Metropolitan Bank Holding Corp. (MCB)·Q3 2025 Earnings Summary

Executive Summary

• EPS of $0.67 declined sharply versus $1.76 in Q2 due to a $23.9M provision for credit losses tied to a single out-of-market CRE multifamily relationship; core earnings power remained solid with net interest income up 5% QoQ and 18.5% YoY .
• Net interest margin expanded for the eighth consecutive quarter to 3.88% (+5bps QoQ), supported by lower cost of funds and disciplined pricing; deposits grew 4.1% QoQ and loans grew 2.6% QoQ .
• Management initiated capital return actions: first common dividend ($0.15) and a board-approved $50M repurchase plan in Q3; liquidity coverage of uninsured deposits stood at 190% and capital ratios remained “well capitalized” .
• Guidance points to NIM expansion in Q4 (3.90%–3.95%) and >3.80% for 2025; focus on cost discipline amid ongoing digital transformation (Q4 one-time ~$3M; tail < $2M in Q1’26) .
• Stock narrative catalyst: visible margin expansion and deposit diversification versus credit provisioning outlier; management “cautiously optimistic” on loan workout reversal timing (Q4 or Q1’26) .

What Went Well and What Went Wrong

• What Went Well

  • “Eighth consecutive quarter of margin expansion” to NIM 3.88%, with total cost of deposits down to 2.98% and total cost of funds at 3.05% .
  • Strong balance sheet growth: loans +$168.9M QoQ to $6.8B; deposits +$281.5M QoQ to $7.1B; liquidity coverage of uninsured deposits at 190% .
  • Strategic execution and platform upgrade progressing; CEO: “MBiM technology investment coming to completion in Q1 2026… expected to contribute to strong EPS growth” .

• What Went Wrong

  • Provisioning spike: $23.9M total (including $18.7M specific reserve) drove EPS compression; NPL ratio increased to 1.20% from 0.60% QoQ .
  • Non-interest expense rose $2.7M QoQ to $45.8M, mainly technology (+$1.6M), compensation (+$1.4M), and licensing (+$0.9M) despite lower FDIC assessments (-$1.0M) .
  • Non-interest income muted at $2.5M; YoY decline reflects absence of prior Banking-as-a-Service revenues .

Financial Results

Estimates vs Actuals (S&P Global; note definitional differences for “Revenue”)

• Values marked with * were retrieved from S&P Global.

S&P Global revenue figures may reflect a different methodology than company “Total revenues” (net interest income + non-interest income), explaining the variance. Values retrieved from S&P Global.

Key Performance Indicators

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “Our efficient core funding alongside of our loan growth continues to drive margin expansion. With our MBiM technology investment coming to completion in the first quarter of 2026 our operating leverage will be in line with prior performance, which is expected to contribute to strong EPS growth” .
• CEO on credit: “We took prudent reserves against a CRE multi-family loan relationship… cautiously optimistic that we will complete the workout… before year end or during the first quarter of next year” .
• CFO: “For the fourth quarter, we expect modest further expansion of the NIM… I expect that the fourth quarter NIM will be between 3.90% and 3.95% and that our annual NIM this year will be north of 3.80%” .
• CFO on deposit rate sensitivity: “We repriced approximately 80% of our unhedged interest-bearing deposits by a full 25 basis points after the Fed rate move” .

Q&A Highlights

• CRE multifamily reserve specifics: Three loans (~$8M, ~$17M, total ~$34M), properties in Champaign, IL and a city in Ohio; reserve ~55% of exposure; restructuring underway, potential reversal in Q4 or Q1’26 .
• CECL macro driver: ~$3.5M of the $5.2M provision tied to Moody’s CRE price index forecast deterioration; remainder due to growth .
• Deposit outlook: Opportunities broad-based across diversified verticals; strategy does not rely on a single vertical .
• Digital transformation costs: ~$3M one-time in Q4; tail < $2M in Q1’26 .
• Margin path: Multiple 2026 cuts could push NIM ~4%; management also pursuing lower-cost deposit opportunities independent of Fed path .

Estimates Context

• EPS: Q3 actual $0.67 vs consensus $2.08* → significant miss driven by specific CRE reserve; Q2 beat ($1.76 vs $1.73*); Q1 slight miss ($1.45 vs $1.53*) .
• Revenue: S&P-defined Q3 actual $55.98M vs consensus $78.28M*; company-reported “Total revenues” were $79.84M, reflecting definitional differences for bank revenue reporting .
• Target price consensus steady at ~$$87.33*; coverage appears limited (EPS estimates count: 3; revenue estimates count: 2)*.
  Values retrieved from S&P Global.

Key Takeaways for Investors

• Margin expansion remains the core earnings driver; management guides Q4 NIM 3.90%–3.95% and >3.80% for 2025—watch for confirmation in Q4 print .
• The Q3 EPS miss is provision-driven and concentrated in an out-of-market CRE multifamily relationship; management is “cautiously optimistic” on workout reversal within two quarters .
• Deposit growth and diversified verticals support lower funding costs; hedged indexed deposits provide carry down to ~3.5% Fed funds effective rate .
• Expense discipline will be critical as digital transformation peaks in Q4 (~$3M one-time) with a small tail in Q1’26; monitor technology and licensing run-rate normalization .
• Capital return (dividend + repurchases) enhances equity story, though CRE concentration ratio ticked up; capital ratios remain “well capitalized” .
• Near-term trading: EPS headline pressure from provisioning may overshadow healthy NIM trajectory; catalysts include NIM delivery, deposit cost declines, and any reserve reversal on the CRE relationship .
• Medium-term thesis: Core-funded growth, platform modernization (MBiM) and deposit diversification support earnings power; watch asset quality trends in CRE and macro path of rates .