Metropolitan Bank (MCB) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (unaudited) Unaudited consolidated financial statements for Q3 2019 reflect significant growth in assets, loans, and deposits, driving increased net income Consolidated Statements of Financial Condition As of September 30, 2019, total assets reached $3.24 billion, a 48.6% increase, primarily fueled by a $626.0 million increase in net loans and a $202.5 million increase in cash and cash equivalents Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2019 (thousands) | Dec 31, 2018 (thousands) | Change ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Assets | $3,243,171 | $2,182,644 | $1,060,527 | 48.6% | | Total cash and cash equivalents | $435,440 | $232,950 | $202,490 | 86.9% | | Net loans | $2,472,253 | $1,846,274 | $625,979 | 33.9% | | Total Liabilities | $2,952,169 | $1,918,127 | $1,034,042 | 53.9% | | Total deposits | $2,705,206 | $1,660,554 | $1,044,652 | 62.9% | | Total Stockholders' Equity | $291,002 | $264,517 | $26,485 | 10.0% | Consolidated Statements of Operations For Q3 2019, net income increased 8.0% to $7.7 million, and for the nine-month period, it rose 15.6% to $22.3 million, driven by higher net interest income Key Operating Results (in thousands, except per share data) | Metric | Q3 2019 (thousands) | Q3 2018 (thousands) | 9 Months 2019 (thousands) | 9 Months 2018 (thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $26,053 | $18,351 | $69,568 | $52,266 | | Provision for loan losses | $2,004 | $(453) | $1,923 | $2,294 | | Net Income | $7,683 | $7,113 | $22,271 | $19,268 | | Diluted EPS | $0.90 | $0.85 | $2.63 | $2.31 | Consolidated Statements of Cash Flows For the nine months ended September 30, 2019, cash and cash equivalents increased by $202.5 million, primarily due to $1.0 billion provided by financing activities Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2019 (thousands) | 2018 (thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $50,521 | $40,869 | | Net cash used in investing activities | $(851,595) | $(295,008) | | Net cash provided by financing activities | $1,003,564 | $147,333 | | Increase (decrease) in cash | $202,490 | $(106,806) | Notes to Unaudited Consolidated Financial Statements The notes detail accounting policies, recent pronouncements, and provide in-depth information on key financial statement components including loan and investment portfolios - The company adopted ASU 2014-09 (Revenue from Contracts) and ASU 2016-01 (Financial Instruments) on January 1, 2019, resulting in adjustments to opening retained earnings of $0.117 million and $0.068 million, respectively[31][32] - The loan portfolio grew to $2.50 billion, with commercial real estate loans making up 60.2% of the total portfolio as of September 30, 2019[47][119] - As of September 30, 2019, there was $2.2 million of total unrecognized compensation expense related to restricted stock awards, expected to be recognized over a weighted-average period of 2.26 years[78] - Off-balance-sheet commitments included $207.5 million in undrawn lines of credit and $36.3 million in letters of credit at September 30, 2019[96][167] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses significant growth in financial condition and operating results for Q3 and nine months 2019, driven by asset and deposit expansion Comparison of Financial Condition The company's financial condition strengthened significantly between December 31, 2018, and September 30, 2019, with total assets increasing by $1.06 billion to $3.24 billion - Total assets grew to $3.24 billion at Sep 30, 2019, from $2.18 billion at Dec 31, 2018[112] - Total deposits increased by $1.05 billion (63.5%) during the first nine months of 2019, reaching $2.71 billion; specialty deposits grew to $1.26 billion, representing 46.5% of total deposits[114] - Loan production for the nine months ended Sep 30, 2019 was $839.7 million, a significant increase from $528.2 million in the same period of 2018[112] Asset Quality Asset quality remains strong, despite an increase in non-performing loans to $4.7 million, primarily due to specific residential and taxi medallion loans Non-Performing Assets (in thousands) | Category | Sep 30, 2019 (thousands) | Dec 31, 2018 (thousands) | | :--- | :--- | :--- | | Total non-accrual loans | $3,998 | $50 | | Accruing loans 90+ days past due | $716 | $239 | | Total non-performing loans | $4,714 | $289 | | Ratio of non-performing loans to total loans | 0.19% | 0.02% | - The ALLL to total loans ratio was 0.98% at September 30, 2019, compared to 1.02% at December 31, 2018[131] - Net recoveries for the nine months ended Sep 30, 2019 were $3.6 million, including $4.2 million in recoveries from previously charged-off taxi medallion loans[131][50] Results of Operations Net income for Q3 2019 increased to $7.7 million, and for the nine-month period, it grew to $22.3 million, primarily driven by a significant increase in net interest income Net Income Comparison (in thousands) | Period | 2019 (thousands) | 2018 (thousands) | Change ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Q3 Net Income | $7,683 | $7,113 | $570 | 8.0% | | 9-Month Net Income | $22,271 | $19,268 | $3,003 | 15.6% | Liquidity and Capital Resources The company maintains a strong liquidity position, with cash and cash equivalents increasing to $435.4 million, and remains 'Well-Capitalized' under regulatory guidelines - Cash and cash equivalents totaled $435.4 million at Sep 30, 2019, up from $233.0 million at Dec 31, 2018[170] - The Bank is subject to Basel III capital rules and was fully compliant, with a capital conservation buffer of 2.5% effective January 1, 2019[177][178] Bank Capital Ratios (as of Sep 30, 2019) | Ratio | Bank Actual | 'Well Capitalized' Minimum | | :--- | :--- | :--- | | Tier 1 leverage ratio | 10.3% | 5.0% | | Common equity tier 1 | 12.2% | 6.5% | | Tier 1 risk-based capital | 12.2% | 10.0% | | Total risk-based capital | 13.1% | 8.0% | Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk through ALCO using NII at-risk and EVE simulation models, without derivative contracts Net Interest Income Sensitivity (Year 1 Forecast) | Rate Change (bps) | Change from Forecast (%) | | :--- | :--- | | +200 | (7.77)% | | +100 | (3.94)% | | 0 | 0.00% | | -100 | 5.55% | Economic Value of Equity (EVE) Sensitivity | Rate Change (bps) | Change in EVE (%) | | :--- | :--- | | +200 | (13.57)% | | +100 | (5.43)% | | 0 | 0.00% | | -100 | (2.95)% | - The company manages interest rate risk by structuring its balance sheet and does not use derivative contracts[184] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal control over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures are effective as of September 30, 2019[193] - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[193] PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal actions arising from normal business activities, with management believing no material impact on financial condition or liquidity - As of September 30, 2019, management opines that any liability from pending or threatened legal actions will not be material to the Company's financial condition[195] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K and prior Quarterly Report - The company's evaluation of its risk factors has not changed materially from those disclosed in its 2018 Annual Report on Form 10-K and the prior quarterly report[196] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the reporting period - None[197] Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - None[198] Mine Safety Disclosures This item is not applicable to the company - Not applicable[199] Other Information There was no other information to report for the period - None[200] Exhibits This section provides an index of the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO and XBRL data files - The report includes CEO and CFO certifications (Exhibits 31.1, 31.2, 32) and XBRL filings as required[203]