Earnings call transcript: Metropolitan Bank beats Q2 2025 forecasts

Metropolitan Commercial Bank (MCB) reported impressive earnings for the second quarter of 2025, surpassing analysts’ expectations. The bank’s earnings per share (EPS) came in at $1.76, beating the forecasted $1.73. Revenue also exceeded expectations, reaching $76.27 million compared to the forecast of $72.55 million. Following the announcement, the stock rose 3.5% in after-hours trading and continued to climb 2.23% in premarket activity. According to InvestingPro data, MCB’s current market capitalization stands at $813.58 million, with the stock trading near its 52-week high of $77.09. The bank’s current Fair Value analysis suggests it is slightly overvalued at these levels.

Key Takeaways

• Metropolitan Bank’s EPS and revenue beat analyst expectations for Q2 2025.
• Stock price surged 3.5% in after-hours trading, continuing upward in premarket.
• Loan portfolio and core deposits showed significant growth.
• The bank announced its first-ever common stock dividend and a new share repurchase program.
• Strong market presence and diverse deposit model highlighted as competitive advantages.

Company Performance

Metropolitan Commercial Bank demonstrated robust performance in Q2 2025, with net income rising 15% quarter-over-quarter to $18.8 million. The bank’s focus on relationship-based commercial banking and strong credit underwriting contributed to its success. The loan portfolio expanded by $271 million, a 4.3% increase, while core deposits grew by $342 million, or 5.3%. InvestingPro analysis reveals the bank maintains a healthy debt-to-equity ratio of 0.44 and has achieved impressive revenue growth of 12.84% over the last twelve months. Want deeper insights? InvestingPro offers 8 additional key tips about MCB’s performance and prospects.

Financial Highlights

• Revenue: $76.27 million, up 8% from the previous quarter.
• Earnings per share: $1.76, a 21% increase from the previous quarter.
• Net interest margin: 3.83%, an increase of 15 basis points.
• Tangible book value per share: $68.44, up 4%.

Earnings vs. Forecast

Metropolitan Bank reported an EPS of $1.76, exceeding the forecast of $1.73, resulting in a positive surprise of 1.73%. Revenue also surpassed expectations, with a 5.13% surprise over the forecasted $72.55 million. This marks a consistent trend of outperforming market predictions.

Market Reaction

Following the earnings announcement, Metropolitan Bank’s stock rose by 3.5% in after-hours trading, closing at $78.02 in premarket, up 2.23%. This movement brought the stock closer to its 52-week high of $77.09, reflecting investor confidence in the bank’s performance and future prospects. InvestingPro data shows MCB has delivered strong returns across multiple timeframes, with a 25.11% gain over the past six months and a 40.86% return over the last year. The stock maintains a beta of 1.09, indicating slightly higher volatility than the broader market.

Outlook & Guidance

The bank projects an annual net interest margin of 3.8% and expects operating expenses to remain between $45-46 million per quarter. Metropolitan Bank aims to capture more market share and explore fee-based income opportunities in 2026. With a P/E ratio of 10.84 and an overall Financial Health Score of "GREAT" according to InvestingPro, the bank appears well-positioned for future growth. Access the comprehensive Pro Research Report for MCB, part of InvestingPro’s coverage of 1,400+ US stocks, for detailed analysis and actionable insights.

Executive Commentary

CEO Mark DiFazio emphasized the bank’s solid foundation and resilience, stating, "Our results continue to show the foundational strength and stability of our diversified commercial bank model." CFO Dan Doherty highlighted the strength of the bank’s deposit funding model, calling it "a true strength of MCB."

Risks and Challenges

• Economic fluctuations could impact loan growth projections.
• Competitive pressures in the commercial banking sector.
• Regulatory changes affecting banking operations.
• Potential delays in technology integration.
• Market volatility influencing investor sentiment.

Q&A

During the earnings call, analysts inquired about the bank’s plans for fee-based revenue and the balance between commercial and real estate loans. Executives confirmed a balanced loan mix and expressed confidence in continued deposit growth across multiple verticals.

Full transcript - Metropolitan Bank Holding (MCB) Q2 2025:

Conference Operator: Welcome to Metropolitan Commercial Bank’s Second Quarter twenty twenty five Earnings Call. Hosting the call today from Metropolitan Commercial Bank are Mark DiFazio, President and Chief Executive Officer and Dan Doherty, Executive Vice President and Chief Financial Officer. Today’s call is being recorded. At this time, all participants have been placed in a listen only mode and the floor will be opened for your questions following the prepared remarks. During today’s presentation, reference will be made to the company’s earnings release and investor presentation, copies of which are available at mcbankny.com.

Today’s presentation may include forward looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to the company’s notices regarding forward looking statements and to non GAAP measures that appear in the earnings release and investor presentation. It is now my pleasure to turn the floor over to Mark DiBasio, President and Chief Executive Officer. You may begin.

Mark DiFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: Thank you. Good morning, and thank you all for joining our second quarter earnings call. Our second quarter financial results further underscore the strength and stability of our business model. Following our strong first quarter, we continue to grow our loan portfolio funded by core deposits. In the second quarter, outstanding loans increased by $271,000,000 or 4.3 percent and core deposits were up $342,000,000 or 5.3%.

Additionally, we expanded our NIM by 15 basis points to 3.83%, up from 3.68% in prior quarter, making this our seventh consecutive quarter of margin expansion. Despite the ongoing uncertainty caused by tariff headlines and market fluctuations, our outlook for further balance sheet growth remains very favorable. In May, we successfully completed a $50,000,000 share repurchase program at a significant discount to our book value per share. Last night, we announced a second $50,000,000 share repurchase program, which we will execute in a disciplined manner. We also announced a dividend on our common stock, the first in our history as a publicly traded company.

Although these initiatives are not the primary drivers of investment returns, they underscore our unwavering focus on creating long term value for our shareholders. Our reported earnings per share for the second quarter was $1.76 or 21% increase from our first quarter results. In addition, we increased our tangible book value per share by more than four percent reaching $68.44 making it our tenth consecutive quarter of book value accretion. Dan will provide further details on the quarterly earnings results shortly. We continue to invest in our franchise wide new technology stack.

Although our timeline has shifted slightly, we now anticipate full integration to be completed by the end of the first quarter next year. We are confident that these new technologies will support and scale with MCB’s diversified and growing commercial bank for years to come. Our asset quality remains excellent with no broad based negative trends identified in any loan segment, geography or sector impacting our portfolio. We actively engaged with our customers to gather insights on current market stress, including the impacts of tariffs on their businesses. And so far the feedback has indicated has not indicated any specific areas of concern.

Our second quarter provision expense was $6,400,000 primarily reflecting our continued loan growth as well as adverse movements in the forecasted macroeconomic factors underpinning our CECL model. In addition, a $2,400,000 reserve was posted for a single nonaccrual loan. We remain confident that a significant portion of loan workouts currently in flight will successfully be resolved in 2025. Our healthy credit metrics are a testament to MCP’s discipline, conservative underwriting and portfolio management and diversity, supported by our focus on relationship based commercial banking and highly qualified commercial clients and sponsors in familiar industries and segments. We remain committed to managing asset quality and optimizing profitability while further solidifying our geographic presence in our key markets.

Our focus for 2025 and beyond is to capture additional market share 20 and strategically position ourselves to seize opportunities that enhance shareholder value. I would like to extend my gratitude to all of our employees, our Board of Directors for their dedication and hard work, which drive our continued success. Lastly, I want to thank our customers and their engagement, loyalty and support. I will now turn the call over to Dan Dougherty, our CFO.

Dan Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: Thank you, Mark, and good morning, everyone. As Mark said, our strong performance in 2025 continued in the second quarter. I’ll start with a few remarks on the balance sheet. As Mark mentioned, we grew the loan book by approximately $270,000,000 in the quarter. Total originations and draws of approximately $570,000,000 were at a weighted average coupon or WACC net of fees of 7.72%.

We had an uptick in floating rate loan originations, which approached 50% of new volume in the quarter. Because of the relatively short duration of our loan portfolio, we continue to diligently focus on the repricing of the back book. Upcoming third quarter maturities of approximately $500,000,000 carry a WACC of 7.47%. Importantly, we have not loosened our credit standards processes in any way to pursue loan growth. Our pipelines remain strong and we project that we may achieve loan growth of more than 12% for the year.

Also in the second quarter, we grew deposits by about $340,000,000 Linked quarter deposit growth was concentrated in the municipal, trustee and lending verticals, though a few other verticals contributed as well. The depth and diversity of our deposit funding model is a true strength of MCB. We continue to forecast that core deposit growth will fund the vast majority of any further loan growth this year and beyond. Quarter over quarter, the cost of interest bearing deposits and the cost of total deposits declined by 13 basis points and seven basis points respectively. The decline in the cost of interest bearing deposits was driven by mix change as well as hedging activity.

In April, we executed a $500,000,000 pay fixed OIS swap at 3.52% versus Fed funds indexed deposits. In our forecast model, we are using the Fed funds minus 75 basis points funding target rate. As Mark noted previously, our NIM was 3.83% in the quarter, up 15 basis points from the prior period. We expect modest further expansion of the NIM as the yield of the loan book increases and funding costs decline through time. With outsized deposit growth, the average balance of relatively wholesale funding declined by about $100,000,000 in the second quarter.

Previous guidance targeted an annual NIM of approximately 3.75%. Based on current trends, I expect that the annual NIM this year will be about five basis points higher or approximately 3.8%. Importantly, that forecast includes only one twenty five basis point rate cut in October. As a reminder, each 25 basis point cut in the Fed funds target rate will, all else being equal, drive about five basis points of NIM expansion annually. Now let’s move on to the income statement and certain related performance measures.

I would like to highlight a couple of metrics that I find noteworthy. The first item is, as Mark mentioned, the 4% increase in our book value per share from $65.8 to $68.44 In the second quarter, we also grew total revenue by 8% from $70,500,000 to $76,200,000 Net income in the second quarter was $18,800,000 or up 2,400,000.0 or more than 15% versus the prior period. Diluted earnings per share was $1.76 up $0.31 or approximately 21% versus the prior period. Other income statement highlights include the following. Net interest income increased $6,700,000 or about 10% quarter over quarter, driven by an increase in average loans and a decline in the cost of funds.

As Mark mentioned, the loan loss provision increased by $1,900,000 from $4,500,000 to $6,400,000 The elevated provision was the result of loan growth and negative changes in the outlook for macroeconomic factors that underlie our CECL model. As well as Mark mentioned, we did hang up a reserve of $2,400,000 on a single non performing loan. Second quarter non interest income was down $1,000,000 primarily because recognition of about $800,000 of BaaS program fees in the prior period. Non interest expense was $43,100,000 essentially flat versus the prior quarter. The major movements quarter over quarter in the OpEx category were a seasonal decline of approximately $1,500,000 in comp and benefits, primarily related to payroll taxes and employee benefits reflected in the first quarter a $1,400,000 decline in professional fees, including declines in legal and consulting.

I expect a portion of this decline to be persistent. A $1,400,000 increase in one time IT project costs. Going forward, one time IT costs for the remainder of 2025 are expected to foot to $8,000,000 to $9,000,000 Further, a $1,000,000 increase in licensing due to the completion of accretion related to a LIBOR cap extinguishment that was previously mentioned in guidance. And finally, $770,000 increase in other expenses, included one time charges of approximately $200,000 Taken together, we expect operating expenses to average approximately 45 to $46,000,000 per quarter for the remainder of 2025. The effective tax rate for the quarter was approximately 30%.

We expect the tax rate to remain consistent at approximately 30% for the remainder of the year. I’ll now hand the mic back to Mark for a closing statement.

Mark DiFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: Our results continue to show the foundational strength and stability of our diversified commercial bank model, which is predicated on MCB’s focused business strategy. Our strategic plan features strong credit underwriting, core funding, disciplined risk management and leveraging of our market standing. We are well positioned to continue to show prudent growth whatever the state of the economy is. As always, we are here to support our clients while delivering appropriate returns to our shareholders. I will now turn the call back to the operator for our Q and A session.

Conference Operator: The floor is now open for questions. Our first question is coming from Mark Fitzgibbon with Piper Sandler. Please go ahead. Your line is open.

Mark Fitzgibbon, Analyst, Piper Sandler: Nice quarter. Thank you, Mark. Thanks, Mark. First question, with the announcement of the dividend and the buyback, which is great yesterday, I’m curious, would it be fair to say that you don’t plan to raise capital near term as I think you alluded to on your first quarter call?

Mark DiFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: Likely, you’re correct there, Mark. But we’re reevaluating opportunities all the time. But the answer is likely yes. Answering that question right now, the answer is yes.

Mark Fitzgibbon, Analyst, Piper Sandler: Okay. And then secondly, you guys have done an amazing job of growing loans and deposits. I’m curious if there are plans out there similar to ramp fee based revenues either organically or through some kind of fee based acquisition?

Mark DiFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: 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 the low cost deposits that we had with GPG alongside of the noninterest 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.

Mark Fitzgibbon, Analyst, Piper Sandler: Okay. And then it looked like this quarter your loan originations were skewed commercial to commercial real estate, I think 90% of originations. Do you think the mix going forward is likely to have a little higher concentration of C and I or evolve a little bit?

Mark DiFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: No. That’s just timing of closings. I think you’ll see at the end of the year pretty much a very healthy mix, very balanced mix between C and I, which is inclusive of Healthcare and CRE as well.

Mark Fitzgibbon, Analyst, Piper Sandler: Okay. And then just one clarification, Dan. I think you said of the $6,400,000 provision this quarter, was it $2,400,000 was tied to a specific credit?

Dan Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: That is correct, Mark. So it’s obviously not a new credit, it’s an existing

Mark Fitzgibbon, Analyst, Piper Sandler: Got you. Okay, great. Thank you.

Dan Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: You’re welcome.

Conference Operator: You. And your next question comes from Fetty Strickland with Hovde Group. Please go ahead.

Fetty Strickland, Analyst, Hovde Group: Hey, good morning, Mark and Dan. Just wanted to kick it off to clarify on the expense guide there. Dan, I think you said $45,000,000 in the last two quarters of the year. Is that number is that all in does that exclude the digital transformation expenses?

Dan Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: That is all in Fiti.

Fetty Strickland, Analyst, Hovde Group: Okay. So core would be lower than that?

Dan Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: Yes, indeed. And something to realize here is that when 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.

Mark DiFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: But one other point I think we should mention that the delay or the extension of time to fully implement this technology stack should not increase the budget overall budget that we projected.

Fetty Strickland, Analyst, Hovde Group: Understood. That’s helpful. Thanks. Shifting gears to the repurchase plan. I think you talked last quarter about a 9% or so TCE target.

Given we’re a little closer there today than we were before, given all the buybacks and the balance sheet growth, is it fair to say buybacks are probably pretty limited as long as the stock is trading where it is today?

Dan Doherty, Executive Vice President and Chief Financial Officer, Metropolitan Commercial Bank: Given where the stock is trading today, yes, indeed. We would not aggressively enter the market. Our basic operating strategy for that is to support the stock below current book. But we may do a little bit, but really very little at this juncture.

Fetty Strickland, Analyst, Hovde Group: Okay. And just one more for me. Just wanted to ask about the deposit growth. Looks like a good bit came from the municipal deposit vertical. Do you still see a good bit of opportunity there going forward?

And can you talk through kind of what other verticals have most near term opportunities?

Mark DiFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: Yes. 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 not only growth but a lot of stability in that vertical. Again, with all of the deposit verticals that we talk about and we describe in our investor deck, we expect each and every one of them to continue to contribute. EB-five has a significant pipeline as does title and ten thirty one as well. So we’re highly confident that we will continue to be as we have been for twenty six years a core funded institution.

Fetty Strickland, Analyst, Hovde Group: Great. That’s it for me. Thanks, guys.

Conference Operator: Thank you. And your next question comes from David Conrad with KBW. Please go ahead.

Mark DiFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: Yes. Good morning. Just a couple of follow ups

David Conrad, Analyst, KBW: on the deposits. I thought it was really the key to the quarter. Know, thus far in earnings season, just feels from the industry that deposit competition and pricing pressure is getting a little bit more intense. Just wonder if you guys are seeing that or do you think this municipal niche kind of helps shield you from some of the competitive factors?

Mark DiFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: I don’t think it’s just a municipal niche. I think you’ve got to look at all of the deposit verticals we have, which are, I wouldn’t say unique in any way, but we do execute really well on all of them. I think we’re just not a team focused as you’ve seen with our competitors since you brought up our competitors. They have this acquisition of teams and I think that creates a very competitive landscape to drive deposits considering you have significant overhead with all of those teams sitting in the bank. So I think they’re creating a good amount of their own internal competitions there to drive deposits at almost any cost.

We don’t have that situation here. So I expect to continue to be a very lean franchise as it relates to deposit gathering.

David Conrad, Analyst, KBW: Great. And then just shifting gears a little bit with the bill coming out of Washington and some concerns over Medicaid. Just wondering any impact or your thoughts on your skilled nursing loan portfolio?

Mark DiFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: 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 closer, very closer, 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 occupants of nursing homes.

So we don’t expect that’s where the cuts will come for sure. Thank you. Appreciate it.

Conference Operator: Thank you. This concludes the allotted time for questions. I would like to turn the call over to Mark DiFazio for any additional or closing remarks.

Mark DiFazio, President and Chief Executive Officer, Metropolitan Commercial Bank: Just once again, thank you for participating and believing in MCB, and thank you again for your support. Have a nice day and nice weekend.

Conference Operator: Today’s Thank you everyone on the conference call and webcast. A webcast archive of this call will be found at www.mcbankny.com. Please disconnect your line at this time and have a wonderful day.

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