Metropolitan Bank (US:MCB)2024-08-02 20:05Financial Performance - Net income for Q2 2024 was $16.8 million, an increase of $1.2 million from $15.6 million in Q2 2023, driven by a $7.8 million increase in net interest income[114]. - For the six months ended June 30, 2024, net income decreased to $33.0 million from $40.6 million in the same period of 2023, primarily due to a $20.7 million increase in non-interest expense[114]. - Non-interest income decreased by $1.7 million to $6.1 million for Q2 2024, driven by lower GPG revenue[126]. - Non-interest expense increased by $9.8 million to $42.3 million for Q2 2024, primarily due to a $3.2 million increase in compensation and benefits and $1.6 million in technology costs related to a digital transformation project[127]. Asset and Liability Management - Total assets increased to $7.3 billion as of June 30, 2024, up by $197.9 million, or 2.8%, from December 31, 2023[104]. - Total liabilities increased to $6.642 billion in Q2 2024 from $5.738 billion in Q2 2023, with stockholders' equity at $680.1 million[119]. - The Company met all applicable regulatory capital requirements to be considered "well capitalized" as of June 30, 2024[137]. - The Company’s asset and liability management function aims to evaluate interest rate risk while maximizing net income and maintaining liquidity and capital[139]. - The Company primarily manages interest rate risk by structuring its balance sheet and occasionally using derivative contracts[141]. Loan and Deposit Growth - Total loans reached $5.8 billion, reflecting a growth of $214.1 million, or 3.8%, primarily driven by a $198.4 million increase in CRE loans and a $53.8 million increase in C&I loans[106]. - Total deposits rose to $6.2 billion, an increase of $432.4 million, or 7.5%, from December 31, 2023, with non-interest-bearing demand deposits comprising 30.5% of total deposits[110]. - At June 30, 2024, the average balance of interest-bearing deposits was $4.2 billion, an increase from $3.9 billion at December 31, 2023[135]. - The Company had $541.0 million in unused loan commitments and $41.7 million in standby and commercial letters of credit as of June 30, 2024[131]. Interest Income and Expense - Net interest income for Q2 2024 was $61.5 million, compared to $53.8 million in Q2 2023, reflecting a net interest margin of 3.44%[119]. - Interest income increased by $26.8 million to $115.8 million in Q2 2024, attributed to an $832.4 million increase in the average balance of loans and a 77 basis point increase in loan yield[120]. - Interest expense increased by $19.0 million to $54.2 million for Q2 2024 compared to Q2 2023, primarily due to a $1.3 billion increase in the average balance of interest-bearing deposits[123]. - The total cost of deposits for Q2 2024 was 3.26%, compared to 2.19% in Q2 2023, reflecting increased funding costs[119]. - The total cost of funds for Q2 2024 increased by 82 basis points compared to Q2 2023, reflecting high short-term interest rates and competition for deposits[123]. Credit Quality - The allowance for credit losses (ACL) was $60.0 million as of June 30, 2024, compared to $58.0 million at December 31, 2023, with a provision of $2.1 million recorded for the first half of 2024[109]. - Non-performing loans decreased to $31.1 million, representing 0.53% of total loans, down from 0.92% at the end of 2023[108]. - The provision for credit losses for the six months ended June 30, 2024, was $2.1 million, reflecting loan growth[125]. Interest Rate Sensitivity - As of June 30, 2024, a 200 basis points increase in interest rates would lead to a 6.55% decrease in net interest income, while a 200 basis points decrease would result in a 5.42% increase[145]. - The estimated Economic Value of Equity (EVE) would decrease by 14.38% with a 200 basis points upward shift in interest rates, and increase by 6.66% with a 200 basis points downward shift[147]. - The projected net interest income at the current interest rate level is $249,046 thousand, with a potential increase to $255,588 thousand if rates decrease by 100 basis points[144]. - The Company’s EVE is projected to be $572,909 thousand at the current interest rate level, with potential decreases to $406,301 thousand if rates increase by 400 basis points[146]. - The sensitivity of net interest income to interest rate changes is analyzed through a simulation model, which incorporates various assumptions about loan prepayment speeds and deposit decay rates[142]. - The Company’s ALCO regularly reviews the sensitivity of earnings and market value of assets and liabilities to interest rate changes[139]. - The analysis of interest rate risk includes various hypothetical scenarios, which are subject to change based on market conditions and other variables[148]. Funding Strategy - The Company has diversified its funding strategy, reducing reliance on branches and increasing deposit gathering from various client segments[96]. - The Company operates six strategically located banking centers, enhancing its deposit franchise through long-standing client relationships[97]. - The estimated amount of FDIC uninsured deposits was $1.6 billion as of June 30, 2024[110].