Business Overview and History

Metropolitan Bank Holding Corp. (MCB) is a bank holding company headquartered in New York, New York, that provides a comprehensive range of business, commercial, and retail banking products and services primarily to small businesses, middle-market enterprises, public entities, and affluent individuals in the New York metropolitan area. The company's strategic positioning and diversified business model have enabled it to navigate the evolving financial landscape and deliver consistent performance.

Metropolitan Bank Holding Corp. was founded in 1999 with the goal of becoming a solutions-oriented, relationship-driven bank focused on serving the needs of middle-market companies and real estate entrepreneurs in the New York metropolitan area. The company's founding members, including Chief Executive Officer Mark DeFazio, recognized an opportunity to fill a gap in the market, as larger financial institutions often overlooked the specific needs of these client segments.

Over the past two decades, Metropolitan Bank Holding Corp. has established itself as a leading commercial bank in its target markets. The company's primary lending products include commercial real estate (CRE) loans, including multi-family loans, and commercial and industrial (CI) loans. The bank has also developed various deposit-gathering strategies, generating a stable source of deposits to fund its diverse loan portfolio without the need for a large branch network.

In addition to traditional commercial banking products, Metropolitan Bank Holding Corp. offers a suite of specialized services, including corporate cash management, retail banking, customized financial solutions for government entities and public institutions, and specialized services for real estate transactions and tax-deferred exchanges. The company's focus on building deep, long-term relationships with its clients has been a key driver of its success.

The bank quickly established itself as a trusted partner to its target commercial clients after beginning operations in 1999. Over the next two decades, Metropolitan Bank Holding Corp. grew its loan portfolio and deposit base through a focus on building deep relationships with business owners and real estate investors. The company developed expertise in key industries like healthcare, particularly skilled nursing facilities, and tailored its products and services to meet the unique needs of these clients.

In the early 2000s, Metropolitan Bank Holding Corp. expanded its offerings to include corporate cash management, specialized services for government entities and municipalities, and solutions for real estate transactions and tax-deferred exchanges. This diversification helped the company weather the financial crisis of 2008-2009 and continue its growth trajectory.

The company faced a significant challenge in 2020 when it became embroiled in investigations by federal and state authorities related to a prepaid debit card program that was part of its global payments business. This led to consent orders with the Federal Reserve and New York State Department of Financial Services, which required the bank to enhance its oversight and compliance practices. Metropolitan Bank Holding Corp. worked diligently to address the regulators' concerns and emerged from this period with strengthened risk management capabilities.

Financial Performance and Outlook

Metropolitan Bank Holding Corp. has demonstrated a strong track record of financial performance, with consistent growth in its loan and deposit portfolios. As of December 31, 2024, the company's total assets stood at $7.30 billion, a 3.3% increase from the previous year. The company's loan portfolio grew by 7.3% year-over-year to $6.00 billion, while total deposits increased by 4.3% to $6.00 billion.

The company's net interest margin (NIM) has also been a focus of management's attention, with the NIM increasing by 4 basis points to 3.66% in the fourth quarter of 2024 compared to the prior linked quarter. Management expects the NIM to continue expanding, with a target range of 3.70% to 3.75% for the full year 2025, supported by disciplined loan pricing and deposit gathering strategies.

In terms of profitability, Metropolitan Bank Holding Corp. reported net income of $66.69 million for the full year 2024, a decrease of 13.6% compared to the previous year. This decline was primarily driven by a $10.00 million regulatory reserve recorded in the third quarter of 2024 and increased expenses related to the company's digital transformation initiatives. However, management remains confident in the company's ability to achieve a core return on tangible common equity (ROTCE) of approximately 13% by the fourth quarter of 2025, supported by continued NIM expansion and disciplined expense management.

The company generated net income of $21.4 million or $1.88 per share in Q4 2024, beating their previous guidance. Annual net interest income increased 13.6% in 2024 versus 2023, meeting their previous guidance. The adjusted ROTCE was 12.3% in Q4 2024 and 12.2% for the full year 2024.

Looking ahead, Metropolitan Bank Holding Corp. is guiding for loan growth of 9% to 11% in 2025 versus year-end 2024. The company expects non-interest income growth of 5% to 6% in 2025 over the $10.5 million in non-GPG fee income recorded in 2024. Annual non-interest expenses are projected to be $175 million to $177 million in 2025, which includes $11 million in one-time costs related to digital transformation and other IT initiatives. The effective tax rate is expected to be between 31% and 32% in 2025.

Strategic Initiatives and Outlook

Over the past year, Metropolitan Bank Holding Corp. has been executing on two major strategic initiatives: the successful exit from the Banking-as-a-Service (BaaS) business and the ongoing investment in a new technology stack to modernize its core banking and payments platforms.

The exit from the BaaS business, which had been a complementary business to the commercial bank for the past 22 years, was completed in 2024. The company demonstrated its ability to effectively manage the associated deposit runoff, increasing total deposits by over $245 million in 2024 and $705 million since the end of 2022 through its diversified deposit verticals.

The company's investment in a new technology stack, which is expected to be fully integrated by the end of 2025, is aimed at supporting the growth and scalability of its diversified commercial banking business. Management believes this initiative will enable the company to enhance its digital capabilities, improve efficiency, and better serve its clients.

Looking ahead, Metropolitan Bank Holding Corp. remains focused on its core strategy of organic growth in the New York metropolitan area, supplemented by selective strategic opportunities that align with its client-centric approach and commitment to creating shareholder value. The company's conservative underwriting, diversified portfolio, and experienced management team position it well to navigate the evolving banking landscape and capitalize on opportunities in its target markets.

Risks and Challenges

While Metropolitan Bank Holding Corp. has demonstrated resilience and adaptability, the company faces several risks and challenges that investors should consider:

1. Concentration risk: A significant portion of the company's loan portfolio is concentrated in CRE, including multi-family loans, and CI loans. An economic downturn or adverse conditions in the real estate market could have a disproportionate impact on the company's financial performance.

2. Interest rate risk: As a financial institution, Metropolitan Bank Holding Corp. is exposed to interest rate risk, which could affect its net interest margin and profitability. The company's ability to effectively manage its asset-liability mix and respond to changes in interest rates will be crucial.

3. Regulatory environment: The banking industry is subject to extensive regulation, and changes in laws, rules, or policies could increase the company's compliance costs and impact its operations.

4. Competition: Metropolitan Bank Holding Corp. operates in a highly competitive market, facing intense rivalry from both traditional banks and non-bank financial services providers. The company's ability to maintain its competitive edge and market share will be critical to its long-term success.

5. Cybersecurity and technology risks: As the company invests in its technology infrastructure, it must also navigate the challenges posed by cyber threats and ensure the reliability and security of its systems.

Despite these risks, Metropolitan Bank Holding Corp.'s strategic positioning, diversified business model, and experienced management team have enabled the company to navigate the evolving financial landscape and deliver consistent performance. Investors should closely monitor the company's progress in executing its strategic initiatives and managing the key risks it faces.

Financials

Metropolitan Bank Holding Corp.'s financial performance has been solid, with consistent growth in its loan and deposit portfolios. As of December 31, 2024, the company reported:

• Total assets: $7.30 billion (3.3% increase year-over-year)

• Loan portfolio: $6.00 billion (7.3% increase year-over-year)
• Total deposits: $6.00 billion (4.3% increase year-over-year)
• Net income: $66.69 million for the full year 2024 (13.6% decrease compared to the previous year)
• Net interest margin (NIM): 3.66% in Q4 2024 (4 basis points increase from the prior linked quarter)

The company's management expects the NIM to continue expanding, with a target range of 3.70% to 3.75% for the full year 2025. They also aim to achieve a core return on tangible common equity (ROTCE) of approximately 13% by the fourth quarter of 2025.

For the most recent quarter (Q4 2024), the company reported:

• Revenue: $71.00 million
• Net Income: $21.42 million

The majority of the company's loan portfolio consists of CRE loans, including $4.32 billion in commercial real estate loans and $376.74 million in multi-family loans, representing 71.3% and 6.2% of the total loan portfolio, respectively. The commercial and industrial loan portfolio amounted to $1.05 billion, or 17.2% of total loans.

Liquidity

Metropolitan Bank Holding Corp. has maintained a strong liquidity position, supported by its diversified deposit base and effective deposit-gathering strategies. The company's successful exit from the Banking-as-a-Service (BaaS) business demonstrated its ability to manage deposit runoff effectively. In 2024, the company increased total deposits by over $245 million, and by $705 million since the end of 2022, through its diversified deposit verticals.

The bank's focus on building long-term relationships with clients and its specialized services for various sectors contribute to a stable funding base. Additionally, the company's conservative underwriting practices and diverse loan portfolio help maintain a balanced asset-liability mix, further supporting its liquidity position.

Key liquidity metrics include:

• Debt/Equity Ratio: 0.63
• Cash and Cash Equivalents: $200.3 million
• Available Credit Lines: The company has $2.9 billion in available secured wholesale funding borrowing capacity.

The company's deposit base consists primarily of money market deposits, which amounted to $4.51 billion, or 75.5% of total deposits, at the end of 2024.

Geographic Markets and Human Capital

Metropolitan Bank Holding Corp. primarily operates in the New York metropolitan area, with a focus on Manhattan and the outer boroughs, as well as Nassau County, New York. The company has a loan production office in Miami, Florida and an administrative office in Lakewood, New Jersey. This strategic geographic focus allows the company to leverage its deep understanding of the local market and maintain strong relationships with its client base.

As of December 31, 2024, the company employed 291 full-time employees and 2 part-time employees, none of whom are represented by a collective bargaining agreement. The company's experienced team of commercial relationship managers and integrated, client-centric approach have been instrumental in growing market share by deepening existing client relationships and continually expanding its client base through referrals and the ability to offer alternatives to traditional retail banking products.

Industry Trends and Competitive Landscape

The bank and non-bank financial services industry in Metropolitan Bank Holding Corp.'s markets is highly competitive. The company faces competition from commercial banks, savings associations, credit unions, consumer finance companies, and other financial institutions. The industry has been impacted by regulatory changes, technological advancements, and shifts in customer preferences.

To maintain its competitive edge, Metropolitan Bank Holding Corp. has focused on developing specialized services and tailored financial solutions for its target client segments. The company's ability to offer alternatives to traditional retail banking products, combined with its deep relationships and market expertise, has allowed it to compete effectively in its chosen markets.

Regulatory Environment and Recent Developments

Metropolitan Bank Holding Corp. operates in a highly regulated industry. The company has been subject to investigations by governmental entities concerning a prepaid debit card product program that was offered through its global payments business. In October 2023, the Bank entered into consent orders with the Federal Reserve and the New York State Department of Financial Services to resolve these investigations.

In the third quarter of 2024, the company recorded a $10 million regulatory reserve in connection with an investigation by the Attorney General of the State of Washington that was resolved in the fourth quarter of 2024. These regulatory actions have underscored the importance of maintaining robust compliance and risk management practices, which the company has continued to strengthen.

Conclusion

Metropolitan Bank Holding Corp. has established itself as a leading commercial bank in the New York metropolitan area, with a strong track record of financial performance and a client-centric approach that has enabled it to build deep, long-term relationships with its customers. The company's successful navigation of the BaaS business exit and its ongoing investment in a new technology stack demonstrate its strategic agility and commitment to positioning itself for continued growth and value creation.

While the company faces various risks and challenges common to the banking industry, its diversified business model, conservative underwriting, and experienced management team position it well to capitalize on opportunities in its target markets. As Metropolitan Bank Holding Corp. continues to execute on its strategic initiatives and navigate the evolving financial landscape, investors should closely monitor the company's progress and its ability to deliver sustainable long-term growth and shareholder value.