Metropolitan Bank (MCB) - 2025 Q2 - Quarterly Report

General Information This section provides general filing details for Metropolitan Bank Holding Corp.'s Quarterly Report on Form 10-Q Filing Details This Quarterly Report on Form 10-Q for Metropolitan Bank Holding Corp. covers the period ended June 30, 2025, detailing its status as an accelerated filer - Filing is a Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] - Registrant is an accelerated filer and not a shell company[4][5] Common Stock and Exchange Information | Metric | Value | | :--- | :--- | | Common Stock Trading Symbol | MCB | | Exchange Registered On | New York Stock Exchange | | Shares Outstanding (July 28, 2025) | 10,421,384 | Glossary of Common Terms and Acronyms This section defines key financial and regulatory terminology used throughout the Form 10-Q to enhance reader comprehension Glossary This section provides a glossary of common terms and acronyms used throughout the Form 10-Q, defining key financial and regulatory terminology to aid reader comprehension - The glossary defines terms and acronyms such as ACL (Allowance for credit losses), AFS (Available-for-sale), CECL (Current Expected Credit Loss), CRE (Commercial real estate), FDIC (Federal Deposit Insurance Corporation), FHLB (Federal Home Loan Bank), GAAP (U.S. Generally accepted accounting principles), and SEC (U.S. Securities and Exchange Commission)[8][9] Note About Forward-Looking Statements This section cautions that the report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially Forward-Looking Statements Disclaimer This section warns readers that the report contains forward-looking statements, which are not guarantees of future performance and are subject to various risks and uncertainties. These factors, detailed in the Company's 10-K and this 10-Q, could cause actual results to differ materially from expectations - Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors that are difficult to predict and generally beyond the Company's control[11] - Key risk factors include managing credit risk, changes in loan demand and real estate values, borrower and depositor concentrations, Federal Reserve interest rate policies, general economic conditions, loss of key personnel or clients, system failures or cybersecurity breaches, and regulatory changes[11][13] - The Company undertakes no obligation to publicly release revisions to forward-looking statements, except as required by law[12] PART I. FINANCIAL INFORMATION This part presents the unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (unaudited) This section presents the unaudited consolidated financial statements, including the statements of financial condition, operations, comprehensive income, changes in stockholders' equity, and cash flows, along with detailed notes. The Company reported an increase in total assets, loans, and deposits, alongside higher net income, but also an increase in provision for credit losses Consolidated Statements of Financial Condition Total assets increased to $7.85 billion at June 30, 2025, up 7.6% from December 31, 2024, driven by growth in net loans and investment securities, with total deposits also increasing significantly Total Assets (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $7,853,849 | | December 31, 2024 | $7,300,749 | | Change | +$553,100 (+7.6%) | Net Loans (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $6,538,718 | | December 31, 2024 | $5,970,803 | | Change | +$567,915 (+9.5%) | Total Deposits (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $6,791,306 | | December 31, 2024 | $5,982,973 | | Change | +$808,333 (+13.5%) | Consolidated Statements of Operations Net income increased for both the three and six months ended June 30, 2025, driven by higher net interest income despite a significant increase in the provision for credit losses and the absence of Global Payments Group (GPG) revenue Net Income (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $18,767 | $16,799 | +$1,968 (+11.7%) | | Six months ended June 30 | $35,121 | $33,002 | +$2,119 (+6.4%) | Net Interest Income (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $73,647 | $61,539 | +$12,108 (+19.7%) | | Six months ended June 30 | $140,599 | $121,248 | +$19,351 (+16.0%) | Provision for Credit Losses (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $6,378 | $1,538 | +$4,840 (+314.7%) | | Six months ended June 30 | $10,884 | $2,066 | +$8,818 (+426.8%) | Consolidated Statements of Comprehensive Income Total comprehensive income increased substantially for both periods ended June 30, 2025, primarily due to unrealized gains on available-for-sale (AFS) securities Total Comprehensive Income (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $20,482 | $16,684 | +$3,798 (+22.8%) | | Six months ended June 30 | $42,800 | $33,733 | +$9,067 (+26.9%) | Unrealized Gain (Loss) on AFS Securities, net (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $3,072 | $103 | | Six months ended June 30 | $10,062 | $(2,463) | Consolidated Statements of Changes in Stockholders' Equity This statement details movements in stockholders' equity, including significant treasury stock purchases and the impact of net income and other comprehensive income for the six months ended June 30, 2025 Treasury Stock Purchased (Six months ended June 30, 2025, in thousands) | Item | Amount | | :--- | :--- | | Treasury stock purchased | $(50,527) | Total Stockholders' Equity (June 30, 2025, in thousands) | Item | Amount | | :--- | :--- | | Total stockholders' equity | $722,968 | - As of July 28, 2025, there were 10,421,384 shares of common stock outstanding[5] Consolidated Statements of Cash Flows Net cash provided by operating activities decreased, while net cash used in investing activities significantly increased due to higher loan originations, and net cash provided by financing activities rose substantially from increased deposits Net Cash Provided by (Used in) Activities (Six months ended June 30, in thousands) | Activity | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Operating activities | $26,149 | $60,252 | $(34,103) (-56.6%) | | Investing activities | $(588,145) | $(223,877) | $(364,268) (+162.7%) | | Financing activities | $514,181 | $138,822 | +$375,359 (+270.4%) | Net Increase (Decrease) in Deposits (Six months ended June 30, in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Six months ended June 30 | $808,333 | $432,370 | Notes to Unaudited Consolidated Financial Statements These notes provide detailed disclosures and explanations for the unaudited consolidated financial statements, covering organizational structure, accounting policies, investment securities, loans and credit losses, borrowings, stockholders' equity, earnings per share, stock compensation, fair value measurements, AOCI, commitments and contingencies, revenue recognition, derivatives, and subsequent events Note 1 — Organization Metropolitan Bank Holding Corp. operates through its wholly-owned subsidiary, Metropolitan Commercial Bank, providing a range of banking products and services primarily in the New York metropolitan area - The Company's primary lending products are Commercial Real Estate (CRE) loans (including multi-family loans) and Commercial and Industrial (C&I) loans[25] - Primary deposit products include checking, savings, and term deposit accounts, all FDIC insured[26] - Specialized services include corporate cash management, financial solutions for government entities, real estate transaction services (title/escrow, Section 1031 exchanges), and EB-5 Program accounts[26] Note 2 — Basis of Presentation The unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information, incorporating management's estimates and assumptions - Unaudited financial statements conform with GAAP and predominant practices within the U.S. banking industry for interim financial information[28] - Management's estimates and assumptions, based on available information, affect reported amounts and disclosures, with actual results potentially differing due to changes in interest rates, economic performance, inflation, and borrower financial condition[29] Note 3 — Summary of Recent Accounting Pronouncements The Company adopted ASU 2023-07 "Segment Reporting" on January 1, 2024, and determined all banking divisions meet aggregation criteria for segment reporting - Adopted ASU 2023-07 "Segment Reporting (Topic 280) - Improvement to Reportable Segment Disclosures" on January 1, 2024[33] - All banking divisions meet the aggregation criteria of ASC 280 due to serving a similar base of primarily commercial clients with similar products and services, managed through similar processes[33] Note 4 — Investment Securities Total investment securities increased to $944.2 million at June 30, 2025, from $915.8 million at December 31, 2024, driven by purchases of available-for-sale (AFS) securities and unrealized gains Total Securities (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $944,206 | | December 31, 2024 | $915,751 | | Change | +$28,455 (+3.1%) | - Unrealized losses on AFS securities are primarily due to changes in market interest rates, and no Allowance for Credit Losses (ACL) was recognized for these securities[39][40] Securities Pledged to Support Wholesale Funding (in thousands) | Date | Amount Pledged | | :--- | :--- | | June 30, 2025 | $779,800 | | December 31, 2024 | $750,300 | Note 5 — Loans and Allowance for Credit Losses Net loans increased by 9.6% to $6.61 billion at June 30, 2025, with the Allowance for Credit Losses (ACL) rising to $74.1 million, reflecting loan growth and specific provisioning, while non-accrual loans also increased Loans, net of deferred fees and costs (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $6,612,789 | | December 31, 2024 | $6,034,076 | | Change | +$578,713 (+9.6%) | Allowance for Credit Losses (ACL) (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $74,071 | | December 31, 2024 | $63,273 | | Change | +$10,798 (+17.1%) | Non-accrual Loans (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $39,938 | | December 31, 2024 | $32,528 | | Change | +$7,410 (+22.8%) | Note 6 — Borrowings Federal funds purchased and FHLBNY advances decreased significantly at June 30, 2025, with no outstanding FRB term loans as the Bank Term Funding Program (BTFP) ceased new loans Federal Funds Purchased (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $50,000 | | December 31, 2024 | $210,000 | | Change | $(160,000) (-76.2%) | FHLBNY Advances (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $150,000 | | December 31, 2024 | $240,000 | | Change | $(90,000) (-37.5%) | - The Company had $2.9 billion in available secured wholesale funding borrowing capacity at June 30, 2025[61] Note 7 — Stockholders' Equity The Company completed a $50 million share repurchase program in May 2025 and approved a new $50 million plan in July 2025, totaling $100 million in authorized repurchases since March 2025 - In May 2025, the Company used substantially all available capacity under a $50 million share repurchase program, purchasing 878,807 shares at an average price of $56.90 per share[62] - On July 17, 2025, a new share repurchase plan was approved for an additional $50 million of common stock[63] - In aggregate, $100 million of share repurchases have been authorized since March 2025[63] Note 8 — Earnings Per Share Both basic and diluted earnings per common share (EPS) increased for the three and six months ended June 30, 2025, reflecting improved net income Basic Earnings Per Common Share | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $1.78 | $1.50 | +$0.28 (+18.7%) | | Six months ended June 30 | $3.23 | $2.96 | +$0.27 (+9.1%) | Diluted Earnings Per Common Share | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $1.76 | $1.50 | +$0.26 (+17.3%) | | Six months ended June 30 | $3.20 | $2.96 | +$0.24 (+8.1%) | Note 9 — Stock Compensation Plan The Company maintains the 2022 and 2019 Equity Incentive Plans, with the 2022 EIP recently amended to increase authorized shares, and $11.3 million in unrecognized compensation expense for restricted stock awards - The 2022 Equity Incentive Plan was amended on May 28, 2025, to increase the number of shares of common stock that may be issued by an additional 750,000[67] - As of June 30, 2025, there was $11.3 million of total unrecognized compensation expense related to restricted stock awards, expected to be recognized over a weighted-average period of 2.16 years[69] - 52,807 Performance Restricted Share Units (PRSUs) were awarded in the first quarter of 2025, vesting over three years if performance criteria are met[73] Note 10 — Fair Value of Financial Instruments The Company measures financial instruments at fair value using a three-level hierarchy, with recurring measurements primarily for AFS securities and derivatives using Level 2 inputs, and non-recurring measurements for collateral-dependent loans using Level 3 inputs - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[74][75] - Assets measured at fair value on a recurring basis include AFS securities, equity investments, and derivative contracts, with most securities categorized as Level 2[76][78] - Collateral dependent loans are measured at fair value on a non-recurring basis using Level 3 inputs, with a net carrying amount of $21.6 million at June 30, 2025[77][78] Note 11 — Accumulated Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income (Loss) (AOCI), net of tax, decreased by $7.7 million to $(45.5) million at June 30, 2025, primarily due to unrealized gains on AFS securities Total Accumulated Other Comprehensive Income (Loss), Net of Tax (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $(45,455) | | December 31, 2024 | $(53,134) | | Change | +$7,679 (+14.5%) | Unrealized Gain (Loss) on AFS Securities, Net of Tax (Six months ended June 30, in thousands) | Period | Amount | | :--- | :--- | | 2025 | $10,062 | | 2024 | $(2,463) | Note 12 — Commitments and Contingencies Off-balance-sheet risks include $715.8 million in unused loan commitments and $27.9 million in standby and commercial letters of credit, with legal and regulatory investigations related to a prepaid debit card product program now resolved Off-Balance-Sheet Financial Instruments (in thousands) | Instrument | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Unused loan commitments | $715,765 | $695,382 | | Standby and commercial letters of credit | $27,870 | $31,920 | - Investigations by the FRB, NYSDFS, and the Attorney General of the State of Washington concerning a prepaid debit card product program have been resolved[89] - Management believes the aggregate liability from other pending or threatened legal/regulatory matters is not expected to be material to the Company's financial condition, results of operations, and liquidity[91] Note 13 — Revenue from Contracts with Customers Non-interest income from customer contracts decreased significantly for both periods ended June 30, 2025, primarily due to the absence of Global Payments Group (GPG) revenue after the Company exited the BaaS business Total Revenue from Contracts with Customers (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $2,610 | $6,147 | $(3,537) (-57.5%) | | Six months ended June 30 | $6,175 | $13,174 | $(6,999) (-53.1%) | - Global Payments Group (GPG) revenue was zero in 2025, compared to $3.686 million (Q2 2024) and $7.755 million (6 months 2024), due to the Company exiting the GPG BaaS business[92][94] Note 14 — Derivatives The Company uses interest rate swaps as derivatives, with $1.55 billion in notional amount designated as cash flow hedges and $69.0 million for non-designated hedges to provide clients with fixed-rate loan options Derivative Notional Amounts (June 30, 2025, in thousands) | Type | Notional Amount | | :--- | :--- | | Derivatives designated as hedges | $1,550,000 | | Derivatives not designated as hedges | $69,000 | - Derivatives designated as hedges are used to manage interest rate risk on certain deposit liabilities and borrowings[96] - Derivatives not designated as hedges are commercial loan interest rate swap agreements that convert client variable-rate loans to fixed-rate loans[97] Note 15 — Subsequent Events On July 17, 2025, the Board of Directors declared a quarterly cash dividend of $0.15 per share, marking the Company's first cash dividend since its initial public offering in 2017 - On July 17, 2025, the Board of Directors declared a quarterly dividend of $0.15 per share on the Company's common stock[99] - This is the Company's first cash dividend since its initial public offering in 2017[99] - The dividend is payable on August 11, 2025, to holders of record on July 28, 2025[99] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, highlighting significant increases in total assets, loans, and deposits, improved net interest income and margin, and recent capital allocation decisions Company Background Metropolitan Bank Holding Corp., through Metropolitan Commercial Bank, serves small businesses, middle-market enterprises, public entities, and affluent individuals primarily in the New York metropolitan area and South Florida, focusing on CRE and C&I lending - The Company's primary market is the New York metropolitan area, with a focus on South Florida[101] - Primary lending products are Commercial Real Estate (CRE) and Commercial & Industrial (C&I) loans[102] - Deposit gathering strategies include corporate cash management, retail banking, tailored solutions for government entities, and specialized real estate transaction services[102] Recent Events The Company declared its first quarterly cash dividend since its 2017 IPO and completed a $50 million share repurchase program, authorizing a new $50 million program in July 2025 - On July 17, 2025, the Board of Directors declared a quarterly dividend of $0.15 per share, the Company's first cash dividend since its 2017 IPO[103] - In May 2025, the Company completed a $50 million share repurchase program, acquiring 878,807 shares at an average price of $56.90 per share[104] - A new $50 million share repurchase plan was approved on July 17, 2025, bringing total authorized repurchases since March 2025 to $100 million[104] Critical Accounting Policies Management identifies the Allowance for Credit Losses (ACL) as the most critical accounting policy, involving significant judgments and assumptions susceptible to material change due to economic and market uncertainties - The Allowance for Credit Losses (ACL) is considered the Company's most critical accounting policy, involving complex and subjective decisions[107] Allowance for Credit Losses The ACL is an estimate subject to significant judgment and short-term change, influenced by economic forecasts, collateral values, and regulatory environment, with a hypothetical sensitivity analysis indicating an 8.4% increase under adverse macroeconomic forecast changes - The ACL is an estimate subject to significant judgment and short-term change due to uncertainties in economic forecasts, collateral values, and future cash flows[108] - The Company relies on external models and economic forecasts, making qualitative adjustments to capture potential limitations and emerging risks not fully represented in the data[109] - A hypothetical sensitivity analysis shows that adverse changes in macroeconomic forecasts could result in an approximate $6.2 million, or 8.4%, net increase in the total ACL for loans and loan commitments as of June 30, 2025[110] Discussion of Financial Condition The Company's total assets increased by $553.1 million, or 7.6%, to $7.9 billion at June 30, 2025, compared to December 31, 2024 Total Assets (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $7,853,849 | | December 31, 2024 | $7,300,749 | | Change | +$553,100 (+7.6%) | Total Cash and Cash Equivalents Total cash and cash equivalents decreased by $47.8 million, or 23.9%, to $152.5 million at June 30, 2025, primarily due to an increase in the loan book and a decrease in wholesale funding, partially offset by an increase in deposits Total Cash and Cash Equivalents (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $152,453 | | December 31, 2024 | $200,268 | | Change | $(47,815) (-23.9%) | - The decrease reflects an increase in the loan book ($578.7 million) and a $250 million decrease in wholesale funding, partially offset by an $808.3 million increase in deposits[113] Investments Total securities increased by $28.5 million, or 3.1%, to $944.2 million at June 30, 2025, mainly due to the purchase of AFS securities and unrealized gains, partially offset by paydowns and maturities Total Securities (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $944,206 | | December 31, 2024 | $915,751 | | Change | +$28,455 (+3.1%) | - The increase was primarily due to the purchase of $85.1 million of AFS securities and $14.5 million in unrealized gains on AFS securities, partially offset by $71.2 million in paydowns and maturities[114] Loans Total loans, net of deferred fees and costs, increased by $578.7 million, or 9.6%, to $6.6 billion at June 30, 2025, primarily driven by a $252.5 million increase in CRE loans, with the healthcare industry representing the largest concentration at 40.0% of total loans Total Loans, Net of Deferred Fees and Costs (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $6,612,789 | | December 31, 2024 | $6,034,076 | | Change | +$578,713 (+9.6%) | - The increase was primarily due to a $252.5 million increase in CRE loans (including owner-occupied)[115] - The largest concentration in the loan portfolio is to the healthcare industry, amounting to $2.6 billion (40.0% of total loans), including $2.5 billion in skilled nursing facilities[116] Asset Quality Non-performing loans increased to $39.9 million at June 30, 2025, from $32.6 million at December 31, 2024, primarily due to specific secured CRE, residential, and unsecured C&I loans, raising the non-performing loans to total loans ratio to 0.60% Non-performing Loans (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $39,938 | | December 31, 2024 | $32,600 | | Change | +$7,338 (+22.5%) | Key Asset Quality Ratios | Ratio | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Non-performing loans to total loans | 0.60% | 0.54% | | Allowance for credit losses to total loans | 1.12% | 1.05% | | Allowance for credit losses to non-performing loans | 185.5% | 194.1% | - The increase in non-performing loans was primarily due to two secured CRE loans, a longstanding secured residential loan, and a single unsecured C&I loan[117] Allowance for Credit Losses – Loans and Loan Commitments The Allowance for Credit Losses (ACL) increased to $74.1 million at June 30, 2025, from $63.3 million at December 31, 2024, with a $10.8 million provision for credit losses reflecting loan growth and specific provisioning Allowance for Credit Losses (ACL) (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $74,071 | | December 31, 2024 | $63,273 | | Change | +$10,798 (+17.1%) | - A $10.8 million provision for credit losses was recorded for the six months ended June 30, 2025, primarily reflecting loan growth and provisioning for a commercial real estate loan and an unsecured C&I loan[118] Deposits Total deposits increased by $808.3 million, or 13.5%, to $6.8 billion at June 30, 2025, driven by increases across most deposit verticals, while non-interest-bearing demand deposits decreased as a percentage of total deposits to 21.0% Total Deposits (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $6,791,306 | | December 31, 2024 | $5,982,973 | | Change | +$808,333 (+13.5%) | Non-interest-bearing Demand Deposits | Date | % of Total Deposits | | :--- | :--- | | June 30, 2025 | 21.0% | | December 31, 2024 | 22.3% | - The aggregate estimated amount of FDIC uninsured deposits was $1.8 billion at June 30, 2025[119] Borrowings Federal funds purchased decreased by $160.0 million to $50.0 million, and FHLBNY advances decreased by $90.0 million to $150.0 million at June 30, 2025, reflecting reduced reliance on these funding sources Federal Funds Purchased (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $50,000 | | December 31, 2024 | $210,000 | | Change | $(160,000) (-76.2%) | FHLBNY Advances (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $150,000 | | December 31, 2024 | $240,000 | | Change | $(90,000) (-37.5%) | Accumulated Other Comprehensive Income Accumulated other comprehensive loss, net of tax, decreased by $7.7 million to $45.5 million at June 30, 2025, primarily due to unrealized gains on AFS securities from changes in market interest rates Accumulated Other Comprehensive Loss, Net of Tax (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $(45,455) | | December 31, 2024 | $(53,134) | | Change | +$7,679 (+14.5%) | - The decrease in comprehensive loss was primarily due to unrealized gains on AFS securities, reflecting changes in market interest rates[122] Results of Operations Net income increased for both the three and six months ended June 30, 2025, driven by higher net interest income and reduced professional fees, partially offset by increased provision for credit losses, absence of GPG revenue, and higher compensation expenses Net Income (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $18,767 | $16,799 | +$1,968 (+11.7%) | | Six months ended June 30 | $35,121 | $33,002 | +$2,119 (+6.4%) | - Key drivers for net income increase include a $12.1 million increase in net interest income (Q2) and a $3.3 million decrease in professional fees (Q2), partially offset by a $4.8 million increase in provision for credit losses (Q2), absence of $3.7 million GPG revenue (Q2), and a $1.7 million increase in compensation and benefits (Q2)[123][124] Net Interest Income and Net Interest Margin Net interest income increased significantly, and net interest margin improved to 3.83% for Q2 2025 and 3.76% for the six months ended June 30, 2025, supported by rigorous loan and deposit pricing initiatives and a decrease in the total cost of funds Net Interest Income (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $73,647 | $61,539 | +$12,108 (+19.7%) | | Six months ended June 30 | $140,599 | $121,248 | +$19,351 (+16.0%) | Net Interest Margin | Period | 2025 | 2024 | Change (bps) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | 3.83% | 3.44% | +39 bps | | Six months ended June 30 | 3.76% | 3.42% | +34 bps | - The increase in net interest margin for the six months ended June 30, 2025, was supported by rigorous loan and deposit pricing initiatives and an 18 basis point decrease in the total cost of funds[133] Interest Income Interest income increased by $11.3 million (9.8%) to $127.0 million for Q2 2025 and by $17.7 million (7.8%) to $245.8 million for the six months ended June 30, 2025, primarily due to a substantial increase in the average balance of loans Total Interest Income (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $127,043 | $115,761 | +$11,282 (+9.8%) | | Six months ended June 30 | $245,813 | $228,096 | +$17,717 (+7.8%) | - The average balance of loans increased by $732.4 million for the second quarter of 2025 and by $619.7 million for the six months ended June 30, 2025, compared to the prior year periods[134][135] Interest Expense Interest expense decreased by $826 thousand (1.5%) to $53.4 million for Q2 2025 and by $1.6 million (1.5%) to $105.2 million for the six months ended June 30, 2025, primarily due to a decrease in the total cost of funds, partially offset by an increase in interest-bearing deposits Total Interest Expense (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $53,396 | $54,222 | $(826) (-1.5%) | | Six months ended June 30 | $105,214 | $106,848 | $(1,634) (-1.5%) | - The decrease was primarily due to a 24 basis point decrease in total cost of funds for Q2 2025 and an 18 basis point decrease for the six months ended June 30, 2025[136][137] - This was partially offset by a $902.9 million increase in the average balance of interest-bearing deposits for Q2 2025 and an $822.6 million increase for the six months ended June 30, 2025[136][137] Provision for Credit Losses – Loans and Loan Commitments The provision for credit losses was $6.4 million for the three months ended June 30, 2025, and $10.9 million for the six months ended June 30, 2025, reflecting continued loan growth and specific provisioning Provision for Credit Losses (in thousands) | Period | Amount | | :--- | :--- | | Three months ended June 30, 2025 | $6,378 | | Six months ended June 30, 2025 | $10,884 | - The provision reflects loan growth and specific provisioning for a CRE loan and an unsecured C&I loan[138] Non-Interest Income Non-interest income decreased significantly by $3.5 million (57.5%) to $2.6 million for Q2 2025 and by $6.9 million (53.1%) to $6.2 million for the six months ended June 30, 2025, primarily due to the absence of Global Payments Group (GPG) revenue Total Non-Interest Income (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $2,623 | $6,139 | $(3,516) (-57.3%) | | Six months ended June 30 | $6,261 | $13,143 | $(6,882) (-52.4%) | - The decrease was driven primarily by the absence of GPG revenue due to the exit from that business[139] Non-Interest Expense Non-interest expense increased by $852 thousand (2.0%) to $43.1 million for Q2 2025 and by $1.6 million (1.9%) to $85.8 million for the six months ended June 30, 2025, mainly due to higher compensation and benefits and increased deposit program related fees, partially offset by decreased professional fees Total Non-Interest Expense (in thousands) | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three months ended June 30 | $43,109 | $42,257 | +$852 (+2.0%) | | Six months ended June 30 | $85,831 | $84,157 | +$1,674 (+2.0%) | - Key drivers include a $1.7 million increase in compensation and benefits (Q2) and a $1.7 million increase in deposit program related fees (Q2), partially offset by a $3.3 million decrease in professional fees (Q2)[140][141] Income Tax Expense The estimated effective tax rate for the second quarter of 2025 was 29.9%, a slight increase from 29.7% in the second quarter of 2024 Estimated Effective Tax Rate | Period | 2025 | 2024 | | :--- | :--- | | Three months ended June 30 | 29.9% | 29.7% | Off-Balance Sheet Arrangements The Company's off-balance sheet risks primarily consist of unused loan commitments totaling $715.8 million and standby and commercial letters of credit amounting to $27.9 million at June 30, 2025 Off-Balance Sheet Financial Instruments (in thousands) | Instrument | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Unused loan commitments | $715,800 | $695,400 | | Standby and commercial letters of credit | $27,900 | $31,900 | Liquidity and Capital Resources This section details the Company's liquidity position, supported by deposit inflows and borrowing capacity, and its strong capital resources, meeting all 'well capitalized' regulatory requirements despite a slight decrease in capital ratios and an increased CRE concentration ratio Liquidity The Company's liquidity is maintained through deposit inflows, loan repayments, securities cash flows, and borrowing capacity, with substantial available secured wholesale funding borrowing capacity despite a decrease in cash and cash equivalents Cash and Cash Equivalents (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $152,500 | | December 31, 2024 | $200,300 | | Change | $(47,800) (-23.9%) | Total Deposits (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2025 | $6,800,000 | | December 31, 2024 | $5,982,973 | | Change | +$817,027 (+13.7%) | - The Company had $2.9 billion in cash on deposit with the FRBNY and available secured wholesale funding borrowing capacity at June 30, 2025[151] Capital Resources Both the Company and the Bank met all 'well capitalized' regulatory capital requirements at June 30, 2025, with capital ratios slightly decreasing but remaining well above minimums, and the non-owner-occupied CRE loan concentration ratio increasing to 371.9% - The Company and the Bank met all applicable regulatory capital requirements to be considered 'well capitalized' at June 30, 2025, and December 31, 2024[152] Company Capital Ratios (June 30, 2025 vs. December 31, 2024) | Ratio | June 30, 2025 | December 31, 2024 | Minimum Required | | :--- | :--- | :--- | :--- | | Tier 1 leverage ratio | 10.0% | 10.8% | 4.0% | | Common equity tier 1 | 10.8% | 11.9% | 4.5% | | Tier 1 risk-based capital ratio | 11.1% | 12.3% | 6.0% | | Total risk-based capital ratio | 12.2% | 13.3% | 8.0% | - Total non-owner-occupied CRE loans were 371.9% of risk-based capital at June 30, 2025 (vs. 346.1% at December 31, 2024), primarily due to the Bank funding the share repurchase program and anticipated quarterly dividends[152] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section addresses the Company's primary market risk exposure, interest rate risk (IRR), and how it is managed through balance sheet structuring and derivative contracts, using simulation models to assess sensitivity to interest rate changes General The Company's asset and liability management aims to evaluate and control interest rate risk (IRR) to maximize net income while maintaining liquidity and capital, with the ALCO overseeing this function - The principal objective is to evaluate and control interest rate risk (IRR) while maximizing net income and preserving adequate levels of liquidity and capital[154] - The Company is not subject to foreign exchange (FX) or commodity price risk[154] Interest Rate Risk Interest rate risk (IRR) is the Company's primary market risk, affecting income, expenses, and fair value, managed by prudently structuring the balance sheet, originating short-term fixed and floating rate loans, and occasionally using derivative contracts - Interest rate risk (IRR) is the Company's primary market risk exposure, impacting income, expense, and fair value of assets and liabilities[155] - IRR is managed by prudently structuring the balance sheet, originating fixed and floating rate loans with maturities less than five years, and using derivative contracts[156] Net Interest Income At-Risk A simulation model estimates the sensitivity of net interest income to interest rate changes, showing that a 200 basis point upward shift would decrease net interest income by 0.67%, while a 200 basis point downward shift would increase it by 2.05% - The Company analyzes net interest income sensitivity using a simulation model[157] Estimated Impact on Net Interest Income (Year 1, June 30, 2025) | Change in Interest Rates (basis points) | Change from Level | | :--- | :--- | | +200 | (0.67)% | | +100 | (0.19)% | | -100 | 0.70% | | -200 | 2.05% | Economic Value of Equity Analysis An Economic Value of Equity (EVE) model assesses the sensitivity of the Company's financial condition to interest rate changes, indicating that a 200 basis point upward shift would decrease EVE by 4.01%, while a 200 basis point downward shift would increase EVE by 0.28% - The Company analyzes the sensitivity of its financial condition to interest rate changes through an EVE model[160] Estimated Impact on EVE (June 30, 2025) | Change in Interest Rates (basis points) | Percent Change | | :--- | :--- | | +200 | (4.01)% | | +100 | (1.75)% | | -100 | 0.61% | | -200 | 0.28% | - These simulation analyses are hypothetical and subject to numerous assumptions, not representing a forecast of actual results[163][165] Item 4. Controls and Procedures Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the most recent fiscal quarter - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[166] - No material changes in the Company's internal control over financial reporting occurred during the most recent fiscal quarter[166] PART II. OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, defaults, mine safety disclosures, other information, and exhibits Item 1. Legal Proceedings The Company is involved in various legal and regulatory actions in the ordinary course of business, with management believing the aggregate liability from these matters is not expected to be material to the Company's financial condition, results of operations, and liquidity - There have been no material changes in legal proceedings previously disclosed in the 2024 Form 10-K[168] - Management's opinion is that the aggregate liability from pending or threatened legal actions is not expected to be material to the Company's financial condition, results of operations, and liquidity[168] Item 1A. Risk Factors There have been no material changes to the risk factors previously described in the Company's 2024 Form 10-K, and these existing risks could materially and adversely affect the Company's business, results of operations, or financial condition - No material changes to risk factors have occurred since the filing of the 2024 Form 10-K[169] - Any of the described risks could materially and adversely affect the Company's business, results of operations, or financial condition[169] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended June 30, 2025, the Company repurchased 649,881 shares of common stock at an average price of $57.24 per share, utilizing substantially all available capacity under a $50 million share repurchase program Common Stock Repurchases (Three months ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 1, 2025 to April 30, 2025 | 453,152 | $54.30 | | May 1, 2025 to May 31, 2025 | 196,729 | $63.91 | | June 1, 2025 to June 30, 2025 | — | — | | Total | 649,881 | $57.24 | - The Company used substantially all available capacity under a $50 million share repurchase program authorized on March 12, 2025[170] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[171] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[172] Item 5. Other Information On June 6, 2025, Nick Rosenberg, Executive Vice President and Chief Business Development Officer, adopted a Rule 10b5-1 trading arrangement for the sale of up to 8,250 shares of the Company's common stock, commencing September 17, 2025 - Nick Rosenberg, EVP and Chief Business Development Officer, adopted a Rule 10b5-1 trading arrangement on June 6, 2025[173] - The arrangement is for the sale of up to 8,250 shares of common stock, commencing on September 17, 2025, and continuing until all shares are sold or September 16, 2026[173] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate organizational documents, certifications from the Principal Executive Officer and Principal Financial Officer, and various XBRL taxonomy extension documents - Exhibits include the Certificate of Incorporation, Amended and Restated Bylaws, Certifications of the Principal Executive Officer and Principal Financial Officer, and XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbases[174] Signatures The report was duly signed on August 1, 2025, by Mark R. DeFazio, President and Chief Executive Officer, and Daniel F. Dougherty, Executive Vice President and Chief Financial Officer, on behalf of Metropolitan Bank Holding Corp - The report was signed by Mark R. DeFazio, President and Chief Executive Officer, and Daniel F. Dougherty, Executive Vice President and Chief Financial Officer[178] - The signing date for the report was August 1, 2025[178]