Metropolitan Bank Holding Corp
For the period ended Jun 30, 2024. Filed Aug 2, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 2, 2024
MCB$95.47+0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0001558370-24-006655
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-02.
0001558370-24-010721
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 70 previous paragraphs and 75 current paragraphs.
33 unchanged; 34 reworded; 5 added; 1 removed; 2 previous and 3 current paragraphs rearranged.
Tables are not compared: 12 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
Net income was $33.0 million for the six months ended June 30, 2024, a decrease of $7.6 million as compared to $40.6 million for the six months ended June 30, 2023. This decrease was due primarily to a $9.0 million increase in net interest income and a $2.9 million decrease in the provision for credit losses, partially offset by a $20.7 million increase in non-interest expense.
Current report
Interest income increased $55.9 million to $228.1 million for the six months ended June 30, 2024 as compared to $172.2 million for the six months ended June 30, 2023, primarily due to the increase in the average balance of loans and an
Current report
increase in the yield for loans. The average balance of loans increased $845.2 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The yield on loans increased 82 basis points for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 due to the increase in prevailing market interest rates and a disciplined approach to loan pricing.
Current report
The provision for credit losses for the three and six months ended June 30, 2024 was $1.5 million and $2.1 million, respectively, which reflects loan growth and a provision related to a single C&I loan.
Current report
Non-interest expense increased $20.7 million to $84.2 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, due primarily to an increase of $6.8 million in compensation and benefits due to severance
Removed paragraphs (1)
Previous report
The provision for credit losses for the first quarter of 2024 was $528,000 compared to $646,000 for the first quarter of 2023. The provision for credit losses was primarily driven by loan growth in both periods.
Reworded paragraphs (34)
Previous wording
The Company is a bank holding company headquartered in New York, New York and registered under the BHC Act. Through its wholly owned bank subsidiary, Metropolitan Commercial Bank (the “Bank”), a New York state chartered commercial bank, 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 primarily in the New York metropolitan area. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-Q.
Current wording
The Company is a bank holding company headquartered in New York, New York and registered under the BHC Act. Through its wholly owned bank subsidiary, Metropolitan Commercial Bank (the “Bank”), a New York state chartered commercial bank, the Company provides a broad range of business, commercial and retail banking products and services to small businesses, middle-market enterprises, public entities and individuals primarily in the New York metropolitan area. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-Q.
Previous wording
The Company operates six banking centers strategically located within close proximity to target clients. The strength of the Company’s deposit franchise comes from its long-standing relationships with clients and the strong ties it has in its market area. The Company has also developed a diversified funding strategy, which enables it to be less reliant on branches. Deposit funding is provided by the following core deposit verticals: (i) borrowing clients; (ii) non-borrowing retail clients; (iii) corporate cash management clients; and (iv) municipal and other local entities.
Current wording
The Company operates six banking centers strategically located within close proximity to target clients. The strength of the Company’s deposit franchise comes from its long-standing relationships with clients and the strong ties it has in its market area. The Company has also developed a diversified funding strategy, which enables it to be less reliant on branches. Deposit funding is provided by the following core deposit verticals: (i) borrowing clients; (ii) non-borrowing retail clients; (iii) corporate cash management clients; (iv) municipal and other local entities; (v) EB-5 Program accounts; and (vi) Title and Escrow and Charter School clients.
Previous wording
Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Management believes that the most critical accounting policy, which involves the most complex or subjective decisions or assessments, is as follows:
Current wording
Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Management believes that the most critical accounting policy, which involves the most complex or subjective decisions or assessments, is the allowance for credit losses.
Previous wording
The ACL has been determined in accordance with GAAP. The Company is responsible for the timely and periodic determination of the amount of the ACL. Management believes that the ACL for loans and loan commitments is adequate to cover expected credit losses over the life of the loan portfolio. Although management evaluates available information to determine the adequacy of the ACL, the level of allowance is an estimate which is subject to significant judgment and short-term change. Because of uncertainties associated with local and national economic forecasts, the operating and regulatory environment, collateral values and future cash flows from the loan portfolio, it is possible that a material change could occur in the ACL. The evaluation of the adequacy of loan collateral is often based upon estimates and appraisals. Because of changing economic conditions, the valuations determined from such estimates and appraisals may also change. Accordingly, the Company may ultimately incur losses that vary from management’s current estimates. Adjustments to the ACL will be reported in the period in which such adjustments become known and can be reasonably estimated. All
Current wording
The ACL has been determined in accordance with GAAP. The Company is responsible for the timely and periodic determination of the amount of the ACL. Management believes that the ACL for loans and loan commitments is adequate to cover expected credit losses over the life of the loan portfolio. Although management evaluates available information to determine the adequacy of the ACL, the level of allowance is an estimate which is subject to significant judgment and short-term change. Because of uncertainties associated with local and national economic forecasts, the operating and regulatory environment, collateral values and future cash flows from the loan portfolio, it is possible that a material change could occur in the ACL. The evaluation of the adequacy of loan collateral is often based upon estimates and appraisals. Because of uncertain economic conditions, the valuations determined from such estimates and appraisals may change. Accordingly, the Company may ultimately incur losses that vary from management’s current estimates. Adjustments to
Previous wording
loan losses are charged to the ACL when the loss actually occurs or when the collectability of principal is deemed to be unlikely. Recoveries are credited to the allowance at the time of recovery. Various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ACL. As a result of such examinations, the Company may need to recognize additions to the ACL based on the regulators’ judgments.
Current wording
the ACL will be reported in the period in which such adjustments become known and can be reasonably estimated. All loan losses are charged to the ACL when the loss actually occurs or when the collectability of principal is deemed to be unlikely. Recoveries are credited to the allowance at the time of recovery. Various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ACL. As a result of such examinations, the Company may need to recognize additions to the ACL based on the regulators’ observations.
Previous wording
In estimating the ACL, the Company relies on models and economic forecasts developed by external parties as the primary driver of the ACL. These models and forecasts are based on nationwide data sets. Economic forecasts can change significantly over an economic cycle and have a significant level of uncertainty associated with them. The performance of the models is dependent on the variables used in the models being reasonable predictors for the loan portfolio’s performance. However, these variables may not capture all sources of risk within the portfolio. As a result, the Company reviews the results and makes qualitative adjustments to the models to capture potential limitations of the models as necessary. Such qualitative factors may include adjustments to better capture the imprecision associated with the economic forecasts, and the ability of the models to capture emerging risks within the portfolio that may not be represented in the data. These judgments are evaluated through the Company’s review process and revised on a quarterly basis to account for changes in forecasts, facts and circumstances.
Current wording
In estimating the ACL, the Company relies on models and economic forecasts developed by external parties as the primary driver of the ACL. These external models and forecasts are based on nationwide data sets. Economic forecasts can change significantly over an economic cycle and have a significant level of uncertainty associated with them. The performance of these models is dependent on the variables used in the models being reasonable predictors for the loan portfolio’s performance. However, these variables may not capture all sources of risk within the portfolio. As a result, the Company reviews the results and makes qualitative adjustments to capture potential limitations of the external models as necessary. Such qualitative factors may include adjustments to better capture the imprecision associated with the economic forecasts, and the ability of the models to capture emerging risks within the portfolio that may not be represented in the data. These adjustments are evaluated through the Company’s review process and revised on a quarterly basis to account for changes in forecasts, facts and circumstances.
Previous wording
One of the more significant judgments involved in estimating the Company’s ACL relates to the macroeconomic forecasts used to estimate credit losses and the relative weightings applied to them. To illustrate the impact of changes in these forecasts to the Company’s ACL, the Company performed a hypothetical sensitivity analysis that decreased the weight on the baseline scenario by 33% and equally allocated the difference to increase the weights on the more optimistic and adverse scenarios. All else equal, the impact of this hypothetical forecast would result in a net increase of approximately $7.0 million, or 11.9%, in the Company’s total ACL for loans and loan commitments as of March 31, 2024. This hypothetical analysis is intended to illustrate the impact of adverse changes in the macroeconomic environment at a point in time and is not intended to reflect the full nature and extent of potential future change in the ACL. It is difficult to estimate how potential changes in any one of the quantitative inputs or qualitative factors might affect the overall ACL and the Company’s current assessments may not reflect the potential future impact of changes to those inputs or factors.
Current wording
One of the more significant judgments involved in estimating the Company’s ACL relates to the macroeconomic forecasts used to estimate credit losses and the relative weightings applied to them. To illustrate the impact of changes in these forecasts to the Company’s ACL, the Company performed a hypothetical sensitivity analysis that decreased the weight on the baseline scenario by 33% and equally allocated the difference to increase the weights on the more optimistic and adverse scenarios. All else equal, the impact of this hypothetical forecast would result in a net increase of approximately $7.1 million, or 11.8%, in the Company’s total ACL for loans and loan commitments as of June 30, 2024. This hypothetical analysis is intended to illustrate the impact of adverse changes in the macroeconomic forecasts at a point in time and is not intended to reflect the full nature and extent of potential future change in the ACL. It is difficult to estimate how potential changes in any one of the quantitative inputs or qualitative factors might affect the overall ACL and the Company’s current assessments may not reflect the potential future impact of changes to those inputs or factors.
Previous wording
The Company had total assets of $7.5 billion at March 31, 2024, an increase of $385.7 million, or 5.5%, from December 31, 2023.
Current wording
The Company had total assets of $7.3 billion at June 30, 2024, an increase of $197.9 million, or 2.8%, from December 31, 2023.
Previous wording
Total cash and cash equivalents were $534.4 million at March 31, 2024, an increase of $264.9 million, or 98.3%, from December 31, 2023. The increase primarily reflected the $500.3 million increase in deposits, partially offset by the $139.0 million decrease in wholesale funding and $94.4 million net deployment into loans.
Current wording
Total cash and cash equivalents were $244.7 million at June 30, 2024, a decrease of $24.8 million, or 9.2%, from December 31, 2023. The decrease primarily reflects the $214.1 million net deployment into loans and the $289.0 million decrease in wholesale funding, partially offset by the $432.4 million increase in deposits.
Previous wording
Total securities were $960.2 million at March 31, 2024, an increase of $28.0 million, or 3.0%, from December 31, 2023. The increase was primarily due to the purchase of $53.3 million of AFS securities, partially offset by the $20.8 million paydown and maturities of AFS and HTM securities.
Current wording
Total securities were $956.2 million at June 30, 2024, an increase of $24.0 million, or 2.6%, from December 31, 2023. The increase was primarily due to the purchase of $72.8 million of AFS securities, partially offset by the $44.3 million paydown and maturities of AFS and HTM securities.
Previous wording
Total loans, net of deferred fees and unamortized costs, were $5.7 billion at March 31, 2024, an increase of $94.4 million, or 1.7%, from December 31, 2023. The increase in total loans was due primarily to an increase of $93.4 million in commercial real estate (“CRE”) loans (including owner-occupied). At March 31, 2024, 80.8% of the CRE and C&I loan portfolio is concentrated in the New York Metropolitan Area (mainly New York City) and Florida.
Current wording
Total loans, net of deferred fees and unamortized costs, were $5.8 billion at June 30, 2024, an increase of $214.1 million, or 3.8%, from December 31, 2023. The increase in total loans was due primarily to an increase of $198.4 million in CRE loans (including owner-occupied) and $53.8 million in C&I loans. At June 30, 2024, 80.2% of the CRE and C&I loan portfolio is concentrated in the New York Metropolitan Area (mainly New York City) and Florida.
Previous wording
The largest concentration in the loan portfolio is to the healthcare industry, which amounted to $1.8 billion, or 32.2% of total loans, at March 31, 2024, including $1.7 billion in loans to skilled nursing facilities.
Current wording
The largest concentration in the loan portfolio is to the healthcare industry, which amounted to $2.0 billion, or 34.5% of total loans, at June 30, 2024, including $1.9 billion in loans to skilled nursing facilities.
Previous wording
Non-performing loans were $51.9 million at March 31, 2024 and December 31, 2023. The table below sets forth key asset quality ratios (dollars in thousands):
Current wording
Non-performing loans declined to $31.1 million at June 30, 2024 compared to $51.9 million at December 31, 2023 due to one multi-family loan relationship that was returned to accrual status. The table below sets forth key asset quality ratios (dollars in thousands):
Previous wording
The ACL was $58.5 million at March 31, 2024, as compared to $58.0 million at December 31, 2023. The Company recorded a $528,000 provision for credit losses for the first quarter of 2024, primarily driven by loan growth.
Current wording
The ACL was $60.0 million at June 30, 2024, as compared to $58.0 million at December 31, 2023. The Company recorded a $2.1 million provision for credit losses for the six months ended June 30, 2024, which reflects loan growth and a provision related to a single C&I loan.
Previous wording
Total deposits were $6.2 billion at March 31, 2024, an increase of $500.3 million, or 8.7%, from December 31, 2023. The increase from December 31, 2023, was due primarily to an increase of $136.3 million in retail deposits, $101.9 million in municipal deposits, $98.7 million in property manager deposits and an aggregate net increase of $163.4 million across other deposit verticals. Non-interest-bearing demand deposits were 30.9% of total deposits at March 31, 2024, compared to 32.0% at December 31, 2023.
Current wording
Total deposits were $6.2 billion at June 30, 2024, an increase of $432.4 million, or 7.5%, from December 31, 2023. The increase from December 31, 2023, was due primarily to broad based increases across most of the Company’s various deposit verticals. Non-interest-bearing demand deposits were 30.5% of total deposits at June 30, 2024, compared to 32.0% at December 31, 2023.
Previous wording
At March 31, 2024, the aggregate estimated amount of FDIC uninsured deposits was $1.6 billion and the aggregate estimated amount of the Company’s uninsured time deposits was $25.1 million. The following table presents the scheduled maturities of time deposits greater than $250,000 (in thousands):
Current wording
At June 30, 2024, the aggregate estimated amount of FDIC uninsured deposits was $1.6 billion, and the aggregate estimated amount of uninsured time deposits was $17.7 million. The following table presents the scheduled maturities of time deposits greater than $250,000 (in thousands):
Previous wording
To support the balance sheet, the Company may at times utilize FHLB advances or other funding sources. At March 31, 2024, the Company had $300.0 million of FHLBNY advances. At December 31, 2023, the Company had $99.0 million of Federal funds purchased and $440.0 million of FHLBNY advances.
Current wording
To support the balance sheet, the Company may at times utilize FHLB advances or other funding sources. At June 30, 2024, the Company had $150.0 million of FHLBNY advances. At December 31, 2023, the Company had $99.0 million of Federal funds purchased and $440.0 million of FHLBNY advances.
Previous wording
At March 31, 2024, the Company had a $100.0 million FRB term loan under the Bank Term Funding Program (“BTFP”). The Federal Reserve established the BTFP on March 12, 2023, as a funding source for eligible depository institutions. Advances can no longer be requested under the program. The BTFP provides short-term liquidity (up to one year) against the par value of certain high-quality collateral, such as U.S. Treasury securities.
Current wording
At June 30, 2024, the Company had a $100.0 million FRB term loan under the Bank Term Funding Program (“BTFP”). The Federal Reserve established the BTFP on March 12, 2023, as a funding source for eligible depository institutions. Advances can no longer be requested under the program. The BTFP was created to provide short-term liquidity (up to one year) against the par value of certain high-quality collateral, such as U.S. Treasury securities.
Previous wording
Accumulated other comprehensive loss, net of tax, was $52.1 million at March 31, 2024, a decrease of $0.8 million from December 31, 2023. The decrease from December 31, 2023 was due to net unrealized gains on outstanding cash flow hedges, partially offset by an increase in unrealized losses on AFS securities due to changes in prevailing interest rates and the reclassification to net income of gains on a terminated cash flow hedge.
Current wording
Accumulated other comprehensive loss, net of tax, was $52.2 million at June 30, 2024, a decrease of $0.7 million from December 31, 2023. The decrease from December 31, 2023 was due to net unrealized gains on outstanding cash flow hedges, partially offset by an increase in unrealized losses on AFS securities due to changes in prevailing interest rates and the reclassification to net income of gains on a terminated cash flow hedge.
Previous wording
Net income was $16.2 million for the first quarter of 2024, a decrease of $8.9 million as compared to $25.1 million for the first quarter of 2023. This decrease was due primarily to an increase of $10.9 million in non-interest expense, partially offset by the $1.2 million increase in net interest income.
Current wording
Net income was $16.8 million for the second quarter of 2024, an increase of $1.2 million as compared to $15.6 million for the second quarter of 2023. This increase was due primarily to a $7.8 million increase in net interest income and a $2.8 decrease in the provision for credit losses, partially offset by a $9.8 million increase in non-interest expense.
Previous wording
Net interest income is the difference between interest earned on assets and interest incurred on liabilities. The following table presents an analysis of net interest income by each major category of interest-earning assets and interest-bearing liabilities. The table presents the average yield on interest-earning assets and the average cost of interest-bearing liabilities. Yields and costs were derived by dividing income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. Average balances were derived from daily balances over the periods indicated. Interest income included fees that management considers to be adjustments to yields. Yields on tax-exempt obligations were not computed on a tax-equivalent basis. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred loan origination fees and costs, and purchase discounts and premiums that are amortized or accreted to interest income.
Current wording
Net interest income is the difference between interest earned on assets and interest incurred on liabilities. The following table presents an analysis of net interest income by each major category of interest-earning assets and interest-bearing liabilities. The table presents the average yield on interest-earning assets and the average cost of interest-bearing liabilities. Yields and costs were derived by dividing income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. Average balances were derived from daily balances over the periods indicated. Interest income includes fees that management considers to be adjustments to yields. Yields on tax-exempt obligations were not computed on a tax-equivalent basis. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred loan origination fees and costs, and purchase discounts and premiums that are amortized or accreted to interest income.
Previous wording
Net interest margin for the first quarter of 2024 was 3.40% compared to 3.86% for the first quarter of 2023. The 46 basis point decrease was due primarily to the shift from non-interest bearing deposits to interest bearing deposits related to the exit from the crypto-related deposit vertical, the increase in the average balance of borrowed funds and, moreover, the increase in the cost of funds, partially offset by loan growth and the increase in loan yields.
Current wording
Net interest margin for the second quarter of 2024 was 3.44% compared to 3.44% for the second quarter of 2023. Net interest margin for the six months ended June 30, 2024 was 3.42% compared to 3.65% for the six months ended June 30, 2023. The 23 basis point decrease was due primarily to the shift from non-interest bearing deposits to interest bearing deposits related to the exit from the crypto-related deposit vertical, and, moreover, the increase in the cost of funds, partially offset by loan growth and the increase in loan yields.
Previous wording
Interest income increased $29.1 million to $112.3 million for the first quarter of 2024 as compared to $83.3 million for the first quarter of 2023, primarily due to the increase in the average balance of loans and increase in yields for loans. The average balance of loans increased $858.5 million for the first quarter of 2024 as compared to the first quarter of 2023. The yields on loans increased 89 basis points for the first quarter of 2024 as compared to the first quarter of 2023 due to the increase in prevailing market interest rates and a disciplined approach to loan pricing.
Current wording
Interest income increased $26.8 million to $115.8 million for the second quarter of 2024 as compared to $89.0 million for the second quarter of 2023, primarily due to the increase in the average balance of loans and an increase in the yield on loans. The average balance of loans increased $832.4 million for the second quarter of 2024 as compared to the second quarter of 2023. The yield on loans increased 77 basis points for the second quarter of 2024 as compared to the second quarter of 2023 due to the increase in prevailing market interest rates and a disciplined approach to loan pricing.
Previous wording
Interest expense increased $27.9 million to $52.6 million for the first quarter of 2024 as compared to $24.7 million for the first quarter of 2023 due primarily to the increase in the average balance of interest-bearing deposits and the increase in the cost of funds. The average balance of interest-bearing deposits increased $1.2 billion for the first quarter of 2024 as compared to the first quarter of 2023, which reflects deposit growth and the shift from non-interest bearing deposits to interest bearing deposits primarily related to the exit from the crypto-related deposit vertical. Total cost of funds for the first quarter of 2024 increased 147 basis points compared to the first quarter of 2023, which reflects the continued effects of high short-term interest rates, intense competition for deposits, and the shift from non-interest bearing deposits to interest bearing funding primarily related to the exit from the crypto-related deposit vertical.
Current wording
Interest expense increased $19.0 million to $54.2 million for the second quarter of 2024 as compared to $35.2 million for the second quarter of 2023 due primarily to the increase in the average balance of interest-bearing deposits and an increase in the cost of funds, partially offset by the decrease in the average balance of borrowed funds. The average balance of interest-bearing deposits increased $1.3 billion for the second quarter of 2024 as compared to the second quarter of 2023, which reflects deposit growth and the shift from non-interest bearing deposits to interest bearing deposits primarily related to the exit from the crypto-related deposit vertical in 2023. The total cost of funds for the second quarter of 2024 increased 82 basis points compared to the second quarter of 2023, which reflects the continued effects of high short-term interest rates, intense competition for deposits, and the shift from non-interest bearing deposits to interest bearing funding related to the exit from the crypto-related deposit vertical. The average balance of borrowed funds decreased $301.2 million for the second quarter of 2024 as compared to the second quarter of 2023, which reflects a disciplined approach to liquidity management.
Previous wording
Non-interest income increased $30,000 to $7.0 million for the first quarter of 2024, as compared to the first quarter of 2023 driven primarily by an increase in service charges on deposit accounts and other service charges and fees, partially offset by lower GPG revenue. At the beginning of 2024, the Company announced it will exit all GPG Banking-as-a-Service relationships, which is expected to be completed during 2024.
Current wording
Non-interest income decreased $1.7 million to $6.1 million for the second quarter of 2024, as compared to the second quarter of 2023 driven primarily by lower GPG revenue, partially offset by an increase in service charges on deposit accounts. At the beginning of 2024, the Company announced that it will exit all GPG Banking-as-a-Service relationships, which is expected to be completed during 2024. Non-interest income decreased $1.7 million to $13.1 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023 driven primarily by lower GPG revenue, partially offset by an increase in service charges on deposit accounts.
Previous wording
Non-interest expense increased $10.9 million to $41.9 million for the first quarter of 2024, compared to the first quarter of 2023 due primarily to $3.6 million in compensation and benefits due to severance expenses related to the GPG wind down, as well as the increase in number of employees, the $2.5 million reversal of the regulatory settlement reserve recorded in the first quarter of 2023, an increase of $1.7 million in technology costs mainly related to the digital transformation project, and an increase of $1.8 million in professional fees. At the beginning of 2024, the Company began implementing an innovative digital transformation project to improve its capabilities and efficiencies for both client facing and internal processes.
Current wording
Non-interest expense increased $9.8 million to $42.3 million for the second quarter of 2024, compared to the second quarter of 2023 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 primarily related to regulatory remediation costs, an increase of $1.6 million in technology costs primarily related to the digital transformation project, and an increase of $1.6 million in other expenses. At the beginning of 2024, the Company began implementing an innovative digital transformation project to improve its capabilities and efficiencies for both client facing and internal processes, which it expects to complete in 2025.
Previous wording
The estimated effective tax rate for the first quarter of 2024 was 33.3% as compared to 25.9% for the first quarter of 2023. The effective tax rate for the first quarter of 2024 reflects unfavorable discrete items related to employee stock compensation. The effective tax rate for the prior year period includes a favorable discrete benefit related to the conversion of stock awards.
Current wording
The estimated effective tax rate for the second quarter of 2024 was 29.7% as compared to 37.4% for the second quarter of 2023. The effective tax rate for the second quarter of 2023 includes an unfavorable discrete expense related to the rescission of stock awards. The effective tax rate for the six months ended June 30, 2024 was 31.5% compared to 30.8% for the six months ended June 30, 2023.
Previous wording
At March 31, 2024, the Company had $599.3 million in unused commitments and $40.1 million in standby and commercial letters of credit. At December 31, 2023, the Company had $595.1 million in unused commitments and $59.5 million in standby and commercial letters of credit.
Current wording
At June 30, 2024, the Company had $541.0 million in unused loan commitments and $41.7 million in standby and commercial letters of credit. At December 31, 2023, the Company had $595.1 million in unused commitments and $59.5 million in standby and commercial letters of credit.
Previous wording
The Company’s most liquid assets are cash and cash equivalents. The levels of these assets are dependent on its operating, financing, lending and investing activities during any given period. At March 31, 2024 and December 31, 2023, cash and cash equivalents totaled $534.4 million and $269.5 million, respectively. Securities, which provide additional sources of liquidity, totaled $960.2 million at March 31, 2024 and $932.2 million at December 31, 2023. At March 31, 2024, there were $180.9 million of securities pledged to support wholesale funding, and to a lesser extent certain other types of deposits, of which $68.1 million were encumbered. At December 31, 2023 there were $845.7 million of securities pledged to support wholesale funding, and to a lesser extent certain other types of deposits, of which $60.0 million were encumbered.
Current wording
The Company’s most liquid assets are cash and cash equivalents. The levels of these assets are dependent on its operating, financing, lending and investing activities during any given period. At June 30, 2024 and December 31, 2023, cash and cash equivalents totaled $244.7 million and $269.5 million, respectively. Securities, which provide an additional source of liquidity, totaled $956.2 million at June 30, 2024 and $932.2 million at December 31, 2023. At June 30, 2024, there were $783.1 million of securities pledged to support wholesale funding, and to a lesser extent certain other types of deposits, of which $170.8 million were encumbered. At December 31, 2023, there were $845.7 million of securities pledged to support wholesale funding, and to a lesser extent certain other types of deposits, of which $60.0 million were encumbered.
Previous wording
The Company’s primary investing activities are the origination of loans, and to a lesser extent, the purchase of loans and securities. For the three months ended March 31, 2024, the Company’s loan production was $269.6 million as compared to $265.4 million for the three months ended March 31, 2023.
Current wording
The Company’s primary investing activities are the origination of loans, and to a lesser extent, the purchase of loans and securities. For the three and six months ended June 30, 2024, the Company’s loan production was $290.8 million and $560.4 million as compared to $425.4 million and $690.8 million, respectively, for the three and six months ended June 30, 2023.
Previous wording
Financing activities consisted primarily of activity in deposit accounts and borrowings. The Company generates deposits from businesses and individuals through client referrals and other relationships and through its retail presence. The Company has established deposit concentration thresholds to avoid the possibility of dependence on any single depositor base for funds. Total deposits were $6.2 billion at March 31, 2024, an increase of $500.3 million, or 8.7%, from December 31, 2023.
Current wording
Financing activities consisted primarily of activity in deposit accounts and borrowings. The Company gathers deposits from businesses and individuals through client referrals and other relationships and through its retail presence. The Company has established deposit concentration thresholds to avoid the possibility of dependence on any single depositor
Previous wording
At March 31, 2024, interest-bearing deposits were comprised of $4.3 billion of money market accounts and $38.1 million of time deposits. Time deposits due within one year of March 31, 2024 totaled $35.5 million, or 0.6% of total deposits. At March 31, 2024, the aggregate estimated amount of FDIC uninsured deposits was $1.6 billon. At December 31, 2023, interest-bearing deposits were comprised of $3.9 billion of money market accounts and $35.4 million of time deposits. Time deposits due within one year of December 31, 2023 totaled $37.6 million, or 0.7% of total deposits. Non-interest-bearing deposits were 30.9% of total deposits at March 31, 2024, as compared to 32.0% at December 31, 2023. At December 31, 2023, the aggregate estimated amount of FDIC uninsured deposits was $1.6 billion.
Current wording
At June 30, 2024, interest-bearing deposits were comprised of $4.2 billion of money market accounts and $30.5 million of time deposits. Time deposits due within one year of June 30, 2024 totaled $24.0 million, or 0.4%, of total deposits. At June 30, 2024, the aggregate estimated amount of FDIC uninsured deposits was $1.6 billion. At December 31, 2023, interest-bearing deposits were comprised of $3.9 billion of money market accounts and $35.4 million of time deposits. Time deposits due within one year of December 31, 2023 totaled $37.6 million, or 0.7%, of total deposits. Non-interest-bearing deposits were 30.5% of total deposits at June 30, 2024, as compared to 32.0% at December 31, 2023. At December 31, 2023, the aggregate estimated amount of FDIC uninsured deposits was $1.6 billion.
Previous wording
At March 31, 2024, the Company had $300.0 million of FHLBNY advances and a $100.0 million FRB term loan under the BTFP. The Company had $2.9 billion and $2.8 billion of available secured wholesale funding capacity at March 31, 2024 and December 31, 2023, respectively. The increase in secured funding capacity is due to the Company optimizing its liquidity resources through the pledge of additional eligible loan collateral.
Current wording
In the event loan demand were to increase faster than expected, or any other unforeseen demand or commitment were to occur, the Company could access its borrowing capacity with the FHLB or obtain additional funds through alternative funding sources, including the brokered deposit market. At June 30, 2024, the Company had $150.0 million of outstanding FHLBNY advances and a $100.0 million FRB term loan under the BTFP. The Company had $3.1 billion and $2.8 billion of available secured wholesale funding capacity at June 30, 2024 and December 31, 2023, respectively.
Previous wording
At March 31, 2024 and December 31, 2023, total non-owner-occupied CRE loans were 363.3% and 368.1% of risk-based capital, respectively.
Current wording
At June 30, 2024 and December 31, 2023, total non-owner-occupied CRE loans were 358.4% and 368.1% of risk-based capital, respectively.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Interest expense increased $46.9 million to $106.8 million for the six months ended June 30, 2024 as compared to $60.0 million for the six months ended June 30, 2023, due primarily to the increase in the average balance of interest-bearing deposits and an increase in the cost of funds. The average balance of interest-bearing deposits increased $1.3 billion for the six months ended June 30, 2024 as compared to the six month ended June 30, 2023, which reflects deposit growth and the shift from non-interest bearing deposits to interest bearing deposits primarily related to the exit from the crypto-related deposit vertical in 2023. The total cost of funds for the six months ended June 30, 2024 increased 114 basis points compared to the six months ended June 30, 2023, which reflects the continued effects of high short-term interest rates, intense competition for deposits, and the shift from non-interest bearing deposits to interest bearing funding.
Current report — wording carried from elsewhere
expenses related to the GPG wind down and the increase in number of employees, an increase of $3.7 million in professional fees primarily related to regulatory remediation costs, an increase of $3.3 million in technology costs primarily related to the digital transformation project, and the $2.5 million reversal of the regulatory settlement reserve recorded in the first quarter of 2023.
Current report — wording carried from elsewhere
base for funds. Total deposits were $6.2 billion at June 30, 2024, an increase of $432.4 million, or 7.5%, from December 31, 2023.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Total cost of funds for the first quarter of 2024 was 330 basis points compared to 183 basis points for the first quarter of 2023, which reflects the continued effects of high short-term interest rates, intense competition for deposits, and the shift from non-interest bearing deposits to interest bearing funding related to the exit from the crypto-related deposit vertical.
Previous report — wording carried elsewhere
The Company has no material commitments or demands that are likely to affect its liquidity other than as set forth below. In the event loan demand were to increase faster than expected, or any other unforeseen demand or commitment were to occur, the Company could access its borrowing capacity with the FHLB or obtain additional funds through alternative funding sources, including the brokered deposit market.