Metropolitan Bank Holding Corp. Reports Second Quarter 2024 Results Form 8 K

Metropolitan Bank Holding Corp. Reports Second Quarter 2024 Results

Strong Earnings, Liquidity, Capital and Asset Quality While Executing Strategic Initiatives

Financial Highlights

¹ Non-GAAP financial measure. See Reconciliation of Non-GAAP Measures on page 12.

NEW YORK, July 18, 2024 ‒ Metropolitan Bank Holding Corp. (the "Company") (NYSE: MCB), the holding company for Metropolitan Commercial Bank (the "Bank"), reported net income of $16.8 million, or $1.50 per diluted common share, for the second quarter of 2024 compared to $16.2 million, or $1.46 per diluted common share, for the first quarter of 2024, and $15.6 million, or $1.37 per diluted common share, for the second quarter of 2023.

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Mark DeFazio, President and Chief Executive Officer, commented,

"Our strong second quarter financial results were underscored by an increase in the net interest margin and stable asset quality despite the persistence of a challenging operating environment. At the same time, we are progressing well on two major strategic initiatives - our digital transformation project and the exit from BaaS activities. We remain confident that our strategy and execution this year will position MCB for continued success."

Balance Sheet

Total cash and cash equivalents were $244.7 million at June 30, 2024, a decrease of $289.7 million, or 54.2%, from March 31, 2024 and an increase of $42.9 million, or 21.3%, from June 30, 2023. The decrease from March 31, 2024, primarily reflects a $150.0 million decrease in wholesale funding and an increase in the loan book of $119.7 million. The increase from June 30, 2023, primarily reflects an $881.1 million increase in deposits, partially offset by an increase in the loan book of $689.3 and a $193.0 million decrease in wholesale funding.

Total loans, net of deferred fees and unamortized costs, were $5.8 billion at June 30, 2024, an increase of $119.7 million, or 2.1%, from March 31, 2024, and an increase of $689.3 million, or 13.4%, from June 30, 2023. Loan production was $290.8 million for the second quarter of 2024 compared to $269.6 million for the prior linked quarter and $425.4 million for the prior year period. The increase in total loans from March 31, 2024 was due primarily to an increase of $104.9 million in commercial real estate ("CRE") loans (including owner-occupied) and $47.8 million in commercial and industrial ("C&I") loans, partially offset by a decrease of $27.9 million of multi-family loans. The increase in total loans from June 30, 2023 was due primarily to an increase of $509.2 million in CRE loans (including owner-occupied) and $150.6 million in C&I loans.

Total deposits were $6.2 billion at June 30, 2024, a decrease of $67.9 million, or 1.1%, from March 31, 2024, and an increase of $881.1 million, or 16.7%, from June 30, 2023. The decrease from March 31, 2024 was due primarily to a decrease of $127.5 million in retail deposits with loan customers and other (GPG) deposits, partially offset by an increase in property manager and municipal deposits of $71.3 million. The increase in deposits from June 30, 2023, was due to broad based increases across most of the Bank's various deposit verticals.

At June 30, 2024, cash on deposit with the Federal Reserve Bank of New York and available secured funding capacity totaled $3.4 billion. The Company and the Bank each met all the requirements to be considered "well capitalized" under applicable regulatory guidelines. Total non-owner-occupied commercial real estate loans were 358.4% of total risk-based capital at June 30, 2024, compared to 363.3% and 363.2% at March 31, 2024 and June 30, 2023, respectively.

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Income Statement

Financial Highlights

Net Interest Income

Net interest income for the second quarter of 2024 was $61.5 million compared to $59.7 million for the prior linked quarter and $53.8 million for the prior year period. The $1.8 million increase from the prior linked quarter was due primarily to an increase in the average balance of loans and overnight deposits and an increase in the yield on loans, partially offset by an increase in the average balance of deposits and a modest increase in the cost of funds. The $7.8 million increase from the prior year period was due primarily to an increase in the average balance of loans and an increase in loan yields, partially offset by an increase in the average balance of deposits and an increase in the cost of funds.

Net Interest Margin

Net interest margin for the second quarter of 2024 was 3.44% compared to 3.40% and 3.44% for the prior linked quarter and prior year period, respectively. The 4 basis point increase from the prior linked quarter was driven largely by an increase in the average balance of loans and an increase in loan yields partially offset by an increase in the average balance of deposits and an increase in the cost of funds.

The total cost of funds for the second quarter of 2024 was 334 basis points compared to 330 basis points and 252 basis points for the prior linked quarter and prior year period, respectively. The increase from the prior linked quarter reflects the continued effects of high short-term interest rates and the intense competition for deposits. The increase from the prior year period reflects the continued effects of high short-term interest rates, the intense competition for deposits and a shift from non-interest bearing deposits to interest bearing funding primarily related to the exit from the crypto-related deposit vertical during 2023.

Non-Interest Income

Non-interest income was $6.1 million for the second quarter of 2024, a decrease of $865,000 from the prior linked quarter and a decrease of $1.7 million from the prior year period. The decrease from the prior linked quarter was driven primarily by a decrease in letter of credit fees and the continuing decline in GPG revenue as that business is wound down, partially offset by an increase in service charges on deposit accounts. The decrease from the prior year period was driven primarily by lower GPG revenue, partially offset by an increase in service charges on deposit accounts.

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Non-Interest Expense

Non-interest expense was $42.3 million for the second quarter of 2024, inclusive of $5.5 million of expenses related to the GPG wind down, regulatory remediation, and the core banking digital transformation. The $357,000 increase from the prior linked quarter was due primarily to a $1.7 million increase in professional fees and other expenses, partially offset by a $1.3 million decline in compensation and benefits. In the prior linked quarter, compensation and benefits was elevated by GPG wind down severance expenses and seasonally higher employer taxes and benefit costs. The $9.8 million increase from the prior year period was due primarily to an increase of $3.2 million in compensation and benefits related to the increase in number of employees, an increase of $1.9 million in professional fees, an increase of $1.7 million in technology costs related to the digital transformation project, and an increase of $1.6 million in other expenses.

Income Tax Expense

The effective tax rate for the second quarter of 2024 was 29.7% compared to 33.3% for the prior linked quarter and 37.4% for the prior year period. The effective tax rate for the prior year period includes a discrete expense related to the rescission of certain stock awards.

Asset Quality

Credit quality remains stable. The ratio of non-performing loans to total loans declined to 0.53% at June 30, 2024 compared to 0.91% at March 31, 2024 due to one multi-family loan relationship that was returned to accrual status. The ratio of non-performing loans to total loans was 0.47% at June 30, 2023.

The allowance for credit losses was $60.0 million at June 30, 2024, an increase of $1.5 million from March 31, 2024, which includes a provision related to a single C&I loan.

Conference Call

The Company will conduct a conference call at 9:00 a.m. ET on Friday, July 19, 2024, to discuss the results. To access the event by telephone, please dial 800-267-6316 (US), 203-518-9783 (INTL), and provide conference ID: MCBQ224 approximately 15 minutes prior to the start time (to allow time for registration).

The call will also be broadcast live over the Internet and accessible at MCB Quarterly Results Conference Call and in the Investor Relations section of the Company's website at MCB News. To listen to the live webcast, please visit the site at least 15 minutes prior to the start time to register, download and install any necessary audio software. For those unable to join for the live presentation, a replay of the webcast will also be available later that day accessible at MCB Quarterly Results Conference Call.

About Metropolitan Bank Holding Corp.

Metropolitan Bank Holding Corp. (NYSE: MCB) is the parent company of Metropolitan Commercial Bank (the "Bank"), a New York City based full-service commercial bank. The Bank provides a broad range of business, commercial and personal banking products and services to individuals, small businesses, private and public middle-market and corporate enterprises and institutions, municipalities, and local government entities.

Metropolitan Commercial Bank was named one of Newsweek's Best Regional Banks and Credit Unions 2024. The Bank was named by the Independent Community Bankers of America as one of the top 20 commercial lenders with more than $1 billion in assets. Kroll affirmed a BBB+ (investment grade) deposit rating on January 25, 2024.

The Bank is a New York State chartered commercial bank, a member of the Federal Reserve System and the Federal Deposit Insurance Corporation, and an equal housing lender.

For more information, please visit the Bank's website at MCBankNY.com.

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Forward-Looking Statement Disclaimer

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include but are not limited to the Company's future financial condition and capital ratios, results of operations and the Company's outlook and business. Forward-looking statements are not historical facts. Such statements may be identified by the use of such words as "may," "believe," "expect," "anticipate," "plan," "continue" or similar terminology. These statements relate to future events or our future financial performance and involve risks and uncertainties that are difficult to predict and are generally beyond our control and may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we caution you not to place undue reliance on these forward-looking statements. Factors which may cause our forward-looking statements to be materially inaccurate include, but are not limited to the following: the interest rate policies of the Board of Governors of the Federal Reserve System; inflation; 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; further deterioration in the financial condition or stock prices of financial institutions generally; 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; unanticipated volatility in deposits; unexpected increases in credit losses or in the level of delinquent, nonperforming, classified and criticized loans; our ability to absorb the amount of actual losses inherent in our existing loan portfolio; an unanticipated loss of key personnel or existing customers; competition from other institutions resulting in unanticipated changes in our loan or deposit rates; an unexpected adverse financial, regulatory or bankruptcy event experienced by our non-bank financial service partners; unanticipated increases in FDIC costs; changes in regulations, legislation or tax or accounting rules, monetary and fiscal policies of the U.S. Government including policies of the U.S. Treasury; impacts related to or resulting from recent bank failures; 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); the current or anticipated impact of military conflict, terrorism or other geopolitical events; the costs, including possibly incurring 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; a failure in or breach of the Company's operational or security systems or infrastructure, including cyberattacks; the failure to maintain current technologies, or to implement new technologies; the failure to maintain effective internal controls over financial reporting; the failure to retain or attract employees; and unanticipated adverse changes in our customers' economic conditions or general economic conditions, as well as those discussed under the heading "Risk Factors" in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q which have been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

Forward-looking statements speak only as of the date of this release. We do not undertake (and expressly disclaim) any obligation to update or revise any forward-looking statement, except as may be required by law.

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Consolidated Balance Sheet (unaudited)

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Consolidated Statement of Income (unaudited)

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Loan Production, Asset Quality & Regulatory Capital

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Performance Measures

(1)Annualized

(2)Net income divided by average tangible common equity.

(3)Non-GAAP financial measure. See Reconciliation of Non-GAAP Measures on page 12.

(4)Total non-interest expense divided by total revenues.

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Interest Margin Analysis

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(6) Determined by dividing annualized interest expense by the sum of total average interest-bearing liabilities and total average non-interest-bearing deposits

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Reconciliation of Non-GAAP Measures

In addition to the results presented in accordance with Generally Accepted Accounting Principles ("GAAP"), this earnings release includes certain non-GAAP financial measures. Management believes these non-GAAP financial measures provide meaningful information to investors in understanding the Company's operating performance and trends. These non-GAAP measures have inherent limitations and are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for an analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Reconciliations of non-GAAP/adjusted financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the following tables:

Explanatory Note

Some amounts presented within this document may not recalculate due to rounding.

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