Transcript: Metropolitan Bank Holding Q2 2026 Earnings Conference Call

Metropolitan Bank Holding (NYSE: MCB ) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

View the webcast at Summary Metropolitan Bank Holding reported balance sheet growth consistent with guidance, with strong lending pipeline and loan yields holding steady. The company resolved several legacy asset quality issues, including settlements on specific loans, and expects normalization of nonperforming loan levels. Strategic investments include an AI initiative aiming for full implementation within 24 months, and a payments platform expected to contribute to revenue in 2027. Retail expansion includes new branches in Florida, New Jersey, and planned locations in North Carolina and Connecticut, focusing on specialty deposits.

20% by year-end, and continued deposit growth. Full Transcript OPERATOR (Operator) Welcome to Metropolitan Bank Holding second quarter 2026 earnings call. Hosting the call today are Mark DeFazio, President and Chief Executive Officer, and Daniel Dougherty, Executive Vice President and Chief Financial Officer. Today's call is being recorded.

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

You may begin. Mark DeFazio, President and Chief Executive Officer Thank you. Good morning and thank you for joining us. I am pleased with the continued progress across the franchise.

Balance sheet growth remains consistent with our guidance, the lending pipeline is strong and loan yields continue to hold. On the funding side, our deposit forecast remains on track and we expect core funding to support balance sheet growth through the second half of 2026. Although our core operating trends remain strong, this quarter's earnings were impacted by several isolated items primarily tied to legacy asset quality matters and investments. We decided to move forward.

I want to address these directly and provide additional context before Dan reviews the financials in great detail. Asset quality. With respect to the Kansas City loan we have been speaking about for the last few years, the original loan balance was 24 million. After posting a specific reserve of 2 million, the carrying balance was reduced to 22 million.

We have reached a $27 million settlement which includes full principal repayment, interest at the note rate and a partial reimbursement of out-of-pocket expenses. We also expect a significant principal paydown by year end with remaining balance being amortized over time and is collateralized and supported by full recourse. We do expect a recovery with this particular loan. We also resolved the legacy out-of-market multifamily matter that we've been discussing also for the last 2 years.

In the third quarter of 2025, we established a $20 million specific reserve for this credit. As I mentioned then, I was confident that we took the adequate amount of reserves and no further reserves would be needed. A full settlement has now been reached and we charged off the prior specific reserve during the quarter. The remaining $14 million loan balance provides for P&I payments, collateral and full recourse.

We will allow this credit to season before placing the restructured loan back on an accrual status. In connection with the high net worth client exposure associated with the matter I just mentioned, we recorded a $4 million charge-off during this quarter. We remain in active settlement discussions with the borrower. While we rejected a $2 million all-cash settlement, we are confident that a resolution will be reached by year end, likely involving a substantial paydown and fully amortizing the remaining obligation.

We also placed a new credit on nonperforming status during the second quarter. This credit relates to a window and door manufacturer that had historically been stable and profitable but experienced execution challenges following an expansion of its business from its core Minnesota market into Texas. The Minnesota company's core business remains mature and stable. We recorded a $10 million charge-off during this quarter.

We are cautiously optimistic that the remaining $16 million term loan balance can be supported and repaid through the company's ongoing operations in Minnesota. Importantly, we view these matters as largely discrete and legacy in nature. Based on our current portfolio review and ongoing monitoring, we expect nonperforming loan levels to normalize and remain in line with long-term historical levels going forward. I'll spend a minute on some noninterest expense and strategic investments.

Dan will provide the details around noninterest expense as well as guidance for the remainder of 2026, but I want to highlight the strategic investments we are making to position the company for future operating leverage and further profitability gains. We have launched an ambitious end-to-end artificial intelligence initiative across the organization. To date we have hired an AI lead officer, two AI analysts and one AI engineer. We have also extended offers to two additional AI scientists and one additional engineer.

Only two of the above hires were in our current run rate. Our objective is for MCB to be ful