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 (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.

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 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’s primary market includes the New York metropolitan area, specifically Manhattan and the outer boroughs, and Nassau County, New York. This market is well-diversified and represents a large market for middle market businesses (defined as businesses with annual revenue of $5 million to $400 million). The Company’s market area has a diversified economy typical of most urban population centers, with the majority of employment provided by services, wholesale/retail trade, finance/insurance/real estate, technology companies and construction. A relationship-led strategy has provided the Company with select opportunities in other U.S. markets, with a particular focus on South Florida.

Current wording

The Company’s primary market includes the New York metropolitan area, specifically Manhattan and the outer boroughs, and Nassau County, New York. This market is well-diversified and represents a large market for middle market businesses (defined as businesses with annual revenue of $5 million to $400 million). The Company’s market area has a diversified economy with the majority of employment provided by services, wholesale/retail trade, finance/insurance/real estate, technology companies and construction. A relationship-led strategy has provided the Company with select opportunities in other U.S. markets, with a particular focus on South Florida.

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. 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

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.

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 the Company’s 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 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

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

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 $6.8 million, or 10.9%, in the Company’s total ACL for loans and loan commitments as of September 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.

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 $6.7 million, or 9.9%, in the Company’s total ACL for loans and loan commitments as of March 31, 2025. 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 $7.4 billion at September 30, 2024, an increase of $335.7 million, or 4.7%, from December 31, 2023.

Current wording

The Company had total assets of $7.6 billion at March 31, 2025, an increase of $315.5 million, or 4.3%, from December 31, 2024.

Previous wording

Total cash and cash equivalents were $318.5 million at September 30, 2024, an increase of $49.0 million, or 18.2%, from December 31, 2023. The increase primarily reflects the $532.6 million increase in deposits, partially offset by the $289.1 million decrease in wholesale funding and the $272.3 million net deployment into loans.

Current wording

Total cash and cash equivalents were $196.5 million at March 31, 2025, a decrease of $3.8 million, or 1.9%, from December 31, 2024. The decrease from December 31, 2024 primarily reflects an increase in the loan book of $308.0 million and a $165.0 million decrease in wholesale funding, partially offset by an increase of $466.3 million in deposits.

Previous wording

Total securities were $954.6 million at September 30, 2024, an increase of $22.4 million, or 2.4%, from December 31, 2023. The increase was primarily due to the purchase of $72.8 million of AFS securities, and the $19.1 million unrealized gain on AFS securities during the third quarter of 2024, partially offset by the $68.1 million paydown and maturities of AFS and HTM securities.

Current wording

Total securities were $927.7 million at March 31, 2025, an increase of $12.0 million, or 1.3%, from December 31, 2024. The increase was primarily due to the purchase of $44.3 million of AFS securities, and the $10.0 million unrealized gain on AFS securities during the first quarter of 2025, partially offset by the $42.3 million paydown and maturities of AFS and HTM securities.

Previous wording

Total loans, net of deferred fees and unamortized costs, were $5.9 billion at September 30, 2024, an increase of $272.3 million, or 4.8%, from December 31, 2023. The increase in total loans was due primarily to an increase of $315.1 million in CRE loans (including owner-occupied) and $41.9 million in one-to four-family loans, partially offset by a $123.4 million decrease in multi-family loans. At September 30, 2024, 79.9% 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 $6.3 billion at March 31, 2025, an increase of $308.0 million, or 5.1%, from December 31, 2024. The increase in total loans from December 31, 2024 was due primarily to an increase of $278.0 million in CRE loans (including owner-occupied). For the three months ended March 31, 2025, the Company’s loan production was $409.8 million as compared to $269.6 million for the three months ended March 31, 2024. At March 31, 2025, 76.8% of the CRE and C&I loan portfolio was 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 $2.1 billion, or 36.3% of total loans, at September 30, 2024, including $2.0 billion in loans to skilled nursing facilities.

Current wording

The largest concentration in the loan portfolio is to the healthcare industry, which amounted to $2.5 billion, or 38.9% of total loans, at March 31, 2025, including $2.4 billion in loans to skilled nursing facilities.

Previous wording

Non-performing loans declined to $31.0 million at September 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):

Current wording

Non-performing loans increased to $34.5 million at March 31, 2025 compared to $32.6 million at December 31, 2024 primarily due to a single unsecured C&I loan. The table below sets forth key asset quality ratios (dollars in thousands):

Previous wording

The ACL was $62.5 million at September 30, 2024, as compared to $58.0 million at December 31, 2023. The Company recorded a $4.8 million provision for credit losses for the nine months ended September 30, 2024, which reflects loan growth, a provision related to a single C&I loan, and a modest increase in the duration of the Company’s loan portfolio.

Current wording

The ACL was $67.8 million at March 31, 2025, as compared to $63.3 million at December 31, 2024. The Company recorded a $4.5 million provision for credit losses for the three months ended March 31, 2025, which primarily reflects loan growth and a provision related to a single unsecured C&I loan.

Previous wording

Total deposits were $6.3 billion at September 30, 2024, an increase of $532.6 million, or 9.3%, 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 28.4% of total deposits at September 30, 2024, compared to 32.0% at December 31, 2023.

Current wording

Total deposits were $6.4 billion at March 31, 2025, an increase of $466.3 million, or 7.8%, from December 31, 2024. The increase from December 31, 2024 was due primarily to increases across most of the Company’s various deposit verticals. Non-interest-bearing demand deposits were 21.5% of total deposits at March 31, 2025, compared to 22.3% at December 31, 2024.

Previous wording

At September 30, 2024, the aggregate estimated amount of FDIC uninsured deposits was $1.6 billion, and the aggregate estimated amount of uninsured time deposits was $20.6 million. The following table presents the scheduled maturities of time deposits greater than $250,000 (in thousands):

Current wording

At March 31, 2025, the aggregate estimated amount of FDIC uninsured deposits was $1.7 billion, and the aggregate estimated amount of uninsured time deposits was $26.5 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 September 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.

Current wording

To support the balance sheet, the Company may at times utilize FHLB advances or other funding sources. At March 31, 2025, the Company had $125.0 million of Federal funds purchased and $160.0 million of FHLBNY advances. At December 31, 2024, the Company had $210.0 million of Federal funds purchased and $240.0 million of FHLBNY advances.

Previous wording

Accumulated other comprehensive loss, net of tax, was $44.1 million at September 30, 2024, a decrease of $8.8 million from December 31, 2023. The decrease from December 31, 2023 was primarily due to unrealized gains on AFS securities, as a result of changes in prevailing interest rates, partially offset by net unrealized losses on outstanding cash flow hedges.

Current wording

Accumulated other comprehensive loss, net of tax, was $47.2 million at March 31, 2025, a decrease of $6.0 million from December 31, 2024. The decrease from December 31, 2024 was primarily due to unrealized gains on AFS securities, as a result of changes in prevailing market interest rates.

Previous wording

Net interest margin for the third quarter of 2024 was 3.62% compared to 3.27% for the third quarter of 2023. The 35 basis point increase was due primarily to an increase in the average balance of loans, an increase in the yield for loans, elevated prepayment penalties and deferred fee recognition as a result of an increased level of loan payoffs, and a decrease in the average balance of borrowed funds, partially offset by an increase in the average balance of deposits and an increase in the cost of funds.

Current wording

Net interest margin for the first quarter of 2025 was 3.68% compared to 3.40% for the first quarter of 2024. The 28 basis point increase was due primarily to an increase in the average balance of loans and a decrease in the cost of funds due to a reduction in short-term interest rates, partially offset by a decrease in the average balance of overnight deposits held at the FRB and by an increase in the average balance of deposits.

Previous wording

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its clients. These financial instruments include commitments to extend credit, which involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. Exposure to credit loss is represented by the contractual amount of the instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments.

Current wording

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, which involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. Exposure to credit loss is represented by the contractual amount of the instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments.

Previous wording

At September 30, 2024, the Company had $611.9 million in unused loan commitments and $36.6 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 March 31, 2025, the Company had $685.4 million in unused loan commitments and $29.0 million in standby and commercial letters of credit. At December 31, 2024, the Company had $695.4 million in unused commitments and $31.9 million in standby and commercial letters of credit.

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, securities, and borrowings are predictable sources of funds, deposit flows, mortgage prepayments and securities cash flows 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 its operating, financing, lending and investing activities during any given period. At September 30, 2024 and December 31, 2023, cash and cash equivalents totaled $318.5 million and $269.5 million, respectively. Securities, which provide an additional source of liquidity, totaled $954.6 million at September 30, 2024 and $932.2 million at December 31, 2023. At September 30, 2024, there were $782.6 million of securities pledged to support wholesale funding, and to a lesser extent certain other types of deposits, of which $172.7 million were encumbered. At December 31, 2023, there were $845.7

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 March 31, 2025 and December 31, 2024, cash and cash equivalents totaled $196.5 million and $200.3 million, respectively. Securities classified as AFS, which provide an additional source of liquidity, totaled $523.5 million at March 31, 2025 and $482.1 million at December 31, 2024. At March 31, 2025, there were $761.7 million of securities pledged to support wholesale funding, and to a lesser extent certain other types of deposits, of which $60.7 million were encumbered. 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.

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 and nine months ended September 30, 2024, the Company’s loan production was $460.6 million and $1.0 billion as compared to $333.5 million and $1.0 billion, respectively, for the three and nine months ended September 30, 2023.

Current wording

The Company’s primary investing activities are the origination and to a lesser extent, purchase of loans and securities. The Company originated $409.8 million and $269.6 million of loans during the three months ended March 31, 2025 and 2024, respectively. During the three months ended March 31, 2025, the Company purchased $44.3 million of AFS securities. During the three months ended March 31, 2024, the Company purchased $53.3 million of AFS securities.

Previous 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 base for funds. Total deposits were $6.3 billion at September 30, 2024, an increase of $532.6 million, or 9.3%, 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 base for funds. Total deposits were $6.4 billion at March 31, 2025, an increase of $466.3 million, or 7.8%, from December 31, 2024.

Previous wording

At September 30, 2024, interest-bearing deposits were comprised of $4.4 billion of money market accounts and $89.4 million of time deposits. Time deposits due within one year of September 30, 2024 totaled $73.5 million, or 1.2%, of total deposits. At September 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 December 31, 2023 totaled $31.8 million or 0.6% of total deposits. Non-interest-bearing deposits were 28.4% of total deposits at September 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.

Current wording

At March 31, 2025, interest-bearing deposits were comprised of $4.9 billion of money market accounts and $133.9 million of time deposits. Time deposits due within one year of March 31, 2025 totaled $126.6 million, or 2.0%, of total deposits. At March 31, 2025, the aggregate estimated amount of FDIC uninsured deposits was $1.7 billion. At December 31, 2024, interest-bearing deposits were comprised of $4.5 billion of money market accounts and $125.4 million of time deposits. Time deposits due within one year December 31, 2024 totaled $118.1 million or 2.0% of total deposits. Non-interest-bearing deposits were 21.5% of total deposits at March 31, 2025, as compared to 22.3% at December 31, 2024. At December 31, 2024, the aggregate estimated amount of FDIC uninsured deposits was $1.6 billion.

Previous 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 September 30, 2024, the Company had $150.0 million of outstanding FHLBNY advances and a $100.0 million FRB term loan under the BTFP. At September 30, 2024 and 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

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. At March 31, 2025, the Company had $125.0 million of Federal funds purchased and $160.0 million of FHLBNY advances. At December 31, 2024, the Company had $210.0 million of Federal funds purchased and $240.0 million of FHLBNY advances. At March 31, 2025 and 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

At September 30, 2024 and December 31, 2023, total non-owner-occupied CRE loans were 353.3% and 368.1% of risk-based capital, respectively.

Current wording

At March 31, 2025 and December 31, 2024, total non-owner-occupied CRE loans were 367.0% and 346.1% of risk-based capital, respectively. The increased CRE concentration ratio is primarily the result of the Bank funding the share repurchase program at the holding company.