Metropolitan Bank Holding Corp.
11/06/2026 | Press release | Distributed by Public on 11/06/2026 15:12
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Company Background
The Company is a bank holding company headquartered in New York, New York and registered under the BHC Act. Through its wholly owned bank subsidiary, Metropolitan Commercial Bank, a New York state-chartered commercial bank, the Company provides a broad range of business, commercial and retail banking products and services to small businesses, middle-market enterprises, public entities and individuals primarily in the New York metropolitan area. See the "GLOSSARY OF COMMON TERMS AND ACRONYMS" for the definition of certain terms and acronyms used throughout this Form 10-Q.
The Company's primary lending products are CRE, including multi-family loans, and C&I loans. Substantially all loans are secured by specific items of collateral including business and consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flows from operations of commercial enterprises. The Company has developed various deposit gathering strategies, which generate the funding necessary to operate without a large branch network. In addition to traditional commercial banking products, the Company offers: corporate cash management and retail banking services; tailored financial solutions for government entities, municipalities, and public institutions; specialized services to facilitate secure and efficient real estate transactions and tax-deferred exchanges for title and escrow and Section 1031 exchanges; and EB-5 Program escrow accounts of foreign investor funds for USCIS approved job-creating projects. The Company's primary deposit products are checking, savings, and term deposit accounts, all of which are insured by the FDIC up to the maximum amounts allowed by law. These activities, together with eight strategically located banking centers, generate a stable source of deposits to support the growth of our diverse loan portfolio and other assets.
The Company is focused on organically growing its position in the New York metropolitan area. Growth in other markets across the country is generally dependent on the business activities of our New York-based customers. Through an experienced team of commercial relationship managers and its integrated, client-centric approach, the Company has grown 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. The Company has converted many of its commercial lending clients into full retail relationship banking clients. Given the size of the market in which the Company operates and its differentiated approach to client service, there is significant opportunity to further grow its loans and deposits. By combining high-tech service with the relationship-based focus of a community bank with an extensive suite of financial products and services, the Company is well-positioned to continue to capitalize on the significant growth opportunities available in the New York metropolitan area and elsewhere.
Critical Accounting Policies
Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Management believes the Company's most critical accounting policy, which involves the most complex or subjective decisions or assessments, is the allowance for credit losses.
Allowance for Credit Losses
The ACL has been determined in accordance with GAAP. The Company is responsible for the timely and periodic determination of the amount of the ACL. Management believes that the ACL for loans and loan commitments is adequate to cover expected credit losses over the life of the loan portfolio. Although management evaluates available information to determine the adequacy of the ACL, the level of allowance is an estimate which is subject to significant judgment and short-term change. Because of uncertainties associated with local and national economic forecasts, the operating and regulatory environment, collateral values and future cash flows from the loan portfolio, it is possible that a material change could occur in the ACL. The evaluation of the adequacy of loan collateral is often based upon estimates and appraisals. Because of uncertain economic conditions, the valuations determined from such estimates and appraisals may change.
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Accordingly, the Company may ultimately incur losses that vary from management's current estimates. Adjustments to the ACL will be reported in the period in which such adjustments become apparent and can be reasonably estimated. All loan losses are charged-off to the ACL when the loss actually occurs or when the collectability of principal is deemed to be unlikely. Recoveries are credited to the allowance at the time of recovery. Various regulatory agencies, as an integral part of their examination process, periodically review the Company's ACL. As a result of such examinations, the Company may need to recognize additions to the ACL based on the regulators' observations.
In estimating the ACL for loans and commitments that are evaluated collectively, the Company uses a third-party modeling platform. Loans evaluated collectively are segmented according to shared risk characteristics, such as loan type, borrower type and collateral to create homogenous loan pools. The measurement of all expected credit losses for financial assets held at amortized cost is based on historical experience, current conditions, and reasonable and supportable forecasts of macroeconomic conditions to account for economic uncertainty. The Company also considers qualitative adjustments for information not adequately captured in the quantitative model. Qualitative adjustments may reflect changes in portfolio composition and concentrations, credit quality, collateral values, lending practices, personnel and loan review processes, regulatory and legal matters, economic conditions, and other portfolio-specific risks.
When loans do not share risk characteristics with other financial assets they are evaluated individually. Management applies its normal loan review procedures in making these judgments. Individually evaluated loans consist of nonaccrual loans, loans that are classified as substandard or doubtful, and loans that have been modified due to financial difficulty. In determining the ACL, the Company generally applies a discounted cash flow method for instruments that are individually assessed. For collateral dependent financial assets where the borrower is experiencing financial difficulty, the ACL is measured based on the difference between the fair value of the collateral (less selling costs if applicable) and the amortized cost basis of the asset as of the measurement date. Fair value is generally calculated based on the value of the underlying collateral less an appraisal discount.
Prior to the third quarter of 2026, the Company utilized lifetime loss rate models to calculate the expected losses over the life of the loan based on exposure at default loan attributes, and reasonable and supportable economic forecasts. The portfolios were segmented by loan level attributes such as loan type, loan size, date of origination, and delinquency status to create homogenous loan pools. During the quarter ended March 31, 2026, the peer group selection process, macroeconomic forecast weightings, and the qualitative factor process were adjusted to reflect current conditions and events. The Company accounted for these revisions prospectively as a change in accounting estimate beginning March 31, 2026, and no prior period amounts were adjusted. The effect of this change in accounting estimate for the three months ended March 31, 2026, was a net decrease in the provision for credit losses of $6.4 million, which is $4.6 million, net of tax, or $0.43 per basic earnings per share and $0.42 per dilutive earnings per share.
The Company continuously monitors current conditions and events and will evaluate potential changes that will enhance the estimation process. During the three months ended September 30, 2026, the Company implemented a new modelling platform and transitioned from a lifetime loss-rate methodology to a discounted cash flow ("DCF") methodology for loans evaluated collectively. The Company determined that the DCF methodology provides a more granular and enhanced measurement framework through its use of individual loan characteristics, contractual cash flows, prepayment assumptions, expected loss expectations, and timing of expected cash flows into the ACL estimate. As part of the implementation the Company updated its loan segmentation, peer data methodology, economic forecast assumptions and certain model inputs, including prepayment assumptions. The Company accounted for these revisions prospectively as a change in accounting estimate beginning September 30, 2026, and no prior period amounts were adjusted. The implementation of the new modelling platform did not have a material impact on the Company's consolidated financial statements.
Under the DCF methodology, the ACL reflects the difference between the amortized cost basis of a loan and the present value of expected future cash flows discounted at the loan's effective interest rate. Expected cash flows incorporate probability of default ("PD") and loss given default ("LGD") assumptions, contractual loan terms, and expected prepayments, as applicable. Loans evaluated collectively are segmented according to shared risk characteristics, such as loan type, borrower type and collateral to create homogenous loan pools. The Company uses relevant historical information, including institution and peer data, to develop quantitative model assumptions. Statistical regression analyses are used to evaluate relationships between historical credit performance and macroeconomic variables and to develop
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forecast PD assumptions. LGD assumptions are derived using historical loss information, peer data, and other relevant inputs considered appropriate by management. A forecast of the U.S. unemployment rate is utilized for all modeled loan segments, and U.S. gross domestic product is also utilized for the C&I and One-to Four-Family loan segments. The Company uses a four-quarter reasonable and supportable forecast period followed by a four-quarter straight-line reversion to the long-term average of the applicable economic variable.
One of the more significant judgments involved in estimating the ACL relates to the reasonable and supportable macroeconomic forecast utilized in the quantitative models. Changes in forecast unemployment affect forecast PD assumptions and, in turn, the estimated allowance for credit losses. To illustrate the sensitivity of the ACL to changes in the economic forecast, the Company increased forecasted unemployment by 10% over the reasonable and supportable forecast period while holding all other model assumptions constant. All else equal, this hypothetical change would have resulted in an increase of approximately $1.7 million, or 2.8%, in the Company's total ACL for loans and unused loan commitments as of September 30, 2026. This hypothetical analysis is intended solely to illustrate the impact of a change in forecasted unemployment at a point in time and does not reflect management's expectations regarding future economic conditions or the full nature and extent of potential future changes in the ACL. It is difficult to estimate how potential changes in any one model assumption or qualitative factor might affect the overall ACL, and the Company's current assessments may not reflect the potential future impact of changes to those inputs or factors.
Discussion of Financial Condition
The Company had total assets of $9.5 billion at September 30, 2026, an increase of $1.2 billion, or 14.7%, from December 31, 2025. Total cash and cash equivalents were $247.0 million at September 30, 2026, as compared to $393.6 million at December 31, 2025.
Investments
Total securities were $1.5 billion at September 30, 2026, an increase of $546.8 million or 58.1%, from December 31, 2025. The increase was primarily due to the purchase of $688.7 million of AFS and HTM securities, partially offset by the $112.0 million paydown and maturities of AFS and HTM securities.
Loans
Total loans, net of deferred fees and unamortized costs, were $7.5 billion at September 30, 2026, an increase of $723.6 million, or 10.6%, from December 31, 2025. The increase in total loans from December 31, 2025 was due primarily to an increase of $454.2 million in CRE loans (including owner-occupied) and an increase of $242.8 million in construction loans, partially offset by a decrease of $18.2 million in C&I loans. At September 30, 2026, 73.4% of the CRE and C&I loan portfolio was concentrated in the New York metropolitan area, mainly New York City, and Florida.
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As of September 30, 2026, total loans consisted primarily of CRE loans and C&I loans. The Company's loan portfolio includes loans to the following industries (dollars in thousands):
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At September 30, 2026 |
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% of Total |
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Balance |
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Loans |
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CRE(1) |
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Skilled Nursing Facilities |
$ |
3,282,315 |
44.2 |
% |
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Construction and Land |
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504,566 |
6.8 |
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Multi-family |
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411,532 |
5.5 |
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Hospitality |
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408,938 |
5.5 |
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Office |
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393,448 |
5.3 |
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Retail |
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388,339 |
5.2 |
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Mixed use |
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350,438 |
4.7 |
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Warehouse / Industrial |
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154,728 |
2.1 |
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Other |
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677,523 |
9.2 |
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Total CRE |
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$ |
6,571,827 |
88.5 |
% |
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C&I |
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Finance & Insurance |
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$ |
235,125 |
3.2 |
% |
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Skilled Nursing Facilities |
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190,896 |
2.5 |
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Individuals |
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115,590 |
1.6 |
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Services |
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104,147 |
1.4 |
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Healthcare |
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94,125 |
1.2 |
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Wholesale |
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39,184 |
0.5 |
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Manufacturing |
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11,262 |
0.2 |
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Other |
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63,086 |
0.9 |
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Total C&I |
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$ |
853,415 |
11.5 |
% |
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(1) CRE loans do not include one-to four-family loans.
The largest concentration in the loan portfolio is to the healthcare industry, which amounted to $3.6 billion, or 48.0% of total loans, at September 30, 2026, including $3.5 billion in loans to skilled nursing facilities.
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Asset Quality
As the Company continues to work diligently toward the resolution of the credits that make up its nonperforming loan portfolio, non-performing loans decreased to $71.7 million at September 30, 2026 compared to $86.9 million at December 31, 2025. The decrease primarily reflects the resolution and charge-off of a single CRE loan relationship and a single non-core C&I loan relationship. The table below sets forth key asset quality ratios (dollars in thousands).
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At or for the |
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At or for the |
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nine months ended |
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year ended |
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September 30, |
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December 31, |
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2026 |
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2025 |
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Asset Quality Ratios |
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Non-performing loans |
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$ |
71,687 |
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$ |
86,884 |
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Non-performing loans to total loans |
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0.95 |
% |
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1.28 |
% |
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Allowance for credit losses to total loans |
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0.85 |
% |
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1.43 |
% |
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Non-performing loans to total assets |
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0.76 |
% |
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1.05 |
% |
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Allowance for credit losses to non-performing loans |
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89.5 |
% |
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111.7 |
% |
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Ratio of net charge-offs (recoveries) to average loans outstanding in aggregate |
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0.94 |
% |
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0.06 |
% |
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Allowance for Credit Losses - Loans and Loan Commitments
The ACL for loans was $64.2 million at September 30, 2026, as compared to $97.1 million at December 31, 2025. The $32.9 million decrease in the ACL primarily reflects enhancements made to the Bank's allowance for credit loss estimation process in the first quarter of 2026, as well as the charge-off of the aforementioned previously reserved CRE loan relationship, partially offset by loan growth. During the third quarter of 2026, the Company implemented a new modelling platform and transitioned from a lifetime loss-rate methodology to a discounted cash flow ("DCF") methodology for loans evaluated collectively. See "- Critical Accounting Policies" above for more information on the Bank's allowance for credit losses.
Deposits
Total deposits were $8.3 billion at September 30, 2026, an increase of $943.4 million, or 12.8%, from December 31, 2025. The increase in total deposits from December 31, 2025 was primarily driven by the Bank's EB-5 Program, Home Owners Association banking and retail deposit verticals. Non-interest-bearing demand deposits were 21.5% of total deposits at September 30, 2026, compared to 20.1% at December 31, 2025.
The table below summarizes the Company's deposit composition by segment for the periods indicated (dollars in thousands):
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At September 30, 2026 |
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At December 31, 2025 |
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Dollar |
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Percentage |
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Non-interest-bearing demand deposits |
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$ |
1,791,652 |
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$ |
1,479,420 |
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$ |
312,232 |
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21.1 |
% |
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Money market |
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6,393,614 |
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5,698,748 |
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694,866 |
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12.2 |
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Savings accounts |
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8,870 |
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8,886 |
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(16) |
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(0.2) |
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Time deposits |
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126,436 |
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190,124 |
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(63,688) |
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(33.5) |
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Total |
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$ |
8,320,572 |
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$ |
7,377,178 |
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$ |
943,394 |
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12.8 |
% |
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At September 30, 2026, the aggregate estimated amount of FDIC uninsured deposits was $2.4 billion, and the aggregate estimated amount of uninsured time deposits was $46.4 million. The following table presents the scheduled maturities of time deposits greater than $250,000 (in thousands):
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At September 30, 2026 |
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Three months or less |
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$ |
20,383 |
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Over three months through six months |
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17,282 |
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Over six months through one-year |
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5,996 |
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Over one-year |
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2,699 |
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Total |
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$ |
46,360 |
Borrowings
To support the balance sheet, the Company may at times utilize FHLB advances or other funding sources. At September 30, 2026, and December 31, 2025, the Company had no outstanding Federal funds purchased or FHLBNY advances.
Accumulated Other Comprehensive Income
Accumulated other comprehensive loss, net of tax, was $54.6 million at September 30, 2026, an increase of $14.9 million from December 31, 2025. The increase from December 31, 2025 was primarily due to unrealized losses on AFS securities, partially offset by unrealized gains on cash flow hedges, as a result of changes in prevailing market interest rates.
Results of Operations
Net Income
Net income was $32.4 million for the third quarter of 2026, an increase of $25.3 million as compared to $7.1 million for the third quarter of 2025. This increase was due primarily to a $20.3 million increase in net interest income, and an $18.8 million decrease in the provision for credit losses, partially offset by a $4.1 million increase in compensation and benefits and a $1.8 million increase in deposit related program fees.
Net income was $83.1 million for the nine months ended September 30, 2026, an increase of $40.8 million as compared to $42.2 million for the nine months ended September 30, 2025. This increase was due primarily to a $56.1 million increase in net interest income and an $18.6 million decrease in the provision for credit losses, partially offset by an $11.6 million increase in compensation and benefits and a $5.4 million increase in deposit related program fees.
Net Interest Income and Net Interest Margin
Net interest income is the difference between interest earned on assets and interest incurred on liabilities. The following tables present an analysis of net interest income by each major category of interest-earning assets and interest-bearing liabilities. The table presents the average yield on interest-earning assets and the average cost of interest-bearing liabilities. Yields and costs were derived by dividing income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. Average balances were derived from daily balances over the periods indicated. Interest income includes fees that management considers to be adjustments to yields. Yields on tax-exempt obligations were not computed on a tax-equivalent basis. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred loan origination fees and costs, and purchase discounts and premiums that are amortized or accreted to interest income.
Net interest margin for the third quarter of 2026 was 4.36% compared to 3.88% for the third quarter of 2025. The 48 basis point increase was primarily due to a lower cost of funds, driven by three 25 basis point federal funds rate decreases in late 2025 and a funding mix shift away from borrowings, as well as higher securities yields reflecting reinvestment of cash flows at market yields, partially offset by lower loan and overnight-deposit yields.
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Net interest margin for the nine months ended September 30, 2026 was 4.17% compared to 3.80% for the nine months ended September 30, 2025. The 37 basis point increase was primarily due to a lower cost of funds, driven by three 25 basis point federal funds rate decreases in late 2025 and a funding mix shift away from borrowings, as well as higher securities yields reflecting reinvestment of cash flows at market yields, partially offset by lower loan and overnight-deposit yields.
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Three Months Ended |
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September 30, 2026 |
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September 30, 2025 |
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Average |
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Yield / |
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Average |
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Yield / |
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(dollars in thousands) |
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Balance |
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Interest |
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Rate (1) |
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Balance |
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Interest |
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Rate (1) |
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Assets: |
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Interest-earning assets: |
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Loans (2) |
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$ |
7,331,185 |
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$ |
134,375 |
7.27 |
% |
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$ |
6,690,695 |
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$ |
123,521 |
7.32 |
% |
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Available-for-sale securities |
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759,093 |
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6,318 |
3.30 |
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626,434 |
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4,224 |
2.68 |
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Held-to-maturity securities |
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438,273 |
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2,876 |
2.60 |
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383,238 |
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1,780 |
1.84 |
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Equity investments |
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6,049 |
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46 |
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3.00 |
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5,751 |
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43 |
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2.94 |
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Overnight deposits |
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328,100 |
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3,179 |
3.84 |
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177,016 |
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1,995 |
4.47 |
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Other interest-earning assets |
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27,724 |
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394 |
5.64 |
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27,564 |
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437 |
6.29 |
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Total interest-earning assets |
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8,890,424 |
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147,188 |
6.57 |
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7,910,698 |
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132,000 |
6.62 |
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Non-interest-earning assets |
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179,637 |
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128,891 |
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Allowance for credit losses |
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(61,704) |
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(74,877) |
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Total assets |
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$ |
9,008,357 |
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$ |
7,964,712 |
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Liabilities and Stockholders' Equity: |
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Interest-bearing liabilities: |
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Money market and savings accounts |
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$ |
6,079,932 |
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47,973 |
3.13 |
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$ |
5,340,340 |
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49,856 |
3.70 |
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Certificates of deposit |
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142,018 |
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1,302 |
3.64 |
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126,600 |
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1,321 |
4.14 |
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Total interest-bearing deposits |
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6,221,950 |
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49,275 |
3.14 |
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5,466,940 |
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51,177 |
3.71 |
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Borrowed funds |
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20,620 |
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304 |
5.84 |
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289,517 |
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3,512 |
4.81 |
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Total interest-bearing liabilities |
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6,242,570 |
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49,579 |
3.15 |
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5,756,457 |
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54,689 |
3.77 |
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Non-interest-bearing liabilities: |
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Non-interest-bearing deposits |
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1,626,652 |
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1,354,163 |
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Other non-interest-bearing liabilities |
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154,646 |
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122,811 |
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Total liabilities |
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8,023,868 |
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7,233,431 |
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Stockholders' equity |
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984,489 |
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731,281 |
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Total liabilities and equity |
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$ |
9,008,357 |
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$ |
7,964,712 |
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Net interest income |
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$ |
97,609 |
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$ |
77,311 |
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Net interest rate spread (3) |
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3.42 |
% |
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2.85 |
% |
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Net interest margin (4) |
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4.36 |
% |
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3.88 |
% |
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Total cost of deposits (5) |
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2.49 |
% |
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|
2.98 |
% |
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Total cost of funds (6) |
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2.50 |
% |
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|
3.05 |
% |
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(1) |
Annualized. |
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(2) |
Amount includes deferred loan fees and non-performing loans. |
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(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. |
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|||||||||||||||||
|
|
|
September 30, 2026 |
|
|
September 30, 2025 |
|
|||||||||||||
|
|
|
Average |
|
|
|
|
Yield / |
|
|
Average |
|
|
|
|
Yield / |
|
|||
|
(dollars in thousands) |
|
Balance |
|
Interest |
|
Rate (1) |
|
|
Balance |
|
Interest |
|
Rate (1) |
|
|||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Loans (2) |
|
$ |
7,095,282 |
|
$ |
382,611 |
7.21 |
% |
|
$ |
6,461,679 |
|
$ |
353,160 |
7.31 |
% |
|
||
|
Available-for-sale securities |
|
713,284 |
|
17,284 |
3.24 |
|
|
603,841 |
|
11,523 |
2.55 |
|
|
||||||
|
Held-to-maturity securities |
|
385,246 |
|
6,406 |
2.22 |
|
|
398,188 |
|
5,572 |
1.87 |
|
|
||||||
|
Equity investments - non-trading |
|
|
5,947 |
|
|
135 |
|
3.03 |
|
|
|
5,608 |
|
|
124 |
|
2.95 |
|
|
|
Overnight deposits |
|
551,311 |
|
15,518 |
3.76 |
|
|
171,892 |
|
5,998 |
4.67 |
|
|
||||||
|
Other interest-earning assets |
|
24,608 |
|
1,104 |
6.00 |
|
|
28,709 |
|
1,436 |
6.69 |
|
|
||||||
|
Total interest-earning assets |
|
8,775,678 |
|
423,058 |
6.45 |
|
|
7,669,917 |
|
377,813 |
6.59 |
|
|
||||||
|
Non-interest-earning assets |
|
145,924 |
|
|
|
|
|
133,116 |
|
|
|
|
|
||||||
|
Allowance for credit losses |
|
(79,784) |
|
|
|
|
|
(69,513) |
|
|
|
|
|
||||||
|
Total assets |
|
$ |
8,841,818 |
|
|
|
|
|
$ |
7,733,520 |
|
|
|
|
|
||||
|
Liabilities and Stockholders' Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Money market and savings accounts |
|
$ |
6,050,890 |
|
|
143,771 |
3.18 |
|
|
$ |
5,073,383 |
|
|
144,154 |
3.80 |
|
|
||
|
Certificates of deposit |
|
159,412 |
|
4,428 |
3.71 |
|
|
128,856 |
|
4,024 |
4.18 |
|
|
||||||
|
Total interest-bearing deposits |
|
6,210,302 |
|
148,199 |
3.19 |
|
|
5,202,239 |
|
148,178 |
3.81 |
|
|
||||||
|
Borrowed funds |
|
21,286 |
|
893 |
5.61 |
|
|
326,954 |
|
11,725 |
4.79 |
|
|
||||||
|
Total interest-bearing liabilities |
|
6,231,588 |
|
149,092 |
3.20 |
|
|
5,529,193 |
|
159,903 |
3.87 |
|
|
||||||
|
Non-interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Non-interest-bearing deposits |
|
1,556,919 |
|
|
|
|
|
1,344,086 |
|
|
|
|
|
||||||
|
Other non-interest-bearing liabilities |
|
126,869 |
|
|
|
|
|
128,004 |
|
|
|
|
|
||||||
|
Total liabilities |
|
7,915,376 |
|
|
|
|
|
7,001,283 |
|
|
|
|
|
||||||
|
Stockholders' equity |
|
926,442 |
|
|
|
|
|
732,237 |
|
|
|
|
|
||||||
|
Total liabilities and equity |
|
$ |
8,841,818 |
|
|
|
|
|
$ |
7,733,520 |
|
|
|
|
|
||||
|
Net interest income |
|
|
|
$ |
273,966 |
|
|
|
|
|
$ |
217,910 |
|
|
|
||||
|
Net interest rate spread (3) |
|
|
|
|
3.25 |
% |
|
|
|
|
2.72 |
% |
|
||||||
|
Net interest margin (4) |
|
|
|
|
4.17 |
% |
|
|
|
|
3.80 |
% |
|
||||||
|
Total cost of deposits (5) |
|
|
|
|
2.55 |
% |
|
|
|
|
3.03 |
% |
|
||||||
|
Total cost of funds (6) |
|
|
|
|
2.56 |
% |
|
|
|
|
|
3.11 |
% |
|
|||||
|
(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. |
Table of Contents
The following tables present the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
||||||||
|
|
|
2026 over 2025 |
|
|||||||
|
|
|
Increase (Decrease) |
|
Total |
|
|||||
|
|
|
Due to |
|
Increase |
|
|||||
|
|
|
Volume |
|
Rate |
|
(Decrease) |
|
|||
|
Interest-earning assets: |
|
|
|
|
|
|
||||
|
Loans |
|
$ |
11,746 |
|
$ |
(891) |
|
$ |
10,855 |
|
|
Available-for-sale securities |
|
994 |
|
1,100 |
|
2,094 |
|
|||
|
Held-to-maturity securities |
|
283 |
|
813 |
|
1,096 |
|
|||
|
Equity investments |
|
|
2 |
|
|
1 |
|
|
3 |
|
|
Overnight deposits |
|
|
1,498 |
|
|
(314) |
|
|
1,184 |
|
|
Other interest-earning assets |
|
3 |
|
(46) |
|
(43) |
|
|||
|
Total interest-earning assets |
|
$ |
14,526 |
|
$ |
663 |
|
$ |
15,189 |
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|||
|
Money market and savings accounts |
|
$ |
6,400 |
|
$ |
(8,284) |
|
$ |
(1,884) |
|
|
Certificates of deposit |
|
151 |
|
(169) |
|
(18) |
|
|||
|
Total deposits |
|
6,551 |
|
(8,453) |
|
(1,902) |
|
|||
|
Borrowed funds |
|
(3,828) |
|
621 |
|
(3,207) |
|
|||
|
Total interest-bearing liabilities |
|
2,723 |
|
(7,832) |
|
(5,109) |
|
|||
|
Change in net interest income |
|
$ |
11,803 |
|
$ |
8,495 |
|
$ |
20,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|||||||
|
|
|
2026 over 2025 |
|
|||||||
|
|
|
Increase (Decrease) |
|
Total |
|
|||||
|
|
|
Due to |
|
Increase |
|
|||||
|
|
|
Volume |
|
Rate |
|
(Decrease) |
|
|||
|
Interest-earning assets: |
|
|
|
|
|
|
||||
|
Loans |
|
$ |
34,222 |
|
$ |
(4,771) |
|
$ |
29,451 |
|
|
Available-for-sale securities |
|
2,315 |
|
3,447 |
|
5,762 |
|
|||
|
Held-to-maturity securities |
|
(186) |
|
1,020 |
|
834 |
|
|||
|
Equity investments |
|
|
8 |
|
|
3 |
|
|
11 |
|
|
Overnight deposits |
|
|
10,886 |
|
|
(1,366) |
|
|
9,520 |
|
|
Other interest-earning assets |
|
(193) |
|
(139) |
|
(332) |
|
|||
|
Total interest-earning assets |
|
$ |
47,052 |
|
$ |
(1,806) |
|
$ |
45,246 |
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|||
|
Money market and savings accounts |
|
$ |
25,316 |
|
$ |
(25,700) |
|
$ |
(384) |
|
|
Certificates of deposit |
|
882 |
|
(478) |
|
404 |
|
|||
|
Total deposits |
|
26,198 |
|
(26,178) |
|
20 |
|
|||
|
Borrowed funds |
|
(12,535) |
|
1,703 |
|
(10,832) |
|
|||
|
Total interest-bearing liabilities |
|
13,663 |
|
(24,475) |
|
(10,812) |
|
|||
|
Change in net interest income |
|
$ |
33,389 |
|
$ |
22,669 |
|
$ |
56,058 |
|
Interest Income
Interest income increased $15.2 million to $147.2 million for the third quarter of 2026 compared to $132.0 million for the third quarter of 2025, primarily due to the $640.5 million increase in the average balance of loans, the $151.1 million increase in the average balance of overnight deposits, and the $188.0 million increase in the average balance of securities.
Table of Contents
Interest income increased $45.2 million to $423.1 million for the nine months ended September 30, 2026 as compared to $377.8 million for the nine months ended September 30, 2025, primarily due to the $633.6 million increase in the average balance of loans and the $379.4 million increase in the average balance of overnight deposits.
Interest Expense
Interest expense decreased $5.1 million to $49.6 million for the third quarter of 2026 as compared to $54.7 million for the third quarter of 2025 due primarily to the 55 basis point decrease in the total cost of funds that reflects the decline in short-term interest rates.
Interest expense decreased $10.8 million to $149.1 million for the nine months ended September 30, 2026 as compared to $159.9 million for the nine months ended September 30, 2025, due primarily to a 55 basis point decrease in the total cost of funds reflecting the decline in short-term interest rates and the $305.7 million decrease in the average balance of borrowed funds.
Provision for Credit Losses - Loans and Loan Commitments
The provision for credit losses for the three months ended September 30, 2026 was $5.1 million, as compared to $23.9 million for the three months ended September 30, 2025. The decrease in the provision for credit losses was driven primarily by lower credit-specific provisioning for certain CRE and C&I loan relationships.
The provision for credit losses for the nine months ended September 30, 2026 was $16.1 million, as compared to $34.7 million for the nine months ended September 30, 2025. The provision for credit losses for the nine months ended September 30, 2026 reflects the impact of credit-specific reserves associated with a non-core C&I loan relationship and other identified C&I and CRE credits, which were subsequently charged off, primarily during the second quarter of 2026. The provision for the nine months ended September 30, 2026 also reflects the impact of enhancements to the Company's allowance for credit loss estimation process in the first quarter of 2026. See "-Critical Accounting Policies" above for more information on the adjustments made to the Bank's allowance for credit loss estimation process.
Non-Interest Income
Non-interest income increased $427,000 to $3.0 million for the third quarter of 2026, as compared to $2.5 million for the third quarter of 2025, driven primarily by an increase in service charges on deposit accounts, partially offset by an increase in the unrealized loss on equity securities.
Non-interest income decreased $691,000 to $8.1 million for the nine months ended September 30, 2026, as compared to $8.8 million for the nine months ended September 30, 2025 driven primarily by an increase in the unrealized loss on equity securities, partially offset by an increase in service charges on deposit accounts.
Non-Interest Expense
Non-interest expense increased $3.7 million to $49.5 million for the third quarter of 2026, compared to the third quarter of 2025 due primarily to a $4.1 million increase in compensation and benefits and a $1.8 million increase in deposit related program fees, partially offset by a $1.5 million decrease in technology costs and a $1.1 million decrease in the Federal Deposit Insurance Corporation ("FDIC") assessment.
Non-interest expense increased $16.1 million to $147.7 million for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, due primarily to an increase of $11.6 million in compensation and benefits due to the increase in the number of employees, a $5.4 million increase in deposit program related fees, a $1.7 million increase in bank premises and equipment, and a $1.5 million increase in technology costs, partially offset by a decrease of $3.9 million in FDIC assessment.
Table of Contents
Income Tax Expense
The estimated effective tax rate for the third quarter of 2026 was 29.5% as compared to 30.1% for the third quarter of 2025. The effective tax rate for the nine months ended September 30, 2026 was 29.7% compared to 30.0% for the nine months ended September 30, 2025. The decline in the effective tax rate reflects the Company's initiation of an investment tax credit purchase program. In the third quarter of 2026, the Bank entered into an agreement to purchase approximately $16.0 million of federal investment tax credits generated by renewable energy projects for approximately $14.5 million. The credits are intended to offset the Bank's 2026 federal income tax liability. No credits had transferred to the Bank as of September 30, 2026. Transfers are expected during the fourth quarter of 2026 and 2027, subject to contractual closing conditions. The Bank accounts for the credits under ASC 740, Income Taxes, and includes the anticipated purchase discount on credits expected to transfer in 2026 in its estimated annual effective tax rate.
Off-Balance Sheet Arrangements
The Company 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, which involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. Exposure to credit loss is represented by the contractual amount of the instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments.
At September 30, 2026, the Company had $623.4 million in unused loan commitments and $30.8 million in standby and commercial letters of credit. At December 31, 2025, the Company had $600.0 million in unused loan commitments and $26.4 million in standby and commercial letters of credit.
Liquidity and Capital Resources
Liquidity
Liquidity is the ability to economically meet current and future financial obligations. The Company's primary sources of funds consist of deposit inflows, loan repayments and maturities, securities cash flows and borrowings. While maturities and scheduled amortization of loans, securities, and borrowings are predictable sources of funds, deposit flows, mortgage prepayments and securities cash flows may be greatly influenced by the general level of interest rates and changes thereto, economic conditions and competition.
The Company regularly reviews the need to adjust investments in liquid assets based upon its assessment of: (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, and (4) the objectives of its asset/liability program. Excess liquidity is generally invested in interest earning deposits and short- and intermediate-term securities.
The Company's most liquid assets are cash and cash equivalents. The levels of these assets are dependent on the Company's operating, financing, lending and investing activities during any given period. At September 30, 2026 and December 31, 2025, cash and cash equivalents totaled $247.0 million and $393.6 million, respectively. Securities, which provide an additional source of liquidity, totaled $1.5 billion at September 30, 2026 and $941.2 million at December 31, 2025. At September 30, 2026, there were $1.4 billion of securities pledged to support wholesale funding, and to a lesser extent certain other types of deposits, of which $171.8 million were encumbered. At December 31, 2025, there were $807.5 million of securities pledged to support wholesale funding, and to a lesser extent certain other types of deposits, of which $118.2 million were encumbered.
The Company's primary investing activities are the origination and, to a lesser extent, purchase of loans and securities. For the three and nine months ended September 30, 2026, the Company's loan production was $918.0 million and $2.1 billion as compared to $514.2 million and $1.4 billion, respectively, for the three and nine months ended September 30, 2025.
Table of Contents
During the three and nine months ended September 30, 2026, the Company purchased $395.1 million and $548.6 million of AFS securities. During the three and nine months ended September 30, 2025, the Company purchased $40.8 million and $125.9 million of AFS securities.
Financing activities consisted primarily of activity in deposit accounts and borrowings. The Company gathers deposits from businesses and individuals through client referrals and other relationships and through its retail presence. The Company has established deposit concentration thresholds to avoid the possibility of dependence on any single depositor base for funds. Total deposits were $8.3 billion at September 30, 2026, an increase of $943.4 million, or 12.8%, from December 31, 2025.
At September 30, 2026, interest-bearing deposits were comprised of $6.4 billion of money market accounts and $126.4 million of time deposits. Time deposits due within one year of September 30, 2026 totaled $122.3 million, or 1.5%, of total deposits. At September 30, 2026, the aggregate estimated amount of FDIC uninsured deposits was $2.4 billion. At December 31, 2025, interest-bearing deposits were comprised of $5.7 billion of money market accounts and $190.1 million of time deposits. Time deposits due within one year of December 31, 2025 totaled $186.3 million or 2.5% of total deposits. Non-interest-bearing deposits were 21.5% of total deposits at September 30, 2026, as compared to 20.1% at December 31, 2025. At December 31, 2025, the aggregate estimated amount of FDIC uninsured deposits was $2.0 billion.
The Company has no material commitments or demands that are likely to affect its liquidity other than as set forth below. In the event loan demand were to increase faster than expected, or any other unforeseen demand or commitment were to occur, the Company could access its borrowing capacity with the FHLB or obtain additional funds through alternative funding sources, including the brokered deposit market. At September 30, 2026 and December 31, 2025, the Company had cash on deposit with the FRBNY and available secured wholesale funding borrowing capacity of $4.2 billion and $3.3 billion, respectively.
Capital Resources
The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. At September 30, 2026 and December 31, 2025, the Bank met all applicable regulatory capital requirements to be considered "well capitalized" under regulatory guidelines. The Company and the Bank manage their capital to comply with their internal planning targets and regulatory capital standards administered by federal banking agencies. The Company and the Bank review capital levels on a monthly basis. Below is a table of the Company's and Bank's capital ratios for the periods indicated:
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum |
|
|
Minimum Ratio |
|
|
Minimum |
|
|
|
|
|
At |
|
|
At |
|
|
Ratio to be |
|
|
Required for |
|
|
Capital |
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
"Well |
|
|
Capital Adequacy |
|
|
Conservation |
|
|
|
|
|
2026 |
|
|
2025 |
|
|
Capitalized" |
|
|
Purposes |
|
|
Buffer(1) |
|
|
|
The Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage ratio |
|
11.5 |
% |
|
9.5 |
% |
|
N/A |
|
|
4.0 |
% |
|
- |
% |
|
|
Common equity tier 1 |
|
12.8 |
% |
|
10.7 |
% |
|
N/A |
|
|
4.5 |
% |
|
2.5 |
% |
|
|
Tier 1 risk-based capital ratio |
|
13.1 |
% |
|
11.0 |
% |
|
N/A |
|
|
6.0 |
% |
|
2.5 |
% |
|
|
Total risk-based capital ratio |
|
13.9 |
% |
|
12.3 |
% |
|
N/A |
|
|
8.0 |
% |
|
2.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage ratio |
|
11.1 |
% |
|
9.1 |
% |
|
5.00 |
% |
|
4.0 |
% |
|
- |
% |
|
|
Common equity tier 1 |
|
12.6 |
% |
|
10.5 |
% |
|
6.50 |
% |
|
4.5 |
% |
|
2.5 |
% |
|
|
Tier 1 risk-based capital ratio |
|
12.6 |
% |
|
10.5 |
% |
|
8.00 |
% |
|
6.0 |
% |
|
2.5 |
% |
|
|
Total risk-based capital ratio |
|
13.5 |
% |
|
11.7 |
% |
|
10.00 |
% |
|
8.0 |
% |
|
2.5 |
% |
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(1) As of September 30, 2026, the capital conservation buffer for the Company and the Bank was 5.91% and 5.47%, respectively, which exceeded the minimum requirement of 2.5% required to be held by banking institutions.
At September 30, 2026 and December 31, 2025, total non-owner-occupied CRE loans were 301.1% and 376.5% of risk-based capital, respectively. The decrease in the CRE loan concentration ratio is primarily due to the increase in the Bank's total capital as a result of the completion of the Company's follow-on public equity offering of common stock in the first quarter of 2026.
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