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| PART I. FINANCIAL INFORMATION | |
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| Item 1. Financial Statements (unaudited) | |
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| Consolidated Statements of Financial Condition | 6 |
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| Consolidated Statements of Operations | 7 |
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| Consolidated Statements of Comprehensive Income | 8 |
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| Consolidated Statements of Changes in Stockholders’ Equity | 9 |
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| Consolidated Statements of Cash Flows | 10 |
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| Notes to Unaudited Consolidated Financial Statements | 11 |
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| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32 |
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| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 41 |
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| Item 4. Controls and Procedures | 43 |
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| PART II. OTHER INFORMATION | 44 |
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| Item 1. Legal Proceedings | 44 |
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| Item 1A. Risk Factors | 44 |
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| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 44 |
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| Item 3. Defaults Upon Senior Securities | 44 |
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| Item 4. Mine Safety Disclosures | 44 |
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| Item 5. Other Information | 44 |
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| Item 6. Exhibits | 45 |
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| Signatures | 46 |
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GLOSSARY OF COMMON TERMS AND ACRONYMS
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| ACL | Allowance for Credit Losses | FHLBNY | Federal Home Loan Bank of New York |
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| AFS | Available-for-sale | FRB | Federal Reserve Bank |
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| ALCO | Asset Liability Committee | FRBNY | Federal Reserve Bank of New York |
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| ALLL | Allowance for loan and lease losses | FX | Foreign exchange |
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| AOCI | Accumulated Other Comprehensive Income | GAAP | U.S. Generally accepted accounting principles |
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| ASC | Accounting Standards Codification | GPG | Global Payments Group |
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| ASU | Accounting Standards Update | HTM | Held-to-maturity |
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| Bank | Metropolitan Commercial Bank | IRR | Interest rate risk |
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| BHC Act | Bank Holding Company Act of 1956, as amended | ISO | Incentive stock option |
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| BSA | Bank Secrecy Act | JOBS Act | The Jumpstart Our Business Startups Act |
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| C&I | Commercial and Industrial | LIBOR | London Inter-Bank Offered Rate |
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| CARES Act | Coronavirus Aid, Relief, and Economic Security Act | LTV | Loan-to-value |
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| CECL | Current Expected Credit Loss | MBS | Mortgage-backed securities |
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| CFPB | Consumer Financial Protection Bureau | NYSDFS | New York State Department of Financial Services |
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| Company | Metropolitan Bank Holding Corp. | OCC | Office of the Comptroller of the Currency |
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| Coronavirus | COVID-19 | OTTI | Other-than-temporary impairment |
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| CRA | Community Reinvestment Act | PPP | Paycheck Protection Program |
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| CRE | Commercial real estate | PRSU | Performance Restricted Share Units |
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| CRE Guidance | Commercial Real Estate Lending, Sound Risk Management Practices | ROU | Right of Use |
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| DIF | Deposit Insurance Fund | SEC | U.S. Securities and Exchange Commission |
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| EGC | Emerging Growth Company | SOFR | Secured Overnight Financing Rate |
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| EVE | Economic value of equity | TDR | Troubled debt restructuring |
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| FASB | Financial Accounting Standards Board | USD | U.S. Dollar |
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| FDIC | Federal Deposit Insurance Corporation | | |
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| FHLB | Federal Home Loan Bank | | |
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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, 2024 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 and other regulatory bodies; |
| ● | an unexpected deterioration in the performance of our loan or securities portfolios; |
| ● | changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio; |
| ● | unexpected increases in our expenses; |
| ● | different than anticipated growth and our ability to manage our growth; |
| ● | global pandemics, including the lingering effects of COVID-19, or localized epidemics, could adversely affect the Company’s financial condition and results of operations; |
| ● | 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 clients; |
| ● | 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 clients’ economic conditions; |
| ● | 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 cybersecurity 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; |
| ● | emerging issues related to the development and use of artificial intelligence could give rise to legal or regulatory action, damage our reputation or otherwise materially harm our business or clients; |
| ● | 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; |
| ● | the 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 clients; |
| ● | changes in consumer spending, borrowing 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 for credit losses; |
| ● | the credit and other risks from borrower and depositor concentrations (by geographic area and by industry); |
| ● | the difficulties associated with achieving or predicting expected future financial results; and |
| ● | the potential impact on the Company’s operations and clients resulting from natural or man-made disasters, wars, acts of terrorism, cyberattacks 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.
