10-Q 1 mcb-20220331x10q.htm 10-Q
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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 March 31, 2022

OR

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 10,931,697 shares of the Registrant’s common stock, par value $0.01 per share, outstanding as of May 2, 2022.

METROPOLITAN BANK HOLDING CORP.

Form 10-Q

Table of Contents

Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Consolidated Statements of Financial Condition as of March 31, 2022 and December 31, 2021

6

Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021

7

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021

8

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021

9

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021

10

Notes to Unaudited Consolidated Financial Statements

11

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

32

Item 3. Quantitative and Qualitative Disclosures About Market Risk

40

Item 4. Controls and Procedures

42

PART II. OTHER INFORMATION

43

Item 1. Legal Proceedings

43

Item 1A. Risk Factors

43

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

43

Item 3. Defaults Upon Senior Securities

43

Item 4. Mine Safety Disclosures

43

Item 5. Other Information

43

Item 6. Exhibits

44

Signatures

45

2

GLOSSARY OF COMMON TERMS AND ACRONYMS

AFS

Available-for-sale

FHLB

Federal Home Loan Bank

ALCO

Asset Liability Committee

FHLBNY

Federal Home Loan Bank of New York

ALLL

Allowance for loan and lease losses

FRB

Federal Reserve Bank

ASU

Accounting Standards Update

FRBNY

Federal Reserve Bank of New York

BaaS

Banking-as-a-Service

FX

Foreign exchange

Bank

Metropolitan Commercial Bank

GAAP

U.S. Generally accepted accounting principles

BHC Act

Bank Holding Company Act of 1956, as amended

HTM

Held-to-maturity

BSA

Bank Secrecy Act

ISO

Incentive stock option

C&I

Commercial and Industrial

JOBS Act

The Jumpstart Our Business Startups Act

CARES Act

Coronavirus Aid, Relief, and Economic Security Act

LIBOR

London Inter-Bank Offered Rate

CECL

Current Expected Credit Loss

LTV

Loan-to-value

CFPB

Consumer Financial Protection Bureau

MBS

Mortgage-backed securities

Company

Metropolitan Bank Holding Corp.

NYSDFS

New York State Department of Financial Services

Coronavirus

COVID-19

OCC

Office of the Comptroller of the Currency

CRA

Community Reinvestment Act

OTTI

Other-than-temporary impairment

CRE

Commercial real estate

PPP

Paycheck Protection Program

CRE Guidance

Commercial Real Estate Lending, Sound Risk Management Practices

PRSU

Performance Restricted Share Units

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

3

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 (many of which are beyond the Company’s control) that could 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 March 10, 2022, and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. In addition, these factors include but are not limited to:

increases in competitive pressures among financial institutions or from non-financial institutions;
changes in the interest rate environment, including the impact of interest rate reform that applies to transactions that reference LIBOR, may reduce interest margins or affect the value of the Company’s investments;
changes in deposit flows or loan demand may adversely affect the Company’s business;
changes in accounting principles, policies or guidelines may cause the Company’s financial condition 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 may be less favorable than currently anticipated;
inflation, which may lead to higher operating costs;
declines in real estate values in the Company’s market area may adversely affect its loan production;
legislative, tax or regulatory changes or actions may adversely affect the Company’s business;
technological changes may be more difficult or expensive 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 fintech partners for which we provide global payments infrastructure;
the failure to maintain current technologies and to successfully implement future information technology enhancements;
the ability to attract or retain key employees;
successful implementation or consummation of new business initiatives may be more difficult or expensive than anticipated;
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 ALLL;
difficulties associated with achieving or predicting expected future financial results; and

4

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 such as COVID-19, as discussed below.

Further, given its ongoing and dynamic nature, including the rate of vaccine acceptance and the development of new variants, it is difficult to predict the continued impact of the COVID-19 pandemic on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy worsens, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our ALLL may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; our cyber security risks may increase if a significant number of our employees are forced to work remotely; and FDIC premiums may increase if the agency experiences additional resolution costs.

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 to publicly release the result 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 required by the law.

5

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)

(in thousands, except share data)

March 31, 

December 31, 

    

2022

    

2021

Assets

Cash and due from banks

$

32,483

$

28,864

Overnight deposits

1,381,475

2,330,486

Total cash and cash equivalents

1,413,958

2,359,350

Investment securities available for sale, at fair value

505,728

566,624

Investment securities held to maturity (estimated fair value of $436.8 million and $380.1 million at March 31, 2022 and December 31, 2021, respectively)

467,893

382,099

Equity investment securities, at fair value

2,173

2,273

Total securities

975,794

950,996

Other investments

15,989

11,998

Loans, net of deferred fees and costs

4,121,443

3,731,929

Allowance for loan losses

(38,134)

(34,729)

Net loans

4,083,309

3,697,200

Receivable from global payments business, net

62,129

39,864

Accrued interest receivable

16,186

15,195

Premises and equipment, net

16,434

15,116

Prepaid expenses and other assets

33,408

16,906

Goodwill

9,733

9,733

Total assets

$

6,626,940

$

7,116,358

Liabilities and Stockholders’ Equity

Deposits

Noninterest-bearing demand deposits

$

3,176,048

$

3,668,673

Interest-bearing deposits

2,763,315

2,766,899

Total deposits

5,939,363

6,435,572

Trust preferred securities

20,620

20,620

Subordinated debt, net of issuance cost

24,712

Secured borrowing

32,322

32,461

Accounts payable, accrued expenses and other liabilities

50,216

36,411

Accrued interest payable

297

746

Prepaid third-party debit cardholder balances

24,092

8,847

Total liabilities

6,066,910

6,559,369

Common stock, $0.01 par value, 25,000,000 shares authorized, 10,931,697 and 10,920,569 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

109

109

Additional paid in capital

383,327

382,999

Retained earnings

200,406

181,385

Accumulated other comprehensive income (loss), net of tax

(23,812)

(7,504)

Total stockholders’ equity

560,030

556,989

Total liabilities and stockholders’ equity

$

6,626,940

$

7,116,358

See accompanying notes to unaudited consolidated financial statements

6

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)

Three months ended March 31, 

    

2022

    

2021

    

Interest and dividend income

Loans, including fees

$

46,536

$

36,840

Securities

Taxable

3,341

736

Tax-exempt

51

35

Overnight deposits

915

344

Other interest and dividends

127

151

Total interest income

50,970

38,106

Interest expense

Deposits

3,625

3,171

Trust preferred securities

108

108

Subordinated debt

605

405

Total interest expense

4,338

3,684

Net interest income

46,632

34,422

Provision for loan losses

3,400

950

Net interest income after provision for loan losses

43,232

33,472

Non-interest income

Service charges on deposit accounts

1,370

972

Global Payments Group revenue

5,657

3,360

Other service charges and fees

506

304

Unrealized gain (loss) on equity securities

(106)

(41)

Total non-interest income

7,427

4,595

Non-interest expense

Compensation and benefits

13,421

11,428

Bank premises and equipment

2,116

2,024

Professional fees

1,474

1,304

Technology costs

1,399

927

Licensing fees

2,294

2,074

Other expenses

3,915

2,566

Total non-interest expense

24,619

20,323

Net income before income tax expense

26,040

17,744

Income tax expense

7,019

5,627

Net income

$

19,021

$

12,117

Earnings per common share

Basic earnings

$

1.74

$

1.46

Diluted earnings

$

1.69

$

1.43

See accompanying notes to unaudited consolidated financial statements

7

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(in thousands)

Three months ended March 31, 

    

2022

    

2021

    

Net Income

$

19,021

$

12,117

Other comprehensive income:

Securities available for sale:

Unrealized gain (loss) arising during the period

(32,195)

(6,934)

Tax effect

9,800

2,210

Net of tax

(22,395)

(4,724)

Cash flow hedges:

Unrealized gain (loss) arising during the period

8,776

2,277

Tax effect

(2,689)

(726)

Net of tax

6,087

1,551

Total other comprehensive income (loss)

(16,308)

(3,173)

Comprehensive Income (Loss)

$

2,713

$

8,944

See accompanying notes to unaudited consolidated financial statements

8

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)

(in thousands, except share data)

Preferred

Additional

AOCI

Stock,

Common

Paid-in

Retained

(Loss),

  

Class B

  

Stock

  

Capital

  

Earnings

  

Net

  

Total

Shares

Amount

Shares

Amount

Balance at January 1, 2021

272,636

$

3

8,295,272

$

82

$

218,899

$

120,830

$

973

$

340,787

Restricted stock, net of forfeiture

93,281

1

1

Stock based compensation

586

586

Impact of shares for tax withholding for restricted stock vesting

(43,521)

(2,101)

(2,101)

Net income

12,117

12,117

Other comprehensive income (loss)

(3,173)

(3,173)

Balance at March 31, 2021

272,636

$

3

8,345,032

$

83

$

217,384

$

132,947

$

(2,200)

$

348,217

Balance at January 1, 2022

$

10,920,569

$

109

$

382,999

$

181,385

$

(7,504)

$

556,989

Restricted stock, net of forfeiture

23,487

Stock based compensation

1,519

1,519

Impact of shares for tax withholding for restricted stock vesting

(12,359)

(1,191)

(1,191)

Net income

19,021

19,021

Other comprehensive income (loss)

(16,308)

(16,308)

Balance at March 31, 2022

$

10,931,697

$

109

$

383,327

$

200,406

$

(23,812)

$

560,030

See accompanying notes to unaudited consolidated financial statements

9

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

(in thousands)

Three months ended March 31, 

    

2022

    

2021

    

Cash flows from operating activities

Net income

$

19,021

$

12,117

Adjustments to reconcile net income to net cash:

Net depreciation amortization and accretion

1,161

1,272

Provision for loan losses

3,400

950

Stock-based compensation

1,519

586

Net change in deferred loan fees

1,037

183

Deferred income tax (benefit) expense

715

Dividends earned on CRA fund

(6)

(9)

Unrealized (gain) loss on equity securities

106

41

Net change in:

Accrued interest receivable

(991)

(733)

Accounts payable, accrued expenses and other liabilities

13,805

(18,908)

Third-party debit cardholder balances

15,245

6,972

Accrued interest payable

(449)

(149)

Receivable from global payments, net

(22,265)

(11,097)

Prepaid expenses and other assets

(701)

7,958

Net cash provided by (used in) operating activities

30,882

(102)

Cash flows from investing activities

Loan originations, purchases and payments, net

(390,546)

(101,649)

Redemptions of other investments

2

Purchases of other investments

(3,991)

(43)

Purchase of securities available-for-sale

(246,744)

Purchase of securities held-for-investment

(95,822)

Proceeds from paydowns and maturities of securities available-for-sale

28,352

25,243

Proceeds from paydowns of securities held-to-maturity

9,858

262

Purchase of premises and equipment, net

(1,874)

(774)

Net cash provided by (used in) investing activities

(454,023)

(323,703)

Cash flows from financing activities

Proceeds from FHLB advances

50

Repayments of FHLB advances

(50)

Redemption of common stock for tax withholdings for restricted stock vesting

(1,191)

(2,101)

Redemption of subordinated debt

(24,712)

Proceeds from (repayments of) secured borrowings, net

(139)

(489)

Net increase (decrease) in deposits

(496,209)

597,111

Net cash provided by (used in) financing activities

(522,251)

594,521

Increase (decrease) in cash and cash equivalents

(945,392)

270,716

Cash and cash equivalents at the beginning of the period

2,359,350

864,305

Cash and cash equivalents at the end of the period

$

1,413,958

$

1,135,021

Supplemental information

Cash paid for:

Interest

$

4,787

$

3,833

Income Taxes

$

2,725

$

2,250

See accompanying notes to unaudited consolidated financial statements

10

Table of Contents

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2022 and 2021

NOTE 1 – ORGANIZATION

Metropolitan Bank Holding Corp., a New York corporation (the “Company”), is a bank holding company whose principal activity is the ownership and management of Metropolitan Commercial Bank (the “Bank”), its wholly-owned subsidiary. The Company’s primary market is the New York metropolitan area. The Company provides a broad range of business, commercial and retail banking products and services to small businesses, middle-market enterprises, public entities and affluent individuals. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-Q.

The Company’s primary lending products are CRE loans, C&I loans, and multi-family loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flows from operations of businesses.

The Company’s primary deposit products are checking, savings, and term deposit accounts, and its deposit accounts are insured by the FDIC under the maximum amounts allowed by law. In addition to traditional commercial banking products, the Company offers corporate cash management and retail banking services and, through its Global Payments Group (“global payments business”), provides BaaS to its fintech partners, which includes serving as an issuing bank for third-party managed debit card programs nationwide and providing other financial infrastructure, including cash settlement and custodian deposit services.

The Company and the Bank are subject to the regulations of certain state and federal agencies and, accordingly, are periodically examined by those regulatory authorities. The Company’s business is affected by state and federal legislation and regulations.

NOTE 2 – BASIS OF PRESENTATION

The accounting and reporting policies of the Company conform with GAAP and predominant practices within the U.S. banking industry. The Unaudited Consolidated Financial Statements (“unaudited financial statements”) include the accounts of the Company and the Bank. All intercompany balances and transactions have been eliminated.  The unaudited financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q, Article 8 of Regulation S-X and predominant practices within the U.S. banking industry. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. The unaudited financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. In preparing the interim unaudited financial statements in conformity with GAAP, management has made estimates and assumptions based on available information. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reported periods, and actual results could differ from those estimated. Information available which could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy, and changes in the financial condition of borrowers.

Some items in the prior year financial statements may have been reclassified to conform to the current presentation. Reclassification had no effect on prior year net income or stockholders’ equity.

The results of operations for the for the three months ended March 31, 2022 and 2021 are not necessarily indicative of the results of operations that may be expected for the entire fiscal year or for any other period.

The unaudited financial statements presented in this report should be read in conjunction with the Company’s audited consolidated financial statements and notes to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC.

11

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METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2022 and 2021

NOTE 3 – SUMMARY OF RECENT ACCOUNTING PRONOUNCEMENTS

Pursuant to the JOBS Act, an EGC is provided the option to adopt new or revised accounting standards that may be issued by the FASB or the SEC either (i) within the same periods as those otherwise applicable to non-EGCs or (ii) within the same time periods as private companies. The Company elected delayed effective dates of recently issued accounting standards. As permitted by the JOBS Act, so long as it qualifies as an EGC, the Company will take advantage of some of the reduced regulatory and reporting requirements that are available to it, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments.

The Company will lose its EGC status on December 31, 2022, since that would be the last day of the fiscal year of the Company following the fifth anniversary of the date of the first sale of common equity securities of the Company pursuant to an effective registration statement under the Securities Act of 1933.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires companies that lease assets to recognize on their balance sheets the assets and liabilities generated by contracts longer than a year. Under ASU 2016-02, the Company will recognize a right-of-use asset and a lease obligation liability on the consolidated statement of financial condition, which will increase the Company’s assets and liabilities. The Company is required to implement ASU 2016-02 by December 31, 2022 and is currently evaluating the potential impact on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), which requires the measurement of all expected credit losses for financial assets held at the reporting date be based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 requires that financial institutions and other organizations will use forward-looking information to better inform their credit loss estimates. This guidance also amends the accounting for credit losses on AFS debt securities and purchased financial assets with credit deterioration. In October 2019, the FASB approved a delay for the implementation of ASU 2016-13. Accordingly, the Company is required to implement ASU 2016-13 by January 1, 2023. Management has established a committee to evaluate the impact of ASU 2016-13 on the Company’s financial statements. The Company expects to recognize a one-time cumulative adjustment to the allowance for loan losses as of the beginning of the reporting period in which ASU 2016-13 takes effect. The Company is currently analyzing certain aspects of the CECL models, inputting data into the models, and evaluating the potential impact on the Company’s ALLL.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the second step in the goodwill impairment test, which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity should recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting unit. The standard was effective for the Company beginning January 1, 2021, and did not have a material impact on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. The amendments in this ASU clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Management has established a working group that is in the process of evaluating the impact of the transition from LIBOR on the Company and its consolidated financial statements.

12

Table of Contents

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2022 and 2021

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 eliminates the accounting guidance for TDRs by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The Company is required to implement ASU 2022-02 by January 1, 2023 and is currently evaluating the potential impact on its consolidated financial statements.

NOTE 4 - INVESTMENT SECURITIES

The following tables summarize the amortized cost and fair value of debt securities AFS and HTM and equity investments and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses (in thousands):

Gross

Gross

Unrealized/

Unrealized/

Amortized

Unrecognized

Unrecognized

At March 31, 2022

    

Cost

    

Gains

    

Losses

    

Fair Value

Available-for-Sale Securities:

U.S. Government agency securities

$

67,995

$

$

(5,249)

$

62,746

U.S. State and Municipal securities

11,761

(1,523)

10,238

Residential MBS

448,457

5

(36,341)

412,121

Commercial MBS

17,217

41

(1,050)

16,208

Asset-backed securities

4,477

(62)

4,415

Total securities available-for-sale

$

549,907

$

46

$

(44,225)

$

505,728

Held-to-Maturity Securities:

U.S. Treasury securities

$

29,821

$

$

(1,332)

$

28,489

U.S. State and Municipal securities

15,995

(1,553)

14,442

Residential MBS

413,947

(27,486)

386,461

Commercial MBS

8,130

(697)

7,433

Total securities held-to-maturity

$

467,893

$

$

(31,068)

$

436,825

Equity Investments:

CRA Mutual Fund

$

2,332

$

$

(159)

$

2,173

Total equity investment securities

$

2,332

$

$

(159)

$

2,173

13

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METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2022 and 2021

Gross

Gross

Unrealized/

Unrealized/

Amortized

Unrecognized

Unrecognized

At December 31, 2021

    

Cost

    

Gains

    

Losses

    

Fair Value

Available-for-Sale Securities:

U.S. Government agency securities

$

67,994

$

$

(1,660)

$

66,334

U.S. State and Municipal securities

11,799

(300)

11,499

Residential MBS

476,393

623

(10,465)

466,551

Commercial MBS

17,787

219

(379)

17,627

Asset-backed securities

4,635

(22)

4,613

Total securities available-for-sale

$

578,608

$

842

$

(12,826)

$

566,624

Held-to-Maturity Securities:

U.S. Treasury securities

$

29,811

$

6

$

(43)

$

29,774

U.S. State and Municipal securities

16,055

299

16,354

Residential MBS

328,095

105

(2,259)

325,941

Commercial MBS

8,138

(99)

8,039

Total securities held-to-maturity

$

382,099

$

410

$

(2,401)

$

380,108

Equity Investments:

CRA Mutual Fund

$

2,326

$

$

(53)

$

2,273

Total equity investment securities

$

2,326

$

$

(53)

$

2,273

For the three months ended March 31, 2022 and 2021, there were no sales and calls of AFS securities.

The tables below summarize, by contractual maturity, the amortized cost and fair value of debt securities. The tables do not include the effect of principal repayments or scheduled principal amortization. Equity securities, primarily investment in mutual funds, have been excluded from the table. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties (in thousands):