Metropolitan Bank NYSE: MCB executives highlighted first-quarter balance sheet growth, deposit momentum, and progress on planned payments and HUD-related initiatives during the company’s first quarter 2026 earnings call. Management also discussed credit developments, margin dynamics, and the expected timing of technology conversion expenses.
Loan growth and pipeline visibility
President and CEO Mark DeFazio said the bank entered the year with “meaningful visibility” into its growth outlook, citing signed client commitments, active onboarding activity, and long-standing relationships. He emphasized that the bank’s iGaming payments effort and HUD platform “are no longer conceptual” and are now in the integration stage.
Executive Vice President and CFO Daniel Dougherty said the loan book increased by about $235 million in the quarter, which he said was consistent with the bank’s guidance for $1 billion of net loan growth in 2026. Dougherty reported first-quarter total originations and draws of approximately $524 million at a weighted average coupon net of fees of about 7.24%, while payoffs and paydowns totaled approximately $287 million at a weighted average coupon of 7.37%.
Looking ahead, Dougherty described the loan pipeline as “very strong,” with more than $1.2 billion of opportunities at various underwriting stages, including more than $700 million represented by signed term sheets.
Deposits outpaced loans; specialty verticals drove growth
On the funding side, Dougherty said deposit growth continued to outpace loan growth. Deposits increased by about $363 million, or roughly 5%, during the quarter. He added that the bank’s cost of deposits dropped by 15 basis points over the quarter, which he attributed primarily to two late-2025 Federal Open Market Committee rate cuts.
Dougherty said municipals, EB-5, and homeowners associations (HOAs) drove most of the deposit increase. DeFazio provided additional color during Q&A, explaining that the bank distinguishes between deposits sourced from commercial clients/retail channels and “specialty deposits.” He said HOAs, EB-5, and municipals fall into the specialty category and are driven by a specialized team rather than loan-related activity. DeFazio also said the bank has been expanding into different geographies to better serve HOAs and municipalities.
Dougherty said the bank’s intent “to continue funding all 2026 loan growth with deposits remains unchanged.” He also pointed to payments and HUD initiatives as programs in execution that are expected to become meaningful contributors to the deposit funding platform “soon.”
Margin commentary: normalized improvement and outlook
Dougherty reported a first-quarter net interest margin (NIM) of 4.08%, down 2 basis points from the prior quarter. However, he said that on a normalized basis, NIM increased about 10 basis points quarter-over-quarter. He explained that the prior-quarter margin had benefited from late-year loan prepayments that increased prepayment penalties and deferred fee income, and that the first quarter included an “outsized” cash balance due to deposit growth exceeding loan growth, year-end loan prepayments, and the capital raise.
After adjusting for the elevated cash position, Dougherty said the first-quarter normalized NIM was about 4.12%. He reiterated guidance that each 25 basis point reduction in the fed funds target rate should produce about five basis points of NIM expansion, but emphasized that the bank has “removed all rate cut assumptions” from its 2026 forecast model.
On the income statement, Dougherty said first-quarter interest income declined about $2.5 million versus the prior quarter, citing fewer days in the quarter, elevated December loan payoffs, and to a lesser extent the impact of late-fourth-quarter rate resets on floating-rate loans. Interest expense declined by about $3 million, which he said resulted in “flattish” overall top-line performance.
Looking forward, Dougherty said the bank expects top-line growth to resume “according to plan,” including at least 20% net interest income growth for the full year. He added that the bank expects NIM to push higher during the year toward 4.15% to 4.20%.
In response to an analyst question about the drivers of margin expansion, Dougherty said the “primary driver” would be repricing of the back book, including renewing or replacing lower-coupon paper at higher coupons. He added that the ability to reprice deposits would depend on mix, noting that EB-5 momentum could help lower deposit costs, while HOAs and government munis tend to sit at the higher end of deposit pricing. DeFazio added that deposits expected from HUD and iGaming “will definitely bring down our cost of funds immediately” looking into 2027.
Credit: charge-offs, reserves, and resolution outlook
On credit, Dougherty said several factors drove a reduction in the allowance for credit losses (ACL) during the quarter. He cited:
- The charge-off of three loans totaling $12.3 million
- A provision release of $2.6 million tied to enhancements to the ACL framework
- Improvements in the forecast for certain underlying macroeconomic variables
Dougherty said the three loans charged off included two unsecured personal loans and one out-of-market commercial real estate loan, and he said the bank was actively seeking recoveries.
During Q&A, DeFazio said the bank had previously discussed two of the three charged-off loans, while the out-of-state CRE loan had not been discussed previously. He added that, out of the $12 million charged off, he was “fairly confident” the bank would recover $7 million to $8 million this year, calling that a “good outcome” on the unsecured facilities.
Separately, DeFazio addressed a loan relationship first referenced in the third quarter of 2025, saying the bank was still working through it and expected a full recovery of principal, interest at the regular rate, and legal fees. He said the matter was moving toward a legal proceeding in Mission, Kansas, and that management hoped to resolve it in the second to third quarter.
Asked whether other issues could affect nonperforming assets, DeFazio said the bank’s recent credit challenges amounted to “inside of five credits” discussed over the past year and a half. He said the bank would return to its “normal trends” of low criticized and classified loans and expected to reach final resolution on the remaining credits this year. He also said the bank believed it was “adequately reserved” for those loans and did not expect further reserves associated with the legacy credits.
In another exchange, Dougherty said that over time management views a reserve level of “100-115 basis points” as appropriate for a growing commercial banking franchise, adding that the longer-run 115 basis-point view “is okay,” though it may take time to reach once remaining nonperforming loans are resolved.
Expenses and technology conversion timing
Dougherty said noninterest expense was $46.4 million, up $2 million from the prior quarter. He attributed the increase primarily to higher compensation and benefits, including about $3 million tied to increased bonus accrual and restricted stock expense, as well as seasonal increases in payroll-related costs. He also noted a $1.8 million decrease in technology costs due to a delay in completion of the bank’s digital transformation project.
For the first quarter, Dougherty said digital project costs were about $1 million. With the “Modern Banking in Motion” conversion now expected to take place in May, he said the bank had “penciled in” about $2 million of related expenses to be recognized in the second quarter. In response to an analyst question, management said it would stick to its previously stated expense guidance, which was referenced on the call as “$189-$191” (without additional detail provided in the transcript).
In closing remarks, DeFazio thanked investors who participated in the recent capital raise and reiterated appreciation for continued shareholder support.
About Metropolitan Bank NYSE: MCB
Metropolitan Bank NYSE: MCB, through its principal subsidiary Metropolitan Commercial Bank, operates as a New York–based regional financial institution providing a range of commercial and consumer banking services. The company offers deposit products including checking, savings and money market accounts, as well as business and personal certificates of deposit. On the lending side, Metropolitan Bank extends commercial real estate financing, equipment loans, working capital lines of credit and consumer installment loans tailored to the needs of small- and medium-sized enterprises and individual customers.
In addition to traditional deposit and lending services, Metropolitan Bank provides specialized treasury and cash-management solutions, foreign exchange services and letters of credit for both domestic businesses and multinational clients.
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