Metropolitan Bank Holding Corp. [MCB] Filings

10-Q 1 mcb-20230630x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


	☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


	☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File No. 001-38282

Metropolitan Bank Holding Corp.

(Exact Name of Registrant as Specified in Its Charter)


New York		13-4042724
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

99 Park Avenue, New York, New York		10016
(Address of Principal Executive Offices)		(Zip Code)

(212) 659-0600

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	MCB	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.

YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ☒

There were 11,062,729 shares of the Registrant’s common stock, par value $0.01 per share, outstanding as of August 1, 2023.

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METROPOLITAN BANK HOLDING CORP.

Form 10-Q

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	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Consolidated Statements of Financial Condition	6

Consolidated Statements of Operations	7

Consolidated Statements of Comprehensive Income	8

Consolidated Statements of Changes in Stockholders’ Equity	9

Consolidated Statements of Cash Flows	10

Notes to Unaudited Consolidated Financial Statements	11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3. Quantitative and Qualitative Disclosures About Market Risk	46

Item 4. Controls and Procedures	48

PART II. OTHER INFORMATION	49

Item 1. Legal Proceedings	49

Item 1A. Risk Factors	49

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	49

Item 3. Defaults Upon Senior Securities	49

Item 4. Mine Safety Disclosures	49

Item 5. Other Information	49

Item 6. Exhibits	50

Signatures	51

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GLOSSARY OF COMMON TERMS AND ACRONYMS


ACL	Allowance for Credit Losses	FHLB	Federal Home Loan Bank
AFS	Available-for-sale	FHLBNY	Federal Home Loan Bank of New York
ALCO	Asset Liability Committee	FRB	Federal Reserve Bank
ALLL	Allowance for loan and lease losses	FRBNY	Federal Reserve Bank of New York
AOCI	Accumulated Other Comprehensive Income	FX	Foreign exchange
ASC	Accounting Standards Codification	GAAP	U.S. Generally accepted accounting principles
ASU	Accounting Standards Update	GPG	Global Payments Group
BaaS	Banking-as-a-Service	HTM	Held-to-maturity
Bank	Metropolitan Commercial Bank	IRR	Interest rate risk
BHC Act	Bank Holding Company Act of 1956, as amended	ISO	Incentive stock option
BSA	Bank Secrecy Act	JOBS Act	The Jumpstart Our Business Startups Act
C&I	Commercial and Industrial	LIBOR	London Inter-Bank Offered Rate
CARES Act	Coronavirus Aid, Relief, and Economic Security Act	LTV	Loan-to-value
CECL	Current Expected Credit Loss	MBS	Mortgage-backed securities
CFPB	Consumer Financial Protection Bureau	NYSDFS	New York State Department of Financial Services
Company	Metropolitan Bank Holding Corp.	OCC	Office of the Comptroller of the Currency
Coronavirus	COVID-19	OTTI	Other-than-temporary impairment
CRA	Community Reinvestment Act	PPP	Paycheck Protection Program
CRE	Commercial real estate	PRSU	Performance Restricted Share Units
CRE Guidance	Commercial Real Estate Lending, Sound Risk Management Practices	ROU	Right of Use
DIF	Deposit Insurance Fund	SEC	U.S. Securities and Exchange Commission
EGC	Emerging Growth Company	SOFR	Secured Overnight Financing Rate
EVE	Economic value of equity	SRC	Smaller reporting company
FASB	Financial Accounting Standards Board	TDR	Troubled debt restructuring
FDIC	Federal Deposit Insurance Corporation	USD	U.S. Dollar

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NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q may contain certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which may be identified by the use of such words as “may,” “believe,” “expect,” “anticipate,” “consider,” “should,” “plan,” “estimate,” “predict,” “continue,” “probable,” and “potential” or the negative of these terms or other comparable terminology. Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of Metropolitan Bank Holding Corp. (the “Company”) and its wholly-owned subsidiary Metropolitan Commercial Bank (the “Bank”), and the Company’s strategies, plans, objectives, expectations and intentions, and other statements contained in this Quarterly Report on Form 10-Q that are not historical facts. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that are difficult to predict and are generally beyond our control and that may cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Factors that may cause actual results to differ from those results expressed or implied include those factors listed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2023 and in this Quarterly Report on Form 10-Q. In addition, these factors include but are not limited to:

●

the interest rate policies of the Board of Governors of the Federal Reserve System;

●

an unexpected deterioration in our loan or securities portfolios;

●

changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;

●

unexpected increases in our expenses;

●

different than anticipated growth and our ability to manage our growth;

●

the lingering effects of the COVID-19 pandemic on our business and results of operation;

●

unanticipated regulatory action or changes in regulations;

●

potential recessionary conditions, including the related effects on our borrowers and on our financial condition and results of operations;

●

unexpected increases in credit losses or in the level of delinquent, nonperforming, classified and criticized loans;

●

an inability to absorb the amount of actual losses inherent in our existing loan portfolio;

●

an unanticipated loss of key personnel or existing customers;

●

increases in competitive pressures among financial institutions or from non-financial institutions, which may result in unanticipated changes in our loan or deposit rates;

●

unanticipated increases in FDIC costs;

●

legislative, tax or regulatory changes or actions, which may adversely affect the Company’s business;

●

impacts related to or resulting from recent bank failures;

●

changes in deposit flows, funding sources or loan demand, which may adversely affect the Company’s business;

●

changes in accounting principles, policies or guidelines may cause the Company’s financial condition or results of operation to be reported or perceived differently;

●

general economic conditions, including unemployment rates, either nationally or locally in some or all of the areas in which the Company does business, or conditions in the securities markets or the banking industry being less favorable than currently anticipated;

●

unanticipated adverse changes in our customers’ economic conditions;

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●

inflation, which may lead to higher operating costs;

●

declines in real estate values in the Company’s market area, which may adversely affect its loan production;

●

an unexpected adverse financial, regulatory, legal or bankruptcy event experienced by our non-bank financial service clients;

●

technological changes that may be more difficult or expensive to implement than anticipated;

●

system failures or cyber-security breaches of our information technology infrastructure or those of the Company’s third-party service providers or those of our non-bank financial service clients for which we provide global payments infrastructure;

●

the failure to maintain current technologies and to successfully implement future information technology enhancements;

●

the effects of any developments, changes or actions relating to any litigation or regulatory proceedings brought against us or any of our subsidiaries;

●

the costs, including the possible incurrence of fines, penalties, or other negative effects (including reputational harm) of any adverse judicial, administrative, or arbitral rulings or proceedings, regulatory enforcement actions, or other legal actions to which we or any of our subsidiaries are a party, and which may adversely affect our results;

●

the current or anticipated impact of military conflict, terrorism or other geopolitical events;

●

the ability to attract or retain key employees;

●

successful implementation or consummation of new business initiatives, which may be more difficult or expensive than anticipated;

●

the timely and efficient development of new products and services offered by the Company or its strategic partners, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value and acceptance of these products and services by customers;

●

changes in consumer spending, borrower or savings habits;

●

the risks associated with adverse changes to credit quality, including changes in the level of loan delinquencies, non-performing assets and charge-offs and changes in the estimates of the adequacy of the ACL;

●

an unexpected failure to successfully manage our credit risk and the sufficiency of our allowance;

●

the credit and other risks from borrower and depositor concentrations (by geographic area and by industry);

●

difficulties associated with achieving or predicting expected future financial results; and

●

the potential impact on the Company’s operations and customers resulting from natural or man-made disasters, wars, acts of terrorism, cyber-attacks and pandemics.

The Company’s ability to predict results or the actual effects of its plans or strategies is inherently uncertain. As such, forward-looking statements can be affected by inaccurate assumptions made or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect conditions only as of the date of this filing. Forward-looking statements speak only as of the date of this document. The Company undertakes no obligation (and expressly disclaims) to publicly release the results of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements, except as may be required by law.

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METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)

(in thousands, except share data)


	June 30,		December 31,
	2023		2022
Assets
Cash and due from banks	$	33,534	$	26,780
Overnight deposits		168,242		230,638
Total cash and cash equivalents		201,776		257,418
Investment securities available-for-sale, at fair value		426,068		445,747
Investment securities held-to-maturity (estimated fair value of $442.4 million and $437.3 million at June 30, 2023 and December 31, 2022, respectively)		515,613		510,425
Equity investment securities, at fair value		2,066		2,048
Total securities		943,747		958,220
Other investments		28,040		22,110
Loans, net of deferred fees and costs		5,149,546		4,840,523
Allowance for credit losses		(51,650)		(44,876)
Net loans		5,097,896		4,795,647
Receivable from global payments business, net		84,919		85,605
Other assets		165,772		148,337
Total assets	$	6,522,150	$	6,267,337
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing demand deposits	$	1,730,380	$	2,422,151
Interest-bearing deposits		3,558,185		2,855,761
Total deposits		5,288,565		5,277,912
Federal funds purchased		243,000		150,000
Federal Home Loan Bank of New York advances		200,000		100,000
Trust preferred securities		20,620		20,620
Secured borrowings		7,655		7,725
Prepaid third-party debit cardholder balances		10,772		10,579
Other liabilities		130,263		124,604
Total liabilities		5,900,875		5,691,440

Common stock, $0.01 par value, 25,000,000 shares authorized, 10,991,074 and 10,949,965 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		110		109
Additional paid in capital		392,742		389,276
Retained earnings		279,344		240,810
Accumulated other comprehensive income (loss), net of tax		(50,921)		(54,298)
Total stockholders’ equity		621,275		575,897
Total liabilities and stockholders’ equity	$	6,522,150	$	6,267,337

See accompanying notes to unaudited consolidated financial statements

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METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Interest and dividend income
Loans, including fees	$	80,516	$	52,185	$	156,476	$	98,721
Securities		4,683		3,706		9,178		7,098
Overnight deposits		3,086		2,994		5,570		3,909
Other interest and dividends		693		273		1,017		400
Total interest income		88,978		59,158		172,241		110,128
Interest expense
Deposits		27,403		3,706		49,776		7,331
Borrowed funds		7,461		—		9,487		—
Trust preferred securities		363		150		693		258
Subordinated debt		—		—		—		605
Total interest expense		35,227		3,856		59,956		8,194

Net interest income		53,751		55,302		112,285		101,934
Provision for credit losses		4,305		2,400		4,951		5,800
Net interest income after provision for credit losses		49,446		52,902		107,334		96,134

Non-interest income
Service charges on deposit accounts		1,481		1,474		2,937		2,844
Global Payments Group revenue		5,731		5,242		10,581		10,899
Other income		643		282		1,311		682
Total non-interest income		7,855		6,998		14,829		14,425

Non-interest expense
Compensation and benefits		15,288		13,415		31,543		26,836
Bank premises and equipment		2,287		2,264		4,631		4,380
Professional fees		4,973		1,692		9,160		3,166
Technology costs		1,482		1,144		2,795		2,543
Licensing fees		3,014		2,686		5,676		4,980
FDIC assessments		1,640		1,240		4,454		2,485
Regulatory settlement reserve		—		—		(2,500)		—
Other expenses		3,758		3,828		7,708		6,498
Total non-interest expense		32,442		26,269		63,467		50,888

Net income before income tax expense		24,859		33,631		58,696		59,671
Income tax expense		9,298		10,442		18,059		17,461
Net income	$	15,561	$	23,189	$	40,637	$	42,210

Earnings per common share
Basic earnings	$	1.39	$	2.12	$	3.65	$	3.86
Diluted earnings	$	1.37	$	2.07	$	3.59	$	3.76

See accompanying notes to unaudited consolidated financial statements

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METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(in thousands)


	Three months ended				Six months ended
	June 30,				June 30,
	2023		2022		2023		2022
Net Income	$	15,561	$	23,189	$	40,637	$	42,210

Other comprehensive income:
Securities available-for-sale:
Unrealized gain (loss) arising during the period		(6,733)		(18,233)		1,500		(50,428)
Tax effect		2,058		5,601		(456)		15,401
Net of tax		(4,675)		(12,632)		1,044		(35,027)


Cash flow hedges:
Unrealized gain (loss) arising during the period		6,777		2,420		5,771		11,196
Reclassification adjustment for gains included in net income		(1,218)		—		(2,453)		—
Tax effect		(1,673)		(743)		(985)		(3,432)
Net of tax		3,886		1,677		2,333		7,764

Total other comprehensive income (loss)		(789)		(10,955)		3,377		(27,263)

Comprehensive Income (Loss)	$	14,772	$	12,234	$	44,014	$	14,947

See accompanying notes to unaudited consolidated financial statements

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METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)

(in thousands, except share data)


	Common			Additional		Retained		AOCI (Loss),
	Stock			Paid-in Capital		Earnings		Net		Total
	Shares	Amount
Three Months Ended
Balance at April 1, 2023	11,211,274	$	112	$	394,124	$	263,783	$	(50,132)	$	607,887
Cumulative effect of changes in accounting principle	—		—		—		—		—		—
Net issuance (rescission) of common stock under stock compensation plans	(220,200)		(2)		(3,962)		—		—		(3,964)
Employee and non-employee stock-based compensation	—		—		2,580		—		—		2,580
Redemption of common stock for exercise of stock options and tax withholdings for restricted stock vesting	—		—		—		—		—		—
Net income	—		—		—		15,561		—		15,561
Other comprehensive income (loss)	—		—		—		—		(789)		(789)
Balance at June 30, 2023	10,991,074	$	110	$	392,742	$	279,344	$	(50,921)	$	621,275

Balance at April 1, 2022	10,931,697		109		383,327		200,406		(23,812)		560,030
Net issuance of common stock under stock compensation plans	—		—		—		—		—		—
Employee and non-employee stock-based compensation	—		—		2,042		—		—		2,042
Redemption of common stock for exercise of stock options and tax withholdings for restricted stock vesting	—		—		—		—		—		—
Net income	—		—		—		23,189		—		23,189
Other comprehensive income (loss)	—		—		—		—		(10,955)		(10,955)
Balance at June 30, 2022	10,931,697	$	109	$	385,369	$	223,595	$	(34,767)	$	574,306

Six Months Ended
Balance at January 1, 2023	10,949,965		109		389,276		240,810		(54,298)		575,897
Cumulative effect of changes in accounting principle	—		—		—		(2,103)		—		(2,103)
Net issuance of common stock under stock compensation plans	64,990		1		—		—		—		1
Employee and non-employee stock-based compensation	—		—		4,802		—		—		4,802
Redemption of common stock for exercise of stock options and tax withholdings for restricted stock vesting	(23,881)		—		(1,336)		—		—		(1,336)
Net income	—		—		—		40,637		—		40,637
Other comprehensive income (loss)	—		—		—		—		3,377		3,377
Balance at June 30, 2023	10,991,074	$	110	$	392,742	$	279,344	$	(50,921)	$	621,275

Balance at January 1, 2022	10,920,569		109		382,999		181,385		(7,504)		556,989
Net issuance of common stock under stock compensation plans	23,487		—		—		—		—		—
Employee and non-employee stock-based compensation	—		—		3,561		—		—		3,561
Redemption of common stock for exercise of stock options and tax withholdings for restricted stock vesting	(12,359)		—		(1,191)		—		—		(1,191)
Net income	—		—		—		42,210		—		42,210
Other comprehensive income (loss)	—		—		—		—		(27,263)		(27,263)
Balance at June 30, 2022	10,931,697	$	109	$	385,369	$	223,595	$	(34,767)	$	574,306

See accompanying notes to unaudited consolidated financial statements

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METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)


	Six months ended June 30,
	2023		2022
Cash flows from operating activities
Net income	$	40,637	$	42,210
Adjustments to reconcile net income to net cash:
Net depreciation amortization and accretion		1,443		2,291
Provision for credit losses		4,951		5,800
Stock-based compensation		4,802		3,561
Net change in deferred loan fees		2,571		3,338
Dividends earned on CRA fund		(25)		(13)
Unrealized (gain) loss on equity securities		7		179
Net change in:
Receivable from global payments, net		686		(28,350)
Third-party debit cardholder balances		193		14,684
Other assets		(15,187)		(23,689)
Other liabilities		5,613		984
Net cash provided by (used in) operating activities		45,691		20,995

Cash flows from investing activities
Loan originations, purchases and payments, net		(311,594)		(646,569)
Redemptions of other investments		110,451		2
Purchases of other investments		(116,381)		(5,362)
Purchase of securities held-for-investment		(24,595)		(170,615)
Proceeds from paydowns of securities available-for-sale		21,061		49,902
Proceeds from paydowns of securities held-to-maturity		19,366		21,643
Purchase of premises and equipment, net		(1,888)		(3,973)
Net cash provided by (used in) investing activities		(303,580)		(754,972)

Cash flows from financing activities
Proceeds from issuance of federal funds purchased		93,000		—
Proceeds from (repayments of) FHLB advances, net		100,000		—
Redemption of common stock for tax withholdings for restricted stock vesting		(1,336)		(1,191)
Redemption of subordinated debt		—		(24,712)
Proceeds from (repayments of) secured borrowings, net		(70)		(417)
Net increase (decrease) in deposits		10,653		(257,172)
Net cash provided by (used in) financing activities		202,247		(283,492)

Increase (decrease) in cash and cash equivalents		(55,642)		(1,017,469)
Cash and cash equivalents at the beginning of the period		257,418		2,359,350
Cash and cash equivalents at the end of the period	$	201,776	$	1,341,881

Supplemental information
Cash paid for:

Metropolitan Bank Holding Corp. [MCB] Filings
10-Q	[2023-08-04]
10-Q	[2023-05-04]
10-K	[2023-02-28]
10-Q	[2022-10-31]
10-Q	[2022-08-09]
10-Q	[2022-05-06]
10-K	[2022-03-10]
10-Q	[2021-11-03]
10-Q	[2021-08-04]
10-Q	[2021-05-05]
10-K	[2021-03-08]
10-Q	[2020-11-04]
10-Q	[2020-08-05]
10-Q	[2020-05-05]
10-K	[2020-03-09]
10-Q	[2019-11-08]
10-Q	[2019-08-07]
10-Q	[2019-05-09]
10-K	[2019-03-13]
10-Q	[2018-11-13]
10-Q	[2018-08-14]
10-Q	[2018-05-15]
10-K	[2018-03-28]
10-Q	[2017-12-19]
S-1	[2017-10-04]