Metropolitan Bank Holding 10K/A 2017 Annual report (amended)

TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
Amendment No. 1

(Mark One)

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017.

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-38282

METROPOLITAN BANK HOLDING CORP.

(Exact name of registrant as specified in its charter)

	New York			13-4042724
	(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

	99 Park Avenue, New York, New York			10016
	(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (212) 659-0600

Securities registered pursuant to Section 12(b) of the Act:

	Title of each class			Name of each exchange on which registered
	Common Stock, $0.01 par value			New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). YES ☒ NO ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

	Large accelerated filer ☐			Accelerated filer ☐
	Non-accelerated filer ☒			Smaller reporting company ☐
	(Do not check if a smaller reporting company)			Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant on June 30, 2017, as reported by the New York Stock Exchange, was approximately $97.3 million.

As of March 23, 2018, there were issued and outstanding 8,194,925 shares of the Registrant’s Common Stock.

DOCUMENTS INCOPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant’s Annual Meeting of Stockholders (Part III).

TABLE OF CONTENTS

	EXPLANATORY NOTE					1
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA					2
	ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES					3
	INDEX TO CONSOLIDATED FINANCIAL STATEMENTS					4

TABLE OF CONTENTS

EXPLANATORY NOTE

Metropolitan Bank Holding Corp. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A to its Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (“SEC”) on March 28, 2018. The Company is re-filing its cover page to correct its I.R.S. Employer Identification Number as well as Item 8 of Part II of the Form 10-K to include the date of the Report of Independent Registered Public Accounting Firm, which date was inadvertently omitted from the original filing. The Company is also revising the Exhibit List to incorporate by reference as Exhibit 3.2 the Company’s Amended and Restated Bylaws and correct the numbering of the footnotes. The Amended and Restated Bylaws are being incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 that was filed with the SEC on October 25, 2017. The Exhibit List of the Form 10-K as originally filed with the SEC contained an incorrect link to the Company’s bylaws as such bylaws existed prior to amendment.

TABLE OF CONTENTS

PART II

ITEM 8. Financial Statements and Supplementary Data

For the Company’s consolidated financial statements, see index on page 4.

TABLE OF CONTENTS

Item 15. Exhibits, Financial Statement Schedules

Financial Statements

See index to Consolidated Financial Statements on page 4.

Financial Statement Schedules

Financial statement schedules have been omitted because they are not applicable or not required or the required information is shown in the Consolidated Financial Statements or Notes thereto under “Part II — Item 8. Financial Statements and Supplementary Data.”

Exhibits Required by Item 601 of SEC Regulation S-K

See Index of Exhibits on pages 53 through 54.

TABLE OF CONTENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		5
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION		6
CONSOLIDATED STATEMENTS OF OPERATIONS		7
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME		8
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY		9
CONSOLIDATED STATEMENTS OF CASH FLOWS		10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		11

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm

Stockholders and the Board of Directors of Metropolitan Bank Holding Corp. and Subsidiary
New York, New York

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial condition of Metropolitan Bank Holding Corp. and Subsidiary (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Crowe Horwath

We have served as the Company’s auditor since 2008.

Livingston, New Jersey
March 28, 2018

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
For the years ended December 31, 2017 and 2016
(Dollar amounts in thousands, except per share data)

	2017			2016
Assets
Cash and cash equivalents:
Cash and due from banks		$	261,231		$	82,931
U.S. Government securities money market funds			—			—
Total cash and cash equivalents			261,231			82,931
Investment securities available for sale, at estimated fair value			32,157			37,329
Investment securities held to maturity (estimated fair value of $5,330 and $6,419 at December 31, 2017 and 2016, respectively)			5,428			6,500
Other investments			13,677			12,588
Loans			1,420,966			1,055,706
Deferred loan fees and unamortized costs, net			(1,070)			(1,160)
Allowance for loan losses			(14,887)			(11,815)
Net loans			1,405,009			1,042,731
Accounts receivable, net			6,601			5,420
Receivable from prepaid card programs, net			9,579			7,566
Accrued interest receivable			4,421			2,735
Premises and equipment, net			6,268			5,035
Prepaid expenses and other assets			5,751			7,733
Goodwill			9,733			9,733
Total assets		$	1,759,855		$	1,220,301
Liabilities and Stockholders’ Equity
Deposits:
Noninterest-bearing demand deposits		$	812,497		$	403,402
Interest-bearing deposits			591,858			590,378
Total deposits			1,404,355			993,780
FHLB Advances			42,198			78,418
Trust preferred securities payable			20,620			20,620
Subordinated debt, net of issuance costs			24,489			—
Accounts payable, accrued expenses and other liabilities			21,678			10,901
Accrued interest payable			749			227
Debit cardholder balances			8,882			6,864
Total liabilities			1,522,971			1,110,810
COMMITMENTS AND CONTINGENCIES (See Note 9)			—			—
Stockholders’ equity:
Class A preferred stock, $0.01 par value, authorized 5,000,000 shares Issued and outstanding 0 at December 31, 2017 and 2016			—			—
Class B preferred stock, $0.01 par value, authorized 2,000,000 shares, issued and outstanding 272,636 at December 31, 2017 and 2016			3			3
Common stock, $0.01 par value, authorized 10,000,000 shares, issued and outstanding 8,196,310 and 4,604,563 at December 31, 2017 and 2016, respectively			81			45
Additional paid in capital			211,145			96,116
Retained earnings			25,861			13,492
Accumulated other comprehensive loss, net of tax effect			(206)	��		(165)
Total stockholders’ equity			236,884			109,491
Total liabilities and stockholders’ equity		$	1,759,855		$	1,220,301

See accompanying notes to consolidated financial statements

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2017, 2016 and 2015
(Dollar amounts in thousands, except per share data)

	2017			2016			2015
Interest and dividend income:
Loans, including fees		$	57,075		$	42,360		$	31,110
Securities:
Taxable			813			886			1,024
Tax-exempt			30			30			31
Money market funds and commercial paper			315			142			110
Other interest and dividends			2,520			737			407
Total interest income			60,753			44,155			32,682
Interest expense:
Deposits			5,873			4,877			3,805
FHLB Advances			840			673			999
Trust preferred securities payable interest expense			636			539			456
Subordinated debt interest expense			1,322			—			—
Total interest expense			8,671			6,089			5,260
Net interest income			52,082			38,066			27,422
Provision for loan losses			7,059			8,060			2,015
Net interest income after provision for loan losses			45,023			30,006			25,407
Non-interest income:
Service charges on deposit accounts			3,452			876			754
Other service charges and fees			4,368			1,179			476
Loan prepayment penalties			111			402			700
Debit card income			3,369			2,926			2,568
Net gains on securities transactions			—			40			—
Total non-interest income			11,300			5,423			4,498
Non-interest expense:
Compensation and benefits			19,166			17,010			13,221
Bank premises and equipment			4,385			3,985			3,620
Directors Fees			894			611			540
Insurance Expense			281			333			363
Professional fees			2,636			1,595			1,360
FDIC assessment			1,067			675			554
Core processing fees			1,495			862			788
Other expenses			2,821			2,300			2,631
Total non-interest expense			32,745			27,371			23,077
Net income before income tax expense			23,578			8,058			6,828
Income tax expense			11,209			3,045			2,559
Net income		$	12,369		$	5,013		$	4,269
Earnings per common share
Earnings per share – basic			2.40			0.43			1.54
Earnings per share – diluted			2.34			0.43			1.54

See accompanying notes to consolidated financial statements

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2017, 2016 and 2015
(Dollar amounts in thousands, except per share data)

	2017			2016			2015
Net Income		$	12,369		$	5,013		$	4,269
Other comprehensive loss
Unrealized gains/losses of securities available for sale:
Unrealized holding loss arising during the year			(54)			(268)			(220)
Reclassification adjustment for net gains included in net income			—			(40)			—
Total unrealized gains/loss on securities available for sale			(54)			(308)			(220)
Tax effect			(13)			(127)			(107)
Total unrealized gains/loss on securities available for sale, net of tax			(41)			(181)			(113)
Comprehensive income		$	12,328		$	4,832		$	4,156

See accompanying notes to consolidated financial statements

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the years ended December 31, 2017, 2016 and 2015
(Dollar amounts in thousands, except per share data)

	Preferred Stock, Class A					Preferred Stock, Class B					Common Stock					Additional Paid-in Capital			Retained Earnings			AOCI (Loss), Net			Total
	Number of Shares		Amount			Number of Shares		Amount			Number of Shares		Amount			Additional Paid-in Capital			Retained Earnings			AOCI (Loss), Net			Total
Balance at January 1, 2015		415,248		$	4		60,000		$	1		2,321,615		$	23		$	50,750		$	7,836		$	129		$	58,743
Conversion of preferred to common stock		(24,204)										13,447			—												—
Issuance of common stock, net		—			—		—			—		722,222			7			12,599			—			—			12,606
Restricted stock		—			—		—			—		38,500									—			—			—
Employee stock-based compensation expense		—			—		—			—		—			—			447			—			—			447
Net income		—			—		—			—		—			—			—			4,269			—			4,269
Other comprehensive loss		—			—		—			—		—			—			—			—			(113)			(113)
Balance at December 31, 2015		391,044		$	4		60,000		$	1		3,095,784		$	30		$	63,796		$	12,105		$	16		$	75,952
Balance at January 1, 2016		391,044		$	4		60,000		$	1		3,095,784		$	30		$	63,796		$	12,105		$	16		$	75,952
Purchase & retirement of treasury preferred stock		(123,924)			(1)													(1,238)			(161)			—			(1,400)
Preferred stock – redemption		(267,120)			(3)													(2,624)			(45)			—			(2,672)
Conversion of preferred to common stock							(60,000)			(1)		60,000			1						—			—			(0)
Issuance of preferred stock, net							272,636			3								5,500			—			—			5,503
Issuance of common stock, net												1,374,112			14			28,354									28,368
Restricted stock, net		—			—		—			—		74,667			—			—			—			—			—
Class A preferred – dividend payment																					(3,420)						(3,420)
Employee stock-based compensation																		2,328			—			—			2,328
Net income																					5,013			—			5,013
Other comprehensive loss																					—			(181)			(181)
Balance at December 31, 2016		—		$	—		272,636		$	3		4,604,563		$	45		$	96,116		$	13,492		$	(165)		$	109,491
Balance at January 1, 2017		—		$	—		272,636		$	3		4,604,563		$	45		$	96,116		$	13,492		$	(165)		$	109,491
Employee stock-based compensation expense		—			—		—			—		—			—			412			—			—			412
Common stock issued in initial public offering, net of stock issuance costs of $10,002		—			—		—			—		3,565,000			36			114,737			—			—			114,773
Restricted stock grants, net of forfeiture		—			—		—			—		28,383			—			—			—			—			—
Exercise of stock options												4,503			—			135			—			—			135
Repurchase of shares for exercise of stock options and tax withholding for restricted stock vesting												(6,139)						(255)									(255)
Net income		—			—		—			—		—			—			—			12,369			—			12,369
Other comprehensive loss		—			—		—			—		—			—			—			—			(41)			(41)
Balance at December 31, 2017		—		$	—		272,636		$	3		8,196,310		$	81		$	211,145		$	25,861		$	(206)		$	236,884

See accompanying notes to consolidated financial statements

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2017, 2016 and 2015
(Dollar amounts in thousands, except per share data)

	2017			2016			2015
Cash flows from operating activities:
Net income		$	12,369		$	5,013		$	4,269
Adjustments to reconcile net income to net cash:
Depreciation and amortization			978			785			696
Net amortization on securities			321			355			492
Amortization of subordinated debt issuance costs			46			—			—
Gain on sale of securities			—			(40)			—
Provision for loan losses			7,059			8,060			2,015
Net change in deferred loan fees			(90)			(15)			(1,006)
Deferred income tax benefit			790			(913)			(455)
Stock-based compensation expense			412			2,328			447
Net change in:
Accrued interest receivable			(1,686)			(434)			(628)
Accounts payable, accrued expenses and other liabilities			10,777			(1,215)			1,542
Change in debit card holder balances			2,018			6,635			(2,919)
Change in Accrued interest payable			522			(93)			(6)
Accounts receivable, net			(1,181)			(4,550)			245
Receivable from prepaid card programs, net			(2,013)			(187)			3,703
Prepaid expenses and other assets			1,151			(1,171)			(2,952)
Net cash provided by operating activities			31,473			14,558			5,443
Cash flows from investing activities:
Loan originations and payments, net			(377,118)			(240,420)			(184,597)
Proceeds from sales of loans			7,871			—			—
Redemptions of other investments			7,203			—			—
Purchases of other investments			(8,292)			(182)			(5,368)
Purchase of securities available for sale			(1,470)			(1,546)			—
Proceeds from sales and calls of securities available for sale			—			2,771			—
Proceeds from paydowns and maturities of securities available for sale			6,359			8,378			9,491
Purchase of securities held to maturity			—			(2,684)			(5,151)
Proceeds from paydowns of securities held to maturity			1,034			1,198			283
Purchase of premises and equipment, net			(2,211)			(1,180)			(1,732)
Net cash used in investing activities			(366,624)			(233,665)			(187,074)
Cash flows from financing activities:
Proceeds from issuance of common stock, net			114,773			28,368			12,606
Proceeds from issuance of preferred stock, net			—			5,503			—
Purchase and retirement of treasury preferred stock			—			(1,400)			—
Proceeds from exercise of stock options			135			—			—
Redemption of common stock for exercise of stock options and tax withholdings for resticted stock vesting			(255)
Redemption of preferred stock, net			—			(2,672)			—
Payment of preferred stock dividend			—			(3,420)			—
Proceeds from issuance of subordinated debt, net of issuance cost			24,443			—			—
Proceeds from FHLB advances			326,864			120,000			97,426
Repayments of FHLB advances			(363,084)			(137,729)			(65,202)
Net increase in deposits			410,575			227,741			156,793
Net cash provided by financing activities			513,451			236,391			201,623
Increase in cash and cash equivalents			178,300			17,284			19,992
Cash and cash equivalents at the beginning of the year			82,931			65,647			45,655
Cash and cash equivalents at the end of the year		$	261,231		$	82,931		$	65,647
Supplemental information:
Cash paid during the year for:
Interest		$	8,149		$	6,182		$	5,025
Taxes		$	8,787		$	5,270		$	3,265
Non-cash investing and financing activities:
Transfer of loans held for investment to held for sale		$	7,871		$	26,095		$	—

See accompanying notes to consolidated financial statements

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 cash flow from operations of businesses. 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”) under the maximum amounts allowed by law. The Bank commenced operations on June 22, 1999.

The Company is subject to 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.

Basis of Presentation: The accounting and reporting policies of the Company conform with U.S. generally accepted accounting principles (“GAAP”) and predominant practices within the U.S. banking industry. The consolidated financial statements include the accounts of the Company and the Bank. All intercompany balances and transactions have been eliminated. The Consolidated Financial Statements (the “financial statements”), which include the accounts of the Company and the Bank, have been prepared in accordance with GAAP. The financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the years presented. In preparing the 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.

A summary of the Company’s significant accounting policies consistently applied in the preparation of the accompanying financial statements follows:

Use of Estimates: To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Cash Flows: Cash and cash equivalents are defined as cash on hand and amounts due from banks and money market funds. Net cash flows are reported for customer loan and deposit transactions, and other investments.

Securities: Debt securities are classified as held to maturity and carried at amortized cost when management has positive intent and ability to hold them to maturity. Debt securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method. Gains and losses on sales of securities are recognized in the consolidated statements of operations upon sale.

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) other-than-temporary impairment (OTTI) related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.

Accounts Receivable & Receivable from Prepaid Card Programs, Net: Accounts receivables, net, primarily consist of the Bank’s in-transit items, trade receivables from prepaid debit card programs and other receivables. Receivables from prepaid card programs are predominantly government scheduled payments including financial assistance programs and pensions.

Revenue Recognition: Revenue is recognized when the related services have been provided and amounts have been earned. Prepaid debit card income consists of monthly maintenance fees, ATM fees, point-of-sale transaction fees, and other revenues. The Company recognizes revenue related to maintenance fees from prepaid debit cardholders on a monthly basis, ATM fees from cardholders when customers withdraw money at certain ATMs, and point-of-sale transaction fees when customers use the cards for purchases, in accordance with the terms and conditions in the cardholder agreements.

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Loans and Allowance for Loan Losses: Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balances, adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

The allowance for loan losses is maintained at an amount management deems adequate to cover probable incurred credit losses. In determining the level to be maintained, management evaluates many factors, including current economic trends, industry experience, historical loss experience, industry loan concentrations, the borrower’s ability to repay and repayment performance and estimated collateral values. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired.

A loan is considered to be impaired when it is probable that the Bank will be unable to collect all principal and interest amounts according to the contractual terms of the loan agreement. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

expected solely from the collateral. All commercial and commercial real estate loans are individually evaluated for credit risk at least annually, and all classified loans are individually evaluated for impairment quarterly. Large groups of smaller balance homogenous loans such as residential real estate loans are collectively evaluated for impairment, and accordingly, are not separately evaluated for impairment disclosures unless the individual loan is classified.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Bank determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component of the allowance covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Bank over a rolling two-year period. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects on any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. The following portfolio segments have been identified: Construction Loans, Commercial Real Estate Loans, Multi-Family Real Estate Loans, One-to-four Family Real Estate Loans, Commercial & Industrial Loans and Consumer Loans.

The risk characteristics of each of the identified portfolio segments are as follows:

Construction — Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the estimated cost of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, additional funds may be required to be advanced in excess of the amount originally committed to permit completion of the building.

If the estimate of value proves to be inaccurate, the value of the building may be insufficient to assure full repayment if liquidation is required. If foreclosure is required on a building before or at completion due to a default, there can be no assurance that all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs will be recovered.

Commercial Real Estate — Commercial real estate loans are secured by nonresidential real estate and generally have larger balances and involve a greater degree of risk than residential real estate loans. Repayment of commercial real estate loans depends on the global cash flow analysis of the borrower and the net operating income of the property, the borrower’s expertise, credit history and profitability, and the

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

value of the underlying property. Of primary concern in commercial real estate lending is the borrower’s creditworthiness and the cash flow from the property. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject, to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy. Commercial real estate is also subject to adverse market conditions that cause a decrease in market value or lease rates, obsolescence in location or function and market conditions associated with oversupply of units in a specific region.

Multi-family Real Estate — Multi-family real estate loans are secured by multi-family real estate and generally have larger balances and involve a greater degree of risk than residential real estate loans. Repayment of multi-family real estate loans depends on the cash flow analysis of the property, occupancy rates, and unemployment rates, combined with the net operating income of the property, the borrower’s expertise, credit history and profitability, and the value of the underlying property. Payments on these loans depend on successful operation and management of the properties, and repayment of such loans may be subject to adverse conditions in the real estate market or the economy.

One-to-Four Family Real Estate — One-to-four family loans are generally made on the basis of the borrower’s ability to make repayment from his or her employment income or other income, and which are secured by real property whose value tends to be more easily ascertainable. Repayment of one-to-four family loans is subject to adverse employment conditions in the local economy leading to increased default rates and decreased market values from oversupply in a geographic area. In general, these loans depend on the borrower’s continuing financial stability and, therefore, are likely to be adversely affected by various factors, including job loss, divorce, illness, or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Commercial & Industrial — Commercial & Industrial loans are generally of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself. Furthermore, any collateral securing such loans may depreciate over time, may be difficult to appraise, and may fluctuate in value.

Consumer — The Bank formed a Consumer Lending Joint Venture with Bankers HealthCare Group (BHG) and made loans to Licensed Medical Professionals for consumer purposes on an unsecured basis. Consumer loans are comprised of these loans and student loans. As a result, repayment of such loans are subject, to a greater extent than loans secured by collateral, to the financial condition of the borrower.

While management uses available information to recognize losses on loans, future additions to the allowance may be necessary, based on changes in economic conditions or any other factors used in management’s determination. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

Interest income on loans is accrued and credited to operations based upon the principal amounts outstanding. Loans are placed on non-accrual when a loan is specifically determined to be impaired or when principal or interest is delinquent for 90 days or more. Delinquent status is based on the contractual terms of the loan. Any unpaid interest previously accrued on those loans is reversed from income. Interest payments received on such loans are applied as a reduction of the loan principal balance when the collectability of principal, wholly or partially, is in doubt. Interest payments received may be deferred on nonaccrual loans in which the principal balance is deemed to be collectible. Interest income is recognized when all the principal and interest amounts contractually due are brought current and the loans are returned to accrual status.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Goodwill: Goodwill and certain other intangibles generally arise from business combinations accounted for under the purchase method of accounting. Goodwill and other intangibles deemed to have indefinite lives generated from business combinations are not subject to amortization and are instead tested for impairment not less than annually or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed. The Company has selected December 31 as the date to perform the annual impairment test.

The goodwill of $9.7 million is associated with a purchase of the prepaid debit card business. The Company performed an impairment assessment, and determined that no impairment of goodwill exists as of December 31, 2017 and 2016.

Stock-Based Compensation: Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of options. The market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Concentrations of Credit Risk: Financial instruments, which potentially subject the Bank to concentration of credit risk, consist primarily of temporary cash investments including due from banks, interest-bearing deposits with banks and real estate loans receivable. A significant portion of real estate loans are collateralized by property in the New York Metropolitan area. The ultimate collectability of these loans may be susceptible to changes in the real estate market in this area.

Premises and Equipment: Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed over the estimated useful lives of the assets by the straight-line method with useful lives ranging from three to ten years. Leasehold improvements are amortized over the shorter of the terms of the respective leases or the estimated lives of the improvements.

Other Investments: Other investments includes FRB stock, FHLB (“FHLB”) stock, and investments in the Solomon Hess SBA Loan Fund (“SBA Loan Fund” or “Fund”). The Bank is a member of the FRB and the FHLB systems. Members are required to own a certain amount of stock based on the level of borrowings and other factors. FRB and FHLB stock are carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. The Bank invested in a SBA Loan Fund for the purpose of satisfying its CRA lending requirements. An investor can redeem its interest in the Fund for the balance of its capital account at any quarter end assuming the investor provides the Fund 60 days’ notice. The investment in this Fund is recorded at cost and periodically evaluated for impairment. The Company held FRB and FHLB stock of $6.7 million and $7.6 million, and a SBA Loan Fund investment of $5.0 million as of December 31, 2017 and 2016. Also included in Other Investments as of December 31, 2017 is $2.0 million investment in certificates of deposit with maturities greater than three months.

Comprehensive Income: Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale which are also recognized as separate components of equity.

Restrictions on Cash: Cash on hand or on deposit with the FRB was required to meet regulatory reserve and clearing requirements. Total amounts on deposit with the FRB were $230.3 million and $57.3 million as of December 31, 2017 and 2016, respectively. There was $662,000 and $659,000 of cash pledged for a collateral account as of December 31, 2017 and 2016, respectively. In addition, there was $6.4 million and $3.6 million of cash held in escrow for debit card program managers as of December 31, 2017 and 2016, respectively.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings per Common Share: Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per common share is computed using the weighted average number shares determined for the basic computation plus the dilutive effect of potential common shares issuable under certain stock compensation plans. Unvested share-based payments awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method. The Company has determined that its outstanding non-vested stock awards are participating securities.

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The primary temporary difference relates to allowance for loan losses. A valuation allowance is recorded, as necessary, to reduce deferred tax assets to an estimated amount expected to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Reclassifications: Some items in the prior year financial statements may have been reclassified to conform to the current presentation. Reclassification had no effect on prior year net income or stockholders’ equity.

Operating segments: While the chief decision-makers monitor the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Recently Issued Accounting Standards: Pursuant to the Jumpstart Our Business Startups Act (“JOBS Act”), 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.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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. The amendments in these ASUs are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company has evaluated the impact of ASU 2016-01 and 2018-03 upon adoption as of January 1, 2019 and has concluded that there is not a material impact on its consolidated financial statements.

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 impact 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 accounting for the tax consequences of a stock payment and amend the manner in which excess tax benefits and a business’s payments to satisfy the tax obligation for recipients of the shares should be classified. The amendments: (i) allow companies to estimate the number of stock awards they expect to vest, and (ii) revise the withholding requirements for classifying stock awards as equity. For all nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Management expects ASU 2016-09 will not have a significant impact on its consolidated financial statements.

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

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements. The Company expects to recognize a one-time cumulative increase 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.

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 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 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 ASU 2018-02 will not have a significant impact on its consolidated financial statements. The amendments in this update are effective fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2018; however, early adoption is permitted.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 2 — INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at December 31, 2017 and 2016 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses (dollars in thousands):

At December 31, 2017	Amortized Cost			Gross Unrealized Gains			Gross Unrealized 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

At December 31, 2016	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Available-for-sale
Residential mortgage-backed securities		$	29,152		$	165		$	(290)		$	29,027
Residential collateralized mortgage obligations			5,233			—			(130)			5,103
Municipal bond			1,122			14			—			1,136
CRA mutual fund			2,115			—			(52)			2,063
Total securities available-for-sale		$	37,622		$	179		$	(472)		$	37,329
Held-to-maturity
Residential mortgage-backed securities		$	6,475		$	—		$	(81)		$	6,394
Foreign government securities			25			—			—			25
Total securities held-to-maturity		$	6,500		$	—		$	(81)		$	6,419

The proceeds from sales and calls of securities and the associated gains and losses are listed below (dollars in thousands):

	Year Ended December 31,
	2017			2016			2015
Proceeds		$	—		$	2,771		$	—
Gross gains		$	—		$	40		$	—
Gross losses		$	—		$	—		$	—

There were no sales or calls of securities in the year ended December 31, 2017. The tax provision related to the net realized gain was $17,000 in 2016.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 2 — INVESTMENT SECURITIES (Continued)

The amortized cost and fair value of debt securities at year-end December 31, 2017 and 2016 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. Securities not due at a single maturity date, primarily mutual funds and mortgage-backed securities are shown separately (dollars in thousands):

	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			—			—			—			—
Beyond 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

	Held to Maturity						Available for Sale
At December 31, 2016	Amortized Cost			Fair Value			Amortized Cost			Fair Value
Within one year		$	—		$	—		$	—		$	—
One to five years			25			25			—			—
Five to ten years			—			—			—			—
Beyond ten years			—			—			1,122			1,136
Total			25			25			1,122			1,136
Residential mortgage-backed securities		$	6,475		$	6,394		$	29,152		$	29,027
Residential collateralized mortgage obligations			—			—			5,233			5,103
CRA mutual fund			—			—			2,115			2,063
Total Securities		$	6,500		$	6,419		$	37,622		$	37,329

There were no securities pledged at December 31, 2017 and 2016 to secure borrowings.

At December 31, 2017 and 2016, 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.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 2 — INVESTMENT SECURITIES (Continued)

Securities with unrealized losses for the years ended December 31, 2017 and 2016, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, and are as follows (dollars in thousands):

	Less than 12 Months						��	12 months or more						Total
At December 31, 2017	Estimated Fair Value			Unrealized Losses				Estimated Fair Value			Unrealized Losses			Estimated Fair Value			Unrealized 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)

	Less than 12 Months						12 months or more						Total
At December 31, 2016	Estimated Fair Value			Unrealized Losses			Estimated Fair Value			Unrealized Losses			Estimated Fair Value			Unrealized Losses
Residential mortgage-backed securities		$	16,733		$	(290)		$	—		$	—		$	16,733		$	(290)
Residential collateralized mortgage obligations			2,887			(60)			2,216			(70)			5,103			(130)
CRA mutual fund			—			—			2,063			(52)			2,063			(52)
Total securities available-for-sale		$	19,620		$	(350)		$	4,279		$	(122)		$	23,899		$	(472)
Residential mortgage-backed securities		$	6,394		$	(81)		$	—		$	—		$	6,394		$	(81)
Total held-to-maturity		$	6,394		$	(81)		$	—		$	—		$	6,394		$	(81)

Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2017 and 2016.

At year-end 2017 and 2016, 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.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 3 — LOANS

Net loans consist of the following as of December 31, 2017 and 2016 (dollars in thousands):

	At December 31,
	2017			2016
Real estate
Commercial		$	783,745		$	547,711
Construction			36,960			29,447
Multifamily			190,097			117,373
One-to-four family			25,568			26,480
Total Real Estate			1,036,370			721,011
Commercial and industrial			340,001			315,870
Consumer			44,595			18,825
Total loans			1,420,966			1,055,706
Deferred fees			(1,070)			(1,160)
Allowance for loan losses			(14,887)			(11,815)
Net loans at the end of the year		$	1,405,009		$	1,042,731

The following tables represent the changes in the allowance for loan losses for the years ended December 31, 2017, 2016 and 2015, by portfolio segment (dollars in thousands). The portfolio segments represent the categories that the Bank uses to determine its allowance for loan losses:

December 31, 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 for loan losses			1,930			4,093			110			536			29			361			7,059
Loans charged-off			—			(3,879)			—			—			—			(108)			(3,987)
Recoveries			—			—			—			—			—			—			—
Total ending allowance balance		$	7,136		$	5,578		$	519		$	1,156		$	138		$	360		$	14,887

December 31, 2016	Commercial Real Estate			Commercial & Industrial			Construction			Multi Family			One-to-four Family			Consumer			Total
Allowance for loan losses:
Beginning balance		$	3,650		$	4,254		$	589		$	986		$	444		$	19		$	9,942
Provision (credit) for loan losses			1,556			6,640			(180)			(366)			322			88			8,060
Loans charged-off			—			(5,530)			—			—			(659)			—			(6,189)
Recoveries			—			—			—			—			2			—			2
Total ending allowance balance		$	5,206		$	5,364		$	409		$	620		$	109		$	107		$	11,815

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 3 — LOANS (Continued)

December 31, 2015	Commercial Real Estate			Commercial & Industrial			Construction			Multi Family			One-to-four Family			Consumer			Total
Allowance for loan losses:
Beginning balance		$	3,283		$	3,106		$	269		$	778		$	480		$	—		$	7,916
Provision (credit) for loan losses			367			1,148			320			208			(47)			19			2,015
Loans charged-off			—			—			—			—			—			—			—
Recoveries			—			—			—			—			11			—			11
Total ending allowance balance		$	3,650		$	4,254		$	589		$	986		$	444		$	19		$	9,942

Total charge offs were $4.0 million, $6.2 and $0 million during the years ended December 31, 2017, 2016 and 2015 respectively. Included in the charge offs for the years ended December 31, 2017 and December 31, 2016 were write downs associated with taxi medallion loans of $3.7 million and $5.1 million, respectively.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of December 31, 2017 and 2016 (dollars in thousands):

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

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 3 — LOANS (Continued)

At December 31, 2016	Commercial Real Estate			Commercial & Industrial			Construction			Multi Family			One-to-four Family			Consumer			Total
Allowance for loan losses:
Individually evaluated for impairment		$	—		$	366		$	—		$	—		$	10		$	—		$	376
Collectively evaluated for impairment			5,206			4,998			409			620			99			107		$	11,439
Total ending allowance balance		$	5,206		$	5,364		$	409		$	620		$	109		$	107		$	11,815
Loans:
Individually evaluated for impairment		$	5,504		$	4,915		$	—		$	—		$	1,130		$	—		$	11,549
Collectively evaluated for impairment			542,207			310,955			29,447			117,373			25,350			18,825			1,044,157
Total ending loan balance		$	547,711		$	315,870		$	29,447		$	117,373		$	26,480		$	18,825		$	1,055,706

The following tables present information related to loans determined to be impaired by class of loans as of and for the years ended December 31, 2017, 2016 and 2015 (dollars in thousands):

At December 31, 2017	Unpaid Principal Balance			Recorded Investment			Allowance for Loan Losses Allocated			Average Recorded Investment			Interest Income Recognized
With an allowance recorded:
Commercial & industrial		$	—		$	—		$	—		$	2,928		$	—
One-to-four family			686			556			9			563			21
Consumer			155			155			77			75			8
Total		$	841		$	711		$	86		$	3,566		$	29
Without an allowance recorded:
Commercial & industrial		$	—		$	—		$	—		$	5,367		$	229
Commercial real estate			2,890			2,368			0			938			43
One-to-four family			3,157			3,010			0			1,547			87
Total		$	6,047		$	5,378		$	—		$	7,852		$	359

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 3 — LOANS (Continued)

At December 31, 2016	Unpaid Principal Balance			Recorded Investment			Allowance for Loan Losses Allocated			Average Recorded Investment			Interest Income Recognized
With an allowance recorded:
Commercial & industrial		$	8,783		$	3,660		$	366		$	6,330		$	207
One-to-four family			694			565			10			565			21
Total		$	9,477		$	4,225		$	376		$	6,895		$	228
Without an allowance recorded:
Commercial real estate		$	5,974		$	5,504		$	—		$	5,814		$	267
Commercial & industrial			1,255			1,255			—			1,340			54
One-to-four family			713			565			—			565			23
Total		$	7,942		$	7,324		$	—		$	7,719		$	344

At December 31, 2015	Unpaid Principal Balance			Recorded Investment			Allowance for Loan Losses Allocated			Average Recorded Investment			Interest Income Recognized
With an allowance recorded:
Commercial & industrial		$	1,933		$	1,933		$	134		$	1,983		$	136
One-to-four family			1,694			1,223			293			1,223			21
Total		$	3,627		$	3,156		$	427		$	3,206		$	157
Without an allowance recorded:
Commercial real estate		$	2,155		$	1,806		$	—		$	1,833		$	93
Commercial & industrial			1,425			1,425			—			1,510			61
Multi-family			5,971			5,971			—			6,010			235
One-to-four family			713			565			—			565			21
Total		$	10,264		$	9,767		$	—		$	9,918		$	410

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. Cash basis interest income equals interest income recognized.

Interest on non-accrual loans not recognized was $88,000 and $57,000 for the years ended December 31, 2017 and 2016, respectively. 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.

For a loan to be considered impaired, management determines after review whether it is probable that the Bank will not be able to collect all amounts 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. Impairment is determined based on the present value of expected future cash flows discounted at the loan’s effective interest rate. For loans that are collateral dependent, the fair value of the collateral is used to determine the fair value of the loan. The fair value of the collateral is determined based on recent appraised values. The fair value of the collateral or present value of expected cash flows is compared to the carrying value to determine if any write-down or specific loan loss allowance allocation is required.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 3 — LOANS (Continued)

The following tables present the recorded investment in non-accrual loans and loans past due over 90 days still on accrual by class of loans as of December 31, 2017 and 2016 (dollars in thousands):

At December 31, 2017	Nonaccrual			Loans Past Due Over 90 Days Still Accruing
Commercial real estate		$	787		$	—
Commercial & industrial			—			—
One-to-four family			2,447			—
Consumer			155			—
Total		$	3,389		$	—

At December 31, 2016	Nonaccrual			Loans Past Due Over 90 Days Still Accruing
Commercial & industrial		$	3,660		$	—

The following table presents the aging of the recorded investment in past due loans by class of loans as of December 31, 2017 and 2016 (dollars in thousands):

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

At December 31, 2016	30 – 59 Days			60 – 89 Days			Greater than 90 days			Total Past Due			Loans not Past Due			Total
Commercial real estate		$	—		$	958		$	—		$	958		$	546,753		$	547,711
Commercial & industrial			14			3,922			—			3,936			311,934			315,870
Construction			—			—			—			—			29,447			29,447
Multifamily			—			—			—			—			117,373			117,373
One-to-four family			—			—			—			—			26,480			26,480
Consumer			—			34			—			34			18,791			18,825
Total		$	14		$	4,914		$	—		$	4,928		$	1,050,778		$	1,055,706

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 troubled debt restructurings and classified as impaired. Included in impaired loans at December 31, 2017 and 2016 were recorded investment of $2.7 million and $7.9 million of loans modified in troubled debt restructurings. The Company has allocated $9,000 and

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 3 — LOANS (Continued)

$10,000 of specific reserves to customers whose loan terms have been modified as TDRs as of December 31, 2017 and 2016, respectively. The Company has not committed to lend additional amounts as of December 31, 2017 and 2016, to customers with outstanding loans that are classified as TDRs.

There were no loans modified as TDRs during the year ended December 31, 2017. During the years ended December 31, 2016 and 2015 the terms of certain loans were modified as TDRs. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk. Modifications involving a reduction of the stated interest rate and/or an extension of the maturity date were for a period of three to five years.

The following table presents loans by class modified as troubled debt restructurings that occurred during the years ended 2016 and 2015 (dollars in thousands):

At December 31, 2016	Number of Loans		Pre-Modification Outstanding Recorded Investment			Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial Real Estate		1		$	3,875		$	3,875
Total		1		$	3,875		$	3,875

At December 31, 2015	Number of Loans		Pre-Modification Outstanding Recorded Investment			Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial & Industrial		1		$	1,933		$	1,933
Total		1		$	1,933		$	1,933

Since there were no modified troubled debt restructurings in 2017, there is no impact on the allowance for loan losses and charge-offs during the year ending December 31, 2017. The Bank has allocated $10,000 and $153,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2016 and 2015, respectively.

In 2017, 2016 and 2015, there were no new loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification. 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.

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.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 3 — LOANS (Continued)

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 that are analyzed individually as part of the above described process 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 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

At December 31, 2016	Pass			Special Mention			Substandard			Doubtful			Total
Commercial real estate		$	542,206		$	4,293		$	1,212		$	—		$	547,711
Commercial & industrial			309,295			2,915			3,660			—			315,870
Construction			29,447			—			—			—			29,447
Multifamily			117,373			—			—			—			117,373
Total		$	998,321		$	7,208		$	4,872		$	—		$	1,010,401

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 December 31, 2017 and 2016 (dollars in thousands):

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

At December 31, 2016	Performing			Non-Performing			Total
One-to-four family		$	26,480		$	—		$	26,480
Consumer			18,825			—			18,825
Total		$	45,305		$	—		$	45,305

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 4 — PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows as of December 31, 2017 and 2016 (dollars in thousands):

	Year Ended December 31,
	2017			2016
Furniture and Equipment (useful life of 3 to 7 years)		$	7,376		$	5,973
Leasehold Improvements (useful life of 3 to 10 years)			10,820			10,012
Total Premises and Equipment			18,196			15,985
Less accumulated depreciation and amortization			(11,928)			(10,950)
Total Premises and Equipment, net		$	6,268		$	5,035

Depreciation and amortization expense amounted to $978,000, $785,000 and $696,000 for the years ended December 31, 2017, 2016 and 2015 respectively.

NOTE 5 — DEPOSITS

Deposits consisted of the following as of December 31, 2017 and 2016 (dollars in thousands):

	At December 31,
	2017			2016
Core Deposits
Noninterest bearing demand accounts		$	812,497		$	403,402
Money market			484,589			482,393
Savings accounts			27,024			17,472
Total core deposits			1,324,110			903,267
Time Deposits
Time deposits under $100,000			73,437			69,188
Time deposits $100,000 and over			6,808			21,325
Total deposits		$	1,404,355		$	993,780

Time deposits greater than $250,000 at December 31, 2017 and 2016 were $38.8 million and $21.3 million, respectively.

The Bank had $103.1 million and $97.3 million of brokered deposits as of December 31, 2017 and 2016, respectively, which were primarily included in money market and savings accounts.

The following are scheduled maturities of time deposits as of December 31, 2017 (dollars in thousands):


2018	$	63,245
2019		16,219
2020		68
2021		283
2022		430
Total time deposits	$	80,245

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 6 — BORROWINGS

At year-end, advances from the FHLB were as follows (dollars in thousands):

	Year Ending December 31,
	2017			2016
Maturing in 2018, fixed rate at rates from 1.21% to 3.23%, weighted averaging 1.53%		$	42,198		$	—
Maturing 2017 through 2018, fixed rate at rates from 0.77% to 3.23%, weighted averaging 0.95%						78,418
Total		$	42,198		$	78,418

Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances. The advances are collateralized by mortgage loans under a blanket lien agreement in the amount of approximately $263.4 million and $204.4 million as of December 31, 2017 and 2016, respectively. Based on this collateral and the Company’s holdings of FHLB stock, the Company is eligible to borrow an additional total of approximately $221.2 million as of December 31, 2017.

FHLB advances that mature over the next five years and thereafter as follows (dollars in thousands):

	Principal
2018		$	42,198
2019			—
2020			—
2021			—
2022			—
Total		$	42,198

Trust Preferred Securities Payable: On December 7, 2005, the Company established MetBank Capital Trust I, a Delaware statutory trust (“Trust I”). The Company owns all of the common capital securities of Trust I in exchange for contributed capital of $310,000. Trust I issued $10 million of preferred capital securities to investors in a private transaction and invested the proceeds, combined with the proceeds from the sale of Trust I’s common capital securities, in the Company through the purchase of $10.310 million aggregate principal amount of Floating Rate Junior Subordinated Debentures (the “Debentures”) issued by the Company. The Debentures, the sole assets of Trust I, mature on December 9, 2035 and bear interest at a fixed rate of 6.82% for the first five years, then at a floating rate of 3-month LIBOR plus 1.85%. The Debentures are callable after five years. The interest rates were 3.21% and 2.73% as of December 31, 2017 and 2016, respectively.

On July 14, 2006, the Company established MetBank Capital Trust II, a Delaware statutory trust (“Trust II”). The Company owns all of the common capital securities of Trust II in exchange for contributed capital of $310,000. Trust II issued $10 million of preferred capital securities to investors in a private transaction and invested the proceeds, combined with the proceeds from the sale of Trust II’s common capital securities, in the Company through the purchase of $10.310 million aggregate principal amount of Floating Rate Junior Subordinated Debentures (the “Debentures”) issued by the Company. The Debentures, the sole assets of Trust II, mature on October 7, 2036, and bear interest at a fixed rate of 7.61% for the first five years, then at a floating rate of three-month LIBOR plus 2.00%. The Debentures are callable after five years. The interest rates were 3.36% and 2.88% as of December 31, 2017 and 2016, respectively.

The Company is not considered the primary beneficiary of these trusts, therefore the trusts are not consolidated in the Company’s financial statements; the subordinated debentures are shown as a liability on

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 6 — BORROWINGS (Continued)

the consolidated statements of financial condition. Interest on the subordinated debentures may be deferred by the Company at any time or from time to time for a period not exceeding 20 consecutive quarterly payments (5 years), provided there is no event of default. At the end of the deferral period, the Company must pay accrued interest, at which point it may elect a new deferral period provided that no deferral may extend beyond maturity.

The investments in the common capital securities of Trust I and Trust II are included in other assets on the consolidated statements of financial condition. The subordinated debentures may be included in Tier 1 capital (with certain applicable limitations) under current regulatory guidelines and interpretations.

Subordinated Debt: On March 8, 2017, the Company closed 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 interests are paid semi-annually 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.

NOTE 7 — INCOME TAXES

Income tax expense consisted of the following for the years ended December 31, 2017, 2016 and 2015 (dollars in thousands):

	Year Ended December 31,
(in thousands)	2017			2016			2015
Current
Federal		$	7,920		$	3,466		$	2,873
State and local			2,499			492			141
Total current			10,419			3,958			3,014
Deferred
Federal			1,045			(795)			(622)
State and local			(255)			(118)			167
Total deferred			790			(913)			(455)
Total income tax expense		$	11,209		$	3,045		$	2,559

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 7 — INCOME TAXES (Continued)

Deferred tax assets and liabilities consist of the following (dollars in thousands):

	At December 31,
	2017			2016
Deferred tax assets:
Allowance for loan losses		$	4,583		$	4,990
Nonaccrual interest income			28			159
Off balance sheet reserves			110			68
Restricted stock			153			165
Tangible asset			23			36
Non-Qualified stock options			183			251
Unrealized loss on securities available for sale			86			118
Total gross deferred tax assets			5,166			5,787
Deferred tax liabilities:
Depreciation and amortization			574			427
Prepaid asset			159			150
Total gross deferred tax liabilities			733			577
Net deferred tax asset, included in other assets		$	4,433		$	5,210

The following is a reconciliation of the Company’s statutory federal income tax rate of 35% to its effective tax rate for the years ended December 31, 2017, 2016 and 2015 (dollars in thousands):

	For the year ended December 31,
	2017					2016					2015
	Tax expense/ (benefit)			Rate		Tax expense/ (benefit)			Rate		Tax expense/ (benefit)			Rate
Pretax income at statutory rates		$	8,252		35.00%		$	2,740		34.00%		$	2,322		34.00%
State and local taxes, net of federal income tax benefit			1,459		6.19			247		3.10			204		3.00
Nondeductible expenses			21		0.09			19		0.20			13		0.20
Stock options			(113)		(0.48)			49		0.60			16		0.20
Tax-exempt income, net			(10)		(0.04)			(10)		(0.10)			—		—
Impact of U.S. tax reform (the Tax Act)			1,581		6.71			—		—			—		—
Other			19		0.08			—		—			4		0.10
Effective income tax expense/rate		$	11,209		47.55%		$	3,045		37.80%		$	2,559		37.50%

Metropolitan Bank Holding Corporation and the Bank file consolidated Federal, New York State and New York City tax returns in 2017, 2016 and 2015.

On December 22, 2017, the U.S. government enacted the Tax Act, which includes significant changes to the U.S. corporate income tax system including a federal corporate rate reduction from 35% to 21% and limitations on the deductibility of interest expense and executive compensation. The Tax Act resulted in a one-time U.S. tax expense of $1.6 million. A majority of the provisions in the Tax Act are effective January 1, 2018.

As of December 31, 2017 and 2016 there are no unrecognized tax benefits, and the Company does not expect this to significantly change in the next twelve months.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 7 — INCOME TAXES (Continued)

The Company and its subsidiary are subject to U.S. federal income tax as well as income tax of the State and City of New York. The Company is no longer subject to examination by the U.S. federal and state or local tax authorities for years prior to 2014.

NOTE 8 — RELATED PARTY TRANSACTIONS

A member of the Board of Directors of the Company is a stockholder of PASL Holding LLC (“PASL”). PASL conducts no business other than the holding of shares of the Company.

A member of the Board of Directors is the managing director of a law firm which acts (1) in connection with certain regulatory and corporate compliance matters and in the preparation of and negotiation of certain contractual vendor arrangements, and (2) as the Bank’s counsel in certain lending transactions. During the years ended December 31, 2017, 2016 and 2015, the Bank incurred legal fees of $101,000, $111,000 and $110,000, respectively, in connection with these services.

Deposits from principal officers, directors, and their affiliates at year-end 2017, 2016 and 2015 were $3.2 million, $710,000 and $538,000 respectively.

A promissory note of $780,000 was made to an executive officer of the Bank during 2016. The note has a fixed interest rate of 2.125% per annum (determined by reference to the 5-year LIBOR rate in effect on the note date, plus 100 basis points) and interest is payable on the last day of each calendar quarter. The note has a balloon payment term and the due date is August, 15, 2021, with no prepayment penalty. The outstanding balance of the subject loan was $780,000 as of December 31, 2017 and 2016.

NOTE 9 — COMMITMENTS AND CONTINGENCIES

The Company leases certain branch properties under operating leases. Approximate future minimum rental payments required under all non-cancellable operating leases, before considering renewal options that generally are present, were as follows (dollars in thousands):

Year Ending December 31,
2018	$	2,753
2019		2,754
2020		2,737
2021		2,201
2022		2,129
Thereafter (and through 2035)		6,754
	$	19,328

Total rent expense for the years ended December 31, 2017, 2016 and 2015, was $2.4 million, $2.3 million and $2.0 million, respectively.

NOTE 10 — FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are 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.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 10 — FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

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.

The Company used the following methods and significant assumptions to estimate fair value:

Investment Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded, values debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to the other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3 inputs). A third party is engaged to obtain the discounted cash flows and the resulting fair value. Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.

Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses 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.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 10 — FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Assets and liabilities measured at fair value on a recurring basis are summarized below (dollars in thousands):

	Fair Value Measurement At December 31, Using
2017	Quoted Prices in Active Markets For Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Residential mortgage-backed securities		$	—		$	24,684		$	—
Residential collateralized mortgage obligation			—			2,706			—
Commercial collateralized mortgage obligations						1,550
Municipal bond			—			1,109			—
CRA Mutual Fund			2,108			—			—

	Fair Value Measurement At December 31, Using
2016	Quoted Prices in Active Markets For Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Residential mortgage-backed securities		$	—		$	29,027		$	—
Residential collateralized mortgage obligation			—			5,103			—
Municipal bond			—			1,136			—
CRA Mutual Fund			2,063			—			—

There were no transfers between Level 1 and Level 2 during 2017 or 2016.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 10 — FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Assets and Liabilities Measured on a Non-Recurring Basis:

There are no loans that are measured at fair value on a non-recurring basis and are impaired at December 31, 2017. Loans that were measured at fair value on a non-recurring basis and were impaired at December 31, 2016, are summarized below (dollars in thousands):

	Fair Value Measurements Using:
	Total at December 31, 2016			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial and industrial loan		$	3,294		$	—		$	—		$	3,294

The following tables presents quantitative information about level 3 fair value measurements for assets measured at fair value on a non-recurring basis at December 31, 2016 (dollars in thousands):

Fair Value

Valuation Technique

Unobservable Input

Range
(Weighted
Average)

December 31, 2016

Impaired loans – Commercial and industrial loan

3,294

Market
approach

Adjustments for
the difference in
comparable sales

10.00%

As of December 31, 2016, impaired loans with allocated allowance for loan losses, which are assets measured at fair value on a non-recurring basis, using the fair value of the collateral (Level 3 inputs), had a carrying amount of $3.7 million with a valuation allowance of $366,000, resulting in an increase of provision for loan loss of $42,000 for the year then ended.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 10 — FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Carrying amount and estimated fair values of financial instruments at December 31, 2017 and 2016 were as follows (dollars in thousands):

	At December 31, 2017
				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)			Total Fair Value
Financial assets:
Cash and due from banks		$	261,231		$	261,231		$	—		$	—		$	261,231
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
Federal Reserve Bank stock			3,911			N/A			N/A			N/A			N/A
Federal Home Loan Bank 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
Financial liabilities:
Deposits without stated maturities		$	1,324,110		$	1,324,110		$	—		$	—			1,324,110
Deposits with stated maturities			80,245			—			80,079			—			80,079
FHLB Advances			42,198			—			42,188			—			42,188
Trust preferred securities payable			20,620			—						19,997			19,997
Subordinated debt, net of issurance cost			24,489			—			25,500			—			25,500
Accrued interest payable			749			27			258			464			749

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 10 — FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

	At December 31, 2016
				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)			Total Fair Value
Financial assets:
Cash and due from banks		$	82,931		$	82,931		$	—		$	—		$	82,931
Securities available for sale			37,329			2,063			35,266			.			37,329
Securities held to maturity			6,500			—			6,419			—			6,419
Loans, net			1,042,731			—			—			1,059,333			1,059,333
Other investments			12,588			N/A			N/A			N/A			N/A
Accrued interest receivable			2,735			—			157			2,578			2,735
Financial liabilities:
Deposits without stated maturities		$	903,267		$	903,267		$	—		$	—		$	903,267
Deposits with stated maturities			90,513			—			90,559			—			90,559
FHLB Advances			78,418			—			78,872			—			78,872
Trust preferred securities payable			20,620			—			—			19,998			19,998
Accrued interest payable			227			19			62			146			227

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 FHLB and FRB stock, and investments in Solomon Hess SBA Loan Fund, due to restrictions placed on transferability.

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.

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, by definition, equal to the amount payable on demand at the recording date (i.e., their carrying amount) resulting in a Level 1 price.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 10 — FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

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.

FHLB Advances: 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 Payable: 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: The estimated fair value is net of the face value of the notes and amortized issuance cost, which is an observable input resulting in a Level 2 classification.

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.

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 is immaterial as of December 31, 2017 and 2016.

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.

NOTE 11 — STOCKHOLDERS’ EQUITY

The Class A preferred stock was nonvoting and contained a dividend rate of 8.00% per annum. Dividends were non-cumulative and payable out of surplus or net profits of the Company when declared by the Company’s Board of Directors, provided that no dividends were paid on common stock until the Class A preferred stock have received all current dividends and any supplementary dividends. Supplementary dividends could be declared at the Board of Directors’ discretion to make up for unpaid ordinary dividends from prior fiscal years.

During 2015, a shareholder converted a total of 24,204 shares of Class A preferred stock to 13,477 shares of common stock. The Company did not issue any preferred stock in 2015. During 2015, the Company issued 722,222 shares of common stock via a rights offering. Total proceeds net of direct offering cost of $394,000 were $12,606,000.

In February 2016, a shareholder converted a total of 60,000 shares of Class A preferred stock to 60,000 shares of common stock without any monetary exchange.

In April 2016, one of the Company’s Preferred Class A shareholders forfeited 123,924 shares and all rights to these Non-Cumulative Perpetual Preferred Class A shares to the United States Marshals Service. The Company purchased these shares and all rights to these shares from the United States Marshals Office for $1.4 million, equating to a price per share of $11.30. These shares were purchased by the Company as Treasury Preferred Stock and retired in August 2016.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 11 — STOCKHOLDERS’ EQUITY (Continued)

In August 2016, all of the remaining outstanding 267,120 Class A preferred stock were redeemed at the issued price of $10.00 per share, totaling $2.7 million. The Company also paid dividends totaling $3.4 million on the shares, which represented the dividend rate of 8% for the period from issuance through redemption.

The Series F, Class B preferred stock is nonvoting and with a par value of $0.01 per share. The stock is subordinate and junior to all indebtedness of the Company and to all other series of preferred stock of the Company. The holders of the stock are entitled to receive ratable dividends as provided herein only if and when dividends are concurrently declared and payable on the shares of common shares.

During August 2016, the Company issued 272,636 shares of Series F, Class B preferred stock for a net amount of $5.5 million, and 1,365,969 shares of common stock via a rights offering for a net amount of $28.2 million. An additional 8,143 common shares were sold to directors for $170,000. The direct offering cost associated with the preferred stock and common stock offering were $710,000. The Company did not issue any preferred stock in 2015.

During 2016, restricted common stock vesting totaled 82,806 shares and. During 2017, restricted common stock vesting totaled 16,969.

The Company completed IPO of its common stock on November 10, 2017 and sold 3,100,000 shares of common stock at $35.00 per share, as well as, 465,000 additional shares of common stock at $35.00 per share pursuant to the underwriter’s overallotment option. The aggregate net proceeds to the Company from its IPO, including the overallotment shares, after deducting the underwriting discount and estimated offering expenses were approximately $115 million.

NOTE 12 — 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 December 31, 2017 and 2016, there were no unissued shares of the Company’s common stock authorized for option grants under the Plan.

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 423,000 shares. The authorized shares will be new issues upon exercise of any options granted. 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% shareholder, 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% shareholder, the exercise period shall not exceed five years from the date of grant. In the event of a change in control, the Committee may determine that any award then outstanding shall be assumed or an equivalent award shall be substituted by the successor corporation.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 12 — STOCK COMPENSATION PLAN (Continued)

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. Historically, the Company has not paid a dividend on its common shares and does not expect to do so in the near future. No options were granted in 2017 and 2016. The fair value of options granted during 2015 was determined using the following weighted-average assumptions as of grant date:

			2015
Risk-free interest rate			12.19%
Expected term			10 years
Dividend yield			0%

There was no unrecognized compensation cost related to non-vested stock options granted under the Plan as of December 31, 2017 and 2016; and there was $622,000 of total unrecognized compensation cost related to non-vested stock options granted under the Plan as of December 31, 2015. Total compensation cost related to stock option plan was $0, $620,000 and $166,000 for 2017, 2016 and 2015, respectively. 178,600 shares of stock options were accelerated to vest as part of restructuring an executive management employment agreement, during the third quarter of 2016.

A summary of the status of the Company’s stock option plan and the change during the year is presented below:

	2017					2016
	Number of Options		Weighted Average Exercise Price			Number of Options		Weighted Average Exercise Price
Outstanding, beginning of year		276,500		$	19.97		289,000		$	20.41
Granted		—			—		—			—
Exercised		(4,503)			30.00		—			—
Cancelled/forfeited		(497)			30.00		(12,500)			30.00
Outstanding, end of year		271,500		$	19.79		276,500		$	19.97
Options vested and exercisable at year-end		271,500		$	19.79		276,500		$	19.97
Weighted average fair value of options granted during the year				$	—				$	—
Weighted average remaining contractual life (years)					5.57					6.25

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 12 — STOCK COMPENSATION PLAN (Continued)

The following table summarizes information about stock options outstanding at December 31, 2017:

	Options Outstanding
Range of Average Exercise Prices	Number Outstanding at December 31, 2017		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
$10 – 20		231,000		6.38		18.00
$21 – 30		40,500		0.95		30.00
$10 – 30		271,500		5.57		19.79

The Company issued restricted stock awards to certain key personnel under the 2009 Equity Incentive Plan. Each restricted stock award vests based on vesting scheduled outlined in the award agreement. Restricted stock awards are subject to forfeiture if the holder is not employed by the Company on the vesting date. In 2013, shareholders approved an additional 300,000 shares available under the plan. In 2016, additional shares of 760,000 were authorized. Total shares issuable under the plan are 823,629 and 851,571 at December 31, 2017 and 2016, respectively. There were 31,606 and 77,667 shares granted in 2017 and 2016, respectively. The fair value of the shares granted was calculated using the share price as of grant date. As of December 31, 2017, there was $1.06 million of total unrecognized compensation expense related to the restricted stock awards. The cost is expected to be recognized over a weighted-average period of 2.0 years.

Total compensation cost that has been charged against income for this plan was $412,000, $1.7 million and $281,000 for 2017, 2016 and 2015, respectively. Out of the total compensation cost related to restricted stocks in 2016, $1.4 million was associated with the grant and immediate vesting of 66,667 restricted shares. These shares were issued as a part of restructuring an executive management employment agreement, during the third quarter of 2016.

The following table summarizes the changes in the Company’s non-vested restricted stock awards for the year ended December 31, 2017:

	Year Ended December 31, 2017
	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding, beginning of year		64,638		$	20.42
Granted		31,606		$	21.00
Forfeited		(3,167)		$	18.00
Vested		(16,973)		$	18.00
Outstanding at December 31, 2017		76,104		$	20.61

The total fair value of shares vested is $725,000, $1.7 million and $68,000 for the years ended December 31, 2017, 2016 and 2015, respectively.

NOTE 13 — EMPLOYEE BENEFIT PLAN

The Company has a 401(k) plan for eligible employees. The contribution for any participant may not exceed the maximum amount allowable by law. Each year, the Company may elect to match a percentage of participant contributions. The Company may also elect each year to make additional discretionary contributions to the plan. The total contributions were $334,000, $268,000 and $221,000 for the year ended December 31, 2017, 2016 and 2015, respectively.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 14 — 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 as of December 31 (dollars in thousands):

	At December 31,
	2017						2016
	Fixed Rate			Variable Rate			Fixed Rate			Variable Rate
Undrawn lines of credit		$	39,651		$	76,008		$	60,984		$	9,890
Letters of credit			23,741			—			9,808			—
		$	63,392		$	76,008		$	70,792		$	9,890

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 2 years. At December 31, 2017, the Bank’s fixed rate loan commitments are to make loans with interest rates ranging from 3.5% to 9.5% and maturities of one year or more. At December 31, 2016 the Bank’s fixed rate loan commitments were to make loans with interest rates ranging from 3.75% to 8.75% 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.

The Bank has stand-by letters of credit in the amount of $23.7 million and $9.8 million included above as of December 31, 2017 and 2016, respectively, for which the Bank has pledged interest-bearing accounts of $1.7 million and $4.0 million as of December 31, 2017 and 2016, respectively. The stand-by letters of credit and the time deposits mature within one year.

NOTE 15 — REGULATORY CAPITAL

The Holding Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. The foregoing capital ratios are based in part on specific quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about capital components, risk weightings and other factors. Failure to meet capital requirements can initiate regulatory action. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Bank on January 1, 2015 with full compliance with all of the requirements being fully phased in by January 1, 2019. The capital conservation buffer was 1.25% at December 31, 2017 and 0.625% at December 31, 2016. The capital conservation buffer requirement is being phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increasing by 0.625% each subsequent January 1, until it reaches 2.5% on January 1, 2019. The net unrealized gain or loss on available for sale securities is not included in the computation of the regulatory capital. The Company and the Bank meet all capital adequacy requirements, to which they are subject, as of December 31, 2017 and 2016.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 15 — REGULATORY CAPITAL (Continued)

terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At December 31, 2017 and 2016, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

The Company’s principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies.

The following is a summary of actual capital amounts and ratios as of December 31, 2017 and 2016, for the Company and the Bank compared to the requirements for minimum capital adequacy and classification as well capitalized. Actual and required capital amounts and ratios are presented below at year end (dollars in thousands):

	Actual					For Capital Adequacy Purposes						To be Well Capitalized under Prompt Corrective Action Regulations
	Amount			Ratio		Amount				Ratio		Amount				Ratio
At December 31, 2017
Total capital (to risk-weighted assets)
Metropolitan Bank Holding Corp.		$	287,039		19.9%		$	115,636	≥		8.0%			N/A			N/A
Metropolitan Commercial Bank		$	280,317		19.4%		$	115,523	≥		8.0%		$	144,403	≥		10.0%
Tier 1 common equity (to risk-weighted assets)
Metropolitan Bank Holding Corp.		$	221,803		15.3%		$	65,045	≥		4.5%			N/A			N/A
Metropolitan Commercial Bank		$	265,076		18.4%		$	64,981	≥		4.5%		$	93,862	≥		6.5%
Tier 1 capital (to risk-weighted assets)
Metropolitan Bank Holding Corp.		$	247,305		17.1%		$	86,726	≥		6.0%			N/A			N/A
Metropolitan Commercial Bank		$	265,076		18.4%		$	86,642	≥		6.0%		$	115,523	≥		8.0%
Tier 1 capital (to average assets)
Metropolitan Bank Holding Corp.		$	247,305		13.7%		$	72,206	≥		4.0%			N/A			N/A
Metropolitan Commercial Bank		$	265,076		14.7%		$	72,099	≥		4.0%		$	90,124	≥		5.0%
At December 31, 2016
Total capital (to risk-weighted assets)
Metropolitan Bank Holding Corp.		$	131,895		12.5%		$	84,733	≥		8.0%			N/A			N/A
Metropolitan Commercial Bank		$	130,949		12.4%		$	84,619	≥		8.0%		$	105,774	≥		10.0%
Tier 1 common equity (to risk-weighted assets)
Metropolitan Bank Holding Corp.		$	114,421		10.8%		$	47,662	≥		4.5%			N/A			N/A
Metropolitan Commercial Bank		$	118,977		11.3%		$	47,598	≥		4.5%		$	68,753	≥		6.5%
Tier 1 capital (to risk-weighted assets)
Metropolitan Bank Holding Corp.		$	119,923		11.3%		$	63,549	≥		6.0%			N/A			N/A
Metropolitan Commercial Bank		$	118,977		11.3%		$	63,465	≥		6.0%		$	84,619	≥		8.0%
Tier 1 capital (to average assets)
Metropolitan Bank Holding Corp.		$	119,923		10.5%		$	45,742	≥		4.0%			N/A			N/A
Metropolitan Commercial Bank		$	118,977		10.4%		$	45,703	≥		4.0%		$	57,128	≥		5.0%

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 15 — REGULATORY CAPITAL (Continued)

The following is a summary of actual capital amounts and ratios as of December 31, 2017 and 2016 for the Company and the Bank compared to the requirements for minimum capital adequacy plus the 1.25% capital conservation buffer currently in place:

	Actual					Minimum for Capital Adequacy plus Capital Conservation Buffer
	Amount			Ratio		Amount				Ratio
December 31, 2017:
Total capital (to risk-weighted assets)
Metropolitan Bank Holding Corp.		$	287,039		19.9%			N/A			N/A
Metropolitan Commercial Bank		$	280,317		19.4%		$	133,573	≥		9.3%
Tier 1 common equity (to risk-weighted assets)
Metropolitan Bank Holding Corp.		$	221,803		15.3%			N/A			N/A
Metropolitan Commercial Bank		$	265,076		18.4%		$	83,032	≥		5.8%
Tier 1 capital (to risk-weighted assets)
Metropolitan Bank Holding Corp.		$	247,305		17.1%			N/A			N/A
Metropolitan Commercial Bank		$	265,076		18.4%		$	104,692	≥		7.3%
Tier 1 capital (to average assets)
Metropolitan Bank Holding Corp.		$	247,305		13.7%			N/A			N/A
Metropolitan Commercial Bank		$	265,076		14.7%		$	72,099	≥		4.0%

	Actual					Minimum for Capital Adequacy plus Capital Conservation Buffer
	Amount			Ratio		Amount				Ratio
December 31, 2016:
Total capital (to risk-weighted assets)
Metropolitan Bank Holding Corp.		$	131,895		12.5%			N/A			N/A
Metropolitan Commercial Bank		$	130,949		12.4%		$	91,230	≥		8.6%
Tier 1 common equity (to risk-weighted assets)
Metropolitan Bank Holding Corp.		$	114,421		10.8%			N/A			N/A
Metropolitan Commercial Bank		$	118,977		11.3%		$	54,209	≥		5.1%
Tier 1 capital (to risk-weighted assets)
Metropolitan Bank Holding Corp.		$	119,923		11.3%			N/A			N/A
Metropolitan Commercial Bank		$	118,977		11.3%		$	70,075	≥		6.6%
Tier 1 capital (to average assets)
Metropolitan Bank Holding Corp.		$	119,923		10.5%			N/A			N/A
Metropolitan Commercial Bank		$	118,977		10.4%		$	45,703	≥		4.0%

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 16 — EARNINGS PER COMMON SHARE

The two-class method is used in the calculation of basic and diluted earnings per share. Under the two-class method, earning available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. The factors used in the earnings per share calculation are as follows (in thousands, except per share data).

	Year Ended December 31,
	2017			2016			2015
Basic
Net income per consolidated statements of income		$	12,369		$	5,013		$	4,269
Less: Dividends paid to preferred shareholders			—			(3,420)			—
Less: Earnings allocated to participating securities			(183)			(30)			(85)
Net income available to common stockholder		$	12,186		$	1,563		$	4,184
Weighted average common shares outstanding including participating securities			5,147,149			3,708,734			2,775,152
Less: Weighted average participating securities			(76,104)			(68,708)			(55,347)
Weighted average common shares outstanding			5,071,045			3,640,026			2,719,805
Basic earnings per common share		$	2.40		$	0.43		$	1.54
Diluted
Net income allocated to common shareholders		$	12,186		$	1,563		$	4,184
Weighted average common shares outstanding for basic earnings per common share			5,071,045			3,640,026			2,719,805
Add: Dilutive effects of assumed exercise of stock options			131,189			33,000			—
Average shares and dilutive potential common shares			5,202,234			3,673,026			2,719,805
Dilutive earnings per commons share		$	2.34		$	0.43		$	1.54

There were no stock options that were not considered in computing diluted earnings per common share for 2017; and 45,500 and 289,000 shares of common stock were not considered in computing diluted earnings per common share for 2016 and 2015, respectively, because they were antidilutive.

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 17 — PARENT COMPANY FINANCIAL INFORMATION

Condensed financial information for the Corporation (parent company only) is as follows (dollars in thousands):

Condensed Balance Sheets

	At December 31,
	2017			2016
Assets
Cash and due from banks		$	6,761		$	818
Loans, net of allowance for loan losses			776			776
Investments			620			620
Investment in subsidiary bank, at equity			274,190			128,671
Other assets			596			11
Total assets		$	282,943		$	130,896
Liabilities and Stockholders’ Equity
Trust preferred securities payable			20,620			20,620
Subordinated debt payable, net of issuance costs			24,489			—
Other liabilities			950			785
Total liabilities			46,059			21,405
Stockholders’ equity:
Preferred stock			3			3
Common stock			81			45
Surplus			211,145			96,116
Retained earnings			25,861			13,492
Accumulated other comprehensive loss, net of tax			(206)			(165)
Total equity			236,884			109,491
Total liabilities and stockholders’ equity		$	282,943		$	130,896

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 17 — PARENT COMPANY FINANCIAL INFORMATION (Continued)

Condensed Statements of Income

	Year Ended December 31,
	2017			2016			2015
Income:
Loan		$	17		$	6		$	—
Securities and money market funds			—			19			25
Total interest income			17			25			25
Interest expense:
Trust preferred securities payable			636			539			455
Subordinated debt interest expense			1,322			—			—
Total interest expense			1,958			539			455
Net interest expense			(1,941)			(514)			(430)
Provision for loan losses			—			4			—
Net interest income after provision for loan losses			(1,941)			(518)			(430)
Other expense			33			—			—
Loss before undistributed earnings of subsidiary bank			(1,974)			(518)			(430)
Equity in undistributed earnings of subsidiary bank			13,560			5,319			4,526
Income before income tax expense			11,586			4,801			4,096
Income tax benefit			(783)			(212)			(173)
Net income		$	12,369		$	5,013		$	4,269

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 17 — PARENT COMPANY FINANCIAL INFORMATION (Continued)

Condensed Statement of Cash Flows

	Year Ended December 31,
	2017			2016			2015
Cash Flows From Operating Activities:
Net income		$	12,369		$	5,013		$	4,269
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Undistributed earnings of subsidiary bank			(13,560)			(5,319)			(4,526)
Amortization of subordinated debt issuance costs			46			—			—
Provision for loan losses			—			4			—
Stock based compensation expense			412			—			—
Decrease (increase) in other assets			(585)			25			(29)
Increase (decrease) in other liabilities			165			415			26
Net cash provided by (used in) operating activities			(1,153)			138			(260)
Cash Flows From Investing Activities:
Investments in subsidiary bank			(132,000)			(26,000)			(11,400)
Loan to related party			—			(780)			—
Net cash used in Investing activities			(132,000)			(26,780)			(11,400)
Cash Flows From Financing Activities:
Proceeds from issuance of common stock, net			114,773			28,368			12,606
Repurchase of common stock for exercise of stock options and tax withholdings for restricted stock vestings			(255)			—			—
Proceeds from issuance of preferred stock, net			—			5,503			—
Purchase and retirement of preferred stock			—			(1,400)			—
Redemption of preferred stock, net			—			(2,672)			—
Proceeds from exercise of stock options			135			—			—
Proceeds from issuance of subordinated debt, net of issuance cost			24,443			—			—
Payment of preferred stock dividend			—			(3,420)			—
Net cash provided by financing activities			139,096			26,379			12,606
Net (decrease) increase in cash and cash equivalents			5,943			(263)			946
Cash and cash equivalents, beginning of year			818			1,081			135
Cash and cash equivalents, end of year		$	6,761		$	818		$	1,081

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 18 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in Accumulated Other Comprehensive Income (Loss) balances, net of tax effects at the dates indicated (dollars in thousands):

	Year Ended December 31,
	2017			2016			2015
Beginning balance		$	(165)		$	16		$	129
Net change in other comprehensive income (loss) before reclassification, net of tax			(41)			(158)			(113)
Amounts reclassified from accumulated other comprehensive income, net of tax			—			(23)			—
Net current period other comprehensive loss			(41)			(181)			(113)
Ending balance		$	(206)		$	(165)		$	16

The following represents the reclassifications out of accumulated other comprehensive (loss) income (dollars in thousands):

	Year Ended December 31,									Affected line item in the Consolidated Statements of Operations
	2017			2016			2015
Realized gain on sale of available for sale securities		$	—		$	40		$	—	Net gains on securities transactions
Income tax expense			—		$	(17)			—	Income tax expense
Total reclassifications, net of income tax		$	—		$	23		$	—

NOTE 19 — UNAUDITED QUARTERLY FINANCIAL DATA

Selected Consolidated Quarterly Financial Data (dollars, except per share amounts, in thousands)

	2017 Quarter Ended
	December 31			September 30			June 30			March 31
Interest income		$	17,864		$	16,401		$	14,047		$	12,441
Interest expense			2,293			2,437			2,281			1,660
Net interest income			15,571			13,964			11,766			10,781
Provision for loan losses			3,499			1,200			1,790			570
Net interest income after provision for loan losses			12,072			12,764			9,976			10,211
Non-interest income			6,249			2,233			1,573			1,245
Non-interest expense			9,780			8,590			7,141			7,234
Income before income taxes			8,541			6,407			4,408			4,222
Income tax expense			5,216			2,562			1,757			1,674
Net income		$	3,325		$	3,845		$	2,651		$	2,548
Basic earnings per share		$	0.50		$	0.83		$	0.57		$	0.55
Diluted earnings per share		$	0.49		$	0.82		$	0.57		$	0.55

(continued)

TABLE OF CONTENTS

METROPOLITAN BANK HOLDING CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016 (Continued)

NOTE 19 — UNAUDITED QUARTERLY FINANCIAL DATA (Continued)

	2016 Quarter Ended
	December 31			September 30			June 30			March 31
Interest income		$	11,919		$	11,337		$	10,970		$	9,929
Interest expense			1,492			1,519			1,598			1,480
Net interest income			10,427			9,818			9,372			8,449
Provision for loan losses			5,900			350			1,250			560
Net interest income after provision for loan losses			4,527			9,468			8,122			7,889
Non-interest income			1,288			1,321			1,658			1,156
Non-interest expense			6,199			8,267			6,662			6,243
Income before income taxes			(384)			2,522			3,118			2,802
Income tax expense			(433)			1,072			1,268			1,138
Net income		$	49		$	1,450		$	1,850		$	1,664
Basic earnings per share		$	0.01		$	(0.50)		$	0.59		$	0.53
Diluted earnings per share(1)		$	0.01		$	(0.50)		$	0.58		$	0.53

(1)

The EPS for September 30, 2016 was negative despite having a positive Net Income due to dividends paid out to preferred shareholders in that quarter.

(continued)

TABLE OF CONTENTS

Signatures

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

				Metropolitan Bank Holding Corp.
	Date: April 5, 2018			By: /s/ Mark R. DeFazio Mark R. DeFazio President and Chief Executive Officer (Duly Authorized Representative)

TABLE OF CONTENTS

EXHIBIT INDEX

	3.1			Certificate of Incorporation of Metropolitan Bank Holding Corp, as amended.(1)
	3.2			Amended and Restated Bylaws of Metropolitan Bank Holding Corp.(2)
	4.1			Form of Common Stock Certificate of Metropolitan Bank Holding Corp.(3)
	4.2			Form of Class B Preferred Stock Certificate of Metropolitan Bank Holding Corp.(4)
	10.1			Registration Rights Agreement, dated June 21, 2016, between Metropolitan Bank Holding Corp. and Endicott Opportunity Partners IV, L.P.(5)
	10.2			Employment Agreement by and among Metropolitan Bank Holding Corp., Metropolitan Commercial Bank and Mark R. DeFazio(6)
	10.3			Metropolitan Bank Holding Corp. 2009 Equity Incentive Plan(7)
	10.4			Metropolitan Commercial Bank Executive Annual Incentive Plan(8)
	10.5			MetBank Holding Corp. 1999 Stock Option Plan(9)
	10.6			Form of Performance Restricted Share Unit Award Agreement(10)
	10.7			Amendment One to Restricted Share Agreements between Metropolitan Bank Holding Corp and Grantee(11)
	10.8			Form of Restricted Share Agreement(13)
	10.9			Form of Stock Option Agreement(13)
	10.10			First Amendment to 2009 Equity Incentive Plan(13)
	10.11			Second Amendment to 2009 Equity Incentive Plan(13)
	10.12			Change in Control Agreement by and among Metropolitan Bank Holding Corp., Metropolitan Commercial Bank and Gerard Perri(13)
	21			Subsidiaries of Registrant(12)
	23			Consent of Independent Registered Public Accounting Firm
	31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(13)
	31.2			Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(13)
	32			Certification of Chief Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(13)
	101			Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of December 31, 2017 and 2016, (ii) the Consolidated Statements of Income for the years ended December 31, 2017 and 2016, (iii) the Consolidated Statements of Retained Earnings for the years ended December 31, 2017 and 2016, (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016, and (v) the notes to the Consolidated Financial Statements(13)

(1)

Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 4, 2017 (File No. 333-220805).

(2)

Incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on October 25, 2017 (File No. 333-220805).

(3)

Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on October 25, 2017 (File No. 333-220805).

(4)

Incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 4, 2017 (File No. 333-220805).

(5)

Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 4, 2017 (File No. 333-220805).

TABLE OF CONTENTS

(6)

Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 4, 2017 (File No. 333-220805).

(7)

Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 4, 2017 (File No. 333-220805).

(8)

Incorporated by reference to Exhibit 10.5 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on October 25, 2017 (File No. 333-220805).

(9)

Incorporated by reference to Exhibit 10.6 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on October 25, 2017 (File No. 333-220805).

(10)

Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 6, 2018 (File No. 001-38282).

(11)

Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 6, 2018 (File No. 001-38282).

(12)

Incorporated by reference to Exhibit 21 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 4, 2017 (File No. 333-220805).

(13)

Previously filed.

Metropolitan Bank Holding (MCB) 10-K/A2017 FY Annual report (amended)