8-K
Metropolitan Bank Holding Corp. (MCB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 21, 2020
METROPOLITAN BANK HOLDING CORP.
(Exact name of the registrant as specified in its charter)
| New York | 001-38282 | 13-4042724 |
|---|---|---|
| (State or other jurisdiction of<br><br> <br>incorporation or organization) | (Commission File Number) | (IRS Employer<br><br> <br>Identification No.) |
| 99 Park Avenue | 10016 | |
| --- | --- | |
| New York, New York | (Zip Code) | |
| (Address of principal executive offices) |
(212) 659-0600
(Registrant’s telephone number)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
|---|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c) | |
| Title of each class | Trading<br><br> <br>Symbol(s) | Name of each exchange on which registered |
| --- | --- | --- |
| Common Stock, par value $0.01 per share | MCB | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On October 21, 2020, Metropolitan Bank Holding Corp. (the “Company”), the holding company for Metropolitan Commercial Bank, issued a press release announcing its financial results for the three and nine months ended September 30, 2020. The press release containing the financial results is attached hereto as Exhibit 99.1 and shall not be deemed “filed” for any purpose, nor shall the information or Exhibit 99.1 be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended.
Item 7.01 Regulation FD Disclosure
The Company has also made available on its website presentation materials containing additional information about the Company’s financial results for the three and nine months ended September 30, 2020 (the “Presentation Materials”). The Presentation Materials are furnished herewith as Exhibit 99.2 and is incorporated by reference in this Item 7.01.
The information provided in Item 7.01 of this report, including Exhibit 99.2, shall not be deemed “filed” for any purpose, nor shall the information or Exhibit 99.2 be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated October 21, 2020 |
| 99.2 | Presentation Materials |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| METROPOLITAN BANK HOLDING CORP. | ||
|---|---|---|
| Dated: October 21, 2020 | By: | /s/ Gregory A. Sigrist |
| Gregory A. Sigrist | ||
| Executive Vice President and Chief Financial Officer |
EXHIBIT 99.1
Release: 4:30 P.M. October 21, 2020
Contact: Investor Relations Department
212-365-6721
IR@MetropolitanBankNY.com
Metropolitan Bank Holding Corp. Reports Net Income of $10.8 Million
And Diluted EPS of $1.27 for the Third Quarter
NEW YORK, October 21, 2020 – Metropolitan Bank Holding Corp. (the “Company”) (NYSE: MCB), the holding company for Metropolitan Commercial Bank (the “Bank”), today reported net income of $10.8 million, or $1.27 per diluted common share, for the third quarter of 2020, as compared to net income of $7.7 million, or $0.90 per diluted common share, for the third quarter of 2019.
For the nine months ended September 30, 2020, the Company reported net income of $27.7 million, or $3.27 per diluted common share, as compared to $22.3 million, or $2.63 per diluted common share, for the nine months ended September 30, 2019.
Financial Highlights for the third quarter of 2020 include:
| • | Annualized return on average assets was 1.07% and 0.98% for the three and nine months ended September 30, 2020, respectively. |
|---|---|
| • | Return on average equity was 13.20% for the third quarter of 2020, an increase of 257 basis points from the third quarter of 2019. Return on<br> average tangible common equity* was 13.85% for the third quarter of 2020, an increase of 259 basis points from the third quarter of 2019. |
| --- | --- |
| • | Net interest margin held steady at 3.18% for the third quarter of 2020, as compared to 3.19% for the linked quarter. |
| --- | --- |
| • | Total assets increased 19.2% to $4.00 billion as of September 30, 2020, as compared to $3.36 billion at December 31, 2019, with net loan growth<br> of 11.7% since December 31, 2019. |
| --- | --- |
| • | Total deposits increased 3.9% during the quarter, and 26.4% from December 31, 2019. |
| --- | --- |
| • | Asset quality continued to be strong with non-performing loans as a percentage of loans outstanding declining by 7 basis points to 22 basis<br> points at September 30, 2020, as compared to 29 basis points at June 30, 2020. Net charge-offs as a percentage of average loans were 2 basis points year-to-date through September 30, 2020. |
| --- | --- |
| • | Total loan modifications related to COVID-19 decreased by 37.5% in the quarter, to $329.9 million at September 30, 2020. The largest decrease in<br> modifications were in full payment deferrals, which declined by 43.0% in the quarter principally due to loans returning to normal payment terms. |
| --- | --- |
* Average tangible common equity excludes Class B preferred stock and intangible assets. See Reconciliation of Non-GAAP Measures on page 16
Mark R. DeFazio, the Company’s President and Chief Executive Officer commented “I am very pleased with the sustained performance of MCB. During an extraordinary time, MCB is successfully navigating the challenges facing the industry and our clients. This positive performance is a testament to our skilled underwriting, strong relationships and the resilience of our clients. MCB continues to benefit from the diversification of our organic loan and deposit platform. We have built a durable platform that continues to deliver strong financial results despite low rates and a flat yield curve. We accomplish this by staying extremely focused on costs and operating our highly efficient franchise, while pricing loans appropriately and maintaining attractive deposit costs.
“In addition, I am pleased to report the Bank’s Global Payments Group continues to expand its payment solutions footprint with additional FinTech clients. As a provider of critical financial infrastructure to FinTechs, MCB will continue to benefit from incremental non-interest income and low-cost deposits, which will further improve our positioning.
“Lastly, I want to express my deepest appreciation for our staff who, while dealing with their own personal challenges with COVID-19, have ensured that the Bank continues to support our clients and build on our profitable growth,” Mr. DeFazio concluded.
Balance Sheet
The Company had total assets of $4.00 billion at September 30, 2020, an increase of 19.2% from December 31, 2019. Total loans increased to $2.99 billion at September 30, 2020, as compared to $2.89 billion and $2.67 billion at June 30, 2020 and December 31, 2019, respectively. The increase from June 30, 2020 primarily included net increases of $23.2 million in CRE loans and $83.8 million in C&I loans, partially offset by paydowns and amortization of $9.5 million in 1-4 Family and Consumer loans. The increase from December 31, 2019 primarily included net increases of $277.1 million in CRE loans and $79.4 million in C&I loans, partially offset by paydowns and amortization of $39.6 million in 1-4 Family and Consumer loans. For the three and nine months ended September 30, 2020, the Bank’s loan production was $183.3 million and $513.2 million, respectively, as compared to $267.7 million and $839.7 million for the three and nine months ended September 30, 2019, respectively.
Total cash and cash equivalents were $767.9 million at September 30, 2020, an increase of 97.3% from December 31, 2019. The increases in cash and cash equivalents reflect the strong growth in deposits of $736.9 million that exceeded growth in loans of $316.6 million for the nine months ended September 30, 2020. Total securities, primarily those classified as available-for-sale (“AFS”), were $187.7 million at September 30, 2020, a decrease of 22.1% from December 31, 2019. AFS securities decreased primarily due to sales of $108.1 million, calls of $30.0 million and maturities and paydowns of $43.0 million, partially offset by purchases of $127.7 million.
Total deposits increased to $3.53 billion at September 30, 2020, up 3.9% and 26.4%, respectively, as compared to $3.39 billion and $2.79 billion at June 30, 2020 and December 31, 2019. The increase in deposits for the third quarter of 2020 over June 30, 2020 was due to increases of $26.8 million in non-interest-bearing deposits and $106.1 million in interest-bearing deposits. The growth primarily derived from retail deposits from lending customers as well as property management accounts and debit card programs. The year-to-date increase in deposits was due to increases of $274.1 million in interest-bearing deposits to $1.97 billion at September 30, 2020, as compared to $1.70 billion at December 31, 2019, and $462.8 million in non-interest-bearing deposits to $1.55 billion at September 30, 2020, as compared to $1.09 billion at December 31, 2019. The increase in deposits was primarily due to growth in bankruptcy and property management accounts, as well as deposit growth in the Bank’s retail network. Non-interest-bearing deposits were 44.0% of total deposits at September 30, 2020, as compared to 39.0% at December 31, 2019.
During the third quarter of 2020, the Bank repaid $104.0 million of Federal Home Loan Bank Advances with a weighted-average cost of funds of 2.09%.
Metropolitan Commercial Bank meets all the requirements to be considered “Well-Capitalized” under applicable regulatory guidelines. At September 30, 2020, total non-owner-occupied commercial real estate loans were 417.3% of risk-based capital, as compared to 412.5% at December 31, 2019.
Income Statement
Net Interest Income
Net interest income for the third quarter of 2020 was $32.3 million, an increase of $2.2 million from the linked quarter. This increase was primarily due to the higher average balance of $4.00 billion in interest-earning assets for the third quarter of 2020, which increased $217.3 million from the linked quarter.
New loans were originated at lower yields, while deposits in the third quarter bore lower interest rates resulting in lower average yields as well as lower cost of interest-bearing liabilities for the third quarter of 2020, as compared to the linked quarter.
Net Interest Margin
Net interest margin held steady at 3.18% for the third quarter of 2020, as compared to 3.19% for the linked quarter. Though the quarter to quarter impact was modest, lower costs of funds on deposits was largely offset by lower yield on interest-earning assets given mix shift toward lower-yielding securities and overnight deposits as the Bank’s available liquidity increased in the quarter. Securities available for sale and overnight deposits yielded 1.26% and 0.14%, respectively, for the third quarter of 2020, as compared to 1.73% and 0.19%, respectively, for the second quarter of 2020.
Non-Interest Income
Non-interest income was $3.6 million for the third quarter of 2020, a decrease of $2.0 from the linked quarter. This decrease was due primarily to a $2.3 million gain on sale of securities recognized in the second quarter of 2020.
Non-Interest Expense
Non-interest expense was $18.9 million for the third quarter of 2020, an increase of $646,000 from the linked quarter. The increase, as explained below, was primarily due to increases in Bank premises and equipment, professional fees and other expenses, offset by a decrease in licensing fees and technology costs.
Bank premises and equipment was $2.1 million for the third quarter of 2020, an increase of $224,000 from the linked quarter, primarily due to moving expenses and disposals of furniture related to the Company taking possession of new space at its headquarters in 99 Park Ave., New York, NY in July 2020.
Professional fees were $1.2 million for the third quarter of 2020, an increase of $339,000 from the linked quarter, principally due to increased legal and consulting fees.
Other expenses were $2.7 million for the third quarter of 2020, an increase of $697,000 from the linked quarter, driven largely by regulatory premiums and certain business-related reserves.
Licensing fees and technology costs amounted to $3.0 million for the third quarter of 2020, a decrease of $500,000 from the linked quarter. This decrease was primarily due a decrease in licensing fees related to certain corporate cash management deposits, offset by an increase in technology costs. Licensing fees amounted to $2.0 million, a decrease of $617,000 for the third quarter of 2020 from the linked quarter, which is primarily due to lower average balances of deposits related to these fees for the third quarter of 2020, as compared to second quarter of 2020. Technology cost
was $941,000 for the third quarter of 2020, an increase of $117,000 from the linked quarter and attributable to the continued growth of the Company and its technology needs.
Non-interest expense was $56.7 million for the nine months ended September 30, 2020, an increase of $13.8 million from the nine months ended September 30, 2019. The increase, as described below, was primarily due to increases in compensation and benefits cost, licensing fees and technology costs, and Bank premises and equipment costs.
Compensation and benefits were $30.0 million for the nine months ended September 30, 2020, an increase of $6.7 million over the nine months ended September 30, 2019. This increase was due to year-on-year increase in the number of full-time employees, as well as growth in total compensation in line with year-on-year loan growth and revenue generation for the nine months ended September 30, 2020 from September 30, 2019.
For the nine months ended September 30, 2020, licensing fees and technology costs was $10.2 million, an increase of $2.7 million over the nine months ended September 30, 2019. This increase was primarily due to increases in licensing fees related to certain corporate cash management deposits and technology costs. Licensing fees amounted to $7.7 million for the nine months ended September 30, 2020, an increase of $2.0 million over the nine months ended September 30, 2019. Average corporate cash management deposits related to these licensing fees amounted to $777.4 million for the nine months ended September 30, 2020, as compared to $324.0 million for the nine months ended September 30, 2019, primarily due to an increase in bankruptcy deposit accounts. Technology costs were $2.5 million for the nine months ended September 30, 2020, an increase of $735,000 over the nine months ended September 30, 2019. The increase in technology costs was due to the growth of the business and its technology needs.
Bank premises and equipment was $6.5 million for the nine months ended September 30, 2020, an increase of $2.0 million over the nine months ended September 30, 2019, primarily due to the Company taking possession of and renovating new headquarters space. The additional rent amounted to $1.8 million for the nine months ended September 30, 2020. In addition, the Bank accelerated the amortization of $575,000 of leasehold improvements related to the Bank’s prior space at its headquarters in the first quarter of 2020.
Asset Quality
Non-performing loans were $6.6 million at September 30, 2020, a decrease of $1.8 million from June 30, 2020, primarily due to one C&I loan, which was paid down by $2.0 million during the third quarter and had a principal balance of $3.5 million outstanding at September 30, 2020.
The provision for loan losses for the third quarter of 2020 was $1.1 million, a decrease of $629,000 from the linked quarter. The provision for loan losses for the third quarter of 2020 was lower than the linked quarter primarily due to the decrease in loan production in the third quarter of 2020, as compared to the linked quarter, and reflecting a modest improvement in the economic environment. Net loan growth for the third quarter of 2020 was $97.3 million, as compared to $126.2 million for the second quarter of 2020.
| (dollars in thousands) | September 30, 2020 | June 30, 2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-performing loans: | ||||||||||||
| Non-accrual loans: | ||||||||||||
| One-to-four family | — | — | ||||||||||
| Commercial and industrial | 4,512 | 6,482 | ||||||||||
| Consumer | 1,157 | 601 | ||||||||||
| Total non-accrual loans | $ | 5,669 | $ | 7,083 | ||||||||
| Accruing loans 90 days or more past due | 954 | 1,365 | ||||||||||
| Total non-performing loans | $ | 6,623 | $ | 8,448 | ||||||||
| Non-accrual loans as % of loans outstanding | 0.19 | % | 0.24 | % | ||||||||
| Non-performing loans as % of loans outstanding | 0.22 | % | 0.29 | % | ||||||||
| Allowance for loan losses | $ | (33,614) | $ | (32,505) | ||||||||
| Allowance for loan losses as % of loans outstanding | 1.12 | % | 1.12 | % | ||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (dollars in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||
| Provision for loan losses | $ | 1,137 | $ | 2,004 | $ | 7,693 | $ | 1,923 | ||||
| Charge-offs | $ | (82) | $ | (275) | $ | (475) | $ | (691) | ||||
| Recoveries | $ | 54 | $ | — | $ | 124 | $ | 4,270 | ||||
| Net charge-offs/(recoveries) as % of average loans (annualized) | 0.00 | % | 0.05 | % | 0.02 | % | (0.22) | % |
Coronavirus Update
Operational Readiness
On September 7, 2020, the Bank implemented its Return-to-Work Plan, which allowed for up to 50% of employees to return to work. The Bank is monitoring conditions in New York City and the surrounding areas and will revise the Return-to-Work Plan, as necessary. The Bank requires certain health protocols to be followed by all employees including, but not limited to, daily temperature checks prior to entering the common workspace, daily health certifications by employees, office cleaning measures, social distancing practices and the use of face coverings in all common areas.
Financial Impact
Loan Portfolio and Modifications
The Bank has taken several steps to assess the financial impact of COVID-19 on its business, including contacting customers to determine how their business was being affected and analyzing the impact of the virus on the different industries that the Bank serves.
The largest concentration in the loan portfolio is healthcare, which amounted to $780.1 million, or 26.1% of total loans at September 30, 2020, including $660.1 million in loans to skilled nursing facilities (“SNF”). The Bank has not noted any significant impact on SNF loans because of COVID-19 as the demand for nursing home beds remains strong and cash flows have not been significantly affected.
Loan Modifications: The Bank has been working with customers to address their needs during the pandemic. Loan customers have requested various forms of relief during this period, including payment deferrals, interest rate reductions and extensions of maturity dates.
The following is a summary of loan modifications requested and in process as of September 30, 2020 (dollars in thousands):
| CRE | C&I | 1-4 Family | Consumer | Total | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Type of Modification | Balance | Number of Loans | Balance | Number of Loans | Balance | Number of Loans | Balance | Number of Loans | Balance | Number of Loans | |||||
| Defer monthly principal payments^(1)^ | $ | 150,151 | 32 | $ | 503 | 1 | $ | — | — | $ | — | — | $ | 150,654 | 33 |
| Full payment deferral^(2)^ | 120,870 | 15 | 7,983 | 5 | 4,098 | 12 | 2,685 | 33 | 135,636 | 65 | |||||
| Allow the use of reserve accounts | 5,000 | 1 | 1,400 | 1 | — | — | — | — | 6,400 | 2 | |||||
| Cease escrowing for tax payments | 4,000 | 1 | — | — | — | — | — | — | 4,000 | 1 | |||||
| Interest rate reduction^(3)^ | 29,703 | 5 | 3,532 | 1 | — | — | — | — | 33,235 | 6 | |||||
| $ | 309,724 | 54 | $ | 13,418 | 8 | $ | 4,098 | 12 | $ | 2,685 | 33 | $ | 329,925 | 107 | |
| (1) | Waived principal payments for 2 to 9 months. | ||||||||||||||
| --- | --- | ||||||||||||||
| (2) | Deferred principal and interest payments or interest-only payments for 3 to 6 months. Deferred payments will be repaid during 2021. | ||||||||||||||
| --- | --- | ||||||||||||||
| (3) | Rate reduced by approximately 100 basis points. | ||||||||||||||
| --- | --- |
Loan modifications as a percentage of total loans decreased to 11.0% at September 30, 2020, as compared to 18.2% at June 30, 2020.
The following is a summary of the weighted average loan-to-value ratio (“LTV”) for CRE, C&I owner-occupied loans and 1-4 Family loan modifications as of September 30, 2020 (dollars in thousands):
| Industry | Total Modifications | Weighted Average LTV | |
|---|---|---|---|
| CRE: | |||
| Retail | $ | 51,235 | 46.5% |
| Hospitality | 81,554 | 50.6% | |
| Office | 16,732 | 27.5% | |
| Mixed-Use | 32,007 | 55.6% | |
| Multifamily | 62,332 | 22.0% | |
| Warehouse | 21,021 | 37.3% | |
| Other | 44,843 | 72.2% | |
| Total CRE | $ | 309,724 | 45.7% |
| C&I Owner-Occupied: | |||
| Real Estate Secured | $ | 7,735 | 69.3% |
| 1-4 Family | |||
| Residential Real Estate | $ | 4,098 | 49.9% |
| $ | 321,557 | 46.3% |
Allowance for Loan Losses (“ALLL”): Management continues to monitor the impact of COVID-19, particularly as the term of loan modifications expire and borrowers return to a normal debt service schedule as well as the commencement of a repayment schedule for payments that were deferred. As such, significant adjustments to the ALLL may be required as the full impact of COVID-19 on the Bank’s borrowers becomes known.
The Bank has not yet adopted ASU No. 2016-13, Financial Instruments – Credit Losses, which requires the measurement of all expected credit losses (“CECL”) for financial asset. The Bank is currently developing CECL models and evaluating its potential impact on the Bank’s ALLL.
About Metropolitan Bank Holding Corporation
Metropolitan Bank Holding Corp. (NYSE: MCB) is the holding company for Metropolitan Commercial Bank. The Bank provides a broad range of business, commercial and personal banking products and services to small and middle-market businesses, public entities and affluent individuals in the New York metropolitan area. Founded in 1999, the Bank is headquartered in New York City and operates six locations in Manhattan, Brooklyn and Great Neck, Long Island. The Bank is also an active issuer of debit cards for third-party debit card programs. Metropolitan Commercial Bank is a New York State chartered commercial bank and a Federal Reserve System member bank whose deposits are insured up to applicable limits by the FDIC, and an equal opportunity lender. For more information, please visit www.mcbankny.com.
Forward Looking Statement Disclaimer
This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include but are not limited to the Company’s financial condition and capital ratios, results of operations and the Company’s outlook and business. Forward-looking statements are not historical facts. Such statements may be identified by the use of such words as “may”, “believe”, “expect”, “anticipate”, “plan”, “continue”, or similar terminology. These statements relate to future events or our future financial performance and involve risks and uncertainties that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we caution you not to place undue reliance on these forward-looking statements. Factors which may cause our forward-looking statements to be materially inaccurate include, but are not limited to those discussed under the heading “Risk Factors” in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as well as an unexpected deterioration in our loan portfolio, unexpected increases in our expenses, greater than anticipated growth and our ability to manage such growth, unanticipated regulatory action, unexpected changes in interest rates, an unanticipated decrease in deposits, an unanticipated loss of key personnel, an unanticipated loss of existing customers, competition from other institutions resulting in unanticipated changes in our loan or deposit rates, unanticipated increases in Federal Deposit Insurance Corporation costs and unanticipated adverse changes in our customers’ economic conditions or economic conditions in our local area in general.
Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and whether the gradual reopening of businesses will result in a meaningful increase in economic activity. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experience additional resolution costs.
Forward-looking statements speak only as of the date of this release. We do not undertake any obligation to update or revise any forward-looking statement.
Consolidated Balance Sheet
| September 30, 2020 | December 31, 2019 | |||
|---|---|---|---|---|
| Assets | (unaudited) | |||
| Cash and due from banks | $ | 8,991 | $ | 8,116 |
| Overnight deposits | 758,913 | 381,104 | ||
| Total cash and cash equivalents | 767,904 | 389,220 | ||
| Investment securities available for sale | 182,334 | 234,942 | ||
| Investment securities held to maturity | 3,050 | 3,722 | ||
| Investment securities -- Equity investments | 2,311 | 2,224 | ||
| Total securities | 187,695 | 240,888 | ||
| Other investments | 11,097 | 21,437 | ||
| Loans, net of deferred fees and unamortized costs | 2,989,550 | 2,672,949 | ||
| Allowance for loan losses | (33,614) | (26,272) | ||
| Net loans | 2,955,936 | 2,646,677 | ||
| Receivable from prepaid card programs, net | 31,237 | 11,581 | ||
| Accrued interest receivable | 12,524 | 8,862 | ||
| Premises and equipment, net | 15,913 | 12,100 | ||
| Prepaid expenses and other assets | 9,720 | 17,074 | ||
| Goodwill | 9,733 | 9,733 | ||
| Total assets | $ | 4,001,759 | $ | 3,357,572 |
| Liabilities and Stockholders' Equity | ||||
| Deposits: | ||||
| Non-interest-bearing demand deposits | $ | 1,553,241 | $ | 1,090,479 |
| Interest-bearing deposits | 1,974,385 | 1,700,295 | ||
| Total deposits | 3,527,626 | 2,790,774 | ||
| Federal Home Loan Bank of New York advances | — | 144,000 | ||
| Trust preferred securities | 20,620 | 20,620 | ||
| Subordinated debt, net of issuance cost | 24,643 | 24,601 | ||
| Secured Borrowings | 32,224 | 42,972 | ||
| Accounts payable, accrued expenses and other liabilities | 37,014 | 23,556 | ||
| Accrued interest payable | 479 | 1,229 | ||
| Prepaid third-party debit cardholder balances | 30,569 | 10,696 | ||
| Total liabilities | 3,673,175 | 3,058,448 | ||
| Class B preferred stock | 3 | 3 | ||
| Common stock | 82 | 82 | ||
| Additional paid in capital | 218,361 | 216,468 | ||
| Retained earnings | 109,054 | 81,364 | ||
| Accumulated other comprehensive gain, net of tax effect | 1,084 | 1,207 | ||
| Total stockholders’ equity | 328,584 | 299,124 | ||
| Total liabilities and stockholders’ equity | $ | 4,001,759 | $ | 3,357,572 |
Consolidated Statement of Income (unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) | 2020 | 2019 | 2020 | 2019 | ||||
| Total interest income | $ | 35,945 | $ | 35,496 | $ | 106,236 | $ | 93,314 |
| Total interest expense | 3,621 | 9,443 | 14,781 | 23,746 | ||||
| Net interest income | 32,324 | 26,053 | 91,455 | 69,568 | ||||
| Provision for loan losses | 1,137 | 2,004 | 7,693 | 1,923 | ||||
| Net interest income after provision for loan losses | 31,187 | 24,049 | 83,762 | 67,645 | ||||
| Non-interest income: | ||||||||
| Service charges on deposit accounts | 863 | 852 | 2,746 | 2,579 | ||||
| Prepaid third-party debit card income | 2,572 | 1,482 | 6,301 | 4,161 | ||||
| Other service charges and fees | 202 | 349 | 1,238 | 940 | ||||
| Unrealized gain on equity securities | — | 17 | 55 | 87 | ||||
| Gain on sale of securities | — | — | 3,287 | — | ||||
| Total non-interest income | 3,637 | 2,700 | 13,627 | 7,767 | ||||
| Non-interest expense: | ||||||||
| Compensation and benefits | 9,944 | 7,875 | 29,962 | 23,286 | ||||
| Bank premises and equipment | 2,111 | 1,790 | 6,498 | 4,473 | ||||
| Professional fees | 1,221 | 906 | 3,058 | 2,617 | ||||
| Licensing fees and technology costs | 2,960 | 3,526 | 10,226 | 7,529 | ||||
| Other expenses | 2,694 | 1,398 | 6,984 | 5,008 | ||||
| Total non-interest expense | 18,930 | 15,495 | 56,728 | 42,913 | ||||
| Net income before income tax expense | 15,894 | 11,254 | 40,661 | 32,499 | ||||
| Income tax expense | 5,111 | 3,571 | 12,971 | 10,228 | ||||
| Net income | $ | 10,783 | $ | 7,683 | $ | 27,690 | $ | 22,271 |
| Earnings per common share: | ||||||||
| Average common shares outstanding - basic | 8,222,870 | 8,175,164 | 8,220,202 | 8,172,638 | ||||
| Average common shares outstanding - diluted | 8,393,211 | 8,348,970 | 8,392,055 | 8,339,958 | ||||
| Basic earnings | $ | 1.30 | $ | 0.92 | $ | 3.34 | $ | 2.69 |
| Diluted earnings | $ | 1.27 | $ | 0.90 | $ | 3.27 | $ | 2.63 |
Net Interest Margin Analysis
| Three months ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2020 | June 30, 2020 | |||||||||||
| Average | Average | |||||||||||
| Outstanding | Yield/Rate | Outstanding | Yield/Rate | |||||||||
| (dollars in thousands) | Balance | Interest | (annualized) | Balance | Interest | (annualized) | ||||||
| Assets: | ||||||||||||
| Interest-earning assets: | ||||||||||||
| Loans ^(1)^ | $ | 2,946,359 | $ | 34,844 | 4.66 | % | $ | 2,827,154 | $ | 32,983 | 4.68 | % |
| Available-for-sale securities | 180,698 | 582 | 1.26 | % | 138,944 | 609 | 1.73 | % | ||||
| Held-to-maturity securities | 3,181 | 14 | 1.71 | % | 3,423 | 16 | 1.85 | % | ||||
| Equity investments - non-trading | 2,284 | 10 | 1.63 | % | 2,274 | 11 | 1.91 | % | ||||
| Overnight deposits | 854,737 | 299 | 0.14 | % | 794,377 | 374 | 0.19 | % | ||||
| Other interest-earning assets | 14,680 | 196 | 5.22 | % | 18,485 | 230 | 4.92 | % | ||||
| Total interest-earning assets | 4,001,939 | 35,945 | 3.54 | % | 3,784,657 | 34,223 | 3.62 | % | ||||
| Non-interest-earning assets | 57,545 | 59,014 | ||||||||||
| Allowance for loan and lease losses | (33,118) | (31,446) | ||||||||||
| Total assets | $ | 4,026,366 | $ | 3,812,225 | ||||||||
| Liabilities and Stockholders' Equity: | ||||||||||||
| Interest-bearing liabilities: | ||||||||||||
| Money market, savings and other interest-bearing accounts | $ | 1,818,436 | $ | 2,258 | 0.49 | % | $ | 1,764,742 | $ | 2,437 | 0.56 | % |
| Certificates of deposit | 97,685 | 423 | 1.72 | % | 97,688 | 478 | 1.97 | % | ||||
| Total interest-bearing deposits | 1,916,121 | 2,681 | 0.56 | % | 1,862,430 | 2,915 | 0.63 | % | ||||
| Borrowed funds | 125,841 | 940 | 2.92 | % | 158,471 | 1,147 | 2.86 | % | ||||
| Total interest-bearing liabilities | 2,041,962 | 3,621 | 0.71 | % | 2,020,901 | 4,062 | 0.81 | % | ||||
| Non-interest-bearing liabilities: | ||||||||||||
| Non-interest-bearing deposits | 1,583,037 | 1,398,438 | ||||||||||
| Other non-interest-bearing liabilities | 76,491 | 78,159 | ||||||||||
| Total liabilities | 3,701,490 | 3,497,498 | ||||||||||
| Stockholders' Equity | 324,876 | 314,727 | ||||||||||
| Total liabilities and equity | $ | 4,026,366 | $ | 3,812,225 | ||||||||
| Net interest income | $ | 32,324 | $ | 30,161 | ||||||||
| Net interest rate spread ^(2)^ | 2.83 | % | 2.81 | % | ||||||||
| Net interest-earning assets | $ | 1,959,977 | $ | 1,763,756 | ||||||||
| Net interest margin ^(3)^ | 3.18 | % | 3.19 | % | ||||||||
| Ratio of interest earning assets to interest bearing liabilities | 1.96 | x | 1.87 | x |
| (1) | Amount includes deferred loan fees and non-performing loans. |
|---|---|
| (2) | Determined by subtracting the annualized weighted average cost of total interest-bearing liabilities from the annualized weighted average yield on total interest-earning<br> assets. |
| --- | --- |
| (3) | Determined by dividing annualized net interest income by total average interest-earning assets. |
| --- | --- |
| Three months ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2020 | September 30, 2019 | |||||||||||
| Average | Average | |||||||||||
| Outstanding | Yield/Rate | Outstanding | Yield/Rate | |||||||||
| (dollars in thousands) | Balance | Interest | (annualized) | Balance | Interest | (annualized) | ||||||
| Assets: | ||||||||||||
| Interest-earning assets: | ||||||||||||
| Loans ^(1)^ | $ | 2,946,359 | $ | 34,844 | 4.66 | % | $ | 2,419,774 | $ | 31,208 | 5.03 | % |
| Available-for-sale securities | 180,698 | 582 | 1.26 | % | 238,384 | 1,521 | 2.55 | % | ||||
| Held-to-maturity securities | 3,181 | 14 | 1.71 | % | 4,050 | 20 | 1.98 | % | ||||
| Equity investments - non-trading | 2,284 | 10 | 1.63 | % | 2,237 | 13 | 2.32 | % | ||||
| Overnight deposits | 854,737 | 299 | 0.14 | % | 420,982 | 2,436 | 2.30 | % | ||||
| Other interest-earning assets | 14,680 | 196 | 5.22 | % | 21,983 | 298 | 5.31 | % | ||||
| Total interest-earning assets | 4,001,939 | 35,945 | 3.54 | % | 3,107,410 | 35,496 | 4.47 | % | ||||
| Non-interest-earning assets | 57,545 | 46,886 | ||||||||||
| Allowance for loan and lease losses | (33,118) | (23,196) | ||||||||||
| Total assets | $ | 4,026,366 | $ | 3,131,100 | ||||||||
| Liabilities and Stockholders' Equity: | ||||||||||||
| Interest-bearing liabilities: | ||||||||||||
| Money market, savings and other interest-bearing accounts | $ | 1,818,436 | $ | 2,258 | 0.49 | % | $ | 1,426,576 | $ | 7,163 | 1.99 | % |
| Certificates of deposit | 97,685 | 423 | 1.72 | % | 112,856 | 718 | 2.52 | % | ||||
| Total interest-bearing deposits | 1,916,121 | 2,681 | 0.56 | % | 1,539,432 | 7,881 | 2.03 | % | ||||
| Borrowed funds | 125,841 | 940 | 2.92 | % | 202,047 | 1,562 | 3.03 | % | ||||
| Total interest-bearing liabilities | 2,041,962 | 3,621 | 0.71 | % | 1,741,479 | 9,443 | 2.15 | % | ||||
| Non-interest-bearing liabilities: | ||||||||||||
| Non-interest-bearing deposits | 1,583,037 | 1,075,781 | ||||||||||
| Other non-interest-bearing liabilities | 76,491 | 27,193 | ||||||||||
| Total liabilities | 3,701,490 | 2,844,453 | ||||||||||
| Stockholders' Equity | 324,876 | 286,647 | ||||||||||
| Total liabilities and equity | $ | 4,026,366 | $ | 3,131,100 | ||||||||
| Net interest income | $ | 32,324 | $ | 26,053 | ||||||||
| Net interest rate spread ^(2)^ | 2.83 | % | 2.32 | % | ||||||||
| Net interest-earning assets | $ | 1,959,977 | $ | 1,365,931 | ||||||||
| Net interest margin ^(3)^ | 3.18 | % | 3.26 | % | ||||||||
| Ratio of interest earning assets to interest bearing liabilities | 1.96 | x | 1.78 | x |
| (1) | Amount includes deferred loan fees and non-performing loans. |
|---|---|
| (2) | Determined by subtracting the annualized weighted average cost of total interest-bearing liabilities from the annualized weighted average yield on total interest-earning<br> assets. |
| --- | --- |
| (3) | Determined by dividing annualized net interest income by total average interest-earning assets. |
| --- | --- |
| Nine months ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2020 | September 30, 2019 | |||||||||||
| Average | Average | |||||||||||
| Outstanding | Yield/Rate | Outstanding | ||||||||||
| (dollars in thousands) | Balance | Interest | (annualized) | Balance | Interest | Yield/Rate | ||||||
| Assets: | ||||||||||||
| Interest-earning assets: | ||||||||||||
| Loans ^(1)^ | $ | 2,826,845 | $ | 100,655 | 4.75 | % | $ | 2,208,125 | $ | 84,277 | 5.09 | % |
| Available-for-sale securities | 179,845 | 2,536 | 1.85 | % | 108,526 | 2,068 | 2.54 | % | ||||
| Held-to-maturity securities | 3,408 | 47 | 1.81 | % | 4,270 | 65 | 2.03 | % | ||||
| Equity investments - non-trading | 2,274 | 32 | 1.85 | % | 2,225 | 39 | 2.29 | % | ||||
| Overnight deposits | 707,125 | 2,266 | 0.43 | % | 331,637 | 5,957 | 2.40 | % | ||||
| Other interest-earning assets | 18,189 | 700 | 5.06 | % | 22,562 | 908 | 5.31 | % | ||||
| Total interest-earning assets | 3,737,686 | 106,236 | 3.79 | % | 2,677,345 | 93,314 | 4.65 | % | ||||
| Non-interest-earning assets | 58,040 | 42,752 | ||||||||||
| Allowance for loan and lease losses | (30,461) | (21,401) | ||||||||||
| Total assets | $ | 3,765,265 | $ | 2,698,696 | ||||||||
| Liabilities and Stockholders' Equity: | ||||||||||||
| Interest-bearing liabilities: | ||||||||||||
| Money market, savings and other interest-bearing accounts | $ | 1,742,611 | $ | 9,867 | 0.76 | % | $ | 1,134,004 | $ | 16,434 | 1.94 | % |
| Certificates of deposit | 99,805 | 1,497 | 2.00 | % | 110,256 | 2,029 | 2.46 | % | ||||
| Total interest-bearing deposits | 1,842,416 | 11,364 | 0.82 | % | 1,244,260 | 18,463 | 1.98 | % | ||||
| Borrowed funds | 157,729 | 3,417 | 2.85 | % | 218,537 | 5,283 | 3.19 | % | ||||
| Total interest-bearing liabilities | 2,000,145 | 14,781 | 0.99 | % | 1,462,797 | 23,746 | 2.17 | % | ||||
| Non-interest-bearing liabilities: | ||||||||||||
| Non-interest-bearing deposits | 1,378,512 | 933,938 | ||||||||||
| Other non-interest-bearing liabilities | 71,210 | 23,947 | ||||||||||
| Total liabilities | 3,449,867 | 2,420,682 | ||||||||||
| Stockholders' Equity | 315,398 | 278,014 | ||||||||||
| Total liabilities and equity | $ | 3,765,265 | $ | 2,698,696 | ||||||||
| Net interest income | $ | 91,455 | $ | 69,568 | ||||||||
| Net interest rate spread ^(2)^ | 2.80 | % | 2.48 | % | ||||||||
| Net interest-earning assets | $ | 1,737,541 | $ | 1,214,548 | ||||||||
| Net interest margin ^(3)^ | 3.26 | % | 3.47 | % | ||||||||
| Ratio of interest earning assets to interest bearing liabilities | 1.87 | x | 1.83 | x |
| (1) | Amount includes deferred loan fees and non-performing loans. |
|---|---|
| (2) | Determined by subtracting the annualized weighted average cost of total interest-bearing liabilities from the annualized weighted average yield on total interest-earning<br> assets. |
| --- | --- |
| (3) | Determined by dividing annualized net interest income by total average interest-earning assets. |
| --- | --- |
Summary of Income and Performance Measures
Five Quarter Trend (unaudited)
| Quarter Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | Sept. 30, 2020 | June 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | ||||||||||
| Net interest income | $ | 32,324 | $ | 30,161 | $ | 28,969 | $ | 28,042 | $ | 26,053 | |||||
| Provision for loan losses | 1,137 | 1,766 | 4,790 | 2,300 | 2,004 | ||||||||||
| Net interest income after provision for loan losses | 31,187 | 28,395 | 24,179 | 25,742 | 24,049 | ||||||||||
| Non-interest income | 3,637 | 5,653 | 4,340 | 2,862 | 2,700 | ||||||||||
| Non-interest expense: | |||||||||||||||
| Compensation and benefits | 9,944 | 10,058 | 9,960 | 7,956 | 7,875 | ||||||||||
| Other Expense | 8,986 | 8,226 | 9,556 | 9,086 | 7,620 | ||||||||||
| Total non-interest expense | 18,930 | 18,284 | 19,516 | 17,042 | 15,495 | ||||||||||
| Income before income tax expense | 15,894 | 15,764 | 9,003 | 11,562 | 11,254 | ||||||||||
| Income tax expense | 5,111 | 4,953 | 2,906 | 3,699 | 3,571 | ||||||||||
| Net income | 10,783 | 10,811 | 6,097 | 7,863 | 7,683 | ||||||||||
| Performance Measures: | |||||||||||||||
| Net income available to common shareholders | 10,694 | 10,716 | 6,032 | 7,741 | 7,550 | ||||||||||
| Per common share: | |||||||||||||||
| Basic earnings | $ | 1.30 | $ | 1.30 | $ | 0.73 | $ | 0.95 | $ | 0.92 | |||||
| Diluted earnings | $ | 1.27 | $ | 1.28 | $ | 0.72 | $ | 0.93 | $ | 0.90 | |||||
| Common shares outstanding: | |||||||||||||||
| Average - diluted | 8,393,211 | 8,359,450 | 8,412,782 | 8,363,080 | 8,348,970 | ||||||||||
| Period end | 8,289,479 | 8,294,801 | 8,294,801 | 8,312,918 | 8,319,852 | ||||||||||
| Return on (annualized): | |||||||||||||||
| Average total assets | 1.07 | % | 1.14 | % | 0.71 | % | 0.95 | % | 0.97 | % | |||||
| Average equity | 13.20 | % | 13.82 | % | 8.00 | % | 10.53 | % | 10.63 | % | |||||
| Average tangible common equity* | 13.85 | % | 14.36 | % | 8.33 | % | 11.13 | % | 11.26 | % | |||||
| Yield on average earning assets | 3.54 | % | 3.62 | % | 4.22 | % | 4.38 | % | 4.47 | % | |||||
| Cost of interest-bearing liabilities | 0.71 | % | 0.81 | % | 1.48 | % | 1.77 | % | 2.15 | % | |||||
| Net interest spread | 2.83 | % | 2.81 | % | 2.74 | % | 2.61 | % | 2.32 | % | |||||
| Net interest margin | 3.18 | % | 3.19 | % | 3.38 | % | 3.35 | % | 3.26 | % | |||||
| Net charge-offs as % of average loans (annualized) | 0.00 | % | 0.03 | % | 0.02 | % | 0.07 | % | 0.05 | % | |||||
| Efficiency ratio | 52.64 | % | 54.58 | % | 58.59 | % | 55.14 | % | 53.89 | % |
*Average tangible common equity excludes Class B preferred stock and intangible assets. See Reconciliation of Non-GAAP Measures on page 16.
Consolidated Balance Sheet Summary, Five Quarter Trend (unaudited)
| (dollars in thousands) | Sept. 30, 2020 | June 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Assets | |||||||||||||||
| Total Assets | $ | 4,001,759 | $ | 3,970,441 | $ | 3,612,012 | $ | 3,357,572 | $ | 3,243,171 | |||||
| Overnight deposits | 758,913 | 813,147 | 569,927 | 381,104 | 424,170 | ||||||||||
| Total securities | 187,695 | 194,979 | 205,646 | 240,888 | 256,835 | ||||||||||
| Other investments | 11,097 | 15,731 | 21,455 | 21,437 | 20,921 | ||||||||||
| Loans, net of deferred fees and unamortized costs | 2,989,550 | 2,892,274 | 2,766,099 | 2,672,949 | 2,496,697 | ||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||
| Deposits: | |||||||||||||||
| Non-interest-bearing demand deposits | $ | 1,553,241 | $ | 1,526,439 | $ | 1,250,584 | $ | 1,090,479 | $ | 1,041,102 | |||||
| Interest-bearing deposits | 1,974,385 | 1,868,300 | 1,771,108 | 1,700,295 | 1,664,104 | ||||||||||
| Total deposits | 3,527,626 | 3,394,739 | 3,021,692 | 2,790,774 | 2,705,206 | ||||||||||
| Borrowings | 45,263 | 149,249 | 189,235 | 189,221 | 189,207 | ||||||||||
| Total stockholders' Equity | 328,584 | 317,169 | 308,536 | 299,124 | 291,002 | ||||||||||
| Asset Quality | |||||||||||||||
| Total non-accrual loans | $ | 5,669 | $ | 7,083 | $ | 6,136 | $ | 4,085 | $ | 3,998 | |||||
| Total non-performing loans | $ | 6,623 | $ | 8,448 | $ | 6,341 | $ | 4,493 | $ | 4,714 | |||||
| Non-accrual loans to total loans | 0.19 | % | 0.24 | % | 0.22 | % | 0.15 | % | 0.16 | % | |||||
| Non-performing loans to total loans | 0.22 | % | 0.29 | % | 0.23 | % | 0.17 | % | 0.19 | % | |||||
| Allowance for loan losses | (33,614) | (32,505) | (30,924) | (26,272) | (24,444) | ||||||||||
| Allowance for loan losses to total loans | 1.12 | % | 1.12 | % | 1.12 | % | 0.98 | % | 0.98 | % | |||||
| Provision for loan losses | 1,137 | 1,766 | 4,790 | 2,300 | 2,004 | ||||||||||
| Net charge-offs | 28 | 185 | 138 | 472 | 275 | ||||||||||
| Regulatory Capital | |||||||||||||||
| Tier 1 Leverage: | |||||||||||||||
| Metropolitan Bank Holding Corp. | 8.4 | % | 8.6 | % | 9.1 | % | 9.4 | % | 9.6 | % | |||||
| Metropolitan Commercial Bank | 9.0 | % | 9.2 | % | 9.8 | % | 10.1 | % | 10.3 | % | |||||
| Common Equity Tier 1 Risk-Based (CET1): | |||||||||||||||
| Metropolitan Bank Holding Corp. | 10.1 | % | 9.9 | % | 9.8 | % | 10.1 | % | 10.4 | % | |||||
| Metropolitan Commercial Bank | 11.8 | % | 11.6 | % | 11.5 | % | 11.8 | % | 12.2 | % | |||||
| Tier 1 Risk-Based: | |||||||||||||||
| Metropolitan Bank Holding Corp. | 11.0 | % | 10.8 | % | 10.7 | % | 11.0 | % | 11.4 | % | |||||
| Metropolitan Commercial Bank | 11.8 | % | 11.6 | % | 11.5 | % | 11.8 | % | 12.2 | % | |||||
| Total Risk-Based: | |||||||||||||||
| Metropolitan Bank Holding Corp. | 12.9 | % | 12.7 | % | 12.1 | % | 12.5 | % | 13.0 | % | |||||
| Metropolitan Commercial Bank | 12.9 | % | 12.6 | % | 12.5 | % | 12.7 | % | 13.1 | % |
Reconciliation of Non-GAAP Measures
In addition to the results presented in accordance with Generally Accepted Accounting Principles ("GAAP"), this earnings release includes certain non-GAAP financial measures. Management believes these non-GAAP financial measures provide meaningful information to investors in understanding the Company’s operating performance and trends. These non-GAAP measures have inherent limitations and are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for an analysis of results reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Reconciliations of non-GAAP/adjusted financial measures disclosed in this earnings release to the comparable GAAP measures are provided in the following table:
| Dollars in thousands, except per share data | Sept. 30, 2020 | June 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total Equity | $ | 328,584 | $ | 317,169 | $ | 308,536 | $ | 299,124 | $ | 291,002 |
| Less: preferred equity | 5,502 | 5,502 | 5,502 | 5,502 | 5,502 | |||||
| Common Equity | $ | 323,082 | $ | 311,667 | $ | 303,034 | $ | 293,622 | $ | 285,500 |
| Less: intangible assets | 9,733 | 9,733 | 9,733 | 9,733 | 9,733 | |||||
| Tangible common equity (book value) | $ | 313,349 | $ | 301,934 | $ | 293,301 | $ | 283,889 | $ | 275,767 |
| Common shares outstanding | 8,289,479 | 8,294,801 | 8,294,801 | 8,312,918 | 8,319,852 | |||||
| Book value per share (GAAP) | $ | 38.97 | $ | 37.57 | $ | 36.53 | $ | 35.32 | $ | 34.32 |
| Tangible book value per common share (non-GAAP)* | $ | 37.80 | $ | 36.40 | $ | 35.36 | $ | 34.15 | $ | 33.15 |
| Average assets | $ | 4,026,366 | $ | 3,812,225 | $ | 3,454,335 | $ | 3,286,916 | $ | 3,131,100 |
| Less: average intangible assets | 9,733 | 9,733 | 9,733 | 9,733 | 9,733 | |||||
| Average tangible assets | $ | 4,016,633 | $ | 3,802,492 | $ | 3,444,602 | $ | 3,277,183 | $ | 3,121,367 |
| Average equity | $ | 324,876 | $ | 314,727 | $ | 306,487 | $ | 296,228 | $ | 286,647 |
| Less: Average preferred equity | 5,502 | 5,502 | 5,502 | 5,502 | 5,502 | |||||
| Average common equity | $ | 319,374 | $ | 309,225 | $ | 300,985 | $ | 290,726 | $ | 281,145 |
| Less: average intangible assets | 9,733 | 9,733 | 9,733 | 9,733 | 9,733 | |||||
| Average tangible common equity | $ | 309,641 | $ | 299,492 | $ | 291,252 | $ | 280,993 | $ | 271,412 |
| Total assets | $ | 4,001,759 | $ | 3,970,441 | $ | 3,612,012 | $ | 3,357,572 | $ | 3,243,171 |
| Less: intangible assets | 9,733 | 9,733 | 9,733 | 9,733 | 9,733 | |||||
| Tangible assets | $ | 3,992,026 | $ | 3,960,708 | $ | 3,602,279 | $ | 3,347,839 | $ | 3,233,438 |
* Tangible book value divided by common shares outstanding at period-end.
EXHIBIT 99.2
Investor Presentation 2020 Q3
Forward-looking Statement This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include but are not limited to the Company’s financial condition and capital ratios, results of operations and the Company’s outlook and business. Forward-looking statements are not historical facts. Such statements may be identified by the use of such words as “may”, “believe”, “expect”, “anticipate”, “plan”, “continue”, or similar terminology. These statements relate to future events or our future financial performance and involve risks and uncertainties that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we caution you not to place undue reliance on these forward-looking statements. Factors which may cause our forward-looking statements to be materially inaccurate include, but are not limited to those discussed under the heading “Risk Factors” in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as well as an unexpected deterioration in our loan portfolio, unexpected increases in our expenses, greater than anticipated growth and our ability to manage such growth, unanticipated regulatory action, unexpected changes in interest rates, an unanticipated decrease in deposits, an unanticipated loss of key personnel, an unanticipated loss of existing customers, competition from other institutions resulting in unanticipated changes in our loan or deposit rates, unanticipated increases in Federal Deposit Insurance Corporation costs and unanticipated adverse changes in our customers’ economic conditions or economic conditions in our local area in general.Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the Coronavirus (“COVID-19”) outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experience additional resolution costs.Forward-looking statements speak only as of the date of this presentation. We do not undertake any obligation to update or revise any forward-looking statement, whether the result of new information, future events or otherwise.
Company Overview Full service commercial bank since 1999 with goal of helping our clients build and sustain wealth Business model combines high-touch service and relationship-based focus of a community bank with extensive suite of financial products and servicesExpertise in Commercial Real Estate (“CRE”) and traditional Commercial and Industrial (“C&I”) lending to middle market companies in the New York metro areaLower cost core deposit franchise through the following sources:Existing lending relationshipsNon-borrowing clients sourced through our banking centersCorporate cash management deposits for clients in possession of or having discretion over large pools of fundsGlobal Payments Group:Prepaid debit card issuing businessBanking services to digital currency businessesMerchant acquiring businessCorrespondent banking servicesBanking services to cannabidiol companiesStrong balance sheet growth while managing net interest margin
Loan and Deposit Portfolio Metropolitan Commercial Bank Multi-family loans – 49% rent regulatedCRE/RBC ratios: MCB 417.3%CRE Owner-occupied is a segment of our C&I Lending platform Loan Portfolio at September 30, 2020$2.99 Billion Deposits at September 30, 2020$3.53 Billion Corporate cash management deposits designed for clients who are in possession of or have discretion over large deposits such as property management companies, title companies, and bankruptcy trustees.Corporate cash management deposit accounts have an expected retention period of greater than 3 years. Corporate cash management deposit accounts in total have a weighted average cost of 48 basis points.
Quarterly Revenues, Profitability and Asset Quality *annualizedFirst quarter 2020 results included a provision in the amount of $3.1 million recorded for the economic impact of COVID-19, excluding this reserve, net income would have been $8.2 million.First quarter 2020 provision for loan losses and allowance for loan losses include of $3.1 million recorded for the economic impact of COVID-19.(3) Second quarter 2020 non-interest income included $2.3 million in gains on sale of securities. 3 Months ended (dollars in thousands) 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Summary Income Statement Net Interest Income $32,324 $30,161 $28,969 $28,042 $26,053 Provision for loan losses $1,137 $1,766 $4,790 (2) $2,300 $2,004 Non-Interest Income $3,637 $5,653 (3) $4,340 $2,862 $2,700 Non-Interest expense $18,930 $18,284 $19,516 $17,042 $15,495 Net Income $10,783 $10,811 $6,097 (1) $7,863 $7,683 Profitability Diluted EPS $1.27 $1.28 (3) $0.72 (1) $0.93 $0.90 ROAA* 1.07% 1.14% 0.71% 0.95% 0.97% ROAE* 13.20% 13.82% 8.00% 10.53% 10.63% ROATCE* 13.85% 14.36% 8.33% 11.13% 11.26% NIM* 3.18% 3.19% 3.38% 3.35% 3.26% Efficiency Ratio 52.64% 54.58% 58.59% 55.14% 53.89% Asset Quality NPLs/Total Loans 0.22% 0.29% 0.23% 0.17% 0.19% NCOs/Average Total Loans* 0.00% 0.03% 0.02% 0.07% 0.05% Reserves/Loans 1.12% 1.12% 1.12% (2) 0.98% 0.98%
Net Interest Margin Analysis Net Interest Margin Components ▬ NIM ▬ Yield on Interest-Earning Assets ▬ Rate on Interest-Bearing Liabilities
Non-interest Income and Expense Detail Non-Interest Income ($000s) Non-Interest Expense ($000s) (1) Includes expenses related to additional leased space at the Company’s headquarter in the amounts of $615,000 for the first and second quarters of 2020 and the fourth quarter of 2019; and $400,000 for the third quarter of 2019. Beginning in August 2020, the Company ceased rent payments on the former space resulting in a reduction of rent expense of approximately $195,000 per quarter. First quarter of 2020 also includes a $575,000 charge-off of the remaining leasehold improvements for the Company’s space that was vacated. 3 Months Ended 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 Service charges on deposit accounts $863 $803 $1,081 $977 $852 Prepaid third-party debit card income 2,572 2,108 1,621 1,482 1,482 Other service charges and fees 202 411 627 413 349 Unrealized gain on equity securities - 19 36 (10) 17 Gain on sale of securities - 2,312 975 - - Total Non-interest Income $3,637 $5,653 $4,340 $2,862 $2,700 3 Months Ended 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 Compensation and Benefits $9,944 $10,058 $9,960 $7,956 $7,875 Bank Premises and Equipment (1) 2,111 1,887 2,500 2,057 1,790 Professional Fees 1,221 882 955 810 906 Technology Costs 941 824 758 739 660 Corporate Cash Management Deposit Licensing Fees 2,019 2,636 3,048 2,724 2,866 Other Expenses 2,694 1,997 2,295 2,756 1,398 Total Non-interest Expense $18,930 $18,284 $19,516 $17,042 $15,495
Balance Sheet and Capital *Metropolitan Bank Holding Corp. and Metropolitan Commercial Bank meet all the requirements to be considered “Well-Capitalized” under applicable regulatory guidelines at each date shown.
Strong Balance Sheet Growth Deposits ($mm) Total Equity ($mm) Assets ($mm) Loans, Net of Deferred Fees ($mm) 38.5% 39.1% 41.4% 45.0% 44.0% ■ % Non-interest Demand Deposits Total cost of deposits including DDA – 0.30%Cost of interest-bearing deposits – 0.56%
Robust Organic Loan Growth within a Diversified Portfolio (1) Includes commercial real estate, multifamily, and construction loans ■ Total CRE(1) (Non-Owner Occupied) ■ Total CRE (Owner Occupied) ■ C&I ■ Other The Bank’s loan production for the three and nine months ended September 30, 2020 was $183.3 million and $513.2 million, respectively. Loans Composition over time ($mm)
Commercial Growth Driven by Expertise in Specific Lending Verticals General Commercial and Industrial Overview C&I Composition at September 30, 2020 Target Market Key Metrics Middle market businesses with annual revenues below $200mmPrimarily concentrated in the New York MSAWell-diversified across industries Average yield of 4.88% YTDStrong historical credit performancePledged collateral and/or personal guarantees from high net worth individuals support most loans Target borrowers have strong historical cash flows, good asset coverage and positive industry outlooks
Relationship-based Commercial Real Estate Lending Composition by Type at September 30, 2020 Composition by Region at September 30, 2020 Overview Target Market Key Metrics New York metropolitan area real estate entrepreneurs with a net worth in excess of $5 millionPrimarily concentrated in the New York MSAWell-diversified across various property types Losses peaked at 51 basis points in 2010 and have been de minimus since 2014Weighted average loan-to-value of 56.15% Majority of loans are originated through direct relationships or referrals from existing clients
NYC Stabilized Multi-family Loan Portfolio MCB multi-family loans underwritten to current cash flows – weighted average DCR of 1.78 on stabilized rent regulated properties Average LTV of 45.32% on stabilized rent regulated properties provide a cushion against falling values
Well-Developed, Diversified Healthcare Portfolio Active in Healthcare lending since 2002CRE – SNF – Average LTV of 68%Highly selective regarding the quality of Skilled Nursing Operators that we financeBorrowers typically have over 1,000 beds under managementLoans are made only in “certificate of need” states which limits the supply of beds and supports stable occupancy rates.Stabilized SNF – 71% of CRE SNF portfolio. Stabilized facility provides adequate cash flows to support debt service and collateral value. Borrowers primary motive for acquisition of a stabilized property is for synergies with existing portfolio of SNFs. Average debt service coverage ratio is 2.02x and average loan-to-value is 67%. Once the loans are seasoned, the mortgage portion of the bridge loan is refinanced with HUD.Stabilized loans and Non-Stabilized loans are respectively $406 million and $156 million. Non-stabilized SNF – typically “turn-around” older SNFs acquired from owners who mismanaged the business, relied too heavily on long-term care (Medicaid reimbursement) or did not stay current with changes in the marketplace. Opportunity for owner to create value by renovating and adding services with higher Medicaid reimbursements rates (rehabilitation services, dialysis, etc.). C& I Healthcare Composition at September 30, 2020 Diversified Healthcare Portfolio CRE Skilled Nursing Facilities (SNF) - $562 millionC&I Skilled Nursing Facilities (SNF) - $98 millionC&I Other Healthcare - $120 million
Well-Developed, DiversifiedHealthcare Portfolio CRE Skilled Nursing Facility Exposure By State
Well-Developed, DiversifiedHealthcare Portfolio C&I Skilled Nursing Facility Exposure By State State Balance ($000's) % of Total C&I SNF Florida 2,548 3% Georgia/Indiana/Wisconsin/Virginia/Ohio/Kentucky 8,230 8% New Jersey 4,063 4% New York 48,336 49% Pennsylvania 11,803 12% Tennessee 23,238 24% Total C&I SNF 98,218 100%
Credit Metrics ALLL/Loans Non-Performing Loans/ALLL NCOs/Average Loans (Annualized) Non-Performing Loans/Loans
Deposit Composition (1) Includes liquidation, receivership, litigation settlement and other fiduciary accounts. Deposit Composition at September 30, 2020 Deposit composition over time ($mm)
Well Positioned for Changing Rate Environment Estimated Sensitivity of Projected Annualized Net Interest Income as of June 30, 2020 Fixed vs. Floating Rate Loans at September 30, 2020 Approximately 67.29% of floating rate loans have floors – Weighted average floor of 5.06% ■ Net Interest Income Note: Given the recent decreases in market interest rates, the Bank did not model a 200-basis point decrease in interest rates at June 30, 2020
Outlook: Loan and Deposit growth, Margin Expansion, Operating Leverage Loan Growth Core Deposit Funding Performance Maintain a diversified commercial real estate portfolio Maintain CRE concentration below our internal limitsCapture market share from larger competitors through differentiated service Corporate Cash Management relationshipsSupport development of retail banking franchiseExisting relationshipsConsider new retail banking centersContinue to provide cash management service to digital currency related clientsExpand debit card issuing business to generate additional low-cost core deposits and fee incomeFuture initiatives: Introduce merchant acquiring services and correspondent banking services Expect future profitability to be driven by organic growthGrowth: Demonstrated ability to capture market shareRate benefit: Low cost, core deposits funding short duration assetsOur growth initiatives will yield enhanced profitability and value to the MCB franchise. Balance Sheet Growth = Long-Term Profitable Relationships
Appendix
MCB Selected Global Payment Clients Debit Card For teens with parental spending controls and financial literacy lessons Metropolitan Commercial BankIssuing Bank Debit Card Premier mobile service provider in the Caribbean and Central America for money transfer Metropolitan Commercial BankIssuing Bank Debit Card | Digital Currency General spend prepaid card that allows consumers to earn rewards paid in digital currency Metropolitan Commercial BankIssuing Bank Debit CardGPR card that can be used to originate low cost transfers to Mexico for consumers Metropolitan Commercial BankIssuing Bank Debit Card | Digital Currency Consumers use debit card to spend US$ that is funded by digital currency Metropolitan Commercial BankIssuing Bank Payments ProcessorAcquiring bank for a company enabling mass payouts for the marketplace and freelancers Metropolitan Commercial BankGlobal Payment Services Digital Currency Banking the e-wallet behind their speed routing for best price execution technology Metropolitan Commercial BankHolding bank for US$ held in e-wallet Debit Card & Payment SolutionsFocused on CoreCard Software and expanding footprint in the FinTech industry Metropolitan Commercial BankStrategic Partner
MCB Selected Global Payment Clients Debit Card Issuer of debit cards linked to margin accounts for the largest U.S. electronic brokerage firm Metropolitan Commercial BankIssuing Bank Payments PlatformProviding global payment services via banking relationships throughout the world Metropolitan Commercial BankGlobal payment services Debit Card General Purpose Reloadable cards and remittance products using the Univision card Metropolitan Commercial BankAcquiring Bank for Cross Border Payments Payments ProcessorDigital check cashing and payment services Metropolitan Commercial BankSponsor Bank Deposit relationships for settlement and operating accounts. Cash management services Metropolitan Commercial Bank Money Transfer CompanyAcquiring bank enabling money transfers domestically and cross border Metropolitan Commercial BankGlobal payment services