Metropolitan Bank Holding Corp

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, a New York state chartered 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 in the New York metropolitan area. In addition, through GPG the Company provides services to non-bank financial service companies by serving as an issuing bank for third- party debit card programs, while also providing such companies with other financial infrastructure components, including

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, 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 in the New York metropolitan area. For an analysis of 2023 results compared with 2022 results, see Part II, Item 7., “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K for the year ended December 31, 2023 filed with the SEC.

Previous wording

The Company’s primary lending products are CRE, including multi-family loans, and C&I loans. Substantially all loans are secured by specific items of collateral including business and consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flows from operations of commercial enterprises. The Company’s primary deposit products are checking, savings, and term deposit accounts, all of which 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 GPG provides services to non-bank financial service companies by serving as an issuing bank for third-party debit card programs, while also providing such companies with other financial infrastructure components, including cash settlement and custodian deposit services. The Company has developed various deposit gathering strategies, which generate the funding necessary to operate without a large branch network. These activities, together with six strategically located banking centers, generate a stable source of deposits and a diverse loan portfolio with attractive risk-adjusted yields.

Current wording

The Company’s primary lending products are CRE, including multi-family loans, and C&I loans. Substantially all loans are secured by specific items of collateral including business and consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flows from operations of commercial enterprises. The Company has developed various deposit gathering strategies, which generate the funding necessary to operate without a large branch network. In addition to traditional commercial banking products, the Company offers: corporate cash management and retail banking services; tailored financial solutions for government entities, municipalities, and public institutions; specialized services to facilitate secure and efficient real estate transactions and tax-deferred exchanges for title and escrow and Section 1031 exchanges; and EB-5 Program accounts for qualified foreign investors. The Company’s primary deposit products are checking, savings, and term deposit accounts, all of which are insured by the FDIC up to the maximum amounts allowed by law. These activities, together with six strategically located banking centers, generate a stable source of deposits to support the growth of our diverse loan portfolio.

Previous wording

The Company is focused on organically growing and expanding its position in the New York metropolitan area and growing its business outside of New York through growth of its New York-based customers and their businesses as they expand in other states. Through an experienced team of commercial relationship managers and its integrated, client-centric approach, the Company has grown market share by deepening existing client relationships and continually expanding its client base through referrals and the ability to offer alternatives to traditional retail banking products. The Company has converted many of its commercial lending clients into full retail relationship banking clients. Given the size of the market in which the Company operates and its differentiated approach to client service, there is significant opportunity to grow its loans and deposits. By combining high-tech service with the relationship-based focus of a community bank with an extensive suite of financial products and services, the Company is well-positioned to continue to capitalize on the significant growth opportunities available in the New York metropolitan area.

Current wording

The Company is focused on organically growing its position in the New York metropolitan area. Growth in other markets across the country is generally dependent on the business activities of our New York-based customers. Through an experienced team of commercial relationship managers and its integrated, client-centric approach, the Company has grown market share by deepening existing client relationships and continually expanding its client base through referrals and the ability to offer alternatives to traditional retail banking products. The Company has converted many of its commercial lending clients into full retail relationship banking clients. Given the size of the market in which the Company operates and its differentiated approach to client service, there is significant opportunity to grow its loans and deposits. By combining high-tech service with the relationship-based focus of a community bank with an extensive suite of financial products and services, the Company is well-positioned to continue to capitalize on the significant growth opportunities available in the New York metropolitan area and elsewhere.

Previous wording

In early 2024, following its decision to exit all consumer facing BaaS relationships, the Company decided to exit all BaaS relationships. The decision to terminate these financial service partnerships will reduce the Company’s exposure to the heightened, and evolving, regulatory standards related to these activities. This decision was supported by a careful review by the Board of Directors and management and reflected recent developments in the payments and non-bank financial service industry, regulations applicable to this business line of the Company, and a strategic assessment of the business case for the Company’s further involvement at this time. The process of closing out the Company’s relationships with BaaS clients in an orderly fashion has commenced and is expected to be completed during 2024. The Company expects minimal financial impact from the exit of this business.

Current wording

In early 2024, following its decision to exit all consumer facing BaaS relationships, the Company decided to exit all GPG BaaS relationships. The decision to terminate these financial service partnerships will reduce the Company’s exposure to the heightened, and evolving, regulatory standards related to these activities. This decision was supported by a careful review by the Board of Directors and management and reflected recent developments in the payments and non-bank financial service industry, regulations applicable to this business line of the Company, and a strategic assessment of the business case for the Company’s further involvement at this time. During 2024 the Company exited the GPG BaaS business, and only residual operational tasks remain to be completed.

Previous wording

A summary of accounting policies is provided in Note 2 to the consolidated financial statements included in this report. 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 the Company’s most critical accounting policy, which involves the most complex or subjective decisions or assessments, is as follows:

Current wording

A summary of accounting policies is provided in Note 2 to the consolidated financial statements included in this report. 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

Previous wording

The Company adopted ASC 326 effective January 1, 2023, 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. 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 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 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 the ACL will be reported in the period in which such adjustments become apparent 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

$5.8 million, or 10.0%, in the Company’s total ACL for loans and loan commitments as of December 31, 2023. 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. For further discussion of the ACL, see Part I, Item 1.,“Business—Asset Quality—Allowance for Credit Losses—Loans and Loan Commitments.”

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 $7.3 million, or 11.6%, in the Company’s total ACL for loans and loan commitments as of December 31, 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. For further discussion of the ACL, see Part I, Item 1.,“Business—Asset Quality—Allowance for Credit Losses—Loans and Loan Commitments.”

Previous wording

The Company had total assets of $7.1 billion at December 31, 2023, an increase of 12.8% from December 31, 2022.

Current wording

The Company had total assets of $7.3 billion at December 31, 2024, an increase of 3.3% from December 31, 2023.

Previous wording

Total cash and cash equivalents were $269.5 million at December 31, 2023, an increase of $12.0 million, or 4.7%, from December 31, 2022. The increase was due primarily to the $459.4 million increase in deposits and the $331.4 million of net cash provided by operations and wholesale funding, partially offset by the $789.7 million net deployment into loans.

Current wording

Total cash and cash equivalents were $200.3 million at December 31, 2024, a decrease of $69.2 million, or 25.7%, from December 31, 2023. The decrease was due primarily to an increase in the loan book of $409.3 million and an $89.0 million decrease in wholesale funding, partially offset by a $245.7 million increase in deposits and an $87.6 million decrease in receivables from the GPG exit.

Previous wording

Total securities were $932.2 million at December 31, 2023, a decrease of 2.7% from December 31, 2022. The change reflects the $108.3 million in paydowns and maturities of AFS and HTM securities, partially offset by the $71.4 million purchase of AFS and HTM securities and the $11.1 million increase in unrealized losses on AFS securities reflecting the changes in the prevailing interest rate environment.

Current wording

Total securities were $915.8 million at December 31, 2024, a decrease of 1.8% from December 31, 2023. The change reflects $92.9 million in paydowns and maturities of AFS and HTM securities, partially offset by $72.8 million of purchases of AFS securities.

Previous wording

There were $845.7 million and $25.0 million of securities pledged to support wholesale funding, and to a lesser extent certain other types of deposits, at December 31, 2023 and 2022, respectively.

Current wording

There were $750.3 million and $845.7 million of securities pledged to support wholesale funding, and to a lesser extent certain other types of deposits, of which $65.5 million and $60.0 million were encumbered, at December 31, 2024 and 2023, respectively.

Previous wording

Effective January 1, 2023, pursuant to ASC 326, the Company evaluates AFS debt securities that experienced a decline in fair value below amortized cost for credit impairment. In performing an assessment of whether any decline in fair value is due to a credit loss, the Company considers the extent to which the fair value is less than the amortized cost, changes in credit ratings, any adverse economic conditions, as well as all relevant information at the individual security level, such as credit deterioration of the issuer, explicit or implicit guarantees by the federal government or the collateral underlying the security. If it is determined that the decline in fair value was due to credit, an ACL is recorded, limited to the amount the fair value is less than the amortized cost basis. The non-credit related decrease in the fair value, such as a decline due to changes in market interest rates, is recorded in other comprehensive income, net of tax. The Company recognizes a credit impairment if the Company has the intent to sell the security, or it is more likely than not that the Bank will be required to sell the security before recovery of its amortized cost. The unrealized losses on AFS securities are primarily due to the changes in market interest rates subsequent to purchase. In addition, the Company does not intend, nor would it be required

Current wording

Effective January 1, 2023, the Company estimates and recognizes an ACL for HTM debt securities pursuant to ASC 326. The Company has a zero loss expectation for nearly all of its HTM securities portfolio, and has no ACL related to these securities. For the small portion of the HTM securities portfolio that does not have a zero loss expectation, the ACL is based on each security’s amortized cost, excluding interest receivable, and represents the portion of the amortized cost that the Company does not expect to collect over the life of the security. The ACL is determined using average industry credit ratings and related historical loss experience, and is initially recognized upon acquisition of the securities, and subsequently remeasured on a recurring basis. Obligations of U.S. State and Municipal securities were rated investment grade at December 31, 2023 and the associated ACL was immaterial. Effective January 1, 2023, pursuant to ASC 326, the Company evaluates AFS debt securities that experienced a decline in fair value below amortized cost for credit impairment. In performing an assessment of whether any decline in fair value is due to a credit loss, the Company considers the extent to which the fair value is less than the amortized cost, changes in credit ratings, any adverse economic conditions, as well as all relevant information at the individual security level, such as credit deterioration of the issuer, explicit or implicit guarantees by the federal government or the collateral underlying the security. If it is determined that the decline in fair value was due to credit, an ACL is recorded, limited to the amount the fair value is less than the amortized cost basis. The non-credit related decrease in the fair value, such as a decline due to changes in market interest rates, is recorded in other comprehensive income, net of tax. The Company recognizes a credit impairment if the Company has the intent to sell the security, or it is more likely than not that the Bank will be required to sell the security before recovery of its amortized

Previous wording

to sell, these investments until there is a full recovery of the unrealized loss, which may be at maturity. As a result, no ACL was recognized during the year ended December 31, 2023.

Current wording

cost. The unrealized losses on AFS securities are primarily due to the changes in market interest rates subsequent to purchase. In addition, the Company does not intend, nor would it be required to sell, these investments until there is a full recovery of the unrealized loss, which may be at maturity. As a result, no ACL was recognized during the year ended December 31, 2024.

Previous wording

Loans are the Company’s primary interest-earning asset.

Current wording

Loans are the Company’s primary interest-earning asset class.

Previous wording

Total loans, net of deferred fees and unamortized costs, were $5.6 billion at December 31, 2023, an increase of 16.2% from December 31, 2022. The increase was due primarily to an increase of $657.0 million in CRE loans (including owner occupied) and $142.8 million in C&I loans. For the year ended December 31, 2023, the Company’s loan production was $1.4 billion, as compared to $1.8 billion for the year ended December 31, 2022. As of December 31, 2023, total loans consisted primarily of CRE, including multi-family mortgage loans, and C&I. At December 31, 2023, 80.5% of the CRE and C&I loan portfolio was concentrated in the New York metropolitan area, mainly New York City, and Florida. At December 31, 2023, the Company’s loan portfolio includes loans to the following industries (dollars in thousands):

Current wording

Total loans, net of deferred fees and unamortized costs, were $6.0 billion at December 31, 2024, an increase of 7.3% from December 31, 2023. The increase was due primarily to an increase of $459.7 million in CRE loans (including owner occupied), partially offset by a $90.8 million decrease in multi-family loans. For the year ended December 31, 2024, the Company’s loan production was $1.3 billion, as compared to $1.4 billion for the year ended December 31, 2023. As of December 31, 2024, total loans consisted primarily of CRE, including multi-family mortgage loans, and C&I. At December 31, 2024, 80.5% of the CRE and C&I loan portfolio was concentrated in the New York metropolitan area, mainly New York City, and Florida. At December 31, 2024, the Company’s loan portfolio includes loans to the following industries (dollars in thousands):

Previous wording

The largest concentration in the loan portfolio is to the healthcare industry, which amounted to $1.8 billion, or 32.7% of total loans, at December 31, 2023, 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 $2.3 billion, or 37.3% of total loans, at December 31, 2024, including $2.1 billion in loans to skilled nursing facilities.

Previous wording

Non-performing loans increased to $51.9 million at December 31, 2023 from $24,000 at December 31, 2022, primarily due to one CRE loan that is fully secured, three multi-family loans with an aggregate ACL of $5.0 million, and two C&I loans where payment is expected in full for both loans. The table below sets forth key asset quality ratios (dollars in thousands):

Current wording

Non-performing loans decreased to $32.6 million at December 31, 2024 from $51.9 million at December 31, 2023, primarily due to one multi-family loan relationship that returned to accrual status. The table below sets forth key asset quality ratios (dollars in thousands):

Previous wording

The ACL for loans is measured on the loan’s amortized cost basis, excluding interest receivable, and is initially recognized upon origination or purchase of the loans and subsequently remeasured on a recurring basis. The ACL is recognized as a contra-asset, and credit loss expense is recorded as a provision for credit losses in the consolidated statements of operation. Loan losses are charged-off against the ACL when management believes the loan is uncollectible. Subsequent recoveries, if any, are credited to the ACL. Loans are normally placed on nonaccrual status if it is probable that the Company will be unable to collect the full payment of principal and interest when due according to the contractual terms of the loan agreement or the loan is past due for a period of 90 days or more, unless the obligation is well-secured and is in the process of collection. The Company does not recognize an ACL on accrued interest receivables, consistent with its policy to reverse interest income when interest is 90 days or more past due.

Current wording

The ACL for loans is measured on the loan’s amortized cost basis, excluding interest receivable, and is initially recognized upon origination or purchase of the loans and subsequently remeasured on a recurring basis. The ACL is recognized as a contra-asset, and credit loss expense is recorded as a provision for credit losses in the consolidated statements of operations. Loan losses are charged-off against the ACL when management believes the loan is uncollectible. Subsequent recoveries, if any, are credited to the ACL. Loans are normally placed on nonaccrual status if it is probable that the Company will be unable to collect the full payment of principal and interest when due according to the contractual terms of the loan agreement or the loan is past due for a period of 90 days or more, unless the obligation is well-secured and is in the process of collection. The Company does not recognize an ACL on accrued interest receivable, consistent with its policy to reverse interest income when interest is 90 days or more past due.

Previous wording

The ACL for loans was $58.0 million at December 31, 2023, as compared to $44.9 million at December 31, 2022. The ratio of ACL to total loans was 1.03% at December 31, 2023 compared to 0.93% at December 31, 2022. The increase in the ACL was primarily due to loan growth, a $4.8 million provision for credit losses on a single multi-family loan and the adoption of ASC 326.

Current wording

The ACL for loans was $63.3 million at December 31, 2024, as compared to $58.0 million at December 31, 2023. The ratio of ACL to total loans was 1.05% at December 31, 2024 compared to 1.03% at December 31, 2023. The increase in the ACL was primarily due to loan growth and a provision related to a single C&I loan.

Previous wording

The Company also records an ACL on unfunded loan commitments, which is based on the same assumptions as funded loans and also considers the probability of funding. The ACL is recognized as a liability, and credit loss expense is recorded as a provision for unfunded loan commitments within the provision for credit losses in the consolidated statements of operation. Upon funding of the loan, any related ACL previously recorded on the unfunded amount is reversed and an ACL is subsequently recognized on the outstanding loan. The ACL for loan commitments was $1.2 million at December 31, 2023, as compared to $180,000 at December 31, 2022.

Current wording

The Company also records an ACL on unfunded loan commitments, which is based on the same assumptions as funded loans and also considers the probability of funding. The ACL is recognized as a liability, and credit loss expense is recorded as a provision for unfunded loan commitments within the provision for credit losses in the consolidated statements of operations. Upon funding of the loan, any related ACL previously recorded on the unfunded amount is reversed and an ACL is subsequently recognized on the outstanding loan. The ACL for loan commitments was $2.0 million at December 31, 2024, as compared to $1.2 million at December 31, 2023.

Previous wording

Total deposits were $5.7 billion at December 31, 2023, an increase of $459.4 million, or 8.7%, from December 31, 2022. The increase in deposits from December 31, 2022, was due primarily to an increase of $749.2 million in retail deposits and $229.1 million in EB-5 Program, Title and Escrow and Charter School deposits, partially offset by the $491.0 million decrease in crypto-related deposits. Non-interest-bearing demand deposits were 32.0% of total deposits at December 31, 2023, compared to 45.9% at December 31, 2022. The decreases in crypto-related deposits and the percentage of non-interest-bearing demand deposits to total deposits reflects the Company’s full exit from the digital currency business in 2023.

Current wording

Total deposits were $6.0 billion at December 31, 2024, an increase of $245.7 million, or 4.3%, from December 31, 2023. The increase in deposits from December 31, 2023, was due primarily to an increase of $934.7 million spread across most of the Bank’s various deposit verticals, partially offset by a $689.0 million decrease in GPG deposits due to the completion of the GPG exit. Non-interest-bearing demand deposits were 22.3% of total deposits at December 31, 2024, compared to 32.0% at December 31, 2023.

Previous wording

The tables below summarize the Company’s deposit composition by segment for the periods indicated, and the dollar and percent change from December 31, 2022 to December 31, 2023 (dollars in thousands):

Current wording

The tables below summarize the Company’s deposit composition by segment for the periods indicated (dollars in thousands):

Previous wording

At December 31, 2023, the aggregate amount of FDIC uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $1.6 billion. In addition, as of December 31, 2023, the

Current wording

At December 31, 2024, the estimated aggregate amount of FDIC uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $1.6 billion. In addition, as of

Previous wording

aggregate amount of the Company’s uninsured time deposits was $21.2 million. The following are scheduled maturities of time deposits greater than $250,000 as of December 31, 2023 (in thousands):

Current wording

December 31, 2024, the estimated aggregate amount of the Company’s uninsured time deposits was $26.2 million. The following are scheduled maturities of time deposits greater than $250,000 as of December 31, 2024 (in thousands):

Previous wording

To support a more efficient balance sheet, particularly related to the decrease in deposits related to the exit from the digital currency business, the Company may at times utilize wholesale funding, which at December 31, 2023, was comprised of $99.0 million of Federal funds purchased and $440.0 million of FHLBNY advances. At December 31, 2022, the Company had $150.0 million of Federal funds purchased and $100.0 million of FHLBNY advances. The Company had $2.8 billion and $1.9 billion of available secured wholesale funding capacity at December 31, 2023 and 2022, respectively.

Current wording

To support the balance sheet, the Company may at times utilize FHLB advances or other funding sources. At December 31, 2024, the Company had $210.0 million of Federal funds purchased and $240.0 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. The Company had cash on deposit with the FRBNY and available secured wholesale funding borrowing capacity of $ 2.9 billion and $3.1 billion, respectively, at December 31, 2024 and 2023, respectively.

Previous wording

On December 7, 2005, the Company established MetBank Capital Trust I, a Delaware statutory trust (“Trust I”). The Company owns all of the common stock of Trust I in exchange for contributed capital of $310,000. Trust I issued $10.0 million of preferred capital securities to investors in a private transaction and invested the proceeds, combined with the proceeds from the sale of Trust I’s common capital securities, in the Company through the purchase of $10.3 million aggregate principal amount of Floating Rate Junior Subordinated Debentures (the “Debentures”) issued by the Company. The Debentures, the sole assets of Trust I, mature on December 9, 2035 and bear interest at a floating rate of three-month SOFR plus 1.85%. The Debentures are callable at any time. At December 31, 2023, the Debentures bore an interest rate of 7.51%.

Current wording

On December 7, 2005, the Company established MetBank Capital Trust I, a Delaware statutory trust (“Trust I”). The Company owns all of the common stock of Trust I in exchange for contributed capital of $310,000. Trust I issued $10.0 million of preferred capital securities to investors in a private transaction and invested the proceeds, combined with the proceeds from the sale of Trust I’s common capital securities, in the Company through the purchase of $10.3 million aggregate principal amount of Floating Rate Junior Subordinated Debentures (the “Debentures”) issued by the Company. The Debentures, the sole assets of Trust I, mature on December 9, 2035 and bear interest at a floating rate of three-month SOFR plus 1.85%. The Debentures are callable at any time. At December 31, 2024, the Debentures bore an interest rate of 6.77%.

Previous wording

On July 14, 2006, the Company established MetBank Capital Trust II, a Delaware statutory trust (“Trust II”). The Company owns all of the common stock of Trust II in exchange for contributed capital of $310,000. Trust II issued $10.0 million of preferred capital securities to investors in a private transaction and invested the proceeds, combined with the proceeds from the sale of Trust II’s common capital securities, in the Company through the purchase of $10.3 million aggregate principal amount of Floating Rate Junior Subordinated Debentures (the “Debentures II”) issued by the Company. The Debentures II, the sole assets of Trust II, mature on October 7, 2036, and bear interest at a floating rate of three-month SOFR plus 2.00%. The Debentures II are callable at any time. At December 31, 2023, the Debentures II bore an interest rate of 7.66%.

Current wording

On July 14, 2006, the Company established MetBank Capital Trust II, a Delaware statutory trust (“Trust II”). The Company owns all of the common stock of Trust II in exchange for contributed capital of $310,000. Trust II issued $10.0 million of preferred capital securities to investors in a private transaction and invested the proceeds, combined with the proceeds from the sale of Trust II’s common capital securities, in the Company through the purchase of $10.3 million aggregate principal amount of Floating Rate Junior Subordinated Debentures (the “Debentures II”) issued by the Company. The Debentures II, the sole assets of Trust II, mature on October 7, 2036, and bear interest at a floating rate of three-month SOFR plus 2.00%. The Debentures II are callable at any time. At December 31, 2024, the Debentures II bore an interest rate of 6.92%.

Previous wording

The Company has loan participation agreements with counterparties. The Company is generally the servicer for these loans. If the transfer of the participation interest does not qualify for sale treatment under GAAP, the amount of the loan transferred is recorded as a secured borrowing. There were $7.6 million and $7.7 million in secured borrowings as of December 31, 2023 and 2022, respectively.

Current wording

The Company has loan participation agreements with certain counterparties. The Company is generally the servicer for these loans. If the transfer of the participation interest does not qualify for sale treatment under GAAP, the amount of the loan transferred is recorded as a secured borrowing. There were $7.4 million and $7.6 million in secured borrowings as of December 31, 2024 and 2023, respectively.

Previous wording

The following table presents the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). For purposes of

Current wording

The following table presents the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume (in thousands).

Previous wording

Total cost of funds for 2023 was 265 basis points compared to 53 basis points for 2022, which reflects the increase in prevailing interest rates and the shift from non-interest bearing deposits to interest bearing funding primarily related to the final exit from the digital currency business in 2023.

Current wording

Total cost of funds for 2024 was 332 basis points compared to 265 basis points for 2023, which reflects the relatively high short-term interest rates in the earlier part of the year, the intense competition for deposits, and a shift from non-interest bearing deposits to interest bearing funding primarily related to the GPG exit.

Previous wording

Interest income increased by $114.7 million to $375.4 million for 2023, as compared to $260.7 million for 2022. The increase from the prior year was due primarily to the $786.2 million increase in the average balance of loans, and the 138 basis point increase in average yield for loans. The increase in average yields on loans reflects the increase in prevailing interest rates on existing floating rate loans, as well as higher yields on new loan production.

Current wording

Interest income increased by $93.0 million to $468.4 million for 2024, as compared to $375.4 million for 2023. The increase from the prior year was due primarily to the $694.9 million increase in the average balance of loans, and the 66 basis point increase in the average yield for loans. The increase in average yields on loans reflects the increase in prevailing market interest rates on existing floating rate loans, as well as higher yields on new loan production.

Previous wording

Interest expense increased by $121.0 million to $152.6 million for 2023, as compared to $31.6 million for 2022. The increase from the prior year was due primarily to the 212 basis point increase in total cost of funds and the shift from non-interest bearing deposits to interest bearing funding primarily related to the exit from the digital currency business in 2023.

Current wording

Interest expense increased by $62.7 million to $215.3 million for 2024, as compared to $152.6 million for 2023. The increase from the prior year was due primarily to the 67 basis point increase in total cost of funds that reflects the relatively high short-term interest rates in the earlier part of the year, the intense competition for deposits, and a shift from non-interest bearing deposits to interest bearing funding primarily related to the GPG exit.

Previous wording

The effective tax rate for 2023 was 27.7% compared to 38.7% for 2022, which reflects a discrete tax item related to the exercise of stock options in 2023 and the $5.5 million reversal of the regulatory settlement reserve in 2023. The elevated effective tax rate for the year 2022 reflects the recording of the $35.0 million regulatory settlement reserve and other discrete tax items.

Current wording

The effective tax rate for 2024 was 31.3% compared to 27.7% for 2023. The effective tax rate for the prior year reflects a discrete tax item related to the exercise of stock options in the third quarter of 2023 and the reversal of the regulatory settlement reserve in that year.

Previous wording

Liquidity is the ability to economically meet current and future financial obligations. The Company’s primary sources of funds consist of deposit inflows, loan repayments and maturities, securities cash flows and borrowings. While maturities and scheduled amortization of loans and securities and borrowings are predictable sources of funds, deposit flows, mortgage prepayments and securities sales are greatly influenced by the general level of interest rates and changes thereto, economic conditions and competition.

Current wording

Liquidity is the ability to economically meet current and future financial obligations. The Company’s primary sources of funds consist of deposit inflows, loan repayments and maturities, securities cash flows and borrowings. While maturities and scheduled amortization of loans and securities and borrowings are predictable sources of funds, deposit flows, mortgage prepayments and securities sales may be greatly influenced by the general level of interest rates and changes thereto, economic conditions and competition.

Previous wording

The Company’s most liquid assets are cash and cash equivalents. The levels of these assets are dependent on the Company’s operating, financing, lending, and investing activities during any given period. At December 31, 2023 and 2022, cash and cash equivalents totaled $269.5 million and $257.4 million, respectively. Securities classified as AFS, which provide additional sources of liquidity, totaled $461.2 million at December 31, 2023 and $445.7 million at December 31, 2022. There were $845.7 million and $25.0 million of securities pledged to support wholesale funding, and to a lesser extent certain other types of deposits, at December 31, 2023 and 2022, respectively.

Current wording

The Company’s most liquid assets are cash and cash equivalents. The levels of these assets are dependent on the Company’s operating, financing, lending, and investing activities during any given period. At December 31, 2024 and 2023, cash and cash equivalents totaled $200.3 million and $269.5 million, respectively. Securities classified as AFS, which provide additional sources of liquidity, totaled $482.1 million at December 31, 2024 and $461.2 million at December 31, 2023. At December 31, 2024 there were $750.3 million of securities pledged to support wholesale funding, and to a lesser extent certain other types of deposits, of which $65.5 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

At December 31, 2023, the Company had $99.0 million of Federal funds purchased and $440.0 million of FHLBNY advances. At December 31, 2023, the Company had cash on deposit with the Federal Reserve Bank of New York and available secured wholesale funding borrowing capacity of $3.1 billion.

Current wording

At December 31, 2024, the Company had $210.0 million of Federal funds purchased and $240.0 million of FHLBNY advances. At December 31, 2024, the Company had cash on deposit with the FRBNY and available secured wholesale funding borrowing capacity of $2.9 billion.

Previous wording

Time deposits due within one year as of December 31, 2023 totaled $31.8 million, or 0.6% of total deposits. Total time deposits were $35.4 million, or 0.6% of total deposits, at December 31, 2023.

Current wording

Time deposits due within one year as of December 31, 2024 totaled $118.1 million, or 2.0% of total deposits. Total time deposits were $125.4 million, or 2.1% of total deposits, at December 31, 2024.

Previous wording

The Company’s primary investing activities are the origination, and to a lesser extent, purchase of loans and securities. The Company originated $1.4 billion and $1.8 billion of loans during the years ended December 31, 2023 and 2022, respectively. During the year ended December 31, 2023, the Company purchased $46.8 million and $24.6 million of AFS and HTM securities, respectively. During the year ended December 31, 2022, the Company purchased $33.8 million and $173.6 million of AFS and HTM securities, respectively.

Current wording

The Company’s primary investing activities are the origination, and to a lesser extent, purchase of loans and securities. The Company originated $1.3 billion and $1.4 billion of loans during the years ended December 31, 2024 and 2023, respectively. During the year ended December 31, 2024, the Company purchased $72.8 million of AFS securities. During the year ended December 31, 2023, the Company purchased $46.8 million and $24.6 million of AFS and HTM securities, respectively.

Previous wording

Financing activities consist 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 $5.7 billion at December 31, 2023, an increase of $459.4 million, or 8.7%, from December 31, 2022.

Current wording

Financing activities consist 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 $6.0 billion at December 31, 2024, an increase of $245.7 million, or 4.3%, from December 31, 2023.