Metropolitan Bank Holding (MCB 0.56%) released its Q2 2025 results on July 17, 2025, highlighted by a 21% sequential increase in reported EPS to $1.76, 4.3% loan growth, 5.3% core deposit growth, and a tenth consecutive quarter of tangible book value per share accretion, now at $68.44. The company announced both a new $50 million share repurchase program and its first-ever dividend, underscoring its balance sheet strength and shareholder return prioritization.

Sustained Net Interest Margin Expansion Amid Cost Declines

Net interest margin (NIM) rose to 3.83% -- a 15 basis point sequential increase and the seventh consecutive quarter of improvement -- while the cost of interest-bearing and total deposits declined by 13 and 7 basis points, respectively, driven by a changing deposit mix and effective hedging. New loan originations of $570 million carried a weighted average coupon of 7.72%, and approximately 50% were floating rate, strengthening the earning asset yield profile amid ongoing rate cycle uncertainty.

"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 expensive wholesale funding declined by about $100 million 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 5 basis points higher, or approximately 3.80%."
— Daniel F. Dougherty, Chief Financial Officer

Margin improvements coupled with lower funding costs directly support higher profitability and capital generation, enhancing the company’s ability to fund disciplined loan growth and shareholder distributions without reliance on external capital markets.

Accelerating Shareholder Returns with New Capital Actions

Following a $50 million share repurchase completed in May at prices below tangible book value, Metropolitan Bank Holding authorized a second $50 million buyback and initiated the first dividend in its public company history. Book value per share rose by 4% to $68.44, and the company explicitly confirmed limited appetite for additional buybacks at or above book value given near-target tangible common equity (buy) ratios.

"In May 2025, we successfully completed a $50 million share repurchase program at a significant discount to our book value per share. Last night, we announced a second $50 million 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."
— Mark R. DeFazio, President and Chief Executive Officer

This deliberate capital return approach underscores management’s focus on creating long-term value for shareholders.

Sound Credit Quality and Prudent Reserve Builds Amid Growth

Quarterly loan loss provision increased to $6.4 million, reflecting both robust loan growth and more adverse macroeconomic factors embedded in the bank's current expected credit losses model, with $2.4 million specifically reserved for a single non-performing loan. Asset quality remains stable, with management noting no negative trends in any portfolio segment or geography, and continued strong engagement with borrowers to monitor risks stemming from tariffs and Medicaid changes.

"Our asset quality remains excellent with no broad-based negative trends identified in any loan segment, geography, or sector impacting our portfolio. We actively engage with our customers to gather insights on current market stress, including the impacts of tariffs on their businesses. So far, the feedback has not indicated any specific areas of concern. Our second quarter provision expense was $6.4 million, primarily reflecting our continued loan growth as well as adverse movements in the forecasted macroeconomic factors underpinning our CECL model. In addition, a $2.4 million reserve was posted for a single non-approval loan."
— Mark R. DeFazio, President and Chief Executive Officer

This disciplined risk management approach ensures that growth is not achieved at the expense of underwriting standards, positioning the company for resilience across credit cycles and minimizing potential future charge-offs.

Looking Ahead

Management is targeting annual loan growth above 12% for 2025, projects a net interest margin of approximately 3.80% for this year, and expects quarterly operating expenses (including all IT and digital transformation costs) to average $45 million to $46 million for the remainder of 2025. Full integration of new technology is now anticipated to be completed by the end of Q1 2026, and the extension should not increase the overall budget. No explicit numerical guidance was provided regarding fee income replacement, but management emphasized ongoing development of non-interest income streams, with strategic announcements expected in 2026.