced mix between C&I, which is inclusive of healthcare, and CRE as well.

Q: Clarification on provision, Dan confirmed $2.4 million tied to specific non-performing loan.

A: Daniel F. Dougherty: That is correct, Mark.

Q: About expense guide and digital transformation, Dan said $45-46 million includes digital transformation expenses, and shift in project end date affects vendor payments.

A: Daniel F. Dougherty: That is all in, Feddie. Indeed. And one thing I realized here is that when, you know, we shifted kind of the end date for the project by a quarter, and when as you do that, it changes some of the dynamics of the vendor payments. So it's a little bit elevated relative to what I previously guided to. I said $45 to $46. But I think we'll kind of hang out right in the middle of that range there. But that's all in.

Q: Buybacks limited if stock trading where it is, Dan responded yes, given stock price, buybacks limited.

A: Daniel F. Dougherty: Given where the stock is trading today, yes. Indeed. We would not aggressively enter the market. Our basic operating strategy for that is to, you know, to support the stock below current book. But we, you know, we may do a little bit, but really very little at this juncture.

Q: Deposit growth in municipal vertical and near-term opportunities, Mark responded municipalities have growth opportunities and other verticals like EV5 and title in 1031 have pipelines.

A: Mark R. DeFazio: Yeah. Yeah. We keep opening up new markets in different states. So we're very fortunate. We have a great team around municipalities. So they are grabbing market share around the country. So we do anticipate growth in that vertical. And again, you know, with all of the deposit verticals that we talk about and describe in our investor deck, we expect each and every one of them to continue to contribute. EV5 has a significant pipeline, as does the title in 1031 as well. So we're highly confident that we will continue to be, as we have been for 26 years, a core-funded institution.

Q: Impact of Medicaid bill on skilled nursing loans, Mark responded no anticipation of cutting resident payments to eligible residents in skilled nursing facilities.

A: Mark R. DeFazio: You know, the way we see it and how our operators analyze it, you have to keep in mind that a good amount of the revenue coming into these skilled nursing home facilities and assisted living facilities is Medicaid. But these are resident-based patients or residents that are sitting in these nursing homes. So they're eligible for Medicaid. And when you read the bill closely, you can see that there is no anticipation of cutting back resident payments to nursing homes as we interpret it, especially for residents that are eligible to receive it. So these are, you know, occupants of nursing homes. So we don't expect that's where the cuts will come, for sure.