(1) Represents costs incurred in connection with the Company's
initial public offering completed in the prior period.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 - ORGANIZATION
Metropolitan Bank Holding Corp. (a New
York Corporation) (the “Company”) is a bank holding company whose principal activity is the ownership and management
of Metropolitan Commercial Bank (the “Bank”), its wholly-owned subsidiary. The Bank’s primary market is the New
York metropolitan area. The Bank offers a traditional range of services to individuals, businesses and others needing banking services.
Its primary lending products are commercial mortgages and commercial and industrial loans. Substantially all loans are secured
by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial
loans are expected to be repaid from the cash flows from the operations of the business. The Bank’s primary deposit products
are checking, savings, and term deposit accounts, and its deposit accounts are insured by the Federal Deposit Insurance Corporation
(“FDIC”) up to the maximum amounts allowed by law. The Bank commenced operations on June 22, 1999.
The Company and the Bank are
subject to the regulations of certain state and federal agencies and, accordingly, is periodically examined by those regulatory
authorities. As a consequence of the extensive regulation of commercial banking activities, the Company’s business is susceptible
to being affected by state and federal legislation and regulations.
NOTE 2 – BASIS OF PRESENTATION
The accounting and reporting
policies of the Company conform with U.S. generally accepted accounting principles and predominant practices within the U.S. banking
industry. All intercompany balances and transactions have been eliminated. The Unaudited Consolidated Financial Statements, which
include the accounts of the Company and the Bank, have been prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been
condensed or omitted pursuant to the rules and regulations of the SEC. The Unaudited Consolidated Financial Statements reflect
all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the
interim periods presented. In preparing the interim financial statements, management has made estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the reported periods. The accounting and reporting policies of
the Company conform with U.S generally accepted accounting principles and predominant practices within the U.S. banking industry.
Certain prior-year amounts have
been reclassified to conform to current year’s presentation.
The results of operations for
the three and six months ended June 30, 2018 are not necessarily indicative of the results of operations that may be expected for
the entire fiscal year. The unaudited consolidated financial statements presented in this report should be read in conjunction
with the Company’s audited consolidated financial statements and notes to audited consolidated financial statements included
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
NOTE 3 – SUMMARY OF RECENT ACCOUNTING
PRONOUNCEMENTS
Pursuant to the Jumpstart Our Business
Startups Act (“JOBS Act”), an Emerging Growth Company (“EGC”) is permitted to elect to adopt new accounting
guidance using adoption dates of nonpublic entities. The Company elected delayed effective dates of recently issued accounting
standards.
Accounting Standards Update (ASU) 2014-09,
Revenue from Contracts with Customers (Topic 606), implements a common revenue standard that clarifies the principles for recognizing
revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s)
with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate
the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies
a performance obligation. In August 2016, the FASB deferred the effective date of the ASU by one year which means ASU 2014-09
will be effective for the Company on January 1, 2019. Management is in the process of evaluating revenue streams to determine
the impact the ASU could have on the Company’s operating results or financial condition.
In January 2016, the FASB issued ASU 2016-01,
an amendment to Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10). The objectives
of the ASU are to: (1) require equity investments to be measured at fair value, with changes in fair value recognized in net income,
(2) simplify the impairment assessment of equity investments without readily determinable fair values, (3) eliminate the requirement
to disclose methods and significant assumptions used to estimate fair value for financial instruments measured at amortized cost
on the balance sheet, (4) require the use of the exit price notion when measuring the fair value of financial instruments, and
(5) clarify the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination
with the entity’s other deferred tax assets. In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements
to Financial Instruments – Overall – Recognition and Measurement of Financial Assets and Liabilities, an amendment
to ASU 2016-01. The amendments clarify certain aspects of the guidance issued in ASU 2016-01. These ASUs will be effective for
the Company on January 1, 2019. The Company has evaluated the impact of ASU 2016-01 and 2018-03 and has concluded that they will
not have a material impact on its consolidated financial statements.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 3 – SUMMARY OF RECENT ACCOUNTING
PRONOUNCEMENTS
(continued)
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842). ASU 2016-02 requires companies that lease valuable assets to recognize on their balance sheets the assets and
liabilities generated by contracts longer than a year. The amendments in this update are effective for fiscal years beginning after
December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, however, early adoption is permitted.
Under ASU 2016-02, the Company will recognize a right-of-use asset and a lease obligation liability on the consolidated balance
sheet, which will increase the Company’s assets and liabilities. The Company is evaluating other potential impacts of ASU
2016-02 on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation
- Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The objectives of the ASU are to
simplify
the accounting for share-based payment transactions, including the income tax consequences, the treatment of forfeitures, and the
classification on the statement of cash flows.
The amendments: (i) allow companies to make an entity-wide accounting policy
election either to estimate the number of forfeitures expected to occur or to account for forfeitures in the compensation cost
when they occur, (ii) revise the withholding requirements for classifying stock awards as equity, (iii) requires that the tax effect
of any difference between the compensation cost of an award recognized for financial reporting purposes and the deduction for an
award for tax purposes is recognized as an income tax expense or benefit in the income statement in the period in which the tax
deduction arises, and (iv) clarifies the classification of excess tax benefits and employee taxes paid when an employer withholds
shares for tax-withholding purpose on the statement of cash flows.
The Company elected to adopt ASU 2016-09
in the second quarter of 2018 and, in accordance with the guidance, has adopted the guidance as of the beginning of the fiscal
year. Under the ASU, the tax effects of awards are treated as discrete items in the reporting period in which they occur. Therefore,
the tax effect of awards is not spread over the entire year through the use of the annual effective tax rate, but instead is recorded
entirely in the period in which the tax deduction arose. The relevant information on restricted stock that vests and stock options
that are excised is used to compare the cumulative book expense to the tax deduction. With this information, the discrete item
is calculated and recorded. The Company prospectively applied the amendment in this guidance requiring recognition of excess tax
benefits and deficits in the income statement resulting in a $62,000 income tax benefit recognized in the six months ended June
30, 2018, resulting in an effective tax rate of 31.1%.
The amendments in the guidance that require
application using a modified retrospective transition method did not have an impact on the Company’s retained earnings as
there were no unrecognized tax benefits that existed prior to April 1, 2018 nor were there forfeiture estimates that were that
impacted compensation expense. 2018 will be the first year of recording any excess tax deduction and these will be reported as
a discrete item in the quarter in which restricted stocks/stock options will vest/be exercised.
In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments – Credit Losses (Topic 326), which requires the measurement of all expected credit losses for financial
assets held at the reporting date be based on historical experience, current condition, and reasonable and supportable forecasts.
Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.
This guidance also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets
with credit deterioration. For the Company, this guidance is effective for fiscal years and interim periods beginning after December
15, 2020. Management has established a committee to evaluate the impact of ASU 2016-13 on the Company’s financial statements.
Management has also engaged a third party vendor for a software solution, which is expected to be implemented during 2018 to begin
testing models and comparing results with current incurred loss estimates. Since the Bank has been using this vendor for credit
analysis and stress testing solutions for over five years, sufficient loan level information should be readily available to test
the Historical Loss and Migration Analysis models, among other potential modeling solutions. The Company expects to recognize a
one-time cumulative adjustment to the allowance for loan losses as of the beginning of the reporting period in which the ASU takes
effect, but cannot yet determine the magnitude of the impact on the consolidated financial statements.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 3 – SUMMARY OF RECENT ACCOUNTING PRONOUNCEMENTS
(continued)
In January 2017, the FASB issued ASU 2017-04,
Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the second step in
the goodwill impairment test which requires an entity to determine the implied fair value of the reporting unit’s goodwill.
Instead, an entity should recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds
the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting
unit. The standard is effective for the Company beginning January 1, 2021, with early adoption permitted for goodwill impairment
tests performed after January 1, 2017. Management expects that ASU 2017-04 will not have a significant impact on its consolidated
financial statements.
In March 2017, the FASB issued ASU 2017-08,
Premium Amortization on Purchased Callable Debt Securities, which shortens the amortization period for the premium on certain purchased
callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of
the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount as discounts
continue to be amortized to maturity. ASU No. 2017-08 is effective for interim and annual reporting periods beginning after December
15, 2019 and early adoption is permitted. The guidance includes a modified retrospective transition approach under which a cumulative-effect
adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted.
Management expects that ASU 2017-08 will not have a significant impact on its consolidated financial statements.
On February 14, 2018 the FASB issued final
guidance in the form of Accounting Standards Update No. 2018-02, which permits - but does not require - companies to reclassify
stranded tax effects caused by 2017 tax reform from accumulated other comprehensive income to retained earnings. Additionally,
the ASU requires new disclosures by all companies, whether they opt to do the reclassification or not. Management expects that
ASU 2018-02 will not have a significant impact on its consolidated financial statements. The amendments in this update are effective
for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2018;
however, early adoption is permitted.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 4 - INVESTMENT SECURITIES
The following table summarizes
the amortized cost and fair value of securities available for sale and securities held to maturity at June 30, 2018 and December
31, 2017 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss
and gross unrecognized losses (dollars in thousands):
At June 30, 2018
|
|
Amortized Cost
|
|
|
Gross
Unrealized/
Unrecognized
Gains
|
|
|
Gross
Unrealized/
Unrecognized
Losses
|
|
|
Fair Value
|
|
Available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
24,133
|
|
|
$
|
3
|
|
|
$
|
(672
|
)
|
|
$
|
23,464
|
|
Residential collateralized mortgage obligations
|
|
|
2,485
|
|
|
|
-
|
|
|
|
(134
|
)
|
|
|
2,351
|
|
Municipal bond
|
|
|
1,086
|
|
|
|
7
|
|
|
|
-
|
|
|
|
1,093
|
|
CRA mutual fund
|
|
|
2,183
|
|
|
|
-
|
|
|
|
(102
|
)
|
|
|
2,081
|
|
Total securities available for sale
|
|
$
|
29,887
|
|
|
$
|
10
|
|
|
$
|
(908
|
)
|
|
$
|
28,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
4,960
|
|
|
|
-
|
|
|
$
|
(203
|
)
|
|
$
|
4,757
|
|
Foreign government securities
|
|
|
25
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25
|
|
Total securities held to maturity
|
|
$
|
4,985
|
|
|
$
|
-
|
|
|
$
|
(203
|
)
|
|
$
|
4,782
|
|
At December 31, 2017
|
|
Amortized Cost
|
|
|
Gross
Unrealized/
Unrecognized
Gains
|
|
|
Gross
Unrealized/
Unrecognized
Losses
|
|
|
Fair Value
|
|
Available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
24,856
|
|
|
$
|
70
|
|
|
$
|
(242
|
)
|
|
$
|
24,684
|
|
Residential collateralized mortgage obligations
|
|
|
2,809
|
|
|
|
-
|
|
|
|
(103
|
)
|
|
|
2,706
|
|
Commercial collateralized mortgage obligations
|
|
|
1,581
|
|
|
|
-
|
|
|
|
(31
|
)
|
|
|
1,550
|
|
Municipal bond
|
|
|
1,098
|
|
|
|
11
|
|
|
|
-
|
|
|
|
1,109
|
|
CRA mutual fund
|
|
|
2,160
|
|
|
|
-
|
|
|
|
(52
|
)
|
|
|
2,108
|
|
Total securities available for sale
|
|
$
|
32,504
|
|
|
$
|
81
|
|
|
$
|
(428
|
)
|
|
$
|
32,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
5,403
|
|
|
$
|
-
|
|
|
$
|
(98
|
)
|
|
$
|
5,305
|
|
Foreign government securities
|
|
|
25
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25
|
|
Total securities held to maturity
|
|
$
|
5,428
|
|
|
$
|
-
|
|
|
$
|
(98
|
)
|
|
$
|
5,330
|
|
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 4 - INVESTMENT SECURITIES
(continued)
The proceeds from sales and calls of securities and the associated
gains and losses are listed below (dollars in thousands):
|
|
Three and six months ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Proceeds
|
|
$
|
1,500
|
|
|
$
|
-
|
|
Gross gains
|
|
$
|
-
|
|
|
$
|
-
|
|
Gross losses
|
|
$
|
(37
|
)
|
|
$
|
-
|
|
Tax impact
|
|
$
|
11
|
|
|
$
|
-
|
|
The amortized cost and fair value of debt securities at June
30, 2018 and December 31, 2017 are shown by contractual maturity. Expected maturities may differ from contractual maturities if
borrowers have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands):
|
|
Held to Maturity
|
|
|
Available for Sale
|
|
At June 30, 2018
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
Within one year
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
-
|
|
|
$
|
-
|
|
One to five years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Five to ten years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Due after ten years
|
|
|
-
|
|
|
|
-
|
|
|
|
1,086
|
|
|
|
1,093
|
|
Total
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
1,086
|
|
|
$
|
1,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
4,960
|
|
|
$
|
4,757
|
|
|
$
|
24,133
|
|
|
$
|
23,464
|
|
Residential collateralized mortgage obligations
|
|
|
-
|
|
|
|
-
|
|
|
|
2,485
|
|
|
|
2,351
|
|
CRA mutual fund
|
|
|
-
|
|
|
|
-
|
|
|
|
2,183
|
|
|
|
2,081
|
|
Total Securities
|
|
$
|
4,985
|
|
|
$
|
4,782
|
|
|
$
|
29,887
|
|
|
$
|
28,989
|
|
|
|
Held to Maturity
|
|
|
Available for Sale
|
|
At December 31, 2017
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
Within one year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
One to five years
|
|
|
25
|
|
|
|
25
|
|
|
|
-
|
|
|
|
-
|
|
Five to ten years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Due after ten years
|
|
|
-
|
|
|
|
-
|
|
|
|
1,098
|
|
|
|
1,109
|
|
Total
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
1,098
|
|
|
$
|
1,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
5,403
|
|
|
$
|
5,305
|
|
|
$
|
24,856
|
|
|
$
|
24,684
|
|
Residential collateralized mortgage obligations
|
|
|
-
|
|
|
|
-
|
|
|
|
2,809
|
|
|
|
2,706
|
|
Commercial collateralized mortgage obligations
|
|
|
-
|
|
|
|
-
|
|
|
|
1,581
|
|
|
|
1,550
|
|
CRA mutual fund
|
|
|
-
|
|
|
|
-
|
|
|
|
2,160
|
|
|
|
2,108
|
|
Total Securities
|
|
$
|
5,428
|
|
|
$
|
5,330
|
|
|
$
|
32,504
|
|
|
$
|
32,157
|
|
There were no securities pledged at June 30, 2018 and December
31, 2017 to secure borrowings.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 4 - INVESTMENT SECURITIES
(continued)
At June 30, 2018 and December 31, 2017,
all of the mortgage-backed securities and collateralized mortgage obligations held by the Bank were issued by U.S. Government-sponsored
entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the Government has affirmed its commitment to support.
Securities with unrealized/unrecognized losses at June 30, 2018
and December 31, 2017, aggregated by investment category and length of time that individual securities have been in a continuous
unrealized/unrecognized loss position, are as follows (dollars in thousands):
|
|
Less than 12 Months
|
|
|
12 months or more
|
|
|
Total
|
|
At June 30, 2018
|
|
Estimated
Fair Value
|
|
|
Unrealized/
Unrecognized
Losses
|
|
|
Estimated
Fair Value
|
|
|
Unrealized/
Unrecognized
Losses
|
|
|
Estimated
Fair Value
|
|
|
Unrealized/
Unrecognized
Losses
|
|
Residential mortgage-backed securities
|
|
$
|
15,054
|
|
|
$
|
(308
|
)
|
|
$
|
8,148
|
|
|
$
|
(364
|
)
|
|
$
|
23,202
|
|
|
$
|
(672
|
)
|
Residential collateralized mortgage obligations
|
|
|
-
|
|
|
|
-
|
|
|
|
2,351
|
|
|
|
(134
|
)
|
|
|
2,351
|
|
|
|
(134
|
)
|
CRA mutual fund
|
|
|
-
|
|
|
|
-
|
|
|
|
2081
|
|
|
|
(102
|
)
|
|
|
2,081
|
|
|
|
(102
|
)
|
Total securities available for sale
|
|
$
|
15,054
|
|
|
$
|
(308
|
)
|
|
$
|
12,580
|
|
|
$
|
(600
|
)
|
|
$
|
27,634
|
|
|
$
|
(908
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
2,909
|
|
|
$
|
(95
|
)
|
|
$
|
1,848
|
|
|
$
|
(108
|
)
|
|
$
|
4,757
|
|
|
$
|
(203
|
)
|
Total held to maturity
|
|
$
|
2,909
|
|
|
$
|
(95
|
)
|
|
$
|
1,848
|
|
|
$
|
(108
|
)
|
|
$
|
4,757
|
|
|
$
|
(203
|
)
|
|
|
Less than 12 Months
|
|
|
12 months or more
|
|
|
Total
|
|
At December 31, 2017
|
|
Estimated
Fair Value
|
|
|
Unrealized/
Unrecognized
Losses
|
|
|
Estimated
Fair Value
|
|
|
Unrealized/
Unrecognized
Losses
|
|
|
Estimated
Fair Value
|
|
|
Unrealized/
Unrecognized
Losses
|
|
Residential mortgage-backed securities
|
|
$
|
9,194
|
|
|
$
|
(85
|
)
|
|
$
|
7,738
|
|
|
$
|
(157
|
)
|
|
$
|
16,932
|
|
|
$
|
(242
|
)
|
Residential collateralized mortgage obligations
|
|
|
-
|
|
|
|
-
|
|
|
|
2,706
|
|
|
|
(103
|
)
|
|
|
2,706
|
|
|
|
(103
|
)
|
Commercial collateralized mortgage obligations
|
|
|
-
|
|
|
|
-
|
|
|
|
1,550
|
|
|
|
(31
|
)
|
|
|
1,550
|
|
|
|
(31
|
)
|
CRA mutual fund
|
|
|
-
|
|
|
|
-
|
|
|
|
2,108
|
|
|
|
(52
|
)
|
|
|
2,108
|
|
|
|
(52
|
)
|
Total securities available for sale
|
|
$
|
9,194
|
|
|
$
|
(85
|
)
|
|
$
|
14,102
|
|
|
$
|
(343
|
)
|
|
$
|
23,296
|
|
|
$
|
(428
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
3,260
|
|
|
$
|
(33
|
)
|
|
$
|
2,045
|
|
|
$
|
(65
|
)
|
|
$
|
5,305
|
|
|
$
|
(98
|
)
|
Total held to maturity
|
|
$
|
3,260
|
|
|
$
|
(33
|
)
|
|
$
|
2,045
|
|
|
$
|
(65
|
)
|
|
$
|
5,305
|
|
|
$
|
(98
|
)
|
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 4 - INVESTMENT SECURITIES
(continued)
The unrealized losses of securities are
primarily due to the changes in market interest rates subsequent to purchase. The Bank does not consider these securities to be
other-than-temporarily impaired at June 30, 2018 and December 31, 2017 since the decline in market value is attributable to changes
in interest rates and not credit quality. In addition, the Company does not intend to sell and does not believe that it is more
likely than not that it will be required to sell these investments until there is a full recovery of the unrealized loss, which
may be at maturity. As a result, no impairment loss was recognized during the six months ended June 30, 2018.
At June 30, 2018 and December 31, 2017,
there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than
10% of stockholders’ equity.
NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans, net of deferred costs and fees, consist of the following
as of June 30, 2018 and December 31, 2017 (dollars in thousands):
|
|
At June 30, 2018
|
|
|
At December 31, 2017
|
|
Real estate
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
857,071
|
|
|
$
|
783,745
|
|
Construction
|
|
|
45,974
|
|
|
|
36,960
|
|
Multifamily
|
|
|
233,474
|
|
|
|
190,097
|
|
One-to-four family
|
|
|
23,929
|
|
|
|
25,568
|
|
Total real estate loans
|
|
|
1,160,448
|
|
|
|
1,036,370
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
354,932
|
|
|
|
340,001
|
|
Consumer
|
|
|
86,277
|
|
|
|
44,595
|
|
Total loans
|
|
|
1,601,657
|
|
|
|
1,420,966
|
|
Deferred fees
|
|
|
(2,010
|
)
|
|
|
(1,070
|
)
|
Loans, net of deferred fees and unamortized costs
|
|
|
1,599,647
|
|
|
|
1,419,896
|
|
Allowance for loan losses
|
|
|
(17,463
|
)
|
|
|
(14,887
|
)
|
Balance at the end of the period
|
|
$
|
1,582,184
|
|
|
$
|
1,405,009
|
|
Non-performing loans include non-accrual
loans and loans past due over 90 days and still accruing. Non-performing loans exclude troubled debt restructurings (“TDRs”)
that are accruing and have been performing in accordance with the terms of their restructure agreement for at least six months.
Non-accrual loans and loans past
due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and
individually classified impaired loans.
There were no loans past due over 90 days
and still accruing or non-accruing TDRs at June 30, 2018 and December 31, 2017. The following tables present the recorded investment
in non-accrual loans by class of loans as of June 30, 2018 and December 31, 2017 (dollars in thousands):
|
|
At June 30, 2018
|
|
|
At
December 31, 2017
|
|
Commercial real estate
|
|
$
|
-
|
|
|
$
|
787
|
|
Commercial & industrial
|
|
|
-
|
|
|
|
-
|
|
One-to-four family
|
|
|
-
|
|
|
|
2,447
|
|
Consumer
|
|
|
192
|
|
|
|
155
|
|
Total
|
|
$
|
192
|
|
|
$
|
3,389
|
|
Interest on non-accrual loans not recognized
was $1,000 and $37,000 for the three months ended June 30, 2018 and June 30, 2017, respectively. Interest on non-accrual loans
not recognized was $2,500 and $77,000 for the six months ended June 30, 2018 and June 30, 2017, respectively.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES
(continued)
The following tables present the aging of the recorded investment
in past due loans by class of loans as of June 30, 2018 and December 31, 2017 (dollars in thousands):
At June 30, 2018
|
|
30-59
Days
|
|
|
60-89
Days
|
|
|
Greater
than 90
days
|
|
|
Total Past Due
|
|
|
Loans not Past Due
|
|
|
Total
|
|
Commercial real estate
|
|
$
|
96
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
96
|
|
|
$
|
856,975
|
|
|
$
|
857,071
|
|
Commercial & industrial
|
|
|
114
|
|
|
|
73
|
|
|
|
-
|
|
|
|
187
|
|
|
|
354,745
|
|
|
|
354,932
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,974
|
|
|
|
45,974
|
|
Multifamily
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
233,474
|
|
|
|
233,474
|
|
One-to-four family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23,929
|
|
|
|
23,929
|
|
Consumer
|
|
|
39
|
|
|
|
-
|
|
|
|
142
|
|
|
|
181
|
|
|
|
86,096
|
|
|
|
86,277
|
|
Total
|
|
$
|
249
|
|
|
$
|
73
|
|
|
$
|
142
|
|
|
$
|
464
|
|
|
$
|
1,601,193
|
|
|
$
|
1,601,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
30-59
Days
|
|
|
60-89
Days
|
|
|
Greater
than 90
days
|
|
|
Total Past
Due
|
|
|
Loans not
Past Due
|
|
|
Total
|
|
Commercial real estate
|
|
$
|
836
|
|
|
$
|
-
|
|
|
$
|
787
|
|
|
$
|
1,623
|
|
|
$
|
782,122
|
|
|
$
|
783,745
|
|
Commercial & industrial
|
|
|
85
|
|
|
|
142
|
|
|
|
-
|
|
|
|
227
|
|
|
|
339,774
|
|
|
|
340,001
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,960
|
|
|
|
36,960
|
|
Multifamily
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
190,097
|
|
|
|
190,097
|
|
One-to-four family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,568
|
|
|
|
25,568
|
|
Consumer
|
|
|
149
|
|
|
|
21
|
|
|
|
155
|
|
|
|
325
|
|
|
|
44,270
|
|
|
|
44,595
|
|
Total
|
|
$
|
1,070
|
|
|
$
|
163
|
|
|
$
|
942
|
|
|
$
|
2,175
|
|
|
$
|
1,418,791
|
|
|
$
|
1,420,966
|
|
Troubled Debt Restructurings:
Loans for which the terms have
been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered TDRs
and classified as impaired. Included in impaired loans at June 30, 2018 and December 31, 2017 were $2.6 million and $2.7 million
of loans modified in TDRs, respectively. The Bank has not allocated specific reserves to those customers with loans modified in
TDRs as of June 30, 2018, compared to $9,000 allocated at December 31, 2017. The Bank had not committed to lend additional amounts
as of June 30, 2018 and December 31, 2017 to customers with outstanding loans that are classified as TDRs. During the three months
and six months ended June 30, 2018 and 2017, there were no significant loans modified as TDRs. During the three and six months
ended June 30, 2018 and June 30, 2017 there were no payment defaults on any loans previously identified as TDRs. A loan is considered
to be in payment default once it is 90 days contractually past due under the modified terms. In order to determine whether a borrower
is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default
on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Bank’s internal
underwriting policy.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES
(continued)
Credit Quality Indicators:
The Bank categorizes loans into risk categories
based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical
payment experience, credit documentation, public information, and current economic trends, among other factors. The Bank analyzes
all loans individually by classifying the loans as to credit risk at least annually. An analysis is performed on a quarterly basis
for loans classified as special mention, substandard, or doubtful. The Bank uses the following definitions for risk ratings:
Special Mention -
Loans classified
as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses
may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.
Substandard -
Loans classified
as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged,
if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized
by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful
- Loans classified
as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses
make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and
improbable.
Loans not meeting the criteria
above are considered to be pass-rated loans. Based on the most recent analysis performed, the risk category of loans by class of
loans is as follows (dollars in thousands):
At June 30, 2018
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
Commercial real estate
|
|
$
|
855,536
|
|
|
$
|
392
|
|
|
$
|
1,143
|
|
|
$
|
-
|
|
|
$
|
857,071
|
|
Commercial & industrial
|
|
|
347,278
|
|
|
|
7,654
|
|
|
|
-
|
|
|
|
-
|
|
|
|
354,932
|
|
Construction
|
|
|
45,974
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,974
|
|
Multifamily
|
|
|
233,474
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
233,474
|
|
Total
|
|
$
|
1,482,262
|
|
|
$
|
8,046
|
|
|
$
|
1,143
|
|
|
$
|
-
|
|
|
$
|
1,491,451
|
|
At December 31, 2017
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
Commercial real estate
|
|
$
|
777,410
|
|
|
$
|
4,369
|
|
|
$
|
1,966
|
|
|
$
|
-
|
|
|
$
|
783,745
|
|
Commercial & industrial
|
|
|
331,775
|
|
|
|
8,226
|
|
|
|
-
|
|
|
|
-
|
|
|
|
340,001
|
|
Construction
|
|
|
36,960
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,960
|
|
Multifamily
|
|
|
190,097
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
190,097
|
|
Total
|
|
$
|
1,336,242
|
|
|
$
|
12,595
|
|
|
$
|
1,966
|
|
|
$
|
-
|
|
|
$
|
1,350,803
|
|
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES
(continued)
For one-to-four family loans and consumer
loans, the Bank evaluates credit quality based on the aging status of the loan, which was previously presented, and by performance
status. Non-performing loans are loans past due over 90 days or more still accruing interest and loans on non-accrual status. The
following table presents the recorded investment in one-to-four family and consumer loans based on performance status as of June
30, 2018 and December 31, 2017 (dollars in thousands):
At June 30, 2018
|
|
Performing
|
|
|
Non-Performing
|
|
|
Total
|
|
One-to-four family
|
|
$
|
23,929
|
|
|
$
|
-
|
|
|
$
|
23,929
|
|
Consumer
|
|
|
86,085
|
|
|
|
192
|
|
|
|
86,277
|
|
Total
|
|
$
|
110,014
|
|
|
$
|
192
|
|
|
$
|
110,206
|
|
At December 31, 2017
|
|
Performing
|
|
|
Non-Performing
|
|
|
Total
|
|
One-to-four family
|
|
$
|
23,121
|
|
|
$
|
2,447
|
|
|
$
|
25,568
|
|
Consumer
|
|
|
44,440
|
|
|
|
155
|
|
|
|
44,595
|
|
Total
|
|
$
|
67,561
|
|
|
$
|
2,602
|
|
|
$
|
70,163
|
|
The following table presents
the activity in the Allowance for Loan Losses (referred herein as “ALLL”) by segment for the three and six months ending
June 30, 2018 and 2017 (dollars in thousands):
Three months ended
June
30, 2018
|
|
Commercial
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Construction
|
|
|
Multi
Family
|
|
|
One-to-four
Family
|
|
|
Consumer
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
7,800
|
|
|
$
|
5,784
|
|
|
$
|
503
|
|
|
$
|
1,210
|
|
|
$
|
383
|
|
|
$
|
580
|
|
|
|
16,260
|
|
Provision/(credit) for
loan losses
|
|
|
339
|
|
|
|
269
|
|
|
|
163
|
|
|
|
347
|
|
|
|
(3
|
)
|
|
|
155
|
|
|
|
1,270
|
|
Loans charged-off
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(67
|
)
|
|
|
(67
|
)
|
Recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
ending allowance balance
|
|
$
|
8,139
|
|
|
$
|
6,053
|
|
|
$
|
666
|
|
|
$
|
1,557
|
|
|
$
|
380
|
|
|
$
|
668
|
|
|
$
|
17,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended
June 30, 2017
|
|
Commercial
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Construction
|
|
|
Multi
Family
|
|
|
One-to-four
Family
|
|
|
Consumer
|
|
|
Total
|
|
Allowance for loan
losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
5,853
|
|
|
$
|
4,963
|
|
|
$
|
502
|
|
|
$
|
687
|
|
|
$
|
105
|
|
|
$
|
126
|
|
|
|
12,236
|
|
Provision for loan
losses
|
|
|
605
|
|
|
|
713
|
|
|
|
55
|
|
|
|
255
|
|
|
|
(3
|
)
|
|
|
165
|
|
|
|
1,790
|
|
Loans charged-off
|
|
|
-
|
|
|
|
(88
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(29
|
)
|
|
|
(117
|
)
|
Recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
ending allowance balance
|
|
$
|
6,458
|
|
|
$
|
5,588
|
|
|
$
|
557
|
|
|
$
|
942
|
|
|
$
|
102
|
|
|
$
|
262
|
|
|
$
|
13,909
|
|
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES
(continued)
Six months ended June
30, 2018
|
|
Commercial
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Construction
|
|
|
Multi
Family
|
|
|
One-to-four
Family
|
|
|
Consumer
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
7,136
|
|
|
$
|
5,578
|
|
|
$
|
519
|
|
|
$
|
1,156
|
|
|
$
|
138
|
|
|
$
|
360
|
|
|
$
|
14,887
|
|
Provision/(credit) for loan losses
|
|
|
950
|
|
|
|
546
|
|
|
|
147
|
|
|
|
401
|
|
|
|
242
|
|
|
|
461
|
|
|
|
2,747
|
|
Loans charged-off
|
|
|
-
|
|
|
|
(71
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(153
|
)
|
|
|
(224
|
)
|
Recoveries
|
|
|
53
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53
|
|
Total ending allowance balance
|
|
$
|
8,139
|
|
|
$
|
6,053
|
|
|
$
|
666
|
|
|
$
|
1,557
|
|
|
$
|
380
|
|
|
$
|
668
|
|
|
$
|
17,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June
30, 2017
|
|
Commercial
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Construction
|
|
|
Multi
Family
|
|
|
One-to-four
Family
|
|
|
Consumer
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
5,206
|
|
|
$
|
5,364
|
|
|
$
|
409
|
|
|
$
|
620
|
|
|
$
|
109
|
|
|
$
|
107
|
|
|
|
11,815
|
|
Provision/(credit) for loan losses
|
|
|
1,252
|
|
|
|
444
|
|
|
|
148
|
|
|
|
322
|
|
|
|
(7
|
)
|
|
|
201
|
|
|
|
2,360
|
|
Loans charged-off
|
|
|
-
|
|
|
|
(220
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(46
|
)
|
|
|
(266
|
)
|
Recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total ending allowance balance
|
|
$
|
6,458
|
|
|
$
|
5,588
|
|
|
$
|
557
|
|
|
$
|
942
|
|
|
$
|
102
|
|
|
$
|
262
|
|
|
$
|
13,909
|
|
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES
(continued)
The following tables present the balance
in the ALLL and the recorded investment in loans by portfolio segment based on impairment method as of June 30, 2018 and December
31, 2017 (dollars in thousands):
At June 30, 2018
|
|
Commercial
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Construction
|
|
|
Multi
Family
|
|
|
One-to-four
Family
|
|
|
Consumer
|
|
|
Total
|
|
Allowance for loan
losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
evaluated for impairment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
96
|
|
|
$
|
96
|
|
Collectively
evaluated for impairment
|
|
|
8,139
|
|
|
|
6,053
|
|
|
|
666
|
|
|
|
1,557
|
|
|
|
380
|
|
|
|
572
|
|
|
|
17,367
|
|
Total
ending allowance balance
|
|
$
|
8,139
|
|
|
$
|
6,053
|
|
|
$
|
666
|
|
|
$
|
1,557
|
|
|
$
|
380
|
|
|
$
|
668
|
|
|
$
|
17,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
for impairment
|
|
$
|
1,535
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,099
|
|
|
$
|
192
|
|
|
$
|
2,826
|
|
Collectively
evaluated for impairment
|
|
|
855,536
|
|
|
|
354,932
|
|
|
|
45,974
|
|
|
|
233,474
|
|
|
|
22,830
|
|
|
|
86,085
|
|
|
|
1,598,831
|
|
Total
ending loan balance
|
|
$
|
857,071
|
|
|
$
|
354,932
|
|
|
$
|
45,974
|
|
|
$
|
233,474
|
|
|
$
|
23,929
|
|
|
$
|
86,277
|
|
|
$
|
1,601,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
Commercial
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Construction
|
|
|
Multi
Family
|
|
|
One-to-four
Family
|
|
|
Consumer
|
|
|
Total
|
|
Allowance for loan
losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
evaluated for impairment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9
|
|
|
$
|
77
|
|
|
$
|
86
|
|
Collectively
evaluated for impairment
|
|
|
7,136
|
|
|
|
5,578
|
|
|
|
519
|
|
|
|
1,156
|
|
|
|
129
|
|
|
|
283
|
|
|
$
|
14,801
|
|
Total
ending allowance balance
|
|
$
|
7,136
|
|
|
$
|
5,578
|
|
|
$
|
519
|
|
|
$
|
1,156
|
|
|
$
|
138
|
|
|
$
|
360
|
|
|
$
|
14,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
for impairment
|
|
$
|
2,368
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,566
|
|
|
$
|
155
|
|
|
$
|
6,089
|
|
Collectively
evaluated for impairment
|
|
|
781,377
|
|
|
|
340,001
|
|
|
|
36,960
|
|
|
|
190,097
|
|
|
|
22,002
|
|
|
|
44,440
|
|
|
|
1,414,877
|
|
Total
ending loan balance
|
|
$
|
783,745
|
|
|
$
|
340,001
|
|
|
$
|
36,960
|
|
|
$
|
190,097
|
|
|
$
|
25,568
|
|
|
$
|
44,595
|
|
|
$
|
1,420,966
|
|
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES
(continued)
A loan is considered impaired when, based
on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or
interest when due according to the contractual terms of the loan agreement. Management applies its normal loan review procedures
in making these judgments. Impaired loans include individually classified nonaccrual loans and TDRs.
The following table presents loans individually
evaluated for impairment recognized as of June 30, 2018 and December 31, 2017 (dollars in thousands):
At June 30, 2018
|
|
Unpaid Principal
Balance
|
|
|
Recorded Investment
|
|
|
Allowance for Loan
Losses Allocated
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Consumer
|
|
|
210
|
|
|
|
192
|
|
|
|
96
|
|
Total
|
|
$
|
210
|
|
|
$
|
192
|
|
|
$
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
2,004
|
|
|
$
|
1,535
|
|
|
$
|
-
|
|
One-to-four family
|
|
|
1,376
|
|
|
|
1,099
|
|
|
|
-
|
|
Total
|
|
$
|
3,380
|
|
|
$
|
2,634
|
|
|
$
|
-
|
|
At December 31, 2017
|
|
Unpaid Principal
Balance
|
|
|
Recorded Investment
|
|
|
Allowance for Loan
Losses Allocated
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
686
|
|
|
$
|
556
|
|
|
$
|
9
|
|
Consumer
|
|
|
155
|
|
|
|
155
|
|
|
|
77
|
|
Total
|
|
$
|
841
|
|
|
$
|
711
|
|
|
$
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
2,890
|
|
|
$
|
2,368
|
|
|
$
|
-
|
|
One-to-four family
|
|
|
3,157
|
|
|
|
3,010
|
|
|
|
-
|
|
Total
|
|
$
|
6,047
|
|
|
$
|
5,378
|
|
|
$
|
-
|
|
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES
(continued)
The following table presents the average
recorded investment and interest income of loans individually evaluated for impairment recognized by class of loans as of and for
the three month periods ended June 30, 2018 and 2017 (in thousands):
Three months ended June 30, 2018
|
|
Average Recorded
Investment
|
|
|
Interest Income
Recognized
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
-
|
|
|
$
|
-
|
|
Consumer
|
|
|
138
|
|
|
|
-
|
|
Total
|
|
$
|
138
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Without an allowance recorded:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
1,540
|
|
|
$
|
16
|
|
One-to-four family
|
|
|
1,104
|
|
|
$
|
14
|
|
Total
|
|
$
|
2,644
|
|
|
$
|
30
|
|
Three months ended June 30, 2017
|
|
Average Recorded
Investment
|
|
|
Interest Income
Recognized
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
847
|
|
|
$
|
9
|
|
Commercial and industrial
|
|
|
3,660
|
|
|
|
-
|
|
Consumer
|
|
|
48
|
|
|
|
-
|
|
Total
|
|
$
|
4,555
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
Without an allowance recorded:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
6,331
|
|
|
$
|
68
|
|
Commercial and industrial
|
|
|
1,160
|
|
|
|
12
|
|
One-to-four family
|
|
|
283
|
|
|
|
26
|
|
Total
|
|
$
|
7,774
|
|
|
$
|
106
|
|
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES
(continued)
The following table presents the average
recorded investment and interest income of loans individually evaluated for impairment recognized by class of loans as of and for
the six month periods ended June 30, 2018 and 2017 (in thousands):
Six months ended June 30, 2018
|
|
Average Recorded
Investment
|
|
|
Interest Income
Recognized
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
185
|
|
|
$
|
-
|
|
Consumer
|
|
|
144
|
|
|
|
2
|
|
Total
|
|
$
|
329
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
Without an allowance recorded:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
1,816
|
|
|
$
|
62
|
|
One-to-four family
|
|
|
1,373
|
|
|
|
28
|
|
Total
|
|
$
|
3,189
|
|
|
$
|
90
|
|
Six months ended June 30, 2017
|
|
Average Recorded
Investment
|
|
|
Interest Income
Recognized
|
|
With an allowance recorded:
|
|
|
|
|
|
|
One-to-four family
|
|
$
|
753
|
|
|
$
|
18
|
|
Commercial and industrial
|
|
|
3,660
|
|
|
|
-
|
|
Consumer
|
|
|
32
|
|
|
|
1
|
|
Total
|
|
$
|
4,445
|
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
Without an allowance recorded:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
6,056
|
|
|
$
|
112
|
|
Commercial and industrial
|
|
|
1,192
|
|
|
|
26
|
|
One-to-four family
|
|
|
377
|
|
|
|
-
|
|
Total
|
|
$
|
7,625
|
|
|
$
|
138
|
|
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 6 – EARNINGS PER SHARE
The computation of basic and diluted earnings per share is shown
below (dollars in thousands, except share data):
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per consolidated statements of operations
|
|
$
|
5,865
|
|
|
$
|
2,651
|
|
|
$
|
12,156
|
|
|
$
|
5,201
|
|
Less: Earnings allocated to participating securities
|
|
|
(49
|
)
|
|
|
(51
|
)
|
|
|
(102
|
)
|
|
|
(100
|
)
|
Net income available to common stockholders
|
|
$
|
5,816
|
|
|
$
|
2,600
|
|
|
$
|
12,054
|
|
|
$
|
5,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding including participating securities
|
|
|
8,198,257
|
|
|
|
4,629,004
|
|
|
|
8,195,542
|
|
|
|
4,629,004
|
|
Less: Weighted average participating securities
|
|
|
(68,770
|
)
|
|
|
(89,079
|
)
|
|
|
(68,770
|
)
|
|
|
(89,079
|
)
|
Weighted average common shares outstanding
|
|
|
8,129,487
|
|
|
|
4,539,925
|
|
|
|
8,126,772
|
|
|
|
4,539,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.72
|
|
|
$
|
0.57
|
|
|
$
|
1.48
|
|
|
$
|
1.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocated to common stockholders
|
|
$
|
5,816
|
|
|
$
|
2,600
|
|
|
$
|
12,054
|
|
|
$
|
5,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic earnings per common share
|
|
|
8,129,487
|
|
|
|
4,539,925
|
|
|
|
8,126,772
|
|
|
|
4,539,925
|
|
Add: Dilutive effects of assumed exercise of stock options
|
|
|
160,561
|
|
|
|
33,000
|
|
|
|
156,834
|
|
|
|
33,000
|
|
Average shares and dilutive potential common shares
|
|
|
8,290,048
|
|
|
|
4,572,925
|
|
|
|
8,283,606
|
|
|
|
4,572,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive earnings per common share
|
|
$
|
0.70
|
|
|
$
|
0.57
|
|
|
$
|
1.46
|
|
|
$
|
1.12
|
|
All stock options for shares of common stock were considered
in computing diluted earnings per common share for three months and six months ended June 30, 2018 and 2017, as no options were
anti-dilutive.
NOTE 7 - STOCK COMPENSATION PLAN
The Company has two share-based compensation plans which are
described below.
Stock Option Plan
The Company established the 1999 Stock
Option Plan (the “1999 Plan”), as amended, under which certain employees and directors may receive stock options. Stock
options are generally granted with an exercise price equal to 100% of the fair value of the common stock at the date of grant.
As of June 30, 2018 and December 31, 2017, there were no unissued shares of the Company’s common stock authorized for option
grants under the Plan.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 7 - STOCK COMPENSATION PLAN (
continued)
Equity Incentive Plan
In May 2009 the Company approved the 2009
Equity Incentive Plan (the “2009 Plan”) as a successor to the 1999 Plan. The 2009 Plan permits the granting of restricted
shares, incentive stock options (“ISO”), nonqualified stock options, stock appreciation rights, restricted share units
and other stock-based awards to employees, directors, officers, consultants, advisors, suppliers and any other persons or entity
whose services are considered valuable for up to 1,183,000 shares. Under the terms of the 2009 Plan, each option agreement cannot
have an exercise price that is less than 100% of the fair value of the shares covered by the option on the date of grant. In the
case of an ISO granted to any 10% stockholder, the exercise price shall not be less than 110% of the fair value of the shares covered
by the option on the date of grant.
In no event shall the exercise price of
an option be less than the par value of the shares for which the option is exercisable. In no event shall the exercise period exceed
ten years from the date of grant of the option, except, in the case of an ISO granted to a 10% stockholder, the exercise period
shall not exceed five years from the date of grant. In the event of a change in control, the Company may determine that any award
then outstanding shall be assumed or an equivalent award shall be substituted by the successor company.
The fair value of each option award is
estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the
table below. Expected volatilities based on historical volatilities of the Company’s common stock are not significant. The
expected term of options granted is based on historical data and represents the period of time that options granted are expected
to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected
term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. No options were granted during
three and six months ended June 30, 2018 and 2017.
A summary of the status of the Company’s
stock option plan and the change during the six months ended June 30, 2018 is presented below:
|
|
Six Months Ended June 30, 2018
|
|
|
|
Number of
Options
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding, beginning of period
|
|
|
271,500
|
|
|
|
19.79
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(3,000
|
)
|
|
|
30.00
|
|
Cancelled/forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding, end of period
|
|
|
268,500
|
|
|
$
|
19.68
|
|
Options vested and exercisable at end of period
|
|
|
268,500
|
|
|
$
|
19.68
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining contractual life (years)
|
|
|
|
|
|
|
5.13
|
|
Options exercised during the six months ended June 30, 2018
were a cashless exercise. There was no unrecognized compensation cost related to non-vested stock options granted under the 2009
Plan at June 30, 2018 and December 31, 2017.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 7 - STOCK COMPENSATION PLAN (
continued)
There was no compensation cost related to stock option plan
for the three and six months ended June 30, 2018 and 2017.
The following table summarizes information about stock options
outstanding at June 30, 2018:
|
|
Options Outstanding
|
|
Range of Average
Exercise Prices
|
|
Number Outstanding at
June 30, 2018
|
|
|
Weighted Average
Remaining Contractual Life
|
|
|
Weighted Average
Exercise Price
|
|
$10 – 20
|
|
|
231,000
|
|
|
|
5.89
|
|
|
$
|
18.00
|
|
$21 – 30
|
|
|
37,500
|
|
|
|
0.45
|
|
|
$
|
30.00
|
|
$10 – 30
|
|
|
268,500
|
|
|
|
5.13
|
|
|
$
|
19.68
|
|
Restricted Stock Awards
The Company issued restricted stock awards
to certain key personnel under the 2009 Equity Incentive Plan. Each restricted stock award vests based on vesting schedule outlined
in the reward agreement. Restricted stock awards are subject to forfeiture if the holder is not employed by the Company on the
vesting date. In 2013, stockholders approved an additional 300,000 shares available under the plan, and in 2016, an additional
760,000 shares were authorized. Total remaining shares issuable under the plan are 724,642 at June 30, 2018, which includes performance
based stock awards discussed below. There were 8,987 restricted shares granted to the Board of Directors as directors’ fees
during the three months ended June 30, 2018
.
These shares vested on the same day as they were awarded and the expense related
to these were booked as directors’ fees expense.
As of June 30, 2018, there was $817,000
of total unrecognized compensation expense related to the restricted stock awards. The cost is expected to be recognized over a
weighted-average period of 2.82 years.
Total compensation cost that has been charged
against income for this plan was $98,000 and $161,000 for the three and six months ended June 30, 2018; and $92,000 and $204,000
for the three and six months ended June 30, 2017, respectively.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 7 - STOCK COMPENSATION PLAN (
continued)
The following table summarizes the changes in the Company’s
non-vested restricted stock awards for the six months ended June 30, 2018:
|
|
Six Months Ended June 30, 2018
|
|
|
|
Number of Shares
|
|
|
Weighted Average
Grant Date Fair Value
|
|
|
|
|
|
|
|
|
Outstanding, beginning of period
|
|
|
76,104
|
|
|
$
|
20.61
|
|
Granted
|
|
|
8,987
|
|
|
|
48.99
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
(16,321
|
)
|
|
|
35.06
|
|
Outstanding at end of period
|
|
|
68,770
|
|
|
$
|
23.61
|
|
The total fair value of shares vested was $742,000 during the
six months ended June 30, 2018, respectively.
Performance Based Stock Awards
During the six months ended June 30, 2018,
the Company established a long term incentive award program under the 2009 Equity Incentive Plan. For each award, threshold target
Performance Restricted Share Units (“PRSUs”) are eligible to be earned over a three-year performance period based on
the Company’s relative performance on certain measurement goals that were established at the onset of the performance period.
These awards were accounted for in accordance with on guidance prescribed in ASC Topic 718,
Compensation – Stock Compensation.
During the six months ended June 30, 2018, 90,000 PRSUs were awarded under the program. These units will be granted at the end
of the three year performance period. The following table summarizes the changes in the Company’s non-vested PRSU awards
for the six months ended June 30, 2018 (dollars in thousands, except share information):
|
|
For the six months ended
June 30, 2018
|
|
|
|
|
|
Weighted average service inception date fair value of award shares
|
|
$
|
4,125,300
|
|
Minimum aggregate share payout
|
|
|
12,000
|
|
Maximum aggregate share payout
|
|
|
90,000
|
|
Likely aggregate share payout
|
|
|
90,000
|
|
Compensation expense recognized
|
|
$
|
561,412
|
|
Total compensation cost that has been charged against income
for this plan was $382,000 and $561,000 for the three and six months ended June 30, 2018, respectively.
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company uses fair value measurements
to record fair value adjustments to certain assets and to determine fair value disclosures. The Company did not have any liabilities
that were measured at fair value at June 30, 2018 and December 31, 2017. Securities available-for-sale are recorded at fair value
on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities
on a non-recurring basis, such as certain impaired loans and goodwill. These non-recurring fair value adjustments generally involve
the write-down of individual assets due to impairment losses.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
(continued)
Accounting guidance establishes a fair
value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) for
identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs
other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs
that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an
asset or liability.
Assets and Liabilities Measured on a Recurring Basis
Assets measured on a recurring basis are
limited to the Bank’s available-for-sale securities (“AFS”) portfolio. The AFS portfolio is carried at estimated
fair value with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income or loss in shareholders’
equity. The fair values for substantially all of these securities are obtained monthly from an independent nationally recognized
pricing service. On a monthly basis, the Bank assesses the reasonableness of the fair values obtained by reference to a second
independent nationally recognized pricing service. Based on the nature of these securities, the Bank’s independent pricing
service provides prices which are categorized as Level 2 since quoted prices in active markets for identical assets are generally
not available for the majority of securities in the Bank’s portfolio. Various modeling techniques are used to determine pricing
for the Bank’s mortgage-backed securities, including option pricing and discounted cash flow models. The inputs to these
models include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities,
bids, offers and reference data. On an annual basis, the Bank obtains the models, inputs and assumptions utilized by its pricing
service and reviews them for reasonableness. The Bank also owns equity securities with a carrying value of $2.1 million at both
June 30, 2018 and December 31, 2017, for which fair values are obtained from quoted market prices in active markets and, as such,
are classified as Level 1.
Assets measured at fair value on a recurring basis are summarized
below (dollars in thousands):
|
|
Fair Value Measurement using:
|
|
|
|
Carrying
Amount
|
|
|
Quoted Prices in Active Markets
For Identical Assets (Level 1)
|
|
|
Significant Other Observable
Inputs (Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
At June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
23,464
|
|
|
$
|
-
|
|
|
$
|
23,464
|
|
|
$
|
-
|
|
Residential collateralized mortgage obligation
|
|
|
2,351
|
|
|
|
-
|
|
|
|
2,351
|
|
|
|
-
|
|
Municipal bond
|
|
|
1,093
|
|
|
|
-
|
|
|
|
1,093
|
|
|
|
-
|
|
CRA Mutual Fund
|
|
|
2,081
|
|
|
|
2,081
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
24,684
|
|
|
$
|
-
|
|
|
$
|
24,684
|
|
|
$
|
-
|
|
Residential collateralized mortgage obligation
|
|
|
2,706
|
|
|
|
-
|
|
|
|
2,706
|
|
|
|
-
|
|
Commercial collateralized mortgage obligations
|
|
|
1,550
|
|
|
|
-
|
|
|
|
1,550
|
|
|
|
-
|
|
Municipal bond
|
|
|
1,109
|
|
|
|
-
|
|
|
|
1,109
|
|
|
|
-
|
|
CRA Mutual Fund
|
|
|
2,108
|
|
|
|
2,108
|
|
|
|
-
|
|
|
|
-
|
|
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
(continued)
There were no transfers between Level 1
and Level 2 during 2018.
There were no assets measured at fair
value on a non-recurring basis at June 30, 2018 and December 31, 2017.
Carrying amount and estimated fair values of financial instruments
at June 30, 2018 and December 31, 2017 were as follows (dollars in thousands):
|
|
|
|
|
Fair Value Measurement Using:
|
|
|
|
|
At June 30, 2018
|
|
Carrying Amount
|
|
|
Quoted Prices in Active Markets
for Identical
Assets (Level 1)
|
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
|
Significant Unobservable
Inputs (Level 3)
|
|
|
Total Fair
Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
10,148
|
|
|
$
|
10,148
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
10,148
|
|
Overnight deposits
|
|
|
240,994
|
|
|
|
240,994
|
|
|
|
-
|
|
|
|
-
|
|
|
|
240,994
|
|
Securities available for sale
|
|
|
28,989
|
|
|
|
2,081
|
|
|
|
26,908
|
|
|
|
-
|
|
|
|
28,989
|
|
Securities held to maturity
|
|
|
4,985
|
|
|
|
-
|
|
|
|
4,782
|
|
|
|
-
|
|
|
|
4,782
|
|
Loans, net
|
|
|
1,582,184
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,628,843
|
|
|
|
1,628,843
|
|
Other investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
FRB Stock
|
|
|
7,223
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
FHLB Stock
|
|
|
4,047
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
SBA Loan Fund
|
|
|
5,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Disability Opportunity Fund
|
|
|
500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500
|
|
|
|
500
|
|
Accrued interest receivable
|
|
|
4,449
|
|
|
|
30
|
|
|
|
112
|
|
|
|
4,307
|
|
|
|
4,449
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits without stated maturities
|
|
$
|
1,450,766
|
|
|
$
|
1,450,766
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,450,766
|
|
Deposits with stated maturities
|
|
|
89,716
|
|
|
|
-
|
|
|
|
88,954
|
|
|
|
-
|
|
|
|
88,954
|
|
Federal Home Loan Bank of New York advances
|
|
|
63,000
|
|
|
|
-
|
|
|
|
62,979
|
|
|
|
-
|
|
|
|
62,979
|
|
Trust preferred securities payable
|
|
|
20,620
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,001
|
|
|
|
20,001
|
|
Subordinated debt, net of issuance cost
|
|
|
24,517
|
|
|
|
-
|
|
|
|
25,313
|
|
|
|
-
|
|
|
|
25,313
|
|
Accrued interest payable
|
|
|
1,019
|
|
|
|
21
|
|
|
|
787
|
|
|
|
211
|
|
|
|
1,019
|
|
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
(continued)
|
|
|
|
|
Fair Value Measurement Using:
|
|
|
|
|
At December 31, 2017
|
|
Carrying
Amount
|
|
|
Quoted Prices in Active Markets
for Identica
l Assets (Level 1)
|
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
|
Significant Unobservable
Inputs (Level 3)
|
|
|
Total Fair
Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
8,790
|
|
|
$
|
8,790
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,790
|
|
Overnight deposits
|
|
|
254,441
|
|
|
|
254,441
|
|
|
|
-
|
|
|
|
-
|
|
|
|
254,441
|
|
Securities available for sale
|
|
|
32,157
|
|
|
|
2,108
|
|
|
|
30,049
|
|
|
|
-
|
|
|
|
32,157
|
|
Securities held to maturity
|
|
|
5,428
|
|
|
|
-
|
|
|
|
5,330
|
|
|
|
-
|
|
|
|
5,330
|
|
Loans, net
|
|
|
1,405,009
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,410,860
|
|
|
|
1,410,860
|
|
Other investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FRB Stock
|
|
|
3,911
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
FHLB Stock
|
|
|
2,766
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
SBA Loan Fund
|
|
|
5,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Certificates of deposit
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,000
|
|
Accrued interest receivable
|
|
|
4,421
|
|
|
|
11
|
|
|
|
116
|
|
|
|
4,294
|
|
|
|
4,421
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits without stated maturities
|
|
$
|
1,324,110
|
|
|
$
|
1,324,110
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
1,324,110
|
|
Deposits with stated maturities
|
|
|
80,245
|
|
|
|
-
|
|
|
|
80,079
|
|
|
|
-
|
|
|
|
80,079
|
|
Borrowed funds
|
|
|
42,198
|
|
|
|
-
|
|
|
|
42,188
|
|
|
|
-
|
|
|
|
42,188
|
|
Trust preferred securities payable
|
|
|
20,620
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,997
|
|
|
|
19,997
|
|
Subordinated debt, net of issuance cost
|
|
|
24,489
|
|
|
|
-
|
|
|
|
25,500
|
|
|
|
-
|
|
|
|
25,500
|
|
Accrued interest payable
|
|
|
749
|
|
|
|
27
|
|
|
|
258
|
|
|
|
464
|
|
|
|
749
|
|
The methods and assumptions used to estimate fair value are
described as follows:
Cash and Due from Banks:
Carrying amounts of cash approximate
fair value, since these instruments are either payable on demand or have short-term maturities and as such are classified as Level
1.
Securities Available for Sale and Held to Maturity:
If
available, the estimated fair values are based on independent dealer quotations on nationally recognized securities exchanges and
are classified as Level 1. For securities where quoted prices are not available, fair value is based on matrix pricing, which is
a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for
the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities resulting
in a Level 2 classification.
Other Investments:
It is not practicable
to determine the fair value of Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock,
and investments in Solomon Hess SBA Loan Fund (“SBA Loan Fund”), due to restrictions placed on transferability. Certificates
of deposit values are based on actively quoted prices and as such are classified as Level 1. Other investments also include a $500,000
investment in The Disability Opportunity Fund (“DOF”), which is an equity equivalent investment to a community development
financial institution. Quoted prices are not available for the DOF and fair value is estimated using discounted cash flow analysis,
using interest rates currently available for similar investments resulting in a level 3 classification.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
(continued)
Loans:
Fair values of loans, excluding loans held for
sale are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair
values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted
cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality
establishing discount factors for these types of loans and resulting in a Level 3 classification. The methods utilized to estimate
the fair value of loans do not necessarily represent an exit price. The fair value of impaired loans with specific allocations
of the ALLL is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a
combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process
by the appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral
underlying such loans. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining
fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements,
or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the
time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a
Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairments and adjusted accordingly.
Deposits without stated maturities:
The fair values disclosed for demand deposits (e.g. interest and non-interest checking, savings and certain types of money
market accounts) are equal to the amount payable on demand at the recording date (i.e., their carrying amount) resulting in a Level
1 price.
Deposits with stated maturities
:
The estimated fair values of certificates of deposit are based on discounted cash flow calculations that use a replacement cost
of funds approach to establishing discount rates for certificate of deposit maturities resulting in a Level 2 classification.
Borrowed funds:
Represents FHLB advances for which the
estimated fair values are based on discounted cash flow calculations that use a replacement cost of funds approach to establishing
discount rates for funding maturities resulting in a Level 2 classification for all other maturity terms.
Trust Preferred Securities:
The estimated fair value
is based on estimates using market data for similarly risk weighted items and takes into consideration the features of the debentures
which is an unobservable input resulting in a Level 3 classification.
Subordinated Debt, net of debt issuance costs:
The fair
value of subordinated debt is estimated using discounted cash flow analyses based on then current borrowing rates for similar types
of borrowing arrangements (deemed a Level 2 valuation), and is provided to the Company independently by a market maker in the underlying
security.
Accrued Interest Receivable and Payable:
For these short-term
instruments, the carrying amount is a reasonable estimate of the fair value resulting in a Level 1, 2 or 3 classification consistent
with the underlying asset or liability the interest is associated with.
Stock based compensation liability:
The fair values of
liabilities related to performance based stock compensation are measured using quoted stock price resulting in a level 1 classification
for these liabilities.
Off-Balance-Sheet Liabilities:
The fair value of off-balance-sheet
commitments to extend credit is estimated using fees currently charged to enter into similar agreements. The fair value was immaterial
as of June 30, 2018 and December 31, 2017.
Fair value estimates are made at specific points in time and
are based on existing on-and off-balance sheet financial instruments. These estimates are subjective in nature and dependent on
a number of significant assumptions associated with each financial instrument or group of financial instruments, including estimates
of discount rates, risks associated with specific financial instruments, estimates of future cash flows, and relevant available
market information. Changes in assumptions could significantly affect the estimates. In addition, fair value estimates do not reflect
the value of anticipated future business, premiums or discounts that could result from offering for sale at one time the Company’s
entire holdings of a particular financial instrument, or the tax consequences of realizing gains or losses on the sale of financial
instruments.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 9 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents changes in Accumulated Other Comprehensive
Income (Loss), net of tax, for the three and six months ended June 30, 2018 and 2017 (dollars in thousands):
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Beginning balance
|
|
$
|
(528
|
)
|
|
$
|
(89
|
)
|
|
$
|
(206
|
)
|
|
$
|
(165
|
)
|
Net change in other comprehensive income (loss) before reclassification
|
|
|
(166
|
)
|
|
|
28
|
|
|
|
(588
|
)
|
|
|
161
|
|
Amounts reclassified from accumulated other comprehensive income
|
|
|
37
|
|
|
|
-
|
|
|
|
37
|
|
|
|
-
|
|
Tax effect
|
|
|
40
|
|
|
|
(12
|
)
|
|
|
140
|
|
|
|
(69
|
)
|
Net current period other comprehensive loss
|
|
|
(89
|
)
|
|
|
16
|
|
|
|
(411
|
)
|
|
|
92
|
|
Ending balance
|
|
$
|
(617
|
)
|
|
$
|
(73
|
)
|
|
$
|
(617
|
)
|
|
$
|
(73
|
)
|
NOTE 10 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments
to extend credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount
recognized in the financial statements. The Bank’s exposure to credit loss in the event of nonperformance by the other party
to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The
Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
The Bank had outstanding the following off-balance-sheet financial
instruments whose contract amounts represent credit risk at June 30, 2018 and December 31, 2017 (dollars in thousands):
|
|
At June 30, 2018
|
|
|
At December 31, 2017
|
|
|
|
Fixed Rate
|
|
|
Variable
Rate
|
|
|
Fixed Rate
|
|
|
Variable
Rate
|
|
Undrawn lines of credit
|
|
$
|
36,193
|
|
|
$
|
104,844
|
|
|
$
|
39,651
|
|
|
$
|
76,008
|
|
Letters of credit
|
|
|
24,915
|
|
|
|
-
|
|
|
|
23,741
|
|
|
|
-
|
|
|
|
$
|
61,108
|
|
|
$
|
104,844
|
|
|
$
|
63,392
|
|
|
$
|
76,008
|
|
A commitment to extend credit is a legally
binding agreement to lend to a customer as long as there is no violation of any condition established in the contract. Commitments
generally expire within two years. At June 30, 2018, the Bank’s fixed rate loan commitments are to make loans with interest
rates ranging from 3.0% to 5.7% and maturities of one year or more. At December 31, 2017, the Bank’s fixed rate loan commitments
had interest rates ranging from 3.5% to 9.5% and maturities of one year or more. The amount of collateral obtained, if any,
by the Bank upon extension of credit is based on management’s credit evaluation of the borrower. Collateral held varies
but may include mortgages on commercial and residential real estate, security interests in business assets, equipment, deposit
accounts with the Bank or other financial institutions and securities.
METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 10 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
(
continued)
The Bank has stand-by letters of credit in the amount of $24.9
million and $23.7 million included above as of June 30, 2018 and December 31, 2017, respectively, for which the Bank has pledged
interest-bearing accounts of $0.9 million and $1.7 million as of June 30, 2018 and December 31, 2017, respectively. The stand-by
letters of credit mature within one year.
NOTE 11 – SUBORDINATED DEBT
On March 8, 2017, the Company completed the issuance of its
$25 million subordinated notes at 100% issue price to accredited institutional investors. The notes mature on March 15, 2027 and
bear an interest rate of 6.25% per annum. The interest is paid semiannually on March 15 and September 15 of each year through March
15, 2022 and quarterly thereafter on March 15, June 15, September 15 and December 15 of each year.
Interest rate from March 15, 2022 to the maturity date shall
reset quarterly to an interest rate per annum equal to the then current three month LIBOR (not less than zero) plus 426 basis points,
payable quarterly in arrears.
The Company may redeem the subordinated notes beginning with
the interest payment date of March 15, 2022 and on any scheduled interest payment date thereafter. The subordinated notes may be
redeemed in whole or in part, at a redemption price equal to 100% of the principal amount of the subordinated notes plus any accrued
and unpaid interest.