Metropolitan Bank Holding Corp. Reports Quarterly Net Income

Revenues Increased 48.1% Year-Over-Year

Loans Increased 28.1% Year-Over-Year

Return on Average Tangible Common Equity¹ of 17.1%

Metropolitan Bank Holding Corp. (the “Company”) (NYSE: MCB), the holding company for Metropolitan Commercial Bank (the “Bank”), reported net income of $25.0 million, or $2.23 per diluted common share, for the third quarter of 2022 compared to net income of $16.2 million, or $1.77 per diluted common share, for the third quarter of 2021.

Quarterly Financial Highlights Year-Over-Year:

• Net interest income of $63.3 million, an increase of 55.2%.
• Net income of $25.0 million, an increase of 53.9%.
• Diluted earnings per share of $2.23, an increase of 26.0%.
• Net interest margin of 3.85%, an increase of 115 basis points.
• Loans totaled $4.6 billion, an increase of 28.1%.
• Deposits were $5.7 billion, an increase of 5.0%.
• Book value per share was $53.26, up 5.5%, and tangible book value per share¹ was $52.37, up 5.7%.
• Return on average equity of 16.8% and return on average tangible common equity¹ of 17.1%.
• Efficiency ratio² improved to 45.1% compared to 47.1%.

Mark DeFazio, President and Chief Executive Officer, commented,

“I am very pleased with our third quarter and year-to-date results. MCB continues to generate strong loan growth and leverage capital efficiently to drive strong returns, which is evident in our 17.1% ROATCE for the third quarter of 2022. Though the current economic outlook will be challenging for our industry, I am confident MCB will maintain its discipline toward margin management and asset quality.

“Operating a branch-lite franchise since inception has led MCB to develop many deposit verticals, which affords us optionality in times where liquidity in the industry is at a premium and pricing is a challenge. This optionality combined with our pricing discipline allows us to better maintain our net interest margin through the rate cycle as we continue to grow.

“Our overall efficiencies also allow us to leverage our platform effectively. The next several quarters will be interesting, but MCB has a business platform that can thrive during these times as we have in other challenging economic periods over the past two decades.

“I want to thank the entire MCB team and our Board for their steadfast support and attention to our continued success.”

¹ Annualized. Non-GAAP financial measure. See Reconciliation of Non-GAAP Measures on page 12.

² Total non-interest expense divided by Total revenues.

Balance Sheet

The Company had total assets of $6.4 billion at September 30, 2022, a decrease of $445.0 million, or 6.5%, from June 30, 2022, and an increase of $280.8 million, or 4.6% from September 30, 2021.

Total cash and cash equivalents were $708.8 million at September 30, 2022, a decrease of $633.1 million, or 47.2%, from June 30, 2022 and a decrease of $1.1 billion, or 61.8%, from September 30, 2021. The decrease from June 30, 2022, reflected the $242.1 million deployment into loans and the $446.9 million outflow of deposits. The decrease from September 30, 2021, reflected the $1.4 billion deployment into loans and securities offset by $274.0 million in deposit growth.

Total loans, net of deferred fees and unamortized costs, were $4.6 billion, an increase of $242.1 million, or 5.5%, from June 30, 2022, and an increase of $1.0 billion, or 28.1% from September 30, 2021. Loan production was $423.6 million for the third quarter of 2022 compared to $512.8 million for the prior linked quarter and $312.9 million for the prior year period. The increase in total loans from June 30, 2022, was due primarily to an increase of $138.9 million in commercial real estate (“CRE”) loans (including owner-occupied) and $88.5 million in commercial and industrial (“C&I”) loans. The increase in total loans from September 30, 2021, was due primarily to an increase of $683.0 million in CRE loans (including owner-occupied) and $257.9 million in C&I loans.

Total securities were $946.7 million at September 30, 2022, a decrease of 5.2% from June 30, 2022, and an increase of 55.8% from September 30, 2021. The decrease from June 30, 2022 reflected the increase in unrealized losses on available-for-sale securities due to the prevailing interest rate environment. The increase from September 30, 2021 was due primarily to the use of excess liquidity to purchase additional securities.

Total deposits were $5.7 billion, a decrease of $446.9 million, or 7.2% from June 30, 2022, and an increase of $274.0 million or 5.0% from September 30, 2021. The decrease from June 30, 2022, was primarily due to a decrease of $485.9 million in digital currency business deposits, partially offset by an aggregate net increase of $39.0 million in all other deposit verticals. The increase in deposits from September 30, 2021, was primarily due to an increase of $333.3 million and $259.1 million in retail and fintech BaaS deposits, partially offset by a decrease of $226.6 million in bankruptcy trustee deposits. Non-interest-bearing demand deposits were 53.4% of total deposits at September 30, 2022, compared to 56.2% at June 30, 2022 and 51.4% at September 30, 2021.

Accumulated other comprehensive loss, net of tax, was $53.8 million, an increase of $19.1 million, from June 30, 2022, and $51.0 million from September 30, 2021. The increases were due to the prevailing interest rate environment which increased the unrealized losses on available-for-sale securities, partially offset by the increases in unrealized gains on cash flow hedges prior to their termination.

In 2020, the Company entered into an interest rate cap derivative contract as a part of its asset liability management strategy to help manage its interest rate risk position. The interest rate cap was designated as a cash flow hedge of certain deposit liabilities. In the third quarter of 2022, the Company terminated the interest rate cap and monetized the gain on the derivative. The unrecognized value of $12.7 million at termination will be released from Accumulated Other Comprehensive Income and recorded as a credit to Licensing fees expense through March 2025.

At September 30, 2022, the Company had available borrowing capacity of $909.4 million from the Federal Home Loan Bank, and an available line of credit of $109.3 million under the Federal Reserve Bank of New York discount window. The Company and the Bank each met all the requirements to be considered “Well-Capitalized” under applicable regulatory guidelines. Total non-owner-occupied commercial real estate loans were 343.3% of total risk-based capital at September 30, 2022, compared to 337.4% and 349.1% at June 30, 2022 and September 30, 2021, respectively.

Income Statement

Financial Highlights

(1) Total revenues equal net interest income plus non-interest income.

(2) Ratios are annualized.

(3) Non-GAAP financial measure. See Reconciliation of Non-GAAP Measures on page 12.

Net Interest Income

Net interest income for the third quarter of 2022 was $63.3 million, an increase of $8.0 million from the prior linked quarter and $22.5 million from the prior year period reflecting the increase in prevailing interest rates and the shift in asset mix to higher-yielding interest earning assets. The increase from the prior linked quarter was primarily due to the $272.2 million increase in the average balance of loans and the 43 basis point increase in the average yield for loans partially offset by the $487.5 million decrease in the average balance of overnight deposits and a higher cost of funds. The increase from the prior year period was primarily due to the $1.4 billion increase in the average balance of loans and securities and the 65 basis point and 204 basis point increases in average yield for loans and overnight deposits, respectively, partially offset by a higher cost of funds.

Net Interest Margin

Net interest margin for the third quarter of 2022 was 3.85% compared to 3.27% and 2.70% for the prior linked quarter and prior year period, respectively. The 58 basis point increase in net interest margin from the prior linked quarter was driven largely by the increase in the average balance of loans, the increase in yields for loans and overnight deposits partially offset by the decrease in the average balance of overnight deposits and a higher cost of funds. The 115 basis point increase from the prior year period was driven largely by the increase in the average balance of loans and securities, the increase in yields for loans and overnight deposits, partially offset by a higher cost of funds.

Total cost of funds for the third quarter of 2022 was 45 basis points compared to 25 basis points and 31 basis points for the prior linked quarter and prior year period, respectively, which reflect the increase in prevailing interest rates.

Non-Interest Income

Non-interest income was $5.8 million for the third quarter of 2022, a decrease of $1.2 million from the prior linked quarter, driven by lower Global Payments Group revenues due to lower digital currency business transactions during the quarter, partially offset by higher fintech Banking-as-a-Service transactions.

Non-Interest Expense

Non-interest expense was $31.2 million for the third quarter of 2022, an increase of $4.9 million and $9.2 million from the prior linked quarter and prior year period, respectively. The increases from the prior periods are driven by an increase in professional fees due to elevated legal fees, as well as an increase in compensation and benefits due to the increase in the number of full-time employees which is in line with revenue growth.

Income Tax Expense

The estimated effective tax rate for the third quarter of 2022 was 30.6% compared to 31.0% and 33.0% for the prior linked quarter and prior year period, respectively.

Asset Quality

Credit quality remains strong as there were no charge-offs during the third quarter of 2022 and non-performing loans to total loans was 0.00% at September 30, 2022 compared to 0.00% at June 30, 2022 and 0.43% at September 30, 2021, respectively.

The Company recorded a provision of $2.0 million for the third quarter of 2022 compared to $2.4 million and $490,000 for the prior linked quarter and prior year period, respectively. The provision was in line with loan growth during the respective periods.

Conference Call

The Company will conduct a conference call at 9:00 a.m. Eastern time on Friday, October 21, 2022, to discuss third quarter 2022 results. To access the event by telephone, please dial 800-245-3047 (US), 785-424-1699 (INTL), and provide conference ID: MCBQ322 approximately 15 minutes prior to the start time (to allow time for registration).

The call will also be broadcast live over the Internet and accessible at MCB Quarterly Results Conference Call and in the Investor Relations section of the Company’s website at MCB News. To listen to the live webcast, please visit the site at least 15 minutes prior to the start time to register, download and install any necessary audio software.

For those unable to join for the live presentation, a replay of the webcast will also be available later that day accessible at MCB Quarterly Results Conference Call.

About Metropolitan Bank Holding Corp.

Metropolitan Bank Holding Corp. (NYSE: MCB) is the parent company of Metropolitan Commercial Bank (the “Bank”). The Bank is a New York City based commercial bank that provides a broad range of business, commercial and personal banking products and services to small, middle-market, corporate enterprises, municipalities, and affluent individuals. The Bank’s Global Payments Group is an established leader in BaaS (Banking-as-a-Service) to various domestic and international fintech, payments and money services businesses. The Bank operates banking centers in New York City and on Long Island in New York State, and is ranked as one of the 100 Fastest-Growing Companies by Fortune, Top 50 Community Banks by S&P, Top 20 Commercial Lenders by ICBA for banks with an asset size of more than $1 billion, and is a member of the Piper Sandler Sm-All Stars Class of 2022. The Bank is a New York State chartered commercial bank, a member of the Federal Reserve System and the Federal Deposit Insurance Corporation, and an equal housing lender. For more information, please visit 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 future 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 the continuing impact of the COVID-19 pandemic on our business and results of operation, an unexpected deterioration in our loan or securities portfolios, unexpected increases in our expenses, different than anticipated growth and our ability to manage our growth, unanticipated regulatory action or changes in regulations, unexpected changes in interest rates, inflation, an unanticipated decrease in deposits, an unanticipated loss of key personnel or existing customers, competition from other institutions resulting in unanticipated changes in our loan or deposit rates, an unexpected adverse financial, regulatory or bankruptcy event experienced by our fintech partners, unanticipated increases in FDIC costs, changes in regulations, legislation or tax or accounting rules, the current or anticipated impact of military conflict, terrorism or other geopolitical events and unanticipated adverse changes in our customers’ economic conditions or general economic conditions, as well as those discussed under the heading “Risk Factors” in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

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 (unaudited)

Consolidated Statement of Income (unaudited)

(1) Certain prior period amounts have been reclassified for consistency with the current period presentation.

Loan Production, Asset Quality & Regulatory Capital

Performance Measures

(1) Ratios are annualized.

(2) Non-GAAP financial measure. See Reconciliation of Non-GAAP Measures on page 12.

(3) Total non-interest expense divided by total revenues

Interest Margin Analysis

(1) Annualized.

(2) Amount includes deferred loan fees and non-performing loans.

(3) Determined by subtracting the annualized average cost of total interest-bearing liabilities from the annualized average yield on total interest-earning assets.

(4) Determined by dividing annualized net interest income by total average interest-earning assets.

(5) Determined by dividing annualized interest expense on deposits by total average interest-bearing and non-interest bearing deposits.

(6) Determined by dividing annualized interest expense by the sum of total average interest-bearing liabilities and total average non-interest-bearing deposits.