Metropolitan Bank Holding Corp. (MCB) is a bank holding company that operates through its wholly-owned subsidiary, Metropolitan Commercial Bank, providing a range of business, commercial, and personal banking products and services primarily in the New York metropolitan area. The company has demonstrated resilience in the face of industry challenges, leveraging its strong commercial banking franchise to deliver solid financial performance.

Financials

For the full year 2023, Metropolitan Bank Holding Corp. reported annual net income of $77,268,000 and annual revenue of $375,405,000. The company's annual operating cash flow stood at $42,426,000, while its annual free cash flow reached $36,677,000. These figures underscore the company's ability to generate consistent profitability and healthy cash flows, even amidst the evolving market landscape.

In the second quarter of 2024, Metropolitan Bank Holding Corp. reported revenue of $67.68 million, up 9.9% over the same period last year. Earnings per share came in at $1.50, compared to $1.37 in the year-ago quarter. While the reported revenue represents a slight miss of 0.50% over the Zacks Consensus Estimate of $68.02 million, the EPS surprise was -4.46% compared to the consensus estimate of $1.57.

The company's net interest margin (NIM) increased by 4 basis points to 3.44% in the second quarter, adding to the 4 basis point increase in the first quarter and a 9 basis point increase in the fourth quarter of 2023. Management attributed this NIM expansion to the company's disciplined loan repricing and pricing strategies, which have enabled Metropolitan Bank Holding Corp. to effectively manage its interest rate risk.

Outlook

Looking ahead, the company provided updated guidance for the full year 2024. Management expects net interest income to be in the range of $246.7 million to $250.4 million, reflecting a 3 to 5 basis point increase in NIM by the fourth quarter. This guidance assumes a 25 basis point rate cut in September, which the company believes could provide an additional 3 to 5 basis points of NIM expansion.

In terms of loan growth, Metropolitan Bank Holding Corp. has adopted a more conservative approach, guiding for approximately $500 million to $600 million in new loan growth for the full year 2024. This is a slight reduction from the company's previous guidance, as management prioritizes pricing discipline and capital preservation amidst the competitive lending environment.

Asset Quality

The company's asset quality remained strong during the quarter, with no identifiable negative trends within the loan portfolio. Non-performing loans stood at $51.9 million, or 0.91% of total loans, as of March 31, 2024. The allowance for credit losses was $58.5 million, or 1.02% of total loans, reflecting the company's prudent risk management practices.

Non-Interest Income

Metropolitan Bank Holding Corp.'s non-interest income, which includes revenue from its Global Payments Group (GPG) business, totaled $6.14 million in the second quarter, compared to the $5.93 million average estimate based on two analysts. The company expects GPG revenue to total $9 million to $11 million for the full year 2024, as it continues to wind down this business line.

Expenses

On the expense front, the company reported total non-interest expense of $42.3 million in the second quarter, which included $1.7 million related to the digital transformation project and $3.8 million in regulatory remediation and GPG wind-down costs. For the full year 2024, the company maintains its guidance of $161 million to $163 million in total non-interest expense, with an expected run-rate of $140 million to $152 million once the strategic initiatives are completed.

Business Overview

The company's geographic footprint is primarily concentrated in the New York metropolitan area, with 80.8% of its CRE and C&I loan portfolio located in New York City and Florida. This regional focus has allowed Metropolitan Bank Holding Corp. to develop deep relationships and expertise within its target markets, contributing to its strong credit performance.

In terms of the loan portfolio composition, the company's largest concentration is in the healthcare industry, which amounted to $1.8 billion, or 32.2% of total loans, as of March 31, 2024. This includes $1.7 billion in loans to skilled nursing facilities, a sector the company has deep expertise in.

Metropolitan Bank Holding Corp. has also been actively managing its deposit base, as it continues to wind down its GPG deposit relationships. As of the end of the second quarter, the company had approximately $350 million in GPG deposits remaining, which it expects to fully exit by the end of 2024. Management is focused on replacing these deposits with core deposits from its lending customers, property managers, and other verticals, while maintaining pricing discipline in the highly competitive deposit gathering environment.

Liquidity

The company's liquidity position remains strong, with $534.4 million in cash and cash equivalents as of March 31, 2024. Additionally, Metropolitan Bank Holding Corp. had $2.9 billion in available secured wholesale funding capacity at the end of the quarter, providing ample flexibility to manage its funding needs.

Conclusion

Overall, Metropolitan Bank Holding Corp. has demonstrated its ability to navigate the current industry challenges, leveraging its commercial banking expertise and disciplined approach to lending and deposit gathering. The company's focus on relationship-based banking, conservative underwriting, and strategic initiatives to wind down its GPG business and execute a digital transformation project position it well for continued success in the years ahead.