Metropolitan Bank (MCB) - 2024 Q3 - Quarterly Report

Financial Performance - Net income for Q3 2024 was $12.3 million, a decrease of$ 9.8 million from $22.1 million in Q3 2023, primarily due to a$ 20.3 million increase in non-interest expense[127] - For the nine months ended September 30, 2024, net income was $45.3 million, down$ 17.4 million from $62.7 million in the same period of 2023, attributed to a$ 41.0 million rise in non-interest expense[127] - Non-interest income decreased by $1.9 million to$ 19.4 million for the nine months ended September 30, 2024, compared to the same period in 2023, mainly due to lower GPG revenue[140] - Non-interest expense increased by $41.0 million to$ 135.4 million for the nine months ended September 30, 2024, compared to the same period in 2023, largely due to a $10 million regulatory reserve and increased technology costs[142] Asset and Deposit Growth - Total assets increased to$ 7.4 billion as of September 30, 2024, reflecting a growth of $335.7 million, or 4.7%, from December 31, 2023[114] - Total deposits reached$ 6.3 billion, an increase of $532.6 million, or 9.3%, from December 31, 2023, with non-interest-bearing demand deposits comprising 28.4% of total deposits[121] - Total loans amounted to$ 5.9 billion, up by $272.3 million, or 4.8%, from December 31, 2023, driven primarily by a$ 315.1 million increase in CRE loans[116] - The Company had $611.9 million in unused loan commitments and$ 36.6 million in standby and commercial letters of credit as of September 30, 2024[145] Loan Quality and Credit Losses - Non-performing loans decreased to $30.9 million, or 0.53% of total loans, down from$ 51.9 million, or 0.92%, at December 31, 2023[120] - The allowance for credit losses (ACL) was $62.5 million, an increase from$ 58.0 million at December 31, 2023, with a provision of $4.8 million recorded for the nine months ended September 30, 2024[120] Interest Income and Margin - Interest income increased by$ 22.6 million to $120.5 million in Q3 2024 compared to$ 97.9 million in Q3 2023, driven by a $606.2 million increase in the average balance of loans[135] - The net interest margin for Q3 2024 was 3.62%, up from 3.27% in Q3 2023, reflecting an increase in loan yields and a decrease in borrowed funds[133] - The average yield on loans increased by 72 basis points in Q3 2024 compared to Q3 2023, due to rising market interest rates and disciplined loan pricing[135] - For the nine months ended September 30, 2024, the net interest margin was 3.49%, slightly down from 3.53% in the same period of 2023, due to increased funding costs[134] Interest Rate Sensitivity - As of September 30, 2024, a 200 basis points increase in interest rates would lead to a 6.53% decrease in net interest income, while a 200 basis points decrease would result in a 6.5% increase in net interest income[165] - The estimated effective tax rate for the nine months ended September 30, 2024, was 31.1%, up from 28.0% for the same period in 2023[143] - The Economic Value of Equity (EVE) would decrease by 14.14% with a 200 basis points increase in interest rates, and increase by 6.03% with a 200 basis points decrease[168] - The estimated EVE at September 30, 2024, is$ 554,520,000 under current interest rates[167] Capital and Funding - The Company had $150.0 million of FHLB advances as of September 30, 2024, compared to$ 99.0 million of Federal funds purchased at December 31, 2023[124] - At September 30, 2024, the Company maintained a Tier 1 risk-based capital ratio of 12.2%, up from 11.8% at December 31, 2023[156] - The total cost of deposits for Q3 2024 was 3.32%, up from 2.74% in Q3 2023, indicating rising funding costs[130] Asset Management and Risk - The company’s asset and liability management function aims to evaluate interest rate risk while maximizing net income and maintaining liquidity and capital[158] - The company primarily manages interest rate risk by structuring its balance sheet and occasionally using derivative contracts[160] - The sensitivity of projected annualized net interest income to interest rate changes is assessed through a simulation model[161] - The company’s asset and liability management committee regularly reviews the sensitivity of earnings and market value of assets and liabilities to interest rate changes[158] - The analysis of interest rate risk is crucial as fluctuations can impact both income and the fair value of interest-earning assets and liabilities[159]